ARCHIVED -  Public Notice CRTC 1989-47

Public Notice

Ottawa, 18 May 1989

Public Notice CRTC 1989-47

Master Antenna Television Systems Exemption

Related Documents

Public Announcements dated 15 April 1976 and 16 March 1977; Public Notices CRTC 1982-45 dated 31 May 1982, 1983-88 dated 29 April 1983, 1983-255 dated 10 November 1983 and 1988-179 dated 7 November 1988.

Background

On 16 March 1977 the Commission issued a public announcement entitled MATV Licensing and Exemption. It set out criteria to allow a class of persons operating those Canadian broadcasting receiving undertakings known as Master Antenna Television (MATV) systems to be exempted from the requirement to hold a broadcasting licence. MATV systems which receive services by satellite are commonly referred to as Satellite Master Antenna Television (SMATV) systems. MATV and SMATV systems (collectively referred to in this notice as MATV systems) generally serve multiple unit dwellings such as apartment buildings and row houses, owned either in condominium or under single title.

During the late 1970s and early 1980s, the expanded use of satellites for the distribution of Canadian and non-Canadian programming services, and the licensing of networks for the delivery of new satellite-delivered Canadian discretionary services, gave rise to the need to revise the 1977 exemption criteria.

On 10 November 1983, the Commission announced in Public Notice CRTC 1983-255 that it could not change its policy of exempting MATV systems due to the substantial legal, regulatory and administrative problems that would be involved in so doing. In order to achieve a more equitable balance between the services offered by MATV systems and cable television licensees, the Commission modified its 1977 exemption criteria to permit MATV systems to distribute all of the programming services authorized for distribution by the cable television system serving the same area. Where services received by microwave or by satellite transmission were being distributed, MATV operators were permitted to charge their users the pass-through fee for the reception of these services and were expected to enter into the necessary contractual arrangements that might be required with respect to such carriage. However, the prohibition against any charge to users for the over-the-air signals provided by an MATV system was maintained.

Since 1983 the broadcasting environment has undergone fundamental changes. An expanded range of Canadian and U.S. satellite-delivered services is now available in Canada. In keeping With the Commission's policy of ensuring that fair competition exists between MATV and cable operators and that their respective subscribers are fairly treated, the Commission decided, in Public Notice CRTC 1988-179, to seek public comment as to whether there was a need to revise the MATV exemption criteria. Specifically, the Commission invited comments from interested parties on the need to make revisions to the 1983 criteria for exemption, particularly paragraphs 1(a), 3 and 5. These criteria address respectively, the role to be played by third party service companies in the maintenance, service and provision of a signal package to an MATV operator; the fee that MATV operators may charge residents; and the signals MATV operators must carry. The issue of the wholesale rates to be charged to MATV operators by network service providers was also raised.

Overview of Comments

Thirty-seven submissions were received in response to Public Notice CRTC 1988-179. Twelve submissions were from the cable industry, ten from conventional, specialty and pay programming service providers or related associations, eight from MATV or SMATV operators or equipment suppliers and seven from other parties including the Ontario Ministry of Culture and Communications (Government of Ontario), the federal Department of Consumer and Corporate Affairs, Canadian Satellite Communications Inc. (CANCOM), Telesat Canada, the Consumers Association of Canada (CAC) and film distributors' associations.

There was a difference of views, particularly between the cable industry on the one hand and MATV operators on the other, as to whether or to what extent the criteria should be revised. Generally the cable industry supported a narrowing of the existing criteria to further restrict the number of MATV undertakings which would fall into the exempt category. The MATV industry, for its part, sought a broadening of those criteria to reduce the regulatory restrictions facing MATV in Canada.

Conclusions

The Commission has concluded, based on its evaluation of all the submissions received, that in order to promote fair competition between MATV and cable operators and to ensure that their respective subscribers are fairly treated, a number of amendments to the 1983 criteria are required.

1. Role of Service Companies

The parties differed as to the role of third party service companies. The cable industry argued that third parties should be precluded from playing any role, while three MATV hardware suppliers and five programming service providers submitted that the role of third parties should include ownership of MATV undertakings.

The Commission has decided that no change to criterion 1 of the 1983 criteria is warranted. The Commission notes, however, that criterion l(a), as presently drafted, does not prohibit a person carrying on an MATV undertaking from contracting with a third party for the provision of services in connection with establishing or operating the undertaking. Moreover, the charges for the provision of these services may include a reasonable profit component for the service company.

2. Separate Fees

The issue of permitting MATV operators to levy a separate fee over and above pass-through fees, as permitted under criterion 3, was discussed by the parties within the context of whether MATV operators should be permitted to make a profit on their operations.

The cable industry took the position that a profit orientation should automatically trigger a requirement to obtain a broadcasting licence. Half of the programming service providers, the condominium MATV operators, the Government of Ontario and the CAC expressed similar viewpoints. MATV hardware suppliers, however, generally supported the explicit incorporation of profit-making within new criteria, a position supported by the balance of the programming service providers and by the federal Department of Consumer and Corporate Affairs.

The Commission has decided not to permit a person carrying on an exempt MATV undertaking to realize any commercial gain or profit from the MATV undertaking. Moreover, in order to preclude the indirect realization of commercial gain or profit, persons carrying on an exempt MATV undertaking may not have any legal or beneficial ownership interest in any third party providing services to the undertaking. Contractual relationships that would otherwise be precluded by this requirement are permitted in respect of the individual MATV undertakings to which such relationships relate provided the contract was entered into on or before 18 May 1989.

The Commission has decided, however, to expand criterion 3 to permit a person carrying on an exempt MATV undertaking to levy separate fees over and above a fee payable to a distributor of a programming service. The following charges may be included in the fees levied by MATV operators: interest on money borrowed and depreciation, maintenance and administration costs as reasonably incurred by the operator of the undertaking in connection with the establishment and maintenance of the undertaking. The MATV operator may also include the reasonable charge or fee payable to the distributor of a service or to an agent appointed by the operator of an undertaking to act on his behalf in arranging and administering agreements with service distributors.

These modifications are set out in the revised criterion 3 in the appendix.

3. Signal Carriage

The cable industry and programming service providers generally supported the position that MATV systems should be restricted to distributing signals identical to those distributed by the cable licensee serving the same area. These parties argued that criterion 5 of the 1983 criteria should be amended so as to preclude MATV distribution of over-the-air U.S. border signals not authorized for distribution on cable systems.

Many of the parties also addressed the issue of what services should be required to be distributed on exempt MATV systems. All parties supported the existing requirement that local over-the-air signals must be distributed. The cable industry and the Government of Ontario suggested that MATV operators should be required to distribute a preponderance of Canadian signals as is required of cable licensees. Some service providers and the Canadian Association of Broadcasters suggested that regional and extra-regional stations should be added to the list of services that MATV operators are required to distribute.

The MATV industry generally supported the Commission's existing policy of permitting MATV operators to distribute the service of any network affiliate where the local cable system is authorized to distribute the service of that station or of any other affiliate of the same network. They also submitted that any service authorized for cable distribution should be interpreted to permit MATV distribution of these services even though they may not actually be carried by the local cable licensee. MATV interests also argued that identical priority distribution requirements should not be imposed on MATV operators due to technical limitations that are characteristic of these installations.

The Commission has decided to amend criterion 5 to clarify that exempt MATV operators may distribute all signals that the local cable licensee is authorized by the Cable Television Regulations, 1986, as amended, or by its conditions of licence or otherwise to distribute whether or not the licensee is actually distributing the service. In order to ensure equitable treatment for MATV and cable undertakings, the Commission has determined that this provision should apply to signals received "over-the-air" as well as those received by satellite or microwave transmission. Exempt MATV undertakings are, therefore, not permitted to distribute U.S. border stations received "over-the-air" if they are not authorized for distribution on the cable system.

The Commission has also revised criterion 5 to clarify that the signals carried by MATV systems need not be identical to those signals carried by the cable system serving the same area so long as they are the signals of affiliates of the same network.

The Commission has accepted the argument that it would be impractical, for technical reasons, to impose the priority distribution rules applicable to cable licensees on MATV undertakings. However, in order to ensure equitable treatment of MATV and cable operations, the Commission has decided to require exempt MATV undertakings to distribute a preponderance of Canadian programming services.

These modifications are set out in revised criteria 5 and 6 in the appendix.

4. Wholesale Rates

All parties supported the position that rates charged by network service providers to MATV undertakings should be no less than those charged to cable licensees. The cable industry and two service providers suggested that such rates could be higher to reflect either the cost advantages enjoyed by MATV or the administrative inefficiencies for the service providers.

The Commission has decided that a specialty programming service provider whose wholesale rate is regulated by condition of licence should charge MATV and cable operators the same wholesale rate for its service. Therefore the Commission confirms that "exhibitor", as it appears in the conditions of licence of certain Canadian specialty service networks includes exempt MATV undertakings, as well as licensed operators. The Commission expects The Sports Network and MuchMusic, whose conditions of licence now require them to charge the Commission-approved wholesale rates to "cable television licensees", to charge exempt MATV undertakings the same rate that is charged to licensed cable operators. The Commission also expects that pay television licensees will charge exempt MATV operators the same rates as those charged to cable operators.

The Commission's revised exemption criteria are attached to this notice as an appendix. For ease of reference, criteria 1, 2, 4 and 7 (previously criterion 6) from the 1983 criteria are unchanged. Criteria 3 and 5 are revised. Criterion 6 is new. They are effective immediately.

Fernand Bélisle Secretary General

  APPENDIX

Criteria for exemption attached to Public Notice CRTC 1989-47 dated 18 May 1989.

MATV Licensing and Exemption

Pursuant to paragraphs 6(1)(a) and 7(1)(e) of the Broadcasting Act, the Commission has exempted persons carrying on broadcasting receiving undertakings of the class known as master antenna television (MATV) from the requirement of holding broadcasting licences.

The effect of the Commission's action is as follows:

A. Effective 18 May 1989, the class of licence known as MATV set out in the CRTC Public Notice entitled Master Antenna Television Systems Licensing and Exemption dated 10 November 1983 is revoked and replaced by the new MATV class of licence outlined below.

B. Effective 18 May 1989, all persons carrying on a broadcasting receiving undertaking in compliance with all of the criteria set out below under the heading "Criteria for Exemption" are exempt from the requirement to hold a broadcasting licence.

Therefore, any broadcasting receiving undertaking which does not qualify for exemption under paragraph B above must be operated in accordance with a broadcasting licence.

Criteria for Exemption

1. The entire undertaking:

 (a) is located exclusively on land owned or leased by the person carrying on the undertaking, or, in the case of an undertaking carried on by a condominium corporation, by such corporation or any of its members; or

 (b) is effectively controlled by and provides service only to an educational institution, including residential buildings owned by and forming a part of such institution.

2. The undertaking is not connected by any form or means of transmission, apart from the direct over-the-air reception of conventional broadcast signals or the direct satellite or microwave reception of services

 (a) to any land not owned or leased by the person or persons described above, or

 (b) over any public street or highway, except in the case of an undertaking carried on by a condominium corporation, or by a registered cooperative society, all of whose members reside on the land on which the undertaking is situated, or by an educational institution described in 1.(b).

3. (a) No separate charge is levied or direct commercial gain obtained for the use of any part of the undertaking or for any service provided thereover, except for a charge levied in proportionate amount on subscribers to recover:

 i) interest on money borrowed and depreciation, maintenance and administration expenses as reasonably incurred by the operator of the undertaking in connection with the establishment and maintenance of the undertaking, and

 ii) the reasonable charge or fee payable by the operator of the undertaking to the distributor of a service or to an agent appointed by the operator of the undertaking to act on its behalf in arranging and administering agreements with service distributors.

 (b) No operator of an undertaking shall have any legal or beneficial ownership interest in any third party providing to the operator, for that undertaking, any services for which separate charges are levied with respect to the matters authorized under paragraphs 3(a)(i) and (ii), unless a contract was entered into on or before 18 May 1989, in which case the application of this subsection to that relationship will only become effective upon the expiration of the term of the said contract.

4. All signals of local Canadian television stations are distributed over the undertaking, in each case with no degradation of received signal.

"Signals of local Canadian television stations" means the signals of all television broadcasting stations licensed by the Commission having Grade A "official contours" (as defined in the Cable Television Regulations, 1986, as amended) enclosing the area in which the undertaking in question is carried on.

5. No service received over-the-air or by satellite or microwave transmission is distributed over the undertaking, other than a service that the Commission by regulation, condition of licence, or otherwise has authorized the licensee of a broadcasting receiving undertaking serving the area within which the undertaking is located to distribute on its undertaking, whether or not the licensee is actually distributing the service.

 Subject to paragraph 4 above, the signals distributed by the exempt undertaking need not be identical to those signals distributed by the licensed broadcasting receiving undertaking serving the area, so long as they are signals of affiliates of the same network.

6. A greater number of the video channels of the undertaking are devoted to the distribution of Canadian programming services than to the distribution of non-Canadian programming services.

7. No feature motion picture locally originated is distributed over the undertaking.