ARCHIVED -  Decision CRTC 85-423

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Decision

Ottawa, 7 June 1985
Decision CRTC 85-423
Canadian Satellite Communications Inc.
Toronto, Ontario - 850668500
Related documents: "The 1980s: A Decade of Diversity" (Therrien Report), July 1980; Decisions CRTC 81-252 dated 14 April 1981, 83-126 dated 8 March 1983 and 85-14 dated 10 January 1985; "The Costs of Choice" (Klingle Report) dated 25 February 1985; Public Notices CRTC 1985-60 dated 22 March 1985 and 1985-67 dated 27 March 1985.
Following a Public Hearing in the National Capital Region the week of 28 April 1985, the Commission approves the application to renew the licence of Canadian Satellite Communications Inc. (CANCOM) to carry on a multiple channel television and radio broadcasting network operation to distribute via satellite, to affiliated broadcasting undertakings, the signals which are set out in the appendix to this decision. The licence will expire on 30 September 1990 and will be subject to the conditions of licence specified in this decision and in the licence to be issued.
I. Background
The extension of public and private Canadian broadcasting services to all parts of Canada is a fundamental objective which the Commission has consistently pursued since its inception. In particular, the CRTC has been concerned with the serious inequalities of service between large urban centres and more remote and isolated communities. This concern has been emphasized in a number of regulatory and procedural initiatives taken by the Commission to facilitate the licensing of broadcasting services to such underserved communities.
Among these initiatives was the 1980 study undertaken by a committee chaired by CRTC Vice-Chairman Réal Therrien, whose mandate was to examine the problems related to the extension of broadcasting services to northern and remote communities.
Some of the major recommendations of the Therrien Report were: that the Commission take immediate action to license the delivery of a range of Canadian satellite television and radio services to remote and under-served communities; that it find ways to simplify licensing and regulatory procedures applicable in northern and remote areas; that it encourage applications from native organizations to promote native-language programming; and that the substitution of native-produced programming for southern-originated programming should be permitted in predominantly native communities. The Committee also noted with concern the proliferation of unauthorized operations providing local delivery of broadcast signals received from U.S. satellites.
In December 1984, a second Task Force headed by Commissioner Paul Klingle was convened to give urgent consideration to the problem of extending broadcasting services at an affordable price to Canadians living in smaller underserved communities throughout Canada. The Task Force report, entitled "The Costs of Choice", indicated that the major obstacle in achieving this goal is the cost involved in satellite-to-cable distribution. The report contained 34 recommendations, each of which was endorsed by the Commission, subject to certain provisions, in Public Notice CRTC 1985-60.
II. Licensing of CANCOM
Following the Commission's call for applications, CANCOM was licensed, over three competing applicants, to deliver a package of Canadian radio and television signals to remote and underserved areas of the country (Decision CRTC 81-252 dated 14 April 1981).
In selecting CANCOM, the Commission gave particular consideration to such factors as the licensee's commitment to implement, within 90 days of receiving a licence, the simultaneous distribution of its service across the country; its target audience of core communities "that presently receive two or less television signals"; its proposal to participate in the development of a low-cost terrestrial distribution system with sufficient flexibility to facilitate the establishment of local broadcasting services in remote communities; its undertaking to provide isolated communities with the same quality of signals as those received in other areas; its commitments to native communities; and, in particular, the broadcasting experience and regional representation of the participating shareholder companies.
Subsequent to a public hearing on 23 November 1982, the Commission further authorized CANCOM to distribute the three commercial and one publicly-supported American network television signals ("3+1 signals") to those core market communities not yet receiving any U.S. signals and to cable licensees who were currently carrying less than the full complement of the 3+1 signals permitted by the CRTC's cable television policy (the extra-cable market).
In granting this authority (Decision CRTC 83-126 dated 8 March 1983), the Commission noted the demand expressed by Canadians in all areas of the country for access to the same range of services as is available in urban centres, but reminded CANCOM that its primary responsibility remains the extension of Canadian broadcasting services to the more remote regions of Canada not yet provided with a comprehensive broadcasting service.
In Decision CRTC 1985-14, dated 10 January 1985, the Commission authorized a $0.20 increase in the total monthly fee CANCOM was permitted to charge for its eight television signal-package, predicated on the unbundling of its rate structure. Again it stressed that CANCOM's primary responsibility remains the extension of Canadian broadcasting services to the more remote and underserved communities and that the CRTC, therefore, expected the company to establish a pricing approach that would not discriminate against these "core market" communities.
III. 30 April 1985 Renewal Hearing
At the hearing, the Commission reviewed with the licensee its performance during its initial term of licence, In these four years of operation, CANCOM has assembled an attractive package of 8 television and 8 radio services which it now distributes to more than 200 affiliates serving some 164,000 subscribers in more than 375 core communities from Vancouver Island to Newfoundland.
The Commission acknowledges the leadership and commitment shown by this licensee in developing what it has termed as "a unique Canadian solution for holding the spread of unlicensed broadcasting systems and for surmounting the problems of Canada's rugged geography". In doing so, CANCOM has successfully overcome numerous difficulties and challenges.
The Commission also acknowledges CANCOM's progress towards achieving its goal of establishing a distribution system that combines satellite and conventional broadcast technology. CANCOM's objectives, now largely met, include the following:
- to design and implement the world's first satellite scrambling system;
- to negotiate agreements with affiliates in "core" and "extra-cable" markets and providing them with financial, technical and marketing services;
- to stimulate Canadian manufacturing efforts to produce low-cost signal distribution equipment;
- to convert unlicensed satellite reception operators to CANCOM affiliates;
- to assemble and uplink a French-language television service (know as TCTV) and uplink a native-language radio signal; and
- to reorient the focus of the company's distribution system from over-the-air to cable technology in order to provide optimal service as more satellite signals became available.
As the primary vehicle for extending private broadcast services to the North and to remote and underserved areas across the country, CANCOM has been responsible for providing thousands of Canadians residing in underserved areas with a variety of radio and television signals.
At the time of CANCOM's original application, the benchmark for a viable cable distribution system was 500 households. By instituting a regional approach, as recommended in the Klingle Report, it is now feasible to extend CANCOM service to communities with as few as 100 households. CANCOM also indicated significant cost efficiencies have been achieved by co-ordinating equipment purchases and administrative services for small communities in any given area. During the coming licence term, CANCOM hopes to achieve a subscriber level of 400,000 in the core market, and to be able to serve communities with as few as 60 to 75 households.
The CRTC supports CANCOM's undertaking to facilitate direct-to-home services for individual farmhouses and rural residences beyond the reach of small community cable systems, and encourages the licensee to pursue its efforts to provide individuals with satellite dishes at a reasonably low cost.
CANCOM stated at the hearing that it currently obtains approximately 55% of its revenue from the core market. The other 45% is derived from its secondary markets, namely the extra-cable market and from those communities where, for reasons of geography, signal quality or other technical problems, CANCOM signals has been permitted to replace signals received over-the-air or via microwave.
In describing the provision of 3+1 service to the extra-cable market, Pierre Morrissette, the President of CANCOM, emphasized:
 Without the revenue from this secondary source, the company simply would not have survived. However, I wish to stress hare, as I have on other occasions, that these secondary markets do not represent a fundamental change in the CANCOM service organization. We are in business first and foremost to provide signals to small communities lacking basic cable television services.
When questioned about its financial situation, the licensee stated that the company expected to reach a modest level of profitability in the 1985/86 fiscal year and that, over the coming licence term, CANCOM would be able to meet all of its commitments to the Commission.
The licensee also described in detail the steps it has taken to provide technical, regulatory and marketing advice to its affiliates, and committed itself to closer co-operation with its associated cable undertakings to ensure the effective marketing and pricing of the CANCOM service.
IV. Issues
CANCOM has appeared before the CRTC on several occasions since the network became operational in January 1982. In Decision CRTC 83-126, the Commission stated that its approval of the 3+1 application was "motivated by the need to equalize access to such signals among all Canadians."
 At the same time, the Commission insists that CANCOM take immediate measures to implement all the commitments made at the time it was licensed ... most specifically in the areas of Atlantic-originated programming, programs of assistance to native groups and the provision of all authorized radio services.
By authorizing uplinks from both the Eastern and Pacific time zones, the Commission was responding to concerns expressed by interveners in terms of time zone differences and simultaneous substitution opportunities. Subsequently, CANCOM filed applications with the CRTC for permission to distribute the NBC and ABC signals from Detroit and delay implementation of its western uplink. In approving the carriage of these services (decisions CRTC 85-547 dated 13 July 1983 and CRTC 84-936 dated 2 November 1984), the Commission emphasized that it would review the overall situation with the licensee at the time of CANCOM's renewal hearing.
The Commission has considered CANCOM's position that, to date, the subscriber base in British Columbia is not sufficient to offset the satellite costs of uplinking the Seattle signals. Nevertheless, the Commission reiterates that CANCOM has an obligation to serve its subscribers in the Mountain and Pacific time zones with programming delivered in appropriate time periods and, consequently, expects that CANCOM will meet this obligation as soon as it is financially feasible to do so, within the new licence term.
Concerning its original commitment to provide Atlantic-originated programming, both on an interim and a long-term basis, CANCOM informed the Commission that it is currently inserting into the CHCH and CITV signals 11/2 hours per week of Atlantic-originated programming provided by the New Brunswick Broadcasting Company Limited. CANCOM is also providing, on a national basis, two Atlantic-area radio services: VOCM St. John's and CFQM-FM Moncton. The licensee cited problems with rights clearance and programs suitability as reasons for not meeting the promised 71/2 hours a week of television programming, and committed itself to providing at least 3 hours a week by the fall of 1985. The Commission expects CANCOM to adhere to this commitment and also expects it to continue in its efforts to provide the full 71/2 hours of Atlantic-originated programming at the earliest feasible date. The licensee is further reminded of its long-term commitment to provide a full Atlantic service when a suitable signal becomes available.
With respect to the development of native-originated programming, CANCOM's Vice President, Native Relations outlined the licensee's initiatives taken to date, in particular, the ongoing negotiations with representatives from various native groups and federal government departments to facilitate the production of native television and radio programs. With respect to its audio uplinks, CANCOM indicated that 28 hours and 30 minutes per week of native-produced radio programming are now available via CHON-FM Whitehorse, CANCOM also confirmed that agreement has now been reached on the second audio uplink and it will soon be in place.
Inasmuch as the Commission has recently issued a call for comments respecting northern native broadcasting (Public Notice CRTC 1985-67 dated 27 March 1985), the Northern Native Broadcasting Committee, composed of Commissioner Paul McRae and Vice-Chairman Réal Therrien, will soon be discussing a number of native broadcasting issues with CANCOM and other interested parties. Nevertheless, the Commission expects the licensee to fulfill its commitment to provide a video uplink in a northern location, and requires that, by 30 September 1986, CANCOM submit detailed plans and a timetable for substituting 10 hours per week of native-produced television programming in the 47 core communities in which there is a predominantly native population.
V. Interventions
More than 25 written interventions were submitted with regard to this application, including 22 supportive comments from CANCOM affiliates and positive interventions from two native organizations. Rogers Cablesystems Inc. spoke of the benefits to be derived from the potential expanded market for CANCOM services:
 As much of the cost of satellite delivery is essentially fixed, this possible increase in market potential provides an opportunity for spreading this fixed cost over a much larger revenue base and thereby reducing the direct cost to individual subscribers ." in remote and underserved communities.
Eastern Cable Limited of St. John's, Newfoundland expressed the opinion that CANCOM was "a partial answer to beating the challenge of ... geography. For the first time ... people in even the smallest centres and most distant outports are able to see and hear a variety of ... television and radio programming."
The Canadian Association of Broadcasters (CAB) and Canadian Motion Picture Distributors Association (CMPDA) both noted that CANCOM has not entered into agreements with broadcasters for the uplinking of their signals.
The Commission has considered the arguments presented by the interveners and the applicant in assessing this application. With respect to the concerns raised by the CAB and the CMPDA, the Commission finds that this issue was already raised in the context of CANCOM's original application as well as the licensee's application for the addition of the 3+1 U.S. signals. It further notes that in Decision CRTC 81-252, it stated that:
 the CANCOM proposal is predicated on the consent of the participating broadcasters for the distribution of their signals.
In this regard, the Commission also stated that it expected that the parties involved would take the appropriate steps to make such contractual or other arrangements as may be necessary. Further, recognizing the problems that may arise in connection with the issue of potential copyright infringement, the Commission notes that these matters are currently under study by Parliament.
Fernand Bélisle Secretary General
APPENDIX/ANNEXE
Signals Distributed by CANCOM/ Authority/Autorisation Signaux distribués par la CANCOM
Television:
CHAN-TV Vancouver Decision CRTC 81-252 CITV-TV Edmonton Decision CRTC 81-252 CHCH-TV Hamilton Decision CRTC 81-252 TCTV Montreal * Decision CRTC 81-252
WJBK-TV (CBS) Detroit Decision CRTC 83-126 WTVS (PBS) Detroit Decision CRTC 83-126 KING-TV (NBC) Seattle ** Decision CRTC 83-126 KOMO-TV (ABC) Seattle ** Decision CRTC 83-126
WDIV (NBC) Detroit Decision CRTC 83-547 WXYZ-TV (ABC) Detroit Decision CRTC 84-936
Radio: CFQM-FM Moncton Decision CRTC 81-252 CKAC Montreal Decision CRTC 81-252 CITE-FM Montreal Decision CRTC 81-252 CKO-FM-2 Toronto Decision CRTC 81-252 CIRK-FM Edmonton Decision CRTC 81-252 CFMI-FM Vancouver Decision CRTC 81-252
CKRW Whitehorse *** Decision CRTC 82-58
VOCM St. John's Decision CRTC 83-126
* The TCTV service presently carried by CANCOM consists of the CFTM-TV signal of Télé-Métropole, the Montreal TVA affiliate.
** Unimplemented.
*** In January 1984 (Decision CRTC 84-15), the CRTC authorized Northern Native Broadcasting, Yukon, to establish an English and Native-language FM radio station at Whitehorse, Yukon. This radio station, CHON-FM, is now in operation, broadcasting 28 hours 30 minutes/week, and is uplinked along with the signal of CKRW, Whitehorse.

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