ARCHIVED -  Telecom Order CRTC 97-1331

Telecom Order

Ottawa, 15 September 1997

Telecom Order CRTC 97-1331

On 23 May 1997, Telesat Canada (Telesat) filed two Transponder Purchase and Operating Services Agreements (Transponder Agreements) for approval regarding a Direct Broadcast Satellite (DBS) in the 91° West longitude orbital position and proposing rates, terms and conditions for the provision of DBS service over the 12 year estimated life of the satellite.

File No.: 8340-T3-01/97

1. In support of its application, Telesat provided the letter of authorization from the Minister of Industry for use of the 91° orbital slot, an economic study, a discussion of the evolution of DBS service and a summary of the terms and conditions of the Transponder Agreements. In confidence, Telesat provided customer Term Sheets, the Transponder Agreements and the DBS Satellite Purchase Agreement.

2. The Transponder Agreements provide for what Telesat terms the "condominium-style" purchase of transponders on the DBS satellite and the payment of ongoing operating fees to Telesat, the satellite operator.

3. Resale of the DBS transponders is permitted subject to a right of first refusal by, first, the other transponder owner, then, Telesat.

4. Telesat submitted that the proposed Transponder Agreements constitute a special facility arrangement with negotiated terms and should be treated separately from Telesat's regulated Space Segment services.

5. Telesat stated that it offered the DBS transponders to all licensed Canadian Direct to Home (DTH) undertakings, those seeking licences as well as other parties who had indicated an interest in DBS capacity under equal terms and negotiated the sale of all of the transponders to two purchasers at identical rates and with other terms which are virtually identical.

6. In support of its claim of confidentiality for the Transponder Agreements, Telesat argued that disclosure of the information contained in the agreements would provide its competitors with detailed financial and commercial information that would undermine Telesat's ability to compete in this market and would harm Telesat's relationship with its customers. Telesat noted that the transponder purchasers would similarly suffer adverse effects from disclosure of the pricing and business plan information contained in the agreements.

7. On 12 June 1997, the Commission issued Telesat Canada - Application for Approval of Direct Broadcast Satellite (DBS) Agreements,Telecom Public Notice CRTC 97-22 to solicit comment on the proposed Transponder Agreements. Comments were received from the Canadian Satellite Users Association (CSUA), ExpressVu Inc. (ExpressVu) and Star Choice Television Network Incorporated (Star Choice).

8. CSUA supported the application noting the need for the industry to address the "grey market" access to unauthorized DTH services, the additional orbital slots that would be available to meet future industry needs, and Telesat's assurance that the proposed DBS project would not impact regulated RF Channel rates. The CSUA specifically endorsed the proposed special facilities approval of agreements as being an appropriate form of regulation for this DBS project.

9. ExpressVu confirmed on the public record that it is one of the transponder purchasers and supported the application. ExpressVu noted the risks that the DBS participants are accepting by investing in the proposed competitive venture.

10. Star Choice asked the Commission to defer consideration of the application stating that, due to the amount of information filed in confidence, parties are not in a position to provide relevant comments. Star Choice requested that the Commission order disclosure of the identity of the proposed transponder purchasers and, in the event that either is related to Telesat, order disclosure of the basic terms and conditions of the contractual arrangements including the rates. Following such disclosure, Star Choice asked the Commission to issue a public notice providing interested parties with an opportunity to make written submissions. Star Choice went on to make arguments regarding the merits of Telesat's application based on the information disclosed on the public record and the assumption that ExpressVu was a purchaser of the transponders.

11. Star Choice argued that the DBS market would not be competitive if a substantial amount of DBS capacity is controlled by ExpressVu. Star Choice also suggested that the right of first refusal of the DBS transponder owners would allow ExpressVu to effectively lock-up any future DBS capacity until satellite policy allows access to U.S. capacity or another Canadian DBS satellite is launched.

12. Telesat, in reply, noted that the DBS transponders had been offered to parties on equal terms, including Star Choice. Telesat noted the support of the CSUA as indicative of the industry's position concerning the proposed agreements. Telesat emphasized the risks that the DBS participants are assuming through their investment in the satellite and the harm that would result if their competitors had access to information concerning the rates, terms and conditions of the Transponder Agreements.

13. The Commission considers that the support of the CSUA is indicative of the general position of the industry apart from the positions taken by DTH licensees, ExpressVu and Star Choice.

14. The Commission accepts the procedure used by Telesat, in offering the DBS transponders to parties on equal terms, as constituting in this case a fair, first come, first served allocation of DBS capacity.

15. Concerning Telesat's request to maintain the confidentiality of the Transponder Agreements in their entirety, the Commission notes that one important regulatory objective of having information disclosed on the public record is to permit meaningful participation by parties in the regulatory process. Another important regulatory objective served by public disclosure is to have publicly disclosed tariffs.

16. Regarding the first objective and Star Choice's requests for disclosure, the Commission notes that Star Choice (i) had access to the Term Sheets which Telesat provided to all parties in offering the DBS sale of transponders, (ii) had access to Telesat's description of the terms and conditions of the proposed Transponder Agreements that was part of the record of this proceeding and (iii) submitted substantive argument which assumed that ExpressVu was a purchaser of the transponders. Accordingly, the Commission is of the view that Star Choice was not prevented from meaningful participation in this proceeding.

17. Having regard to the foregoing, the request by Star Choice for disclosure of the identity of the transponder purchasers, issuance of a subsequent public notice and a subsequent opportunity to comment is denied.

18. Concerning the objective of having publicly disclosed tariffs, the Commission is of the view that Telesat has not justified the harm that would likely result from disclosure of many sections of the Transponder Agreements, particularly in view of the disclosure already effected by the distribution of Term Sheets to many parties, and in view of the substantial disclosure of major terms of the proposed Transponder Agreements made by Telesat in its summary of the terms of the agreements on the public record of this proceeding.

19. Accordingly, Telesat is directed to file, within 30 days of the date of this Order, an abridged version of the Transponder Agreements for the public record providing, for each section of the Transponder Agreements, its justification of any abridgement in relation to the harm that would likely result from disclosure weighing it against the public interest in disclosure. In doing so, Telesat is specifically directed to address the extent of the likely harm where the provisions in question have been publicly summarized or do not differ materially from those disclosed in the Term Sheets. Concerning the future availability of DBS capacity, Telesat is to show how the harm in disclosure of the terms of the Transponder Agreements regarding resale and reassignment of DBS capacity outweighs the public interest in disclosing this information.

20. On the basis of the record of this proceeding, the Commission finds that the proposed DBS arrangement would further the Canadian telecommunications policy objectives set out in the Telecommunications Act and, accordingly, approves the Transponder Agreements as of the date of this Order.

21. The Commission notes in passing that the proposed Canadian DBS satellite and an active Canadian presence in the DBS market would assist in providing alternatives to unauthorized broadcasting services and would contribute to the achievement of the objectives of the broadcasting policy for Canada as set out in the Broadcasting Act.

Laura M. Talbot-Allan
Secretary General

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