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Decision
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Ottawa, 1 August 1985
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Decision CRTC 85-628
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Cathay International Television Inc.
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Vancouver, British Columbia - 850080300
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Following a Public Hearing in Hull, Quebec on 30 April 1985, the Commission approves, by majority decision, the application by Cathay International Television Inc. (Cathay) for authority to acquire the assets of the ethnic (formerly referred to as "multilingual" ) regional pay television network serving British Columbia from World View Television Limited (World View), and for a broadcasting licence to continue the operation of that undertaking. Approval of the application, however, is conditional upon the licensee meeting the programming requirements set out in this decision.
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The Commission will issue a licence to Cathay upon surrender of the current licence. The licence will be subject to the conditions of licence specified in the appendix to this decision, and will expire 31 March 1987, at the same time as other pay television licences.
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I. Background
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a) Corporate Reorganization
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On 18 March 1982, the Commission approved the application by Bernard T.C. Liu, representing a company which was subsequently incorporated under the name of World View, for an ethnic regional pay television network licence to serve British Columbia (Decision CRTC 82-240). Since the licensee's incorporation in April 1982, there were continuing discussions among World View shareholders with respect to the appropriate capitalization and management of the company. In June 1984 a majority decision by the licensee's Board of Directors resulted in the replacement of senior management and the placement of the company into voluntary receivership, on behalf of the secured creditors. This corporate restructuring involved Mr. Kent Lee, a director of World View who was subsequently appointed Acting President, along with Mr. Sing Kwan So who continued as Chairman/Secretary. Mr. Brian Sung was appointed a director and controller, responsible for day-to-day management of World View while in receivership.
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In July 1984, the licensee advised the Commission that the British Columbia Development Corporation (BCDC) had demanded repayment of its $500,000 secured loan, and that the BCDC was entitled to appoint an outside receiver to secure its interests.
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In August 1984, the company of Wolrige Mahon Ltd. was appointed, by the secured creditors, Receiver-Manager of World View and, by the end of November 1984, Trustee in Bankruptcy by the courts. While a financial settlement had been negotiated with the BCDC an agreement could not be concluded with the majority shareholder on a capital reorganization of World View and the trustee was forced to sell the licensee's assets. Cathay, the company formed by Messrs. Sung, Lee, So and their families, submitted the successful bid to acquire the World View assets at a subsequent bankruptcy auction and, accordingly, submitted the above application to the Commission.
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b) Programming
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Despite the significant personal efforts and capital contributions of the principals of World View, the licensee has encountered various difficulties in establishing an ethnic pay television service for British Columbia. While its service was readily accepted by British Columbia's substantial Chinese population, other ethnic communities did not show as much interest in subscribing to its service. The aforementioned financial and operating problems along with the initial lack of broad subscriber support, hampered World View's plans to provide 92 hours per week of programming in nine different languages (Chinese, Hindi, Punjabi, Swedish, Danish, Norwegian, Finnish, Japanese and Italian). According to Mr. B. Sung, World View had tried to fulfill its commitment to ethnic programming. It had initially acquired and distributed a variety of ethnic programs, but without the establishment of a firm business base the applicant was forced to take steps "to reduce the range of programming in order to stem the company's rapidly draining resources". World View then concentrated on providing Chinese-language programming which, while in receivership, has attracted some 10,000 subscribers to the service.
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Further, the programming advisory board, which World View had proposed to set up in order to consult with other linguistic groups in the region for the purpose of marketing and expanding the variety of programming on its service, was never established because of the unresolved corporate and financial problems.
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II. The Cathay Application
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a) Ownership and Management
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Cathay emphasized at the hearing that it was confident that, with its sound management team and adequate financial resources, it could not only maintain but revitalize this important ethnic service.
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Cathay indicated that 85% of the proposed shareholders are World View's original investors, although no single individual or company would have a controlling interest. The applicant advised that the voting shares would be held on an equal basis by members of the three founding families of World View, and that there would be no block voting agreement among these shareholders. Mr. Brian Sung, a successful and respected Vancouver businessman, will be President and Managing Director of Cathay, with Mr. Kent Lee, Executive Vice-President. When asked how Cathay's management approach will differ from that of World View, the applicant stated:
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We have been able to meet and discuss with other experts in the field of multilingual television. They are now available to us. I do not believe that the original management of World View, at least to the best of our knowledge, ever availed themselves of these people.
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b) Programming
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Cathay stated that it would provide a predominantly Chinese-language service (96%) with some English-language programs (4%) totalling 34 hours per week. Canadian content would consist of 11/2 hours per week of locally-produced news and community information services. Foreign-originated programming would be purchased from Hong Kong on a month-to-month basis, with a first-year budget of $840,000, rising to more than $1 million per year thereafter.
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With respect to local programming, the applicant said that "steps would be taken to improve and enhance our news show", so as to achieve a high-quality ethnic news service which would be stimulating and innovative. Cathay committed a local programming budget of $140,000 for the first year of operation, $147,000 for the second year and $300,000 for the third year. When questioned by the Commission on the substantial third-year increase, the licensee stated:
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We hope to have experienced the results that we have projected for year one and for year two, and we just wish to make a quantum increase to local production ... It will be bigger budgets for writing, it will mean the ability to hire more writers and more research to conduct more local programming. There are many, many, many issues that ethnic people wish to explore and have brought forward to their own societies ... It is certainly our intention and our desire to increase local production.
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Once it achieves a strong subscriber base with a predominantly Chinese-language service, Cathay argued that it would "be in a much stronger position to explore the addition of other ethnic services." In addition it said it was committed to reintroduce on a phased-in basis some of the different ethnic services which had been part of World View's original proposal for an ethnic pay television service. While it did not commit itself to a specific timeframe in this regard, Cathay undertook, within one year of this decision, to conduct a marketing study to assess the feasibility of distributing East Indian, Pakistani and Italian programming and stated that it would reintroduce at least two ethnic services within three years.
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III. Issues and Concerns
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The Commission notes with concern that, while Cathay's application proposes essentially a Chinese-language service, the undertaking which it wishes to acquire was licensed in 1982 to provide a pay television network which would serve a number of ethnic communities with third-language programs, that is, in languages other than English, French or native Canadian.
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Decision CRTC 82-240 emphasized:
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In approving this application, the Commission has given particular consideration to the diversity of the multilingual programming proposed, particularly in the evening viewing hours. In this regard, it notes that the applicant's proposed multilingual service is designed to meet the needs of various linguistic communities in Vancouver by providing a diverse mix of programming in Chinese, Japanese, Italian, Scandinavian and East Indian languages, among others ... Further, as the service develops, the applicant is encouraged to expand the variety of languages offered in order to meet the needs of the various linguistic communities in Vancouver.
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Given the needs and expectations of these ethnic groups for a variety of programming services in their mother tongue, the Commission is concerned with the evolution of a predominantly Chinese-language service and with the limited commitments of Cathay for the provision of other ethnic language services. Mindful of the serious problems that beset World View in its efforts to develop an ethnic pay television operation, the Commission recognizes that Cathay might wish to adopt a more cautious approach in the phasing-in of additional third-language services. At the same time, it is concerned about the integrity of the licensing process whereby an ethnic pay television network licence was granted, following a public hearing, on the basis of very specific and fundamental commitments to serve a number of ethnocultural groups in British Columbia.
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The Commission has also had to weigh the fact that it has licensed Chinavision Canada Corporation (Chinavision) to distribute a national, Chinese-language specialty programming service (Decision CRTC 84-445). Chinavision presented a strong, opposing intervention at the hearing, claiming that Cathay proposes to provide a unilingual Chinese-language service which would deprive other ethnic groups in British Columbia from receiving service in their own languages and that, if approved, it would seriously impede the establishment of Chinavision's national specialty service in British Columbia, where one-third of all Chinese Canadians reside. The intervener indicated that a second, competing Canadian Chinese-language discretionary service would raise the cost of foreign-originated programming and have a negative impact on the funds allocated to Canadian program production.
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In May 1984, the Commission predicated its approval of Chinavision's predominantly Chinese-language, national, specialty programming service on the condition that Chinavision not provide service to British Columbia for a period of two years, recognizing the negative impact that a Chinese-language specialty programming service might have on the development of World View. In Decision CRTC 84-445, the Commission noted Chinavision's desire:
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... to co-exist with other multilingual services, without causing them any undue harm and, in particular, to cooperate fully with World View so as to minimize any adverse effects on the service provided by the pay television licensee. Chinavision is, therefore, precluded from extending its network service to the British Columbia market during its first two years of operation.
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IV. Conclusions
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In reaching its decision to approve this application, the Commission took note of Cathay's assurances during the course of the hearing that it was fully committed to reintroducing ethnic pay television service in British Columbia, on a phased-in basis, as finances permit.
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The Commission has considered the professional expertise and sound financial resources of Cathay's principal shareholders; the advantages of local ownership of an ethnic regional service; the extensive public support for this application; and the applicant's commitments to effective management, quality programming and ongoing consultation with representatives in the multicultural community. It has also considered the very positive remarks of Mr. D. Selman, on behalf of the Receiver-Manager, with respect to the financial and corporate status of World View as reconstructed by Cathay:
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... the problems have been resolved. World View, as it stands today, is paying all its bills. World View in fact, were I not there charging it fees, would be breaking even ... I would understand a refusal of this application if the evidence was clear that the applicants did not have the ability or the resources to operate this licence. This is clearly not the case.
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The Commission is, therefore, satisfied, based on Cathay's commitment to the re-introduction of ethnic pay television services for British Columbia, that, as long as the following condition with respect to programming is met, approval of the application is in the public interest.
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Accordingly, it is a condition of this approval that, in addition to Chinese-language programming, Cathay, as a minimum, provide programming in two languages other than English, French or native Canadian within one year of the date of this decision and that least 15 hours per week be allocated to each ethnic programming service distributed on the network.
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The licensee is encouraged to consult with representatives of the ethnic communities to be served to ensure that their scheduling needs are accommodated and expects all ethnic programs to be scheduled on an equitable basis at convenient viewing hours. The Commission will also expect the licensee to add to these programming services in order to meet the needs of other linguistic communities.
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The Commission will follow the development of this ethnic pay television service with interest, and expects Cathay to take all necessary measures to develop a viable ethnic operation that reflects adequately the needs of the various ethnic communities in British Columbia. The Commission also expects the licensee to submit a progress report in this regard within twelve months.
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The Commission acknowledges the many interventions that were received in support of this application, reflecting the high level of interest in the future of the service. It has also considered the interventions expressing reservations with regard to the proposed service and concern about its potential impact on the development of Chinavision as a national service. As mentioned in Decision CRTC 84-445, the Commission will review the specialty programming services after their first two years of operation, and it will determine:
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...the acceptability of plans to be submitted by Chinavision for the extension of its discretionary specialty network service to British Columbia, without causing undue harm or dislocation to World View. However, should a satisfactory agreement be reached with World View on mutually-acceptable terms and conditions, the Commission would be prepared to give early consideration to an application by the licensee for such an extension of its service.
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Conditions of licence, similar to those previously imposed on World View with respect to the ownership, programming and operation of the undertaking, are set out in the appendix to this decision.
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Fernand Bélisle Secretary General
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Minority Opinion of Commissioner Rosalie Gower
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The stringency of the condition of approval of this application is, in my view, a formula for failure.
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It is unfair for a regulator, however well-motivated, to impose conditions so onerous that there is no reasonable hope of the licensee meeting them.
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Pay television is not a basic service but discretionary. Its success must depend upon consumer demand and satisfaction.
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As the majority decision states, when it was first licensed, World View attempted to serve more than one language group but sufficient subscriber support was not obtained. This ethnic service was kept alive through the loyal support of the Chinese community who now receive 25 hours of Chinese-language programming per week, at a rate of $17.50 per month. Any less would clearly be unacceptable.
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The condition being imposed, two more language groups at 15 hours each per week in the first year, will require the licensee to more than double the amount of programming, if the Chinese service is to be maintained at its present level or increased to 34 hours. Can this fragile service which is already in receivership survive this heavy additional financial burden? Will all 3 language groups be willing to pay the same fee for significantly different quantities of programming to support the service?
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Competition is already present and alternate sources of ethnic programming are provided to 7 language groups by channel 19 on cable and by the community channel and the ethnic radio service.
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It would be ironic, were this local service to fail as a result of being required to serve too many language groups too quickly, if the natural consequence is the eventual presence of a unilingual Chinese-language service based in Toronto.
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Moreover, other pay television services have been allowed to alter their commitments when services offered proved to be uneconomic.
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Rather than a condition of approval, Cathay should be encouraged to expand from a unilingual service only when and if a viable market is assured for other language services and the licence should be of sufficient length to provide a measure of assured continuity and financial stability to the service.
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APPENDIX
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Conditions of licence for Cathay International Television Inc.
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Ownership
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1. The prior approval of the Commission is required with respect to any act, agreement or transaction which will, directly or indirectly
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(a) result in a change of or materially affect the ownership or effective control of the broadcasting undertaking licensed hereby;
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(b) transfer or enlarge a bloc of securities designated herein as subject to this requirement; or
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(c) result in the transfer of any securities of the broadcasting undertaking licensed hereby to any person who, directly or indirectly, has any pecuniary or proprietary interest in an undertaking engaged in the exhibition of pay television or in a broadcasting receiving undertaking licensed by the Commission.
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2. The ownership or effective control of the broadcasting undertaking licensed hereby shall be deemed to be materially affected where, inter alia,
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(a) a person obtains control of a sufficient number of the voting securities of the licensee or of a corporation which has, directly or indirectly, effective control of the licensee, so as to result in control of not less than 10% of all issued voting securities thereof by that person, or by that person together with one or more of his associates; or
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(b) a person, or a person together with one more of his associates, having control of at least 10% but less than 40% of the issued voting securities of the licensee or of a corporation which has, directly or indirectly, effective control of the licensee, obtains control of a further bloc of securities thereof representing at least 10% of the total of all such issued securities.
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3. The definitions outlined in the CRTC Public Announcement of 7 January 1980, entitled TRANSFERS OF OWNERSHIP OF LICENSED BROADCASTING UNDERTAKINGS, will apply and form an integral part of the condition set out herein.
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Other Conditions
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1. The licensee shall not extend service to any location without the prior approval of the Commission.
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2. The licensee shall, during the remainder of the term of this licence in each semester commencing 1 July 1985, devote not less than 60% of the total time (i) during which programming is distributed on its undertaking and (ii) during the hours between 6:00 P.M. and 10:00 P.M. to the distribution of programs in languages other than English, French, or a native Canadian language.
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3. The licensee shall devote to the distribution of feature films, not more than 25% of the total programming time allocated by condition of licence to the distribution of programs in English, French or a native Canadian language.
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4. Except as authorized by the Commission, the broadcasting undertaking licensed hereby shall be operated in fact by the licensee itself.
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5. This licence shall not be transferred or assigned.
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6. In these conditions:
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"semester" means a period of six consecutive months ending on the last day of June and December in each year.
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