ARCHIVED -  Public Notice CRTC 1995-14

Public Notice

Ottawa, 26 January 1995

Public Notice CRTC 1995-14

EXEMPTION ORDER RESPECTING TELESHOPPING PROGRAMMING SERVICE UNDERTAKINGS

In Public Notice CRTC 1993-172 dated 8 December 1993, the Commission requested public comments as to whether it should issue an order granting an exemption from licensing and other requirements, to persons operating a certain class of broadcasting undertaking, namely those offering home shopping and/or infomercial services. Such an exemption would be granted pursuant to powers of exemption granted to the Commission under subsection 9(4) of the Broadcasting Act (the Act).

Background

Following a call for applications for new specialty, pay television and pay-per-view programming undertakings issued in Public Notice CRTC 1993-77 dated 3 June 1993, the Commission received a number of applications proposing home shopping and/or infomercial services. In Public Notice CRTC 1993-172, the Commission noted that the applications containing proposals to offer this category of service raise fundamental questions regarding how the licensing of any such undertakings would meet the general principles and objectives detailed in Public Notice CRTC 1993-77.

Accordingly, in Public Notice CRTC 1993-172, the Commission requested comments "regarding whether, and under what circumstances, those proposing to carry on undertakings offering home shopping and/or infomercial services should be exempted from licensing requirements." The Commission also requested comments on the establishment of specific criteria to define the characteristics of such an exempt class of undertaking as well as regarding what priority, if any, the Commission should grant services provided by persons falling within the exempt class for the purposes of cable distribution.

Public Comment

In response to its call for comments, the Commission received 21 submissions, including those by members of the public, private broadcasters, the Canadian Association of Broadcasters (CAB), consumer and industry associations, the Canadian Direct Marketing Association (CDMA), cable operators, the Canadian Cable Television Association (CCTA) and from the applicants potentially affected by any such exemption order.

Comments from members of the public generally recommended that operators of undertakings that offer full-motion home shopping and/or infomercial services should not be exempted from licensing requirements. They also stated that such services should be entirely self-funded, with no fee charged to the cable subscriber.

Of 19 industry-related parties who filed submissions, 12 requested that the Commission not create an exempt class for such undertakings and encouraged a licensing procedure to ensure that the general principles and objectives set out in section 3 of the Act are met.

Those who favoured an exemption from licensing requirements argued that the Commission should streamline the regulatory process in order to allow Canadian undertakings to respond quickly to competition from unregulated direct broadcast services. Some noted that home shopping and infomercial services are part of a broad array of new services that do not resemble the type of programming offered by undertakings the Commission has typically licensed. Certain parties suggested that the proposed exemption criteria should encompass enough flexibility to allow for the introduction of new and innovative technologies, yet ensure that certain quality standards are met. It was argued that such exempted undertakings could meet the "applicable" principles and objectives set out in section 3 of the Act. The CDMA proposed that the exemption order include a requirement for predominant use of Canadian creative and other resources.

Private broadcasters, industry associations and other interested parties who otherwise favoured a licensing requirement, proposed that any exemption criteria should ensure an appropriate contribution to the Canadian broadcasting system.

The Commission's Conclusions

Having carefully considered the submissions, the Commission, by majority vote, has decided to issue the Exemption Order attached to this notice. Specifically, the Order exempts from the requirement to hold a broadcasting licence persons operating undertakings that offer what shall be hereafter designated as "teleshopping services".

The Commission is concerned that such undertakings should not compete for audience attention with licensed programming undertakings. Accordingly, it has established exemption criteria that restrict the type of programming that may be included in such teleshopping services. Specifically, the programming must be restricted to the offering of merchandise for direct sale, and must not contain programming material from categories 1 through 12 found under item 6 of Schedule 1 attached to the Specialty Services Regulations, 1990. This approach is intended to restrict the mixing of entertainment and information content, i.e. "infotainment".

The Commission is satisfied that these restrictions on programming content will lessen the impact on either existing specialty service programming undertakings or on conventional television programming undertakings. Further, the Commission considers that the attractiveness of teleshopping services and hence, their impact on the audiences of its licensees, will be limited.

The Commission notes that teleshopping services offer for sale, goods and services that are frequently purchased by those who may require or otherwise appreciate assistance in accessing the types of goods and services offered. While much of the merchandise provided by existing teleshopping services is limited in variety and utility, it is expected that choice and quality will increase rapidly as more mainstream advertisers come to use teleshopping services to market their goods and wares.

The Commission has decided not to require teleshopping programming service undertakings to make a direct contribution to the broadcasting system by way of any financial allocation, for example, to a production fund. Instead, the Commission is satisfied that teleshopping programming service undertakings can most effectively contribute to the Canadian broadcasting system by making predominant use of Canadian creative and other resources.

Exemption Criteria

In the attached Exemption Order, the Commission has described the exempt class of undertaking using nine separate criteria. The first three deal with general issues, and the six that follow deal with issues particular to this class of undertaking.

General Criteria

The first general criterion is that the undertaking must be one that the Commission would not be prohibited from licensing pursuant to any Act of Parliament or any Direction to the Commission by the Governor in Council. These directions currently place restrictions on the level of foreign ownership and control of an undertaking, and the circumstances under which educational authorities and municipalities may hold licences.

The second general criterion is that the undertaking must meet all technical requirements of the Department of Industry, Science and Technology (DIST) and must possess all authorizations or certificates prescribed by the Department. The Commission reminds operators of undertakings exempted from licensing requirements that DIST may alter its technical requirements from time to time, and that it is their responsibility to keep themselves informed of any changes.

The third general criterion is that the undertaking must be one that does not broadcast programming that is religious or political in nature.

Specific Criteria

Criteria four through nine, for the most part, reflect the specific proposals contained in the submissions received from the industry at large, and include the restrictions discussed earlier regarding the type of programming these undertakings may provide.

These undertakings will also be required to adhere to established industry codes with respect to advertising to children, gender portrayal and violence. Programming must be provided to a distribution undertaking at no cost. Furthermore, in keeping with the contribution this class of undertaking is expected to make to the objectives contained in section 3 of the Act, the undertaking's programming must originate in Canada and make predominant use of Canadian creative and other resources.

These services are also required to adhere to sections 3, 3.1, 4 and 5 of the Specialty Services Regulations, 1990 as amended from time to time. These sections include provisions prohibiting the distribution of certain kinds of programming, restrictions regarding the advertising of alcoholic beverages and restrictions on the broadcast of commercial messages to which the Food and Drug Act applies. Programming content must also be clearly identified, in the manner set out in the Exemption Order.

Notwithstanding this Exemption Order, the Commission expects operators of undertakings falling within this exempt class to carry on their undertakings in a responsible manner, in accordance with the spirit of the Act and regulations, and respecting, for example, the Act's call for services of high standard.

Parties operating undertakings exempted from licensing requirements should be mindful that, if at any time the Commission deems it necessary or advisable, it may revoke or amend the exemption order for this class of undertaking.

The operators of undertakings in this class are exempt from licensing requirements provided that the undertakings meet the various criteria set out in the order, as may be amended from time to time by the Commission. Any undertaking that does not meet all of the applicable criteria continues to require a licence from the Commission.

Other Matters

The Commission received a number of recommendations concerning the issue of priority cable distribution identified in Public Notice CRTC 1993-172. For example,
representatives of programming interests called for various measures to ensure a higher priority for their services over teleshopping services, whether licensed or exempt. On the other hand, distributors suggested that carriage of teleshopping services of exempt undertakings should be entirely left to the discretion of each cable operator as is currently the practice with the services of most other exempt undertakings.

Having considered these differing positions, the Commission has determined that no compelling case has been made to warrant according any special carriage priority for the services of exempt teleshopping programming service undertakings. However, the Commission reiterates that programming services have priority over non-programming services.

In view of the Commission's determination to exempt teleshopping programming service undertakings from the requirement to hold a broadcasting licence, the Commission has returned the four complete applications on file that had been submitted pursuant to Public Notice CRTC 1993-77.

The Exemption order contained in the appendix is effective immediately. The Commission announces further that, pursuant to their conditions of licence and paragraphs 10(1)(l) or 24(1)(j), as may be applicable, of the Cable Television Regulations, 1986, cable licensees are hereby authorized to distribute the services of exempt teleshopping programming service undertakings.

The Commission refers interested parties to Public Notice CRTC 1994-59 dated 6 June 1994 regarding future licensing action. The notice sets a date of 30 June 1995 for the filing of applications for additional new specialty, pay television and pay-per-view services.

Allan J. Darling
Secretary General

Dissents

The written dissents of Commissioners Garth Dawley, Edward A. Ross and Sally Warren are set out below.

Dissenting opinion of Commissioner Garth Dawley

In my judgement, the failure of the decision outlined in this Public Notice and the attached Exemption Order Respecting Teleshopping Programming Service Undertakings to differentiate between the terms "teleshopping" and "infomercials" place the decision by the Commission's majority in conflict with a previous decision contained in Public Notice CRTC 1994-139. That public notice specifically permits "...only licensees of private television programming undertakings" to air infomercials at this time. Public Notice CRTC 1994-139 further commits the Commission to undertake a re-evaluation of this position in three years. If it is the intention of the majority decision to exempt only teleshopping from licensing requirements, clearly, the Commission's failure to define the terms "teleshopping" and "infomercials", thus providing a clear distinction between the two services, obscures the CRTC's intent and will result in confusion to interested parties.

Dissenting opinion of Commissioner Edward A. Ross

I dissent from this decision taken by the majority of the Commission, particularly the exemption of stand alone infomercial services.

Dissenting opinion of Commissioner Sally Warren

I dissent from this decision to exempt the operators of teleshopping programming service undertakings from the necessity to hold a licence for the following reasons.

I believe channels dedicated to infomercials will not be a worthwhile addition to the Canadian broadcasting system. Indeed, some have expressed the view that the system already has more than enough infomercials.

The Commission recently (Public Notice CRTC 1994-139) amended the television regulations to permit the airing of infomercials during the broadcast day for private television stations. That amendment, however, has the redeeming effect of directing a percentage of the revenues derived from infomercials to the production of Canadian programming.

In this decision, the sole benefit to the system will be the "predominant use of Canadian and other resources" in the production of these commercials. While I do not underestimate the value of this, I do not believe that it is balanced by the negative impact that a glut of infomercials could have on viewers.

Exemption Order Respecting Teleshopping Programming Service Undertakings

The Commission, pursuant to subsection 9(4) of the Broadcasting Act (the Act), by this order, exempts from the requirements of Part II of the Act and any regulations, those persons carrying on broadcasting undertakings of the class defined by the following criteria:

Purpose

The purpose of these programming undertakings is to provide distribution undertakings with programming that is intended to sell or promote goods and services.

Description

1. The Commission would not be prohibited from licensing the undertaking by virtue of any Act of Parliament, of the Direction to the CRTC (Eligible Canadian Corporations) or of any other direction to the Commission by the Governor in Council.

2. The undertaking meets all technical requirements of the Department of Industry, Science and Technology and has acquired all authorizations or certificates prescribed by the Department.

3. The undertaking does not broadcast programming that is religious or political in nature.

4. The undertaking provides a programming service consisting exclusively of programming intended to sell or promote goods and services. No part of the undertaking's programming includes programming as described under item 6 of Schedule 1 of the Specialty Services Regulations, 1990.

5. The undertaking's programming complies with the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) "Sex-Role Portrayal Code for Television and Radio Programming", the provisions of the CAB's "Broadcast Code for Advertising to Children" and the guidelines on the depiction of violence in television programming set out in the CAB's "Voluntary Code Regarding Violence in Television Programming", as amended from time to time and approved by the Commission.

6. The undertaking provides its programming without charge to any distribution undertaking receiving the service.

7. The undertaking's programming originates in Canada, and the undertaking makes predominant use of Canadian creative and other resources in the creation and presentation of its programming.

8. The undertaking's programming complies with sections 3, 3.1, 4 and 5 of the Specialty Services Regulations, 1990, as amended from time to time.

9. The undertaking identifies its programming by including, once every 30 minutes, a clear and prominent written and oral announcement that the programming is intended to sell or promote goods and services.