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Ottawa, 17 August 1992
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Decision CRTC 92-570
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Premier Choix:TVEC Inc.
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Montréal, Quebec - 912841400
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Following a Public Hearing in Montréal and Quebec City beginning on 23 March 1992, the Commission renews the broadcasting licence of the specialty programming undertaking Canal Famille from 1 September 1992 to 31 August 1999, subject to the conditions set out in the appendix to this decision and in the licence to be issued.
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The Commission authorized the operation of Canal Famille in 1987 (Decision CRTC 87-896), together with its approval of applications proposing a number of other specialty programming and pay television services. In accordance with subsection 10(2) of the Cable Television Regulations, 1986, this satellite-to-cable service is made available to cable television affiliates for distribution on an optional basis on the basic service. More than 1.6 million households currently subscribe to this service, the majority of which are in Quebec.
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The March 1992 hearing was the first opportunity the Commission had to publicly examine the performance of Canal Famille since the original issuance of licence. The Commission notes that, in general, the licensee fully met all the expectations and conditions attached to this licence and, in some areas, has even surpassed them. The Commission therefore considers that a full licence renewal is justified under the circumstances. The Commission notes in this regard the licensee's commitment to appear before the Commission for the purpose of assessing what changes to the conditions of its licence may be required if amendments to the regulations governing distribution, tiering or linkage are adopted following the structural hearing tentatively scheduled for 1993.
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The Commission also considered the future plans outlined by the licensee in its application and during the hearing, specifically its commitment to maintain the current orientation of its programming, which is directed exclusively to children and youth up to fourteen years of age. Adherence to this commitment shall continue to be required by condition of licence (condition no. 1). In order to improve its availability to young people, the licensee proposes to increase its hours of broadcast by 221 hours annually. The proposed hours of broadcast are from 7:00 a.m. to 7:00 p.m. Monday to Thursday; 7:00 a.m. to 8:00 p.m. Sunday; and from 7:00 a.m. to 9:00 p.m. on Friday and Saturday, as well as during extended holiday periods and summer vacations.
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The Commission also notes the licensee's commitment to continue to provide its young audience with programming that is primarily Canadian in content, entertaining, non-violent and commercial-free. To this end, the Commission renews the current conditions of licence that require that the licensee devote not less than 60% of the broadcast year to the distribution of Canadian programs (condition no. 3), that it not distribute sports programs (condition no. 2) or advertising material, with the specific exception of unpaid public service announcements and promotional announcements concerning its own programs (condition no. 6).
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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 these fees 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.
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As a general approach to the rate regulation of specialty programming undertakings, the Commission has decided not to allow annual increases based upon inflationary costs, except for undertakings such as Canal Famille that do not distribute advertising, and whose income from subscribers is the only source of revenues.
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In this regard, the Commission examined the licensee's plans for investment in programming as well as the rate schedule it proposed for the new licence term. The licensee proposed to increase its wholesale rate per subscriber per month from $0.60 to $0.65 effective 1 September 1992, with annual increases in subsequent years rising to $0.87 during the seventh year of the licence term. The Commission also took into account the fact that the introduction of Canal Famille has been successful as its subscribership and revenues have far exceeded initial forecasts during the first three years of operation.
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Consistent with the general approach described above, and based upon its analysis of all the financial data relating to this application, the Commission has decided to set Canal Famille's wholesale rate at $0.60 per subscriber per month effective 1 September 1992, accompanied by a partial indexing formula identical to the formula governing subscriber fees of cable television undertakings. Consequently, effective 1 January 1993 and, thereafter, effective 1 January of each year of its new licence term, the licensee may increase its wholesale rate by an amount equivalent to the Consumer Price Index (CPI) less 2%. Notwithstanding the foregoing, should the CPI exceed 10%, the corresponding wholesale rate increase shall not exceed an amount equivalent to 80% of the CPI increase (condition no. 7).
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The Commission notes, however, that the licensee shall inform the affiliated cable television undertakings of any increase no later than 1 September of each year. The CPI shall therefore be calculated over a period from 1 July to 30 June of each year.
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With respect to its investments in Canadian programming, the licensee stated that it expended some $10.7 million on such programming between 1988 and 1991, or nearly 19% more than the amount stipulated by its conditions of licence. According to the figures provided by the licensee, it expended, on average, some 35% of its gross revenues on investment in or the acquisition of Canadian programs between 1989 and 1992.
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Following a discussion at the hearing concerning the appropriate level of Canal Famille's contributions in this area in future years, the Commission has decided to require the licensee to incur expenses in each year of no less than 35% of its gross revenues, derived from the operation of this service in the preceding year, on Canadian programming rights, development (including the script and pilot program development fund, training grants and funding allocated to captioned programming for the hearing impaired) and promotion expenditures (condition no. 4).
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The Commission also notes the licensee's efforts regarding the distribution of original Canadian programs and has renewed the condition of licence requiring that it broadcast no less than 104 hours of original, first-run Canadian programs annually (condition no. 5). Consistent with the licensee's commitment, the Commission also expects the licensee to incur expenses, during each year of its new licence term, of $205,000 on script and concept development. The Commission also took note of the licensee's commitment to maintain its policy of obtaining the majority of its acquired programming from Canadian distributors.
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Following the intervention presented at the hearing by the Quebec Centre for the Hearing Impaired, the licensee agreed to increase its commitment to captioning for its young hearing impaired audience. The Commission therefore expects the licensee, during the second year of its new licence term, to ensure that no less than 20% of its programming is closed captioned and to increase this to a minimum of 40% during the fifth year and subsequent years. The Commission also expects the licensee to monitor the broadcasting of its closed-captioned programs to ensure the quality of the captioning.
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The Commission acknowledges the many interventions submitted with regard to this application; most of these, although supportive of Canal Famille's licence renewal, expressed concern regarding its proposed rate schedule.
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Allan J. Darling
Secretary General
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APPENDIX
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Conditions de licence
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Premier Choix:TVEC Inc.
(Canal Famille)
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1. The programming provided by the licensee shall have as its target audience only children and youth up to 14 years of age.
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2. The licensee shall not distribute on Canal Famille any programs from the sports category (category 6) set out in Schedule I of the Specialty Services Regulations, 1990.
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3. The licensee shall devote not less than 60% of the broadcast year to the distribution of Canadian programs.
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4. In each broadcast year, the licensee shall incur expenses of not less than 35% of the annual gross revenues, derived from the operation of this service in the preceding year, on Canadian programming rights, development (including the script and pilot program development fund, training grants and funding expended on captioning for the hearing impaired) and promotion expenditures.
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5. In each broadcast year, the licensee shall distribute no less than 104 hours of original, first-run Canadian programs.
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For the purposes of this condition, an original, first-run program means a program that will be distributed for the first time by the licensee and has never before been distributed by the licensee of any other broadcasting undertaking.
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6. The licensee shall distribute no advertising material, more specifically, any advertisement intended to sell or promote goods, services, natural resources or activities and includes any advertisement that mentions or displays in a list of prizes the name of the person selling or promoting these goods, services, natural resources or activities, with the exception of:
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a) a free public service announcement;
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b) a promotion for a program distributed by the licensee;
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c) a network identification announcement made by the licensee;
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d) a production credit.
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7. Effective 1 September 1992, the licensee shall charge each exhibitor of this service the maximum monthly wholesale rate of $0.60 per subscriber. Effective 1 January 1993, and 1 January of each subsequent year of its new licence term, the licensee may increase its wholesale rate by an amount equivalent to the Consumer Price Index (CPI), calculated over the period of 1 July to 30 June in the previous year, less 2%. Notwithstanding the foregoing, should the CPI exceed 10%, the corresponding wholesale rate increase shall not exceed an amount equivalent to 80% of the CPI increase.
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Definitions
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For the purpose of these conditions of licence:
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all time periods shall be reckoned according to the eastern time zone
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"broadcast day" means the period of up to 18 consecutive hours, beginning each day not earlier than six o'clock in the morning and ending not later than one o'clock in the morning of the following day, as selected by the licensee
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"broadcast month" means the total number of hours devoted by the licensee to broadcasting during the aggregate of the broadcast days in a month "broadcast year" means the total number of hours devoted by the licensee to broadcasting during the aggregate of the broadcast months in a 12-month period, beginning on 1 September in any year.
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