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Public Notice
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Ottawa, 18 October 1990
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Public Notice CRTC 1990-96
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CALL FOR APPLICATIONS FOR LICENCES TO CARRY ON BROADCASTING UNDERTAKINGS (CABLE AND/OR MULTIPOINT DISTRIBUTION SYSTEMS) FOR THE EXTENSION OF SERVICES TO UNLICENSED LOCATIONS WITHIN THE A AND B CONTOURS OF TELEVISION BROADCASTING STATIONS PROVIDING A THIRD CANADIAN TELEVISION SERVICE
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The Commission announces that it is prepared to consider applications for new broadcasting licences to operate new Cable Television and/or Multipoint Distribution Systems (MDS) and applications to extend the service areas of existing broadcasting receiving undertakings in order to extend subscription service by cable or MDS to unlicensed locations within the A and B contours of television broadcasting stations providing a third Canadian television service.
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Parties interested in submitting such applications are invited to file their applications with the Commission by 31 January 1991, and to submit all necessary technical documentation to the Department of Communications by the same date. This call should not be taken as indicating any conclusion by the Commission regarding the effectiveness or viability of MDS technology in extending service to any particular area, nor should it be construed that the Commission, having called for applications, will necessarily approve applications submitted for any or all of the areas covered by the call.
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A major and longstanding objective of the Commission has been the extension of broadcasting services to all regions of Canada, including remote and underserved communities. Most recent progress in this regard has been accomplished using what are now considered conventional technologies, and include broadcasting stations, cable systems, terrestrial microwave and satellite distribution systems.
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In this call for applications, the Commission is now focusing its attention on semi-urban, semi-rural areas which lie in close proximity to major metropolitan centres, but fall outside existing licensed boundaries of the large cable television undertakings serving these centres. While a third Canadian television service may be available off-air in such areas, viewers might still lack the choice made possible through cable television. Licensees serving such areas would therefore not fall within the definition of a Part III licensee found in the Cable Television Regulations, 1986 and, accordingly, this call does not contemplate applications requesting Part III status. The Commission reminds applicants that, as in all calls for extension of service, the Commission's primary goal in assessing applications will be to arrive at a licensing approach that will ensure the establishment of viable operations for the provision of an attractive package of broadcasting services to the greatest number of unserved subscribers at an affordable cost and at the earliest possible date.
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Applicants will be expected to bear this consideration in mind in preparing their applications and to demonstrate clearly why they believe their applications best satisfy this primary goal.
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The Commission has stated its preference for cable-delivered services on a number of occasions (see Public Notice CRTC 1985-60 and 1987-254). Notwithstanding its expressed preference for cable technology, the Commission recognizes the fragile economics of extending cable service to the less densely populated areas specified by this call. The Commission is convinced that MDS technology could be used successfully to provide a cable-type service to residents of these areas beyond the possible reach of cable in the immediate future.
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Current Policy for MDS Systems
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The Commission first signalled its willingness to consider licensing of MDS systems in Public Notice CRTC 1987-254 dated 26 November 1987. The detailed licensing policy set out in that notice described three possible uses for MDS technology as a delivery system: 1) to extend the service of a cable television system into less populated areas within its authorized service area where cable extension would be uneconomical;
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2) to introduce a new cable-type service into an unserved area; and
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3) to provide a competing delivery system in cabled areas for discretionary services as defined in the Cable Television Regulations, 1986.
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A different licensing scheme was proposed for each of these three uses. In addition, the Commission noted that the licensing policy might be revised in the future if the evolution of either the technology or its use indicated the need for changes.
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Since that policy was issued, the Commission has had the opportunity to consider four proposals to establish MDS operations to provide a service similar to that contemplated by this call. The four applicants were Valley MMD Systems Ltd., Sky Cable Inc. (Sky Cable), Stuart Craig, representing a company to be incorporated (Craig) and Northern Cablevision Ltd. (Northern). In each case, following consideration of the proposals at public hearings, the Commission denied the applications (see CRTC Decisions 89-489, 90-394 and 90-1039).
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Through this process it became apparent that these applications used MDS technology in a manner that was not envisioned by the above-noted policy. Further, the Commission found it necessary to make a major revision to the policy in Decision CRTC 89-489 in reference to an application by Valley MMD Systems Ltd. since it appeared that different rules would apply to the licensee, depending on whether the Commission was considering an application for a new licence or an extension to an existing service area. The Commission stated the following in that decision:
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In the Commission's view, the issues raised in connection with the MDS application considered at the Vancouver hearing clearly point to the need for certain policy revisions at this time.
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Specifically, the Commission has concluded that it would be inappropriate and potentially inequitable for it to determine the extent to which it will regulate the rates and the distribution of services of an MDS undertaking by reference to whether this new technology is intended to introduce service to a new, unserved area or to extend service within the boundaries of an existing cable system.
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Instead, when considering future subscription-based MDS applications for a given area, the Commission will be guided by the criterion that would apply to an applicant seeking a cable licence to serve the same area, namely the number of licensed television stations whose grade B official contour encompasses the local head end site. (emphasis added) To clarify its current policy for all potential applicants in the context of this call, the Commission now makes the following three statements:
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1) In the case of all proposals for MDS service pursuant to this call, the Commission considers that the appropriate regulatory framework regarding rates and the distribution of services is that applicable to a cable applicant under Part II of the Cable Television Regulations, 1986.
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2) The Commission considers that applications by existing cable licensees proposing the use of MDS to extend service should first be treated as applications to amend an existing licence by extending the service area boundary. Applicants contemplating the formation of consortia that include existing cable licensees are urged to take this into consideration as an integral part of their proposals.
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3) The Commission will wish to discuss with those existing cable licensees the necessity to issue an additional broadcasting licence to extend service using MDS technology.
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Development of the Policy
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The four previous MDS applications raised three issues of concern. In the Commission's view, these concerns must be resolved before MDS technology can be successfully used for the purposes envisioned by this call. Accordingly, applicants will be expected to address the following issues:
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1)Future Cable Expansion
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In dealing with the applications to provide MDS service put forward by Sky Cable, Craig and Northern (see Decisions CRTC 90-394 and 90-1039) a major concern raised in interventions by existing cable licensees was the effect that the licensing of MDS service, as proposed, would have in discouraging the expansion of existing cable service boundaries or the construction of new cable systems. In Decision CRTC 90-1039, the Commission addressed the problem of future cable expansion as follows:
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... the Commission considers that to provide the MDS operator an opportunity to file a competing application, should there be an application to extend cable service to an area within the service contours of an MDS system, would be very burdensome. This is particularly the case given that the nearby presence of cable infrastructure and the potential for cross-subsidization would make approval of applications to extend existing cable boundaries the logical choice in almost every instance.
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The Commission recognizes this as a major concern but, at the same time, notes that very little expansion of licensed territory belonging to existing major cable systems has taken place in recent years. Further, as a result of increased consolidation in the industry, many of these cable systems are now part of the largest multi-system operations in the country.
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One of the issues to be considered is the potential represented by the large subscriber base of nearby major cable systems to subsidize cable service extension to many suburban and rural areas. The Commission also is of the view that it may now be appropriate to use MDS technology to provide residents of these areas with greater viewing choice. Therefore, the Commission will expect all MDS applicants to address the need to allow for future cable expansion and the extent to which such expansion is possible.
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In the absence of applications by existing cable licensees to extend service to the areas contemplated under this call, the Commission will be prepared to give favourable consideration to applications by others to extend such service.
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2) Financial Viability of Neighbouring Subscription-based Systems
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In order not to jeopardize the financial viability of neighbouring subscription-based systems, the Commission currently attaches the following condition of licence to all new subscription-based systems employing over-the-air delivery techniques: It is a condition of licence that the licensee shall not solicit or accept a subscription from, or make available equipment to decode its signals for use by, any person resident inside or outside of the area encompassed by the contours approved for the licensee by the Commission (the approved contours), when that person is resident
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a) within the authorized service area of any broadcasting receiving undertaking licensed now or in the future, or
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b) within the area encompassed by the contours approved by the Commission for any other subscription-based broadcasting undertaking licensed now or in the future,
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unless the prior written consent of the applicant or licensee of the other undertaking or the prior approval of the Commission has been obtained or, in the case of a person resident inside the approved contours, that person had subscribed to the licensee's subscription television service prior to the licensing of the other undertaking.
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Applicants must include with their applications a list of all neighbouring subscription-based systems, together with their comments as to how the above-noted condition may apply in their particular case. 3) Frequency Limitations
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This call for extension of service does not contemplate applications proposing a competing delivery system in existing cabled areas for discretionary services. Owing to the limited number of frequencies available in the MDS band, however, applicants are expected to address the impact that their proposals will have on any future use of MDS technology, as well as the following matters: service priority carriage, the size of an attractive basic service package, and tiering and linkage with specialty and discretionary services from the Part II list of Eligible Satellite Services.
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OTHER CONSIDERATIONS
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In light of rapidly evolving industry conditions, the Commission will be concerned with the financial capability of the applicants and the viability of the proposed services.
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Thus, applicants will be required to provide evidence that clearly demonstrates the demand and market for the service. Without limiting the scope of the issues to be covered, each applicant should also provide the following:
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An analysis of the market in question, including projected subscriber levels, taking into account the results of any surveys conducted that substantiate these projections and the effect on these projections of future expansion of existing cable systems. A marketing plan, if warranted, for the development and distribution of the new service.
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A clear demonstration of financial viability consistent with the requirements indicated by the applicant's financial projections, including demonstrated availability of supplementary financing in the event that projected revenues are not realized.
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A clear demonstration of the financial viability of the principals.
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Applicants proposing to receive and distribute distant signals as part of the basic service should be guided by the Cable Television Regulations, 1986, with respect to the cable distribution of distant Canadian signals. They should also provide the Commission with full particulars of the costs involved and any contractual or affiliation agreements entered into for the delivery of such signals, including the costs on a per signal per subscriber basis if applicable.
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The Commission also reminds applicants that they should conform with the eligibility requirements set out in the Consolidated Regulations of Canada, 1978, chapter 376 (Eligible Canadian Corporations) and in P.C. 1985-2108 dated 27 June 1985 (Ineligibility to hold broadcasting licences).
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The Commission will announce at a later date the time and place of the public hearings where applications received pursuant to this call will be considered and where they may be examined by the public. A description of each application will also be published in newspapers of general circulation within the area to be served.
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The public will be given the opportunity to comment on any applications by submitting written intervention(s) to the undersigned with proof that a true copy of the intervention(s) has been served on the applicant(s) at least twenty(20) days before the date of the hearing.
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Alain F. Desfossés
Secretary General
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