ARCHIVED -  Decision CRTC 97-370

Decision

Ottawa, 6 August 1997

Decision CRTC 97-370

Teleglobe Inc., through its division Teleglobe Media Enterprises, C.I. Covington Fund Inc., Baton Broadcasting Incorporated and Novanet Communications Limited, on behalf of a company to be incorporated (and to be known as LOOK TV Inc.) Barrie, Belleville, Brantford, Brockville, Chatham, Cobourg, Collingwood, Cornwall, Guelph, Hamilton, Kingston, Kitchener, Leamington, Lindsay, London, Midland, Orillia, Oshawa, Owen Sound, Peterborough, Port Hope, St. Catharines/ Niagara, Sarnia/Clearwater, Simcoe, Stratford, Tillsonburg, Toronto and surrounding communities in Ontario - 199701115

Barrie, Belleville, Brantford, Huntsville, Kingston, London, Peterborough, Sarnia, Smiths Falls, St. Catharines, Toronto, Wheatley and Wingham and surrounding communities, Ontario - 199701181Barrie, Orillia, Gravenhurst and Bracebridge, Ontario - 199701108Buchanan, Detweiler, Essa, Fergus, Glen Cross, Kleinburg, Middleport, Milton, Newmarket, Oshawa-North and Toronto and surrounding communities, Ontario - 199701173 Hamilton and vicinity, Kitchener/Waterloo and vicinity and Greater Metropolitan Toronto and vicinity, Ontario - 199607967

Application by Teleglobe Inc. and others OBCI, to be known as LOOK TV Inc. for a licence for a new MDS radiocommunication distribution undertaking - Approved Competing applications - Denied

Competing applications - Denied

1. Following a public hearing in Toronto beginning on 26 May 1997, the Commission approves the application by Teleglobe Inc. through its division Teleglobe Media Enterprises (Teleglobe), Baton Broadcasting Incorporated (Baton), C.I. Covington Fund, and Novanet Communications Limited, on behalf of a company to be incorporated and to be known as LOOK TV Inc. (LOOK TV), for a licence to carry on a radiocommunication distribution undertaking to transmit broadcasting services in encrypted mode by means of a digital multipoint distribution system (MDS) to serve the communities listed following the applicant's name. The Commission will issue a licence expiring 31 August 2003, subject to the conditions specified in Appendix II to this decision and in the licence to be issued.

2. The Commission denies the four other above-noted applications for the reasons set out later in this decision.

Background

3. In Public Notice CRTC 1996-150 dated 26 November 1996, the Commission announced that it had received applications for broadcasting licences to carry on new MDS radiocommunication distribution undertakings to provide service in the greater Toronto area and other communities in southern Ontario. As is its usual procedure in such cases, the Commission called for applications from other parties wishing to obtain such a licence to provide MDS service to communities in southern Ontario. Subsequently, in Public Notice CRTC 1996-150-1 dated 28 January 1997, the Commission clarified its intent, advising potential applicants that the National Capital Region and surrounding regions in eastern Ontario did not fall within the scope of this call.

4. At the hearing, there was discussion regarding the precise delineation of the southern Ontario area encompassed by the call. LOOK TV intends to operate a transmitter at Avonmore to serve Brockville and Cornwall as well as a transmitter at Spencerville to serve Kemptville, and Craig Broadcast Systems Inc. (CBSI) proposed to operate a transmitter at Smiths Falls. The two other regional applicants, Selectview Cable Services Inc. (SelectView) and PowerTel TV Inc. (PowerTel), applied for service areas that would have extended no further east than the Oshawa/Bowmanville area. The latter two applicants argued that any communities east of that point were beyond the scope of this call. All of the parties, however, indicated that they intended to respond to the Commission's call for applications for licences to carry on MDS undertakings to serve the National Capital Region and other communities in eastern Ontario (Public Notice CRTC 1997-45 dated 25 April 1997).

5. In the Commission's view, the call announced in Public Notice CRTC 1996-150 was intended to cover all of southern Ontario. The clarification, set out in Public Notice CRTC 1996-150-1, that the National Capital Region and areas surrounding it in eastern Ontario were excluded from the call, was not meant to be a general exclusion of all of eastern Ontario.

Assessment of the Applications

6. In its evaluation of these applications, the Commission has taken into consideration, among other factors, the range of signals provided in each service offering and the proposed subscriber fees, the breadth of the coverage that would be provided by the respective undertakings, the viability of each applicant's business and marketing plans, and the subscriber penetration levels projected by each, including the projected ratios of subscribers to be drawn from cabled versus non-cabled markets.

7. Previously, the Commission had considered that MDS undertakings should complement, rather than compete with cable distribution undertakings. As stated in Public Notice CRTC 1995-183 dated 26 October 1995, however, and reiterated in Decision CRTC 95-910 dated 20 December 1995, which licensed Canada's first regional MDS undertaking in Manitoba, the Commission now considers that an important role of MDS undertakings should be to provide competition to established cable undertakings. Accordingly, in reaching its decision, the Commission gave particular consideration to which applicant would be most able to compete with cable undertakings, as well as with new direct-to-home (DTH) licensees operating in the same market.

8. Of the five applicants, only LOOK TV and CBSI proposed to cover a substantial portion of southern Ontario. In this regard, the Commission is satisfied that LOOK TV's proposed transmitters at Avonmore and Spencerville fall within the scope of the Commission's call. Multipoint Communications (Barrie) Limited's (Multipoint) proposed service area was limited to the Barrie area and, even within that area, the applicant failed to provide for full coverage to Gravenhurst. The service areas proposed by PowerTel and SelectView in response to this call, would have left a large part of southern Ontario, including Sarnia, Windsor, Belleville and Kingston, without coverage.

9. Multipoint is wholly owned by Point to Point Communications (Barrie) Ltd. In examining Multipoint's business plan, the Commission is concerned with the applicant's reliance on debt financing and the fact that it demonstrated little or no capacity to inject equity into the proposed undertaking. Multipoint projected that nearly 95% of its subscribers would come from households in licensed cable markets and that the penetration rate would reach 20% after three years. The Commission notes, however, that the applicant's anticipated penetration rates for the enhanced basic service and pay service were not substantiated by an independent market study, and that Multipoint's overall projected penetrations greatly exceed those forecast by the other applicants. The Commission is concerned about the viability of Multipoint's business plan and, in particular, its ability to inject any equity should its subscriber penetration prove to be lower than projected.

10. SelectView is owned 80% by Canadian shareholders and 20% by a non-Canadian shareholder, Hong Ho Precision Textile Co. The Commission considers that SelectView's proposal to charge each subscriber a refundable rental deposit for the decoder box would create a barrier to entry, particularly in a heavily-cabled market. In addition, the Commission considers that SelectView's projected unit charge for the antenna and the decoder, the lowest of all applicants, may not be realistic, and might have earned the applicant insufficient revenues to purchase the additional antennae and decoders that would be necessary for it to achieve its projected annual growth rates. The Commision is also concerned with the small percentage of capital that will be provided by Canadian shareholders.

11. PowerTel is wholly owned by PowerTel Wireless Inc. which, in turn, is owned by Simmonds Capital Limited (100(). The Commission notes that PowerTel's proposed capital costs for system equipment are the most expensive of all the applicants. In addition, PowerTel's proposed operating costs are more than twice the level incurred by cable systems currently operating in Ontario and proposed by other applicants. PowerTel's ability to recover these costs is based on the assumption that 71% of its subscribers would be attracted to its large, all-encompassing Powerpack package. In comparison with the other applicants and current Ontario cable systems, however, the resultant proposed monthly subscription revenue per subscriber is very high. This raises concerns regarding the viability of the applicant's business plan, particularly should its projections not be achieved. Moreover, the Commission considers that the applicant might have had difficulty implementing its plan to increase its rates by 3% annually, particularly in the competitive market in which it would have been operating. This again calls into question the viability of PowerTel's business plan. Finally, the Commission is concerned about the uncertainty created by the unsettled equity contributions of the various parties and the high debt load that would have been incurred by the applicant.

12. For these reasons, the Commission is not convinced that Multipoint, SelectView and PowerTel demonstrated that they would be able to meet the Commission's criterion that applicants be able to compete on a sustainable basis in the same market with cable distribution undertakings and new DTH licensees. The Commission has, therefore, denied their applications.

13. LOOK TV, the successful applicant, will be effectively controlled by Teleglobe which holds 74.5% of the proposed licensee's voting rights. The remaining shareholders are Baton (4.5%), C.I. Covington Fund Inc. (15%), Novanet Communications Limited (5%) and Mr. Scott Colbran (1%).

14. CBSI applied on behalf of a company to be incorporated which would have been owned 40% by Mr. A. Stuart Craig through CBSI, 30% by Whitecastle Investments Inc., 15% by Origin Investments Inc., 7.5% by Hawk Hill Investments Limited and 7.5% by Jefferson Partners Capital Limited.

15. The Commission considers that either of the applications submitted by LOOK TV or CBSI could have been licensed. CBSI is an experienced television and radio broadcaster and operates an MDS undertaking in Manitoba. LOOK TV's senior management has considerable experience in cable distribution, and its controlling shareholder, Teleglobe, is a strong, well-financed company. Each applicant proposed a wide coverage area extending throughout most of southern Ontario, the area identified in the call, and would offer competitive service packages and programming proposals. In addition, each proposed viable and attainable business plans.

Rationale for Approval

16. In licensing an MDS undertaking, the Commission considers that the proposed service should provide coverage to a large area, including uncabled communities, and should be competitive with cable and DTH undertakings in served markets. The Commission is satisfied that LOOK TV has demonstrated a strong commitment to provide coverage to the area in the southern Ontario market identified in the call and to compete aggressively with cable and DTH undertakings. Moreover, the Commission is satisfied that LOOK TV has the financial resources to fulfil its commitment.

17. The Commission notes that CBSI's business plan is conservative and its projections are attainable at a low break-even penetration level of only 36,000 subscribers. However, the Commission considers that CBSI's limited marketing budget and general approach to marketing, in particular, raise doubts concerning the applicant's commitment to provide effective competition to incumbents, from the outset, in both rural and urban markets.

18. Subscribers to CBSI's proposed service would have been required to pay an upfront charge of $199.99 to acquire the necessary equipment to receive the signal as well as an installation fee of $99.95. The Commission questions whether CBSI would have the financial capacity to continue operations should the demands of a competitive market compel the applicant to reduce or eliminate these upfront charges.

19. For its part, LOOK TV has indicated a "strong commitment to serve all of the households within its coverage area, including those not passed by cable". LOOK TV does not propose to charge subscribers any upfront downpayment to lease equipment, which should make it more competitive with cable. The Commission is satisfied that LOOK TV has the financial resources to purchase the equipment, even should its costs prove to be higher than expected, or should its subscriber penetration exceed projections.

20. One of the aspects of LOOK TV's application that received attention at the hearing is the fact that BCE Inc. (BCE) holds a 24.3% voting interest in Teleglobe, the applicant's controlling shareholder. BCE owns Bell Canada, holds a 58.5% interest in Telesat Canada Inc. and has control of ExpressVu, a DTH satellite distribution undertaking. In addition, BCE is conducting cable distribution trials in Repentigny, Quebec and in London, Ontario (Broadcasting Decision CRTC 97-192 and Telecom Decision CRTC 97-11 dated 8 May 1997). In their interventions, the Canadian Cable Television Association and Rogers Cablesystems Inc. expressed concern regarding the possibility that a telephone company might acquire control of an MDS undertaking soon after its licensing.

21. In responding to these interventions at the hearing, the applicant emphasized that BCE is a minority shareholder that will not control LOOK TV. The applicant clearly stated that "Teleglobe's interests go far beyond the interests of BCE".

22. Pursuant to section 5 of the Cable Television Regulations, 1986 (the regulations) (which applies to LOOK TV by condition of licence), parties must apply to obtain the Commission's approval of any agreement or transaction that directly or indirectly effects a change in the effective control of the licensee, or results in a shareholder in the licensee or in its controlling shareholder, increasing its shares to more than 30% of the voting interests. Given the broad participation of BCE-related companies in various competitive distribution undertakings, the Commission will not be disposed to approve such an application by BCE, absent a compelling case to the contrary. Upon receipt of such an application, the Commission would examine the impact of the proposed changes upon the competitive environment.

23. In considering the licensing of LOOK TV in this competitive process, the Commission has given careful consideration to the applicant's present ownership structure, particularly the fact that BCE has no more than an indirect minority interest in the proposed licensee. The Commission has concluded that the present ownership does not raise concerns that would warrant denial of LOOK TV's application. It should be noted in this regard that, when the Commission awards a licence following a competitive process, it expects the licensee to implement and operate its undertaking as proposed.

24. Accordingly, for all of the reasons noted above, the Commission has approved LOOK TV's application and denied CBSI's application.

LOOK TV's Service

25. The MDS undertaking will consist of 23 transmitters located across the region with a master head end situated at Scarborough and six secondary head ends across southern Ontario. The applicant will offer its subscribers a mix of local, regional, extra-regional and distant television services, as well as a range of pay, specialty and other services. The effective isotropic radiated power (EIRP) of each transmitter is listed in Appendix I to this decision.

26. The Commission notes that LOOK TV's rates will be competitive with those offered by cable. Its digital service will provide an alternative to cable, in terms of quality and choice of service. Furthermore, LOOK TV will offer local programming services which should make it competitive with DTH undertakings.

27. Consistent with the licensing policy set out in Public Notices CRTC 1997-25 and 1997-84 dated 11 March and 2 July 1997, respectively, the Commission will issue a Class 1 licence to LOOK TV. By condition of licence, the operation of this undertaking will be regulated pursuant to Parts I, II and IV of the regulations, with the exception of sections 3, 4, 7, 8, 9, 10, 11, 17, 18 and 20. Section 16 of the regulations will apply in accordance with the qualification specified in the condition of licence set out in Appendix II to this decision.

28. This authority will only be effective and the licence shall only be issued at such time as the Commission receives documentation establishing that an eligible Canadian corporation has been incorporated in accordance with the application in all material respects and that it may be issued a licence.

Authorized Programming Services and Distribution Requirements

29. The Commission authorizes LOOK TV to distribute the broadcasting services listed in Appendix II to this decision as well as the services listed for each transmitter site in the appendix to the applicant's letter dated 22 May 1997, with the exception of the requirements stipulated in the conditions of licence. LOOK TV is also authorized to offer its subscribers pay-per-view programming services without requiring them to subscribe to the basic service.

30. As licensed, LOOK TV will have the technical capacity to distribute 75 video services. LOOK TV indicated that it later plans to upgrade the system's channel capacity to accommodate 155 video services. The applicant requested authorization to be exempted from the requirement of section 16 of the regulations to carry all mandatory audio programming services at the launch of the service. LOOK TV stated, however, that it would distribute all mandatory audio services once it has the expanded channel capacity that will allow it to do so.

31. The Commission approves LOOK TV's request. Accordingly, the Commission will apply the requirement of section 16 of the regulations to distribute all mandatory audio programming services once LOOK TV upgrades its channel capacity. A condition of licence in this regard is set out in Appendix II to this decision.

32. LOOK TV is authorized to distribute, at its option, without advertizing material, the content included with its electronic programming guide as a special programming channel. This channel will offer promotional programming and will enable the subscriber to preview the various programming services available on LOOK TV.

33. In accordance with the conditions of licence specified in Appendix II to this decision, LOOK TV is authorized to insert promotional material as a substitute for the local availabilities on certain non-Canadian services. LOOK TV is also authorized to carry the signals of four commercial U.S. networks and one PBS signal as part of the basic service and to include one of the U.S. superstations with one of its specialty programming packages.

34. LOOK TV is required, in the manner described in the condition of licence set out in Appendix II to this decision, to effect simultaneous substitution.

Access

35. In Public Notice CRTC 1996-60, the Commission set out its policy regarding the provision of access to Canadian programming services by distribution undertakings, including MDS undertakings. Consistent with those requirements, the Commission expects LOOK TV to distribute the signals of all licensed English-language pay television and specialty programming undertakings, subject to the availability of MDS channel capacity, and other considerations discussed in Public Notice CRTC 1996-60. The Commission notes that, once the applicant has upgraded the system's channel capacity to 155 channels, it will be able to accommodate all licensed specialty, pay and pay-per-view services, including those that will not be available for some time following the launch of the service. The Commission also considers that LOOK TV must give priority to the carriage of programming services over non-programming services.

Contribution to the Development of Canadian Programming

36. LOOK TV proposed to contribute 7% of its gross annual revenues to support the development of Canadian programming. According to LOOK TV's proposal, 4% would be allocated to the Canada Television and Cable Production Fund (CTCPF) and 3% to various educational and multimedia initiatives.

37. Consistent with the policy framework set out in Public Notices CRTC 1997-25 and 1997-98 dated 22 July 1997, however, the Commission requires LOOK TV to contribute a minimum of 5% of its gross annual revenues derived from broadcasting activities (hereinafter "gross annual revenues") to support the development of Canadian programming. This annual contribution shall be made in accordance with the condition of licence set out in Appendix II to this decision, as summarized below.

38. More specifically, of the 5% above, the licensee must contribute a minimum of 3% of its gross annual revenues to independently-administered Canadian production funds. Of this amount, 80% must be directed to the CTCPF, while up to 20% may be directed to one or more independently-administered production funds other than the CTCPF, provided that these other funds meet the criteria set out in Public Notice CRTC 1997-98.

39. With respect to the remainder, the licensee may elect to contribute up to 2% of its gross annual revenues to local programming initiatives. Should the licensee choose to contribute less than 2% of its gross annual revenues to local programming initiatives, the balance shall be directed to independently-administered production funds in accordance with the provisions set out above.

40. The Commission notes that LOOK TV may make financial contributions to the creation of new Canadian programming beyond those requirements stipulated above.

41. Consistent with its commitment, LOOK TV is authorized to operate a community programming channel in accordance with the provisions of sections 13, 14 and 15 of the regulations.

42. Initially, LOOK TV will provide local information on the community channel in digital, alphanumeric form. Within approximately 18 months of beginning operations, LOOK TV will offer video programming on the community channel.

43. The Commission considers that the community channel should provide access to members of the community served to allow them the opportunity to reflect their community on television. In reviewing the applicant's proposals for the community channel, the Commission finds that much of the programming would not truly be an expression of the community as it sees itself. The Commission also finds that a large proportion of the proposed programming would be educational in nature, and that nearly all of the funds proposed for local reflection would be directed to educational programming.

44. The Commission considers that the community channel is not the proper vehicle to distribute educational programming. Accordingly, the Commission authorizes LOOK TV to offer a special programming service that will be separate from the community channel and will be devoted to educational programming. A condition of licence to this effect is set out in Appendix II to this decision.

45. At the hearing, LOOK TV noted that there is an emerging market for distance educational programming and indicated that, in future, it might enter into distance learning initiatives with educational broadcasters. As another contribution to the community, LOOK TV proposed to offer its service free of charge to schools in the area.

46. The Commission notes that LOOK TV proposed to use "push" and "pull" technologies on its community channel. The Commission expects LOOK TV to provide an appropriate screening system that will allow individual subscribers a choice of options with respect to content and delivery.

47. At the hearing, the Commission questioned LOOK TV on whether Baton would be involved in the production of local expression and local educational programming. Baton, a shareholder in LOOK TV, is a major player in Canada's broadcasting industry. LOOK TV assured the Commission that Baton's participation in the local programming broadcast on the community and educational channels would be at arm's length.

48. For community programming and any other programming of a service that it originates, the licensee shall adhere to the Cable Community Channel Standards, and the guidelines on the depiction of violence in television programming set out in the Canadian Association of Broadcasters' Voluntary Code Regarding Violence in Television Programming, as amended from time to time and approved by the Commission. A condition of licence is set out in Appendix II to this decision.

Employment Equity

49. 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.

Other Matters

50. This authority will only be effective and the licence will only be issued at such time as construction of the transmitting facilities is completed and they are prepared to commence operation. If the construction is not completed within twelve months of the date of this decision or, where the appli-cant applies to the Commission within this period and satisfies the Commission that it cannot complete construction and commence operation before the expiry of this period, and that an extension of time is in the public interest, within such further periods of time as are approved in writing by the Commission, the licence will not be issued. The applicant is required to advise the Commission (before the expiry of the twelve-month period or any extension thereof) in writing, once it has completed construction and is prepared to commence operation.

51. The Department of Industry has advised the Commission that the transmitters at Pontypool, Warkworth, Demorestville, Cataraqui, Chantry, Spencerville, Avonmore, Ancaster, Thorold, Welland, Goderich, Plympton, Chatham, Essex, Scarborough, Aurora and Cermpky are conditionally technically acceptable as special cases, subject to successful co-ordination with the U.S. Federal Communications Commission, and that Broadcasting Certificates will only be issued once it has been determined that this co-ordination has been achieved.

52. In accordance with subsection 22(1) of the Broadcasting Act, the Commission will only issue the licence and the authority will only be granted at such time as written notification is received from the Depart-ment of Industry that its technical requirements have been met, and that Broadcasting Certificates will be issued.

53. The Department of Industry has also advised the Commission that the transmit-ters at Guelph, Mount Forest, Owen Sound, Byron, Woodstock and Moonstone are technically acceptable as special cases, based on non-standard operation.

54. The Commission acknowledges the many interventions submitted in support of this application. The Commission also acknowledges the concerns expressed in the opposing interventions and is satisfied with the applicant's response thereto.

This decision is to be appended to the licence.

Laura M. Talbot-Allan
Secretary General

This document is available in alternative format upon request.

Appendix I to Decision CRTC 97-370

Effective Isotropic Radiated Power (EIRP) of Each Transmitter of the MDS Radiocommunication Distribution Undertaking to be known as LOOK TV

LOCATION/ENDROIT EIRP/ (watts)

Scarborough 32
Pontypool 32
Warkworth 32
Demorestville 32
Cataraqui 32
Chantry 32
Spencerville 8
Avonmore 32
Aurora 32
Moonstone 32
Cermpky 26
Ancaster 25
Guelph 32
Mount Forest 32
Owen Sound 32
Thorold 19
Welland 19
Woodstock 32
Byron 32
Goderich 32
Plympton 32
Chatham 32
Essex 1

Appendix II to Decision CRTC 97-370

Conditions of Licence for the MDS Radiocommunication Distribution Undertaking to be known as LOOK TV

1. Except as provided below, for the purposes of the Cable Television Regulations, 1986 (the regulations), as amended from time to time, the licensee is deemed to be a Class 1 licensee:

a) sections 3, 4, 7, 8, 9, 10, 11, 17, 18 and 20 of the regulations shall not apply to the licensee; and

b) section 16 of the regulations shall not apply to the licensee until it upgrades its channel capacity as proposed in its Phase 2 plans.

2. The licensee is authorized to distribute any specialty, pay television and radio services, except a radio service of the type discussed in paragraph 16(3)(d) of the regulations, as well as any of the programming services contained in the list of Part II Eligible Satellite Services attached to Public Notice CRTC 1997-96 dated 22 July 1997 as amended from time to time, and in accordance with the distribution and linkage requirements as set out in condition of licence 5. In addition, the licensee is authorized to distribute the programming services listed for each transmitter site in the appendix to the licensee's letter dated 22 May 1997, with the following exceptions:

London/Kichener market

The licensee shall distribute CKNX-TV at the Guelph, Ancaster, Woodstock, Plympton, Byron, Goderich, Mount Forest and Owen Sound sites.

The licensee shall distribute CBET (CBC) Windsor at the Byron and Plympton sites.

Chatham/Windsor market

The licensee shall distribute CKCO-TV-3 (CTV) at the Chatham and Essex sites and CBLN-TV (CBC) at the Chatham site.

Belleville/Kingston/Cornwall market

The licensee shall distribute CIVO-TV (STQ) and CHOT-TV (TVA) Hull, Quebec, and CHRO-TV (CTV), CHCH-TV-1 (IND) and CITY-TV-2 (IND) Ottawa at the Chantry, Spencerville and Avonmore sites.

3. Unless otherwise authorized by the Commission:

a) the licensee shall delete the distribution of the programming of a non-Canadian television programming service and substitute the identical programming of a Canadian television programming undertaking, licensed to serve the province of Ontario or a part thereof, where the signal of that Canadian television programming undertaking is distributed by the licensee; and

b) the licensee shall delete and substitute the programming of television programming services, in the manner contemplated in paragraph a) above, where the licensee has received, at least seven days prior to the date on which the programming is broadcast, a written request for the deletion and substitution of the programming of the television programming service.

c) For the purpose of this condition, "identical" shall have the same meaning as defined in the regulations.

The licensee may discontinue the deletion and substitution of programming of a television programming service where the licensee verifies that the programming of the television programming services in respect of which the deletion is made, is not identical, or is no longer scheduled for distribution in identical periods.

4. The licensee is required to ensure that no subscriber may ultimately receive a total number of programming services that contains less than a preponderance of Canadian programming services. For the purpose of this condition, multiplex programming channels, repeat channels and non-programming channels will be disregarded and each licensed PPV service distributed will be counted as a single channel.

5. a) The licensee may only distribute the signals of four commercial U.S. networks and one PBS signal as part of the basic service.

b) The non-Canadian programming services specified in the list of Part II Eligible Satellite Services may only be offered in a discretionary package with Canadian pay television and/or Canadian specialty services, and are subject to the following linkage requirements:

i) each Canadian pay television service (excluding a pay-per-view service) may be linked in a single discretionary package with no more than five channels of the non-Canadian programming services specified in either Section A or Section B of the list of Part II Eligible Satellite Services, but in no case can a single discretionary package, whose Canadian component includes more than one pay television service, contain more than five channels of non-Canadian programming services linked with the Canadian pay television services included in that package;

ii) each Canadian specialty service, distributed within a discretionary package that may include one or more Canadian specialty and/or pay television service, may be linked with no more than one channel containing any of the non-Canadian programming services specified in Section A of the list of Part II Eligible Satellite Services.

c) The licensee may designate one of the U.S. superstations specified in Section B of the list of Part II Eligible Satellite Services 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 services containing only non-Canadian programming services; and

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

6. The licensee is authorized to insert, at its option, certain promotional material as a substitute for the "local availabilities" (i.e. non-Canadian advertising material) of non-Canadian satellite services. At least 75% of these local availabilities must be made available for use by licensed Canadian programming services for the promotion of their respective services, for the promotion of the community channel and for unpaid Canadian public service announcements. A maximum of 25% of the local availabilities may be made available for the promotion of discretionary programming services and packages, customer service information, channel realignments, cable FM service and additional cable outlets.

7. The licensee shall contribute 5% of its gross annual revenues to support the development of Canadian programming in accordance with the following provisions:

a) The licensee must contribute a minimum of 3% of its gross annual revenues derived from broadcasting activities to independently-administered Canadian production funds. Of this amount, 80% must be directed to the CTCPF, while up to 20% may be directed to one or more independently-administered production funds other than the CTCPF, provided that these other funds meet the criteria set out in Public Notice CRTC 1997-98, as may be amended from time to time.

b) The licensee may contribute up to a maximum of 2% of its gross annual revenues derived from broadcasting activities to local programming initiatives. Should the licensee choose to contribute less than 2% of its gross annual revenues to local programming initiatives, the balance shall be directed to independently-administered production funds in accordance with the provisions set out in paragraph (a).

c) The licensee is required to remit its first contribution to the CTCPF, and to such other independently-administered production fund(s) as it may elect to support in accordance with paragraph (a) above, no later than 45 days following the end of the month in which it commences operations. Contributions made thereafter shall take the form of monthly instalments to be remitted within 45 days of month's end, and representing a minimum of 3% of that month's gross revenues.

8. The licensee is authorized to distribute, as a special programming service, without advertising material, as defined in the Television Broadcasting Regulations, 1987 (the television regulations), as amended:

a) programming provided by an educational institution, where the programming falls within paragraph 6(5)(a) or 6(5)(b) of Schedule I to the television regulations; and

b) interactive services of an educational or informative nature that consist of images and sounds accompanied by alphanumeric material, or predominately alphanumeric material that is available in conjunction with a program distributed by the licensee.

9. For community programming and any other programming of a service that it originates, the licensee shall adhere to the Cable Community Channel Standards, and the guidelines on the depiction of violence in television programming set out in the Canadian Association of Broadcasters' Voluntary Code Regarding Violence in Television Programming, as amended from time to time and approved by the Commission.