ARCHIVED -  Public Notice CRTC 1997-33

Public Notice

Ottawa, 27 March 1997

Public Notice CRTC 1997-33

Timetable for the Commission's Consideration of Applications for New Specialty and Pay Television Services.

In Public Notice CRTC 1996-120 dated 4 September 1996, the Commission introduced decisions approving applications for more than 20 new specialty television services and one pay television service. Four of the English-language and four French-language specialty undertakings were licensed on the basis that they would commence operation on or before 1 September 1997, and under terms that, upon launch, would entitle them to immediate access to distribution on analog channels, subject to available channel capacity pursuant to the Commission's Access Rules for Broadcast Distribution Undertakings set out in Public Notice CRTC 1996-60.

In the case of 13 English-language specialty services, the Commission determined that the Access Rules will only apply by the earlier of: the deployment of digital technology by the distributor, or 1 September 1999. These services are expected to be in operation by that date.

The Commission stated in Public Notice CRTC 1996-120 that, while it did not intend to issue a call for further applications for new pay and specialty television programming services, it would consider any such applications received on a case-by-case basis.

Notwithstanding the above, and although the Commission has subsequently received a number of applications proposing new pay and specialty services, it now believes that it would be premature to hear applications for new pay and specialty services prior to the September 1997 launch of the services already licensed. Accordingly, all applications for new pay and specialty television services that are received before 30 September 1997, and that are deemed to be complete by that date, will be dealt with at a public hearing to be scheduled shortly following that date.

The Commission considers that it is appropriate to clarify at this time the details of the approach it will take in considering applications for new Canadian specialty and pay television services. The essential elements of this approach were originally set out in Public Notice CRTC 1995-205, but have been modified to take into account the licensing approach announced in September 1996.

I Licensing Criteria

a) General

In its examination of applications for new licences, the Commission assesses the ability of the proposed service to contribute to the realization of the objectives set out in the Broadcasting Act and to strengthen the Canadian broadcasting system. Accordingly, applicants proposing new services should be prepared to demonstrate how their proposals will contribute to the diversity of high quality programming available to Canadians, and how they will provide new opportunities and revenue sources for Canadian program producers and creative talent.

b) Carriage arrangements

Consistent with the approach taken in Public Notice CRTC 1996-120, the Commission considers that applicants proposing new English-language specialty services should generally be prepared to accept licensing under terms that would suspend application of the Access Rules until the deployment of digital technology by a distributor, or 1 September 1999, whichever occurs first.

Because of the particular nature of French-language markets, and the ability of these markets to support new services, French-language specialty services are, in many cases, distributed on the basic service in these markets. In other French-language cable markets, some French-language specialty services are distributed on a high penetration discretionary tier. Accordingly, in the
case of any new French-language specialty undertakings that are licensed, the Commission intends to maintain its practice of authorizing the distribution of their services on a modified dual status basis, with immediate access to analog carriage pursuant to the Access Rules.

In addition, applications proposing new English- and French-language services that are premised on carriage on basic service, or on a high penetration discretionary tier, must justify such distribution on the basis of agreements with distributors or on the basis of evidence demonstrating the exceptional importance of the proposed service to the achievement of the objectives of the Broadcasting Act.

c) Exhibition of Canadian programming

It is likely that few, if any, new English- or French-language services will be carried on the basic service or on existing high penetration tiers. The Commission therefore expects applicants proposing new services to commit to an appropriate minimum level of Canadian content, regardless of actual subscriber levels. For many services, the Commission may expect content levels to increase in proportion with subscriber growth.

An applicant whose business plan is predicated on distribution of its service as part of the basic service or within a high penetration tier will generally be expected to meet Canadian content requirements equivalent to those of conventional Canadian television broadcasters, unless the specialized nature of the service makes this impracticable.

Each application must contain a completed Promise of Performance (Part II of the application form).

d) Expenditures on Canadian programming

All applicants are expected to make appropriate financial commitments for expenditures on Canadian programming based upon reasonable revenue projections. In the case of each specialty services licensee whose application was approved in June 1994 and in September 1996, the Commission imposed, as a condition of licence, an expenditure formula based on an appropriate percentage of the previous year's gross revenues. This percentage was derived by dividing the applicant's total projected Canadian programming expenditures over a seven-year period by the projected total gross revenues for the same period. The Commission considers it reasonable to adopt the same approach in the case of future specialty applications.

e) Marketing Strategy

Each application must include a detailed marketing strategy demonstrating the demand for the proposed service, including its programming concepts, packaging scenarios and retail costs. The marketing strategy should include information concerning the market or markets to be served by the proposed service, target audiences, commercial inventory, advertising rates and projected sell-out rates.

f) Impact on existing services

In Public Notice CRTC 1996-120, the Commission stated that applicants for future English-language services "should not generally be directly competitive with specialty services already licensed". Thus, applicants proposing services that would compete directly with existing Canadian specialty services will be expected to discuss the impact the proposed new service may have on the ability of licensed service(s) to fulfil their licence obligations.

Any new French-language service can be expected to have a significant impact upon existing conventional and specialty licensees when carried on the basic service or on a high penetration tier. Applicants proposing new French- language services will therefore be expected to address the impact that their services may have on existing French-language conventional and specialty services.

g) Financial viability

Each applicant will be expected to provide evidence that clearly supports the financial viability of its proposed service. This must include a detailed business plan, including financial projections of revenues, expenses, capital costs and all underlying assumptions used to prepare projections. Specifically, there must be identification of sufficient funding within the business plan to finance both the start-up and on-going costs of operations until such time as the proposed undertaking becomes profitable. In addition, applications must include documentary evidence that all of the proposed funding within the business plan will be unequivocally available on or before the date the Commission renders its decision on the application (detailed guidelines regarding adequate financing requirements are available from the Commission). The Commission expects applicants to file only one business plan with their application.

In the case of applications predicated on distribution as part of the basic service or within high penetration tiers, the Commission will wish to discuss the impact of the wholesale rates proposed on the affordability of basic service or of high penetration tiers.

II Completeness of Applications

The Commission advises that, in keeping with its past practice, should an applicant fail to provide the required information set out above in relation to support for Canadian programming, marketing strategy, financial viability and ownership, the application will be deemed incomplete and returned to the applicant. Further, the Commission will not accept significant changes to an application after it has been filed, unless such changes have been made in response to a specific request from the Commission. Applicants who have already filed proposals for pay or specialty services with the Commission prior to the date of this public notice may withdraw and resubmit their applications by 30 September 1997 if they deem it necessary to do so.

III Filing of Applications

The Commission will announce at a later date details of the public hearing at which applications proposing new Canadian pay or specialty television programming services will be heard. As indicated above, in order to be considered at that hearing, complete applications must be filed with the Secretary General of the Commission on or before 30 September 1997.

Allan J. Darling
Secretary General