ARCHIVED -  Decision CRTC 96-595

Decision

Ottawa, 4 September 1996

Decision CRTC 96-595

3216195 Canada Inc., carrying on business as Sports/Specials Pay-Per-View

Across Canada - 199600644

Sports/Specials Pay-Per-View - Approved

Following a Public Hearing beginning on 6 May 1996 in the National Capital Region, the Commission, by majority vote, approves the application by 3216195 Canada Inc. (the licensee) for a broadcasting licence to carry on a national English-language pay television programming undertaking providing a digital pay-per-view (PPV) service to be delivered via satellite.

The Commission will issue a licence expiring 31 August 2003, subject to the conditions specified in the appendix to this decision and in the licence to be issued. The service of the programming under-taking must, by condition of licence, be in operation within 36 months of this decision unless the service provider, prior to the expiry of this period, applies and receives an extension of time within which to commence operations.

Distribution arrangements

The new service will be known as Sports/Specials Pay-Per-View. As explained in Public Notice CRTC 1996-120 which introduces this and other decisions issued today, and in accordance with the the provisions set out in the distribution and linkage notice also issued today (Public Notice CRTC 1996-121), the service will be available exclusively as a discretionary service, and will be distributed across the country at the discretion of terrestrial broadcasting distribution undertakings that are subject to the Commission's distribution and linkage requirements. As a specialized, as opposed to a general interest, pay television service, Sports/Specials Pay-Per-View will not have guaranteed access to any channel or channels of distribution undertakings under the Commission's Access Rules.

The Commission notes that the satellite signals to be distributed by the proposed undertaking will likely be those that will be distributed by the licensee on its national English-language, Direct-to-home (DTH) pay-per-view television programming undertaking, whose sports/specials service was authorized for carriage by licensed DTH satellite distribution undertakings, at their discretion, in Decision CRTC 95-907 dated 20 December 1995. In that decision, the Commission emphasized that its approval of the DTH pay-per-view service did 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". Today's decision essentially authorizes 3216195 Canada Inc. to offer its proposed sports/specials pay-per-view service, as a discretionary pay television service, to subscribers served by the terrestrial distribution industry.

In its application, Sports/Specials Pay-Per-View indicated that it planned to launch the service at the same time as its DTH pay-per-view service commences operations. It also emphasized at the hearing that its proposal was predicated on the introduction of digital capacity by distribution undertakings, that it would therefore expect to receive no distribution on analog channels, and that it was prepared to accept a condition of licence precluding such distribution. A condition of licence to this effect is included in the attached appendix.

Consistent with the Commission's policy with respect to pay-per-view services, it is a further condition of licence that the licensee not enter into an affiliation agreement with the licensee of a distribution undertaking that is subject to the Commission's distribution and linkage requirements, unless the agreement incorporates a prohibition against linkage of the Sports/Specials Pay-Per-View service with any non-Canadian discretionary service.

Ownership

The licensee company is effectively controlled by CTV Television Network Ltd. (CTV) through its ownership of 60% of the company's issued voting interests. The remaining voting interests are 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.

The licensee's controlling shareholder, CTV, is Canada's only privately-owned national television network. As a consequence of Decision CRTC 96-251, voting rights in respect of the largest block of the company's shares (42,9%) is exercised by Baton Broadcasting Incorporated (Baton), which is also one of Canada's largest operators of private television stations. Baton, itself, is indirectly controlled by members of the Eaton family.

Programming

Nature of service

As proposed, the licensee will provide an English-language pay television (pay-per-view) service consisting of programs 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). A condition of licence requiring Sports/Specials Pay-Per-View to preserve the nature of the service, as described above, is set out in the appendix to this decision.

Programming acquired from related persons

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 at the Toronto headquarters of CTV for distribution to licensees of distribution undertakings.

As was the case with 3216195 Canada Inc. in the context of its similar DTH pay-per-view application, the applicant was unable to specify the amount of program-ming that it would acquire from its share-holders on an annual basis. In Decision CRTC 95-907, the Commission indicated that it might be reasonable, in certain circumstances, to permit pay television and DTH pay-per-view licensees to distribute both filler and other programming produced either by themselves or by others to whom they are related.

At that time, the pay television regulations prohibited a pay television licensee from distributing programming, other than filler programming, that is produced by itself or by a person to whom it is related. The Commission has since amended these to permit licensees to apply for a condition of licence that would allow them to distribute both filler and other programming produced by themselves or by others to whom they are related. The Commission reminds the licensee that, should it apply for such a condition of licence, it would be required to specify in its application the maximum amounts of programming (other than filler programming) that it proposes either to produce on an annual basis or to acquire each year from persons to whom it is related.

Exclusive and preferential rights

As recommended in interventions presented at the hearing by the licensees of certain existing pay television undertakings, and as agreed to by the applicant, it is a condition of licence that the licensee not acquire exclusive or other preferential rights to any 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 would be best 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, and for the Commission to consider such matters on a case-by-case basis.

Canadian content

Sports/Specials Pay-Per-View agreed to accept a condition of licence that would parallel that imposed on its DTH pay-per-view undertaking, which specifies a minimum permissible Canadian content level of 20%, based on the number of hours of programs actually made available each year by distribution undertakings to their pay-per-view subscribers. A condition of licence requiring adherence to this minimum level of Canadian content is contained in the appendix to this decision.

Funding for Canadian programming

Also consistent with the approach taken by the Commission in Decision CRTC 95-907, and as agreed to by Sports/Specials Pay-Per-View, the Commission has decided to require the licensee to contribute a minimum of 5% of the gross annual revenues earned by its pay television undertaking herein licensed to an existing, independently-administered Canadian program production fund. A condition of licence to this effect is contained in the appendix to this decision.

Advertising

The Commission recognizes that many of the packages of sports programming the licensee proposes to acquire from other sources will include commercial messages as an integral part of an out-of-market live feed, and that these messages could not be deleted by the licensee in any practical or cost-effective manner.

At the same time, the Commission notes that the licensee's operations, in respect of the pay television service authorized by this decision, will be governed by the pay television regulations, including paragraph 3(2)(d) of those regulations which prohibits the inclusion of commercial messages.

In Public Notice CRTC 1995-217 introducing Decision CRTC 95-907 and other decisions on applications proposing new DTH distribution and pay-per-view programming undertakings, the Commission announced that, as soon as practicable, it would propose an amendment to the pay television regulations that will authorize the distribution, in limited circumstances, of programming containing commercial messages. The Commission has, in Public Notice CRTC 1996-118, proposed such an amendment that, once made, would permit Sports/Specials Pay-Per-View to distribute programming that includes commercial messages contained in the live feed of out-of-market programming in the category of sports. The Commission further intends to have the amendment made before the licensee commences operation.

Other Matters

Employment equity

In Public Notice CRTC 1992-59 dated 1 September 1992 and entitled "Imple-mentation of an Employment Equity Policy", the Commission announced that the employment equity practices of broad-casters would be subject to examination by the Commission. In its application, Sports/ Specials Pay-Per-View indicated that it would fully incorporate the CTV Employ-ment Equity Policy and plan into the operation of the proposed service. The Commission encourages the licensee to consider the equity issues in its hiring practices and in all other aspects of its management of human resources. The Commission will review the licensee's performance in implementing the employment equity practices at the time of licence renewal.

Closed captioning

The Commission encourages Sports/Specials Pay-Per-View to close caption 90% of its programming, by the end of the licence term.

Conclusion

The Commission is satisfied that this new service, under the effective control of CTV,
will benefit the broadcasting system and contribute to diversity by increasing the revenues available to the Canadian program production industry and by providing viewers with increased choice.

The Commission acknowledges and has considered the interventions submitted with respect to this application.

This decision is to be appended to the licence.

Allan J. Darling
Secretary General

APPENDIX / ANNEXE

Conditions of licence for Sports/Specials Pay-Per-View

1. The licensee shall provide a national English-language pay television service. The licensee shall draw its programs 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 Category 7 (drama), Category 8 (music and dance) and Category 10 (game shows).

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

3. The licensee, through its agreements with the licensees of terrestrial distribution undertakings, shall ensure that, in each broadcast year, a minimum of 20% of the total number of hours of Sports/Specials Pay-Per-View programs that are made available each year by 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.

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

(a) once the service commences operation, 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 commencing operation, 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.

5. The licensee shall not enter into an affiliation agreement with the licensee of a distribution undertaking that is subject to the Commission's distribution and linkage requirements, unless the agreement incorporates a prohibition against linkage of the Sports/Specials Pay-Per-View service with a non-Canadian discretionary service.

6. This undertaking must be in operation within 36 months of the date of this decision, or, where the licensee applies to the Commission within this period and satisfies the Commission that it cannot complete implementation before the expiry of this period and that an extension is in the public interest, within such further period time as is approved in writing by the Commission.

7. 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.

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

9. 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.

10. The licensee shall ensure that its agreements with distribution undertakings specify that the service may not be distributed on analog channels.