ARCHIVED -  Decision CRTC 96-606

Decision

Ottawa, 4 September 1996

Decision CRTC 96-606

1163031 Ontario Inc.

Across Canada - 199600875

Outdoor Life - Approved

Following a Public Hearing held in the National Capital Region beginning on 6 May 1996, the Commission approves, by majority vote, the application by 1163031 Ontario Inc. (the applicant), for a broadcasting licence to carry on a national English-language programming undertaking (Specialty Television Service) to be known as Outdoor Life.

This service will be available via satellite to all broadcasting distribution undertakings across the country. In the case of those distribution undertakings that are subject to the Commission's distribution and linkage requirements, it will be available on a modified dual status basis, as explained in Public Notice CRTC 1996-120, which introduces this and other decisions released today, and in accordance with the provisions set out in the distribution and linkage public notice also issued today (Public Notice CRTC 1996-121). As proposed by the applicant, and by condition of licence, the authorized maximum monthly wholesale rate shall be $0.10 per subscriber, in cases where Outdoor Life is distributed as part of the basic service.

Ownership

As part of its application, the applicant submitted a three-phased plan outlining its intentions with respect to its ownership structure. Under phase II of the applicant's proposed ownership structure, which is the ownership structure as applied for, Outdoor Life is wholly owned by 1163031 Ontario Inc., a holding company which, in turn, is held by three shareholders: 1155638 Ontario Inc. (36.77%), Rogers Programming Services Inc. (Rogers) (29.9%), and Outdoor Life Network, L.L.C. (U.S.) (33.3%).

1155638 Ontario Inc. is jointly owned by Baton Broadcasting Incorporated (Baton) and Ralph C. Ellis Limited (Ellis). Baton, which is indirectly controlled by members of the Eaton family, is one of Canada's largest operators of private television stations. BBS Productions Inc., a Baton affiliate, is a producer of internationally distributed television programming.

Ellis was founded by Mr. Ralph C. Ellis who also established Keg Productions Limited (Keg). These companies are among the leading program production and distribution companies in Canada. Keg is Canada's largest producer of wildlife entertainment programming.

The Outdoor Life Network, L.L.C. (U.S.) is a U.S. programming service devoted to outdoor recreation, conservation, wilderness and adventure programming. Given the magnitude of the interest of Outdoor Life Network, L.L.C. (U.S.) in the holding company, the Commission
considers that the ownership structure discussed above complies with the Direction to the CRTC (Ineligibility of Non-Canadians), Order-in-Council P.C. 1996-479 dated 11 April 1996.

Under the third and final phase of the applicant's plan, each of the three shareholders would hold an equal 33.33% voting interest. In response to questioning at the oral phase of the public hearing regarding the various proposed ownership structures, the applicant acknowledged that, should its present application be approved, this should not be construed as the Commission having authorized the proposed changes in Outdoor Life's ownership structure, as outlined in phase III of the ownership plan. The Commission notes that, pursuant to section 10 of the Specialty Services Regulations, 1990, a separate application, requesting Commission approval, will be required prior to the implementation of phase III.

The Commission has concerns whenever a cable company participates in the ownership of a specialty service, as reflected in the Convergence Report of 19 May 1995. As one of Outdoor Life's shareholders is Rogers, an indirect subsidiary of Rogers Communications Inc., Canada's largest cable operator, the issue of preferential treatment or access is of concern. In this regard, the Commission notes that Rogers made a commitment that:

it will not give access to the programming services in which it has an ownership interest on preferential terms and conditions or disadvantage those programming services in which it does not have an ownership interest.

Consequently, the Commission expects that Outdoor Life will not be given preferential treatment or access to distribution systems by any distributor that holds an ownership interest in the licensee company.

With its application, the applicant included a "Term Sheet", which set out certain terms, conditions, rights and obligations governing its ownership structure. The applicant indicated that this "Term Sheet" would be reflected in a unanimous shareholders' agreement. As discussed at the hearing, the Commission will not issue a licence until the applicant has executed and filed with the Commission a unanimous shareholders' agreement that is acceptable to the Commission.

Once the above requirement has been satisfied by the applicant, the Commission will issue a licence, expiring 31 August 2003, subject to the conditions specified in the appendix to this decision and in the licence to be issued.

In Public Notice CRTC 1996-120, the Commission outlined a licensing approach that grouped English-language services into two categories. The Access Rules will apply to the second group of services, to which Outdoor Life belongs, at the earliest of the following: the deployment of digital technology by the distributor, or 1 September 1999. The service of this programming undertaking must, by condition of licence, be in operation within 36 months of the date of this decision unless the service provider, prior to the expiry of this period, applies for and receives an extension of time within which to commence operations.

Programming

Nature of Service

The applicant will offer a 24-hour-a-day specialty television service targeted primarily towards adults aged 18 to 49 years. The programs will deal exclusively with outdoor recreation, conservation, wilderness and adventure. The schedule will revolve around eight key themes such as: 1) outdoor exploration and adventure; 2) marine recreation; 3) winter recreation; 4) conservation; 5) nature enthusiasts; 6) anglers; 7) outdoor cooking and 8) hunting.

As described by the applicant at the hearing, and as set out as a condition of licence in the appendix to this decision, all of the programs broadcast by Outdoor Life will be drawn from the following program categories as defined in the Specialty Services Regulations, 1990: 2 (Analysis and interpretation); 5(b) (Informal education); 6(b) (Amateur sports); 11 (Human interest) and 12 (Filler programming).

When questioned at the hearing regarding the filler programming to be broadcast on Outdoor Life, the applicant explained that this programming will never be longer than 15 minutes, will not be part of the regular schedule, nor will it be listed in the program schedule. In addition to acquiring filler programming, the applicant intends to produce some of this programming itself.

Canadian Content

Throughout the licence term, at least 30% of the programs broadcast on Outdoor Life over the broadcast day will be Canadian. At least 30% of the programs broadcast during the evening broadcast period will be Canadian. The applicant is required, by condition of licence, to adhere to these levels of Canadian programs.

Canadian Programming Expenditures

Consistent with the approach set out in Public Notice CRTC 1996-120 and as discussed with the applicant at the hearing, by condition of licence, it shall, in the broadcast year following its first year of operation and in each subsequent broadcast year, devote to expenditures on Canadian programs at least 37% of the previous year's gross revenues derived from the operation of the service. Some flexibility in the accounting of these expenditures is provided for in the condition of licence on Canadian programming expenditures attached to this decision.

Independent Program Production

In recognition of the involvement of Baton and Ellis in program production and distribution, the applicant stated that:

the parties are committed to the principle that all Canadian independent program producers and distributors will receive fair and equitable treatment from the Outdoor Life programming service.

The applicant indicated that 60% of its new, independent Canadian production would come from arm's length sources. At the hearing, the applicant agreed that producers with an ownership interest in this service would obviously not be considered as an arm's length independent production source. Further, the applicant stated that persons involved in this application, in any way, would not be entitled to any development money ear-marked for this service. As agreed at the hearing, the applicant is required to adhere to these commitments by condition of licence.

The applicant also plans to acquire some programming in volume deals. The licensee indicated that a volume deal would typically involve 65 episodes of a series, or approximately 30 hours of programming. The Commission expects the applicant to adhere to its commitment not to contract volume deals with program production or distribution companies that are affiliated with companies which exercise a controlling interest in Outdoor Life, including Ellis and Keg.

Advertising

Consistent with the applicant's commitments, it is a condition of licence that all paid advertising material distributed on Outdoor Life shall be national advertising, and shall be restricted to a maximum of eight minutes per hour, with some flexibility for the placement of advertising material in longer programs.

Other Matters

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 its application, the applicant indicated that it was in the process of developing a policy in this regard. The Commission expects the applicant to complete and implement an employment equity policy by the time the service begins operation. The Commission encourages the applicant to consider equity issues in its hiring practices and in all other aspects of its management of human resources. In particular, the Commission encourages Outdoor Life to promote equitable representation in on-air staff positions and in voice-overs of station-produced commercial messages. The Commission will review the applicant's performance in implementing its employment equity practices at the time of licence renewal.

Closed Captioning

In accordance with the policy announced in Public Notice CRTC 1996-120, the Commission requires the applicant to close caption not less than 90% of all programming over the broadcast day by the end of the licence term.

Conclusion

In approving this application, the Commision is satisfied that Outdoor Life will contribute to the overall diversity of Canadian programming services available to viewers across the country. The Commission is of the view that Outdoor Life will attract many Canadians who do not find their interests and lifestyle reflected in the programming currently offered on television.

The Commission acknowledges and has considered the interventions submitted with respect to this application.

This decision is to be appended to the licence.

Allan J. Darling
Secretary General

APPENDIX/ANNEXE

Conditions of licence for Outdoor Life

1. The licensee shall provide a national English-language specialty service devoted exclusively to programs that deal with outdoor recreation, conservation, wilderness and adventure and shall draw its programs exclusively from the following categories: 2 (Analysis and interpretation); 5(b) (Informal education); 6(b) (Amateur sports); 11 (Human interest); and 12 (Filler programming), as set out in item 6 of Schedule I of the Specialty Services Regulations, 1990.

2. The licensee shall devote to the distribution of Canadian programs not less than 30% of the broadcast day, and not less than 30% of the evening broadcast period.

3. In accordance with the Commission's position on Canadian programming expenditures as set out in Public Notices CRTC 1992-28, 1993-93 and 1993-174:

(a) In the broadcast year following the first year of operation, and in each subsequent broadcast year, the licensee shall expend on Canadian programs not less than 37% of the previous broadcast year's gross revenues derived from the operation of this service.

(b) In the broadcast year following the first year of operation, and in each subsequent broadcast year, excluding the final year, the licensee may expend an amount on Canadian programs that is up to five percent (5%) less than the minimum required expenditure for that year calculated in accordance with this condition; in such case, the licensee shall expend in the next broadcast year of the licence term, in addition to the minimum required expenditure for that year, the full amount of the previous year's underexpenditure.

(c) In the broadcast year following the first year of operation, and in each subsequent broadcast year, where the licensee expends an amount on Canadian programs that is greater than the minimum required expenditure for that year calculated in accordance with this condition, the licensee may deduct:

(i) from the minimum required expenditure for the next broadcast year of the licence term, an amount not exceeding the amount of the previous broadcast year's overexpenditure; and

(ii) from the minimum required expenditure for any subsequent broadcast year of the licence term, an amount not exceeding the difference between the overexpenditure and any amount deducted under (i) above.

(d) Notwithstanding the above, during the licence term, the licensee shall expend on Canadian programs, at a minimum, the total of the minimum required expenditures calculated in accordance with the licensee's condition of licence.

4. (a) Subject to subsection (b) and (d), the licensee shall not distribute more than eight (8) minutes of advertising material during each clock hour.

(b) In addition to the eight minutes of advertising material referred to in subsection (a), the licensee may distribute during each clock hour, a maximum of 30 seconds of additional advertising material that consists of unpaid public service announcements.

(c) The licensee shall not distribute any paid advertising material other than national paid advertising.

(d) Where a program occupies time in two or more consecutive clock hours, the licensee may exceed the maximum number of minutes of advertising material allowed in those clock hours if the average number of minutes of advertising material in the clock hours occupied by the program does not exceed the maximum number of minutes that would otherwise be allowed per clock hour.

5. From the date of commencement of service, the licensee shall charge each exhibitor of this service a maximum wholesale rate of $0.10 per subscriber per month, where the service is carried as part of the basic service.

6. The licensee shall not remit any program development funds to its shareholders or affiliated corporations.

7. The licensee may require access to distribution undertakings in accordance with the Access Rules contained in Public Notice CRTC 1996-60 at the earliest of the following:

(a) at such time as the distribution undertaking makes use of digital technology for the delivery of programming to subscribers; or

(b) 1 September 1999.

8. This undertaking shall be in operation within thirty-six (36) 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 period of time as is approved in writing by the Commission.

9. The licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) "Sex-Role Portrayal Code for Television and Radio Programming", as amended from time to time and approved by the Commission.

10. The licensee shall adhere to the provisions of the CAB's "Broadcast Code for Advertising to Children", as amended from time to time and approved by the Commission.

11. The licensee shall adhere to 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.

12. No licence will be issued until a signed and executed unanimous shareholders' agreement has been submitted to, and approved by the Commission.

For the purpose of these conditions of licence, the terms "broadcast day", "broadcast year", "evening broadcast period" and "clock hour" shall have the same meaning as those set out in the Television Broadcasting Regulations, 1987; "first year of operation" shall mean the first broadcast year in which the licensee is in operation for a period exceeding 90 days, excluding any free trial period; and "national paid advertising" shall mean advertising material as defined in the Specialty Services Regulations, 1990 and that is purchased at a national rate and receives national distribution on the service.

Dissent of Commissioner Andrée Wylie

Commissioner Andrée Wylie dissents from this and from all of the other decisions issued today in respect of applications for licences to carry on new English-language specialty television programming undertakings whose services fall within the second category, namely those to whom the Access Rules will apply at the earliest of the following: the deployment of digital technology by the distributor, or 1 September 1999. The rationale underlying the Commissioner's dissent is presented at the conclusion of Public Notice CRTC 1996-120.