ARCHIVED -  Decision CRTC 95-20

Decision

Ottawa, 19 January 1995

Decision CRTC 95-20

Canadian Satellite Communications Inc.

Across Canada - 940475700 - 940098700 - 940092000 - 940975600

Licence Renewal and addition of Seattle and Minneapolis signals - Approved

Removal of restriction contained in the lists of "Part II Eligible Satellite Services" and "Part III Eligible Canadian Satellite Services" that licensees may distribute only one signal of each U.S. network - Approved in part

Following a Public Hearing held in Toronto beginning on 3 October 1994, the Commission renews, from 1 September 1995 to 31 August 1998, the licence issued to Canadian Satellite Communications Inc. (Cancom) to carry on a multiple-channel television and radio broadcasting relay distribution undertaking to distribute to affiliated broadcasting undertakings, via satellite, the signals set out in the appendix to this decision and thereby to extend television and radio services to remote and underserved communities. The licence will be subject to the conditions specified in this decision and in the licence to be issued.

In granting Cancom this three-year licence term, the Commission has taken into account the expected rapid decrease in the cost of transmitting television signals via satellite attributable primarily to the advent of digital video compression (DVC). This term will provide for an orderly transition period during which the Commission will assess Cancom's continued role within the Canadian broadcasting system. This term will also enable the Commission to assess at an early date Cancom's progress in implementing rate reductions.

The Commission approves Cancom's applications to amend its broadcasting licence by adding KCTS-TV (PBS), KING-TV (NBC), KOMO-TV (ABC) and KIRO-TV (CBS) Seattle, Washington, as well as KARE-TV (NBC) and WCCO-TV (CBS) Minneapolis, Minnesota, to the list of signals that it is authorized to distribute.

The Commission approves in part Cancom's request that the restriction contained in the lists of "Part II Eligible Satellite Services" and "Part III Eligible Satellite Services" (the Part II and Part III lists) that licensees may distribute only one signal of each U.S. network be amended. These lists were most recently published in Public Notice CRTC 1994-145 dated 28 November 1994.

CANCOM's rates, its distribution of additional U.S. signals, and its request for changes to the current restriction regarding the distribution of duplicate U.S. network signals by its affiliates are discussed below.

In a related decision issued today (Decision CRTC 95-21), the Commission denies the applications submitted by Chamcook Communications Limited (Chamcook) for amendments to its relay distribution undertaking licence for authority to distribute U.S. television network signals to affiliates in the Atlantic region. Similarly, the Commission denies the related applications by Chamcook affiliates to add the distribution of these proposed services.

At the time the Commission next considers Cancom's licence renewal, it may be appropriate for the Commission to consider applications by other parties seeking authority to provide a package of programming services to cable operators, whether on a national or regional basis.

Cancom's Mandate

Currently, Cancom is authorized to distribute conventional U.S. television network services, via satellite, to Canadian cable operators in various parts of the country. Cancom's primary responsibility, as first stated in Decision CRTC 81-252 approving Cancom's initial licence application, and most recently reiterated in Decision CRTC 90-92 which last renewed its licence, is to extend Canadian broadcasting services to the more remote regions of Canada, not yet provided with a comprehensive broadcasting service.

Cancom's Repositioning Strategy

At the hearing, there was considerable discussion regarding Cancom's repositioning strategy aimed at making the licensee more competitive in face of the evolving communications environment and the possible imminent introduction of new technologies. Cancom's repositioning strategy is based, in part, on its plans to reduce its satellite costs by distributing services in digitally-compressed form instead of in the more expensive analog form.

As part of its repositioning strategy, Cancom stated that it would provide DVC decoder boxes for the head ends of all cable systems serving fewer than 1,000 subscribers to replace their existing analog decoders. According to Cancom, this will equate to a cost of approximately $41 million over seven years. Cancom identified this financial commitment as part of its contribution to the Canadian broadcasting system.

(i) Rate Reduction

Cancom proposes to use some of the savings it realizes from the switch to DVC technology to reduce the rates it charges cable television undertakings for its signals, thereby, making its service more attractive to subscribers. Under Cancom's current conditions of licence, the licensee may charge a maximum monthly fee of $6.65 per subscriber per month for its eight channel package. In its renewal application, Cancom requested an amendment to this maximum monthly fee, lowering it to $5.95. At the hearing, Cancom indicated that it would accept a maximum monthly fee of $5.95 on the complete package of services that it is
authorized to offer.

The Commission notes, however, that the $5.95 maximum monthly fee proposed by Cancom includes the costs associated with providing the DVC decoders to cable systems serving fewer than 1,000 subscribers. Specifically, while Cancom claimed that it would provide DVC decoders "free of charge" to these small systems, it acknowledged that the total average per subscriber price charged to satellite-reliant affiliates for its signals would be reduced by approximately $1.18 per month, excluding interest costs, if Cancom's affiliates were to bear the costs of these decoders directly.

In its intervention, Chamcook maintained that its members do not want the decoders provided by Cancom. Elaborating on Chamcook's position, Regional Cable T.V. (Atlantic) Inc., a Chamcook affiliate and licensee of 218 small cable systems serving communities in Newfoundland, stated that it preferred to choose its own package of U.S. services and to apply any consequent savings to purchasing its own decoders.

The Commission does not consider that it is appropriate for Cancom to include in its monthly fee the $1.18 cost associated with providing DVC boxes. Accordingly, the Commission requires Cancom to unbundle the $1.18 cost of the decoders from the rate card and to decrease its rate card accordingly. The Commission requires Cancom to submit to the Commission, within three months of the date of this decision, a revised rate card that is in accordance with the requirements set out in this decision.

It is a condition of licence that the licensee is authorized to charge its affiliated undertakings for the provision of its satellite distribution service, a maximum monthly fee of

a) $500.00 where its affiliate is a commercial camp, or

b) in all other cases, $4.77 per subscriber per month for the complete package of services that it is authorized to offer.

(ii) Addition of Signals

Cancom's repositioning strategy also proposes to use a further part of the savings realized by the switch to DVC technology, and consequent reductions in its satellite delivery costs, to add more programming services. In its application, Cancom claimed that cable operators are demanding more Canadian satellite services, either to augment distant signals that are already available, or to provide signals of a higher quality than those available by terrestrial means. For this reason, Cancom indicated its intention to submit applications to the Commission seeking authorization to distribute additional Canadian satellite signals.

In its current application, Cancom proposed to distribute additional U.S. network signals in order to provide cable affiliates a choice of more regionally-relevant U.S. services, particularly outside central Canada. Previously, in Decision CRTC 94-76 dated 9 March 1994, the Commission authorized Cancom to distribute NBC and PBS signals originating in Boston, Massachusetts. Cancom is now requesting authority to distribute U.S. signals originating in Seattle, Washington and Minneapolis, Minnesota. According to Cancom, it will lose Manitoba cable operators as affiliates if it does not offer the Minneapolis signals. In addition, Cancom argued that British Columbia cable operators want "a full complement of 3+1 services from the Pacific Coast region and in that time zone."

The Commission notes that it has, over the years, often received complaints regarding the violence depicted in the local news programming broadcast on the Detroit stations. As an example, Television Northern Canada (TVNC) stated, in its intervention, that the violence portrayed in southern-originated programming has a negative impact on northern aboriginal communities. The Commission considers that the signals from Boston, approved in Decision CRTC 94-76, as well as the Minneapolis and Seattle signals now requested by Cancom, will provide cable licensees with alternative programming services in cases where their subscribers have indicated a preference for signals other than those from Detroit.

Based on the foregoing, the Commission has approved Cancom's requests to add KCTS-TV (PBS), KING-TV (NBC), KOMO-TV (ABC) and KIRO-TV (CBS) Seattle, as well as KARE-TV (NBC) and WCCO-TV (CBS) Minneapolis, to the list of signals that it is authorized to distribute.

Distribution of Duplicate U.S. Network Signals

Cancom asked the Commission to amend the Part II and Part III lists most recently published in Public Notice CRTC 1994-145 dated 28 November 1994, by amending the restriction specifying that licensees may distribute only one Cancom signal of each U.S. network. Cancom argued that this restriction is discriminatory because it prohibits those cable systems that do not have U.S. conventional television signals available by terrestrial means from distributing duplicate network signals received from Cancom without specific authority from the Commission. At the same time, the lists permit those systems with access to over-the-air or microwave signals to distribute duplicate signals, received via satellite from Cancom, albeit on a discretionary basis in the case of Class 1 systems and Class 2 systems with 2,000 or more subscribers.

In its application, Cancom proposed that the restriction be revised to permit all Class 1 and large Class 2 systems to distribute a duplicate U.S. network service received via satellite from Cancom on a discretionary basis, irrespective of the means of reception of the other network service. Under Cancom's proposal, Part III and small Class 2 systems would be permitted to distribute a duplicate U.S. network service, received via satellite from Cancom, either on the basic service or on a discretionary basis, irrespective of the means of reception of the other network service. Cancom contended that its proposed change would not result in a proliferation of U.S. services because the Cable Television Regulations, 1986 (the regulations) require cable systems to devote a greater number of video channels for the distribution of Canadian services than non-Canadian services.

The Canadian Association of Broadcasters (CAB) opposed Cancom's request, arguing among other things that the Commission should not permit cable operators to distribute U.S. duplicate network signals other than in accordance with the requirements that currently apply. Other interveners requested that the Commission not permit duplicate distribution of commercial U.S. networks by Class 1 and large Class 2 systems, regardless of their method of reception, without an express condition of licence.

In response to those interventions, Cancom amended its request by proposing that the restriction on the Part II list be changed to allow Class 1 and large Class 2 cable licensees to distribute one duplicate PBS signal only on a discretionary basis, without the need for prior approval from the Commission. Cancom did not alter its request that the restriction on the Part III list be amended to allow Class 2 cable systems with fewer than 2,000 subscribers and Part III cable systems to distribute one duplicate signal of each U.S. network, both commercial and non-commercial.

The Commission is prepared to accept Cancom's revised proposal with respect to the duplicate carriage of PBS signals by Class 1 and large Class 2 systems. In reaching this conclusion, the Commission considers that permitting the carriage of one duplicate PBS signal by all cable systems is an acceptable compromise between subscriber demand for services and the need to protect audiences for Canadian broadcasters. The Commission, however, is not convinced that Class 2 cable systems with fewer than 2,000 subscribers and Part III cable systems should be treated differently than other cable systems regarding the distribution of Cancom-delivered duplicates of commercial U.S. network signals. Accordingly, the Commission approves in part Cancom's request and will permit all cable licensees the carriage of a duplicate PBS service, received via satellite from Cancom. For Class 1 licensees and licensees of Class 2 systems with 2,000 or more subscribers, such duplicate PBS services must be distributed on a discretionary basis.

In Public Notice CRTC 1995-8 issued today, the Commission has amended the Part II and Part III lists, in accordance with the policy noted above.

Section 23 of the Regulations

In Notice of Public Hearing CRTC 1994-12 dated 5 August 1994, the Commission stated that it intended to examine the continuing need for section 23 of the
regulations. Section 23 of the regulations requires that:

 Except as otherwise provided pursuant to a condition of its licence, where a Part III licensee elects to distribute a Part III eligible non-Canadian satellite service or a pay television service or a specialty service, delivered by satellite, the licensee shall distribute at least four television programming services, at least one of which is a Canadian programming service, delivered to the licensee's local head end by a relay distribution undertaking or by a network operator which or who is licensed to extend television and radio services to remote and underserved communities.

As noted earlier, Cancom is the only licensed undertaking authorized to distribute a package of U.S. and Canadian conventional television signals via satellite to remote and underserved communities. Effectively, section 23 therefore requires all Part III cable systems distributing non-Canadian satellite services or any pay or specialty service to purchase at least four signals from Cancom.

In its renewal application, Cancom argued that section 23 should be retained for the entire new licence term. Cancom stated that, without section 23, larger Part III and Class 2 cable systems would seek terrestrial means to obtain conventional U.S. and Canadian television signals. Further, Cancom estimated that the loss of these cable systems would result in revenue reductions of between $8.4 million and $12.7 million per year. Cancom claimed that losses of this magnitude would impair its ability to offer additional signals and to implement rate reductions for its remaining satellite-reliant affiliates. The applicant contended that, should section 23 be eliminated immediately, it would be "extremely difficult, if not impossible", to maintain its commitments to the Canadian broadcasting system.

In its written response to interventions from cable operators who supported eliminating section 23, Cancom modified its position and proposed that section 23 could be maintained, as is, until the end of August 1997, at which time the requirement would be reduced, so that Part III licensees would need to carry only three Cancom signals, one of which must be Canadian. Starting 1 September 1999, the requirement would be reduced to two Cancom signals, including one Canadian signal, and finally to one Canadian Cancom signal on 1 September 2001. Cancom proposed that Part III cable systems distributing satellite services should not be obligated to distribute any of its signals following expiry of the proposed seven-year renewal term.

The applicant maintained that this approach would permit it to retain cable affiliates that would otherwise leave Cancom if section 23 were to be eliminated immediately and would thus prevent a significant loss of revenues.

At the hearing, the Cable Television Association of Alberta (CTAA) interpreted Cancom's proposal for a phase-out of section 23 as an acknowledgement that the protection afforded by the section is no longer needed. The CTAA opposed Cancom's proposal to phase out section 23 on the grounds that it would cause disruption for subscribers. Instead, the CTAA recommended that this section of the regulations be eliminated no later than 18 months into Cancom's licence renewal, thus giving Cancom time to plan for the change.

The Association of Cable Operators of Manitoba (ACOM) stated that it would be reluctant to see section 23 continue for two more years, because it intends to submit an application to the Commission, within this period of time, for authority to provide U.S. conventional television network signals to Part III systems, either by microwave or by satellite.

Both the CTAA and the ACOM requested that the Commission not make any decision with respect to Cancom that would prohibit other parties from filing applications for competing satellite services.

The Canadian Cable Television Association (CCTA) advocated eliminating section 23 immediately rather than waiting for two years to initiate the process. The CCTA pointed out that, even if the Commission were to announce the elimination of section 23 immediately, Cancom would still have time to prepare for the change because of the length of the public process required to amend the regulations.

The Commission notes that section 23 was introduced to provide Cancom with a stable revenue base at a time when it was experiencing financial difficulties. The Commission is pleased to note that Cancom has now effectively retired the debt that it accumulated during its start-up phase and is currently operating in positive financial circumstances. In the Commission's view, this calls into question the need to continue providing Cancom with the protection afforded by section 23.

Section 23 has served to promote Canadian programming services by effectively requiring that Part III cable systems distributing satellite services also carry at least one of Cancom's conventional Canadian television signals. However, since section 23 was enacted, the Commission has amended the regulations to require that all Part III cable systems, as well as Class 2 systems with fewer than 2,000 subscribers and utilizing more than 12 channels, distribute a preponderance of Canadian programming services. In the Commission's view, the objective of promoting the distribution of Canadian programming services by small cable systems can be met by the preponderance requirement.

Furthermore, Cancom was originally licensed at a time when Canadian speciality or pay television services had yet to emerge. The Commission notes that there is now a considerably greater number of Canadian television services available via satellite, including the 10 new Canadian satellite-to-cable discretionary services licensed in June 1994.

Accordingly, the Commission has issued today Public Notice CRTC 1995-7 calling for public comment on a proposal to amend the regulations by specifying that the requirements of section 23 will no longer apply, effective 1 September 1997.

Contributions to Native Broadcasters

In Decision CRTC 90-92, which last renewed Cancom's licence, the Commission set out the expectation that Cancom implement without delay the video uplink for the distribution of native-produced programming, in accordance with its commitment noted in Decisions CRTC 81-252 and 85-423. Cancom installed the video uplink in Whitehorse in July 1991 in time for the launch of TVNC's service in early 1992.

The Commission notes Cancom's commitment to provide TVNC with up to five hours per week of video uplink time, after hours, for delivery of southern-based aboriginal programming. Cancom will also offer its sales force, free of charge, to market TVNC to cable systems across the country, and will continue to provide free satellite transmission services for five native radio services. In addition, Cancom will purchase satellite transmission services for the specific use of native broadcasters, once it begins digital transmission in 1995.

At the time of its original licence application, Cancom made a commitment to appoint a native representative as a vice president of the company, with responsibility to co-ordinate and schedule native programming. Following the death of the native representative employed in this position in 1987, another Cancom vice-president, a non-native, assumed responsibility for native programming. In its renewal application, Cancom stated that rather than hiring a native person for a position "for which there is no full-time demand", it would seek to hire aboriginal people into "more meaningful and practical positions in which they could develop new, transferable skills." At the hearing, TVNC stated that it would consider having a native representative on Cancom's Board of Directors to be an acceptable alternative.

Cancom's commitments to native communities were among the factors the Commission took into consideration in licensing Cancom over three competing applications (Decision CRTC 81-252). In subsequent decisions renewing Cancom's licence (Decisions CRTC 85-423 and 90-92), the Commission placed expectations on the licensee that it fulfil its commitments to support native-originated broadcasting services. The Commission considers that Cancom has an ongoing responsibility to continue to support native broadcasters and notes, in this regard, Cancom's statement at the hearing that "our commitment to assist native broadcasters will survive any phasing-out of section 23."

Other Matters

In Public Notice CRTC 1992-59 dated 1 September 1992 and entitled "Implementation of an Employment Equity Policy", the Commission announced that the employment equity practices of broadcasters would be subject to examination by the Commission. It encourages the licensee to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.

It is a condition of licence that the licensee shall offer its services to all undertakings willing to enter into affiliation agreements with it and to all direct-to-home distribution undertakings that have been exempted by the Commission from the requirements of Part II of the Broadcasting Act for the delivery of the direct-to-home services to direct-to-home subscribers only, and to provide to all such undertakings, in accordance with the terms of affiliation agreements filed with the Commission, such services as the Commission may authorize such affiliates to distribute.

It is a condition of licence, in respect of any transfers of ownership or control, that the licensee adhere to the provisions of section 5 of the Cable Television Regulations, 1986 together with the associated definitions contained in section 2 of these regulations.

It is a condition of licence that the signals and program services provided to each affiliate shall not be deleted, curtailed or altered in any manner by the licensee except as may be authorized or required by the Commission in writing.

The Commission has taken into consideration the comments contained in the numerous interventions submitted with respect to Cancom's applications.

Allan J. Darling
Secretary General

APPENDIX / ANNEXE

Signals Authorized for Distribution by Cancom/
Signaux provenant du réseau de la Cancom dont la distribution est autorisée

Television/télévision

CHAN-TV* Vancouver, British Columbia/Colombie-Britannique
CITV-TV Edmonton, Alberta
CHCH-TV* Hamilton, Ontario
CFTM-TV Montréal, Québec
CITY-TV Toronto, Ontario
WTOL-TV (CBS) Toledo, Ohio
WTVS (PBS) Detroit, Michigan
WDIV (NBC) Detroit, Michigan
WXYZ-TV (ABC) Detroit, Michigan
WBZ-TV (NBC) Boston, Massachusetts
WGBH-TV (PBS) Boston, Massachusetts
WUHF-TV (FOX) Rochester, New York
KARE-TV (NBC) Minneapolis, Minnesota
WCCO-TV (CBS) Minneapolis, Minnesota
KCTS-TV (PBS) Seattle, Washington
KING-TV (NBC) Seattle, Washington
KOMO-TV (ABC) Seattle, Washington
KIRO-TV (CBS) Seattle, Washington

* Native-produced television programs, on a part-time basis, on satellite channels used for the distribution of these services/Émissions de télévision produites par les autochtones, à temps partiel, sur les canaux de satellite qui servent à distribuer ces services.

Radio

CKAC Montréal, Québec
CITE-FM Montréal, Québec
CHFI-FM Toronto, Ontario
CIRK-FM Edmonton, Alberta
CISN-FM Edmonton, Alberta
CFMI-FM Vancouver, British Columbia/Colombie-Britannique
CKNM-FM Yellowknife, Northwest Territories/Territoires du Nord-ouest
CKRW Whitehorse, Yukon Territory/Territoire du Yukon
CHON-FM Whitehorse, Yukon Territory/Territoire du Yukon
VOCM St. John's, Newfoundland/Terre-Neuve