ARCHIVED - Decision CRTC 84-1

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Ottawa, 5 January 1984
Decision CRTC 84-l
Allarcom limited
Reconsideration of the Amendment of the Pay Television Network Licence of the Allarcom Limited Authorizing the Provision of Service to the Provinces of Manitoba and Saskatchewan and the Northwest Territories- 82168700
Following the Public Hearing held in Vancouver on 29 November l983, and, in accordance with Order in Council P.C. l983-2878 dated 20 September l983 ("the Order in Council"), the Commission announces its decision concerning the reconsideration of Decision CRTC 83-576, authorizing Allarcom limited ("Allarcom") to extend its pay television service to the provinces of Manitoba and Saskatchewan and in the Northwest Territories.
Allarcom's application to extend its pay television service from Alberta was submitted subsequent to Public Notice CRTC l982-76 dated 16 August 1982, which called for applications to serve Manitoba, Saskatchewan and the Northwest Territories to be filed by 16 November 1982. Subsequently, in response to a request by another interested party for more time, the deadline was extended to 17 January l983. Notwithstanding the extension, Allarcom was the only applicant at the public hearing in Winnipeg on 19 April l983. Decision CRTC 83-576 dated 27 July l983 authorized the provision of an alternate general interest service to Manitoba, Saskatchewan and the Northwest Territories by means of an amendment to the licence originally issued to Allarcom for the provision of service to Alberta.
The Order in Council referred Decision CRTC 83-576 back to the Commission for reconsideration and hearing on the grounds the Commission failed to consider or did not consider adequately:
 "whether the amendment may place the licensee in an enhanced position to that foreseen in Decision CRTC 82-240 to compete with the national general interest licensee without being subject to requirements comparable to those imposed by the Commission on the national general interest licensee in Decision CRTC 82-240 and, in particular, the requirement to provide a national French-language general interest service;"
 "whether and to what extent the amendment accords with the objectives of the Canadian pay television system as stated by the Commission in its Decision 82-240 and subsequent decisions relating to pay television and, in particular, as to the respective roles and obligations of a regional, general interest licensee and the national general interest licensee in light of the apparent evolution of the overall market structure of the Canadian pay television system;"
The matters which have been deemed to be material to the reconsideration of Decision CRTC 83-576 are dealt with below and, where applicable, are discussed in a broader context in the Introductory Statement which forms a part of this decision.
It is appropriate to note that First Choice Canadian Communications Corp. ("First Choice"), the national, general interest pay television licensee, intervened at the April l983 hearing. In a presentation at the hearing, First Choice summarized its position as follows:
 As you will see, the bottom line of it is, we do not oppose Allarcom's application before you. We think that extension of the regional into Manitoba and Saskatchewan is consistent with the policy enunciated in 82-240.
Subsequently, according to submissions heard at the 29 November l983 public hearing, First Choice changed its position. It gave as its reason, the "increased focus on head-to-head competition and the complete lack of regional differentiation that has now become evident in respect to the Ontario and Alberta licences".
One of the matters raised by the Order in Council relates to whether the amendment may place Allarcom in an enhanced position to that foreseen in Decision CRTC 82-240.
In Decision CRTC 82-240, the Commission imposed equal Canadian content exhibition time requirements on the competing general interest licensees in order to ensure fair and equitable regulatory treatment. However, it established different conditions of licence for each licensee, requiring that specified percentages of total revenues from pay television operations be expended on Canadian programming. These requirements varied in relation to the nature of the services and to the respective cost structure and market size of each licensee. They are set out below:
Ontario Independent Pay Television ("OIPI") 50%
First Choice 45%
Allarcom 35%
Star Channel l5%
In Decision CRTC 82-l023, which licensed Télévision de l'Est du Canada ("TVEC") on 23 November l982, and Decision CRTC 83-ll5, which licensed Aim Satellite Communications Corp. ("Aim") on 21 February l983, the licensees were required, by conditions of licence, to expend 35% of total revenues from pay television operations in each year during the term of their respective licences on Canadian programs.
In establishing differing obligations among the licensees, the Commission noted that it had considered "the national licensee's responsibility to provide service in the two official languages, as well as the smaller market size and different cost structures of the regional licensees".
With respect to the obligations of the national, general interest licensee, First Choice was required to provide distinct French-language and English-language pay television services from coast to coast, 24 hours per day. This requirement applied to First Choice on an interim basis during the initial two years of operations "or until such further time as the Commission may determine". In this regard, the Commission stated it would review the scheduling format of the French-language service offered by First Choice in the light of the programming offered by any regional, general interest French-language service which might be licensed to serve the region of Quebec, Ontario and Atlantic Canada.
Specific regulatory obligations and conditions of licence were also imposed on the regional, general interest licensees in terms of regional representation in the ownership and management of the undertakings as well as the funding of regional productions to "provide new opportunities for regional expression by stimulating creative talent and utilizing production facilities in communities across Canada". licensees were also expected to "cooperate with other regional licensees in the production, acquisition and exchange of programs that express and interpret the distinctive experiences, characteristics and lifestyles of each region".
Since they were licensed to serve limited geographic areas, these licensees were effectively prevented from realizing potential economies of scale.
Taking into account the regional role of Allarcom, the Commission imposed additional obligations on the Alberta licensee in Decision CRTC 83-576. These obligations included the requirement that the licensee adhere to the following commitments as a condition of approval of the extension of its service to the rest of the Prairie region:
- to produce or acquire six hours per week of programming in Alberta, with a further two hours per week which will originate in Manitoba and Saskatchewan upon implementation of service;
- to establish a creative development office in both Manitoba and Saskatchewan. With an initial budget for each province of $100,000 for 1983, rising to $260,000 by 1987, the offices would be managed by creative development officers acquainted with the production facilities and talent in Manitoba or Saskatchewan;
- to establish an advisory council in each province to be operated independently of the Alberta council; and
- to establish separate production funds in each province, with at least 20% of each production fund to be spent in the province of origin.
Considering the relatively small size of the market, which represents 6% of all cable subscribers in Canada, and in the light of the pay television experience to date, the Commission considers it would not be economically viable for a licensee to provide service to the Manitoba, Saskatchewan and the Northwest Territories region without sharing the costs of operation over a larger subscriber base. The Commission's position is reinforced by the fact that no other applicant applied for the provision of the service at the time of the public hearing.
Furthermore, taking into consideration the very high costs of operation and the limited size of the markets generally served by regional, general interest licensees, the Commission considers that the possibility of being able to benefit from certain economies of scale is necessary to ensure that licensees are financially capable of fulfilling their Canadian program content commitments, while providing quality programming that will attract subscribers to a discretionary service.
In Decision CRTC 82-240, the Commission established a regulatory frame-work that was designed to be fair and equitable to all pay television licensees. At the same time, the Commission emphasized that, its regulatory approach would be "free from all but essential constraints ... that will permit pay television networks maximum flexibility to innovate and experiment."
The Commission considers that Decision CRTC 83-576 is consistent with this approach. Furthermore, it is satisfied that it does not give any undue competitive advantage to Allarcom and does not place it in an enhanced position to that foreseen in Decision CRTC 82-240.
The Order-in-Council also raised the matter as to whether, and to what extent, the amendment granted by Decision CRTC 83-576 is consistent with the objectives of Decision CRTC 82-240, in particular as to the respective roles and obligations of the national and regional general interest licensees, in light of the apparent evolution of the pay television market since the issuance of Decision CRTC 82-240.
Although the industry has evolved considerably since 1 February 1983, such evolution is consistent with Decision CRTC 82-240. The Commission specifically noted that "a distinctly Canadian pay television system should evolve over time and the licences issued in this decision are the first step in this direction" and, recognizing that pay television was being introduced at a critical time, it emphasized the fact that "to succeed, pay television will have to be adaptable to a changing and competitive environment".
In the Introductory Statement to this decision, the Commission has reviewed in some detail the roles and obligations of the general interest licensees in the light of the evolution of the pay television industry and of the general framework for pay television established in Decision 82-240. The Commission views the respective roles and obligations of the national and regional general interest licensees as fair and equitable and is satisfied that they have not been unfairly altered by Decision CRTC 83-576.
Moreover, the Commission explicitly allowed for the possibility of extending the licensees' authorized service areas when it stated:
 It will also consider means to provide pay television to other parts of the country, including the extension of the service areas proposed in the applications of the regional pay television services licensed by this decision.
The Commission has also received 37 submissions commenting on the reconsideration of Decision CRTC 83-576 and notes that, with the exception of First Choice, all of the submissions, including that of the Government of Saskatchewan, were in support of Decision CRTC 83-576, and were generally of the view that it was consistent with Decision CRTC 82-240.
Having given careful consideration to all of the above factors, including those outlined in the Introductory Statement which are applicable to this decision, as well as the strong support expressed at the hearing for Decision CRTC 83-576 by the interveners, the members of the Commission are all of the opinion that approval of the proposed extension of service is fully justified and is in accord with the objectives, structure and regulatory framework of Decision CRTC 82-240. Accordingly, the Commission hereby confirms, without change, variation or alteration, the amendment of Allarcom's pay television licence authorized by Decision CRTC 83-576.
J.G. Patenaude
Secretary General

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