ARCHIVED - Broadcasting Public Notice CRTC 2002-31

Broadcasting Public Notice CRTC 2002-31

Ottawa, 12 June 2002

A licensing policy to oversee the transition from analog to digital, over-the-air television broadcasting

In Call for comments on a proposed policy to oversee the transition from analog to digital over-the-air television broadcasting, Public Notice CRTC 2001-62, 5 June 2001 (Public Notice 2001-62), the Commission invited submissions on its proposals concerning the policy objectives and principles that would govern the transition from analog to digital television (DTV) broadcasting.

In Public Notice 2001-62, the Commission also asked various questions about what would constitute an appropriate regulatory framework for the carriage of over-the-air DTV signals by broadcasting distribution undertakings (BDUs). In Call for comments on a proposed policy framework for the distribution of digital television services, Public Notice CRTC 2002-32, which is also issued today, the Commission examines these views and suggestions, and sets out for further public comment its preliminary conclusions regarding the policy and related regulatory amendments that should govern the distribution of DTV services.

The present notice announces the Commission's policy framework for the broadcast of digital, over-the-air television services. The Commission is satisfied that this framework and its underlying principles will serve the objectives of the Broadcasting Act. The Commission is now prepared to give fast-track consideration to applications for broadcasting licences to carry on what will be known as transitional digital television undertakings, provided that the applications accord with the policy objectives and principles set out below, and are based on the Department of Industry's allotment plan for digital television.

General policy objectives

Digital television (DTV) is a new technology based on the Advanced Television Systems Committee transmission standard (A/53). The new standard has been adopted for use in Canada, as well as in the United States, and is designed to replace the current analog NTSC broadcast system that has been in use now in North America for over half a century. The superior video and audio characteristics of digital television technology using the new A/53 standard will overcome many of the shortcomings of today's analog system which have become increasingly apparent as consumer TV sets have become more technologically advanced. The standard defines a number of digital television formats ranging from narrow screen to wide screen, and from "low definition" to "high definition" television, or HDTV. The standard provides for the capacity to transmit either one HDTV signal or up to five signals of lower definition programming, as well as some supplementary data in one 6 MHz television channel.

In Call for comments on a proposed policy to oversee the transition from analog to digital over-the-air broadcasting, Public Notice CRTC 2001-62, 5 June 2001 (Public Notice 2001-62), the Commission announced that, in developing its policy to oversee the transition from analog to digital television, it would be guided by the following objectives:

• The transition policy should provide guidance to broadcasters, distributors and producers in their adoption of the new digital television technology.

• The continued strength and growth of the Canadian broadcasting industry should be fostered and its cultural objectives maintained.

• The production, broadcast and distribution of high quality A/53 Canadian programs across the country should be encouraged.

• Canadian viewers should benefit from these technological advances to the fullest possible extent.

• The orderly and timely migration to advanced digital television services should not be impeded by unnecessary regulation.

The Commission reaffirms each of these five policy objectives.

In Public Notice 2001-62, the Commission also advanced for public comment a number of general policy principles, including its preliminary view that digital technology should be treated as a replacement for analog technology. Further, it suggested that a voluntary model that would develop at a pace set by the marketplace, rather than a transition model based on mandated deadlines, would be the more appropriate approach for the Canadian broadcasting system.

The Commission also expressed the view that issuing a new, transitional digital television licence to a television broadcaster would be preferable to amending its existing licence. One reason given by the Commission for this view was that a new licence would enable it to authorize the broadcaster to offer a certain amount of digital programming that differs from its analog program offering. The Commission stated that it would be prepared to allow up to 14 hours per week of such programming. The Commission added that, while it would encourage existing broadcasters to apply for transitional DTV licences, it might be willing to consider applications by prospective new entrants, should incumbent broadcasters fail to take advantage of the available spectrum allotments, or should channel capacity exceed that allotted to existing broadcasters.

The comments received by the Commission dealt with a range of issues. Although parties raised questions with respect to certain specific policy proposals and how they should be implemented, there was general support for the overall thrust of the proposed policy principles. In the following sections of the present notice, the Commission examines the views of parties on the various issues and sets forth its determinations on each.

The Commission's determinations on a licensing policy to oversee the transition from analog to digital, over-the-air broadcasting

DTV as a replacement technology

As noted earlier, the Commission's preliminary view expressed in Public Notice 2001-62 was that DTV should be introduced in Canada as a replacement technology, rather than as a new technology that would simply take its place alongside the existing analog system. Although there was some discussion about the particulars, there was overall support for this approach. Accordingly, it is the Commission's determination that:

· Digital technology will be treated as a replacement for analog technology.

No mandated transition deadline

There was also broad acknowledgement that the Commission's preliminary proposal for a voluntary, market-driven transition model, without mandated deadlines, would be the most realistic and appropriate approach for Canada to adopt. The Canadian Association of Broadcasters (CAB) emphasized that "the DTV rollout should take place in stages, moving from the largest primary markets to secondary markets over a period of years". It added that, "the pace and degree of market acceptance in larger markets will determine when the DTV rollout can be extended to smaller markets." The Canadian Cable Television Association (CCTA) agreed with the CAB's view that the market-driven model proposed by the CRTC would be the most appropriate approach, and would be far preferable to ".earlier approaches in North America that assumed the abandonment of the analog spectrum".

Some concern was expressed about the difficult business decisions that confront small market broadcasters in their efforts to weigh accurately the benefits and costs of converting to DTV. Télé Inter-Rives Ltée, the licensee of CIMT-TV Rivière-du-Loup and owner of three other television stations in the Gaspé region of Quebec, proposed a delay in the DTV roll-out of between five and ten years in small markets.

The Canadian Broadcasting Corporation (CBC) acknowledged that the "delivery of the CBC's programming will need to become digital in the future". It noted, however, that "the availability of additional funding is not subject to the Corporation's control". It added that it will be obliged to seek additional funding for this activity because its "current programming priorities and limited resources do not permit the Corporation to pursue digital television programming activities in any substantive manner at this time".

A joint submission by CTV Television Inc. and Bell ExpressVu Limited Partnership (CTV/Bell) suggested an approach that would incorporate an implementation plan, albeit a voluntary one. In CTV/Bell's view, such a plan would give the industries most directly concerned - the broadcasting, production and distribution industries - a timeframe within which they could plan their transition strategies. CTV/Bell also argued that an implementation plan would reduce the "first mover" risk, whereby a broadcaster might find itself as the unsupported lead in the rollout of DTV in its marketplace.

There were two comments received by the Commission that were more clearly opposed to the voluntary, market-driven approach proposed by the Commission for the introduction of DTV in Canada. Mr. Brian Olmsted expressed concern that such an approach would see the Canadian broadcasting industry fall behind U.S. television broadcasters in the rollout of DTV. Motorola Canada Limited, a wireless equipment manufacturer, also considered that the Commission should take a more pro-active role in hastening the introduction of DTV.

On balance, the Commission believes that reliance on an implementation plan with a specified deadline for the rollout of DTV would lead to more problems than it would resolve. It agrees that such a plan could produce potential benefits. It is also aware that unnecessary delay in the roll out of DTV could result in the loss of Canadian audiences to the DTV signals of non-Canadian broadcasters, and limit the broadcasting and sales opportunities available to the producers of digital programming. At the same time, it considers that developing and adhering to an implementation plan would be difficult, given the very rapid rate of technological change and the uncertainty as to how the digital transition will unfold. DTV is a technology whose success is dependent on consumer acceptance, and the pace at which that acceptance will grow is difficult to predict. Accordingly the Commission's determination is that:

• A voluntary, market-driven transition model, without mandated deadlines, is the most appropriate approach in Canada.

New licences will be required for DTV undertakings

Some broadcasters indicated that they would prefer to enter digital television broadcasting by means of amendments to their existing licences. They noted that it has been through such amendments that some radio licensees have been authorized to establish digital radio transmitters. The Commission acknowledges that certain radio station licensees have received licence amendments authorizing them to provide digital programming. These amendments, however, only permit a licensee to simulcast on its digital transmitter the programming aired on its analog transmitter. They also constitute exceptions to the transitional digital radio policy, which specifically calls for the licensing of digital radio undertakings separately from their analog version.

As discussed further below, a transitional digital television licence, like a transitional digital radio licence, will authorize the holder to broadcast each week a maximum of 14 hours of digital programming that does not duplicate the programming broadcast on the analog signal. This unduplicated programming is a distinction that, even in a purely analog environment, would require that a separate licence be issued. Further, digital television undertakings raise substantial issues, including those that surround the carriage of DTV signals by distribution undertakings, that are best addressed through a separate licensing regime. Accordingly, the Commission's determination is that, consistent with parallel provisions contained in the Commission's policy for digital radio:

• A new transitional digital television licence will be issued for each digital television undertaking. Licensees who wish to use digital television facilities to provide programming consisting essentially of a simulcast of their existing analog services will qualify for licensing, subject to specific terms and conditions. The duration of a licence term will be considered as part of the application process.

Fast track consideration of licence applications

Unlike the conversion from black and white to colour television, the new DTV technology is not backward compatible. This means that digital transmissions can only be viewed using digital TV sets or, with some sacrifice in quality, using analog TV sets equipped with set top boxes that can convert the digital signals to analog. For this reason, the Department of Industry has developed an allotment plan for the transition period that identifies an "equivalent" digital channel for each channel used by an existing over-the-air television broadcaster. Thus:

• The Commission will give fast track consideration to applications by existing over-the-air broadcasters that accord with the Commission's transitional digital policy and are based on the Department of Industry's allotment plan for DTV.

Licensing of new entrants

Some parties raised the question of whether new entrants should be licensed during the transition period. The CAB stated that ".it is premature now, and will continue to be so for the foreseeable future, to define a firm cut-off for the expiration of the right to use a DTV spectrum allotment". Individual broadcasters also questioned whether it would be advisable to issue DTV licences to new entrants during the transition. They argued that this would weaken the business case of existing broadcasters for converting to DTV. In the view of these parties, new entrants would fragment audiences, increase the cost of programming, and drive down advertising rates at a time when incumbent broadcasters are under considerable financial stress. They suggested that, if new entrants are to be licensed, the market entry criteria must be amended to reflect the obligations of the digital transition faced by incumbents.

The Commission notes the concerns expressed about the possible licensing of new entrants during the transition period. The Commission emphasizes in this regard that incumbent television broadcasters are encouraged to apply early for transitional DTV licences. In the Commission's view, if a market-driven transition to DTV is to succeed, then market forces, including those brought to bear by prospective new entrants, should not be discouraged, and innovation should be promoted. This is particularly the case in locations where there is available spectrum, or where existing broadcasters are not prepared to offer digital services on a timely basis. The concerns voiced on the matter, most notably by incumbent television broadcasters, will be addressed when applications by prospective new entrants for new digital television undertakings are heard.

Accordingly, the Commission determines that:

• The Commission will follow its normal licensing processes. Should an existing broadcaster fail to apply for a transitional digital television licence within a reasonable period, or otherwise demonstrate that it is not prepared, on a timely basis, to make use of the Department of Industry's spectrum allotment, the Commission is willing to consider applications by prospective new entrants predicated on use of that spectrum.

• Existing broadcasters are encouraged to apply early for new transitional digital television licences and to implement the digital transmitters necessary to make the transition.

The Commission emphasizes that any application for a new television licence filed by prospective new entrants during the transition period, whether predicated on the use of digital or analog spectrum or both, will be considered by the Commission on a case-by-case basis and in accordance with its existing policies. These existing policies include those set out in Building on success - a policy framework for Canadian television, Public Notice CRTC 1999-97, 11 June 1999, and others related to such matters as market entry and the issuance of calls, where appropriate, for competing applications.

Canadian content obligations and the 14 hour program allowance

Under the Commission's policy proposal set out in Public Notice 2001-62, a transitional digital television licensee would be permitted to broadcast a maximum of 14 hours per week of programming that is not duplicated on the analog version of the service. It would be required, however, to ensure that a minimum of 50% of this unduplicated programming be Canadian. The purpose of this proposal was to encourage innovation and experimentation in the development of DTV broadcasting in Canada, promote the production of Canadian high definition digital programming, and attract viewers to the digital transmissions.

Although parties did not oppose the proposed 14-hour per week allowance, some parties noted that it exceeded the amount of local and acquired programming that many smaller broadcasters currently provide in their analog schedules. The CAB supported the broadcast of a certain amount of digital programming that differs from the analog service, including multicast and data services, provided that a majority of the program content broadcast on a licensee's existing analog television service is duplicated on the main DTV signal. The CAB also requested ".content flexibility with respect to the specific obligations and conditions of licence that will be imposed on the unduplicated digital programming broadcast under a transitional DTV licence". The CAB expressed the view that such an approach would enable broadcasters to determine what mix of services best meets the needs of the public and to develop appropriate business cases.

The CCTA also supported the policy proposal that the broadcast of up to 14 hours per week of unduplicated programming be permitted, "provided that such programming is high definition, wide screen [16:9 aspect ratio], quality digital programming". The CCTA added that ".mandatory carriage will not drive penetration; HDTV content and competition for early adopters will". According to the CCTA, to restrict the availability of HDTV programming would only delay the introduction of HDTV in Canada.

The Commission notes that the amount of HDTV programming currently available, including Canadian digital programming, is quite limited. It is concerned that, in the absence of a requirement that 50% of the unduplicated programming on a digital transmitter be Canadian, broadcasters might fill their digital schedules with foreign material, and that the amount of Canadian digital program production would remain limited. The Commission emphasizes that 14 hours per week would be the maximum amount of digital programming that would be permitted to differ from the programming contained in a broadcaster's analog program schedule.

Over the years, one of the approaches taken by the Commission to ensure the production of Canadian television programming has been to impose regulatory requirements on licensees for the exhibition of minimum levels of Canadian content. The Commission is satisfied that this approach has been successful in the past, and considers that it remains appropriate, given the hurdles that broadcasters must overcome during the digital transition. Accordingly, the Commission concludes the following:

• The Commission's existing policies and regulations, as well as the conditions of licence currently applicable to a broadcaster in respect of its analog television service will also apply to any transitional digital programming service the broadcaster may be licensed to provide. These include requirements for the provision of 60% Canadian content during the broadcast year and 50% during the evening broadcast period, and for the exhibition of a minimum of 8 hours per week of priority programming where required by condition of licence.

• Where the licensee of an analog television undertaking is also the licensee of a transitional digital television undertaking, it will be authorized to broadcast a maximum of 14 hours per week of programming on the digital service that is not duplicated on the analog service. Broadcasters will be free to provide lesser amounts of unduplicated digital programming, and may choose to offer none. A minimum of 50% of the unduplicated digital programming must be Canadian.

Program formats

Wide screen programming

The Commission notes that the 16:9 aspect ratio is used for screening most films in movie theatres. It is also a feature of digital, high definition television that is becoming increasingly familiar to television viewers. The Commission believes that a policy that digital programming aired on transitional DTV undertakings adhere to the 16:9 aspect ratio would ensure that even low definition digital telecasts offer some technical improvement over NTSC analog broadcasts. It would also encourage Canadian producers to make use of the wide screen as they move into the production of high definition programming. Accordingly, the Commission's determination is that:

• All programming produced in the 16:9 aspect ratio must be broadcast in that ratio on transitional DTV undertakings. Further, the Commission encourages broadcasters to produce 16:9 format programming or to acquire such programming whenever possible. However, programming originally produced in the 4:3 aspect ratio will not have to be re-formatted.

High definition television programming

DTV technology offers the capacity for a broadcaster to air one HDTV program stream per DTV signal. Alternatively, a DTV signal may be used to transmit two or three medium definition, or up to five low definition program streams plus some supplementary data. Although the Commission is mindful of DTV's capacity to deliver a multiple of program and data streams, it considers that the policy for the transition from analog to digital television should favour the broadcast of HDTV programming, and of Canadian HDTV programming in particular.

Such emphasis would be consistent with the recommendations of the Task Force on the Implementation of Digital Television (the Task Force). The Task Force was established by the government in October 1995, and included participation from a broad cross-section of stakeholders in the broadcasting industry. In its consensus report, which was submitted to the Minister of Canadian Heritage in October 1997, the Task Force stated that Canada must strive for the highest possible quality of digital television service in a timely manner. It therefore recommended that, by the end of 2007, two thirds of each broadcaster's schedule, and two thirds of new Canadian content productions, should be available in the HDTV format. This target date of 31 December 2007 follows by three years the 2004 date projected by the Task Force for the launch of digital television broadcasting in Canada.

The Commission considers that Canadian viewers must be provided programming of the highest quality that fully exploits the spectrum made available for digital broadcasting. The Commission will therefore require that all of the unduplicated programming broadcast by a transitional digital television station, whether it is Canadian or non-Canadian, be in the HDTV format. With respect to Canadian content, the Commission's policies have focused on the evening broadcast period, when television audiences are the largest. Maintaining this focus for the broadcast of HDTV programming during the transition period will allow broadcasters the necessary flexibility to use their digital facilities to experiment with multicast, data and other services of lower definition, delivered during other periods of the day when television audiences are generally smaller. Accordingly:

• All of the programming on the digital service that is not duplicated on the analog service must be in the HDTV format.

• All Canadian programs aired during the evening broadcast period by the licensee of a transitional DTV undertaking, whether duplicated or not, are to be broadcast in the HDTV version, where such a version exists.

• Consistent with the Task Force recommendation, the Commission encourages transitional DTV broadcasters to ensure that, by 31 December 2007, two thirds of each broadcaster's scheduleis available in the HDTV format.

Program rights

In its submission, the CAB expressed a view similar to that contained in the joint submission by CTV/Bell view concerning program rights. According to the CAB:

The creation of a de facto North American rights regime at the expense of Canadian broadcasters is a crucial issue for the entire Canadian broadcasting system and must be addressed in a digital environment. In fact, this has already begun to take place as the result of U.S. satellite services acquiring exclusive North American rights for specific programs offered on their services.

The Commission, in overseeing the Canadian broadcasting system, does not become involved in negotiations between producers and broadcasters concerning program rights. For the broadcasting distribution industry, however, the Commission, in its call for comments set out in Public Notice 2002-32, has proposed that authority to distribute the digital version of foreign services contained in the Lists of Eligible Satellite Services be made subject to the same stipulations regarding the purchase of program rights as are currently applicable to analog services.

Supplementary services

The Commission considers that the use of DTV capacity for the delivery of multicast programming and data transmission services could be of potential benefit to consumers and to the broadcasting system as a whole. These might include new, innovative forms of multicast programming. They might also include data transmission services. Both could provide commercial opportunities for the broadcasting industry. At the very least, such services could generate revenues to offset a portion of the costs incurred by a broadcaster in making the transition to digital. The Commission notes in this regard that DTV technology provides the means to encrypt signals, thereby ensuring payment and addressing copyright issues.

Data transmission

The Commission considers that the various business models for data transmission remain somewhat speculative, since there is no experience in Canada with the use of A/53 technology to deliver data. Most, if not all applications will require some form of return path, either through local cable plant or telephone lines. This means that broadcasters and common carriers will have to co-operate in developing service applications. More importantly, the Commission does not consider that the primary motivation for making the transition to DTV should be to exploit its ability to transmit data. Rather, it is the Commission's belief that DTV should be used to promote the development of new Canadian programming of high quality, and to make this available to viewers in a picture format that is superior to the current analog NTSC format. To this end, broadcasters should ensure that the high definition programming they purchase or produce is transmitted to viewers without loss of signal quality.

The Commission foresees no significant broadcasting policy concerns with respect to data transmission, since it appears likely that it will remain a minor adjunct relating directly to the main programming stream or its commercial content. Accordingly, the Commission makes the following determinations:

• The Commission will expect broadcasters to ensure that the transmission of data does not affect the quality or quantity of DTV programming broadcast to viewers, and more specifically, that it does not supplant or impair the delivery of HDTV programming when it is available.

• The Commission will monitor the development of any data services offered to ensure that the policy objectives set out in the Broadcasting Act are met.

• Any issues that may emerge with respect to the provision of data services by broadcasters will be examined as necessary.

Multicast programming services

Multicast programming services give rise to potential concerns. These relate to the impact that multicast services might have in the current broadcasting marketplace, whether the new multicast services are advertiser supported, subscription based, or both. The Commission notes in this regard the following concerns raised by Pelmorex Communications Inc. (Pelmorex):

.a policy decision that would authorize each over-the-air station to transmit what would amount to four new programming services along with its main over-the-air television service [would] have a catastrophic impact on Canadian pay television and specialty services, particularly if the only limit on those multicast services was that they would have to "add to, supplement or be related to" the over-the-air television station, as suggested by the CAB.

Use of DTV technology to deliver multicast services, potentially in preference to the broadcast of HDTV programming, might also have the effect of discouraging the introduction of HDTV, thereby diminishing the motivation that consumers might otherwise have for purchasing a digital television set.

The Commission has weighed the possible advantages of multicast programming services against these potential concerns. On balance, it has concluded that such services can contribute in a positive manner to the Canadian broadcasting system. Their positive contribution can only be maximized, however, if the services are truly innovative and non-duplicative of existing services. The Commission shares the concerns of Pelmorex and others in this regard, and will therefore be predisposed to license new and innovative services, in preference to those that would merely duplicate the services of existing off-air, specialty or pay television undertakings. To address concerns that multicast services might slow the introduction of HDTV, the Commission will expect broadcasters to ensure that the delivery of multicast programming does not affect adherence to their qualitative and quantitative commitments concerning the amount and the quality of the high definition programming that they broadcast on the main digital programming service.

In order to ensure that the introduction of multicast program services does not negatively affect the current structure of the broadcasting industry, applications to provide multicast services will be considered on a case-by-case basis, and will be licensed separately from the main DTV service. Although additional, more specific licensing criteria for multicast services may evolve through the public hearing process, the particulars of each proposal, including Canadian content levels, market entry criteria, allocation of revenues, carriage and substitution arrangements will be examined against the background of the Commission's existing television policy framework. A discussion of the associated distribution and substitution issues for multicast and data services is contained in Public Notice 2002-32.

The Commission concludes that its transition policy will allow for the licensing of multicast programming services on the following basis:

• Multicast services should make a positive contribution to the Canadian broadcasting system during the transition period.

• Each multicast programming service will be considered on a case-by-case basis and will be licensed by the Commission separately from the main DTV service. A multicast service will generally be subject to the same Canadian content, logging and other regulatory requirements that apply to existing television services.

• The Commission's predisposition will be to license new and innovative multicast services, in preference to those that duplicate existing over-the-air services, pay or specialty services.

• The delivery of a multicast service may not take precedence over the broadcast of the HDTV version of a program whenever such a version is available.

Interactivity

In its submission, the CCTA raised its concerns regarding the fact that "a significant portion of both the CAB and the Global submissions deals with proposed rules, restrictions and standards for interactivity". According to the CCTA, these matters are unrelated to the issues before the Commission in this public process, namely the development of policies to deal with the introduction of digital television. The Commission notes in this connection that it initiated a separate public process concerning interactivity issues in Fact finding inquiry on interactivity,Public Notice CRTC 2001-113, 2 November 2001. Interested parties were to have filed comments by 15 February 2002.

Provision of over-the-air television service

Over-the-air coverage

According to the CAB, across the regions of Canada, over-the-air reception accounts for amounts varying from 18% to 44% of all viewing of programming broadcast by conventional television networks (Canadian and non-Canadian). Overall, 25% of viewing of Canadian stations is by over-the-air reception. In Public Notice 2001-62, the Commission underscored the importance it places on the continued availability to all Canadians of conventional, unencrypted, advertiser supported, over-the-air broadcast television services. The Commission stated that viewers must not be disenfranchised by the replacement of today's analog telecasts by DTV. It also endorsed the following recommendation contained in the Task Force report on the implementation of digital television:

Basic broadcast television services that are freely and universally available over the air are central to achieving the objectives of the Canadian broadcasting system. This must continue in future digital terrestrial distribution packages.

Accordingly, in Public Notice 2001-62, the Commission strongly encouraged broadcasters to provide digital coverage that matches their current analog coverage, within the constraints of the Department of Industry's allotment plan, and to maintain their existing analog coverage in full during the transition period. The Commission reiterates the importance it places on the preservation of free, universal access to broadcast services. Thus:

• Broadcasters are encouraged to maintain their existing analog coverage in full during the transition.

• Broadcasters are encouraged to construct their own digital facilities to provide coverage that matches their current analog coverage, within the constraints of the Department of Industry's allotment plan.

• The service area of a DTV station will be defined by its digital service area contour.

Notwithstanding the above, and as noted below, there was an awareness among parties of the particular challenges that the DTV transition would represent for broadcasters serving smaller markets and for the CBC.

Small market broadcasters

Public Notice 2001-62 raised the matter of how best to ensure that the smaller, secondary and rural markets continue to be well served. The Commission acknowledged that, in such markets, it might be too costly for broadcasters to construct new digital facilities and to operate them for any length of time in tandem with their existing analog stations. It indicated that a direct switchover to digital transmission might be the only affordable course of action. As the Commission also noted, however, the switch to DTV off-air broadcasting in smaller markets is generally expected to occur only after the transition has taken place in the larger markets. This could well be at a time when the penetration of digital television sets and the availability of affordable set top converters have significantly reduced the reliance of viewers on over-the-air analog reception.

Further, the Commission considers that, with advance planning, all broadcasters, including those serving small markets, can take advantage of the normal equipment depreciation and replacement cycle. This would allow the transition to DTV to proceed throughout Canada, spurred by declining equipment prices and by an increasing use of digital television sets in the home.

The CBC

The Commission notes that, given the size of the CBC's infrastructure and the scope of its coverage and program production, the digital transition will represent a considerable financial challenge for the public broadcaster. According to the CBC, implementing DTV will require supplementary government funding. Such funding was provided years ago to allow the CBC to implement its Accelerated Coverage Plan, which extended the CBC's television and radio services to all Canadian communities having a population of 500 or more.

The CBC stated that a "realistic approach" to ensuring that its television network services remain available in small and remote communities would be to use over-the-air digital transmission to serve residents of the ten largest markets, representing 70% of Canada's population. The remaining 30% would be served via satellite.

It is clear to the Commission that converting the CBC's infrastructure - studios and transmitters - will be an expensive undertaking. Even the limited plan advanced by the CBC, and described above, raises certain questions. If all existing regional services are maintained and delivered via satellite, unless sharing arrangements can be devised, 23 satellite feeds would be required to distribute the CBC's programming throughout the country. In assessing any savings that the CBC's plan might represent to the taxpayers who support its operations, the Commission believes that it would be appropriate to take into account the cost of the satellite reception dishes that individual homeowners would have to purchase, as well as any fees they would have to pay, in order to receive the CBC's services via satellite.

The Commission reiterates that the digital transition will be a voluntary transition driven by the market, and not by the regulator. The determination as to when to apply for a transitional digital television licence will remain entirely with individual broadcasters, taking into account their particular circumstances.

Other issues

The Commission notes that certain, long-term aspects of digital broadcasting discussed in Public Notice 2001-62 have not been revisited or canvassed in the current notice. The Commission intends to address these at a later date, as part of a separate public process, following the implementation of the transitional DTV regime and after some operational experience has been gained.

The Commission thanks all those who filed comments in this proceeding. The Commission is also grateful to the Task Force on the Implementation of Digital Television, whose recommendations have greatly assisted the Commission in developing its policy.

Secretary General

This document is available in alternate format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca