ARCHIVED -  Decision CRTC 96-529

Decision

Ottawa, 27 August 1996

Decision CRTC 96-529

Star Choice Television Network Incorporated

Across Canada - 952895100

New, national, direct-to-home satellite distribution undertaking - Approved

Following a Public Hearing held in the National Capital Region commencing 8 July 1996, the Commission approves the application for a broadcasting licence to carry on a new, national direct-to-home (DTH) satellite dis-tribution undertaking. This approval is in accord-ance with the policy provisions set out in Public Notice CRTC 1995-217 dated 20 December 1995, as modified in Notice of Public Hearing CRTC 1996-6 dated 10 May 1996.

Public Notice CRTC 1995-217 had served as the introduction to the Commission's decisions on earlier applications for licences to carry on new DTH satellite distribution undertakings. In that notice, the Commission stated that, in order to permit the new DTH distribution undertakings licensed in Decisions CRTC 95-901 and 95-902 to establish themselves, both as competitors to cable and as strong Canadian alternatives to unauthorized direct broadcast satellite services entering the Canadian market, it would generally not be disposed to begin processing further applications for new Canadian DTH distribution services until six months after these first two services had commenced delivery of services to subscribers.

In Notice of Public Hearing CRTC 1996-6, the Commission noted that, due to unforeseen circumstances, including technical difficulties affecting Telesat Canada's Anik E1 satellite, it no longer appeared that the DTH distribution undertakings licensed in Decisions CRTC 95-901 and 95-902 would commence operations within the first six months of 1996. In light of these changed circumstances, the Commission determined to proceed with consideration of the current application.

The service herein authorized, to be known as Star Choice, will derive its revenues entirely from subscription fees, and will provide programming services exclusively to individual subscribers in all parts of Canada on a DTH basis.

The applicant proposed to distribute basic and discretionary programming services, including national broadcasting television network services, other English- and French-language television services, licensed specialty, multicultural television services, pay television and DTH pay-per-view (PPV) services, audio programming services, and authorized non-Canadian programming services.

The licensee has stated that it will distribute programming services in accordance with the government's Satellite Policy. The licensee's plans and options with respect to the satellite delivery of its service are examined in a later section of this decision.

The approval granted herein shall only be effective, and the licence shall only be issued, at such time as the undertaking is prepared to commence operations. The licence shall not be issued if this undertaking is not 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 implementation before the expiry of this period and that an extension is in the public interest, within such further periods of time as are approved in writing by the Commission. The licensee shall advise the Commission in writing once it is prepared to commence operations.

Subject to the foregoing, the Commission will issue a licence to carry on a national DTH satellite distribution undertaking, expiring 31 August 2002. This date coincides with the expiry date of the licences issued in December 1995 in respect of the two other national DTH satellite distribution undertakings. The licence will be subject to the conditions specified in the appendix to this decision and in the licence to be issued.

Ownership and Control of the undertaking

Star Choice Television Network Incorporated is a wholly-owned subsidiary of Direct Choice T.V. Inc., a public company Canadian owned and controlled, and incorporated in British Columbia. The applicant stated that Direct Choice T.V. Inc. is controlled by its Board of Directors, led by Mr. K. Richard Buckingham as the company's President, Chief Executive Officer and largest individual shareholder.

The Government's Satellite Policy

In a letter to the Commission dated 14 June 1995, the government clarified its policy concerning the use of satellite facilities. The policy, as clarified, permits Canadian broadcasting undertakings to use either Canadian or non-Canadian satellite facilities to carry foreign originated services that are intended primarily for foreign audiences and that are authorized by the Commission for distribution in Canada. The policy, however, stipulates that such undertakings "...should make use of Canadian satellite facilities to carry (i.e. receive and/or distribute to Canadians) all Canadian programming services..." In the case of emergencies leading to lack of availability of Canadian satellite capacity, the policy allows for Canadian broadcasting undertakings to use non-Canadian satellite facilities to distribute Canadian programming services on an interim basis, in certain circumstances.

Satellite Delivery Options

In its application and at the public hearing, Star Choice Television Network Incorporated committed to comply with all aspects of the Commission's policies governing DTH satellite distribution undertakings. However, the application by Star Choice Television Network Incorporated raises, as a significant issue, the question of whether satellite capacity will be available to the licensee for the distribution of licensed Canadian programming services and whether the licensee's use of such capacity would be in accordance with the requirements of the government's Satellite Policy. The licensee's original plan had been to deliver such services using Telesat Canada's Anik E1 satellite. These plans had to be set aside due to the partial failure of Anik E1 earlier this year, and the subsequent announcement by Telesat Canada that it would be unable to provide satellite transponders, on either Anik E1 or E2, to any DTH distribution undertaking.

In the December 1995 decisions issued concurrently with Public Notice CRTC 1995-217, the Commission had denied one application for a licence to carry on a DTH distribution undertaking because of the uncertainty then surrounding the status of that applicant's proposed U.S. partner, whose responsibility it would be to supply the satellite capacity for the U.S. component of the proposed service. Some of the interveners to the current application argued that the Star Choice proposal should also be denied due to the uncertainties regarding the satellite distribution of its Canadian programming component.

In a letter to the Commission, and again at the hearing, Star Choice Television Network Incorporated presented details regarding four specific options it had developed to ensure the satellite delivery of Canadian programming services, on an interim basis and in a manner that conforms to the government's Satellite Policy, until more permanent Canadian satellite capacity becomes available. In a letter to the applicant dated 4 July 1996, which was filed with the Commission as part of this proceeding, Telesat Canada confirmed that: "...there appears to be a number of feasible interim alternatives available to Star Choice prior to Telesat attaining a long term replacement solution for addressing the loss of capacity of Anik E1." In its letter, Telesat Canada expressed support for three of the four options then under investigation by the applicant, namely "...the sublease of Anik E2 capacity from existing customers, the procurement of Anik C1 for reuse in a Canadian orbital slot and the potential for interim use of a U.S domestic satellite [Hughes Communication's SBS 5]." The fourth option put forward by the applicant would entail uplinking the service's Canadian signals to the EchoStar II satellite until such time as longer term Canadian satellite capacity becomes available. It is expected that EchoStar II will be launched in the late summer or fall of 1996.

The licensee's preferred option, one involving Telesat Canada and Stentor Canadian Network Management (Stentor; the alliance of certain Canadian telephone companies), would allow the licensee to sub-lease transponder capacity on Anik E2 from Stentor. This plan would yield the equivalent of two national transponders, less the capacity used by an existing service. At the hearing, the applicant indicated that the transmission technology used by the existing service is compatible with the system chosen by Star Choice.

The signals of Canadian programming services that might be accommodated using this transponder capacity would be in addition to the authorized non-Canadian services to be supplied by EchoStar II.

The Commission notes the licensee's confirmation that either of the two options contemplating use of non-Canadian satellites, if employed, would be for an interim period only, until such time as
Canadian satellite capacity becomes available, and would be implemented in accordance with the government's Satellite Policy. The Commission is further satisfied that these options, either individually or in combination, present credible and practicable means to ensure the satellite delivery of Canadian programming in the face of the technical problems that have affected the operational capabilities of Telesat Canada's existing Anik satellites.

In particular, the Commission notes the licensee's statement that its preferred option noted above would enable it to implement the proposed service within four months of its application being approved, thereby providing a timely alternative to the expanding market in Canada for unauthorized non-Canadian satellite distribution services. The Commission also notes that additional capacity for Canadian programming services may become available to the licensee should existing Canadian services that convert from analog to digital services elect to share the resulting additional available channel capacity through the adoption of digital video compression technology that is compatible with that chosen for the distribution of the Star Choice service.

The Commission further notes the licensee's commitments to comply with the government's Satellite Policy and to obtain the Canadian distribution rights for the non-Canadian programming it intends to carry as part of its service.

DTH distribution regulatory framework

In Public Notice CRTC 1995-217, the Commission outlined the regulatory framework that will apply to all DTH satellite distribution undertakings. DTH satellite distribution undertakings represent a new class of undertak-ings for which, at present, there are no applicable regulations. As such, the licensee is required, by condition of licence, to adhere to sections 5, 6(1) and (2), 19 and Part IV of the Cable Television Regulations, 1986 respecting transfers of control and ownership, annual returns, the alteration and curtailment of programming services, and the mediation and resolution of disputes.

Authorized programming services

The licensee is authorized, by condition of licence, to distribute the signals of the programming services listed in the appendix to this deci-sion, in accordance with the terms set out therein.

Access requirements

The licensee is required to distribute, at its own cost, all licensed English- and French-language specialty and pay television program-ming services, subject to available satellite capacity. In addition, the licensee is required to distribute, at its own cost, at least one Eng-lish- and one French-language gen-eral interest DTH PPV television program-ming service, again subject to available satellite capacity.

Should the licensee elect to distribute a pay audio service in which it or another distribution undertaking has an ownership interest exceeding 30%, it must also distrib-ute at least one other pay audio service whose ownership is independent of any distribution undertaking, with the terms of the discre-tionary carriage to be agreed upon by the DTH operator and the originator of the programming service. In order to qualify for such access, it would be the responsibility of the pay audio service to pay the satellite uplink and transmission costs associated with the distribution of the signal.

Distribution and linkage requirements

Consistent with Public Notice CRTC 1995-217, the Commission has required, by condition of licence, that a preponderance of Canadian programming services be received by a subscriber. In other licence conditions set out in the appendix to this decision, the Commission has required that the licensee adhere to specified linkage and distribution rules. The licensee is also required, by condition of licence, to adhere to the specified rules governing program substitution and deletion, and to offer a basic service that includes the CBC French- and English-language television network services, as well as a CTV television network signal.

Production fund

As stated in Public Notice CRTC 1995-217, the Commission has decided to require the licensees of all DTH distribution undertakings and all DTH pay-per-view television programming undertakings to make contributions representing no less than 5% of their gross annual revenues to fund Canadian program production. In its application, Star Choice Television Network Incorporated stated that it would adhere to such a commitment. Accordingly, by condition of licence, the licensee is required to contribute a minimum of 5% of the gross annual revenues earned by the broadcasting activities of its DTH distribu-tion undertaking to an existing, independently- admi-nistered, Canadian program production fund.

As part of this condition, the licensee is required to report to the Commission, prior to commencing operations, identify-ing the name of the existing fund to which it will make its contribu-tions. The licensee is further required to remit its contributions in the form of monthly instalments, the first to be made within 45 days of the end of the month in which it commences operation and, thereafter, within 45 days of each month's end, and representing a minimum of 5% of that month's gross revenues.

Employment equity

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.

Closed captioning

The licensee should provide, as a minimum, at the output of each set-top decoder, a National Television Systems Committee (NTSC) television signal complete with its associated standard monaural audio. It should also distribute any closed captioning signals that were present with the programming service when it was received by the under-taking at the input to its system. The Commission expects the licensee to acquire and publicize the avail-ability of a telecommunication device for the deaf (TDD).

Other Matters

In its application, Star Choice Television Network Incorporated emphasized that the viability of its proposed service will rely heavily on the use of operating software that is secure from unauthorized interception. It advised the Commission that while it will use a decoding and authorization system compatible with that used by EchoStar, the equipment purchased by Canadian subscribers to the Star Choice service will only allow access to signals distributed and authorized by the Star Choice service. EchoStar's U.S. authorization centre will not have the capability to authorize any Canadian signals for reception by the Canadian subscribers of Star Choice through the application of a unique conditional access card that will be supplied by the licensee to its Canadian subscribers. Subscribers will only be able to receive those non-Canadian signals that the licensee has been permitted by the Commission to distribute. The licensee also stated that its contractual arrangements with EchoStar will ensure that EchoStar's U.S. telephone number for authorization is not accessible from Canada. The Commission fully supports the licensee's initiatives to safeguard authorized distributors and programmers against the unlawful reception of unauthorized DTH services.

The Commission notes the licensee's plans to transmit an on-screen electronic programming guide that would list its services in both the French and English languages. The licensee indicated that, subject to negotiations with the provider of a French-language DTH PPV service, it would offer either a bilingual PPV barker channel or a separate French-language PPV barker channel. The licensee also proposed to make its barker channel available to community groups throughout Canada for the distribution, during prime time and without charge, of one hour per day of videotaped programming. The licensee confirmed that only programming produced by community groups will be distributed under this proposal, and that the programming will be selected by an independent panel of individuals representing all regions of Canada.

The Commission notes the licensee's further statement at the hearing that it plans to distribute the English-language audio programming service produced by The National Broadcast Reading Service Incorporated (Voice/Print) as a supplementary audio service. The licensee also indicated at the hearing that the set-top boxes to be utilized by subscribers will be equipped so as to accept the installation of V-chip equipment, at the individual subscriber's expense, thus permitting the subscriber to block out violence in programming in accordance with a pre-set rating code.

The Commission encourages the licensee to proceed with implementation of each of the proposals noted above.

The Commission acknowledges, and has considered, the interventions and comments submitted in respect of this application.

Allan J. Darling
Secretary General

 APPENDIX TO DECISION CRTC 96-529 / ANNEXE À LA DÉCISION CRTC 96-529

Conditions of Licence

1.  The licensee shall adhere to the provisions contained in sections 5, 6(1) and (2) and 19, and in Part IV of the Cable Television Regula-tions, 1986 (the cable regula-tions).

2.  a) Unless otherwise authorized by the Commission, and subject to the following, the licen-see is authorized to distrib-ute the signal of any licensed television program-ming undertaking. The licen-see is authorized to distrib-ute such a service unless the licensee of that service objects in writ-ing to its carriage, both to the Commis-sion and to the distribution undertaking, within 90 days of the date of this decision. The licensee is also authorized to distribute the services of all other licensed or exempt programming undertakings (other than a pay television programming under-taking that provides a pay-per-view service). The licensee is also authorized to distribute an Electronic Program Guide, a PPV market-ing channel, and a marketing channel for its service.

b)  Unless otherwise authorized by the Commission, the licen-see is authorized to distrib-ute the following non-Cana-dian programming services:

 WJLA-TV Washington/KUSA-TV Denver (ABC)*
 WRAL-TV Raleigh/KMGH-TV Denver (CBS)*
 WNBC New York/KCNC-TV Denver (NBC)*
 KDVR-TV Denver (FOX)
 KRMA-TV Denver (PBS)
 The Nashville Network (TNN)
 The Arts and Entertainment Network (A&E)
 Cable News Network (CNN)
 The Weather Channel (TWC)
 CNN Headline News (CNN-2)
 The Silent Network (Kaleidoscope)
 The Learning Channel
 CNBC/FNN**
 Cable Satellite Public Affairs Network (C-Span)
 WGN-TV Chicago
 WWOR-TV New York City
 WTBS Atlanta
 WPIX New York City
 WSBK-TV Boston
 KTLA Los Angeles
 Black Entertainment Television (BET)
 Lifetime Television
 Comedy Central

*  In the case of ABC, CBS and NBC, subscribers may receive only one of each.

**  Pursuant to CRTC Circular Letter No. 377, dated 5 June 1991, the licensee is authorized to distribute only the 6:00 a.m. to 7:00 p.m. (ET) Monday to Friday programming component of CNBC/FNN.

3.  The licensee shall offer a basic service that includes at least one of each of the CBC English- and French-language television network affiliates or member stations and at least one affiliate of the CTV English-language television network service. Every subscriber must  subscribe to the basic service to receive any discretionary services, except the DTH pay-per-view services.

4.  a) For the purpose of this condition, the term "identical" shall have the same meaning as that set out in section 2 of the cable regulations.

b)  Where the licensee receives, at least seven days before the date on which the programming service is broadcast, a written request for substitution or deletion from the operator of a licensed Canadian television programming undertaking, the licensee shall

i)  delete a non-Canadian television programming service and substitute the identical programming service of the Canadian television programming undertaking whose signal is also distributed by the licensee, and

ii)  delete a programming service that is identical to that of the Canadian television programming undertaking and that is receivable by subscribers located within the grade B contour of the Canadian television programming undertaking.

c)  The licensee may discontinue a deletion and/or substitution made pursuant to paragraph b) where the licensee verifies that the pro-gramming service in respect of which the deletion or substitution is made is not, or is no longer, identical.

5.  a) For the purposes of this condition, "identical", in respect of two or more programming services, means that not less than 95 per cent of the video and audio components of those programming services, exclusive of commercial messages and any part of the services carried on a subsidiary signal, are the same and are broadcast on a non-simultaneous basis within the same broadcast week; "broadcast week" shall mean a period of seven consecutive days beginning on Sunday; "commercial message" shall have the same meaning as that set out in section 2 of the cable regulations.

b)  Where the licensee receives, at least seven days before the date on which the programming service is broadcast, a written request for deletion from the operator of a licensed Canadian television programming undertaking, the licensee shall delete a programming service that is identical to that of the Canadian television programming undertaking and that is receivable by subscribers located within the grade B contour of the Canadian television programming undertaking.

c)  The licensee may discontinue a deletion made pursuant to paragraph b) where the licensee verifies that the pro-gramming ser-vice in respect of which the deletion is made is not, or is no longer, identical.

6.  The licensee shall ensure that no subscriber receives a total number of programming services that contains less than a pre-ponderance of Canadian programming services.

For  the purpose of this condi-tion, multiplex programming channels, repeat channels and non-programming channels will be disregarded and each licensed DTH PPV service dis-tributed will be counted as a single channel.

7.  The non-Canadian programming services listed below may only be offered in a discretionary package with Canadian pay tele-vision and/or Canadian specialty services, and are subject to the following linkage requirements:

a)  Each Canadian pay television service (excluding a Canadian DTH PPV television service) may be linked in a single discretionary package with no more than five channels of the following authorized non-Canadian programming services:

 The Nashville Network (TNN)
 The Arts and Entertainment Network (A&E)
 Cable News Network (CNN)
 The Weather Channel (TWC)
 CNN Headline News (CNN-2)
 The Silent Network (Kaleidoscope)
 The Learning Channel
 CNBC/FNN
 Cable Satellite Public Affairs Network (C-Span)

 WGN-TV Chicago*
 WWOR-TV New York City*
 WTBS Atlanta*
 WPIX New York City*
 WSBK-TV Boston*
 KTLA Los Angeles*
 Black Entertainment Television (BET)
 Lifetime Television
 Comedy Central

 *U.S. Superstations/
 *Superstations américaines

In no case,  however, can a single discretionary package, whose Canadian component includes more than one pay television ser-vice, contain more than five channels of non-Canadian pro-gramming services, linked with those Canadian pay television services.

b)  Each Canadian specialty ser-vice, distributed within a discretionary package that may include one or more Cana-dian specialty and/or pay television services, may be linked with no more than one channel of the following authorized non-Canadian pro-gramming services:

 The Nashville Network (TNN)
 The Arts and Entertainment Network (A&E)
 Cable News Network (CNN)
 The Weather Channel (TWC)
 CNN Headline News (CNN-2)
 The Silent Network (Kaleidoscope)
 The Learning Channel
 CNBC/FNN
 Cable Satellite Public Affairs Network (C-Span)

c)  The licensee may designate one of the U.S. superstations authorized in paragraph a) above and distribute the signal of that superstation within a discretionary package that may include one or more Canadian specialty and/or pay television service.

d)  The licensee is not permitted to offer a package of ser-vices containing only non-Canadian programming services.

e)  The licensee is not permitted to link authorized non-Canadian programming services with a Canadian specialty service distributed on the basic service.

8.  The licensee shall act in accordance with sections 13, 14 and 15 of the cable regulations when it distributes community programming on its barker channel.

" Community programming" shall have the same meaning as that set out in section 2 of the cable regulations.

9.  The licensee shall, in each year (i.e. the period from 1 September to the following 31 August), contribute to an existing, independently-administered, Cana-dian program production fund an amount equal to or greater than 5% of the annual gross revenues earned by its broadcasting activities. The licensee is also required to report to the Com-mission, prior to commencing operations, identifying the name of the existing fund to which it will make its contributions. The licensee shall remit its contri-butions in the form of monthly instalments, representing a minimum of 5% of each month's gross revenues, payable within 45 days of the end of the month in question. The first installment shall be due within 45 days of the end of the month in which the licensee commences operations.

10.  The licensee is prohibited from distributing any pay-per-view service other than that of a licensed DTH PPV television programming undertaking.

11.  The licensee must distribute at least one French-language DTH PPV service where it distributes one or more English-language DTH PPV services.

12.  The licensee, if it elects to distribute a pay audio service in which it or another distribution undertaking has 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 the discretionary carriage to be agreed upon by the licensee and the originator of the programming service.