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Ottawa, 3 April 1985
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Telecom Decision CRTC 85-6
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TARIFFS FOR RADIO AND TELEVISION PROGRAM CHANNELS
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BACKGROUND
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For purposes of this decision, the radio and television program channels provided by the federally-regulated terrestrial telecommunications common carriers (the carriers) have been characterized by the Commission as comprising three types of components: local loops, interface equipment and other types of transmission facilities (hereafter transmission facilities).
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At present, the carriers use both general and special tariffs for the provision of radio program channels. All the carriers have general tariffs for full-time local radio program channels and for occasional-use local and interexchange radio program channels. Bell Canada (Bell), CNCP Telecommunications (CNCP), NorthwesTel Inc. (NorthwesTel) and Terra Nova Telecommunications Inc. (Terra Nova) have general tariffs for full-time interexchange radio program channels. In Bell's case, the tariffs are applicable to channels provided wholly within its territory. For those local and interexchange radio program channels provided under fixed-term contracts, special tariffs are also used by all the carriers.
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With regard to television program channels, all the carriers except British Columbia Telephone Company (B.C. Tel) provide occasional-use channels using rates specified in their general tariffs. Full-time channels are leased under special tariffs.
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In Bell Canada, British Columbia Telephone Company and Telesat Canada: Increases and Decreases in Rates for Services and Facilities Furnished on a Canada-Wide Basis by Members of the TransCanada Telephone System, and Related Matters, Telecom Decision CRTC 81-13, 7 July 1981 (Decision 81-13), at page 157, the Commission directed Bell and B.C. Tel to file general tariffs for inter-provincial radio and television program channels.
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In response to this directive, Bell and B.C. Tel filed tariff revisions for inter-provincial (or inter-company) occasional-use radio and television program channels, which were approved by the Commission to be effective 22 February 1982. In a letter dated 25 February 1982, the Commission also directed Bell to file tariffs for full-time inter-company radio and television program channels.
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By letter dated 15 April 1982, Bell responded by stating:
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... if the Commission considers that Bell Canada's tariff filing has not met the requirements of
its directive at page 157 of Telecom Decision 81-13, the Company is
requesting the Commission to reconsider its order and to make such modifications as the
Commission may deem appropriate.
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In support of its request for reconsideration, Bell submitted that there was substantial doubt as to the correctness of the directive at page 157 of Decision 81-13. Bell also requested that the Commission regard its letter of 15 April 1982 as an application for review under section 63 of the National Transportation Act in the event that such an approach was deemed necessary. In a letter dated 23 April 1982, B.C. Tel supported Bell's position.
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In a letter dated 10 January 1983, the Commission advised Bell that its occasional use tariffs did not fully comply with the requirements of Decision 81-13. The Commission further stated:
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Before making a determination on the Company's request for reconsideration, the Commission
considers it useful to obtain certain additional information from the Company in light of the
points raised in your letter of 15 April 1982. The relevant information requests are set out in an
attachment to this letter. In addition to information on inter-Company channels, the
Commission also considers it appropriate to examine the Company's use of the Special Facility
Tariff for channels provided on a intra-Company basis.
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Similar requests for information were subsequently sent to B.C. Tel, CNCP, NorthwesTel and Terra Nova.
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In CRTC Telecom Public Notice 1984-41, dated 15 August 1984 (Public Notice 1984-41), the Commission decided, on the basis of the additional information provided by Bell and B.C. Tel, to review the directive at page 157 of Decision 81-13.
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The Commission went on to note that the use of special tariffs for radio and television program channels gives rise to the potential for undue discrimination among various customers using similar services, due to the aggregate nature of such tariffs and their varying levels of profitability. The Commission was of the view that undue discrimination could also arise from the fact that Bell's general tariff item for full-time radio program channels is used only for short-term applications and is subject to general rate increases, while the longer term applications are covered by special tariffs, often on the basis of fixed-price contracts which are unaffected by general rate increases. The Commission also noted that, because such tariffs are often exempted from general rate increases, there is a risk that subscribers to other services may be cross-subsidizing special tariff customers.
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Reference was made to CNCP Telecommunications, General Increase in Rates, Telecom Decision CRTC 81-26, 16 December 1981 (Decision 81-26) and CNCP Telecommunications - Special Tariffs Covering the Provision of Interconnected Private Line Voice Services, Telecom Decision CRTC 82-9, 29 September 1982 (Decision 82-9). These decisions established fungibility as the criterion for determining the appropriateness of fixed-price, fixed-term contracts for transmission services. Under this fungibility criterion, fixed-price, fixed-term contracts such as those covered by special tariffs are appropriate for transmission services only where it can be shown that, due to the nature of the facilities or customer requirements, it is reasonably ascertainable that the facilities will not be commercially reusable after the contract period ends.
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The Commission stated that, based on the record to date, it was persuaded that inter-company radio program channels are not essentially different from long-haul interexchange channels offered on an intra-company basis and that the market for these services is sufficently large and the components used are sufficiently fungible to warrant the use of general tariffs. The Commission proposed, therefore, that all radio program channels should be offered under general tariffs. (The radio program channel proposal)
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Public Notice 1984-41 also invited comment regarding ways to improve the terms and conditions contained in existing radio program channel general tariffs. More specifically, comment was invited on whether channel conditioning up to 15 KHz might be an appropriate addition to the present general tariffs. At present, Bell's General Tariff provides for up to 15 KHz conditioning for local radio program channels but only up to 8 KHz for interexchange channels.
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Finally, with respect to television program channels, the Commission noted that only occasional-use channels are included in the carriers' general tariffs. The Commission further noted the evidence of the limited commercial reusability of certain television program channel components and indicated that such a limitation, taken together with the limited size of the television program channel market, particularly the inter-company market, might warrant the alteration of the directive at page 157 of Decision 81-13. Accordingly, the Commission proposed that, while the transmission facility component of television program channels should be offered under general tariffs, special tariffs should continue to apply to those components of television program channels which can be demonstrated to be non-fungible (the television program channel proposal).
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The Commission advised that it would continue its practice, begun on 7 January 1983, of granting interim approval to special tariffs covering radio and television program channels, for which proposed rates are compensatory, until the issues raised in Public Notice 1984-41 were resolved.
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In response to Public Notice 1984-41, the Commission received comment from Bell, B.C. Tel, Canadian Broadcasting Corporation (CBC), CNCP, CTV Television Network Ltd. (CTV), NorthwesTel, Government of Ontario (Ontario), Radiodiffusion Mutuelle Canada Ltée (Radiomutuel), Selkirk Communications Ltd. (Selkirk), Télémédia Communications Inc. (Télémédia) and Terra Nova.
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THE RADIO PROGRAM CHANNEL PROPOSAL
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1) Positions of Parties
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Bell and B.C. Tel did not support the provision of full-time interexchange radio program channels under general tariffs. Bell submitted that the market for long-haul interexchange radio program channels is not sufficiently large and the components are not sufficiently fungible to warrant the use of general tariffs. While Bell indicated that the local loops and transmission facilities components would generally be reusable, it stated that a large portion of its investment in these channels, consisting of the audio-interface equipment component and modifications to meet required transmission specifications, would not generally be considered reusable. Bell argued that the latter point is particularly true when the size of the potential market is considered. In this regard, Bell noted that it has only six customers for such channels, one of which accounts for over 95% of its total revenues in this market. Moreover, Bell noted that the size of the market is likely to diminish with time due to increased use of satellite transmission and advances in digital technology which are rapidly rendering in-place analogue components obsolete.
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B.C. Tel argued that the interexchange radio program channel market is not sufficiently large to warrant the use of general tariffs. In this regard, B.C. Tel noted that, in its operating territory, it is very unusual to find more than one radio program channel being carried over any specific interexchange transmission facility cross-section. Noting as well that most radio program channels are one-way, B.C. Tel argued that the conversion of these channels to two-way voice channels would require additional expenditures which may or may not be warranted by demand levels for two-way voice traffic. B.C. Tel also noted that radio program channels use analogue components whereas the company is moving towards the use of digital technology.
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Both Bell and B.C. Tel submitted that potential customers may acquire transmission facilities from several different suppliers, namely, other terrestrial carriers or, in the case of satellite transmission, Telesat Canada or Canadian Satellite Communications Inc. (Cancom). In addition, potential customers may build their own transmission facilities, subject to microwave licensing requirements.
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With regard to the issue of potential undue discrimination between general tariff and special tariff customers for similar services, Bell argued that, while the use of special tariffs may result in different rates for similar services, the rates reflect the costs of providing the individual services. B.C. Tel argued that the services are not "similar services" since the cost of providing custom built or designed services varies widely from customer to customer. In addition, B.C. Tel submitted that the concept of undue discrimination should not be applied to a competitive market.
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With regard to the issue of cross-subsidization of special tariff customers, Bell and B.C. Tel submitted that, since rates under special tariffs are designed to be compensatory, the risk of such cross-subsidization from subscribers to other services is minimal.
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CNCP, NorthwesTel and Terra Nova supported the use of general tariffs for full-time radio program channels.
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Noting that it served only a small share of the market CNCP stated that, in its view, the components it uses are less likely to be reusable than would be the case for the carriers with larger market shares. CNCP proposed that the Commission establish a general principle that radio program channels be included in general tariffs. CNCP also stated that special tariffs should only be approved by the Commission when the carrier has demonstrated that the components utilized are not commercially and economically reusable.
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NorthwesTel and Terra Nova took the position that they should be permitted to continue to offer both full-time and occasional-use radio program channels at existing general tariff rates, while retaining the option to price unique or non-standard radio program channels on a special tariff basis. They also argued that they should be able to offer discounts for long-term contracts through special tariffs. In support of their position, NorthwesTel and Terra Nova stated that it is sometimes necessary to offer discounts for long-term contracts in competitive situations and that special tariffs are appropriate where it is necessary to incur extraordinary costs to supply and condition a channel.
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CBC, Radiomutuel, Selkirk and Télémédia opposed the Commission's proposal concerning the use of general tariffs for radio program channels. Noting the specific requirements of broadcasters, including technical specifications and general quality considerations, CBC argued that the provision of radio program channels cannot be thought of in terms of standard service offerings. Radiomutuel and Télémédia were concerned with the potential increases in their rates in the event that radio program channels were provided under general tariffs. Both argued that they would be subjected to large increases.
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Ontario took the position that special tariffs are appropriate only where a carrier can clearly demonstrate that the components involved are not reusable. In the particular case of radio program channels, Ontario supported the Commission's proposal to include them in general tariffs.
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With regard to the possible addition to the general tariffs of channel conditioning up to 15 KHz, NorthwesTel and Terra Nova both agreed that it would be an appropriate addition. NorthwesTel noted that it would prefer to file unbundled rates for the conditioning equipment required so that it could provide customers with the option of supplying their own approved conditioning equipment.
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2) Conclusion
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The Commission considers that, as a general principle, services should be offered under general tariffs whenever feasible, since the use of these tariffs ensures that customers of comparable services will be treated uniformly.
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In assessing whether it is feasible for radio program channels to be offered under general tariffs, the Commission has decided that it is appropriate to apply the fungibility criterion enunciated in Decisions 81-26 and 82-9 to each component of these channels. Accordingly, the Commission has concluded that general tariffs are appropriate for fungible components of radio program channels and that it is appropriate to offer non-fungible components under long-term contracts, such as those covered by special tariffs, in order that the carrier may be better assured of recovery of the capital-related costs involved.
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Having considered the positions of the parties, the Commission is of the view that the likelihood that the audio-interface equipment component of radio program channels will not be fungible is sufficiently large to warrant the offering of this component through special tariffs. Consistent with the rating approach in Decision 82-9, the Commission considers that these special tariffs should comprise a fixed rate for the capital-related costs of the offering and a variable rate to recover costs which are not capital-related, such as ongoing maintenance and administration costs. This latter rate, similar to the Tier 'B' rate of a PBX offering, would be subject to revision to reflect changes in costs.
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With regard to radio program channel local loops and transmission facilities, the Commission has concluded that they are fungible and accordingly finds that general tariffs are appropriate for these components. Since each carrier currently has a general tariff for local radio program channels for the most commonly used frequency ranges, the main effect of this finding will be to require additions to the tariffs for interexchange radio program channels. Accordingly, the Commission directs that general tariffs be filed by the carriers within ninety days as follows:
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1) General tariffs are to be filed for the local loop and transmission facility components
necessary to provide full-time interexchange radio program channels, at the frequency ranges
for which the carrier currently provides service.
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2) At the option of each carrier, general tariffs for the local loop and transmission facility
components necessary to provide full-time radio program channels may be filed for frequency
ranges for which the carrier does not currently provide service.
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3) Rates filed for the transmission facility component are to be based on voice-grade analogue
channel rates, reflecting differences in the transmission facilities necessary to provide radio
program channels and voice-grade analogue channels. In addition, differences in value of
service are to be taken into account.
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In the case of Bell and B.C. Tel, the above requirements apply to channels provided both on an intra-company and inter-company basis. Further, in the case of Bell, since its current practice is to apply its general tariffs only to short-term applications, general tariffs for longer term use of the transmission facility component are to be filed for use in conjunction with audio-interface equipment components leased under special tariffs.
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In its comments regarding terms and conditions which might be improved in existing radio program channel tariffs, NorthwesTel raised the issue of permitting customers the option of providing their own approved conditioning equipment or renting it from NorthwesTel. The Commission is prepared to consider this issue if, in the future, there exists a demand for such arrangements which is not being accommodated by the carriers.
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THE TELEVISION PROGRAM CHANNEL PROPOSAL
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1) Positions of Parties
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Bell, B.C. Tel, NorthwesTel and Terra Nova opposed the provision of the transmission facility component of television program channels under general tariffs. They argued that all components of television program channels should be offered under special tariffs.
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In support of this position, Bell and B.C. Tel noted that the market for television program channels is very small and that the likelihood of being able to reuse the components is remote. Both noted that, whereas television program channels are currently provided using analogue transmission, each company is moving towards the use of digital transmission. B.C. Tel added that few localities in its operating territory could absorb the additional capacity which would result if one-way television program channels were converted to two-way voice channels.
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Terra Nova noted that the provisioning costs could vary dramatically depending upon location and the quality of service specifications required by a customer. NorthwesTel noted that its provision of television program channels is limited to one short video link and that it does not forecast an additional requirement for this service.
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Consistent with its position regarding radio program channels, CNCP proposed that the Commission establish a general principle that television program channels be included in general tariffs and that special tariffs only be approved in cases where the carrier has demonstrated that the components utilized are not commercially and economically reusable.
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Ontario supported the Commission's proposal that the transmission facility component of television program channels be offered under general tariffs.
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CBC and CTV opposed the provision of the transmission facility component of television program channels under general tariffs. CTV stated that special tariffs had worked well and had been both effective and fair. More specifically, CTV argued that the transmission facility components of its national microwave network should not be considered fungible given the limited size of the Canadian market for television program channels. CTV indicated that, in its view, the imposition of general tariffs would likely result in a significant increase in the cost to it for the distribution of its program services.
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2) Conclusion
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In assessing the feasibility of offering the transmission facility component of television program channels under general tariffs, the Commission has again utilized the criterion of fungibility. Based on the record of this proceeding, the Commission has concluded that the transmission facility component of television program channels is not, in general, likely to be fungible. Accordingly, the Commission finds the use of special tariffs to be justified for all components of television program channels.
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However, the Commission is of the view that, in future filings, rates for television program channels should be unbundled into two rate elements; namely, a fixed rate for the capital-related costs of the offering and a variable rate to recover costs which are not capital-related. This unbundling would facilitate the application of changes to the latter rate element reflecting changes in costs.
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OTHER MATTERS
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1) Variation of Decision 81-13
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Consistent with its conclusions concerning the applicability of special tariffs for components of radio and television program channels, the Commission hereby varies Decision 81-13 so as to remove the requirement to file general tariffs for full-time television program channels and the audio-interface equipment component of full-time radio program channels.
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2) Disposition of Tariffs for Radio and Television Program Channels Approved on an
Interim Basis
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During the course of this proceeding, the Commission has granted interim approval to a number of applications involving the use of special tariffs for the provision of radio and television program channels. The Commission has concluded that the requirements of this decision should not be applied to these applications and accordingly has decided to grant them final approval. More specifically, the applications filed under the Tariff Notices listed in the Appendix to this decision are hereby approved.
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Fernand Bélisle
Secretary General
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Appendix
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BELL CANADA
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TARIFF NOTICE DATE TELECOM ORDER DATE
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374 02-04-81 83-1 07-01-83
396 13-05-81 83-2 07-01-83
416 19-06-81 83-3 07-01-83
544 23-12-81 83-4 07-01-83
560-A 29-03-83 83-256 22-04-83
631-A 29-03-83 84-535 31-08-84
663 01-06-82 83-7 07-01-83
720 16-08-82 83-4 07-01-83
727 25-08-82 83-8 07-01-83
745 15-09-82 83-9 07-01-83
811 19-11-82 83-23 19-01-83
925 14-04-83 83-312 24-05-83
929 19-04-83 83-522 13-09-83
1025 31-08-83 84-8 17-01-84
1059 12-10-83 84-59 10-02-84
1116 06-12-83 84-9 17-01-84
1117 07-12-83 84-60 10-02-84
1190 06-03-84 84-201 12-04-84
1262 22-05-84 84-360 12-06-84
1351 22-08-84 84-717 14-11-84
1516 06-02-85 85-123 04-03-85
1537 21-02-85 85-142 25-03-85
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BRITISH COLUMBIA TELEPHONE COMPANY
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TARIFF NOTICE DATE TELECOM ORDER DATE
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451 18-03-82 83-230 13-04-83
478 20-05-82 83-529 13-09-83
588 05-11-82 83-11 07-01-83
686 22-04-83 83-530 13-09-83
712 20-06-83 83-435 25-07-83
779-A 22-03-84 84-232 13-04-84
786-A 01-03-84 84-212 12-04-84
826 21-12-83 84-42 24-01-84
881 23-03-84 84-234 13-04-84
918 28-05-84 84-396 19-06-84
969 15-08-84 84-561 05-09-84
980 30-08-84 84-598 21-09-84
1024 30-10-84 84-779 03-12-84
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