ARCHIVED -  Public Notice CRTC 1995-218

Public Notice

Ottawa, 20 December 1995

Public Notice CRTC 1995-218

LICENSING OF FOUR NEW PAY AUDIO PROGRAMMING UNDERTAKINGS

This public notice serves as an introduction to Decisions CRTC 95-911, 95-912, 95-913 and 95-914 of today's date, in which the Commission approves four applications for broadcasting licences to carry on pay audio programming undertakings, following a Public Hearing in the National Capital Region commencing 14 November 1995. The licences will be issued to DMX Canada (1995) Ltd. (DMX), Peter Kruyt on behalf of a company to be incorporated for a service to be called Power Music Choice (Power Music Choice), Canadian Satellite Communications Inc., Westcom Radio Group Ltd. and Pelmorex Radio Inc., partners in a partnership to be known as the CWP Partnership for a service to be called Allegro (Allegro), and the Canadian Broadcasting Corporation for a service to be called Galaxie (Galaxie).

Given that these services are clearly discretionary in nature, the Commission has determined that a competitive environment is appro-priate for pay audio programming undertakings in order that distributors and consumers may have a choice of this type of service. It has therefore established the following policies, reflected in conditions of licence, that will be applicable to all licensees.

Canadian Content

Paragraph 3 (1)(f) of the Broadcasting Act (the Act) states 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, unless the nature of the service provided by the undertaking, such as specialized content or format...renders that use impracticable, in which case the undertaking shall make the greatest practicable use of those resources."

The Commission notes that, under the terms of the Radio Regulations, 1986 (the regulations), radio stations must ensure that at least 30% of popular musical selections and at least 10% of traditional and special interest musical selections aired each broadcast week are Canadian. Further, it notes that each pay audio applicant has proposed at least a 30% level of Canadian musical selections for Canadian-produced channels.

The Commission has therefore imposed conditions of licence requiring each licensee to ensure that a minimum of 30% of the musical selections broadcast each week on Canadian-produced audio channels, considered together, must be Canadian. This condition will therefore not be applied to each Canadian-produced channel individually, but rather to the Canadian-produced channels as a whole.

French-language vocal music

Sub-paragraph 3 (1)(d)(iii) of the Act indicates, among other things, that the Canadian broadcasting system should reflect the linguistic duality of Canada.

At the hearing, there was general agreement among representatives of French-language artistic organizations that 25% of the channels offered on pay audio services should consist of French-language vocal music. There was agreement that channels consisting only of instrumental music, or entirely of music in languages other than English or French, should not be included in this calculation. The Commission also notes that all applicants are prepared to include French-language vocal music channels in their services.

The Commission has therefore determined that it is appropriate to require, by condition of licence, that at least 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, devote to musical selections in the French language, on a weekly basis, a minimum of 65% of its vocal music selections from category 2, as defined in the regulations.

Linkage with Non-Canadian Produced Channels

Two of the applicants, DMX and Power Music Choice, proposed to distribute a number of channels produced in the United States as part of the package of channels offered to subscribers. DMX proposed to begin operations with a service consisting of 10 Canadian channels and 25 non-Canadian channels. The number of Canadian-produced channels would be increased and the number of non-Canadian channels reduced so that, by the third year of operations, 15 Canadian channels and 20 foreign-produced channels would be dis-
tributed.

Power Music Choice, for its part, indicated that the number of non-Canadian produced channels would never exceed the number of Canadian- produced channels.

Both applicants hoped that it would be possible to eventually customize their services so it would be possible for subscribers to choose what particular non-Canadian channels would be in the package they receive.

However, assemblage of the program material on non-Canadian channels is not controlled by the Canadian licensee. Such assemblage is the primary programming function of a pay audio service. Consequently, the Commission considers that an alternative licensing approach for pay audio programming undertakings would be appropriate.

The Commission has therefore determined that it will license the applicants based only on the Canadian-produced channels that they propose to distribute. However, licensees, by condition of licence, will be permitted to package or link a maximum of one non-Canadian produced pay audio channel with each Canadian-produced channel. Furthermore, the condition of licence specifies that, in no case, may subscribers to a pay audio service be offered a package of pay audio channels in which non-Canadian pay audio channels predominate. Upon request by the Commission, each licensee must provide a list of all non-Canadian pay audio channels that are distributed on its service.

The licensee will, however, have final responsibility for the content of the programming on all of the channels distributed as part of the undertaking. In this regard, the Commission notes that the applicants who have proposed to incorporate non-Canadian channels into their services 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 they would make available to subscribers in Canada.

Canadian Talent Development

In Public Notice CRTC 1995-196 entitled "Contributions By Radio Stations To Canadian Talent Development - A New Approach", the Commission set out a revised policy for radio stations with respect to Canadian talent development. Under this policy, each radio station would participate in a plan which would involve making an annual contribution to a third party associated with Canadian talent development. In this plan, an eligible third party for Canadian talent development is defined as "FACTOR, MusicAction, national and provincial music organizations, performing arts groups, schools and scholarship recipients." The Commission further clarified in that public notice, that "all money going to third parties must be directly connectedto the development of Canadian musical and other artistic talent."

The Commission considers that licensees of pay audio services should make a contribution to Canadian talent development. Given the nature of the service and the commitments proposed by the applicants, the Commission considers that it is appropriate to include a condition of licence requiring each pay audio licensee to contribute each year, a minimum of 4% of its gross annual revenues to eligible third parties associated with Canadian talent development as defined above. Licensees must report the names of the third parties associated with Canadian talent development, together with the amounts paid to each, on their annual returns.

Carriage by Distribution Undertakings

Three of the pay audio applicants are associated through common ownership with cable or direct-to-home (DTH) distribution undertakings. DMX is associated with Shaw Cablesystems, Power Music Choice is associated with the Power DirectTv DTH distribution undertaking, and Allegro is associated with the ExpressVu DTH distribution undertaking. Based on discussions at the public hearing, the Commission understands that all three are assured of carriage by the distribution undertakings with which they are affiliated.

Galaxie, on the other hand, is not associated with any distribution undertaking. In order to assure that the CBC's service is carried on some distribution undertakings, the Corporation suggested that, in the event the Commission chose to license more than one pay audio service, it require distributors choosing to carry a digital audio service in which the distributor has an interest, to offer to distribute to its subscribers on equitable terms the pay audio service of any licensee independent of a distribution system.

In Public Notice CRTC 1995-218 issued today, the access guidelines for DTH distribution undertakings address the carriage of pay audio services as follows:

With respect to distribution of pay audio programming services, the Commission considers that access should be primarily market-driven and negotiated between the DTH distributor and the programming undertaking. However, the Commission agrees with the CBC that DTH distributors who choose to carry pay audio servcies in which they have an ownership interest should also provide access to independent services, given the diversity in programming among the competing pay audio services, and the relatively small channel capacity demands of such audio services. However, the Commission does not consider that it is necessary or appropriate for DTH subscribers to be forced to subscribe to, or pay for, more than one pay audio service. The Commission will therefore require the licensees of DTH distribution undertakings that elect to distribute a pay audio service in which they or another distribution undertaking have an ownership interest exceeding 30%, also to distribute at least one other pay audio service whose ownership is independent of any distribution undertaking, with the terms of the 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 pay audio service to pay for the satellite uplink and transmission costs associated with the distribution of the signal.

Logging Requirements

In light of the numerous channels that will be distributed by these undertakings, and the very limited amount of spoken word material that will be broadcast, the Commission has decided not to require that the licensees maintain audio tapes of all matter broadcast as is its practice with radio stations. Instead, the Commission, by condition of licence, is requiring that each licensee maintain sequential lists of all recordings played on each pay audio channel with designations for Canadian musical selections and for French-language vocal music. Licensees will be required to maintain these lists for a period of four weeks and forward these lists to the Commission upon request, along with a notarized attestation of the lists' accuracy.

Allan J. Darling
Secretary General