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ARCHIVED -  Decision CRTC 99-88

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Decision CRTC 99-88

Ottawa, 19 April 1999
Bell Satellite Services Inc.
Across Canada – 199804175
12 November 1998 Public Hearing
National Capital Region
New national direct-to-home pay-per-view undertaking
The Commission approves the application by Bell Satellite Services Inc. (BSSI) for a national direct-to-home pay-per-view (DTH PPV) service, offering movies and other acquired programming on up to 22 channels in English and 8 in French. The new service will distinguish itself from other DTH PPV services by offering up to 10% of its programming in languages other than English and French, and by offering a greater amount of children’s programming than is usually available from pay-per-view services. The licence will expire 31 August 2005.
Additional diversity in PPV programming
1. The new service will be offered to the subscribers of the direct-to-home service provided by BSSI, and known as Bell ExpressVu. The Commission is satisfied that implementation of the programming plans as set out in the application will create a new service offering increased diversity and choice for consumers. The applicant plans a service that will offer distinctive programming. Specific commitments related to programming plans have been applied as conditions of licence, set out in the appendix to this decision. In addition, the Commission wishes to emphasize its expectation that the programming diversity commitments be satisfied or exceeded during the licence term.
Description of service
2. The PPV programming offered by the applicant will consist entirely of acquired programming. It will predominately be made up of feature films, but will also include concerts, sports events and other special events. The applicant stated that it intends to offer a service with a character distinct from other PPV services, by offering up to 10% of its programming in languages other than English and French, and by offering increased programming directed to children.
3. The licensee will support the creation of additional Canadian programming through the contribution in each broadcast year of at least 5% of its annual gross PPV revenues to an independently administered Canadian program production fund. This contribution is the subject of a condition of licence set out in the appendix to this decision.
4. In its application, BSSI proposed that it would provide 22 English signals and 8 French signals, plus English and French-language barker channels carrying promotional material. The applicant stated that, should the total number of signals offered move above or below 30, it would ensure that the English and French signals would be maintained in a 3:1 ratio, barker channels excluded. However, the minimum number of French signals would be no fewer than five.
5. As part of its application, BSSI made a number of commitments respecting its proposed English-language programming. These commitments include the broadcast of at least 12 Canadian feature films per broadcast year (including all new Canadian feature films suitable for PPV exhibition and meeting the Pay Television Standards and Practices Code), as well as a minimum of four Canadian-based events. The applicant further committed to remit to the rights holders of all such films and two such events each broadcast year, 100% of the revenues earned by the licensee from their exhibition. BSSI also made a commitment to present a minimum yearly ratio of Canadian to non-Canadian first-run feature film titles of 1:20, and a yearly ratio of Canadian to non-Canadian events of 1:7.
6. BSSI made similar commitments with respect to its proposed French-language programming. It stated that it would provide, in each broadcast year, a minimum of 20 Canadian feature films in the original French-language version or dubbed in French, which have been exhibited in theatres in French-language markets. This would include all new Canadian features that are available and suitable for PPV and meet the Pay Television Standards and Practices Code. In respect of French-language Canadian feature films, the applicant commited to remit 100% of the gross revenues derived from the broadcast of those films to distributors and providers, with a minimum of 60% to the programming providers. The commitment made by the licensee to the ratio of Canadian to non-Canadian first-run feature films is no less than 1:12 in each broadcast year on each channel used for their broadcast.
7. With respect to Canadian-based events targeting the French-language market, the applicant made a commitment to provide six such events in both years one and two; eight in both years three and four; ten each in years five and six; and twelve in year 7 of operation. The commitment to the ratios of Canadian to non-Canadian events on each channel used for their broadcast in years one and two is 6:20, in years three and four is 8:20, in years five and six is 10:20 and in year seven of operation is 12:20. Finally, the applicant also committed to schedule, repeat and promote all Canadian feature films in the same manner as non-Canadian feature films.
8. For the period from the commencement of operations to 31 August 1999, BSSI proposed that its performance with respect to its commitments regarding Canadian content in feature films and events would be assessed on a pro-rata basis.
9. BSSI proposes to launch the new service as soon as the new Canadian satellite Nimiq is operational, expected during the Spring of 1999.
Ownership, access and vertical integration issues
10. BSSI is controlled by BCE Inc. (BCE). BCE is the parent company of Bell Canada. The applicant is also the general partner in a limited partnership that is the licensee of the national DTH undertaking known as Bell ExpressVu and of a national satellite relay distribution undertaking (Decision CRTC 99-87 of today's date). The proposed service will be an integral part of the DTH service offered by Bell ExpressVu. A business relationship in which the same parent company controls the DTH distribution as well as the programming offered in a DTH PPV environment is often referred to as a "vertically integrated" undertaking.
11. Interventions were submitted in opposition to this application by Viewer’s Choice Canada Inc./Canal Indigo, a partnership (VCC/Canal Indigo) and WIC Premium Television Ltd. (WPT), both of which are licensees of DTH PPV services currently carried by Bell ExpressVu and projected to be carried for at least two years following the launch of the PPV service. Both interventions take issue with the possible negative effects of vertical integration in this case and noted that approval of this application would result in the new service eventually replacing the carriage of their own DTH PPV services by Bell ExpressVu.
12. BSSI made it clear in its application that, if the application were approved, Bell ExpressVu would not carry any general-interest DTH PPV services other than its own. BSSI stated that it considers there are important economies of scale to a vertically-integrated DTH distribution and DTH PPV programming operation.
13. The Commission notes that the access requirements for DTH undertakings set out in Part 4 of the Broadcasting Distribution Regulations (the regulations) require only that such undertakings carry both an English-language and a French-language general-interest DTH PPV service. There is no requirement in the regulations for carriage of either a particular DTH PPV service or multiple general-interest DTH PPV services.
14. Also with regard to vertical integration, on 6 July 1995, the Governor in Council issued Directions to the CRTC (Direct-to-Home (DTH) Pay-Per-View Television Programming Undertakings) Order SOR/95-320 (the Direction).
15. The Direction charges the Commission with promoting a dynamically competitive market for DTH PPV undertakings, through its licensing actions. It also directs the Commission not to refuse a licence to an applicant for a DTH PPV service for the sole reason that the applicant also holds a licence to carry on a DTH distribution undertaking.
Sports programming
16. An intervention in opposition to this application was also submitted by 3216195 Canada Inc., the licensee of the specialty service Sports/Specials Pay Per View (Sports/Specials). Sports/Specials argued that, if the BSSI application were approved, the Commission should apply a condition of licence prohibiting the carriage of the new service by Bell ExpressVu unless Sports/Specials is also distributed by Bell Express Vu. It also requested that the Commission impose a condition of licence limiting the sports programming in BSSI’s schedule. According to Sports/Specials, its own service would experience financial harm if such limitations were not imposed.
17. The Commission has decided not to impose the conditions suggested in the intervention by Sports/Specials. While Sports/Specials would not be required to guarantee the provision of a continuous service to BSSI, it would be in a position to consume up to 10 Bell ExpressVu channels, possibly on short notice. The Commission is concerned that such an arrangement could lead to undue disruption in the BSSI schedule, as well as the under-utilization of capacity, especially when the long term satellite capacity situation is unclear. With respect to the limitation of sports programming to be offered by the DTH PPV service, the Commission is not convinced that such a limitation is necessary, given the discretionary nature of such programming, and the relatively modest number of subscribers that Bell Express Vu has, compared to other distributors, particularly cable undertaking operators. Furthermore, limited interest DTH PPV services are not required to be carried under the provisions of the regulations.
18. The Commission notes and has considered all of the interventions submitted with respect to this application.
The Commission’s rationale
19. The Commission has licensed BSSI as a part of a vertically-integrated DTH distribution/DTH PPV programming undertaking for a variety of reasons. First, the Commission notes that DTH PPV is a distinctly different and currently very small sector of the overall distribution market place, especially in comparison to the cable industry. It is satisfied that vertical integration in this environment will not have an undue negative effect upon the broadcasting system as a whole. Secondly, the regulations do not set out any requirement for the distribution of more than one general-interest DTH PPV service in each official language by a DTH distribution undertaking. While the interveners have raised the issue of access as a reason to deny the application, the regulations do not require the applicant’s DTH distribution undertaking to provide distribution to multiple DTH PPV services. Thirdly, the Direction specifies that the Commission not refuse to grant such a licence solely on the basis of vertical integration. Finally, it is the opinion of the Commission that approval of the proposed service will contribute to provision to the Canadian consumer of an additional level of choice and diversity in entertainment programming, and is therefore in the public interest. In particular, BSSI will provide a service which will introduce new and different PPV programming to the broadcasting system.
Expectations
20. The Commission is of the opinion that the applicant’s commitments in a variety of programming matters are integral to the granting of this licence. It considers the adherence to these commitments to be of great importance in the creation of a service which will offer increased diversity to Canadian consumers. The Commission therefore expects the licensee to:

· adhere to its commitments related to programming directed to children and programming in languages other than English and French;

· adhere to its commitment to offer an identifiably diverse service; and

· comply with the Pay Television Programming Standards and Practices Code.

Conditions of licence
21. The Commission will issue a licence expiring 31 August 2005. The licence will be subject to the conditions specified in the appendix to this decision and in the licence to be issued.
Other matters
22. The licence will only be issued and effective when the undertaking is ready to begin operation. When the licensee has completed construction and is prepared to commence operation, it must advise the Commission in writing. If the undertaking is not constructed and ready to operate within 12 months of today’s date, extensions to this time frame may be granted provided that the licensee applies in writing to the Commission before the 12-month period or any extension of that period expires.
23. The Commission notes that this licensee is subject to the Employment Equity Act that came into effect on 24 October 1996 (1996 EEA), and therefore files reports concerning employment equity with Human Resources Development Canada. As a result of a consequential amendment to the Broadcasting Act, the Commission no longer has the authority to apply its employment equity policy to any undertaking that is subject to the 1996 EEA.
Secretary General
This decision is to be appended to the licence. It is available in alternative format upon request, and may also be viewed at the following Internet site:

www.crtc.gc.ca

Appendix to decision CRTC 99-88
Conditions of licence
(1) The licensee must ensure that the service consists of programming to be drawn from the categories set out in Item 6 of Schedule 1 of the Pay Television Regulations, 1990, as amended, generally consisting of feature films, but also including concerts, sports events and other special events, and sold on both an individual and series basis.
(2) The licensee is authorized to make available for distribution by licensed DTH distribution undertakings its service, which will consist of as many as 30 channels of programming with no less than 8 French channels as well as both English- and French-language "barker" channels.
(3) If the total number of channels moves above or below 30, the licensee shall maintain the channels in a ratio of French to English of 1:3, with a minimum of 5 French-language signals in addition to the French-language barker channel.
(4) With respect to English-language programming, the licensee shall, through its agreements with the licensees of DTH distribution undertakings, ensure that in each broadcast year, the following is made available by these licensees to their PPV subscribers:

a) a minimum amount of 12 Canadian feature films (including all new Canadian feature films suitable for PPV exhibition and meeting the Pay Television Standards and Practices Code);

b) a minimum amount of 4 English-language Canadian-based events; and

c) a minimum yearly ratio of Canadian to non-Canadian first-run feature film titles of at least 1:20, and a yearly ratio of Canadian to non-Canadian events of at least 1:7.

(5) With respect to French-language programming, the licensee shall, through its agreements with the licensees of DTH distribution undertakings, ensure that, in each broadcast year, the following is made available by these licensees to their PPV subscribers:

a) a minimum amount of 20 Canadian feature films in the original French-language version, or dubbed in French, which have been exhibited in theatres in French-language markets, including all new Canadian feature films suitable for PPV exhibition and meeting the Pay Television Standards and Practices Code;

b) a minimum amount of 6 French-language events in each of years one and two of operation, eight in each of years three and four; ten in each of years five and six; and twelve in year seven of operation; and

c) a minimum yearly ratio of Canadian to non-Canadian first-run feature films of 1:12, and a minimum ratio of Canadian to non-Canadian events, on each channel used for their broadcast, of at least 6:20 in years one and two of operation, 8:20 in years three and four, 10:20 in years five and six and 12:20 in the seventh year of operation.

(6) During the period from the commencement of operations of the service to 31 August of that broadcast year, the licensee’s performance with respect to its commitments regarding Canadian content in feature films and events will be assessed on a pro-rata basis.
(7) The licensee shall ensure that both English-language and French-language Canadian feature films are scheduled, repeated and promoted in the same manner as non-Canadian feature films.
(8) The licensee shall contribute at least 5% of its gross annual revenues derived from its PPV broadcasting activities to independently-administered Canadian production funds, to support the development of Canadian programming.

a) Of this amount, 80% must be directed to the Canadian Television Fund (CTF) (as defined in the Broadcasting Distribution Regulations, as amended from time to time) while up to 20% may be directed to one or more independently-administered production funds other than the CTF, provided that these other funds meet the criteria set out in Public Notice CRTC 1997-98, as may be amended from time to time.

b) The licensee is required to remit its first contribution to the CTF, and to such other independently-administered production fund(s) as it may elect to support in accordance with paragraph (a) above, no later than 45 days following the end of the month in which it commences operations. Contributions made thereafter shall take the form of monthly instalments to be remitted within 45 days of month's end, and representing a minimum of 5% of that month's gross revenues.

(9) The licensee shall remit to the rights holders of all English-language Canadian films and two Canadian-based events per year, 100% of the gross revenues earned by the licensee from the exhibition of these films and events. With respect to French-language Canadian feature films, the licensee shall remit 100% of the gross revenues earned by the licensee from the exhibition of these films to distributors and providers, with a minimum of 60% to the programming providers.
(10) The licensee shall not acquire exclusive or other preferential rights to PPV programming exhibited as part of its service.
(11) The licensee shall not enter into an affiliation agreement with the licensee of a DTH distribution undertaking unless the agreement incorporates a prohibition against the linkage of the licensee's PPV service with any non-Canadian discretionary service.
(12) The licensee shall adhere to the Pay Television Regulations, 1990.
(13) 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.
(14) The licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' Sex-Role Portrayal Code for Television and Radio Programming as amended from time to time and approved by the Commission.
For the purpose of the above conditions of licence, "broadcast year" means that period between 1 September in any year and the following 31 August.
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