ARCHIVED -  Public Notice CRTC 1995-156

Public Notice

Ottawa, 20 September 1995

Public Notice CRTC 1995-156

Mandatory Orders Issued Pursuant to Subsection 12(2) of the Broadcasting Act Concerning the Operations of Unlicensed Broadcasting Undertakings in Vancouver, British Columbia

In Notice of Public Hearing CRTC 1994-20 dated 28 December 1994, the Commission called the British Columbia Housing Foundation (BCHF); the Owners, Strata Plan No. LMS990 (Strata Owners); Pacific Place Communications Limited (PPC); and BC Tel to appear before it at a public hearing in Vancouver on 13 February 1995. The hearing was to enable the Commission to inquire into, hear and determine whether mandatory orders should be issued to these parties requiring them to cease and desist operating broadcasting undertakings, either alone or with others, at the locations noted below or anywhere else in Canada, except in compliance with the Broadcasting Act.

The Commission understands that BCHF is the owner of an apartment building at 238 Davie Street in Vancouver, while Strata Owners is the term used to describe the Strata Corporation and the individual owners of condominium units in a building located nearby at 289 Drake Street. The two buildings are part of Pacific Place, a planned community being developed by Concord Pacific Developments Ltd. (Concord) on land that served as the site for Vancouver's World Fair Exposition in 1986.

PPC is a company owned jointly by Concord and a subsidiary of BC Tel, BC Tel Support Services Ltd. (BCTS). According to its spokesperson at the hearing, PPC was formed in 1992 for the purpose of developing the communications infrastructure to serve the planned community on the former Expo '86 site.

Distribution undertakings that currently serve the two buildings noted above are part of this infrastructure. Residents of these buildings are provided with television signals, some of which are received over the air using roof-top antennas, while others are delivered by BCTel's fibre optic facilities from remote head end sites in Burnaby and Haney. These head end sites are either owned or leased by Western CCTV Distribution Inc. (Western), a company in which PPC holds a 20% ownership interest. The sites are operated by Western as part of a terrestrial relay distribution network undertaking (TRDNU).

In January 1994, the Commission received a complaint from Rogers Cable T.V. Limited that PPC, through its involvement in the operation of the broadcasting undertakings noted above, was effectively operating an unlicensed distribution undertaking in Vancouver. In responding to subsequent requests by the Commission for information regarding this matter, PPC contended that the undertakings fall within the class of broadcasting undertaking defined by the criteria set out in the Commission's Exemption Order Respecting Master Antenna Television Systems, as amended (see Public Notice CRTC 1994-133 dated 26 October 1994). By this order, persons carrying on certain undertakings are exempted by the Commission from the licensing requirements contained in Part II of the Broadcasting Act and from any regulations made thereunder. PPC argued further that Western's TRDNU is also exempted from licensing requirements pursuant to an exemption order issued by the Commission in Public Notice CRTC 1993-53 dated 30 April 1993.

Nevertheless, based on information obtained through correspondence with PPC, and through meetings with its representatives, the Commission reached a preliminary finding of non-compliance, and directed the owners to cease and desist operating the undertakings in question. To date, however, the undertakings have continued to operate. The purpose of the hearing was thus to consider whether mandatory orders should be issued pursuant to section 12 of the Broadcasting Act, requiring PPC, BC Tel, BCHF, the Strata Owners, or others involved in the operation of these broadcasting undertakings, to cease and desist.

Background

Master Antenna Television (MATV) systems in multiple-unit dwellings, such as apartment buildings, condominiums, hotels and hospitals, provide residents with access to television signals that might not otherwise be obtainable using simple set-top antennas, or rabbit ears. An MATV system typically consists of a roof-top antenna and a satellite receiving device to capture television signals for distribution to a building's residents. To an extent, such systems are comparable to a roof-top antenna serving a single-family dwelling. At the same time, because they distribute broadcasting services to multiple users, MATV systems are, in fact, broadcasting undertakings and fall within the jurisdiction of the Commission under the Broadcasting Act.

Rather than require the operators of MATV undertakings to apply for broadcasting licences, the Commission elected in 1977 to issue an exemption order setting out a number of criteria which, if met, would qualify such operators for exemption from licensing requirements. Among the exemption criteria were requirements that the MATV system distribute all local television signals, that it be operated on a not-for-profit basis, and that the system be located entirely on land owned or leased by the system's operator. A further criterion was that the undertaking not be connected by any form or means of transmission, apart from the direct off-air reception of conventional broadcast signals, (i) to any land not owned or leased by the system's operator, or (ii) over any public street or highway, except in the case of an MATV system operated by a condominium corporation or registered co-operative society all of whose members reside on land on which the undertaking is situated.

In subsequent years, the criteria have been amended to allow for reception of signals via satellite and for the use of microwave or optical fibre to connect the building portion of an undertaking to its remote head end, provided the remote head end portion is solely and exclusively owned or leased by the person carrying on the undertaking, and serves that building portion only.

MATV undertakings are an integral and important part of the Canadian broadcasting system. Under the amended criteria, many have become extremely complex communications systems often serving many hundreds of apartment units. Exempted from licensing requirements and operating as not-for-profit enterprises, MATV systems can offer an attractive and frequently less costly alternative to cable television systems, whose operators must be licensed and must comply with various regulations and conditions of licence, and must make appropriate contributions to the broadcasting system.

From 1977 to the present, the rationale underlying the Commission's MATV policy has not changed, and may be summarized as follows: to the extent that an MATV system remains analogous to a homeowner's roof-top antenna or satellite dish, in both its configuration and range of services, it may be exempted from Commission licensing requirements without adverse impact on the Canadian broadcasting system. When the operator of an MATV system wishes to go beyond that point by expanding the territorial reach of the system, for exemple, or by operating for direct commercial gain, then for the benefit of the broadcasting system as a whole, the operator must first obtain a broadcasting licence and adhere to Commission rules and regulations in the same manner that any competing cable system is required to do.

The Commission's policy approach respecting MATV undertakings is based on the principles of fairness and equitable treatment. At the same time, the Commission recognizes the advantages of competition between cable and other distribution undertakings. In its 19 May 1995 report to Government entitled Competition and Culture on Canada's Information highway: Managing the Realities of Transition, the Commission emphasized that it is prepared to consider, without delay, licence applications by those (other than telephone companies) seeking to carry on distribution undertakings to compete in the core cable business. The Canadian Cable Television Association, in its submissions to the Commission in the Information Highway proceeding, also expressed support for such competition, provided it is fair competition.

The Commission may well receive licence applications in the coming months from parties proposing to offer competitive alternatives to cable, including those from the operators of MATV undertakings wishing to expand the scope of their present operations. These will be given speedy consideration by the Commission. However, in the interest of maintaining as streamlined a regulatory environment as possible, other MATV operators will continue to be exempted from Commission licensing requirements, provided their undertakings meet all of the Commission's exemption criteria.

The Vancouver Public Hearing

The parties called to the Vancouver hearing were all represented by Mr. Gregory Kane, Q.C. Giving evidence on behalf of all the parties were Mr. Jon Markoulis, President of PPC, and Ms. Deborah Fahy, a specialist in issues relating to condominium law. Much of the Commission's questioning of these representatives focused on two of the criteria contained in the Commission's MATV exemption order, namely criterion 1(a) and criterion 2. By its questions, the Commission sought to determine who, in fact, is operating the MATV undertakings serving residents of the buildings located at 238 Davie Street and 289 Drake Street in Vancouver, and to clarify its understanding of the undertakings' technical configuration. The pertinent portions of criteria 1 and 2 are set out below:

1. The entire undertaking:

 a) is situated exclusively on land owned or leased by the person carrying on the undertaking, or, in the case of an undertaking carried on by a condominium corporation, by such corporation or any of its members....

2. The undertaking is not connected by any form or means of transmission, apart from i) the direct over-the-air reception of conventional broadcast signals, ii) the direct satellite reception of services, or iii) the use of microwave or optical fibre to connect the building portion* of an MATV undertaking to its remote head end portion, which is solely and exclusively owned or leased by the person carrying on the undertaking, and which serves that building portion only,

 a) to any land not owned or leased by the person or persons described above, or

 b) crossing over or under any public street or highway (or in the case of any MATV system fully built before 2 March 1994, over any public street or highway), except in the case of an undertaking carried on by a condominium corporation, or by a registered cooperative society, all of whose members reside on the land on which the undertaking is situated....

 * Where the building portion consists of more than one building, these buildings may not be connected by crossing over or under any public street or highway (or in the case of any MATV system fully built before 2 March 1994, over any public street or highway), except in the case of an undertaking carried on by a condominium corporation, or by a registered cooperative society, all of whose members reside on the land on which the undertaking is situated....

In order to meet the requirements of criterion 1(a), the operator of an MATV undertaking must also own or lease the land on which the undertaking is exclusively located, i.e. BCHF in the case of the MATV system at 238 Davie Street, and the owners of the condominium units in the case of the undertaking serving 289 Drake Street. According to the parties called to the hearing, BCHF and the Strata Owners carry on the MATV undertakings in question, but have entered into agreements with PPC, who acts as agent on their behalf in operating the systems.

Over time, the Commission has responded to a number of requests from apartment owners, condominium corporations and others for advice on whether their contractual arrangements with third parties for the operation of MATV systems leave them sufficient control over the undertakings to qualify for an exemption from licensing requirements. Although the Commission weighs the particular circumstances of each case, its general position is that the transfer of any given indicator of control to an agent would not necessarily mean that the apartment owner or condominium corporation does not operate the system. However, when a large number of such aspects of control are given up, it may well be that the owner or corporation does not, in fact, operate the undertaking.

The Commission has examined the contracts between PPC and each of the BCHF and Strata Owners. With regard to the contract between PPC and the Strata owners, the Commission notes that this was drafted by PPC's solicitors, who also represent the developer, Concord; it was signed by Mr. Markoulis on behalf of PPC and by Concord's Chief Financial Officer as the sole and founding member of the Strata Corporation. Thus, at the time of signing, the Strata Corporation was controlled by Concord. The contract's terms specify, however that the contract would be binding on each subsequent condominium owner.

With respect to the contract between PPC and BCHF, the Commission notes the statement contained in a letter from the solicitors of BCHF to the effect that, as of 2 November 1994:

 [PPC] has provided television service by way of a cablevision connection to the building, however, [BCHF] has not yet signed any contracts with [PPC] with respect to the ownership or management of the telecommunications equipment used to provide such service and takes the position that [PPC] is totally responsible for such telecommunications equipment and the cablevision service provided.

Subsequently, in a letter dated 20 January 1995, BCHF advised the Commission that it had signed a contract with PPC, and that BCHF had assumed responsibility for operating the undertaking.

While there are differences between the two contracts, many of the terms and conditions are the same or of the same effect. In both cases, the contracts give PPC the exclusive right to provide communications services to the two premises, thus precluding either BCHF or the Strata Owners, and arguably, even individual tenants or condominium owners, from installing their own communications systems. The agreements further specify that PPC owns the distribution systems, that it retains the right to determine who may use them, and that the systems do not become fixtures. While BCHF collects from each of its tenants at 238 Davie Street and remits a monthly lump sum payment to PPC, each condominium owner at 289 Drake Street remits a monthly payment to PPC. PPC has the right to increase the monthly fees charged to BCHF and the Strata Owners. Under the agreements, PPC is also permitted to add or delete services distributed on the two undertakings.

Despite the rights conferred on PPC under these agreements, it remained the parties' contention at the hearing that the undertakings were not being carried on by that company, but by BCHF and the Strata Owners. When asked to explain how this could be the case, Mr. Markoulis claimed that the recital in the contract identifying PPC as the agent for the owners is an "overriding clause" and that, in practice, PPC "...only does what the owners want."

Mr. Kane stated:

 ...we are trying to explain to you what these provisions mean and what the intention was in terms of putting them into this contract.

Mr. Kane added that the relationship between the parties:

 ...has to be considered in the context of the reality that exists in a condominium corporation, number one, and then in a larger site such as Pacific Place, where we are talking about the community of interests that exists within that overall development.

What Mr. Markoulis and Mr. Kane were arguing, in effect, is that the actual relationship between PPC and each of BCHF and the Strata Owners differs from the relationship described in the contracts between these parties, and that the rights held by PPC under the contracts would apparently be superceded because BCHF or the Strata Owners could dictate changes at anytime. In the Commission's view, this argument disregards an essential purpose that any contract is intended to serve: to establish clearly the rights that belong to individual parties. This argument would also mean that the clauses of the contract that follow the recital are essentially meaningless. The Commission notes in this context that, notwithstanding the parties' arguments, Mr. Markoulis claimed in other statements made at the hearing that the contracts would indeed be binding with regard to at least certain of the clauses contained therein, including those pertaining to access to equipment, installation of second systems, and costs of service.

The Commission acknowledges that, if PPC and either BCHF or the Strata Owners agree to changes, for example to the services distributed by the MATV systems, then these changes can be made. However, based on the plain language of the contracts between the parties, should PPC not agree to a change, or decide to implement a change without the agreement of BCHF or the Strata Owners, it would appear that there is little that these latter two parties can do with regard to the MATV systems.

On the basis of all the evidence available to it, the Commission therefore finds that PPC is, in fact, the operator of these broadcasting undertakings and that, because the properties on which these undertakings are located are not owned or leased by PPC, the undertakings do not meet criterion 1(a) of the MATV exemption order.

Regarding the technical configu-ration of these MATV systems, criterion 2 permits a person carrying on an exempt MATV undertaking to use optical fibre or microwave to connect the building portion of the undertaking to its remote head end portion, provided that the remote head end portion "is solely and exclusively leased by the person carrying on the undertaking, and...serves that building portion only." Otherwise, and except for the over-the-air or satellite reception of services, the undertaking must not be connected to any land not owned or leased by the person carrying on the undertaking.

It was confirmed by the parties at the hearing that the undertakings at 238 Davie Street and 289 Drake Street in Vancouver are both connected by optical fibre to the same remote head end sites at Burnaby and Haney. Thus, the remote head end sites are not used exclusively by any one MATV undertaking, but are shared by at least two, and perhaps among several MATV systems. The Commission notes in this regard the testimony by Mr. Markoulis at the hearing that MATV systems similar to those serving the residents at these two addresses are operational in other residential buildings at Pacific Place. As was also confirmed by the parties at the hearing, the remote head ends are not owned or leased by BCHF or the Strata owners, but by Western.

At the hearing, the parties argued that the MATV exemption order must be interpreted by the Commission so as to permit an exempt MATV undertaking to receive signals from an exempt TRDNU such as that operated by Western. The parties noted that, when the Commission first proposed exempting the operators of TRDNUs from licensing requirements, among the proposed exemption criteria was one restricting the distribution of any signals to licensed distribution undertakings, "...or to exempted distribution undertakings such as MATV systems." The parties contended that, because the TRDNU exemption order and an amendment to the MATV exemption order were both issued on the same date (30 April 1993), the two had to be interpreted by the Commission in such a way as to make them compatible, specifically that exempt TRDNUs should be authorized to distribute services to exempt MATV undertakings, and exempt MATV undertakings should not be prohibited from receiving signals delivered by TRDNUs.

The Commission most recently amended the language of criterion 2 of the MATV exemption order in Public Notice CRTC 1994-133 dated 26 October 1994, issued some 18 months following publication of the TRDNU exemption order. The language of criterion 2 was amended by the Commission specifically to preclude the use of optical fibre to distribute signals from any remote head end to more than one MATV undertaking. As stated in this notice:

 ...the Commission has decided to permit the use of optical fibre only for the connection of the building portion of an MATV undertaking to a remote head end portion solely and exclusively owned or leased by the person carrying on the undertaking. This restriction reflects the Commission's determination that to allow joint use facilities could lead to a "de facto" cable system serving many MATVs.

The Commission has considered the parties' argument that the TRDNU and MATV exemption orders should be interpreted so as to make them compatible. In the Commission's view, to apply this interpretation, and thereby to permit the TRDNU in question to deliver signals to more than one exempt MATV undertaking, would negate the analogy between an MATV undertaking and a home owner's roof-top antenna, and would be inconsistent with both the spirit and letter of the Commission's MATV exemption order.

For these reasons, even had the Commission determined that BCHF and the Strata Owners are carrying on their own respective MATV undertakings, and that PPC is simply their agent for the purpose of seeing to the day-to-day operation of the systems, the Commission has determined that the technical configuration of the two undertakings is such that they fail to meet the requirements of criterion 2.

Conclusion

Accordingly, the Commission has issued the mandatory orders appended to this notice ordering PPC, BCTS, BCHF and the Strata Owners, within 90 days of today's date, to cease and desist operating a broadcasting undertaking, either alone or with others, at 238 Davie Street or 289 Drake Street in Vancouver, or anywhere else in Canada, except in compliance with the Broadcasting Act. The 90-day period should allow the parties sufficient time to take the appropriate measures to comply with the Broadcasting Act.

The Commission will file these mandatory orders with the Federal Court. As set out in subsection 13(1) of the Broadcasting Act, the Commission's mandatory orders will then become orders of the Federal Court and will be enforceable in the same manner as orders of the Court. According to the Federal Court Rules, anyone who disobeys an order of the Court may be found guilty of contempt of court.

Allan J. Darling
Secretary General

Appendix to Public Notice CRTC 1995-156

Mandatory Order 1995-2

Pacific Place Communications Limited, BC Tel Support Services Ltd. and the British Columbia Housing Foundation are hereby ordered, pursuant to subsection 12(2) of the Broadcasting Act, within 90 days of today's date, to cease and desist operating a broadcasting undertaking, either alone or with others, at 238 Davie Street in Vancouver, or anywhere else in Canada, except in compliance with the Broadcasting Act.

Mandatory Order 1995-3

Pacific Place Communications Limited, BC Tel Support Services Ltd. and the Owners, Strata Plan No. LMS990 are hereby ordered, pursuant to subsection 12(2) of the Broadcasting Act, within 90 days of today's date, to cease and desist operating a broadcasting undertaking, either alone or with others, at 289 Drake Street in Vancouver, or anywhere else in Canada, exept in compliance with the Broadcasting Act.