ARCHIVED -  Decision CRTC 95-914

Decision

Ottawa, 20 December 1995

Decision CRTC 95-914

The Canadian Broadcasting Corporation

Across Canada - 951860600

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 issued today, the Commission approves, by majority vote, the application of the Canadian Broadcasting Corporation (CBC, the Corporation) 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 of licence specified in the appendix to this decision and in the licence to be issued.

The applicant proposed to establish a service that will be known as "Galaxie". The service will include 30 channels of music at the beginning of operations, and will be distributed by both cable and direct-to-home (DTH) distribution undertakings. All channels would be produced in Canada and at least 38% of the musical selections played on the service each week would be Canadian. Consistent with the Commission's regulatory framework for pay audio programming undertakings announced in Public Notice CRTC 1995-218, the Commission is attaching a condition of licence specifying that at least 30% of all musical selections broadcast each week on Canadian-produced pay audio channels, considered together, be Canadian. The Commission, however, encourages the applicant to meet the 38% level of Canadian content that it has proposed.

The applicant proposed to provide five channels devoted to French-language vocal music upon commencing operations. 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 all Canadian-produced pay audio channels, other than those consisting entirely of instrumental music or 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.

Regarding the issue of possible cross-subsidization with other CBC services, the CBC indicated that when CBC resources are used, costs will be fully charged back to Galaxie. To avoid cross-subsidization, the Commission has included a condition of licence which addresses this concern.

Consequently, the Commission expects the licensee to ensure that implementation of Galaxie will have no adverse impact on the CBC's main services.

With respect to Canadian talent development, the applicant has proposed to contribute 2% of gross annual revenues to FACTOR/MusicAction and 2% to CBC Records/Disques SRC. The applicant proposed that such payments would start once its initial investment has been recouped. The CBC projected that payments would begin in the fifth year of operations.

Consistent with its regulatory framework, the Commission is attaching a condition of licence requiring that CBC contribute each year a minimum of 4% of the gross annual revenues earned by the service to eligible third parties associated with Canadian talent development. Such eligible third parties are defined as "FACTOR, MusicAction, national and provincial music organizations, performing arts groups, schools and scholarship recipients." In Public Notice CRTC 1995-218, the Commission further clarified that all money going to third parties as defined above must be directly connected to the development of Canadian musical and other artistic talent. The Commission notes that a donation by CBC to its own record company would not qualify as a donation to a third party. It therefore requires the CBC to re-allocate the amounts it proposed to contribute to CBC Records/Disques SRC to an eligible third party. The condition of licence will be in effect from the beginning of operations.

Unlike other applicants whose proposals for new pay audio programming services were considered at this hearing, CBC is not associated through any level of common ownership with any DTH or cable distribution system.

The Corporation was therefore concerned that the Galaxie service be able to obtain equitable access to distribution systems. CBC suggested that the Commission implement a proposal for "tied carriage" which it defined as follows:

... if a distributor chooses to carry a digital music service in which the distributor has an interest, or to carry a service which proposes to offer a number of foreign channels, the distribution undertaking would also be required to offer the independent Canadian licensee(s) on equitable terms to its subscribers.

The Corporation also considered that it should be the responsibility of DTH distribution undertakings to pay for uplinking and satellite transmission costs of delivering the Galaxie service to subscribers. However, at the hearing, CBC set out an alternative scenario under which it would take responsibility for uplinking and satellite transmission costs if that was necessary.

The Commission agrees with the CBC that distributors who choose to carry pay audio services in which they have an ownership interest exceeding 30% should also provide access to independent services, particularly given the diversity in pay audio programming this would ensure, and the relatively small channel and satellite capacity demands of audio services. The Commission, however, does not consider that it is necessary or appropriate for subscribers to be forced to subscribe to or pay for more than one pay audio service. Consequently, in Public Notice CRTC 1995-218 issued today, the access guidelines for DTH distribution undertakings include a provision that such DTH systems that carry a pay audio service in which they have an ownership interest exceeding 30% must also distribute at least one other pay audio service whose ownership is independent of any distribution undertaking, with the terms of discretionary carriage to be agreed upon by the DTH operator and the originator of the pay audio service. In order to qualify for such access, it would be the responsibility of the independent pay audio service to pay the uplinking and satellite transmission costs associated with the distribution of the signal.

The Commission acknowledges and has considered all the interventions submitted regarding the application by the Corporation. 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 95-914

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 to the pay audio service be offered a package of pay audio channels in which non-Canadian channels predominate. The licensee must provide the Commission, upon request, with a complete list of all non-Canadian pay audio channels being distributed on its service.

4. The licensee shall contribute each year a minimum of 4% of the gross annual revenues of its 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, along with the information required pursuant to condition of licence 13a) below.

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 Revised CBC Guidelines on Sex-Role Portrayal, dated 12 August 1991, 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", "spoken word" and "broadcast week" 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.

13.a) The licensee shall file with the Commission, by 30 June of each year, in a format consistent with previous years, its unaudited financial statements for the preceding fiscal year. The licensee shall also report the total incremental revenues and total incremental costs incurred by Galaxie within the notes to the audited financial statements of the CBC at the end of each fiscal period.

b) The licensee shall file, by 30 November of each year, in a format consistent with previous years, unaudited financial statements for the twelve-month period ending the preceding 31 August. CBC management shall certify that these financial statements have been reviewed in accordance with section 8200 of the Canadian Institute of Chartered Accountants handbook.