ARCHIVED -  Public Notice CRTC 1994-7

Public Notice

Ottawa, 3 February 1994

Public Notice CRTC 1994-7

Amendments to the Cable Television Regulations, 1986

In Public Notice CRTC 1993-137 dated 7 October 1993, the Commission proposed amendments to the Television Broadcasting Regulations, 1987 and to the Cable Television Regulations, 1986 (the regulations).

In response, the Commission received 113 submissions from members of the public, cable operators, private and public broadcasters, various industry associations and other interested parties. The present public notice, however, examines only those 25 comments that addressed the proposed amendments to the cable television regulations. Comments regarding the proposed amendments to the television regulations, and the Commission's disposition with respect thereto, are the subject of a separate notice to be issued shortly.

The proposed amendments to the cable television regulations were for the purpose of allowing implementation of various policy changes announced following the "structural" public hearing of March 1993. These policy changes were intended to anticipate and respond to the challenges of the changing communications environment in the coming years. The proposed amendments included, among other things, revisions to the requirements governing distribution and linkage of cable services; provisions regarding access by programming services to cable distribution; distribution requirements for small cable systems; establishment of a mechanism for the mediation and resolution of disputes between licensees of programming and distribution undertakings; and deregulation of fees for small cable systems.

In the following sections of this notice, the Commission discusses only those comments on amendments that raised significant concern among the parties, and sets out its findings and conclusions resulting from this public process.

1. The Mediation and Resolution of Disputes

The Commission considers that access to cable distribution by Canadian programming services is vital to preserving the Canadian character of the broadcasting system. The Commission will continue to expect licensees of programming and distribution undertakings to negotiate carriage, and the terms of such carriage, in good faith. Never-theless, disputes have arisen in the past and may well do so in the future.

Accordingly, the proposed amendments to the cable regulations made provision for the creation of a new section (Part IV), which would allow for the establishment of a mechanism to mediate and resolve disputes between licensees of programming undertakings and licensees of distribution undertakings regarding access to distribution facilities.

Although some comments opposed this proposal, most agreed in principle with the introduction of such a mechanism, but suggested some amendments. Several parties suggested that, in the event of a dispute between licensees of programming and distribution undertakings regarding access, the Cable Television Standards Council (CTSC) could serve as the first forum for the mediation of such disputes.

The Commission fully supports such a role for the CTSC, but would first expect the Canadian Cable Television Association (CCTA) to proceed with its proposal "to change the make-up of the Council, by adding a representative of the programming services, so as to ensure fairness in the mediation of access disputes".

The Commission also notes that the CCTA is in the process of revising its access guidelines and will be submitting them to the Commission for its acceptance very shortly.

Given the above, and in particular the CCTA's efforts to develop fair and effective access guidelines, the Commission would expect most disputes to be resolved without resort to the Commission's proposed mediation process. Nevertheless, it considers that the provision of a dispute resolution mechanism in the regulations is essential to ensure retention by the Commission of the regulatory authority to oblige a cable operator to carry a particular programming service. Accordingly, the Commission has decided to adopt Part IV of the regulations as proposed.

2. Priority Distribution of Services of Licensed Programming Undertakings Over Other Services

In Public Notice CRTC 1993-137, the Commission proposed to introduce a new regulation that would require all licensees to give priority to the distribution of the services of licensed programming undertakings over other services.

While most interveners supported the general intent of the proposal, others expressed some concern with the amendment as drafted. Of the latter group, several argued that the proposed regulation could lead to the removal of certain foreign or exempt programming services from cable carriage on systems with limited channel capacity, to the great dissatisfaction of subscribers who have become accustomed to, and enjoy, such services.

The Commission acknowledges that the proposed amendments to the priority distribution rules contained in subsections 11(3) and 26(3), as drafted, could be interpreted as effectively establishing a "must carry" status for the services of licensed programming undertakings regardless of geographic factors, language or other considerations. For example, cable licensees serving Anglophone markets could be required to distribute the French-language and third-language services of all licensed programming undertakings, regardless of the linguistic or ethnic make-up of their market. Similarly, licensees serving Francophone markets could be required to distribute the English-language services of all licensed programming undertakings, even if this required the deletion of other authorized programming services.

Finally, if priority is given to the services of licensed programming undertakings, cable licensees could be required, depending on the channel capacity of individual systems, to drop a number of exempt and foreign programming services that subscribers may have grown accustomed to and expect to receive.

The Commission reiterates its long-standing policy requirement that cable operators must give priority to the distribution of programming services over non-programming services. Given the effectiveness of this policy in the past, and taking into account the new regulation for the mediation and resolution of disputes and the proposed revisions to the CCTA's Access Guidelines, the Commission has decided to give further consideration as to whether it is appropriate or necessary to enshrine this policy in the regulations. Accordingly, the Commission will not adopt the proposed subsections 11(3) and 26(3) of the regulations at this time.

3. Digital Video Compression (DVC) Standards

Under the new definition of the term "capital expenditures" contained in the proposed amendments to the regulations, certain DVC and addressability-related expenditures by cable licensees would become eligible for the purposes of sub-section 18(6) fee increase applications. In particular, a portion of the cost of an addressable, digital decoder installed in each cable household could be recovered through such fee increases. As indicated in Public Notice CRTC 1993-137, the Commission had sought comments on whether the applicability of this mechanism should be conditional on the cable industry adopting a common DVC standard.

All of those who commented on this issue agreed that the adoption of a common DVC standard for the Canadian broadcasting system would be desirable, and many stated that subsection 18(6) fee increases for digital decoders should be tied to adherence to a common standard. There was signi-ficant support for the work of Advanced Broadcasting Systems of Canada Inc. (ABSOC) in establishing a broad-based DVC solution. The CCTA and various cable licensees expressed concern, however, that a formal standards-setting process may cause inordinate delays in the roll-out of DVC technology and in the development of universal addressability. They further noted that many of the decisions affecting technical protocols are beyond the control of the Canadian industry and that there are several outstanding issues for which no imminent resolution is foreseen.

While the Commission agrees that the adoption by all Canadian programmers and distributors of a common DVC standard would be beneficial to the Canadian broadcasting system, it notes that considerable progress has been achieved in standardization and cross licensing of technology in the U.S., and that there continues to be broad participation in the ABSOC process by major Canadian players.

On balance, the Commission is satisfied that there are sufficient incentives for the cable industry, and for the broadcasting industry as a whole, to reach a broad-based agreement leading to a high degree of commonality in both the satellite and cable-distribution links. It has therefore concluded that the eligibility of a portion of the cost of the digital, addressable decoder for the purposes of subsection 18(6) fee increases need not be conditional on the cable industry adopting a common DVC standard.

4. Multiplexed Programming

In the proposed amendments to the regulations, the Commission advanced for public discussion a definition of "multiplexed programming". Proposed subsections 11(2) and 26(2) state that program repeat channels and multiplexed services may not be used for the purpose of the "preponderance rule" stipulated in subsections 11(1) and 26(1). The Commission has decided to adopt these amendments as proposed.

The two comments that addressed this matter expressed some concern with the definition of multiplexed programming as drafted and requested clarification regarding the manner in which cable licensees should count their Canadian programming services when determining prepon-derance under sections 11 and 26 of the regulations.

Further, it was suggested that the regulations should be clarified to clearly authorize cable licensees to distribute multiplexed programming.

The Commission considers that the further changes to subsections 11(2) and 26(2) proposed in these comments are not necessary. For the purposes of determining preponderance, the Commission will count a pay-per-view service as one service, regardless of the number of channels used for its distribution. It will also count a pay television service as one service, whether or not the pay television service is offering multiplexed programming on additional channels.

As for the question of whether cable licensees require additional authority to distribute multiplexed programming, the Commission notes that paragraph 10(1)(e) of the present cable regulations already authorizes cable licensees to distribute a pay television service. Further, the Commission stated in Public Notice CRTC 1993-74 that multiplexed programming for pay television services does not require any special authorization by the licensees of such programming undertakings, so long as the original conditions of licence are being met.

5. Program Repeat Channels

Proposed paragraph 10(1)(j) of the regulations would permit cable licensees to distribute programming authorized for distribution on repeat channels. The Commission has decided to adopt this amendment as proposed.

The Commission has taken note, however, of a proposal by the Canadian Association of Broadcasters and CanWest Global Communications Corp. that the operator of a program repeat channel should be permitted to request simultaneous substitution against identical programming on a foreign or distant station.

The Commission acknowledges that this proposal may have certain merit inasmuch as it would allow increased flexibility for those offering repeat channels to take advantage of simultaneous substitution without constraints on the scheduling of programs within their main services. Nevertheless, the Commission considers that this proposal goes beyond the scope of the current proposed amendments and has therefore decided that it would be inappropriate to pursue the matter at this time.

However, should licensees of programming undertakings and of distribution undertakings, together, put forward a more detailed proposal in this regard that takes into account the various potential concerns that might arise from its implementation, the Commission would be prepared to revisit this matter in the future.

6. Distribution Requirements for Small Class 2 Systems

In Public Notice CRTC 1993-137, the Commission proposed that the distribution requirements stipulated in Part II of the regulations would no longer apply to Class 2 systems with fewer than 2,000 subscribers. Instead, such systems would be subject to the same distribution requirements applicable to Part III systems, except for those requirements stipulated in section 23 of the cable regulations.

The Commission has decided to implement this proposal, but with one minor alteration. Specifically, the Commission has introduced to the regulations a reference date of 31 August 1993; the subscriber count on the later of that date or the date a licence was first issued will determine if a given Class 2 system will be subject to the Part II or Part III carriage requirements.

The Commission notes that, at licence renewal time, and on a case-by-case basis, it would still be able to determine what distribution rules should apply if a particular Class 2 system subject to Part III of the regulations grows in size beyond the 2,000 subscriber threshold.

Except where otherwise indicated above, the Commission has enacted the amendments to the regulations in essentially the same form as they appeared in the attachment to Public Notice CRTC 1993-137. A copy of these amendments is attached. They were registered on 25 January 1994 (SOR/94-133) and came into force on that date. It is expected that these amendments will be published in the Canada Gazette Part II on 9 February 1994.

For related documents: please refer to Public Notice CRTC 1986-182 (1 August 1986); CRTC Notice of Public Hearing 1992-13 (3 September 1992); Public Notice CRTC 1993-74 (3 June 1993); and Public Notice CRTC 1993-137 (7 October 1993).

Allan J. Darling
Secretary General

JUS-93-544-02
(SOR/DORS)

SCHEDULE

1. (1) The definitions "service admissible par satellite assujetti à la partie II", "service admissible par satellite canadien assujetti à la partie III" and "service admissible par satellite non canadien assujetti à la partie III" in section 2 of the French version of the Cable Television Regulations, 1986, are revoked.

(2) Paragraph (e) of the definition of the term "alphanumeric service" in section 2 of the said Regulations is revoked and the following substituted therefor:

(e) spoken words that relate to what is represented by the letters, numbers, graphic designs or still images; (service alphanumérique)

(3) The definitions "A.M. station" and "F.M. station" in section 2 of the said Regulations are revoked and the following substituted therefor:

"A.M. station" means a station that broadcasts in the A.M. frequency band of 525 to 1605 kHz, but does not include a carrier current undertaking or a transmitter that only rebroadcasts the radiocommunications of another station; (station M.A.)

"F.M. station" means a station that broadcasts in the F.M. frequency band of 88 to 108 MHz, but does not include a carrier current undertaking or a transmitter that only rebroadcasts the radiocommunications of another station; (station M.F.)

(4) The expression "(service admissible par satellite assujetti à la partie II)" at the end of the definition "Part II eligible satellite service" in section 2 of the English version of the said Regulations is revoked and the following substituted therefor

(service par satellite admissible en vertu de la partie II)

(5) The expression "(service admissible par satellite canadien assujetti à la partie III)" at the end of the definition "Part III eligible Canadian satellite service" in section 2 of the English version of the said Regulations is revoked and the following substituted therefor:

(service par satellite canadien admissible en vertu de la partie III)

(6) The expression "(service admissible par satellite non canadien assujetti à la partie III)" at the end of the definition "Part III eligible non-Canadian satellite service" in section 2 of the English version of the said Regulations is revoked and the following substituted therefor:

(service par satellite non canadien admissible en vertu de la partie III)

(7) Section 2 of the said Regulations is further amended by adding thereto, in alphabetical order, the following definition:

"multiplexed programming" means programming broadcast by a pay television service that is distributed on two or more channels; (programmation multiplexée)

(8) Section 2 of the French version of the said Regulations is further amended by adding thereto, in alphabetical order, the following definitions:

" service par satellite admissible en vertu de la partie II " Service de programmation compris dans la liste des services dont la distribution par un titulaire autre qu'un titulaire assujetti à la partie III est permise par le Conseil. (Part II eligible satellite service)

" service par satellite canadien admissible en vertu de la partie III " Service de programmation offert au moyen d'un satellite canadien et compris dans la liste des services dont la distribution par un titulaire assujetti à la partie III est permise par le Conseil. (Part III eligible Canadian satellite service)

" service par satellite non canadien admissible en vertu de la partie III " Service de programmation offert au moyen d'un satellite non canadien et compris dans la liste des services dont la distribution par un titulaire assujetti à la partie III est permise par le Conseil. (Part III eligible non-Canadian satellite service)

2. Section 7 of the said Regulations is revoked and the following substituted therefor:

7. Subject to subsection 24(2), this Part does not apply to licensees that hold Class 2 licences and that have less than 2,000 subscribers or Part III licensees.

3. (1) Paragraph 10(1)(h) of the French version of the said Regulations is revoked and the following substituted therefor:

h) tout service par satellite admissible en vertu de la partie II;

(2) Paragraphs 10(1)(i) and (j) of the said Regulations are revoked and the following substituted therefor:

(i) the programming service of any distant television station that is not a Part II eligible satellite service and that was distributed before June 3, 1993;

(j) the programming service provided by the licensee of a local television station or a specialty service and authorized by the Commission for distribution on program repeat channels, in accordance with Public Notice CRTC 1993-74, entitled Structural Public Hearing;

(k) the programming service of a cable temporary network special event type 2 undertaking within the meaning of Public Notice CRTC 1993-49, entitled Exemption Order Respecting Cable Temporary Network Special Event Type 2 Undertakings, where the operator of the undertaking is exempted from the requirements of Part II of the Broadcasting Act by the Commission pursuant to subsection 9(4) of that Act; and

(l) any programming service authorized by the Commission pursuant to a condition of its licence.

(3) Subsection 10(2) of the said Regulations is revoked and the following substituted therefor:

(2) Except as otherwise provided pursuant to a condition of its licence, where a licensee distributes a programming service referred to in paragraph(1)(e), (f) or (h), the licensee shall distribute the service in accordance with the rules governing the distribution of the service as set out in Public Notice CRTC 1993-75, entitled Distribution and Linkage Requirements.

4. Section 11 of the said Regulations is renumbered as subsection 11(1) and the section is further amended by adding thereto the following subsections:

(2) For the purposes of subsection (1), Canadian programming services and non-Canadian programming services do not include multiplexed programming or the programming distributed on program repeat channels.

5. Subsection 16(3) of the said Regulations is amended by deleting the word "or" at the end of paragraph (c) thereof, by adding the word "or" at the end of paragraph (d) thereof and by adding thereto the following paragraph:

(e) the audio programming service of a carrier current undertaking.

6. (1) Subsections 18(1.1) to (2.1) of the said Regulations are revoked and the following substituted therefor:

(1.1) Except as otherwise provided pursuant to a condition of its licence, and subject to subsections (1.2) and (2), this section does not apply to a licensee that has less than 6,000 subscribers on the later of August 31, 1993 and the day on which the Commission first issued the license to carry on the undertaking.

(1.2) The Commission may review increases in the basic monthly fee of a licensee having 2,000 or more but less than 6,000 subscribers where, within 60 days after receipt of notification of the increase, 10 per cent or more of the licensee's subscribers filed written complaints regarding the increase with the Commission.

(2) The Commission, in reviewing an increase referred to in subsection (1.2), may do any or all of the following:

(a) request any information referred to in section 6;

(b) conduct a public hearing regarding the increase; and

(c) disallow all or part of the increase, beginning on the date of the disallowance.

(2.1) For the purposes of subsections (2.2) and (2.3), a licensee is considered to be operating in a francophone market where the population having French as its mother tongue represents more than 50 per cent of the total population of all cities, towns and municipalities, encompassed in whole or in part within the licensed area of the licensee, according to the most recent population figures published by Statistics Canada.

(2) All that portion of subsection 18(4)3 of the said Regulations preceding paragraph (b) thereof is revoked and the following substituted therefor:

(4) Where a licensee intends to increase its basic monthly fee pursuant to subsection (2.2), (2.3), (2.4) or (3), it shall not implement the increase unless

(a) it sends to each of its subscribers a written notice of the increase, setting out the amount of the increase, expressed in dollars,in each part of the basic monthly fee increased pursuant to subsection (2.2), (2.3), (2.4) or (3), as applicable;

(3) The definition of "capital expenditure"3 in subsection 18(5) of the said Regulations is revoked and the following substituted therefor:

"capital expenditure" means the capital expenditures that a licensee has incurred in respect of an activity or transaction during the twelve-month period beginning on September 1 in any year, that would not have been incurred if the activity or transaction had not been undertaken, where the activity or transaction is

(a) the purchase or capital lease of the licensee's head end, to the extent that the purchase or capital lease relates to the reception or processing of the basic service,

(b) the replacement or rebuilding of the licensee's distribution system or subscriber drops to upgrade the quality of service provided, to the extent that the replacement or rebuilding relates to the distribution of the basic service,

(c) the purchase or capital lease of equipment used exclusively for community programming to enhance the quality or increase the quantity of community programming, or

(d) the purchase or capital lease, up to a maximum of $150.00, of one addressable digital decoder installed in a subscriber's household or premises. (dépenses en immobilisations)

(4) Subsections 18(6) to (6.2)3 of the said Regulations are revoked and the following substituted therefor:

(6) Subject to subsections (7) and (9), a licensee may increase its basic monthly fee, during the twelve-month period beginning on January 1 in any year, by a maximum of

(a) the lesser of

(i) the result obtained by dividing 10 per cent of its capital expenditure under paragraphs (a), (b) and (c) of the definition "capital expenditure" in subsection (5), for the period ending on August 31 of the preceding year, by 12 times the number of subscribers to whom it sends a notice under paragraph (7)(a), and

(ii) three per cent of the base portion authorized as of August 31 of the preceding year; plus

(b) the lesser of

(i) the result obtained by dividing 10 per cent of its capital expenditure under paragraph (d) of the definition "capital expenditure" in subsection (5), for the period ending on August 31 of the preceding year by 12 times the number of subscribers to whom it sends a notice under paragraph (7)(a), and

(ii) three per cent of the base portion authorized as of August 31 of the preceding year.

(6.1) Subject to subsection (6.3), where 60 months have elapsed following an increase pursuant to subsection (6) or that subsection as it read immediately prior to the coming into force of this subsection, that tookeffect on May 15, 1990 or later, a licensee shall decrease its basic monthly fee by an amount equal to that increase.

(6.2) Subject to subsection (6.3), on or before January 1, 1995, a licensee shall decrease its basic monthly fee by an amount equal to the total of all increases pursuant to subsection (6) as it read immediately prior to the coming into force of this subsection, that took effect during the period beginning on August 1, 1986 and ending on May 14, 1990.

(6.3) The requirement to decrease the basic monthly fee pursuant to subsections (6.1) and (6.2) is suspended so long as a licensee contributes one half of the amount referred to in subsections (6.1) and (6.2) to the production of Canadian programming, as mentioned in Public Notice CRTC 1993-74.

(5) Paragraph 18(7)(c)3 of the French version of the said Regulations is revoked and the following substituted therefor:

c) s'il s'est écoulé une période de 60 jours depuis la réception par le Conseil de l'exemplaire de l'avis, de la déclaration et des documents visés à l'alinéa b).

(6) All that portion of subsection 18(8) of the said Regulations preceding paragraph (a) thereof is revoked and the following substituted therefor:

(8) Subject to subsection (9), a licensee may increase the base portion of its basic monthly fee where

7. Section 21 of the said Regulations is revoked and the following substituted therefor:

21. This Part applies to Part III licensees and, except for section 23, to licensees that hold Class 2 licences and that have less than 2,000 subscribers.

8. All that portion of subsection 22(1) of the said Regulations preceding paragraph (a) thereof is revoked and the following substituted therefor:

22. (1) Except as otherwise provided in subsection (2) or pursuant to a condition of its licence, a Part III licensee or a licensee that holds a Class 2 licence and that has less than 2,000 subscribers shall distribute on the basic band of its undertaking

9. Section 23 of the French version of the said Regulations is revoked and the following substituted therefor:

23. Sauf disposition contraire des conditions de sa licence, le titulaire assujetti à la partie III qui choisit de distribuer un service par satellite non canadien admissible en vertu de la partie III, ou un service de télévision payante ou un service spécialisé distribués par satellite, doit distribuer au moins quatre services de programmation de télévision fournis à sa tête de ligne locale par un exploitant de réseau autorisé à dispenser des services de télévision et de radio à des collectivités éloignées et mal desservies, dont au moins un doit être un service de programmation canadien.

10. (1) All that portion of subsection 24(1) of the said Regulations preceding paragraph (a) thereof is revoked and the following substituted therefor:

24. (1) Except as otherwise provided pursuant to a condition of its licence, a Part III licensee or a licensee that holds a Class 2 licence with less than 2,000 subscribers on the later of August 31, 1993 and the day onwhich the Commission first issued a licence to carry on the undertaking may distribute

(2) Paragraphs 24(1)g) and h) of the French version of the said Regulations are revoked and the following substituted therefor:

g) tout service par satellite canadien admissible en vertu de la partie III;

h) tout service par satellite non canadien admissible en vertu de la partie III;

(3) Subsection 24(2) of the said Regulations is revoked and the following substituted therefor:

(2) Where a Part III licensee or a licensee that holds a Class 2 licence and that has less than 2,000 subscribers elects to distribute community programming pursuant to paragraph (1)(b), the licensee shall comply with the requirements of sections 13 and 15.

11. (1) All that portion of section 25 of the said Regulations preceding paragraph (a) thereof is revoked and the following substituted therefor:

25. A Part III licensee or a licensee that holds a Class 2 licence and that has less than 2,000 subscribers shall not alter or curtail any programming service or radiocommunication in the course of its distribution except

(2) Paragraph 25(a) of the French version of the said Regulations is revoked and the following substituted therefor:

a) qu'en conformité avec les conditions de leur licence;

12. The said Regulations are further amended by adding thereto, immediately after section 25, the following:

26. (1) Except as otherwise provided pursuant to a condition of its licence, a Part III licensee or a licensee that holds a Class 2 licence and that has less than 2,000 subscribers shall, where it utilizes any channels other than those of the basic band, devote a greater number of the video channels of its undertaking to the distribution of Canadian programming services than to the distribution of non-Canadian programming services.

(2) For the purposes of subsection (1), Canadian programming services do not include multiplexed programming or the programming distributed on program repeat channels.

PART IV

MEDIATION

Mediation and Resolution of Disputes

27. (1) In this Part, "wholesale rate" means the fee payable on a monthly basis by a licensee to a programming undertaking in order to receive a programming service.

(2) Where there is a dispute between the licensee of a programming undertaking and the licensee of a distribution undertaking concerning the carriage or terms of carriage of programming, including the wholesale rate, originated by the programming undertaking, one or both of the parties to the dispute may refer the matter to the Commission for mediation.

(3) The Commission may appoint a person to mediate the dispute.

(4) All matters relating to the mediation of a dispute shall be kept confidential, unless in the opinion of the Commission, the circumstances require otherwise, in which case the Commission may make any information relating to the mediation available to the public.

(5) Information provided by a party for the purposes of the mediation shall not be used by the other party to the mediation for any other purpose except with the consent of that party.

(6) During the mediation of a dispute, the mediator may request additional information from the parties, or require their attendance at a meeting in order to discuss the matters in dispute.

(7) A mediator may refer a matter to the Commission where a party does not comply with a request of the mediator, and the Commission may require the additional information or attendance at a meeting in order to discuss the matters in dispute.

Agreement

28. An agreement that is reached following mediation shall be in writing and signed by all parties to it and shall be considered by the Commission as binding on the parties.

29. Where no agreement is reached by the parties, the mediator shall submit a report to the Commission concerning the mediation within the period established by the Commission.

Commission Determination

30. The Commission may, where no agreement is reached following mediation, render a decision regarding carriage and the terms and conditions of carriage, including the wholesale rate, of programming originated by the programming undertaking involved in the dispute.