ARCHIVED -  Public Notice CRTC 1996-149

Public Notice

Ottawa, 22 November 1996

Public Notice CRTC 1996-149

Proposed New Broadcasting Licence Fee Regulations

Section 11 of the Broadcasting Act (the Act) empowers the Commission to make regulations respecting licence fees. Under subsection 11(1) the Commission may make regulations:

·  establishing schedules of fees to be paid by licensees of any class;

·  providing for the establishment of classes of licensees;

·  providing for the payment of any fees payable by a licensee, including the time and manner of payment; and

·  respecting the interest payable by a licensee in respect of any overdue fee.

Furthermore, under the authority of subsection 11(2) of the Act, the Commission may make regulations for fees to be calculated by reference to any criteria that the Commission deems appropriate.

The Commission proposes to make new licence fee regulations pursuant to Section 11 of the Act. A copy of the proposed regulations is appended to this public notice (Broadcasting Licence Fee Regulations, 1997). The proposed regulations would replace the existing Broadcasting Licence Fee Regulations [C.R.C., c.373.] effective 1 April 1997.

The existing regulations require that the licensee of each broadcasting undertaking pay to the Commission an annual licence fee based on the revenue earned by that undertaking during the return year or portion of the return year. The minimum licence fee currently payable is $25. In the case of any undertaking whose revenues exceed the specified limits, the licensee is required to pay $25 plus 1.8% of the amount by which revenues exceed exemption amounts. Each licensee is currently required to file with the Commission, on or before 30 November in each year (three months following completion of the return year on 31 August), a licence fee return in respect of each broadcasting undertaking that it carries on, along with the applicable licence fee amount.

By contrast, the proposed regulations would eliminate the $25 basic licence fee, and require that only those undertakings with revenues in excess of specified exemption levels file a licence fee return and pay the applicable licence fee amount. The calculation of the licence fees would be based on gross fee revenue amounts, less the applicable exemption levels. Furthermore, the proposed regulations would expand the classes of undertakings exempt from the requirements of these regulations, to include native, community and educational broadcasting undertakings. The Commission considers that this streamlining initiative would reduce the regulatory burden placed on small undertakings, since it is estimated that in excess of 2,000 broadcasting undertakings that currently pay the basic $25 fee would no longer be required to file an annual licence fee return or pay licence fees.

Effective 1 April 1996, Treasury Board granted the Commission vote-netting authority for the broadcasting activity. Vote-netting is a means of funding selected government programs or activities whereby Parliament authorizes a department or agency to apply revenues towards costs directly incurred for specific activities. Funding, in the form of licence fee revenues, will now be required by 1 April of each year in order to finance the Commission's operating expenditures related to the regulation of the broadcasting industry. Under the provisions of the current regulations, licence fees are due and payable on or before 30 November of each year.

To provide the Commission with the funding it requires on 1 April, the proposed regulations would establish a revised fee structure. Under this structure, each licensee subject to the regulations would pay to the Commission each year, a Part I licence fee payable 30 days following the date of invoice. The Commission intends to mail invoices on or about 2 March of each year in order to make these come due on 1 April, which is the beginning of the eighth month of the return year. A Part II licence fee would be payable on or before 30 November, three months following completion of the return year. Both of these fees would be collected by the Commission from only those licensees whose fee revenues exceed the established licence fee exemption levels. The Commission estimates that there are approximately 745 broadcasting undertakings whose fee revenues currently exceed these levels. Under the proposed regulations, revenue exemption levels by undertaking type would be equivalent to the levels allowed under the current regulations.

In cases where a licensee has not filed a previous licence fee return or has not filed a licence fee return for the most recently completed return year, the proposed regulations would provide authority for the Commission to estimate an undertaking's fee revenue. This estimate would be based on industry trends and the previous financial performance of the licensee.

The intent of the revised fee structure is to create a system that, in relation to the existing fee structure, would result in approximately the same amount of fees payable on an industry-wide basis, over a period of three years. Furthermore, assuming that its funding base remains stable, the Commission projects that the licence fees payable by each undertaking would approximate the amount that would be assessed under the current system.

The Part I licence fee would be calculated and invoiced by the Commission by first dividing a licensee's fee revenue from the most recently completed return year (less the exemption level relevant to the licensee) by the aggregate fee revenues from the most recently completed return year of all licensees whose fee revenues exceed the applicable exemption levels (less the aggregate exemption level for all such licensees). The resulting figure would then be multiplied by the total broadcasting regulatory cost to be recovered by the Commission in respect of its fiscal year. Costs to be recovered by the Commission through the Part I licence fee would be those broadcasting-related items set out in the Commission's Expenditure Plan published in The Estimates of the Government of Canada, excluding the costs of regulating the broadcast spectrum.

For 1997, it is the Commission's intention to issue invoices for Part I licence fees in early March. These fees would be due and payable 30 days after billing, or 1 April, which ever date is later. For the purposes of industry cash forecasting, the Commission estimates that this fee component would equal approximately 25% of the total annual licence fee payable by each undertaking.

The new regulations would also permit the Commission to adjust the Part I licence fees to take into account the Commission's actual expenditures on broadcasting activities during the fiscal year. Although the Commission would not be able to disburse monies in order to make refunds, any excess fees would be credited to the undertakings as part of subsequent billings, while shortfalls would be subject to an additional billing.

The Part II licence fee would consist of an annual fee, based on the fee revenue of a licensed undertaking for the most recently completed broadcasting year. It would be calculated and payable on or before 30 November by every licensee whose fee revenues exceed established exemption levels, using a licence fee return form provided by the Commission. This fee, which includes the costs of regulating the broadcasting spectrum, would be calculated by multiplying an undertaking's fee revenue (less the applicable exemption level) by a set percentage of 1.365%. This method is similar to the current method of licence fee calculation, except that the proposed percentage is lower than the existing 1.8%.

Other changes in the proposed regulations pertain to the use of terminology that is consistent with the Act, elimination of prescribed Licence Fee Returns that are currently incorporated as a schedule to the regulations, and inclusion of a specific reference to the assessment of interest and administrative charges on overdue accounts in accordance with the government's Interest and Administrative Charges Regulations.

Interested parties wishing to comment on the proposed regulations must send their submissions to the Secretary General, CRTC, Ottawa, Ontario, K1A 0N2, by Monday, 6 January 1997. Any submissions to be considered as part of the proceeding must be actually received by the Commission and not merely mailed by that date. While receipt of submissions will not be acknowledged, they will be considered by the Commission and will form part of the public record of the proceeding.

Allan J. Darling
Secretary General

BROADCASTING LICENCE FEE REGULATIONS, 1997

INTERPRETATION

1. The definitions in this section apply in these Regulations.

" associated corporation" has the meaning assigned to that expression in section 256 of the Income Tax Act. (société associée)

" exemption level" means

(a) for a distribution undertaking, $175,000;

(b) for a television undertaking, $1.5 million; and

(c) for a radio undertaking,

(i) subject to subparagraph (ii),

(A) where the fee revenue of the undertaking is $2 million or less, $2 million, and

(B) where the fee revenue of the undertaking is greater than $2 million, $500,000, and

(ii) in the case of a joint radio operation,

(A) where the combined fee revenue of the radio undertakings is $4 million or less, $4 million, and

(B) where the combined fee revenue of the radio undertakings is greater than $4 million, $500,000. (franchise)

"fee revenue", in respect of a licensee of a broadcasting undertaking, means the gross revenue derived during a return year from the licensed activity of the licensee, whether received by the licensee or by an associated corporation, and, without limiting the generality of the foregoing, includes

(a) any revenue received in respect of all transmitters forming part of the undertaking, where the broadcasting undertaking consists of more than one transmitter;

(b) the estimated revenue, based on industry trends and the previous financial performance of the licensee, where a licensee has not filed a previous licence fee return or has not filed a licence fee return for the most recently completed return year; and

(c) revenue that is derived from the sale of air-time of the broadcasting undertaking by the Corporation and paid by the Corporation to the licensee.

This definition does not include any amount received for the sale of air-time by the licensee from another licensee, other than the Corporation. (recettes désignées)

"fiscal year" means the one-year period beginning April 1, in any year. (exercice)

"joint radio operation" means an AM and an FM radio undertaking operated by the same licensee, or by a licensee and an associated corporation, where any part of the FM 3 mV/m contour overlaps any part of the AM daytime 15 mV/m contour. (entreprise de radio conjointe)

"licensee" means a person licensed to carry on a broadcasting undertaking. (titulaire)

"Part I licence fee" means the licence fee set out in Part I. (droits de licence de la partie I)

"Part II licence fee" means the licence fee set out in Part II. (droits de licence de la partie II)

"radio undertaking" includes an undertaking licensed by the Commission as a (Radio) Programming Undertaking, a (Pay-Audio) Programming Undertaking or a (Radio) Network. (entreprise de radio)

"return year" means the one-year period beginning September 1, in any year. (année de rapport)

"television undertaking" includes an undertaking licensed by the Commission as a (Television) Programming Undertaking, a (Pay-TV) Programming Undertaking, a (Satellite-to-Cable) Programming Undertaking, a (Specialty) Programming Undertaking, a (Direct-to-home pay-per-view) Programming Undertaking, a (Video-on-demand) Programming Undertaking or a (Television) Network. (entreprise de télévision)

APPLICATION

2. These Regulations apply to all licensees other than

(a)  a radio undertaking or a television undertaking licensed by the Commission as a student broadcasting undertaking, a native broadcasting undertaking, a community broadcasting undertaking or an educational broadcasting undertaking; and

(b)  broadcasting undertakings carried on by the Corporation.

fees

3. Every licensee shall pay annually to the Commission

(a)  a Part I licence fee, payable 30 days after the date of the invoice from the Commission, and

(b)  a Part II licence fee, payable on or before November 30 in each year.

4. Where a fee referred to in section 3 has become due but remains unpaid, the licensee shall pay interest and administrative charges in accordance with the Interest and Administrative Charges Regulations.

LICENCE FEE RETURNS

5. On or before November 30 in each year, every licensee whose fee revenue for the most recently completed return year exceeds the exemption level shall file with the Commission a licence fee return, on the form provided by the Commission, with respect to each broadcasting undertaking that is carried on by the licensee.

6. A licence fee return filed pursuant to section 5 shall contain the information required in the form referred to in that section for the one-year period commencing September 1st of the year preceding the calendar year in which the return is required to be filed.

PART I

PART I LICENCE FEE

7. The components of a Part I licence fee shall consist of

(a)  an initial amount calculated in accordance with subsection 8(1); and

(b)  an annual adjustment amount calculated in accordance with subsection 8(2).

8. (1) The initial amount shall be calculated by the Commission using the formula

(A / B) x C

where

A  is the licensee's fee revenues for the most recently completed return year, less that licensee's exemption level for that return year;

B  is the aggregate fee revenues for the most recently completed return year of all licensees whose fee revenues exceed the applicable exemption levels, less the aggregate exemption level for all those licensees for that return year; and

C  is the estimated total regulatory costs of the Commission for the current fiscal year as calculated in accordance with section 9.

(2) The annual adjustment amount shall be calculated by the Commission using the following formula

(A / B) x D

where

A  is the licensee's fee revenues for the most recently completed return year, less that licensee's exemption level for that return year;

B  is the aggregate fee revenues for the most recently completed return year of all licensees whose fee revenues exceed the applicable exemption levels, less the aggregate exemption level for all those licensees for that year; and

D  is the difference between the estimated total regulatory costs and the actual total regulatory costs of the Commission for the fiscal year as calculated in accordance with section 9.

(3) The annual adjustment amount referred to in subsection (2) shall be charged or credited to the licensee in the following year's invoice and shall not, in any case, result in a disbursement of monies on the part of the Commission.

9. (1) The estimated total regulatory costs of the Commission for the current fiscal year is the sum of the following amounts as set out in the Commission's Expenditure Plan published in Part III of The Estimates of the Government of Canada:

(a)  the costs of the Commission's Broadcasting Activity; and

(b)  the share that is attributable to the Commission's Broadcasting Activity of

(i) the costs of the Commission's administrative activities, and

(ii) the other costs that are taken into account to arrive at the net cost of the Commission's program, excluding the costs of regulating the broadcasting spectrum.

(2) The actual total regulatory costs of the Commission shall be calculated in accordance with subsection (1) using actual amounts.

10. The Commission shall publish, each year, the estimated total regulatory costs referred to in subsection 9(1) in a public notice in the Canada Gazette, Part I.

PART II

PART II LICENCE FEE

11. A Part II licence fee shall consist of an annual licence fee, based on the fee revenue of a licensee for the return year that terminated in the current calendar year or during that portion of that return year in which the licensee held the licence to operate the undertaking, the amount of which shall be calculated as follows:

(a)  for a distribution or a television undertaking, 1.365 per cent of the amount by which the fee revenue exceeds the applicable exemption level; and

(b)  for a radio undertaking,

(i)  subject to subparagraph (ii), 1.365 per cent of the amount by which the fee revenue exceeds the applicable exemption level,

(ii) in  the case of a joint radio operation, 1.365 per cent of the amount by which the combined fee revenue exceeds the applicable exemption level.

REPEAL

12. The Broadcasting Licence Fee Regulations are repealed.

COMING INTO FORCE

13. These Regulations come into force on April 1, 1997.