ARCHIVED -  Decision CRTC 95-907

Decision

Ottawa, 20 December 1995

Decision CRTC 95-907

Gary Maavara, on behalf of a company to be incorporated

Across Canada - 952047900

New, national, direct-to-home, English-language pay-per-view television programming undertaking - Approved

Following a Public Hearing in the National Capital Region commencing 30 October 1995, and in accordance with Public Notice CRTC 1995-217 which accompanies this and other related decisions issued today, the Commission approves the application for a broadcasting licence to carry on a new, national English-language, Direct-to-home (DTH) pay-per-view television programming undertaking. As proposed, the service will be known as Sports/Specials Pay Per View (Sports/Specials), and will be distributed in Canada exclusively by licensed DTH satellite distribution undertakings, at their discretion.

The Commission will issue a licence to carry on a national DTH pay-per-view television programming undertaking, expiring 31 August 2002. The licence will be subject to the conditions specified in the appendix to this decision and in the licence to be issued. This authority will only be effective, and the licence will only be issued, at such time as the Commission receives documentation establishing that the company has been incorporated in accordance with the application in all material respects, and that it is an eligible Canadian corporation.

The Commission emphasizes that the licence to be issued is in respect of a stand-alone service, and that the approval herein granted does not prejudge any future applications that may be filed by the applicant, or by a person related to the applicant, proposing other pay-per-view or similar programming services.

Ownership

The licensee will be effectively owned and controlled by CTV Television Network Ltd. (CTV) through its ownership of 60% of the company's issued voting shares. The remaining shares will be owned by The Molson Companies Limited (Molson) and LMC International, Inc. (LMC), each with 20%; the latter shareholder is a non-Canadian corporation and is, among other things, active in the satellite delivery of sports-oriented pay-per-view programming in the U.S. and other markets.

Nature of service

According to the application, programming on the service will consist primarily of coverage of professional and amateur sports competitions. Coverage will also be given from time to time to non-sports-related special events, such as a leadership conference of the Group of Seven Most Industrialized Nations or a papal visit. Programming will be acquired by the licensee in Canada and abroad, in many instances through arrangements with the licensee's shareholders, CTV, Molson and LMC. The programming will be packaged for distribution to DTH distribution licensees at the Toronto headquarters of CTV.

The licensee is authorized to furnish programming to DTH distributors for distribution on a "barker" channel. In this regard, the Commission expects the licensee to adhere to its commitment to market and promote its Canadian-produced special events and other programming at least as much as it does its non-Canadian programming.

The Commission expects the licensee to adhere to its further commitment to ensure that all of the Canadian programming offered by the service is accompanied by closed captions and, whenever possible, to "include closed captioning as an essential factor in the overall rights agreement when acquiring programs". In its application, Sports/Specials indicated that, while the placement of orders for pay-per-view programming by subscribers will not require telephone service, CTV has a telecommunication device for the deaf (TDD) that would be available for any enquiries. The Commission expects the licensee to publicize the availability of the telephone number for CTV's TDD equipment.

Because the service will be event-based, it will not operate on a full-time basis, or require a dedicated amount of satellite transponder capacity. The number of DTH channels used to distribute the service at any given time will depend upon arrangements with DTH distribution undertakings and on the number of separate events receiving simultaneous coverage on the service.

As agreed to by the applicant, the service shall, by condition of licence, consist of programming to be drawn exclusively from the categories set out in Item 6 of Schedule I to the Pay Television Regulations, 1990 (the pay television regulations), with the exception of categories 7 (drama), 8 (music and dance) and 10 (game shows). Moreover, the licensee shall, by condition of licence, adhere to the pay television regulations, with the exception of paragraphs 3(2)(d),(e) and (f). Because DTH pay-per-view television programming undertakings represent a new class of programming undertaking, the definition of "licensee" contained in subsection 2(1) of the pay television regulations shall also not be applicable in the case of this licensee.

Paragraphs 3(2)(e) and (f) of the pay television regulations prohibit the licensee of a pay television undertaking from distributing programming, other than filler programming, that is produced by itself or by a person related to the licensee. The Commission notes in this regard that it is currently considering the possibility of amending the pay television regulations to permit pay television licensees, by condition of licence, in certain circumstances, to include programming in their services that is either produced by themselves or by others to whom they are related.

Consistent with that proposed approach, it is a condition of licence that, except as may otherwise be authorized by the Commission upon application, the licensee not distribute programming, other than filler programming, that is produced by the licensee after today's date, or that is produced by a person related to the licensee after the later of today's date and the day on which the person becomes related to the licensee.

In the Commission's view, given the particular circumstances of this licensee and the niche nature of the programming service it proposes to offer, it may well be reasonable to permit Sports/Specials to acquire a certain amount of programming that is produced by persons to whom it is related, namely its three shareholders. At the same time, the Commission considers that Sports/Specials and other DTH pay-per-view licensees should be required to specify their sources of such programming and the maximum annual amount they propose to acquire from each, and to limit themselves to these maximum amounts by condition of licence.

At the public hearing, Sports/Specials was unable to quantify the amount of programming produced by CTV, Molson and LMC that it would acquire on an annual basis. Accordingly, the Commission invites the licensee to apply, without delay, for an exception to the above condition of licence that would specify the maximum permissible amounts of programming produced by CTV, Molson and LMC that it may acquire annually.

Paragraph 3(2)(d) of the pay television regulations prohibits the inclusion of commercial messages in pay television programming. The Commission's decision not to apply this prohibition to the licensee is in recognition of the fact that the packages of sports programs the licensee proposes to acquire, will often contain commercial messages which it would not be practical or cost-effective for the licensee to delete, given that they form an integral part of a live feed.

The licensee confirmed, however, that there would be no commercial messages in any of its special event programming. The Commission also notes Sports/Special's proposal that a significant amount of the service's Canadian content would consist of sports programming produced by CTV, and the licensee's statement that, in most cases, it would be able to remove all the commercial messages contained in such programming before it is distributed to pay-per-view subscribers.

Accordingly, the licensee is required, by condition of licence, to ensure that commercial messages contained in the programming it packages for distribution by licensed DTH distribution undertakings are restricted to those contained in the live feed of out-of-market programming in the category of sports. The Commission expects Sports/Specials to ensure that, to the maximum extent possible, the commercial messages contained in this element of its service are stripped from the live sports programs prior to their distribution.

Moreover, consistent with the conditions of licence imposed on other DTH PPV licences issued today, it is a condition of licence that the licensee not sell, or accept compensation for, any commercial message on the service.

Exclusivity and preferential rights

By virtue of section 5(a) of Order-In-Council P.C. 1995-1106, dated 6 July 1995 (the Order), the Commission is required "to prohibit, by appropriate means, [DTH pay-per-view programming undertakings] from acquiring exclusive or other preferential rights to pay-per-view distribution of feature films and other programming within Canada". Most of the participants who addressed this issue at the hearing were of the view that a condition of licence would constitute the most appropriate means of implementing this component of the Order. The Commission agrees with this approach and, accordingly, the licensee will be prohibited, by condition of licence, from acquiring exclusive or other preferential rights to pay-per-view programming exhibited as part of its service.

The term "preferential rights" is broad in scope and could be the subject of different interpretations in light of the particular circumstances at hand. For this reason, the Commission considers that, in dealing with complaints relating to the acquisition of preferential rights, it is preferable to allow the parties to frame the issues as they see fit, and to put forward their respective views as to what might constitute a breach of the condition of licence, on a case-by-case basis.

Revenue splits and carriage arrangements

The licensee has proposed a 50/50 revenue split between itself and DTH licensees. While the applicant intends to provide a feed of its service to each DTH distributor, its application is predicated on each distributor assuming responsibility for costs associated with carriage and billings.

The licensee did not request that DTH distribution licensees be required to distribute the proposed service on a mandatory basis. In licensing this undertaking, the Commission has therefore not considered this service in the context of any specific access policy framework.

However, as discussed further in Public Notice CRTC 1995-217 accompanying this and other decisions issued today on applications considered at the 30 October 1995 Public Hearing, the Commission has determined that it is reasonable for the licensees of DTH distribution undertakings generally to assume the costs associated with digitizing, compressing and uplinking the services of DTH television programming undertakings.

Canadian content

In its application, Sports/Specials proposed that a minimum of 20% of the total number of hours of programming it packages for delivery to DTH distribution undertakings would be Canadian. At the hearing, the applicant confirmed that it would abide by a condition of licence specifying a minimum permissible Canadian content level of 20% which would be based on the number of hours actually made available each year by licensed DTH distribution undertakings for distribution to their pay-per-view subscribers.

The Commission is satisfied that this level of Canadian content is sufficient, given the nature of the proposed service. Accordingly, it is a condition of licence that the licensee, through its agreements with the licensees of DTH distribution undertakings, shall ensure that, during the period between the date the service commences operations and 31 August 1996, and in each subsequent broadcast year, a minimum of 20% of the total number of hours of Sports/Specials programming that is made available each year by the licensees of DTH distribution undertakings to their pay-per-view subscribers is Canadian.

Production fund

In its application, Sports/Specials made a commitment to contribute amounts, ranging from $50,000 in year one to $472,000 in year seven, to fund new Canadian programs in under-represented categories. The applicant indicated that it was its intention to have these contributions administered through an existing independent agency. In most years, these amounts represent approximately 4.3% of the applicant's projected gross revenues. At the hearing, the applicant indicated that these amounts had been calculated on the basis of its projected gross revenues, minus a deduction for costs associated with sales promotion.

As stated in Public Notice CRTC 1995-217, the Commission has decided to require the licensees of all DTH distribution undertakings and of all DTH pay-per-view television programming undertakings to make contributions representing no less than 5% of their gross annual revenues to an existing Canadian program production fund.

Accordingly, by condition of licence, the licensee is required to contribute a minimum of 5% of the gross annual revenues earned by its DTH pay-per-view television programming undertaking to an existing, independently-administered, Canadian program production fund in the following manner:

 a) once the service commences operations, the licensee shall set aside a minimum of 5% of its gross monthly revenues for remittance to the fund of its choice;

 b) the licensee is required to report to the Commission, within six months of today's date, identifying the name of the fund to which it has chosen to contribute, and confirming that the amounts previously set aside for the fund have been remitted to it;

 c) the licensee is further required, thereafter, to make its contributions to the fund in the form of monthly installments paid within 45 days of month's end and representing a minimum of 5% of that month's gross revenues.

Employment equity

In Public Notice CRTC 1992-59 dated 1 September 1992 and entitled "Implementation of an Employment Equity Policy", the Commission announced that the employment equity practices of broadcasters would be subject to examination by the Commission. In this regard, the Commission encourages the licensee to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.

Other matters

It is a condition of licence that the licensee shall not enter into an affiliation agreement with the licensee of a DTH distribution undertaking, unless the agreement incorporates a prohibition against linkage of the Sports/Specials service with any non-Canadian discretionary service.

By condition of licence, the licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) "Sex-role Portrayal Code for Television and Radio Programming", as amended from time to time and approved by the Commission.

By condition of licence, the licensee shall adhere to the "Pay Television Programming Standards and Practices Code", as amended from time to time and approved by the Commission.

By condition of licence, the licensee shall also adhere to the "Pay Television and Pay-Per-View Programming Code Regarding Violence", as amended from time to time and approved by the Commission.

The Commission acknowledges, and has considered, the interventions submitted in respect of this application.

Allan J. Darling
Secretary General

APPENDIX TO DECISION CRTC 95-907

Conditions of licence

1. The service shall consist of programming to be drawn exclusively from the categories set out in Item 6 of Schedule I to the Pay Television Regulations, 1990 (the pay television regulations), with the exception of categories 7 (drama), 8 (music and dance) and 10 (game shows).

2. The licensee shall adhere to the pay television regulations, with the exception of paragraphs 3(2)(d),(e) and (f). The definition of "licensee" contained in subsection 2(1) is not applicable.

3. Except as may otherwise be authorized by the Commission upon application, the licensee shall not distribute programming, other than filler programming, that is produced by the licensee after today's date, or that is produced by a person related to the licensee after the later of today's date and the day on which the person becomes related to the licensee.

4. The licensee shall ensure that commercial messages contained in the programming it packages for distribution by licensed DTH distribution undertakings are restricted to those contained in the live feed of out-of-market programming in the category of sports.

5. The licensee shall not sell, or accept compensation for, any commercial message on the service.

6. The licensee shall not acquire exclusive or other preferential rights to any pay-per-view programming exhibited as part of its service.

7. The licensee, through its agreements with the licensees of DTH distribution undertakings, shall ensure that, during the period between the date the  service commences operations and 31 August 1996, and in each subsequent broadcast year, a minimum of 20% of the total number of hours of Sports/Specials programming that is made available each year by the licensees of DTH distribution undertakings to their pay-per-view subscribers is Canadian. For the purpose of this condition, the broadcast year shall begin on 1 September in any year and terminate on the following 31 August.

8. The licensee shall contribute a minimum of 5% of the gross annual revenues earned by its DTH pay-per-view television programming undertaking to an existing, independently-administered, Canadian program production fund in the following manner:

 a) once the service commences operations, the licensee shall set aside a minimum of 5% of its gross monthly revenues for remittance to the fund of its choice;

 b) the licensee is required to report to the Commission, within six months of today's date, identifying the name of the fund to which it has chosen to contribute, and confirming that the amounts previously set aside for the fund have been remitted to it;

 c) the licensee is further required, thereafter, to make its contributions to the fund in the form of monthly instalments paid within 45 days of month's end and representing a minimum of 5% of that month's gross revenues.

9. The licensee shall not enter into an affiliation agreement with the licensee of a DTH distribution undertaking, unless the agreement incorporates a prohibition against linkage of the Sports/Specials service with any non-Canadian discretionary service.

10. The licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) "Sex-role Portrayal Code for Television and Radio Programming", as amended from time to time and approved by the Commission.

11. The licensee shall adhere to the "Pay Television Programming Standards and Practices Code", as amended from time to time and approved by the Commission.

12. The licensee shall adhere to the "Pay Television and Pay-Per-View Programming Code Regarding Violence", as amended from time to time and approved by the Commission.