ARCHIVED -  Decision CRTC 94-287

Decision

Ottawa, 6 June 1994

Decision CRTC 94-287

Denial of applications for licences to carry on new Canadian specialty and pay-per-view television programming undertakings (see appendices A and B to this decision)

At the Public Hearing held in the National Capital Region beginning on 14 February 1994, the Commission considered applications for licences to carry on Canadian specialty, pay and pay-per-view (PPV) television programming undertakings filed in response to a call by the Commission for these types of applications in Public Notice CRTC 1993-77.

The Commission denies the applications listed in Appendix A of this decision; and denies, by majority vote, those listed in Appendix B.

In making its licensing decisions, the Commission gave particular consideration to the affordability of the package of specialty services proposed and to the channel capacity of cable operators. Recognizing that, at this time, specialty services will likely be offered to viewers in a single package or tier, the Commission was mindful that the additional cost of the package of services licensed not compromise the viability of new and existing services. For Francophone markets, this consideration was crucial. In addition, the Commission sought to ensure that any new services approved would be viable by making certain that they would have access to as many subscribers as possible. Accordingly, for Anglophone markets, the Commission limited the number of new services approved to the number of channels that would be generally available in 1995-96 and that would provide for maximum penetration.

Recognizing that the above concerns limited the number of services to be licensed, the Commission reviewed each application on the basis of the criteria enunciated in Public Notice CRTC 1993-77, namely the financial viability, the impact on existing licensees, the Canadian content, the revenue sources and the cable distribution of specialty services. In addition, the Commission had particular concern regarding the overall attractiveness and diversity of the package.

In this proceeding, the Commission was also mindful of the particular vulnerability of the existing Canadian pay and pay-per-view services. As noted in its decisions licensing the Classic Channel and MOVIEMAX, the Commission restated its objectives for pay television in general and underlined the fact that new pay or pay-per-view services would not have any appreciable impact on existing services or otherwise affect their ability to meet the programming obligations established for them by the Commission.

Bearing all of the above-noted factors in mind, the Commission has licensed six specialty and two pay television services for the Anglophone market and two specialty services for the Francophone market. These applications were approved in Decisions CRTC 94-278 to 94-286 issued today.

French-Language Pay-Per-View

The Commission wishes to emphasize that its denial of the competing applications for the French-language PPV television services proposed by The Partners of Canal Première/ Viewer's Choice Canada (Canal Première) and by Jean-Fortier, on behalf of a company to be incorporated (Chapiteau), both listed in Appendix B, should not be taken as dismissal of the value and benefits of the proposed services. Indeed, they would offer Canadian programs that complement existing programming services. They would represent, within the French-language market, a new showcase for major productions, thus allowing producers to expand their revenue base and contribute to the development of new high-quality programs. They would also give Francophone viewers more timely access to major popular productions.

- Ownership

The Commission notes that the Canal Première partners include First Choice Canadian Communications Corporation (First Choice), which is ultimately controlled by members of the Greenberg family of Montréal through the Astral group. In the Francophone market, Astral has a 54.2% indirect interest in Premier Choix:TVEC Inc., which provides the pay television service "Super Écran", the specialty programming service "Le Canal Famille", and "Arts et Divertissement", a new specialty programming service approved in Decision CRTC 94-286 issued today. In addition to requesting a licence amendment allowing it to operate a French-language PPV television service, Canal Première intended to convert the proposed service to a video-on-demand service during the course of its licence term.

Chapiteau represents an alliance of major French-language broadcasters, including Télé-Métropole, Cogeco Radio-Télévision, Télévision Quatre Saisons, the CBC, and Société de radio-télévision du Québec (Radio-Québec). The Commission notes that the first three of these entities have significant ownership interests in the French-language conventional television market in Quebec and, through various associated companies, are also involved in cable undertakings which, together, serve over 70% of the subscribers in the Francophone market.

Given the existing roles that both applicants play in the Quebec market that the proposed undertakings would serve, the Commission has significant concerns as to whether these applications, as filed, represent proposals that would best serve the public interest. The Commission is particularly concerned that approval of either application could undermine the present equilibrium in the French-language television market. To have issued a licence to one of the applicants would leave out of French-language pay-per-view one or more of these important players in French-language broadcasting which could be detrimental to the broadcasting system and the people it serves.

- Other Concerns

Chapiteau's plans to solicit sponsors to promote the broadcast of special programs or reduce the charges that subscribers would pay for Canadian productions runs counter to the Pay Television Regulations, 1990 (the Regulations). The Commission is also concerned that the proposed 50% limit on the level of independent productions in its programming means that the applicant would produce a portion of its own programming, which is also contrary to the Regulations. Moreover, the Commission has reservations about the soundness of the applicant's revenue projections, and considers them to be highly optimistic.

In licensing undertakings to provide similar services to Eastern Canada in 1991 and Western Canada in 1992, the Commission sought to enable Canadian entrepreneurs to compete against foreign Direct Broadcasting Satellite (DBS) services which will soon begin operation in Canada. Foreign DBS would not represent the same threat to French-language broadcasters. The possibility that foreign DBS services would use multilingual audio tracks, namely the Spanish- and French-languages, still remains. However, it does not seem to be one of their priorities at this time. Furthermore, the success of any pay-per-view service is related to the number of addressable decoders in the market. In the Francophone market, there are only some 250,000 of such decoders according to applicants. At the Public Hearing, Vidéotron Ltée mentioned that it will start to deploy more rapidly its addressable decoders in the Montréal and Quebec City markets in 1998.

Consequently, having heard the evidence of the applicants and interveners and taking into account the present equilibrium of the French-language television industry, the Commission, by majority vote, has determined that there is no urgent need nor would it best serve the interest of the market to license a French-language PPV television service at this time.

The Commission does not rule out the possibility of approving applications for these types of services in the future, provided the shortcomings identified in this decision are satisfactorily addressed or mechanisms are brought forward to satisfy the Commission's concerns.

Allan J. Darling
Secretary General

APPENDIX A

Veronica Tennant, on behalf of a company to be incorporated, services to be called "Festival" - 931521900 - 932203300

Comedy Central Canada Ltd., service to be called "Comedy Central
Canada" - 931532600

The Partners of Second City/WIC/Candy-Limited Partnership, service to be called "The Second City Comedy Channel" - 931567200

Fun TV The Animation Network Inc., service to be called "Fun TV" - 931545800

The Family Channel Inc., service to be called "The Cartoon Network/Le Réseau Cartoon"
- 931538300

CHUM Limited, service to be called "Space" - 931536700

Public Awareness Television Inc., service to be called "PATV" - 931542500

Telemedia Communications Inc., service to be called "The TV Guide Channel"
- 931529200

Cogeco Radio-Télévision Inc., services to be called "Entertainment Television Canada" and "Télé-Variétés" - 931547400 - 931546600

MusiquePlus Inc., service to be called "Musiquextra" - 931561500

Baton Broadcasting Incorporated and Canadian Broadcasting Corporation, service to be called "Headline" - 931522700

The Partners of CanWest Headline News Partnership, services to be called "CanWest Headline News/Télé-Manchettes" - 931706600 - 931511000

The Pelmorex News Channel Inc./Canal Nouvelles Pelmorex Inc., services to be called "The News Channel" and "Le Canal Nouvelles" - 931570600 - 932238900

CTV Television Network Ltd., service to be called "CTV 24 Hour News" - 931518500

The Partners of The Financial Network, service to be called "The Financial Network (TFN)" - 931512800

CHUM Limited, service to be called "Pulse 24" - 931528400

CFTO-TV Limited and Rogers Broadcasting Limited, on behalf of a company to be incorporated, service to be called "Greater Toronto News (GTN)" - 931564900

CHUM Limited, service to be called "MuchMoreMusic" - 931534200

CHUM Limited, service to be called "MuchCountry" - 931533400

CMC Television Service Inc. - 931503700

Standard Radio Inc., on behalf of a company to be incorporated, service to be called "The Country Channel" - 931549000

2813327 Canada Inc., service to be called "Canada's Country Music Channel"
- 931548200

The Partners of The Hockey Channel - 931535900

The Partners of T'Elle'Vision Partnership, service to be called "T'Elle'Vision"
- 931516900

The Partners of Grown Up Channel Partnership, service to be called "The Grown Up Channel" - 931515100

The Partners of Vitality Network, service to be called "Vitality Network" - 931544100

QTN Networks Inc./Réseaux QTN Inc., services to be called "Quest TV" and "Téléscope"
- 931557300 - 931708200

Nature Canada Television Network Inc. - 931506000

Travel Canada Inc. - 931550800

Canadian Learning Television Ltd. - 931560700

2952939 Canada Inc. - 931524300

APPENDIX B

Jean Fortier, on behalf of a company to be incorporated, service to be called "Chapiteau"
- 931517700

The Partners of Canal Première/Viewer's Choice Canada - 931513600

DISSENTING OPINIONS TO DECISION CRTC 94-287

Dissenting opinion of Mr. Keith Spicer, Chairman of the CRTC

Having weighed all of the cultural, market and technical realities, I consider the CHAPITEAU application was clearly the better of the two pay-per-view applications and deserved to be licensed.

Dissenting opinion of Mr. Claude Sylvestre, Commissioner

I do not support the majority decision to deny one of the two licence applications for a French-language pay-per-view television service. The Commission should have approved a licence for CHAPITEAU; the undertaking would have contributed to diversity through its programming, and it would have involved all television networks in Quebec as well as Cogeco. CHAPITEAU would have been a unique Quebec undertaking comprised of organizations that normally compete against one another. And the notion that there would be undue concentration of ownership in the partners, who would have exclusive control of the pay-per-view market, is an incorrect interpretation and a distortion of the concept of joint action and strategic alliances aimed at producing quality programming and achieving financial viability in a limited market like Quebec.

Dissenting opinion of Mr. Yves Dupras, Quebec Regional Commissioner

I cannot subscribe to the majority opinion on CHAPITEAU. Licensing this undertaking would have been justified on the basis of its original and innovative concept.

The CHAPITEAU proposal reflected the cultural specificity of the Quebec market and the unique structure of its broadcasting system. Besides distributing films, events and shows originating in Quebec and elsewhere, CHAPITEAU would have carried major high-profile series and other television programs produced in Quebec. The benefits of adding Quebec productions to the television menu would have been numerous: a greater choice for subscribers, an additional outlet for independent television producers, the creation of additional opportunities for the exposure of new programs, and an opportunity for conventional television undertakings to rebroadcast the most popular programs in their inventory. The benefits to be derived from the operation of CHAPITEAU would have provided direct financial support to the conventional French-language television broadcasters of Quebec whose programming expenditures are considerably greater as they serve more than 90% of the audience.

CHAPITEAU did not represent a "concern" with respect to ownership concentration. The associates were not otherwise related, and all had equal voting rights. Through competition among conventional television undertakings and the ACCESS COMMITMENT given by cable operators, the other players in the system would have continued to be treated equitably.

Access to the service by independent producers of drama programming would not have been threatened by the possibility that CHAPITEAU would produce certain programs itself. CHAPITEAU had committed to ensure that a minimum of 50% of its Canadian programming would come from independent producers. It committed to schedule 24 feature length Canadian films each year; this is effectively equivalent to a commitment to broadcast all French-language feature films produced by independent producers, and a large number in the English-language as well, given the financial contributions allocated for dubbing. With respect to the proposed inclusion of television programs in the schedule, which constitutes an innovative feature for a pay-per-view television service, independent producers would have continued to be the sole source of major television series, given the complexities and high costs associated with their production.

As for the negative impact on pay television, any potential for adverse effects would arise from the introduction of pay-per-view television itself, and not specifically from CHAPITEAU. The experience
of English-language pay-per-view television indicates that pay television can still continue to
develop. As for CHAPITEAU, it made a clear commitment to maintain the orderly market for television outlets and underlined the importance of pay television revenues for the cable industry.

Thus, I cannot agree with the statement that the CHAPITEAU proposal could have undermined the equilibrium in the Quebec market, and even less as a result of not granting participation to pay television. In attempting to provide subscribers with the best possible choice of services, we must ensure instead an equilibrium that allows major undertakings such as the CBC and Télé-Métropole to continue the production and broadcast of an authentic and necessary cultural product, one that, for the long term, will sustain the broadcasting industry, which is the subject of admiration in many countries. The CHAPITEAU application would have served this objective.

Finally, the Commission was under no obligation to apply The Pay Television Regulations, 1990. It could have issued a licence as requested, given the special circumstances of the Francophone market.