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Ottawa, 31 January 1992
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Decision CRTC 92-28
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Allarcom Pay Television Limited
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Edmonton, Alberta - 911505600
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Following a Public Hearing commencing 29 October 1991 in Vancouver, the Commission approves the application by Allarcom Pay Television Limited (APT) for a broadcasting licence to carry on an English-language, general interest pay television programming undertaking for the distribution of a pay-per-view (PPV) service via satellite to cable affiliates in British Columbia, Alberta, Saskatchewan, Manitoba, the Northwest Territories and the Yukon Territory.
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The licensee will be regulated pursuant to the Pay Television Regulations, 1990. The Commission will issue a licence expiring 31 August 1997; the licence will be subject to the terms and conditions set out in this decision and in the licence to be issued.
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As proposed by the applicant, the PPV service will consist primarily of feature films, but will include a variety of specials such as musical concerts and coverage of sporting events. Although cable systems may utilize fewer channels, the applicant contemplates that cable affiliates will generally exhibit the PPV programming using five channels; a sixth would be used as a non-encrypted barker channel to advertise upcoming programs. Initially, the service will be offered during the evening and early morning, approximately eight hours a day. The precise hours of operation, however, and the scheduling of films, may be customized for individual affiliates.
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APT is owned 100% by WIC Western International Communications Inc., a company with extensive interests in Canadian radio and television broadcasting. APT is, itself, licensee of the general interest pay television undertaking serving Western Canada, also known as Superchannel, and holds a 50% interest in the licensee of the national pay television undertaking, The Family Channel Inc.
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In Decision CRTC 90-78, the Commission approved an application by APT for authority to provide a PPV service to subscribers of Superchannel in the three Saskatchewan cities of Regina, Saskatoon and Yorkton. As had been requested by APT at the time, the licence was granted on an experimental basis, for a two-year period expiring 2 February 1992.
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Subsequently, in Decision CRTC 91-160, the Commission granted Viewer's Choice Canada (VCC) a licence, expiring 31 August 1994, to carry on an undertaking for the distribution of a PPV service to cable television affiliates throughout Eastern Canada. VCC is a general partnership effectively controlled by the same interests that own the general interest pay television licensee serving Eastern Canada (First Choice). In both decisions, the Commission referred to the criterion it had established for the licensing of PPV services, as first set out in Public Notice CRTC 1988-173 accompanying the Commission's decisions renewing the licences of the general interest pay television services. In that notice, the Commission stated that it would be prepared to deal with PPV proposals provided that applicants "reflect the existing pay television structure in their proposals". In the APT and VCC decisions, the Commission emphasized that its primary concern with PPV related to the ability of this new form of service to contribute in a meaningful manner to the development and exposure of Canadian programming.
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As noted above, access to the PPV service under the APT experiment in Saskatchewan has been limited to cable subscribers of Superchannel. The applicant's proposal to retain this "buy-through" approach as part of the business plan for its new PPV service in Western Canada underwent considerable discussion at the hearing. APT's principal argument in support of this approach was that the absence of such a buy-through could lead to an unacceptable decrease in the number of Superchannel subscribers.
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The Canadian Cable Television Association (CCTA) and several cable television licensees in Western Canada filed interventions opposing APT's proposed buy-through requirement. Among other things, it was noted that VCC's PPV subscribers are not required to subscribe to First Choice, and argued that a buy-through would retard the growth of PPV in Western Canada. Specifically, it was claimed that any buy-through would limit the potential audience, a situation that, for many cable licensees, would render economically unfeasible the capital expenditures necessary to offer the service. It was also noted that the limiting effect of a buy-through on the size of the potential market for PPV would make more difficult the investment decisions that will be required of the cable industry if it is to move towards universal addressability and adoption of channel compression technology.
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At the hearing, the CCTA noted the considerable capital investment already made by cable licensees in order to offer discretionary services, and stressed that the industry would continue to provide marketing assistance to pay television. This intervener also noted the indications it has been receiving from its members that pay television subscriptions are, in fact, increasing as a consequence of the recent addition of U.S. superstations to discretionary pay television packages.
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Shaw Cablesystems Limited (Shaw) echoed the CCTA's commitment to support both pay television and PPV. Shaw confirmed that the addition of the U.S. superstations, and an associated marketing campaign, have served to increase pay television subscriptions. Shaw also suggested that the convenience of PPV would complement the perceived value of pay television, and would result in further growth for the latter. In their comments at the hearing, spokespersons for APT reiterated concerns about the potential decline in the number of Superchannel subscribers if a subscription to that pay television service was not a prerequisite to obtaining PPV. APT also suggested that, in the absence of such a safeguard, certain cable licensees might lessen their financial and other commitments for the promotion and marketing of Superchannel.
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At the same time, the applicant acknowledged that a buy-through requirement may have a limiting effect on PPV's growth. The applicant also expressed confidence that, based upon the representations made to it by the CCTA, Shaw and various other cable licensees, appropriate marketing arrangements could be made with most cable operators, such that PPV could potentially be offered to all cable subscribers, regardless of whether they were also subscribers of Superchannel or The Family Channel.
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In the circumstances, noting APT's own observations at the hearing regarding the limiting impact of a buy-through on the growth of PPV, and particularly in light of the positive comments by the applicant and representatives of the cable television industry regarding their commitment to future co-operation in marketing both Canadian pay and PPV television services, the Commission is also confident that APT will find a buy-through to be unnecessary.
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The Commission notes that the service will complement VCC's existing PPV service in Eastern Canada by providing an expanded window and increased revenue opportunities for Canadian programming. The Commission also views the proposed service as forming a welcome and timely addition to the programming choices available to Canadians within the regulated broadcasting system, particularly in light of industry-wide concerns regarding the likely expansion of competition from satellite-delivered, non-Canadian multichannel PPV services. For all of the reasons set out in this decision, the Commission considers that approval of APT's application is in the public interest, and that the applicant's request for a 67-month licence term is reasonable.
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Based upon APT's commitments set out in the present application with respect to the exhibition of, and expenditures on, Canadian programming, as well as its commitment to the promotion of Canadian films, the Commission is satisfied that the proposed service will make an incremental contribution to the development and exposure of such programming.
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The Commission's assurance in this matter also springs from recognition of APT's experience in mounting and operating its experimental PPV service, and of the success of that experiment, particularly with respect to the effectiveness of the technology employed, the marketing and scheduling strategies and, ultimately, the buy-rates achieved.
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In line with APT's proposals for the exhibition of Canadian programming, the licensee shall, by condition of licence, distribute on its undertaking a minimum of 12 Canadian feature films and all new Canadian dramatic features that are suitable for PPV and meet the Pay TV Standards and Practices, and a minimum of 2 Canadian-based events in each broadcast year. The broadcast year shall be twelve-month period ending 31 August.
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During the period of 3 February to 31 August 1992, however, APT shall distribute on its undertaking a minimum of 7 Canadian feature films and all new Canadian dramatic features that are suitable for PPV and meet the Pay TV Standards and Practices, and a minimum of 1 Canadian-based event.
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Also consistent with APT's commitments, the Commission expects the licensee to provide an exhibition window for Canadian films at least equal to the minimum length of the exhibition window given to non-Canadian films; and to continue to exhibit on the service any Canadian film that is performing as well as, or better than, any non-Canadian film that is also being offered at the same time.
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Given the difficult market conditions that continue to confront the Canadian feature film industry in its efforts to secure distribution and exhibition, the Commission expects APT to ensure that its marketing efforts on behalf of Canadian films exhibited on the service are at least equal to its efforts in respect of non-Canadian films. Further, the Commission expects APT to maintain a film ratio of no less than 1:20 in respect of Canadian to non-Canadian "first-run" titles exhibited on the service in each broadcast year. The Commission had some discussion at the hearing, notably with the Saskatchewan Motion Picture Association, the Canadian Film and Television Production Association and Alliance Releasing Corporation, regarding the feasibility and the desirability of an all-Canadian channel on PPV. These interveners asked that APT be required to exhibit at least one Canadian feature film on its service at all times. Although not proposed by APT, such a concept was supported by several other non-appearing interveners.
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The Commission has considered this matter and has determined that, in the circumstances, the applicant's commitments for the distribution of Canadian films are satisfactory, and that such a proposal might tend to ghettoize Canadian films.
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In keeping with the applicant's commitments for expenditures on Canadian programming, APT shall, by condition of licence, invest in the production of Canadian films over the course of the licence term, the greater of $2.4 million or 30% of APT's share of the gross revenues derived from the exhibition of feature films and events distributed by the cable television affiliates of the PPV service. This investment shall be exclusive of any expenditures made by the licensee on the promotion of such films.
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Further, the licensee shall, by condition of licence, adhere to its commitment to remit to the rights holders of all Canadian films exhibited on the service, 100% of APT's share of gross revenues derived from the exhibition of these films by the cable television affiliates.
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As discussed at the hearing, the licensee shall, by condition of licence, and upon request by the Commission, provide to it a record of the PPV programming distributed by individual cable affiliates. Moreover, by condition of licence, APT shall retain control at all times over the scheduling of films and events exhibited on the cable television undertakings operated by its affiliates.
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Notwithstanding the distribution and linkage requirements referred to in subsection 10(2) of the Cable Television Regulations, 1986, the Commission does not consider that the service provided by the licensee should be linked with any non- Canadian discretionary service or services. Accordingly, the Commission expects the licensee to ensure that all affiliation agreements entered into between it and cable television licensees incorporate a prohibition against such linkage.
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The Commission notes the licensee's commitment, offered in response to an intervention presented at the hearing by the Pacific Captioning Assistance Society, to ensure that, as a minimum, closed captions are provided for all feature films exhibited on the service having a window of longer than a week. The Commission expects APT to adhere to this commitment.
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The Commission acknowledges the many other interventions submitted in respect of this application, including those by numerous film producers and distributors and other interested parties. The views expressed by these interveners have all been taken into account by the Commission in reaching its decision.
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Allan J. Darling
Secretary General
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