ARCHIVED -  Decision CRTC 95-912

Decision

Ottawa, 20 December 1995

Decision CRTC 95-912

Peter Kruyt, on behalf of a company to be incorporated

Across Canada - 951871300

New, national, pay audio programming undertaking - Approved

Following a Public Hearing in the National Capital Region beginning 14 November 1995, and in accordance with Public Notice CRTC 1995-218 which accompanies this and other related decisions published today, the Commission approves, by majority vote, the application for a broadcasting licence to carry on a new pay audio programming undertaking.

The Commission will issue a licence expiring 31 August 2002. The licence will be subject to the conditions set out in the appendix to this decision and in the licence to be issued.

The licensee will be owned and controlled by Power Broadcasting Inc. (Power), through its ownership of 80.01% of the company's issued voting shares. The remaining shares will be held by DirecTv Inc., a non-Canadian corporation active in the delivery of programming in the U.S. market using high powered U.S. satellite facilities. Power is a Canadian company with significant television and radio holdings in Ontario and Quebec.

This authority will only be effective, and the licence will only be issued, at such time as the Commission receives documentation establishing that an eligible Canadian corporation has been incorporated in accordance with the application in all material respects, and that it may be issued a licence.

The applicant proposed to establish a service to be known as Power Music Choice which would initially be distributed by the Power DirecTv direct-to-home (DTH) distribution undertaking, but would eventually be made available to other DTH distribution undertakings and cable systems. Power Music Choice would consist of 12 pay audio channels at the outset. Six channels would be Canadian-produced; the applicant committed that, at no time would the number of non-Canadian channels exceed the number of Canadian-produced channels. The overall minimum level of Canadian musical selections offered on the six proposed Canadian-produced channels would be 60%. Consistent with the Comission's regulatory framework for pay audio programming undertakings announced in Public Notice CRTC 1995-218, the Commission has attached a condition of licence requiring that a minimum of 30% of the musical selections broadcast each week on Canadian-produced pay audio channels, considered together, be Canadian. The Commission, however, encourages the licensee to meet the 60% Canadian content level set out in the application.

The non-Canadian channels would be obtained from Digital Cable Radio Associates, an American company that provides a digital audio service. The applicant would, however, have the ability to authorize or de-authorize the distribution of any pay audio channel or any musical selection on any pay audio channel that it would make available for reception in Canada. As noted in Public Notice CRTC 1995-218, the Commission has determined that it will license pay audio applicants based only on the Canadian-produced channels that they proposed to distribute. The Commission has, however, attached a condition of licence allowing a maximum of one non-Canadian pay audio channel to be packaged or linked with each Canadian-produced channel.

The applicant proposed that a minimum of two Canadian-produced channels would be devoted to French-language vocal music. Consistent with the regulatory framework set out in Public Notice CRTC 1995-218, the Commission is attaching a condition of licence requiring that a minimum of 25% of the Canadian-produced pay audio channels offered by the undertaking, other than those consisting entirely of instrumental music or of music entirely in languages other than English or French, devote to musical selections in the French language, on a weekly basis, a minimum of 65% of the vocal music selections from category 2, as defined in the Radio Regulations, 1986. The licensee will be required to fulfil this condition from the outset of operations.

In Public Notice CRTC 1995-218, the Commission indicated that it would require pay audio licensees to contribute each year a minimum of 4% of its gross annual revenues to eligible third parties associated with Canadian talent development. Such third parties are defined as "FACTOR, MusicAction, national and provincial music organizations, performing arts groups, schools and scholarship recipients." In that notice, the Commission further clarified that all money going to eligible third parties must be directly connected to the development of Canadian musical and other artistic talent. The Commission notes the commitment by the applicant to contribute 6% of its gross annual revenues to FACTOR and 4% to MusicAction, and encourages the licensee to maintain this level of support for Canadian talent development.

Although not qualifying as a contribution to an eligible third party, the Commission notes that Power Music Choice plans to invest $15,000 per year for the recording and production of Canadian children's stories to be distributed on its children's channel.

The Commission acknowledges and has considered all of the interventions submitted regarding this application. It considers that the conditions imposed on the licensee in this decision have addressed the concerns expressed by several interveners.

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. In this regard, the Commission encourages the licensee to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.

Allan J. Darling
Secretary General

APPENDIX TO DECISION CRTC 95-912

Conditions of Licence

1. A minimum of 30% of the musical selections broadcast each week on Canadian-produced pay audio channels, considered together, must be Canadian.

2. A minimum of 25% of all Canadian-produced pay audio channels, other than those consisting entirely of instrumental music or of music entirely in languages other than English or French, must devote to musical selections in the French language, on a weekly basis, a minimum of 65% of the vocal music selections from category 2, as defined in the Radio Regulations, 1986.

3. A maximum of one non-Canadian pay audio channel may be packaged or linked with each Canadian-produced pay audio channel. In no case may subscribers of the pay audio service to be offered a package of pay audio channels in which non-Canadian channels predominate. The licensee must provide to the Commission, upon request, a complete list of all foreign-produced pay audio channels distributed on its service.

4. The licensee shall contribute each year a minimum of 4% of the gross annual revenues of the pay audio service to eligible third parties associated with Canadian talent development. Such third parties are defined as FACTOR, MusicAction, national and provincial music organizations, performing arts groups, schools and scholarship recipients. The licensee shall report the names of the third parties associated with Canadian talent development, together with the amounts paid to each, on its annual return.

5. The licensee shall not broadcast commercial messages.

6. The licensee shall not broadcast spoken word programming, with the exception of identification of musical selections, promotion of the service and programming directed to children.

7. The licensee shall adhere to the provisions contained in sections 3 and 11 of the Radio Regulations, 1986, as amended from time to time by the Commission.

8. The licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) "Sex-Role Portrayal Code for Television and Radio Programming" as amended from time to time and approved by the Commission.

9. The licensee shall maintain sequential lists of all recordings played on each pay audio channel with designations for Canadian musical selections and for French-language vocal music. These lists shall be kept by the licensee for a minimum of four weeks and forwarded to the Commission upon request, along with a notarized attestation of the lists' accuracy.

10. The undertaking shall be in operation within 12 months of the date of this decision or, where the licensee applies to the Commission within this period and satisfies the Commission that it cannot complete the implementation before the expiry of this period and that an extension is in the public interest, within such further period of time as is approved in writing by the Commission.

11. The definitions of "Canadian", "commercial message", "broadcast week" and "spoken word" set out in section 2 of the Radio Regulations, 1986, as amended, and the definition of "Canadian musical selection" set out in subsection 2,2(2) of the said Regulations, as amended, shall apply to these conditions and the licensee with the necessary changes.

12. The licensee may not distribute any non-Canadian pay audio channel that includes commercial messages or that includes spoken word programming, with the exception of identification of musical selections, promotion of the service or programming directed to children.

Dissenting opinion of Yves Dupras, Regional Commissioner for Quebec

Pay Audio programming undertakings

I am opposed to licensing the services of DMX and Power Music Choice because control over programming on all channels is unsatisfactory and because these services do not make maximum use of Canadian resources.

I make a distinction between these services and the pay-per-view television service of Power DirecTicket because the nature of the pay-per-view service does not require the same control over programming. In the case of Power DirecTicket, I believe that controlling the signal is sufficient. With a continuous-play digital music service, however, the situation is different; it can be received unscrambled at any time as long as customers pay their monthly subscription; subscribers have no choice but to accept the programming as packaged. In such cases, control must also extend to program packaging, as the service provided is the result of this packaging. Neither DMX nor Power Music Choice can control this aspect of the American channels they propose to carry.

I also oppose the solution adopted by the majority, that is, to issue licences only for the channels produced in Canada, while allowing DMX and Power Music Choice to act effectively as distribution undertakings for American channels (the "new linkage rule"). By seeking to avoid concerns relating to control, the majority is ignoring, in more than one respect, the requirements of paragraph 3(1)(f) of the Broadcasting Act (the Act), which stipulates that "each broadcasting undertaking shall make maximum use, and in no case less than predominant use, of Canadian creative and other resources in the creation and presentation of programming...".

With a Canadian content requirement of 30% (applicable only to channels produced in Canada), and a new linkage rule that excludes some channels from the Canadian content calculation, Power Music Choice, after proposing 60% Canadian content for its channels produced in Canada, can now reduce that level to 30% and could have an even lower percentage on its service as a whole. The same is true of DMX: it could decrease the Canadian content on its Canadian-produced channels from 40% to 30%.

As for Galaxie and Allegro, because all their channels will be produced in Canada, the new linkage rule will require them to provide more Canadian content than their competitors unless Galaxie and Allegro go the same route and use non-Canadian channels, which would be an unwelcome departure from the proposals presented to the Commission at the hearing.

In general, DMX and Power Music Choice do not make maximum use of Canadian resources, as the services proposed by Galaxie and Allegro clearly show. In view of the shortcomings of those two applications, I fail to see why the majority felt obligated to approve them, as two other services were proposed that would be produced entirely in Canada and would be more consistent with the objectives of the Act. Moreover, I feel the choice offered by Galaxie and Allegro would have amply satisfied the demand for such services.

Finally, the competitive model established by the granting of licences to all the applicants ignores the potentially negative consequences for Galaxie, which may, as a consequence, find itself unable to negotiate the distribution costs associated with its service; this situation would have been quite different if only Galaxie and Allegro had received licences. We need only recall that Galaxie is the service that makes the greatest use of Canadian resources.