ARCHIVED -  Decision CRTC 88-773

Decision

Ottawa, 27 October 1988

Decision CRTC 88-773

Premier Choix:TVEC Inc.

Montreal, Quebec -880326400

Following a Public Hearing in the National Capital Region commencing 13 June 1988, the Commission renews the licence issued to Premier Choix: TVEC Inc. (PC:TVEC) to carry on a French-language pay television network (known as Super Écran) in eastern Canada (Ontario, Quebec and the Atlantic provinces) from 1 November 1988 to 31 August 1993, subject to the conditions specified in the appendix to this decision and in the licence to be issued.

This term, the end of which conforms with the end of a broadcast year, will enable the Commission to consider the renewal of this licence at the same time as that of other Canadian pay and specialty licences.

The Commission requested each licensee whose renewal application was under consideration at the 13 June 1988 hearing to provide a precise description of the programming it proposed to offer during the new licence term. Specifically, the Commission sought assurances that each of the Canadian pay and specialty networks will continue to provide an attractive range of quality programming within a specific format, while avoiding any undue siphoning or duplication of the program material provided by other members of the Canadian broadcasting system.

In describing the nature of its service, PC:TVEC proposed to continue to offer general interest programming, at least 50% of which will consist of feature films from various sources that satisfy the criteria established in 1985 by the pay television licensees in a document entitled "Pay Television Standards and Practices". The licensee further specified that the programming would also include made-for-television movies, theatrical releases, variety and musical programs, children's programming, documentaries and other film productions, specials, sports events and promotional material.

In response to an intervention from The Sports Network (TSN) concerning the amount of sports programming which PC:TVEC could offer, the licensee indicated at the hearing that it has not presented any sports programming to date nor is it its intention to do so "in the immediate future". Nevertheless, the licensee stated [TRANSLATION]:

... we would like to retain the option because tastes change and evolve. We constantly monitor our subscribers' wishes and if our research ever indicated that there would be a place for sports events on Super Ecran, we should - as we do now - be able to respond to these wishes.

Given the discretionary nature of the service provided by the general interest pay television networks and the relatively small impact of such services on conventional television and specialty services, the Commission is willing to allow PC:TVEC a certain amount of flexibility with respect to that portion of its program schedule consisting of other than dramatic programming. Nevertheless, in light of the important mandate of the pay television licensees to contribute to diversity and to provide new opportunities and revenue sources for the Canadian film and video production industry, the Commission considers that PC:TVEC should refrain from relying too heavily on sports programming in its schedule.

Accordingly, after taking into account the licensee's proposal and the discussions at the hearing, the Commission has attached, as a condition of PC:TVEC's licence, the requirement that at least 50% of its programming schedule consist of dramatic programs, with no more than 5% of the program schedule of PC:TVEC averaged over a six-month semester being devoted to sports programming.

In the interest of flexibility, and within the 5% limit, the Commission will permit the licensee to distribute up to a maximum of 20 hours of sports programming in any week, including repeats. This will permit the licensee to provide coverage, for example, of a specific sports tournament. At the same time, the Commission expects the licensee not to siphon sports programming currently being distributed by a Canadian specialty network or by a Canadian conventional television licensee.

PC:TVEC's Performance

The Super Ecran service came into being in September 1984 following Decision CRTC 84-32 dated 24 January 1984, in which the Commission authorized the amalgamation of two existing French-language pay television undertakings. Since that time, PC: TVEC has made a significant contribution to the French-language film production and distribution industries in Canada. At the hearing, Mr. Hubert Harel, President of PC: TVEC explained that the new service had the task of [TRANSLATION]:

... offering to consumers a product they wanted and would buy while respecting, to the best of our ability, the expectations of the Commission and other interested parties, specifically, the cable operators, suppliers and the various production houses and distributors of film and other television products.

He also noted that PC:TVEC's subscriber level had more than doubled from 59,000 in September 1984 to 155,000 as of 31 May 1988, and that nearly $7 million had been spent to date on marketing the service.

The Commission notes that PC:TVEC has exceeded the requirements imposed on it by conditions of licence in Decision CRTC 86-814 dated 2 September 1986. The requirements, which specify the amount of Canadian programming to be exhibited and the amount of money to be expended on this programming, include the obligation that at least half of the Canadian programming distributed by PC:TVEC be Canadian dramatic programming, and that 20% of annual gross revenues be expended on investment in or acquisition of Canadian programming. According to information filed with the renewal application, PC:TVEC will have spent some $10,364,500 on Canadian programming between September 1984 and 31 August 1988, including approximately $6,726,000 between 1 September 1986 and 31 August 1988 which represents better than 23% of its gross revenues in each of the last two broadcast years.

At the hearing, the licensee emphasized that it distributes all French-language Canadian film productions available to it, as well as dubbed versions of English-language Canadian films that are appropriate for its audiences and meet the standards established for pay television licensees. Generally, all Canadian films that receive theatrical release are distributed on PC:TVEC. The licensee noted that there is little domestic production other than films prepared for industrial or training purposes, that is not acceptable for distribution on its service. There are, however, a few English-language films that, although suitable for pay television distribution, have not been dubbed because they have not been screened in Quebec movie theatres or are judged to be inappropriate for broadcast by the conventional francophone television services.

Representatives of PC:TVEC explained that Super Ecran currently broadcasts an average of 30 new films each month, of which at least 3 are Canadian and receive prominence in terms of scheduling. Feature films constitute approximately 83% of the current program schedule. Children's programming, consisting of a 90-minute block of programming 6 mornings a week and occasional feature films, occupies a further 7% of the schedule. Variety programs make up 1% of the schedule, while the remaining 9% consists of bridging material (interstitials) including promotions for upcoming films.

Currently, the licensee is required to devote 30% of prime viewing hours, (defined for the purpose of this licensee as being the period from 6:00 p.m. to 10:00 p.m. Eastern time) and 20% of the remainder of the schedule to Canadian programming. Material of U.S. origin occupies 49% of the schedule, 14% originates in France and the remaining 17% comes from other countries such as Italy, the United Kingdom, West Germany, Japan, Belgium and Australia.

Prior to Decision CRTC 86-814, the licensee had projected a deficit of $19.1 million by 31 August 1989. In its renewal application, however, PC: TVEC indicated that it became profitable in 1986. The Commission notes that as of 31 January 1988 the licensee's cumulative deficit had been reduced to $9.9 million.

PC:TVEC is now a viable broadcasting undertaking in the French-language market, having discharged the debt of its two predecessor corporations, except for $913,000 still owed to SOGIC which, it stated, will be paid off by 31 March 1989. In serving the smallest market of the three general interest pay licensees, PC:TVEC has realized dramatic increases in subscriber penetration. This is evidence of the success of its marketing efforts and attests to the attractiveness of the programming service it offers.

The one area in which the licensee's performance has fallen short of its commitment is the funding of script and concept development. Decision CRTC 84-32 noted the licensee's commitment to contribute a minimum of 5% of its gross revenues for this purpose over the licence term. Based on the revenues earned by PC:TVEC between February 1984 and 31 August 1987, the licensee would have been required to invest some $1.8 million in order to fulfill this commitment. At the hearing, however, the licensee acknowledged that virtually no funds have been expended for script and concept development.

Financial Projections for the New Licence Term

The licensee submitted three sets of projections for the upcoming licence term: a "pessimistic" scenario, based on the assumption that the number of subscribers would increase only gradually during the new licence term, reaching a total of 227,000 households by 31 August 1993; a "median" scenario which projected that subscriber levels should increase over the five-year licence term from a level of approximately 166,000 on 31 August 1988 to 189,000 by the end of year one and attain a level of 281,000 by the end of year five; and an "optimistic" scenario projecting some 304,000 subscribers by the end of the new licence term.

After discussion with the licensee at the hearing, the Commission considers that the assumptions underlying the licensee's median scenario are the most reasonable and, accordingly, has relied on this set of projections, as modified at the hearing, in reaching its conclusions. According to this scenario the number of subscribers will grow by 49% from 1988/89 through 1992/93 to achieve a penetration level of 22% of potential cable households by 31 August 1993 and PC:TVEC will fully recover its cumulative deficit before the fourth year of the new licence term.

Programming Plans

The Commission acknowledges the success achieved by the Super Ecran service over the past three years in overcoming the serious financial difficulties with which it was faced. In evaluating PC:TVEC's proposals and commitments for the new licence term, the Commission has taken into account the characteristics of the pay television marketplace and the unique characteristics of the francophone sector of that market. The Commission has also taken note of the licensee's comments with respect to the recent introduction of the new French-language specialty services and the likely impact of these services on the potential number of cable subscribers in the province of Quebec. Further, the Commission has given consideration to the licensee's past performance, the assumptions underlying its subscriber and revenue projections and its plans for the new licence term.

Finally, the Commission has taken into account the 30 interventions received from individuals, representatives of the film, cable and broadcast industries with respect to PC:TVEC's application for the renewal of its licence.

The conditions of licence and the specific expectations contained in this decision reflect the Commission's general concerns with respect to all Canadian pay and specialty services; they are also in line with the licensee's own commitments, as set out in its application and presentation, and as subsequently increased during the hearing.

(i) Exhibition of Canadian Programming

PC:TVEC requested in its application that the Canadian content requirement during prime viewing hours be reduced from the existing level of 30% to 20%. The 10% difference would be offset by the addition of French-language feature films of foreign origin so that, during prime viewing hours, it would present a minimum of 20% Canadian productions and an additional 10% made up of foreign productions originally produced in the French language and originating from other francophone nations.

Further, the licensee made a firm commitment to distribute all available appropriate French-language or dubbed English-language Canadian feature films that have not been broadcast by French-language conventional television licensees. It also committed that at least one presentation of each of these productions would be during prime viewing hours.

PC:TVEC also proposed that the existing conditions of licence pertaining to the exhibition of Canadian programming during prime viewing hours be modified. Specifically, it requested that the present definition of prime viewing hours (6:00 p.m. to 10:00 p.m. Eastern time) be extended by two hours, to midnight. The licensee claimed that this would give it the flexibility to schedule certain Canadian films that are not appropriate for distribution during family viewing hours later in the evening. It explained that the extended six-hour period of prime viewing hours would give it three two-hour programming blocks.

It committed to continue to devote a minimum of 20% of the remainder of the broadcast day to the distribution of Canadian programming.

At the hearing, PC:TVEC agreed to increase its Canadian content level to 25%, both over the total schedule and in prime viewing hours, once its cumulative deficit is paid off.

The Commission is not convinced that it is appropriate to claim the hour between 11:00 p.m. and midnight as prime viewing hours during which the distribution of Canadian programming is to be promoted since the available audience is substantially smaller than earlier in the evening. At the same time, the Commission is of the view that a degree of flexibility within prime viewing hours is desirable in the interests of maximizing exposure of Canadian feature films that are designed to appeal to different audiences.

Accordingly, the Commission has decided to redefine PC:TVEC's prime viewing hours as being the period between 6:00 p.m. and 11:00 p.m. Eastern time. This new definition, which extends the period by one hour, will allow PC:TVEC greater flexibility in scheduling Canadian programs at times appropriate to specific target audiences.

In light of the improved financial performance of PC:TVEC and given the importance of increasing the amount of Canadian programming distributed during prime viewing hours, the Commission has determined that, during the first four years of the new licence term, PC:TVEC will be required by condition of licence to devote 25% of the newly-defined prime viewing hours to the exhibition of Canadian programs. This condition will result in an increase in the amount of time devoted to the exhibition of Canadian programming each semester over that provided under the existing condition of licence, as well as that proposed by the licensee in its renewal application. Specifically, PC:TVEC will be required to distribute a minimum of 8.75 hours on average per week of Canadian programs during prime viewing hours.

In the fifth year of the new licence term, PC:TVEC will be required, by condition of licence, to devote 30% of prime viewing hours to the exhibition of Canadian programs, for a total of 10.5 hours of Canadian programs on average each week.

In line with the licensee's commitment and as agreed to at the hearing, PC:TVEC will be required by condition of licence to devote 20% of the remainder of its program schedule to Canadian content in years one through four, increasing to 25% in year five. The specific details of these conditions of licence are set out in the appendix to this decision.

The licensee also proposed to devote not less than 30% of the prime viewing hours and not less than 30% of the remainder of the program schedule measured on a six-month semester basis, to the distribution of feature films produced originally in the French language. The Commission expects the licensee to abide by this commitment.

In Decision CRTC 86-814, the Commission established that the licensee would be awarded a 150% time credit for each new Canadian first-run dramatic production scheduled to commence in prime viewing hours or, in the case of a production intended for children, scheduled to commence at an appropriate viewing time. In order to encourage the distribution of such programming, the Commission has determined that the 150% credit will continue to apply during the next licence term.

In this respect, the licensee noted that, to date, thirteen productions have qualified as first-run Canadian programs for purposes of the 150% time credit, and it estimated that eventually it would be able to claim about a dozen feature films a year.

The Commission expects the licensee to continue to seek to license for distribution all Canadian feature films that comply with the general interest pay television licensees' Pay Television Standards and Practices Code and to schedule these films evenly throughout its programming day. The Commission also expects PC:TVEC to co-operate with other Canadian pay television licensees to achieve the widest possible distribution of Canadian feature films and other Canadian programming, including the distribution of subtitled or dubbed versions of English-language Canadian productions.

As the Commission considers that dramatic programs should remain the major component of the Canadian programs distributed by PC:TVEC, the licensee will be required by condition of licence to ensure that at least 50% of its Canadian programs each year are dramatic programs.

(ii) Expenditures on Canadian Programming

In its application, PC:TVEC committed to expend at least 20% of its gross revenues annually on the investment in or acquisition of Canadian programs. In addition, the licensee proposed to raise the level of its expenditures as the number of subscribers to its service increased. Specifically, PC:TVEC committed to raise its expenditures on Canadian programming from the current level of 20% of gross revenues to 22% in the year following that in which the number of subscribers is at least 200,000 subscribers and to 24% in the year following that in which the number of subscribers is at least 250,000. According to the licensee's projections, these targets would be achieved in the fall of 1989 and of 1991 respectively.

In response to concerns expressed by the Commission at the hearing that there could be no guarantee as to when the projected penetration levels would be met, the licensee committed to expend an additional 2% of gross revenues on Canadian programs once its cumulative deficit is fully recovered, which it estimated would occur by the end of the fourth year of the new licence term. If this is the case, PC:TVEC will spend an additional sum of some $592,000 in the fifth year of the new licence term for this purpose.

However, should PC:TVEC pay off the cumulative deficit by 31 August 1991, with 26% of gross revenues expended on Canadian programming in years four and five of the new licence term, an additional $1,138,000 will have been spent on Canadian programs, over that projected in the application.

If this is the case, the licensee's total Canadian programming expenditures will amount to some $28,839,000 over the new licence term, or an average of 23.2% of its gross revenues each year.

The Commission considers that it is appropriate for the licensee of a discretionary network to link its Canadian program expenditure commitments to its subscriber level. Accordingly, as indicated in the appendix to this decision, PC:TVEC will be required to adhere to these commitments, by conditions of licence. In this respect, the Commission expects the licensee to make every effort to pay off its cumulative deficit as quickly as possible.

In terms of the breakdown of its Canadian programming expenditures between acquisitions and investments, PC:TVEC proposed in its application to spend $2,092,000 in year one of the new licence term, increasing to $3,049,000 in year five on licence fees to acquire Canadian programs, and $1,600,000 in year one increasing to $3,975,000 in year five on equity investment in Canadian film productions.

As noted in the Public Notice of today's date that introduces this and the other pay television network renewal decisions, many of the interventions received from members of the independent production community emphasized that they would much prefer the general interest pay television licensees to allocate a greater proportion of their program budgets to licence fees rather than to equity investments.

At the hearing, the Commission expressed concern about the high proportion of its Canadian program expenditures that PC:TVEC proposed to devote to investment in Canadian programming. In explaining why PC:TVEC wished to be able to invest in film productions and not be restricted to acquiring product through the prepayment of licence fees, Mr. Harel stated [TRANSLATION]:

... Super Écran wants to play an active, participatory role in the eventual product, while the role of someone who has pre-purchased licence fees for a cinema production is merely passive for no interaction is possible between the producer and the eventual broadcaster....

What we are asking is that we be permitted to continue during the new licence term to have this flexibility ... It is essential for the maintenance of a stable market in which all interested parties know that, in addition to receiving a fair price for their Canadian product, they can depend upon the broadcaster for additional funds in the form of equity investment.

Upon further discussion of this subject, PC:TVEC committed to divide its Canadian programming expenditures equally between acquisitions and investments, averaged over the five-year term of licence.

As set out in the appendix to this decision, the Commission has established a condition of licence requiring the licensee to devote a minimum of 50% of its expenditures for the acquisition of or investment in Canadian programs to acquisitions until such time in the new licence term as the cumulative deficit of PC:TVEC will have been recovered. As stated above, this is expected to be by the end of the third year of the new licence term.

Commencing in the month following full recovery of the cumulative deficit, PC:TVEC will be required by condition of licence to increase this percentage to 60%. In order that the Commission may measure the licensee's performance prior to the expiry of the new licence term, this condition covers the period up until 28 February 1993. The Commission expects, however, that PC:TVEC will maintain this percentage during the remainder of the 1992/93 broadcast year.

At the hearing, the licensee also discussed with the Commission the types of expenditures that would be deemed to be acquisitions or investments for the purpose of calculating whether its commitments had been met. These expenditures are set out in the attached conditions of licence. The Commission has concluded that the artistic community will benefit more if such expenditures are measured in terms of cash outlays in a particular year rather than in terms of the amortization in that year of part of the capitalized cost of acquiring or investing in Canadian programs. This cash outlay approach will be introduced as of 1 September 1989 to allow licensees to take full advantage of any unamortized portions of previous expenditures on Canadian programs.

Concerning script and concept development, PC:TVEC indicated in its application that it would invest $100,000 each year, indexed to the cost of living, for a total of approximately $550,000 over five years. At the hearing, the licensee referred to a commitment from the Quebec Department of Communications that it would also contribute funds for this purpose.

The Commission is concerned about PC:TVEC's past performance in terms of this important aspect of its mandate as a general interest pay television licensee. As noted in the Public Notice of today's date which introduces this and the other pay television network renewal decisions, script and concept development funds serve a critical function in encouraging new production talent and in realizing new projects. In its written intervention, the Association des Producteurs de Films et de Vidéo du Québec commented at length on this matter and criticized this licensee's past contribution as being inadequate.

Accordingly, in line with the licensee's commitment, PC:TVEC is required, by condition of licence, to expend on script and concept development during each year of the new licence term approximately $100,000 per year, indexed to the cost of living. The precise amounts to be expended each year are set out in the appendix to this decision.

The licensee explained at the hearing that its Canadian programming costs as a percentage of total program expenditures will average 32.5% over the new licence term. According to the licensee, its annual budget for Canadian programming will increase by 88% over this five-year period, from $3.7 million to $7.1 million, while its budget for foreign programming will remain stable.

The Commission expects the licensee to ensure that it maintains in each of the new licence term the ratio of Canadian to foreign programming expenditures found in its application.

PC:TVEC will also be required by condition of licence to devote at least 50% of its total Canadian programming expenditures each year to dramatic programs.

Finally, in order that the Commission may monitor the Canadian productions exhibited each year by PC:TVEC, the licensee will be required to provide, as part of its annual return, details of its Canadian programming, including information on the producer, the cost of the production, date of release, etc. An abridged version of this report, in which acquisition and investment expenditures will be identified and compared in relative percentages, will be placed on the public file of PC:TVEC.

Other Matters

Closed Captioning

In its application PC:TVEC proposed that a special fund, the "Fonds Réal Therrien" be established for the purpose of providing closed captioning of feature films. The fund would be named for the former Vice-Chairman of the CRTC in recognition of his interest in this matter and his efforts on behalf of deaf and hearing impaired Canadians. Although the licensee has suggested that other parties, such as the Canadian Caption Development Agency, the Association of the Deaf, the Quebec and federal Department of Communications, Telefilm Canada, TVOntario and the Canal Famille specialty service will be invited to participate in this undertaking, PC:TVEC has committed to donate $100,000 per year indexed to the cost of living to the fund, regardless of whether others choose to contribute. It estimated that this amount will provide for the captioning of between 25 and 30 films each year.

The Commission acknowledges the licensee's initiative and notes the supportive interventions received from a number of associations representing the interests of deaf and hearing impaired persons in a number of communities in the province of Quebec, including the Association du Québec pour enfants avec problèmes auditifs and the Centre Québécois de la déficience auditive/The Quebec Center for the Hearing Impaired.

The Commission expects the licensee, within the first year of the new licence term, to make use of the Line 21 text capability to inform deaf and hearing-impaired subscribers to its service who are equipped with a decoder permitting the reception of captioned information, of the time at which closed captioned programs are scheduled to appear and to advise viewers of Super Écran whenever technical difficulties prevent scheduled captioned programming from being presented.

Further, inasmuch as English-language closed captions will already be available for a number of films that are dubbed in French for distribution by PC:TVEC, and given that the closed captioning system consists of two channels, the licensee is encouraged to offer closed captioning in both of Canada's official languages whenever possible.

In light of the licensee's strong initiative in terms of captioning, the Commission also encourages PC:TVEC within the first year of the new licence term to install a Telephone Device for the Deaf to provide for better communication between itself and the deaf and hearing impaired.

Sex-Role Stereotyping and Violence

All of the general interest pay television licensees adhere, on a voluntary basis, to the Pay Television Standards and Practices Code, which addresses sex-role stereotyping, violence and scheduling. The Commission expects the licensee to continue to adhere to this code, as amended from time to time, and to review its standards and practices on a regular basis with Commission staff.

Ownership Structure

In Decision CRTC 88-136 dated 7 March 1988, the Commission approved an application by PC:TVEC for authorization to transfer to 129610 Canada Inc. (129610) an irrevocable option to acquire an additional 785,454 Class "B" voting shares from the licensee's capital stock. Once 129610 exercises the option, it will own approximately 51% of PC:TVEC's voting shares.

129610 is a wholly-owned subsidiary of First Choice Canadian Communications Corporation (First Choice) which is the licensee of the national English-language general interest pay television network serving eastern Canada and which shares with Allarcom Pay Television Limited equal ownership in The Family Channel, the English-language national general interest pay television service for children, youth and families.

Other shareholders in PC:TVEC are Quebec's Société générale des industries culturelles (SOGIC), (formerly known as the Société de développement des industries de la culture et des communications) which, upon completion of the share transfer authorized in Decision CRTC 88-136, will reduce its holding from 22.45% to 6.19% of the voting shares; Cogeco Inc., a Quebec-based company with radio, television and cable television interests in the province which owns 4.34% of the licensee company; and members of the public who currently hold 38.40% of the voting shares.

PC:TVEC is also the licensee of Canal Famille, the French-language specialty television service targeted to children and young adolescents.

PC:TVEC's Board of Directors includes four members nominated by First Choice and one by Cogeco. So long as it continues to own at least 150,000 Class "B" common shares (4.29%), SOGIC will continue to have three nominees, at least one of whom must be a representative of the Quebec film industry. Two other directors are elected by the public shareholders.

The Commission notes that once 129610 exercises its irrevocable option to acquire shares in PC:TVEC Astral Bellevue Pathé Inc. (Astral) will own a controlling interest in both First Choice and the licensee.

Accordingly, for the reasons set out in Decision CRTC 88-772 of today's date, to ensure separation of the activities of PC: TVEC and those of Astral and to avoid any perception of unfair practices, the Commission has attached conditions to PC:TVEC's licence with respect to the distribution of films and video productions in which Astral has played a role.

Further, with regard to the separation of PC:TVEC and Astral, the Commission expects that the management of PC:TVEC will be entirely separate, distinct and independent from that of Astral; that the programming acquisition personnel at PC: TVEC will be entirely separate from any Astral connection and will report exclusively, through management, to the PC:TVEC Board; and that PC:TVEC will treat all producers and distributors on a non-discretionary basis.

Finally, the Commission expects the licensee to adhere to its undertaking to submit separate financial statements for the PC:TVEC and Canal Famille programming undertakings.

As noted in the Public Notice of today's date which introduces this and the other pay television network renewal decisions, the Commission intends to publish for comment early next year proposed amendments to the Pay Television Regulations relating to ownership and other matters. Pending the enactment of these amendments, the Commission expects PC:TVEC to comply with section 14 of the television regulations, as well as with the commitment made at the hearing with respect to the transfer of its shares to persons having more than a 5% interest in a cable television system or other undertaking engaged in the exhibition of pay television.

Interventions

The Commission has taken into account the views expressed by the interveners who support PC:TVEC's renewal application. The Association des producteurs de film et de vidéo du Québec emphasized the financial support this licensee has given to the Quebec film industry and its initiative to devote a proportion of its program schedule to foreign French-language productions.

The Commission has also considered the comments of the cable television industry as expressed by the Canadian Cable Television Association, and a number of Canada's largest cable licensees. These interveners spoke of their continued commitment to the development and growth of Canada's pay television services.

Fernand Bélisle
Secretary General

PREMIER CHOIX:TVEC INC.

Conditions of Licence

Nature of the Service

1. The licensee shall provide a regional general interest pay television network service in French, with programming intended for all audiences. The licensee shall not distribute programming from categories 1 (news), 4 (religion) or 5(A) (formal education) of item 6 of Schedule I to the Television Broadcasting Regulations, 1987 and shall not devote more than 5% of its programming schedule during each semester to programming from category 6 (sports) of item 6, with a maximum of 20 hours in any week. The licensee shall devote at least 50% of its programming schedule during each semester to dramatic programs.

Exhibition of Canadian Programs

2.(a) During each semester from 1 November 1988 to 31 August 1992, the licensee shall devote to the distribution of Canadian programs not less than

(i) 25% of the time from 6:00 p.m. to 11:00 p.m. (Eastern time) and

(ii) 20% of the remainder of the time during which it distributes programming.

(b) During each semester from 1 September 1992 to 31 August 1993, the licensee shall devote to the distribution of Canadian programs not less than

(i) 30% of the time from 6:00 p.m. to 11:00 p.m. (Eastern time) and

(ii) 25% of the remainder of the time during which it distributes programming.

For the purposes of condition number 2, 150% credit will be given for time during which the licensee distributes a new Canadian production which commences between 6:00 p.m. and 11:00 p.m. (Eastern time) or, in the case of a new Canadian production intended for children, at an appropriate children's viewing time, and the licensee will receive such a credit for each showing of such a production within a two-year period from the date of first showing by that licensee.

3. In each broadcast year during the term of this licence, the licensee shall devote to the distribution of Canadian dramatic programs not less than 50% of the time that it devotes to the distribution of Canadian programs.

Expenditures on Canadian Programs

4.( a) Subject to paragraph (b), in each broadcast year during the term of this licence, the licensee shall expend on the acquisition of or investment in Canadian programs a percentage of its gross revenues for that year that is not less than the percentage shown in the table below:

Average Number of Residential, Bulk and SMATV Percentage of Revenue/
Subscribers In the Previous Year/Nombre moyen Pourcentage des
d'abonnés du service résidentiel, de groupe et recettes
du STSAC au cours de l'année précédente

199,999 or less/ou moins 20%
200,000 - 249,999 22%
250,000 or more/ou plus 24%

(b) As of the month following the one in which the licensee no longer has a cumulative deficit, the licensee shall expend on the acquisition of or investment in Canadian programs an additional 2% of its gross revenues for the balance of the broadcast year and for each subsequent broadcast year.

5. From 1 November 1988 to 31 August 1989, the licensee shall expend $83,333 on script and concept development, excluding overhead costs, and in each subsequent broadcast year during the term of this licence the licensee shall expend on script and concept development, excluding overhead costs, not less than the greater of

(1) the amount shown in the table below or

(2) the amount calculated by increasing $100,000 each year from 30 April 1989 until 30 April of that broadcast year by the percentage change in the All-items Consumer Price Index for Canada published by Statistics Canada for each year.

Expenditures on script and concept development

1 September 1989-31 August 1990/1er septembre 1989-31 août 1990 $105,000
1 September 1990-31 August 1991/1er septembre 1990-31 août 1991 $110,000
1 September 1991-31 August 1992/1er septembre 1991-31 août 1992 $115,000
1 September 1992-31 August 1993/1er septembre 1992-31 août 1993 $120,000

6. (a) During the period from 1 November 1988 until the end of the month in which the licensee no longer has a cumulative deficit, the licensee shall devote to the acquisition of Canadian programs not less than 50% of its expenditures on the acquisition of or investment in Canadian programs for that period.

(b) During the period from the beginning of the month following the one in which the licensee no longer has a cumulative deficit until 28 February 1993, the licensee shall devote to the acquisition of Canadian programs not less than 60% of its expenditures on the acquisition of or investment in Canadian programs for that period.

7. In each broadcast year during the term of this licence, the licensee shall allocate to Canadian dramatic programs at least 50% of its expenditures on the acquisition of or investment in Canadian programs for that year.

8. In making the calculations required for the purposes of conditions number 4 to 7, for the period from 1 September 1989 to 31 August 1993 there shall be taken into account only actual cash outlays. Prior to that period, there may be taken into account any current expenditures or any unclaimed expenditures made during the previous licence term for the acquisition of or investment in Canadian programs.

Distribution of Film and Video Productions Involving Astral

9(a )The licensee shall not distribute any film or video production with respect to which Astral has carried on activities other than financing or distribution.

(b) Where Astral has carried on financing or distribution activities with respect to a film or video production, the licensee shall not distribute that film or video production unless all actual production and creative control, apart from financial approvals which the pay television licensees normally require, remains the full responsibility of an independent Canadian production company.

10. Definitions

In these conditions:

"broadcast year" means the period from 1 November 1988 to 31 August 1989 and each 12-month period thereafter beginning on 1 September.

"Canadian program" means a program that qualifies as a Canadian program in accordance with the criteria established by the Commission in the appendix attached to Public Notice CRTC 1984-94 entitled "Recognition for Canadian Programs" and the appendix and schedules attached to Public Notice CRTC 1988-105 entitled "Amendments to the definition of a Canadian program as it relates to certain types of animated productions and as it relates to expenditures on all productions."

"cumulative deficit" does not include any deficits from DTH operations.

"dramatic program" means a program described in categories 7(A) to 7(F) of item 6 of Schedule I of the Television Broadcasting Regulations, 1987, SOR/87-49.

"expend on acquisition" means

(a) expend to acquire exhibition rights for the licensed territory, excluding overhead costs;

(b) expend on script and concept development, excluding overhead costs; or

(c) expend on the production of filler programming, as defined in section 2 of the Pay Television Regulations, SOR/84-797 including direct overhead costs

and "expenditure on acquisition" shall have a comparable meaning.

"expend on investment" means expend for the purposes of an equity investment or an advance on account of an equity investment but not overhead costs or interim financing by way of loan

and "expenditure on investment" shall have a comparable meaning.

"new Canadian production" means

(a) a Canadian dramatic program which exceeds 75 minutes in duration and in relation to which all financial expenditures made by the licensee were made prior to the commencement of principal photography or taping and in which principal photography or taping was completed after 1 January 1985 or

(b) a Canadian program intended for children which exceeds 25 minutes in duration and in relation to which all financial expenditures made by the licensee were made prior to the completion of principal photography or taping

and which is a program that has never been broadcast in French in the licensed territory.

"revenue" means revenue from residential, bulk and SMATV subscribers and does not include revenue from DTH subscribers or any return on an investment in programming.

"semester" means the four-month period from 1 November 1988 to 28 February 1989 and each six-month period thereafter beginning in March and September.