ARCHIVED -  Public Notice CRTC 1995-5

Public Notice

Ottawa, 13 January 1995

Public Notice CRTC 1995-5

Policy Governing the Distribution of Video Games Programming Services

On 23 March 1994, the Commission issued Public Notice CRTC 1994-34, which initiated a public process concerning the manner in which video games services should be authorized for distribution by cable undertakings. This notice was issued in response to a proposal by Sega of Canada, Inc. (Sega), a major video games supplier, that it be permitted to provide a video games service to be distributed by cable television undertakings.

The proposed Sega video games service, as explained in Sega's original submission and as clarified later during the public process, would permit cable subscribers, who have already made an investment in its game player, to subscribe to its service on a discretionary basis and thereby have access via cable to a monthly menu of Sega games. Subscribers would need to acquire a special channel adaptor in addition to the game player.

Built into the channel adaptor would be a "V-chip" device to allow parents, by way of an encoded message, to prevent access to games that they deem unacceptable for their children's use, based upon the rating levels assigned to these games. Sega committed to ensure that all games would be rated in accordance with a videogame classification system into age-specific categories and that this classification would be performed by an independent Canadian, video game rating body. Moreover, Sega committed to comply with relevant industry codes on violence, advertising to children and gender portrayal and has introduced toll-free lines to provide parents with easy access to information on the content of its video games.

Sega has also committed to establish an Interactive Entertainment Development Fund to provide financial assistance to Canadians developing and producing new Canadian multi-
media products. Sega would contri-bute, on a monthly basis, an amount ranging from 3% to 5% of its gross revenues in the previous month, depending upon the paying subscriber level obtained.

Public Notice CRTC 1994-34 proposed to exempt Video Games Programming Service Undertakings from licensing requirements. In response to that notice, the Commission received 56 comments from interested parties, including individuals, representatives of the cable, television and telecommunications industries, programming undertakings and suppliers, as well as various consumer and related associations.

The Commission reviewed the comments submitted by interested parties and took note, in particular, of those comments proposing that video games programming service undertakings should make some form of direct contribution to the Canadian broadcasting system. Subsequently, the Commission decided to issue a further notice, Public Notice CRTC 1994-75 dated 29 June 1994, requesting comments as to the most appropriate type of contribution that should be required of these proposed exempt undertakings.

The Commission received 61 comments from various interested parties in response to this second notice.

The Commission examined carefully all submissions received in response to both notices and has decided, by majority vote, to adopt a dual approach to the distribution of video games services. In certain circumstances as outlined below, cable undertakings could, as the parties responsible for any video games service distributed on their systems, apply for a licence amendment authorizing them to distribute such a service. In such cases, the operators of video games undertakings would not need to be separately licensed or exempted from licensing requirements. Alternatively, where video games undertakings meet the specified criteria of the Exemption Order Respecting Video Games Programming Service Undertakings appended to this notice, cable undertakings may distribute such exempt services in accordance with an authority granted pursuant to their general condition of licence.

The Commission has taken special note of the commitments of Sega in its video game service proposal, including those with respect to such matters as child-protection features and contribution to an Interactive Entertainment Development Fund. It expects Sega to ensure that all its commitments are adhered to when its service is distributed in Canada. The CRTC also expects all other cable video games services to provide similar child-protection features as those proposed by Sega.

Distribution by Cable Undertakings - Authorization by Licence Amendment

The Commission considers that there may be situations where a cable licensee has such control over the programming of the video games service as to be, in fact, the operator of the service. Such indicators of control would include the ability to control the transmission of programming material; the acquisition of programming material by contract or otherwise from a supplier; the ability to preview, choose and schedule the programming material; and the ability to decide on the fee to be charged subscribers. It is the Commission's view that, where such key indicators of control by a cable licensee are present, it would be appropriate for the licensee to apply for an amendment to its licence authorizing it to originate a video games service as a special programming service, offered on a discretionary basis. In such cases, the Commission would generally issue a public notice to afford interested parties an apportunity to comment on the application. Where such applications are approved, the Commission would generally impose, by condition of licence, substantially the same requirements as are set out in criteria 3 to 7 of the attached exemption order and such other requirements as may be deemed appropriate.

The commission will generally be prepared to authorize the distribution of such a service on a fully-discretionary, stand-alone basis where the cable licensee establishes to the Commission's satisfaction that at least 10% of the video games offered by the service are Canadian. If, on the other hand, fewer than 10% of the video games offered on the service are Canadian, the service will generally be authorized only where the cable licensee proposes to distribute it on a channel that would otherwise be available, under the current linkage rules, for the distribution of a non-Canadian eligible satellite service as part of a discretionary tier.

The Commission may review the Canadian content level from time to time to ensure it adequately reflects the potential for games developed in Canada to be included as part of such a service.

Exemption Order Approach

The second type of authorization by virtue of which a video games service may be distributed is by meeting all of the specified criteria of the attached Exemption Order Respecting Video Games Programming Service Undertakings. The Commission acknowledges the comments and suggestions received in response to both public notices and has taken these into account in arriving at the specific criteria contained in the appended order. Key issues raised by the comments are discussed below.

Appropriateness of Exempting Video Games Services

Subsection 9(4) of the Broadcasting Act (the Act) requires the Commission to exempt persons who carry on broadcasting undertakings from any or all of the requirements of Part II of the Act, or any regulations made under that Part, where it is satisfied that compliance with those requirements will not contribute in a material manner to the implementation of the broadcasting policy set out in subsection 3(1) of the Act.

Some interveners opposed exempting video games programming service undertakings, arguing that only through licensing could that kind of programming be controlled and monitored. Others stated that it is exactly these kinds of services that will change the face of broadcasting and, hence, the creation of an exemption order would be inappropriate.

The Commission considers that the terms of the order provide criteria that adequately address the policy concerns raised by the Act, and is satisfied that licensing persons carrying on such undertakings would not contribute in a material manner to implementation of the broadcasting policy.

The Commission notes further that any alleged non-compliance with the terms of the exemption order may be addressed on a case-by-case basis, directly with the operator of the video games undertaking concerned; any such operator may be requested to demonstrate that it has met the terms of the order, failing which the appropriate sanctions could be applied. Additionally, should the Commission determine that the exemption approach is not adequately addressing the policy concerns raised by the Act, the exemption order could be revoked.

Ownership Requirement - Criterion 1

In the first round of comments, the absence of a criterion requiring Canadian ownership was often raised. The same concern was again raised in comments submitted in the second round, including those that generally supported the exemption approach. After full consideration, the Commission has decided to include as Criterion 1 a requirement that the operator of an exempt undertaking be eligible for licensing so as to better ensure that the Canadian broadcasting system shall be effectively owned and controlled by Canadians.

Technical Requirements and Restrictions against Programming of a Political or Religious Nature- Criteria 2 and 3

No changes regarding these two proposed criteria have been made by the Commission.

Promotion - Criterion 4

Some interveners suggested that no advertising whatsoever be permitted on the service. Others stated that the broadcast of ancillary programming, "in conjunction" with the video games programming service, could permit a separate barker channel for the service. After reviewing the comments received, and as suggested by some interveners, the Commission has revised Criterion 4 to require that any advertising distributed within a video games programming service promotes only the programming service and those video games offered by the service provider that are, themselves, suitable for inclusion as part of the service, in particular as they relate to criteria 6 & 7.

Contribution - Criterion 5

The Commission has reviewed in depth the comments on the issue of contribution. It has concluded that the application of strictly defined requirements in this area is inappropriate at this time. In arriving at this conclusion, the Commission has decided that the nature of such services and the current sources of programming make it unlikely that such services will be able to make predominant use of Canadian creative and other resources at this time. Accordingly, the Commission has added a criterion requiring that an exempt undertaking's programming must originate in Canada and that the undertaking must make the greatest practicable use of Canadian creative and other resources in the creation and presentation of its service.

Content Issues - Criteria 6 & 7

In the first round of comments, some interveners expressed concerns about violence in video games and the Commission's ability to adequately require or monitor adherence to the various industry codes. The Commission believes that Criterion 6, as drafted, can and will provide the Commission with the necessary tools to implement and monitor adherence to the various codes. Complaint-based investigation will, as in the case of other undertakings, permit the Commission to address any possible concerns in this area.

The Commission has also included, as Criterion 7, a requirement that an exempt undertaking categorize the video games it offers and provide information to subscribers indicating, at a minimum, the suitability of individual games for use by children and adolescents. This will permit parents to have better control over the use of such services by their children. In this regard, and as an example, the Commission notes that Sega has developed and implemented an age-specific rating system for video games set by an independent Video Rating Council, comprised of educators, child psychologists and sociologists. Should the Commission determine that these provisions are proving to be inadequate, the Commission will revisit this matter.

Other Matters

Although a number of other matters were raised by interveners, the Commission has decided that additional criteria addressing such matters are either not necessary or are inappropriate.

For example, a number of interveners suggested that a criterion be added regarding channel capacity and priority. The Commission notes, firstly, that these matters are more appropriately dealt with at the level of the distributor than by this exemption order. The Commission also notes that the cable industry's Access Commitment guarantees priority to licensed pay and specialty services for distribution on Class 1 cable systems. Moreover, it is the Commission's expectation, in all other cases, that the distribution of exempt video games services will not be at the expense of licensed Canadian services.

The Commission has also taken note of concerns raised in several comments that an exemption order approach offered little assurance that video games undertakings would operate in accordance with the specified criteria or that these criteria could be enforced effectively. Although the Commission considers that it has adequate enforcement tools available to it in the event of any complaints, it also notes that one video games service supplier, Sega, has indicated its willingness to file an annual public report to the Commission relating to the fulfilment of its commitments under the exemption order. It would be the intention of the Commission to include any such voluntarily filed reports in a public file.

The exemption order contained in the appendix to this notice 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 video games services of undertakings that meet the exemption criteria.

Allan J. Darling
Secretary General

Dissents

Chairman Keith Spicer, and Commissioners Garth Dawley and Edward A. Ross, dissented from this decision taken by the majority of the Commission. The written dissents of Commissioners Dawley and Ross are set out below.

Dissenting opinion of Commissioner Garth Dawley

Utilization of the Canadian broadcasting system to distribute video games programming services, such as that proposed by Sega, would be a frivolous misuse of the system. Allowing the operators of this type of undertaking to be exempted from licensing requirements would seriously impair the Commission's ability to maintain adequate control over such services.

Dissenting opinion of Commissioner Edward A. Ross

It is my view that the operators of undertakings providing video games programming services should not be exempted, but should be licensed. This would better enable the Commission to ensure adherence by Sega or others, not only to their commitments, but to regulations or any other conditions of licence and requirements the Commission might impose.

The onus, then, would be on the licensees of such undertakings, and not on the licensees of cable television undertakings distributing their services, to ensure that all such requirements are respected.

APPENDIX

EXEMPTION ORDER RESPECTING
VIDEO GAMES 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 made thereunder, those persons carrying on broadcasting undertakings of the class defined by the following criteria:

I.Purpose

The purpose of these programming undertakings is to provide the subscribers of cable distribution undertakings with programming consisting of software and related information distributed through the facilities of those distribution undertakings, to enable the subscribers to select and play video games using facilities located at their premises.

II. 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 that Department.

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

4. The undertaking provides a programming service consisting only of:

a) software and related information which will enable a person to select and play video grames using broadcasting receiving apparatus located at the subscriber's premises and

b) ancillary programming consisting of promotional information concerning only the programming service and video games offered by that video games supplier, except for such games that are rated or found to be unsuitable for the cable service, provided such programming is broadcast in conjunction with programming set out in a) above and not on a separate channel.

5. The undertaking's programming must originate in Canada and the undertaking must make the greatest practicable use of Canadian creative and other resources in the creation and presentation of programming.

6. The undertaking's programming complies with the Canadian Association of Broadcasters' Sex-Role Portrayal Code for Television and Radio Programming, Voluntary Code Regarding Violence in Television Programming and Broadcast Code for Advertising to Children, as amended from time to time and approved by the Commission.

7. The video games offered via the undertaking's programming service are categorized and information is provided to subscribers indicating, at a minimum, the suitability of individual games for use by children and adolescents.