ARCHIVED -  Public Notice CRTC 1997-7

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Public Notice

Ottawa, 10 January 1997
Public Notice CRTC 1997-7
Options for Extending Protection of Program Rights: Call for Comments
Since 1971, the Commission has required certain cable systems to fulfil simultaneous substitution requests from local and regional television stations, under certain circumstances. Under section 20 of the Cable Television Regulations, 1986 (the Regulations), when a Class 1 cable distribution undertaking receives a request from a broadcaster operating a local or regional television station (a local broadcaster), it is required, subject to certain conditions, to curtail the distribution of the programming service of a television station with lower priority or no priority and substitute the identical programming service of the local broadcaster.
Television service priorities, as established by section 9 of the Regulations, determine which services a cable distributor is required to carry as part of its basic service. Essentially, the programming services of local CBC stations, educational authorities and private television stations have higher priority than the services of out-of-market stations such as regional or national stations. The services of other television stations, such as U.S. network affiliates, have no priority but may be
distributed as part of the basic service where channel capacity exists and all requirements are met.
Simultaneous substitution is intended to allow for the full exploitation of program rights purchased by local broadcasters, since it can prevent situations in which a program for which a local broadcaster holds the program rights is broadcast simultaneously on the local station and on an out-of-market station. It results in more secure and increased revenues for broadcasters, since they are able to attract larger audiences and thereby justify increased rates for advertisements. However, it cannot fully protect exclusive program rights because it does not apply to situations in which the same program is broadcast by a local station and an out-of-market station at different times, or in which different episodes of the same syndicated program series are broadcast on a local station and an out-of-market station at the same time. Further, some parties have expressed concern that local broadcasters feel compelled to tie their program schedules as closely as possible to those of non-Canadian broadcasters in order to take advantage of the Commission's simultaneous substitution rules. Thus, it has been argued that the current rules, while generating additional revenues for some broadcasters, has had the effect of reducing program diversity as well as failing to fully protect the program rights of local broadcasters.
Direct-To-Home Satellite (DTH) service providers are currently required, by condition of licence, not only to perform simultaneous substitution but also to delete the programming service of an out-of-market station when the identical program is broadcast on both stations within the same broadcast week. In Public Notice CRTC 1995-217, the Commission noted that discussions between DTH distributors and the Canadian Association of Broadcasters (CAB) regarding alternatives to substitution had taken place. The Commission stated that it was prepared to accept "such alternatives to the above requirements as may be mutually agreed upon by the parties concerned".
Advanced substitution is the term currently used to refer to a variety of proposals that would extend the protection of local broadcasters' program rights. It would provide for substitution of a local station's programming service over an out-of-market station's programming service, in a wider range of circumstances, as a solution to the limitations of the current simultaneous substitution provisions. The CAB has estimated that advanced substitution could result in up to $35 million annually in additional advertising revenues for Canadian television stations.
In its 19 May 1995 report, "Competition and Culture on Canada's Information Highway: Managing the Realities of Transition", the Commission stated that it recognizes the importance to all Canadian licensees of protecting the program rights that they have purchased. Accordingly, the Commission intends to conduct a public proceeding with a view to ... exploring options with respect to advanced, or non-simultaneous, substitution.
Subsequently, in Public Notice CRTC 1996-69 dated 17 May 1996, the Commission announced that it would conduct a public process for the purpose of establishing comprehensive regulations applicable to all distribution undertakings. Although the Commission did not raise the issue of advanced substitution in its notice, the CAB submitted an intervention to that proceeding in which it proposed a number of advanced substitution measures as well as a possible approach to strip program substitution. The issue was also raised by two DTH service providers. In Notice of Public Hearing CRTC 1996-11, dated 27 September 1996, the Commission indicated that it considered the CAB's advanced substitution proposals to be beyond the intended scope of the proceeding, but that it was prepared to explore the more limited proposal regarding strip program substitution at the public hearing. The Commission stated that it intended to announce shortly how it would proceed with regard to the issue of advanced substitution.
The Public Hearing
The Commission hereby announces that it will conduct a public proceeding, including a public hearing, commencing on 16 June 1997 in the National Capital Region, for the purpose of examining the feasibility and options associated with advanced substitution.
While the Commission acknowledges that the CAB's proposal to allow substitution of non-identical episodes of strip programs could mean additional revenues for Canadian broadcasters, it is concerned that implementation of this proposal could result in a reduction in the choice of programming that viewers would have at any particular time. It therefore considers it important to have viewer reaction to this proposal widely canvassed, and has concluded that strip program substitution should also be considered in the context of the public proceeding on advanced substitution.
In this notice, the Commission describes various approaches to the implemen-tation of advanced substitution as well as some of the issues raised by these proposals, and invites comments from interested parties on a number of questions.
Advanced substitution is a broad concept that could be implemented in several different ways. Discussion has generally focused on three possible approaches: program deletion, non-simultaneous substitution, and second local channel simulcast. Strip program substitution could also be considered a form of advanced substitution. These four models, some of which may be more suitable for certain distribution technologies than for others, are described below.
a) Program deletion
In this model, a distributor would be required to delete the programming service of an out-of-market television station distributed on its system for the duration of a specific program when a local broadcaster holds the exclusive rights to the program in the geographic area served by the distribution system. In these situations, the screen could be left blank, or the programming could be replaced with a still image explaining why the program was deleted and when it would be available on the local channel.
It has been suggested that this option would be less complex and less expensive, from a technical perspective, than most of the other mechanisms described below. On the other hand, it would be more disruptive for viewers, who may be faced with blank screens or still images in place of a program they expected to see. Although any deleted programming would be available eventually on the local station, this option could reduce overall viewing opportunities for subscribers.
b) Non-simultaneous substitution
This model would involve replacing the programming of an out-of-market station with a local broadcaster's identical programming, even when the programming is broadcast at different times on the two stations. To accomplish this, the local broadcaster would have to provide a direct, closed signal feed to the head end of every distribution system in its geographic area that it wanted to perform the non-simultaneous substitution. When an out-of-market station aired a program for which the local broadcaster held exclusive rights, the local broadcaster would send its programming to the cable head end through this separate feed. The distributor would then be required to substitute the local broadcaster's programming service over the programming service of the out-of-market station for the duration of that program.
In this model, local broadcasters would no longer need to consider the program schedules of other broadcasters in order to take advantage of program substitution. They could, however, be faced with significant additional costs, both in providing the separate feed and in buying the necessary program rights for the additional broadcast of the program. This approach could also be relatively complex, on a technical level, for both distributors and broadcasters. While non-simultaneous substitutions would seem little different from simultaneous substitutions as they are currently performed, they might occur more often.
c) Second local channel simulcast
This model would involve authorizing, through a public process, each local broadcaster to operate a second channel that could be programmed to take advantage of all possible simultaneous substitution opportunities. In this model, a distributor would provide each local broadcaster in its coverage area with a second channel on its distribution system. The local broadcaster would schedule this second channel so that any programs for which it had exclusive rights were broadcast at the same time as they were broadcast on any out-of-market station carried by the distributor that aired the same program. The distributor would then be required to replace the programming service of the out-of-market station with the identical programming on the local broadcaster's second channel, just as it currently does to fulfil simultaneous substitution requests. The Commission notes that the possibility of "program repeat channels" was addressed in the context of its Structural Public Hearing held in March 1993, and that Public Notice CRTC 1993-74 provides a description of the type of programming such channels would be expected to provide.
This model could allow local broadcasters to take maximum advantage of simultaneous substitution opportunities, with no loss of programming or scheduling flexibility on their main channels. It seems unlikely that there would be a significant reduction in viewing choices or opportunities for viewers. On the other hand, technical and operating costs could be substantial, for both distributors and broadcasters. Again, the broadcaster would be required to purchase additional program rights for any program that is broadcast on both the main channel and the second local channel. Further, given the limited analogue channel capacity on most cable systems, at least in the short term, as well as the cost and scarcity of satellite transponders for DTH services, this proposal would raise significant questions about access to distribution systems and about the efficiency of using additional channels to distribute programming that would be largely the same as that already available on other services.
d) Strip program substitution
"Strip programs" generally refers to syndicated programs broadcast at the same time each day from Monday to Friday. Under the current simultaneous substitution rule, substitution can only occur when an identical program episode is broadcast by two stations at the same time. If different episodes of the same strip program series are broadcast at the same time, the local broadcaster's programming service cannot be substituted over the other station's. The CAB has expressed concern that local broadcasters cannot always "match" episodes with those broadcast by out-of-market stations in order to take advantage of simultaneous substitution opportunities because some stations do not indicate which episode of a strip program will be broadcast on a given day. Strip program substitution would allow local broadcasters to request substitution of a strip program regardless of the specific episode that is broadcast by the out-of-market station.
As noted above, this option was discussed in the context of the broadcast distribution regulations hearing. At that time, the CAB estimated that strip program substitution would generate an additional $9.6 million in annual revenues for Canadian broadcasters in the top 10 English-language markets. The Canadian Cable Television Association indicated that no new equipment would be needed to implement this option; the only cost to cable operators would be increased operating costs. Nonetheless, many cable operators expressed concern about viewer reaction to such a mechanism, suggesting that many of their subscribers would be extremely distressed if they found that one episode of a strip program was being substituted for another in this manner.
Request for comments
In light of the concerns raised by each of these options, the Commission calls for comments on the advisability and feasibility of implementing advanced substitution through any of these models, or by any other means. Without limiting discussion on this matter, the Commission particularly invites comments that explore the following areas for each of the four proposed methods of achieving advanced substitution described above:
a) The impact of advanced substitution on the viewing public
·  What impact would each of the four proposed options have on viewer choice?
·  What is the most subscriber-friendly method of implementing advanced substitution?
b) The potential benefits of advanced substitution
·  What would the financial benefit be to broadcasters, or to the broadcasting system?
·  Would advanced substitution increase diversity, program choice, or viewing opportunities for the public, particularly with regard to Canadian programs? Would this result in benefits to the Canadian independent production industry?
·  Would advanced substitution increase scheduling and programming flexibility for broadcasters?
c) The technical and cost issues raised by advanced substitution
·  What are the costs of implementing advanced substitution, for distributors and broadcasters?
·  What technical options are available to distributors?
·  How should the costs be shared between broadcasters and distributors?
·  What implications would advanced substitution have on the cost and distribution of program rights?
In addition to these areas of discussion, the Commission would also welcome comments on regulatory and other issues regarding advanced substitution, including the following:
·  Are there other feasible methods of allowing broadcasters to fully exploit their exclusive program rights, in addition to the four approaches described above?
·  What specific changes would have to be made to the Commission's distribution regulations and policies, such as its Access Policy, in order to implement advanced substitution? Are such changes likely to have a negative impact on certain sectors of the Canadian broadcasting industry?
·  Should the Commission permit one specific form of advanced substitution, or should it allow distributors or broadcasters to choose from among several different options the method that would work best in each situation?
·  Should the approach to advanced substitution differ for different types of distributors, such as direct-to-home satellite services or distributors licensed on a regional basis?
·  Which classes of distributors should be required to perform advanced substitution? Should distributors serving small numbers of subscribers have to meet the same requirements as larger distributors?
Finally, in light of the impact any approach to advanced substitution is likely to have on the viewing public, and given public attitudes towards simultaneous substitution, the Commission would be particularly interested in receiving submissions that explore the potential public reaction to advanced substitution, including strip program substitution, such as consumer surveys or other primary research on the issue. Research studies submitted should be provided during the first round of comments, as described below, so that other interveners may have the opportunity to comment on them during the second stage. The Commission is not prepared to accept surveys and other primary research during the second round of comments.
Public proceeding
The Commission will hold a two-stage written comment process prior to the 16 June 1997 public hearing. Details of the public hearing will be announced at a later date.
During the first stage, the Commission invites comments as described above. The deadline for the submission of written comments during the first stage is Friday, 11 April 1997.
These initial comments will be made available for examination by the public as soon as possible following the deadline, in the Commission's offices at the addresses provided below.
Interested parties, including those who may not have participated in the first stage of the process, will then have an opportunity to submit written comments in the second stage regarding any issue raised in the first round of comments.
The deadline for written comments submitted as part of this second stage is Monday, 12 May 1997.
The Commission considers that this process should provide interested parties a full opportunity to make their views known during the written phase of this proceeding. In the interest of focusing and streamlining the oral phase of the proceeding, the Commission will not generally be prepared to entertain discussion on issues other than those raised by interested parties in the written comments.
The Commission will only accept submissions that are received in the Commission on or before the prescribed dates noted above.
The Commission offers the following additional information respecting procedural requirements:
1.  Interested parties wishing to appear at the public hearing must have participated in the first or second stage of the written process.
2.  Submissions filed in response to this notice should be complete and focused. In the case of long submissions, the Commission would appreciate the inclusion of a short executive summary.
3.  Any party requesting to appear at the public hearing must provide clear reasons, on the first page of its submission, as to why its written submission is not sufficient and why an appearance is necessary. The Commission will inform each party whether its request to appear is granted.
4.  In the second stage of the written process, comments should be limited to issues raised in the submissions received during the first stage of the process. Any interested party who submits comments during the second stage of the written process must identify, on the first page of its submission, the first-stage submissions that its comments address.
5.  To ensure effective use of time at the public hearing, the Commission may use a written question process to obtain additional information from those who have filed submissions, after either the first or second stage of the written process. The questions and answers will form part of the public record and may be consulted by other interested parties.
6.  Comments filed in response to this notice must be addressed to the Secretary General, CRTC, Ottawa, Ontario K1A 0N2, and must be filed in hard copy form.
7.  All comments will be considered by the Commission, and will form part of the public record of the proceeding without further notification, provided the procedure set out above has been followed. Interested parties are therefore strongly encouraged and expected to monitor the content of the public examination files.
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Allan J. Darling
Secretary General

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