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Ottawa, 3 June 1993
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Public Notice CRTC 1993-76
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REGULATORY POLICY FOR MULTIPOINT DISTRIBUTION SYSTEMS (MDS)
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At a Public Hearing held on 2 December 1991 in the National Capital Region, the Commission heard applications for licences for multi-channel, subscription television undertakings based on multipoint distribution system (MDS) technology to serve 39 locations across Canada. Public Notice CRTC 1990-96 dated 18 October 1990, which had initially called for such applications, also announced the Commission's intention to develop a new regulatory policy for undertakings using this technology.
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Between the date that the call for applications was issued and the December 1991 hearing, a number of factors emerged, each having a potentially significant influence on the use of the technology and the Canadian broadcasting environment as a whole. Firstly, the Department of Communications announced that the number of frequencies allocated to MDS service would be reduced from 31 to 15. However, developments in the area of digital video compression (DVC) technology held out the promise of greatly increasing the carriage capacity of MDS and other distribution undertakings. Further, the development of non-Canadian direct broadcast satellites (DBS) became an increasing likelihood. Finally, while the October 1990 call for applications focused on the use of MDS as a complement to cable television service, it became evident at the December 1991 hearing that certain of the applications were predicated, at least in part, on operating in competition with cable.
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In view of the foregoing, the Commission denied the MDS applications then before it, and announced its intention to examine fully the impact of these changes and the future role of MDS at a structural hearing planned for the spring of 1993.
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The structural hearing took place in March 1993. In this and other public notices issued today, the Commission sets out its findings and determinations on a number of interrelated policy issues. Having taken into account the extensive discussion of the specific MDS issues noted above, and consistent with the overall policy approach announced by the Commission in Public Notice CRTC 1993-74 of today's date, the Commission hereby announces its detailed regulatory policy for MDS-based broadcasting undertakings.
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REGULATORY POLICY
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1. The Role of MDS
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The Commission considers that an appropriate role for MDS, at this time, is to provide a broad range of television services, on a subscription basis, to households in areas not served by cable television undertakings; and that the regulation of MDS, while taking into account the differences between the two technologies, should generally parallel that of cable television.
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The following regulatory guidelines pertain specifically to MDS systems operating as radiocommunication distribution undertakings.
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2. Technical Operations
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MDS systems should make effective use of the frequencies they occupy and provide the greatest coverage possible in the circumstances. In determining the extent to which proposed systems conform to this criterion, the Commission will take into account the potential of the market, the resources available to the applicant, and factors affecting signal transmission such as local topography.
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MDS-based undertakings may also make use of VHF and UHF television and FM radio frequencies on a low-power, unprotected basis.
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MDS licensees may use DVC to increase the signal carriage capacity of their systems.
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Licensees of MDS systems should provide to their subscribers receiver-decoder units to permit the tuning of the MDS, and other television signals received off-air, with equal ease.
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3. Signal Carriage
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a) Permissible Signals
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MDS subscribers should have access to a broad range of television and radio services. The Commission, therefore, will generally be prepared to authorize the carriage, in encrypted mode, of the same services authorized for distribution by cable television undertakings.
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The Commission expects that most MDS operations will transmit exclusively in the encrypted mode. Applications for non-encrypted transmission will be considered on a case-by-case basis in rural and remote areas not served by a "local" commercial television station, taking into account, as well, the impact that the proposed MDS undertaking could have on other broadcasting undertakings in the area.
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b) Preponderance of Canadian Services
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Licensees should distribute more Canadian than non-Canadian television services, and these services should be counted in the same manner as they are for cable distribution undertakings.
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c) Extension of Television Services
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MDS should contribute to the extension of Canadian television services.
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In particular, licensees should distribute the services of the Canadian Broadcasting Corporation (CBC) and the appropriate provincial educational broadcasting authority received by satellite or other means, unless the same or similar services are available to the public through "local" television stations.
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MDS systems should, to the extent feasible, distribute the signals of "regional" or "extra-regional" television stations where no local signals of the same network are available. They should also distribute the signals of "local" television stations in cases where the MDS signal contour extends significantly beyond the Grade A contour of the "local" station.
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For this purpose, a station is normally considered "local" if the MDS transmitter site is located within the station's Grade A signal contour, and "regional" if the MDS transmitter site is between its Grade A and B contours. Similarly, a station is "extra-regional" if the MDS transmitter site is located within 32 km of the station's Grade B contour.
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d) Community Programming
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MDS operations with 2,000 or more subscribers should distribute community programming.
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e) Distribution and Linkage
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MDS systems with 2,000 or more subscribers should be operated in accordance with the distribution and linkage rules applicable to cable television undertakings.
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4. Simultaneous Program Substitution
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MDS systems should provide simultaneous program substitution services to television stations in the following circumstances:
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* The MDS system has 6,000 or more subscribers and the program substitution has been requested in writing by the licensee of a "local" or "regional" television station; or
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* the MDS system receives signals subject to simultaneous substitution directly from a cable undertaking.
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5. Subscriber Fees
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Subscription fees for MDS systems with 6,000 or more subscribers will be regulated by condition of licence. Generally, systems with fewer than 6,000 subscribers will not be subject to fee regulation. However, to provide a mechanism to safeguard the interests of subscribers, the Commission will, by condition of licence, allow for the review and possible variance of the fee of an MDS licensee having 2,000 or more but less than 6,000 subscribers upon receipt of written complaints from 10% or more of its subscribers. This provision is similar to that proposed by the Commission with respect to small cable systems having 2,000 or more but less than 6,000 subscribers, as set out in Public Notice CRTC 1993-74 issued today. Also, the Commission considers that installation fees should not exceed the one time costs reasonably incurred by the licensee in performing an installation.
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MDS licensees may sell or lease receiving equipment to subscribers and require security deposits prior to the provision of service on reasonable terms and conditions.
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6. Service Area, Market Impact, and Financial Viability
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MDS systems should not jeopardize the financial viability of neighbouring subscription-based systems. Moreover, the viability of MDS undertakings should not depend upon the provision of service to households located within the authorized service area of any licensed cable distribution undertaking, or within the principal market area of any licensed MDS or STV (subscription television) system. Accordingly, MDS licensees may provide service to households located in any area, except where prohibited by a condition of licence imposed at the time of licensing.
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Applicants for a new licence should demonstrate that the viability of the proposed operation is based on service to households enclosed by the undertaking's principal market area, that being the area enclosed by the undertaking's approved signal contour. Households outside this contour are normally considered a secondary market.
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MDS licensees should not solicit or accept subscribers within the authorized service areas of cable undertakings or within the approved signal contours of STV or other MDS systems without the prior written concurrence of the licensees concerned or the prior written approval of the Commission.
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Further, MDS licensees should ensure that any services distributed in the non-encrypted mode, and that are also distributed by a neighbouring cable television undertaking as optional signals under the Cable Television Regulations, 1986 cannot, to the satisfaction of the Commission, be received by the public within the authorized service area of the cable television undertaking. As well, licensees should ensure that any signals they transmit other than "local" signals and those of the CBC or a provincial educational broadcaster cannot be received within the approved signal contours of neighbouring MDS or STV undertakings.
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7. Joint MDS/Cable Television Operations
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MDS technology may be used by a cable television licensee to extend service to households beyond the authorized cable service area. In such cases the undertakings will be licensed separately, and applicants will be expected to demonstrate that the viability of their proposed MDS operations is based upon the provision of service to households outside of the cable undertaking's authorized service area.
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Furthermore, while licensees of joint MDS/cable operations may provide MDS service to households within the authorized cable service area, the technical operation should be designed to optimize reception in the territory beyond the cable undertaking's boundaries. In addition, applicants should assure the Commission that licensing the MDS operation will not unduly hamper the future extension of cable service or delay the provision of cable service to households within the existing service area.
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While joint cable/MDS operations may share technical and other facilities, licensees should ensure that neither operation directly subsidizes the other.
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Related Documents: Public Notices CRTC 1987-254 dated 26 November 1987, 1990-96 dated 18 October 1990 and 1993-74 dated 3 June 1993; Decision CRTC 92-369 dated 18 June 1992; and Notices of Public Hearing CRTC 1991-10 dated 4 October 1991 and 1992-13 dated 3 September 1992.
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Allan J. Darling
Secretary General
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