ARCHIVED -  Decision CRTC 87-903

Decision

Ottawa, 1 December 1987

Decision CRTC 87-903

YTV Canada, Inc. - 871209300

The commission approves the application by YTV Canada, Inc. (YTV) for a network licence to provide a national, English-language specialty programming service designed for target audiences of children, youth, and children and youth together with their parents. This satellite-to-cable service will be available to cable television affiliates on an optional basis for distribution on the basic service, in accordance with the provisions outline in the Public Notices accompanying this decision (Public Notices CRTC 1987-260 and CRTC 1987-261). The licence, which will be issued and be effective on 1 September 1988, will expire 31 August 1991 and will be subject to the conditions specified in this decision and in the licence to be issued.

As described by the applicant and as set out as a condition of licence in the appendix to this decision, YTV's schedule shall consist of programming directed at the following target audiences: children up to 5 years of age for 30% of the program schedule, children and youth aged 6 to 17 (48%), with a maximum of 22% directed to a target audience of children and youth with their families. YTV described its alternative family programming in the hours from 10:00 p.m. to midnight as a mix of fine arts, drama, video art, music, lifestyle and health, science and technology, nature, discovery and public affairs programming.

In order to assess the manner in which YTV will fulfill its commitment to adhere strictly and at all times with the orientation of its programming service, as described in its application and as clarified at the hearing, particular with respect to the program content scheduled during the evening broadcast period, and to assess the fairness mechanisms that will be applied by the cable systems involved in the ownership of this service with respect to the other specialty services, the Commission has determined that at thee-year licence term is appropriate.

The Commission notes the applicant's statements that it does not intend to provide sports, news or public affairs programs or music video clips directed to adult audiences, and that it will only exhibit films that have been approved for family viewing by the Ontario Film Review Board.

Ownership Structure

The corporate ownership of YTV consists of Founder Shareholders CUC Limited (CUC) and Rogers Broadcasting Limited (RBL), each of which hold 25.4% of the voting shares; the Charter Founder Group, composed of Appletree Television Productions, Inc. and Jon Slan Enterprises Limited, both independent Canadian production companies and holding 12.2% and 7.3% of the voting shares respectively; and the Charter Investor Group made up of Canamedia Productions Inc., a television production/distribution company (5.3%), Decima Research, Ltd., a Canadian public opinion research company (5.3%), Cablecasting Limited, one of the ten largest cable television firms in Canada with systems in Ontario, Alberta and Manitoba (5.3%), and two "pool units" of five investors each, holding a total of 10.7% of the voting shares; with the remaining 3% of the voting shares held in trust for future management employees.

CUC Canada's fifth-largest cable operator, with a total of approximately 255,00 subscribers in more than 50 Ontario communities. Through its 48.3% interest in Northern Cable Services Limited, which in turn holds a 100% interest in Mid-Canada Communications (Canada) Corp., CUC also has an indirect interest in 11 radio and 7 television undertakings in Northern Ontario. For its part, RBL is the licensee of Toronto radio stations CFTR and CHFI-FM and has direct control of CFMT-TV, the multilingual television station in Toronto. Further, through its corporate parent, Rogers Communications Inc., RBL is affiliated with Rogers Cable T.V. Limited, the largest cable television operator in Canada, with systems in Alberta, British Columbia and Ontario.

In support of the application, YTV stressed the long-term involvement of the Founder Shareholders in the development of a dedicated channel for children's programming. CUC's Scarborough undertaking was the first in Canada to establish a special programming channel for children, utilizing original productions and repeats of programs obtained from CBC and TVOntario. This service ended in 1979 and was succeeded the following year by a 4-hour-a-day program pack-age, initiated by TVOntario with the assistance of Rogers Cablesystems Limited, and known as Galaxie.

During the four years of its existence, Galaxie was distributed via video-cassette to some 1.7 million cable households, with the Rogers' organization contributing some $4 million for the acquisition and production of suitable children's programming.

In response to Public Notice CRTC 1983-93 calling for applications to operate a national specialty television network, two proposals for a children's channel were submitted. Roger Price collaborated with Rob Burton of Appletree Productions, Inc. on one submission, while TVOntario applied to extend the Galaxie service on a national scale. Neither application was heard, however; the Galaxie proposal was not heard for reasons of its basic distribution requirements and the Price/Burton application was adjourned at the request of the applicant for lack of financing.

In response to a further CRTC call (Public Notice CRTC 1984-196), the Commission received applications from the National Film Board and from Price/Burton. CUC Limited and Jon Slan became partners in the latter application, but once again neither application was heard.

Subsequently, the Commission held a series of public meetings to canvass views on the potential establishment of a Canadian children's, youth or family-oriented cable television service, and in August 1986 (Public Notice CRTC 1986-199) issued a new call for applications for network licences to offer Canadian specialty programming services. In response to this call, the Commission received applications for children's and youth programming services from YTV and from Télé-Jeunesse Canada/Young Canada Television (TJC/YCT) proposing part-time services in French and English. The TJC/YCT applications were withdrawn from the agenda of the 20 july 1987 Public Hearing because the applicant did not file complete applications.

YTV submitted that the current application represents a well-balanced combination of broadcast management experience and expertise in the production and marketing of children's television programming and noted that it is supported by solid private sector financing and pre-launch exhibition commitments for distribution to more than 3 million Canadian cable households.

Demand

in support of its claim that there is strong interest in a children's and youth specialty programming service, Mr. Rob Burton, on behalf of YTV, stated:

  ... although in the main, most people are monthly satisfied with their television service, children are not satisfied ... and parents are not satisfied ...

  The issue that they seek relief on is access, availability. The way the television system is now set up, you can find television for youth and children only in certain ghettoized area of the schedule ... What we are after is full-time access.

The application substantiated YTV's contention that there is significant public demand for a national satellite-delivered television service directed to children and youth, citing an audience survey undertaken by Decima Research, Ltd. (January 1985) which projected that 57% of cable subscribers would support an increase of 55¢ per month for such a service, and the Moss, Roberts and Associates study commissioned by the Government of Ontario (December 1986) which ranked a new children's service among the most desirable of possible new cable television services. The Commission notes that other surveys considered at this hearing indicated that approximately one-third of Canadians are positively inclined to a new children's service.

YTV provided confirmation that eight cable operators, representing in excess of 3 million cable households, have agreed to distribute the service from the first day of operation. The cable systems committed to exhibit the service are Rogers Cable T.V. Limited/Western Cablevision Limited, CUC Limited, Cablecasting Limited, Maclean-Hunter, Shaw Cablesystems Ltd., Selkirk Communications Limited, Skyline Cablevision Ltd., and Fundy Cable Holdings Ltd.

  This would result in YTV being available to approximately 55% of all cable homes in Canada. Because converters are not yet in universal use, the ultimate percentage of homes in which YTV Canada's service would be seen would be approximately 44% of all cable homes and 55% of all English [-language] cable homes.

Programming

YTV emphasized that its main focus is to provide Canadian viewers with affordable alternative fare for Canada's young people "in terms of scheduling, entertainment and intellectual stimulation", balanced with alternative family-oriented fare in the later evening periods. The service is to be predominantly Canadian in content, and the applicant proposed to invest more than $4.6 million over 3 years in new Canadian programming, including regional drama productions to be showcased in a weekly half-hour slot on Saturday afternoons. In addition, it proposed to offer appropriate programs obtained from the U.S., Europe and else-were, with a minimum of 35% of this non-Canadian content to come from other than North America sources.

YTV outlined five programming goals:

 * to increase the availability of appropriate programming for children and young people;

 * to increase children's chances to appreciate Canadian heritage through a wider window on Canada;

 * to increase children's chances to see regional expressions of Canadian culture;

 * to open a wider window on the world and bring our kids the best programs the rest of the world has to offer; and,

 * to make certain that YTV Canada fits into and contributes to the growth of the Canadian broadcasting system.

In describing the programming, the applicant provided the Commission with ten programming guidelines, including guarantees for a minimum of 60% Canadian content over the 18-hour broadcast day and between 6:00 p.m. and midnight, and a minimum of 40 hours per year of original first-run Canadian programming. Programming suitable for the family audience, which YTV defines as "programming suitable for viewing by children, youth and their parents together" will be assured by the creation of a classification system of ratings for television programs. Further, only those feature films that meet the Ontario Film Review Board's "Family" and "Parental Guidance" classifications will be distributed, and these will occupy no more than 10% of the total programming schedule. The applicant further made a commitment that music videos would not exceed more than 5% of its program schedule.

The application specified that YTV would spend $5.6 million Canadian programming (41% of gross revenues) in year 1, $4.9 million (33%) in year 2 and $5.4 million (31%) in year 3, including expenditures for script and concept development. YTV explained at the hearing that the savings it will realize from reduced Telesat Canada satellite rates in years 1 and 2, which will be $1.5 million and $600,00 respectively, have been allocated to Canadian programming.

While few details about the distribution of appropriate alternative programming in the "family viewing" periods were provided in the application, the Commission notes Mr. Burton's comment at the hearing that:

  Even in this late night period we will avoid senseless violence, themes of sexual gratification, and other fare in-appropriate for a children's channel. That is because we know that Nielsen reports that after 10:00 p.m. at night, there are still over 400,000 Canadian kids under the age of 11 watching television.

The Commission has taken these statements to mean that all of the programming to be exhibited on this specialty service will have a high degree of intrinsic value for children and youth. For this reason, and in addition to the programming guidelines submitted by the applicant which the Comission has imposed as conditions of YTV's licence in the appendix, the commission requires by condition of licence that all drama programs to be exhibited between 6:00 p.m. and midnight are to feature a child, youth, puppet, animated character or a creature of the animal kingdom as a major protagonist. This should ensure that children and youth can readily and strongly identify with the characters and storyline of the dramatic productions.

In addition, YTV will be required as a condition of its licence to limit the amount of U.S. dram productions, excluding feature films, exhibited between 6:00 p.m. and midnight to a maximum of 1 hour per day (non cumulative), and ensure that no more than two feature films a week from any source are exhibited in the hours between 6:00 p.m. and midnight.

YTV will also be required, as a condition of licence, to submit to the Commission prior to launching the service, its proposed program classification system. Inasmuch as the licence will only be issued effective 1 September 1988, the Commission will wish to be satisfied, prior to that date, that the applicant's television classification provisions are appropriate.

The Commission Is satisfied that these measures, in addition to the commitments made by the applicant, will ensure that the YTV service fulfills its commitment to serve Canada's children and youth and their families with alternative programming, and fully expects that this service will be oriented to children and youth up to 17 years of age.

Further, with respect to the applicant's commitment to provide a minimum of 40 hours of original, first-run Canadian programming in year one, increasing to 69 hours by year 5, the Commission requires YTV, as a condition of licence, to provide a minimum of 55 hours of original Canadian production and expects that a renewal application would include plans to increase substantially the amount of new Canadian material to be exhibited. The Commission expects that these hours of original, first-run Canadian programming will consist of material that has never before been distributed by any licensee of a broadcasting under takin and which will be distributed for the first time by the licensee.

In line with the applicant's commitment, as a condition of licence YTV will be required, in each broadcast year, to devote not less than 10% of its annual gross revenues to investment in the development and production of first-run, original Canadian programs, and not less than 20% of its annual gross revenues to the licensing of Canadian programs.

YTV will originate its signal from Toronto and provide the same schedule of programming in both the eastern and pacific time zones. For this purpose, it intends to make use of channels to be leased from Telesat Canada on the Anik C-3 satellite, and two satellite uplinks.

Viability

The total financing available for this proposal is $5.5 million, consisting of a $3 million capital lease (guaranteed by CUC Enterprises Limited), a $ 1 million operating line of credit, and $1.5 million in equity investment. In addition, the investors have pledged to make available a further $1 million, if required.

The applicant proposes to derive approximately 10% of its revenue from national advertising. YTV's projected advertising revenue, based on viewing patterns, for the U.S. specialty children's and youth service, Nickelodeon, is $1.3 million in year 1, rising to $1.7 million in year 2 and $2 million in year 3. At the hearing, YTV representatives assured the Commission that YTV would maintain both its 60% Canadian content commitments and its projected Canadian program expenditures, even if there were revenue shortfalls or unforeseen expenditure in the early years:

  ... we [would] have two options at that point. We can look at our costs to ensure that we are monitoring [them] effectively and then, secondly, we would probably have to revisit our rate card, if need be. We don't anticipate that happening, given the back-up financing that is available to us ... Let me guarantee the Commission, though, that we would not be back here trying to walk away form our Canadian content commitments.

The applicant has made a commitment not to include any advertising in programming directed to pre-schoolers, which will be offered 71/2 hours-a-day, Monday to Friday, from 8:00 a.m. to 3:30 p.m. It specified, however, it would seek sponsorship arrangements for this segment of its schedule. Moreover, it indicated that it would limit its national advertising availabilities in all other programs to 8 minutes per hour. There would be a maximum of 4 commercial interruptions per half-hour, scheduled to take advantage of natural breaks in the programs. In line with these commitments, the Commission has imposed, as conditions of YTV's licence, restrictions with respect to advertising.

YTV's application further states that all proposed children's advertising material will be screened and analyzed by its staff to determine that it adheres to the requirements of its own code for advertising to children which is designed to ensure:

 * that the product or service is demonstrated in a fair and honest way, and without raising unreasonable or unrealistic expectation;

 * that only appropriate forms of behaviour are depicted- avoiding displays of violence, prejudice or envy, and unsafe or potentially dangerous uses of the product or service;

 * that the intellectual and emotional maturity of the intended audience is taken into account;

 * there are no appeals to purchase potentially harmful products; and

 * that all necessary disclaimers are included.

All children's advertising will be monitored daily and the type, frequency and presence of all commercials will be reviewed and evaluated by the licensee on a monthly basis. No advertisements for vitamins or non-prescription drugs will be accepted.

Mr. Burton described YTV'S advertising philosophy as follows:

  Both as parents and as producers ... we have concerns about inappropriate advertising .. that is why we adopted and will operate under the YTV Code of Children's Advertising. The YTV Code goes further than the existing broadcasters' code.

The Commission notes YTV's statements at the hearing with respect to pursuing a responsible approach to advertising and, as a condition of licence, requires that the licensee meet, as a strict minimum, the standards of the Broadcast Code on Advertising to Children published by the Canadian Association of Broadcasters.

YTV's application was predicated upon a wholesale rate of $0.40 to cable operators, of which $0.30 would be received by YTV, with $0.10 in "local distribution costs" to be retained by the cable operator. Mr. Kevin Shea, Vice President of Marketing for Rogers Communications Inc., explained YTV's position at the hearing:

  The negotiating process that took place between YTV and its affiliates, having had experience from dealing with other specialty services, we factored in a $0.10 payment or co-op agreement with the cable operator ... to encourage the marketing of services at the local level ...

  The $0.10 arrangement between our affiliates is there for engineering, [and] administration, but, I underline, marketing.

Based on discussions at the hearing, the Commission has concluded that only $0.30 can be properly viewed as a payment to a third party and, as such, if authorized by the Commission, eligible for the pass-through mechanism in section 18(3) of the Cable Television Regulations, 1986. Accordingly, as set out in the appendix to this decision, the Commission has authorized, by condition of licence, a monthly wholesale rate of $0.30 per subscriber for year 1, $0.31 per subscriber for year 2 and $0.32 per subscriber for the third year of YTV's licence term.

Ownership Concerns

In calling for applications for new specialty programming services (Public Notice CRTC 1986-199 dated 13 August 1986), the CRTC stated that it recognized that a number of concerns had been voiced about exhibitors of programming services also functioning as program distributors. The call further stated that, while the Commission was not disposed to change its requirement limiting cable licensee involvement to a minority shareholder position, "proposals based on the integration of distribution and exhibition functions ... must demonstrate how fair and equitable access will be ensured to others wishing to use cable channels as the means of exhibition."

The Commission invited interested parties to comment specifically on the matter of access to cable distribution and on alternatives to the flexible "gatekeeper" role which cable licensees has been permitted with respect to the distribution of optional services (Public Notice CRTC 1987-121 dated 4 May 1987).

A number of interveners at the hearing objected to any degree of cable participation in the ownership of specialty programming services, citing the potential for conflict of interest if the exhibitor and program provider were to be the same. In particular, interveners referred to the following areas of concern relating to vertical integration and concentration of ownership: access to cable distribution facilities by other specialty services, discriminatory pricing practices, assignment of channel position, marketing support including promotion and packaging arrangements, and related concerns such as appropriate security measures for discretionary services.

In response to questioning at the hearing, Mr. Robert Short, Deputy Chairman of CUC, described YTV's ownership structure as a "broad-based group ... a collaboration of producers, professionals in the media field, cable people and broadcasters".

  A unique group, bringing together an interesting series of disciplines. The Board [of Directors] has a membership of 15 [of which] 6 are from the voting trust [CUC Limited and Rogers Broadcasting Limited], the balance of 9 are from the other disciplines.

The applicant indicated that CUC and Cablecasting Limited respectively hold 25.4% and 5.3% of the voting shares and nominate 3 and 1 members to the Board of Directors. The Commission notes however that RBL, which is affiliated with Rogers Cable T.V. Ltd. through its parent Rogers Communications Inc., also holds 25.4% of the voting shares and nominates 3 members to the Board. This relationship brings the involvement of the cable industry in this application to a mojority or controlling interest fp the voting shares of YTV. Moreover, inasmuch as the powers of the executive committee (which consists of seven members, of whom four are to be nominated by the Founder Shareholders, CUC and RBL, and three by the minority shareholders) relate to the "management of the corporation" and "the supervision of its day-to-day operations ... including specifically the responsibility to recommend programming principles and policies for the coproporation and to approve the annual budget", it is evident that, in fact, cable interests have effective control of this undertaking. This was acknowledged by Mr. Short at the hearing, who noted:

  We feel that control is necessary to provide the authority for accountability. The CRTC, quite rightly, will hod principally CUC and Rogers accountable for the Promise of Performance. We are the licensed companies in the consortium.

  There must be, in our view, authority sufficient to carry out the responsibilities. Control is needed to provide the stability, the firmness of purpose that you are looking for.

  ... There must be authority balanced with responsibility. That means a degree of control with proper safeguards. The makeup of our group, we think, provides the stability, the assurance that the channel will be viable ... We need the creativity of the producers, of the media people. We certainly must have the committed cable carriage distribution. That is the revenue source.

When asked at the hearing how the applicant would guarantee the continued participation of non-cable interests in YTV, representatives of both the voting trust and the minority shareholders assured the Commission shareholders assured the Commission that any increase in the ownership in YTV by cable interests would be subject to prior CRTC approval. The Commission accepts this commitment and requires, by conditions of licence that any increase beyond 56.13% in the number of shares of YTV affiliated with cable licensees shall not take place until approved by the Commission.

YTV also made the following commitments:

 * non-cable-licence-holding shareholders would have a right of first refusal to buy any shares that become available from other non-cable shareholders;

 * cable representation on the Executive Committee will not exceed four members (out of seven);

 * should additional equity capital be required, YTV would make every effort to sell preferred or non-voting common shares to new investors rather than to cable licensees; and

  * YTV will provide the CRTC with financial reports every six months, "including any revisions and projections, and comments as to what ... procedures ... are contemplated to meet financial requirements".

The Commission has noted these commitments and further requires, by condition of licence, that YTV ensure that the Board of Directors and the Executive Committee of YTV each have representatives, other than representatives of RBL, CUC and Cablecasting Limited, with experience in the production of children's programming. In this regard, by 30 November of each year of the licence term, YTV is also enquired, by condition of licence, to file with the Commission a report setting out the members of the Board and of the Executive Committee and identifying those with experience in the production of children's programming. Moreover, the Commission expects the Board of YTV to ensure that the applicant's provisions governing appropriate programming and advertising are adhered to at all times.

Citing the positive contribution that its proposed service could make to the production of Canadian programming, YTV suggested that safeguards could be put in place to deal with any concerns about cross-ownership or concentration of ownership. YTV emphasized that without the involvement of cable interests in this proposal there would have been no application at this hearing for a national English-language children's and youth channel to be distributed on basic cable service. It argued that only the participants in this proposal had been sufficiently committed to the realization of such a channel to invest the necessary funds for its start-up and initial operating expenses. It also noted that, when considering the issue of vertical integration, one must take into account the geography and limited population of Canada which result in a small and costly market base.

The cable investors in this application undertook to ensure non-discrimatory exhibition and marketing arrangements to protect the interests of other specialty programming services that might be licensed by the Commission. Rogers Communications Inc. (RCI) and CUC were specifically asked to file a description of the measures they would institute as cable operators to guarantee fair access to their cable systems so as to avoid any perception of preferential treatment of YTV. Each under-took neither to ask for nor receive from YTV any special concessions not available to other cable affiliates, and to establish a fairness committee. In letters to the Commission dated 30 July 1987, CUC and RCI out-lined the details of their safeguard mechanisms. Copies of their letters were placed on the public file.

CUC proposed an ad hoc committee, composed of one representative from CUC, one from the complainant, one from the local community affected and an independent chairperson, to deal with complaints involving access or channel positioning and suggested that the CRTC should be the final arbiter of any unresolved disputes. RCI would establish a three-member committee, consisting of an RCI director and two others independent of RCI and its associated companies, to deal with written complaints on access, rates, channel positioning or marketing and promotional support. It, too, suggested that the complainant could appeal the committee's decisions on matters other than rates to the Commission.

The Commission has examined carefully the safeguard mechanisms proposed by CUC and RCI for ensuring that specialty licensees will have fair access to the cable systems operated by these licensees. It has also considered the specific comments of a number of interveners in this respect and has determined that the membership of the fairness committees should consist of a representative of the cable licensee, a representative of the complainant, and an outside representative mutually acceptable to the other two appointees. Further, inasmuch as the Commission regulates the rates to be charged to subscribers and has authorized wholesale rates for each of the specialty services licensed today, and as it has devised a formula for the calculation of a markup for cable operators, fairness committees will not be the forum for problems relating to rates. The Commission does, however, expect these committees to deal with problems relating to access, channel positioning and marketing support or packaging. Decisions of the committees are to be binding on the cable operators.

The Commission intends to assess carefully the effectiveness of the structures that have been proposed by the cable participants in this application to safeguard the interests of the minority shareholders, other players in the Canadian broadcasting system and the Canadian public. It expects each of the parties to abide at all times by these commitments os as to ensure fair access to their exhibition facilities by all Canadian specialty and pay television services.

Conclusion

In assessing this application, the Commission has given particular attention to the objectives, orientation and nature of the programming proposed; the commitments made with respect to Canadian programming content and the more than $4.6 million YTV has committed to invest in new Canadian children's programming over its first three years of operation; and the positive contribution this specialty programming service targeted to children, youth and family audiences can make in terms of providing appropriate programs for young Canadians, including at those times when such material is not available on conventional television stations. The Commission has also taken into account the demonstrated demand for a specialty children's, youth and family programming service to be distributed on basic cable, and the viability of the proposal, marketing and exhibition projections submitted by the applicant.

The Commission has also given consideration to the concerns raised by interveners with respect to the significant level of cable ownership in this undertaking and the potential disadvantages accruing from the vertical integration of the distribution and exhibition functions of this specialty service.

In weighing these factors, the Commission has also considered the long-standing commitment of the Founder Shareholders to a dedicated, cable-originated children's service, their related expertise in and contribution to children's programming, and the safeguards proposed by the cable investors in this application to ensure fair and equitable access to their exhibition facilities by all licensed specialty services. On balance, the Commission is convinced that the advantages that will accrue to cable subscribers and to the Canadian broadcasting system by licensing this children's and youth specialty programming service and the safeguards to be put in to place far outweigh any potential disadvantages.

In particular, the Commission notes that the YTV programming service will ad an important element of diversity to the Canadian broadcasting system by offering younger viewers increased access to children's and youth programming and by providing alternative viewing choices for family audiences in the evening viewing period. The Commission considers that this channel can make a positive contribution to the overall intellectual and cultural development of Canadian children and youth.

Moreover, with respect to concerns expressed by a number of broadcasters, including Mid-Canada Communications (Canada) Corporation, Global Communications Ltd., CITY-TV and the MuchMusic network, that YTV would exhibit in its evening program period product similar to that broadcast by conventional television stations, the Commission intends to monitor closely the development of this service during its three-year licence term to ensure that the orientation of the programming service strictly adheres to the guidelines established by YTV and to the additional requirements that have been imposed by the Commission with respect to drama programming and feature films to be exhibited between 6:00 p.m. and midnight. The Commission is satisfied that, taken together, these provisions will guarantee that the programming offered by YTV will provide Canadian children and youth with an attractive, alternative viewing choice.

As to the impact that the licensing of this service may have on existing broadcasters in terms of audience fragmentation and erosion of advertising revenues, the Commission has, in this regard, examined the evidence and information presented by the applicant and assessed all of the comments and studies available in the context of this hearing. In particular, the Commission has noted the applicant's expectation that only 10% of its revenue will be derived from national advertising. on the basis of its assessment of all of the evidence before it, the Commission has concluded that although this service could obtain up to 1.3% of the audience share from conventional broadcasters, the overall impact on existing broadcasters will be minimal.

With regard to other issues of public concern, the Commission wishes to reiterate that it shares the public's ongoing concern with respect to violence in television programming, particularly when it relates to children's programming. It will wish to be assured therefor that YTV exercises particular care and discretion in the presentation and scheduling of its programming, and refrains from broadcasting programs depicting scenes of violence.

The Commission notes that the applicant has agreed to abide by the CAB's self-regulatory guidelines on sex-role stereotyping. The Commission will require YTV to abide by this commitment as a condition of its licence.

The applicant also made a commitment that YTV's programming would reflect the multicultural nature of this country. In this regard, the Commission fully expects that YTV's programming will represent multicultural minorities in a manner that reflects realistically their participation in Canada society and contributes to eliminating negative stereotyping.

In terms of service to the hearing-impaired, the Commission notes that a representative of YTV, Mr. Shea, who is also a director of the Canadian Captioning Development Agency, emphasized that YTV would "make every attempt to purchase the captioned version" of acquired programming and gave a commitment that "any new programming" generated by YTV through independent Canadian producers would be closed captioned. He also said YTV intends to acquire an in-house unit to caption the shelf material it purchases.

The Commission will follow with interest the applicant's progress in developing this specialty programming service for children, youth and their parents, and fully expects it to abide by all of the conditions of licence set out in the appendix to this decision.

The Commission acknowledges the many interventions submitted in response to the YTV application and has taken the comments it has received into account in reaching its decision. For the most part, the interveners considered this proposal to be an appropriate vehicle for realizing many of the goals articulated for a dedicated children's channel by The Children's Broadcast Institute, including the requirements that such a service should be predominantly Canadian in character and content and "should stimulate and help finance the production of a significant amount of new programming as well as providing a showcase for existing programs".

Several of the interveners noted that this application would, if licensed, provide a much needed alternative source of Canadian children's programming. Mr. Hussein Ajwani stated that "The additional [monthly] cost ... is little to ask for a channel appropriate for viewing by children." Mr. Keith Digby of Victoria noted that "Currently we have very little television for children other than the highly violent, sexist, cartoon-oriented formula productions. YTV is one way of ensuring that the quality and style of children's programming will improve." Mr. David Patterson of Filmline International Inc. commented that "their proposal strikes me as the sensible and moderate approach we have long needed in Canada to provide more and better television viewing opportunities for our children."

The British Columbia Federation Council for Exceptional Children 646 expressed support for "children's television programming that is educational while being entertaining, positive and creative in nature and socially relevant". Over a dozen letters were received from cable subscribers stating "I am prepared to absorb a modest increase in ;my basic cable rate to finance the creation of this worthwhile programming service". With respect to the proposed optional-to-cable distribution of this service, a number of cable operators, including Saskatoon Telecable Ltd. and the Cable Television Association of Alberta filed letters of support.

Fernand Bélisle
Secretary General

APPENDIX

Conditions of Licence

YTV Canada, Inc. (YTV)

1. In each broadcast year, a minimum of 30% of the programming distributed on YTV shall have as its target audience children up to 5 years of age, a minimum of 48% shall have as its target audience children and youth 6 to 17 years of age and a maximum of 22% shall have as its target audience families.

2. The licensee shall devote 100% of the programs in the drama category distributed in the evening broadcast period to programs with a major protagonist that is a child, youth under the age of 18 years, puppet, animated character or creature of the animal kingdom.

3. Programming distributed by the licensee with families as the target audience shall not include programs form the following categories as set out in item 6 of Schedule I of the Television Broadcasting Regulations, 1987:news (category 1), analysis and interpretation (public affairs) (category 2), sports (category 6); or music videos.

4. The licensee shall devote not more than 5% of the broadcast year to music videos.

5. In any evening broadcast period, the licensee shall distribute no more than one hour (non-cumulative) of drama programs produced in the United States, excluding feature films.

6.  a) The licensee shall devote no more than 10% of the broadcast year to feature films.

  b) In any seven-day period of Sunday to Saturday, in the evening broadcast period the licensee shall distribute no more than two feature films.

  c) All feature films distributed on YTV shall have received from the Ontario Film Review Board a classification of "Family" or "Parental Guidance" or equivalent.

7. The licensee is required to create a classification system for drama programs other than feature films that is analogous to the classification system of the Ontario Film Review Borad, and to submit it to the Commission by 30 june 1988.

8. The licensee shall devote not less than 60% of the broadcast year and 60% of the evening broadcast period to the distribution of Canadian programs.

9. In the first year of operation, the programming distributed by the licensee shall include a minimum of 40 hours of original, first-run Canadian programs, increasing to a minimum of 55 hours of original, first-run Canadian programs during the third year of operation.

 For the purpose of this condition, an original, first-run program means a program which has never before been distributed by any licensee of a broadcasting undertaking and which will be distributed for the first time by the licensee.

10. In each broadcast year, the licensee shall devote a minimum of 35% of its non-Canadian programming to programming to programs from non-North American sources.

11.  a) From the date of commencement of service to 31 August 1989, the licensee shall charge each exhibitor of this service the wholesale rate of $0.30 per subscriber per month.

  b) From 1 September 1989 to 31 August 1990, the licensee shall charge each exhibitor of this service the wholesale rate of $0.31 per subscriber per month.

  c) From 1 September 1990 to 31 August 1991, the licensee shall charge each exhibitor of this service a wholesale rate of $0.32 per subscriber per month.

12.  a) Subject to (b) and (c), the licensee shall distribute no more than 8 minutes of advertising material during each clock hour.

  b) The licensee shall not distribute any advertising material other than national advertising.

  c) The licensee shall distribute no commercial messages during any program that has as its target audience children up to 5 years of age.

13. Any increase in the overall percentage of shares of YTV held by RBL, CUC, Cablecasting Limited or any other individual or company affiliated with a cable licensee beyond 56.13% requires prior Commission approval.

14. The Board of Directors and the Executive Committee of YTV shall each have representatives, other than representatives of RBL, CUC and Cablecasting Limited, with experience in the production of children's programming.

15. In each broadcast year, the licensee shall devote not less than 10% of the annual gross revenues derived from the operation of this service to investment in the development and production of original, first-run Canadian programs, and not less than 20% of its annual gross revenues to the licensing of Canadian programs.

16. The licensee shall adhere to the provisions of the Broadcast Code for Advertising to Children published by the CAB, as amended from time to time and accepted by the Commission.

17. The licensee shall adhere to the CAB's self-regulatory guidelines on sex-role stereotyping, as amended form time to time and accepted by the Commission.

18. For the purposes of these conditions, all time periods shall be reckoned according to the eastern time zone.

19. The definitions of advertising material, broadcast day, broadcast mont, broadcast year, Canadian program, clock hour and commercial message set out in section 2 of the Television Broadcasting Regulations, 1987 (SOR/87-49), as amended by SOR/87-425, the definition of evening broadcast period in section 4, and the provisions of sections 5, 6, 7, 8, 10(1) and (3) to (6), 12, 13 and 14 of the said Regulations shall apply to the licensee with the necessary changes.

20. The license shall keep separate accounts which set out for each financial year ending 31 August

  a) the gross revenues in respect of its operations under its license;

  b) the amounts expended by it on the acquisition of or investment in Canadian programs intended for distribution on its undertaking broken out between expenditures on original, first-run Canadian programs, on the licensing of Canadian programs, and on script and concept development; and

  c) the amount expended by it on the acquisition of non-Canadian programs intended for distribution on its undertaking.

21. The licensee shall file a statement of the accounts referred to in section 20 with the Commission on or before 30 November of each year.

22. Together with the record required to be filed with the Commission pursuant to subsection 10(3) of the Television Broadcasting Regulations, 1987, the licensee is required to provide in its program log or machine readable record the following information:

 ° for each program, the target audience (i.e. children up to 5 years, children and youth 6 to 17 years or families),

 ° for each music and dance program, an indication as to whether it was comprised of music videos,

 ° for each feature film, the classification assigned by the Ontario Film Review Board, and

 ° for each non-Canadian program, the country of origin.

23.  The licensee shall file with the Commission by 30 November of each year, a report setting gout the names of the members of the Board of Directors and Executive Committee and identifying the representatives with experience in the production of children's programming.