ARCHIVED -  Decision CRTC 92-529

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Ottawa, 5 August 1992
Decision CRTC 92-529
Canadian Broadcasting Corporation
Across Canada - 912835600
Following a Public Hearing in Toronto commencing 10 March 1992, the Commission renews, from 1 September 1992 to 31 August 1999, the broadcasting licence issued to the Canadian Broadcasting Corporation (Newsworld) to carry on the specialty programming undertaking authorized to provide a national English-language news and information service. The licence will be subject to the conditions specified in the appendix to this decision and in the licence to be issued.
The Commission first licensed Newsworld in 1987 (Decision CRTC 87-904), concurrent with its decisions approving applications proposing a number of other new specialty and pay television services. In accordance with subsection 10(2) of the Cable Television Regulations, 1986, in Anglophone markets, the service is delivered via satellite to cable, on an optional basis, for distribution by cable television affiliates to their subscribers as part of the basic service. In Francophone markets, the service may be distributed on the basic service or, with Newsworld's consent, as part of a discretionary tier. Approximately 6,404,000 cable subscribers currently have access to the Newsworld service, including some 1,141,000 located in Francophone markets.
The March 1992 hearing was the Commission's first opportunity to conduct a public review of Newsworld's performance. In general, the Commission is satisfied with this performance, and considers that a full-term licence renewal, as requested by Newsworld, is justified.
Wholesale Rates
The currently-authorized wholesale rates for Newsworld's service are $0.32 and $0.10 per month in Anglophone and Francophone markets, respectively. The licensee proposed to increase these rates to $0.59 and $0.185, effective 1 September 1992, and to raise them again in subsequent years by an amount equal to the annual increase in the rate of inflation. According to the applicant's business plan, these inflationary increases are projected to raise the monthly wholesale rate in Anglophone markets to $0.72 by year seven.
At the hearing, the licensee responded to extensive questioning by the Commission regarding the various plans and initiatives upon which it had based the requested rate increases noted above. The licensee explained that its plans are designed to "solidify and build on those programming areas where Newsworld can continue to forge its distinctly Canadian identity", and "stabilize its base operations in response to [financial] difficulties" experienced during the current licence term.
The Commission has assessed the applicant's proposed initiatives in detail. It has determined that many are consistent with Newsworld's mandate, as proposed in its original licence application and approved by the Commission in Decision CRTC 87-904, and should bring about an appreciable improvement in the quality of Newsworld's programming. Falling within this category are Newsworld's plans to solidify and stabilize the service in response to the December 1990 restructuring of the CBC's English-language television service by hiring additional staff and allocating greater resources to maintain equipment and studio space. The Commission agrees that increased subscriber revenues are also justified to meet higher costs associated with acquiring independent productions, fee payments to guests and rights to foreign news programming. Further, the Commission supports the licensee's plans to provide more live programming through the use of portable interview facilities and the lease of satellite news gathering equipment and transponder time.
The Commission, however, considers that the funding identified as being required to implement some of the licensee's proposed initiatives may be unreasonable. As an example, the licensee had projected marketing expenditures of more than $14.9 million over a seven year period for such items as promotion, audience relations and liaison with the cable industry. Newsworld submitted that these are areas that have been neglected in the past, and a greater emphasis must now be given to them in order " stay in the same place" with respect to viewership and advertising revenues, particularly in the face of increased competition from CNN.
The Commission does not consider that cable subscribers should be called upon to fund the licensee's projected marketing expenditures as a means to enable Newsworld to maintain its existing advertising revenues. Further, the Commission views the licensee's projected revenues from advertising as being somewhat conservative, and considers that they should be attainable particularly in light of the flexibility accorded Newsworld later in this decision with regard to the scheduling of advertising material.
Other initiatives proposed by the licensee appear to represent an expansion in the level of service originally proposed by Newsworld. While the licensee in 1987 proposed to add three foreign correspondents to supplement the six then employed by the CBC's network television services, the renewal application contains plans to employ four staff at each of three additional foreign bureaux to provide coverage of events in Europe, the Pacific Rim, and Central and South America. In addition, Newsworld proposes to add eight staff at the CBC's London bureau, acquire a full-time transponder and uplink for Atlantic feeds, and part-time facilities for Pacific feeds.
Still other plans appear to fall outside the scope of the licensee's mandate, as originally conceived. For example, the licensee proposed the advancement of funds to independent producers to "kick start" a stream of new Canadian documentaries; the creation of a separate development fund for independently-produced news and information programming; and the establishment of an office "to assist independent producers develop concepts, produce pilots and secure appropriate funding for on-going production".
Although the Commission has consistently urged licensees to devote greater effort and attention to the support and development of a successful Canadian independent production sector, it considers that Newsworld should provide such support through increased licence fees rather than through such mechanisms as the creation of an office to furnish assistance and advice to independent producers.
In Public Notice CRTC 1991-23, the Commission stated that it planned to examine carefully the wholesale fees of specialty programming undertakings as part of the licence renewal process to ensure that the fees in effect remain appropriate, taking into account the contributions of such services to the Canadian broadcasting system and the Commission's concerns regarding the affordability of basic cable service.
As a general approach to the rate regulation of undertakings such as Newsworld, the Commission has decided not to allow annual increases based upon inflationary costs. While such increases may be justifiable in the case of specialty services that do not distribute advertising, and whose income from subscribers is thus their only source of revenues, services such as Newsworld have the ability to compensate for inflation, or otherwise to increase their revenues, by maximizing their advertising income. The Commission notes that licensees of such services also have the ability to improve their operating margins by increasing the overall efficiency of their undertakings.
Consistent with the general approach described above, and based upon its analysis of the licensee's various initiatives and the justifiability of their related costs, the Commission has decided to grant Newsworld, by condition of licence, a one-time increase in the wholesale rates it may charge cable television affiliates, effective 1 January 1993, of $0.23 in Anglophone markets and $0.05 in Francophone markets, representing new maximum rates of $0.55 and $0.15, respectively. The Commission is satisfied that the one-time rate increases are justified and sufficient to enable the licensee to improve and maintain the quality of its service. It has included in these wholesale rates an allowance for inflation. Therefore, the subsequent annual increases sought by the licensee to cover inflationary costs are denied.
In authorizing implementation of the one-time rate increases on 1 January 1993, rather than on 1 September 1992 as requested by Newsworld in its application, the Commission has taken note of the objections to the licensee's request raised in interventions submitted by representatives of the cable television industry. According to these interveners, most cable systems seek to limit rate increases to a single increase on 1 January of each year. They claim that to adjust rates at any other time or any more frequently would result in unnecessary inconvenience to subscribers and unwarranted administrative costs to cable operators for subscriber notification.
The Commission is mindful of the licensee's concerns regarding its present financial situation; it has also given consideration to the modifications proposed by Newsworld at the hearing with respect to the timing of any rate increases. On balance, however, the Commission is satisfied that the one-time wholesale rate increases, effective on 1 January 1993, will provide the licensee with sufficient cash flow to overcome both its short and long-term financial concerns.
In its application, Newsworld submitted that it has been prevented from maximizing its advertising revenues in the past, due to a condition of its present licence which restricts the distribution of advertising material on the service to no more than 8 minutes of national advertising per clock hour.
The licensee's concern regarding the existing condition on advertising is that it fails to take into account the fact that Newsworld's programming is frequently given over to live coverage of elections, legislative hearings, constitutional conferences and other such non-scheduled events, during which it is often difficult or inappropriate to insert commercial messages. It therefore requested that, should such long-form live programming prevent it from distributing the 8 minutes of advertising material permissible in any given clock hour, it be allowed to compensate for this by scheduling up to 10 minutes of paid advertising material in other hours of the same broadcast day.
Newsworld noted that the existing licence condition has also prevented it in the past from distributing the number of unpaid public service announcements (PSAs) it might otherwise have chosen to include in its schedule, due to the need to earn advertising revenues. It therefore requested that it be permitted to distribute up to one minute of unpaid PSAs in each clock hour, over and above the 8 minutes of advertising material currently allowed. Further, it asked that messages promoting Canadian programs appearing on Newsworld not be counted as advertising material.
The Commission has considered the licensee's requests for flexibility in these three areas and is prepared to grant Newsworld the same flexibility that it extends to licensees of conventional television undertakings and other specialty programming undertakings.
For example, in the case of paid commercial messages that the licensee is unable to insert in any particular hour of an unscheduled long-form live program more than one hour in length, the Commission is not prepared to allow the licensee to place such material in other hours of the same broadcast day without qualification. The Commission will, however, permit Newsworld, by condition of licence, to insert such commercial messages elsewhere within the same non-regularly-scheduled program, as it deems appropriate, up to a maximum of 10 minutes in any clock hour. The Commission notes that a similar provision has already been accorded other specialty services, such as Réseau des Sports, that is in line with the commercial scheduling flexibility granted to conventional broadcasters.
Further, in line with the flexibility currently proposed for television licensees, the Commission will not count as advertising material any messages promoting Canadian programs to be aired on Newsworld. Similarly, in addition to the 8 minutes of advertising material currently authorized, the Commission will permit Newsworld, by condition of licence, to distribute in each clock hour a maximum of 30 seconds of unpaid PSAs. The Commission intends to amend the Specialty Services Regulations, 1990 to make available to other licensees the same measure of flexibility herein accorded Newsworld with regard to PSAs and promotional messages.
The Commission notes the licensee's response to concerns voiced by certain representatives of the television broadcast industry regarding references to a regional sales strategy in Newsworld's application. The licensee stated that it has no intention of seeking other than national advertising during the new term. It subsequently defined national advertising as being that "purchased at a national rate and which has national distribution". Newsworld acknowledged that such a definition would not prevent it from selling air time to an advertiser whose message was only relevant to a specific region, provided that the advertiser paid the full national rate.
Noting that the interveners' concerns were essentially directed to the possibility that the licensee might offer discounts on its national rate to regional or local advertisers, the Commission has amended Newsworld's condition of licence as a means to preclude such a practice. Specifically, in order to ensure that the rates offered such advertisers are the same as those contained in Newsworld's published rate card (including such incentives as are normally offered), the Commission has defined national advertising as that purchased at a national rate and receiving national distribution on the service.
In 1991, the Commission reviewed with the CBC the various measures it had taken late in the previous year to restructure the main English- and French-language television services in response to budgetary shortfalls. In Decision CRTC 91-423, the Commission expressed concern regarding the implications for cross-subsidization raised by the carriage on CBC's English-language television stations of a simulcast of Newsworld's weekday morning news program. In this context, the Commission notes Newsworld's statement at the hearing that it does not contemplate entering into any further simulcasting arrangements.
In line with the licensee's commitment, the Commission has added a condition of licence prohibiting the simulcast on the main service of any regularly-scheduled Newsworld programming other than two hours of Newsworld's morning news package.
Audit Requirements
In order to ensure that there would be no cross-subsidization between Newsworld and the CBC's main service, the Commission attached a condition to Newsworld's original licence requiring it to file, by 30 November in each year, the results of an independent audit certifying that, for each year ending 31 August, the main service had fully recovered the incremental costs incurred in providing the service, and that no monies received by the CBC from Parliamentary appropriations had been used to fund Newsworld. This condition was amended in Decision CRTC 89-831 to change the filing date to 30 June of each year for the results of the year ending the preceding 31 March. The decision specified that unaudited financial statements for each broadcast year ending 31 August would also be required.
In its renewal application, Newsworld requested that these audit requirements be further amended. It proposed that, in place of an independent audit, Newsworld's incremental costs and revenues be reported within the notes to the CBC's main financial statements, with the amounts to be audited by the Auditor General within the scope of the corporate audit. Detailed financial schedules pertaining to Newsworld's operations would be submitted to the Commission on an unaudited basis. It was further proposed that the financial results of each broadcast year, as prepared by CBC management, would continue to be filed with Newsworld's annual returns.
In presenting its case the licensee noted that, whatever the CRTC's audit requirements might be, the CBC is not permitted by Parliament to appropriate any of its funding to subsidize Newsworld, and that it is the role of the Auditor General to ensure that this does not occur. It added that both of the audits conducted by the Office of the Auditor General to date have confirmed that Newsworld is in compliance with its licence conditions and that adequate safeguards are in place to ensure a proper and effective separation of costs.
Given the findings of the Auditor General that the cost separation mechanisms employed by the licensee have indeed been effective, the Commission is satisfied that the less burdensome audit requirements proposed by Newsworld will serve the same purpose as the requirements currently in place, and has amended the relevant conditions of licence accordingly. The Commission nevertheless expects the licensee to ensure that the existing cost separation procedures continue to be followed throughout the new licence term.
As a related matter, Newsworld requested that the Commission extend from five to seven years the period within which the licensee is required to repay the main service for start-up capital and development costs. According to the licensee, its original projections had contemplated the establishment of a single broadcast centre at Toronto; no budgetary provision had been made for the additional centres subsequently established elsewhere in Canada. Newsworld contends that the additional unforeseen capital expenditures associated with the structure that was actually put in place now make it impossible for Newsworld to repay the start-up costs within the original five-year repayment schedule. In the circumstances, the Commission considers that the licensee's request is reasonable, and it is hereby approved.
Service to the Deaf and Hearing-Impaired
In Decision CRTC 87-904, the Commission noted the licensee's commitment to ensure that fully half of each 24-hour broadcast day would be either closed captioned or signed. To date, the amount of captioned or signed Newsworld programming stands at approximately one half of the level originally promised. At the hearing, the licensee stated that 75% of Newsworld's schedule would be closed captioned by the end of the new licence term.
Consistent with the importance the Commission attaches to the provision of service of the highest quality attainable to the deaf and the hearing impaired, particularly in the context of regularly-scheduled programming, the Commission has decided to attach a condition of licence requiring Newsworld to ensure that, commencing 1 September 1993, a minimum of 50% of its programming in each 24-hour period is either signed or closed captioned, increasing to a minimum of 75% by 1 September 1997.
The licensee also made a commitment at the hearing to ensure that telephone devices for the deaf (TDDs) would be installed within 60 days of the hearing at its news centres in Toronto, Halifax and Calgary. Subsequent to the hearing, Newsworld notified the Commission that TDDs have indeed been installed at the three news centres in question.
Revisions to Conditions of Licence
Absent from the conditions of licence set out in the appendix to this decision are certain requirements that had been attached to the original licence pertaining to matters since attended to by the licensee or which, in the Commission's view, are otherwise no longer relevant. Among the deleted conditions is one that had required the licensee to ensure that 58.8% of its gross revenues were expended on Canadian programming. Given the nature of the service, and taking into account the continuing requirement that 90% of each broadcast week be devoted to Canadian programming, the Commission is satisfied that it is no longer necessary to attach this condition to Newsworld's licence.
Other Matters
The Commission notes the opposing interventions received concerning Newsworld's proposal, as part of its renewal application, to make available to cable affiliates serving Francophone markets a French-language news service consisting of a daily, four-hour programming package. A number of concerns were raised about this proposal, including the lack of market research or industry consultation carried out by Newsworld. Although Newsworld announced at the hearing that it had decided not to proceed with these plans, the Commission notes that, in any event, such a proposal would have to be the subject of an application for a separate licence.
At the hearing, Newsworld addressed the cable carriage of its service and stated "that basic carriage, optional to basic, is the best form of combining some aspect of choice with a wide distribution that can achieve a public service objective". In this context, Newsworld also addressed the availability of the U.S. news service, CNN; in this regard, the Commission notes Newsworld's statement:
 [...] we cannot philosophically ask for the banning of CNN, a valuable service of information, and we will not. We do ask, however, that Canadian viewers have a Canadian choice in news, and that means not that we want to force Newsworld onto cable systems that have never carried [it], but we strongly urge that cable operators should  not be allowed to move the American CNN service to basic or extended basic and then to drop Newsworld.
There was considerable discussion at the hearing regarding provisions for the cable carriage of the Newsworld service. Some interveners expressed the view that the service should be provided to all cable systems in Anglophone markets for distribution on the basic service on a mandatory basis. Others objected to the fact that the present method of distribution obliges cable operators that opt to carry the service to distribute it on the basic service to all of their subscribers.
The Commission considers that questions concerning provisions for the cable carriage of Newsworld and other specialty services are matters more appropriately addressed in the context of the public hearing regarding the structure of the broadcasting industry tentatively scheduled for the spring of 1993. The Commission notes the licensee's statement that, notwithstanding any regulatory changes that may flow from that proceeding, its preference was for a full-term licence. Newsworld added, however, that it would seek any amendments to its conditions of licence that it considers necessary as a result of any such regulatory changes.
The Commission acknowledges the large number of thoughtful and well-prepared interventions received in support of Newsworld's application for licence renewal. The supporting interventions provided the Commission with the views of more than 1,500 individual Canadian citizens, public interest groups, national, provincial and municipal politicians, educators, labour organizations, representatives of the broadcast industry and other business interests. All attested to the value of Newsworld's service in keeping Canadians in touch with one another and well informed of events affecting their lives. The Commission also wishes to acknowledge and thank for their constructive contribution those interveners who raised concerns or expressed opposition to one or more aspects of Newsworld's renewal application.
Allan J. Darling
Secretary General
Appendix to Decision CRTC 92-529
Conditions of Licence
Canadian Broadcasting Corporation
1. The programming provided by the licensee on the news and information service shall be dedicated exclusively to programs drawn from the following categories as set out in Schedule I to the Specialty Services Regulations, 1990:
 News (category 1);
 Analysis and Interpretation
 (category 2);
 Reporting and Actualities (category 3);
 Religion (category 4);
Education, informal (category 5b);
and Sports (category 6).
 Programs from the sports category shall include no live programming.
2. The licensee shall devote no less than 90% of the broadcast week to the distribution of Canadian programs.
 For the purpose of this condition, broadcast week means seven consecutive days, beginning on Sunday.
3. (1) Subject to subsections (3) and (4), the licensee shall not distribute more than 8 minutes of advertising material during each clock hour.
 (2) For the purpose of this condition, advertising material does not include a promotion for a Canadian program to be broadcast by the licensee, notwithstanding that a sponsor is identified in the title of the program or is identified as a sponsor of that program, where the identification is limited to the name of the sponsor only and does not include a description or representation of the  products or services or any attributes of the sponsor's products or services.
 (3) In addition to the maximum of 8 minutes of advertising material referred to in subsection (1), the licensee may broadcast, during each clock hour, a maximum of 30 seconds of additional advertising material that consists of unpaid public service announcements.
 (4) Where a long-form live program that is not regularly- scheduled occupies time in two or more consecutive clock hours, the licensee may exceed the maximum number of minutes of advertising material set out in subsection (1) during any of those clock hours, up to a maximum of 10 minutes in any clock hour, provided that the average number of minutes of advertising material broadcast during the clock hours occupied by the program does not exceed 8 minutes.
 (5) For the purpose of this condition, a clock hour is a period of 60 minutes beginning on each hour and ending immediately prior to the next hour.
4. (1) The licensee shall not distribute any paid advertising material other than national advertising material.
 (2) For the purpose of this condition, paid national advertising means advertising that is purchased at a national rate and receives national distribution on the Newsworld service.
5. (1) The licensee shall charge exhibitors of this service a maximum monthly wholesale rate per subscriber as set out below:
 From 1 September to 31 December 1992: $0.32  From 1 January 1993 and for the remainder of the licence term: $0.55
 (2) Notwithstanding subsection (1), the licensee shall charge exhibitors of this service in Francophone markets a maximum monthly wholesale rate per subscriber as set out below:
 From 1 September to 31 December 1992: $0.10
 From 1 January 1993 and for the remainder of the licence term: $0.15
 (3) For the purpose of this condition, an exhibitor will be considered to be operating in a Francophone market where the population claiming the French language as its first language represents more than 50% of the total population of all cities, towns and municipalities, encompassed in whole or in part by the licensed area of the exhibitor, according to the most recent population figures published by Statistics Canada.
6. Commencing 1 September 1993 and during each of the four twelve-month periods thereafter, the licensee shall ensure that a minimum of 50% of all programming distributed on the service is either closed captioned or signed. Commencing 1 September 1997, and during each of the two final twelve-month periods, the licensee shall ensure that a minimum of 75% of all programming distributed on the service is either closed captioned or signed.
7. The licensee shall file with the Commission, by 30 June of each year, its unaudited financial statements for the preceding fiscal year in a format consistent with  previous years. The licensee shall also report the total incremental revenues and total incremental costs incurred by Newsworld within the notes to the audited financial statements of the CBC at the end of each fiscal period.
 The licensee shall also file, by 30 November of each year, unaudited financial statements in a format consistent with previous years for the twelve-month period ending the preceding 31 August. CBC management shall certify that these financial statements have been reviewed in accordance with section 8200 of the Canadian Institute of Chartered Accountants handbook.
8. The licensee shall keep separate accounts, which set out for each fiscal year ending 31 March,
 a) the gross revenues of its operations under this licence; and
 b) the amounts expended by it on the acquisition of and/or the investment in Canadian programs intended for distribution on the undertaking, including a breakout of the amount expended for closed captioning and/or signing for the deaf and hearing-impaired of programs distributed on the news and information service.
9. The licensee shall file with the Commission, on or before 30 June in each year, a statement of the accounts referred to in the preceding condition of licence.
10. (1) Subject to subsection (2), the licensee shall not engage in the simultaneous distribution of regularly-scheduled Newsworld programming on the CBC Television Network or on any CBC-owned-and-operated or affiliated undertaking.  (2) Notwithstanding subsection (1), the licensee may continue the simultaneous distribution of two hours of the six-hour weekday news program entitled "The CBC Morning News".
11. The licensee shall adhere to the Revised CBC Guidelines on Sex-Role Portrayal, dated 12 August 1991, as amended from time to time and accepted by the Commission.
12. The licensee shall adhere to the standards for children's advertising set out in the Corporation's Advertising Standards Policy C-5 dated 4 June 1986 and entitled "Advertising Directed to Children Under 12 Years of Age", as amended from time to time and accepted by the Commission, provided that the policy meets as a minimum the standards set out in the CAB's Code on Broadcast Advertising to Children, as amended from time to time and accepted by the Commission.

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