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Public Notice
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Ottawa, 2 August 1985
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Public Notice CRTC 1985-175
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Review of Non-Programming Services and Cable Advertising - 28 October 1985 Public Hearing - Hull, Quebec
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For related documents: see Non-programming Services by Cable Licensees, Public Announcement 6 June 1978; Non-programming Services by Cable Television Licensees, Public Announcement, 26 March 1979; Decision CRTC 79-266, 26 March 1979; Introduction to Decisions CRTC 81-919 to 81-222, 30 December 1981; Public Notice CRTC 1983-232, 3 October 1983; Decision CRTC 85-66, 30 January 1985; Notice of Public Hearing 1985-27, 4 April 1985.
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In Notice of Public Hearing CRTC 1985-27, which announced the 30 April 1985 Public Hearing in Hull, Quebec, the Commission stated that two major policy issues, namely nonprogramming services and cable advertising, would be considered at a separate public hearing in the Fall of 1985. It was the Commission's determination that a wide-ranging and in-depth discussion of the issues and concerns surrounding these matters was required.
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At the 30 April 1985 hearing, the Commission considered comments received in response to Public Notice CRTC 1984-305 and entertained discussion concerning proposed New Cable and Subscription Television Regulations. Subsequent to the hearing and pursuant to the requirements of the Statutory Instruments Act, revised proposed regulations will be sent for examination to the Department of Justice. The Commission expects to be able to issue these revised proposed regulations for further public comment shortly after their return from the Department of Justice.
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Numerous aspects of the Cable Television Regulations were addressed at that hearing, many of which occasioned lengthy but beneficial exchanges among the participants. Discussion of the proposed Section 4, Use of Undertaking, raised several questions including a fundamental question concerning the nature of the Commission's regulatory approach. While some of the minor concerns are likely to be dealt with in a revised proposed Section 4, the Commission intends to continue discussion of this major issue concerning regulatory approach at the 28 October 1985 Public Hearing.
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BACKGROUND
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A. NON-PROGRAMMING SERVICES ON CABLE
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In 1978 the Commission announced that it would consider applications for the provision of "new communication services of a non-programming nature." Applications were heard in November 1978 and decisions were rendered in March 1979 approving certain such services on an experimental basis for a period of two years.
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In a Public Announcement released with the decisions, the Commission detailed its concerns regarding these innovative services and imposed conditions to ensure that programming services maintained priority, that no cross-subsidization would occur, and that no advertising would be permitted. Subsequently, several other applications for the cable distribution of non-programming services, similar to those authorized in March 1979, were authorized for periods of up to two years, under the same terms and conditions.
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On 30 December 1981, in Decisions CRTC 81-919 to CRTC 81-922, the Commission approved several additional experimental non-programming services, denied a proposed real estate service, and announced its intention to hold a public hearing, then tentatively scheduled for late 1983, to assess the economic, technological, cultural and social impact of the cable distribution of non-programming services. In the Introductory Statement relating to these decisions the Commission stressed its concern that parties be permitted access to cable systems for the provision of l'accès aux similar services.
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On 3 October 1983, the Commission announced, in response to a cable industry request, a postponement of this review hearing for two years. This rescheduling was considered to be appropriate because licensees had not advanced significantly in their experiments and were not in a position to provide the Commission with data that would enable it to assess adequately the potential impact of the new services.
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The experiments approved to date have included the provision of video games, home security, downloading of computer software, energy meter-reading, controlling and switching, videotex, viewership rating, opinion polling, telebanking, teleshopping, and fixed image data banks (including teleshopping and real estate listings).
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The introduction of non-programming services represents an entirely new field of endeavour for cable licensees and has the potential to alter the traditional role of cable as, primarily, a distributor of broadcasting services. The industry itself has indicated its uncertainty about the technological potential and market acceptance of these new and emerging technologies. The licensee's marketing efforts have encountered a virtual absence of consumer awareness of these services, although some industry observers still claim that the combining of computers with cable plant will revolutionize many aspects of our society. In their view, interactive two-way cable technology has a potential which has been barely touched.
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Several factors have combined to delay the implementation of some services and limit the range and scope of others. The high cost of converting systems to two-way plant has been a major impediment. Funds which might have been available for two-way conversion were in some instances diverted with the introduction of discretionary programming services which, in most cases, in volved heavy capital investment in decoders and expanded channel capacity. Then too, unfavourable economic conditions forced some cable opera operators to cancel or postpone their plans to implement these new services. Some licensees have indicated that the initial approval of these services on an experimental basis for a two-year period only has been a deterrent in attracting capital investment in services which, in most cases, are highly speculative due to unproven market demand.
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ISSUES AND CONCERNS
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In its initial 1978 Public Announcement concerning the inception of non-programming services on cable, the Commission cited Section 3(j) of the Broadcasting Act in which it is declared that "the regulation and supervision of the Canadian broadcasting system should be flexible and readily adaptable to scientific and technical advances." However, in its decisions granting the authority to provide such innovative services, the Commission expressed certain concerns and specified a limited experimental period so that sufficient data and experience could be accrued to assess the economic, technological, cultural and social impact of the cable distribution of these services prior to granting further authorizations.
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For reasons previously cited, the development of non-programming services has not proceeded as anticipated and, therefore, the Commission does not have the extensive and detailed information and data which it had hoped to receive. Consequently, the Commission wishes to examine extensively from the widest perspective the provision of non-programming services. In particular, the Commission would like to discuss the proper and timely development of these services with respect to their potential impact on the Canadian economy in general and the Canadian broadcasting system specifically; the development of appropriate technology; the factors inhibiting the implementation and growth of these services as well as possible methods of facilitating their development; and the role of cable television in this area. The Commission is interested in whatever additional data or research regarding non-programming services might be available from concerned parties or the public at large.
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Without limiting the scope of public comment in any way, the Commission invites submissions which will respond to some or all of these specific questions.
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QUESTIONS
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A. NON-PROGRAMMING SERVICES
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1. Should non-programming services be regulated?
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2. Should all non-programming services continue to be authorized only on an "experimental" basis?
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3. Should there be limitations on the type of non-programming services authorized?
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4. Should all types of non-programming services be dealt with in the same manner?
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5. Should the authority to distribute such new services be limited to a period that is less than the term of licence?
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6. What type of regulatory procedure (Public Notice, Public Hearing, etc.) would be adequate and appropriate?
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7. What information should be submitted to the Commission in any application for authority to distribute such a service?
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8. Should cable companies be permitted to use their facilities for data transmission? If so, under what conditions?
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9. Would access by third parties to the cable distribution system contribute to the development of non-programming services? If so, under what arrangements or conditions should third parties have access?
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10. What is the best approach to a pricing formula for leased spectrum space?
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11. What is the potential for co-ventures between cable licensees and third parties?
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12. Is there a simple appropriate method which can be used to allocate costs to non-programming services, e.g. by channel capacity utilized?
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13. Should advertising be permitted on non-programming channels?
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B. CABLE ADVERTISING
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In order to provide for the costs associated with the inception of these services and to reduce the risk of entering the market-place with untried services, what has been most frequently suggested by the cable industry is the authority to provide certain types of advertising.
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Advertising on cable has been an issue of concern to the cable industry and the Commission for many years. A variety of proposals for the distribution of cable advertising on the community channel, special programming and non-programming channels has been considered over the years and, with the exception of limited sponsorship activity, the Commission has consistently denied all such proposals stating that a general policy review would be required.
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The Commission's policy with respect to advertising on cable-originated services is contained in its 26 March 1979 Review of Certain Cable Television Programming Issues. In it the Commission notes that "cable licensees should not expect to benefit from both subscriber revenue and commercial advertising in competition with broadcasters."
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The Commission's position, at that time, focused on the need to regulate entry into broadcast markets in order to assure the market viability of existing and new stations in a competitive environment where commercial success was, and still is, determined by audience acceptance and ratings. In the Commission's view the fullfilment of program content requirements by the broadcasting industry necessitated commercial revenue from advertising. Within that framework, the cable operator was perceived as having an assured and stable subscriber revenue without the risks and requirements to which broadcasters were subject.
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Among the various proposals put forward regarding the general issue of cable involvement in advertising are those which have suggested different forms of advertising on the community channel. In this respect, the Commission in its Community Channel Policy Review (Circular No. 297 dated 12 June 1984) stated that it "is not persuaded at this time that allowing advertising on the community channel would preserve the principles embodied in its 1975 policy." In order that the review of cable advertising be comprehensive, the Commission will also entertain discussion of its policy regarding advertising on the community channel.
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In addition, the Commission is interested in receiving any studies concerning the potential impact cable advertising might have on Canadian radio and/or television broadcasting undertakings and, again without limiting the scope of public comment, it invites comments on some or all of the following questions.
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1. What is the potential for cable advertising to attract new sources of revenue to, and strengthen, the Canadian broadcasting system?
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2. Are there any studies or evidence which indicate that advertisers are seeking either additional or innovative advertising opportunities?
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3. Should cable advertising be allowed nationally, or based on a case-by-case study of selected markets?
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4. Could certain forms of advertising pose a threat to local broadcasters?
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5. Would cable licensees be interested in attracting national sponsors? If so, what would be a projected ratio between national and local sponsors?
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6. What is the potential for coventures between cable licensees and local commercial broadcastters?
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7. Should cable licensees be permitted to explore and develop new concepts in advertiser-related services, such as a channel devoted to programming which combines aspects of information and advertising (informercials), programs and advertising (programercials), documentaries and advertising (documercials) as well as TV auctions, shop-at-home, direct-response purchasing, etc.?
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8. Should cable licensees be permitted to sell, locally, advertising in the slots currently available from several U.S. satellite services? If so, how would this activity impact on broadcasters, including radio licensees?
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C. ADVERTISING ON THE COMMUNITY CHANNEL
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1. Should cable licensees be permitted to sell advertising on the community channel? If so, what types of advertising and under what conditions?
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2. Could the introduction of advertising jeopardize the longstanding philosophy and orientation of the community channel?
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3. Should advertising on the community channel be limited to those communities which lack other local broadcast services?
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4. Would advertising activities reduce staff and facilities normally dedicated to community programming?
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5. What is the feasibility of separating the operating costs of advertising activities from the costs normally associated with the operation of the community channel?
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6. Should advertising in languages other than English or French be permitted on the community or special programming channels?
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7. Should revenue generated by advertising on community channels result in corresponding net increases in community programming budgets?
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CONCLUSION
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The Commission expects the 28 October 1985 hearing to focus on the issues raised in this public notice and the related concerns expressed in comments received in response to this Public Notice. It is not the intent of the Commission to discuss pay-per-view at this hearing. This subject will be dealt with in a separate public process.
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Written comments should be submitted not later than 13 September 1985 to the Secretary General, CRTC, Ottawa, Ontario, K1A 0N2. Persons wishing to appear at the 28 October 1985 public hearing should notify the Secretary General in writing not later than 4 October 1985.
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Fernand Bélisle Secretary General
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