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Star Choice Television Network Incorporated
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Across Canada - 199711990
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New national satellite relay distribution undertaking - Approved
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1. Following a Public Hearing held in the National Capital Region beginning on 16 February 1998, the Commission approves the application by Star Choice Television Network Incorporated (Star Choice), for a broadcasting licence to carry on a national satellite relay distribution undertaking (SRDU). The applicant has stated that the new service will be known as Star Choice Business Network Services.
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2. The Commission will issue a licence to Star Choice, expiring 31 August 2000, subject to the conditions specified in this decision, and in the licence to be issued.
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Background - Policy framework for the introduction of competition to the satellite relay distribution industry
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3. In other documents issued today, the Commission announces its decisions with respect to certain other applications presented at the 16 February 1998 hearing. These applications contemplate the introduction of competition on a national or regional basis to Canadian Satellite Communications Inc.'s (Cancom) licensed broadcasting activity, the distribution of television services to terrestrial broadcasting distribution undertakings (BDUs). In Decision CRTC 98-171, the Commission has renewed Cancom's SRDU licence for two years. All of the remaining applications have been denied, including one by Prime Time Canada, on behalf of a company to be incorporated, proposing a third national SRDU service (see Decisions CRTC 98-173 to 98-174).
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4. Also issued today is Public Notice CRTC 1998-60, in which the Commission announces its policy framework for a competitive SRDU industry. This policy addresses, among other things, the role that such undertakings are expected to play within the Canadian broadcasting system and the contributions they are required to make to the creation and presentation of Canadian programming. In order to ensure fair and sustainable competition, the policy framework also prescribes a specific condition of licence to deal with concerns about undue preference or disadvantage. Further, the Commission has imposed requirements on licensees regarding their conduct and obligations in resolving disputes between themselves and their affiliates.
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5. As indicated above, the Commission's SRDU policy will generally rely upon competition to ensure that the broadest possible choice is available to BDUs at a reasonable cost. While the Commission has decided to issue a new licence to Star Choice and renew Cancom's licence, the current uncertainty concerning the future ownership structure within the Canadian SRDU industry raises questions about the extent of the competition that will exist in that industry in the future. In the circumstances, the Commission considers that the two year licence terms granted to Star Choice and Cancom are warranted.
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Terms and Conditions of the Licence Issued to Star Choice
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6. Star Choice is a wholly-owned subsidiary of Star Choice Communications Inc. (SCC), and is the licensee of an existing, national, direct-to-home (DTH) distribution undertaking. SCC is in turn controlled by Shaw Communications Inc. (Shaw). Shaw is the licensee of several radio stations, specialty services such as YTV and Country Music Television, as well as the second-largest cable operation in the country, serving approximately 1.5 million Canadian households.
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7. Shaw also holds an interest in video-on-demand undertakings, a pay audio undertaking, the service known as the Telelatino Network Inc., as well as telecommunications services.
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8. In interventions and at the hearing, Cancom, and other parties, expressed the concern that, with the Star Choice DTH distribution undertaking acting as a retailer in competition with BDUs, and Star Choice's SRDU acting as a wholesaler selling signals to BDU competitors, this degree of vertical integration would lessen competition generally. Cancom also argued that this situation would reduce its own ability to compete.
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9. Star Choice proposed in its written application to adhere to conditions of licence which would ensure the independence of Star Choice from those businesses in other sectors of the communications industry that are also controlled by Shaw. At the hearing, in response to Cancom's concerns, Star Choice also stated that, while it is true that it would be both competing with and supplying terrestrial BDUs, its retail competitors will choose to purchase signals from the Star Choice SRDU only "if we offer them a better deal". In this regard, the position taken by many cable undertakings including those serving small and remote communities, is that even though Star Choice would be both a supplier and a direct competitor, such a situation is preferable to having to purchase signals in a monopoly environment.
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10. The Commission has considered the views of both Cancom and the applicant, and considers that Cancom is well positioned to meet the competitive challenges ahead. Given Cancom's strong position as the incumbent in the SRDU marketplace, the Commission considers that the licensing of Star Choice, as an immediate competitor, is an important factor in establishing a sustainable competitive environment.
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11. Consistent with the foregoing, it is a condition of licence that the SRDU undertaking to be carried on by Star Choice shall remain at all times an entity that is independent of, and legally separate and distinct from Shaw and all companies or other entities controlled directly or indirectly by Shaw.
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12. By condition of licence, none of the licensee's board of directors shall be persons who are members of the board of directors of Shaw or any company or other entity controlled directly or indirectly by Shaw.
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13. By condition of licence, no employee of the SRDU licensee, or any individual providing services on a contractual basis to the SRDU licensee, shall, at the same time, be employed by any BDU (including a DTH BDU) that is controlled, directly or indirectly, by Shaw, or by any company or other entity controlled directly or indirectly by Shaw.
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14. The Commission notes that the foregoing conditions of licence were agreed to by the licensee following discussions at the hearing and that similar conditions apply to the licence for the Star Choice DTH undertaking. The Commission is satisfied that adherence by Star Choice to the conditions of licence set out above addresses concerns relating to the independence of the Star Choice SRDU business from Shaw.
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15. It is a condition of licence that the licensee adhere to the provisions of section 4 of the Broadcasting Distribution Regulations (the regulations), in respect of any transfers of ownership or control.
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16. To the extent the licensee is entitled to information in the possession of a BDU, pursuant to an affiliation agreement, and such information is not available on the public record, by condition of licence the licensee shall retain an independent third-party auditor to access such information and to ensure that only aggregate information and recommendations regarding the SRDUs' compliance with the terms of the DTH/SRDU signal supply agreement are transmitted to the licensee.
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17. The Commission notes the statements made by Star Choice at the hearing that it sees the primary role of an SRDU as extending service to remote communities, and that a competitive environment should provide competitive prices. The applicant also stated at the hearing: "...as wholesale suppliers, SRDUs provide licensed distribution undertakings with the raw materials they need to meet their competitive challenges. In this supportive role, our primary mandate must be to augment signal choice at the lowest possible cost." The Commission expects that its policy to permit entry to the SRDU marketplace will bring the benefits of competition to all areas served by SRDUs as they increasingly compete with each other and with terrestrial alternatives, such as optical fibre and microwave distribution networks.
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18. Star Choice proposed to distribute services from the list of Canadian and non-Canadian programming services set out in the Appendix to this decision. The signals include various Canadian television services as well as non-Canadian television services originating in Buffalo, New York and Spokane, Washington.
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19. The Commission notes the licensee's commitment to ensure that each regional package of non-Canadian 4+1 signals offered to BDUs is from a single metropolitan area.
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20. In addition, the licensee stated that it would ensure, as satellite capacity becomes available, that non-Canadian programming services originate in the same, or the closest, time zone to that of the region in which the BDU affiliate is located. The Commission notes the applicant's commitment, within one year of commencing operation, to apply for authorization to add the distribution of U.S. 4 + 1 signals originating in a market situated in the central time zone for the convenience of Star Choice's subscribers in that time zone.
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21. Consistent with the Commission's SRDU policy framework, Star Choice is authorized, by condition of licence, to distribute via satellite to its affiliates, the television signals of any of the services listed in the Appendix to this decision, subject to the following requirements:
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a) the licensee shall ensure that a majority of the television signals it distributes are Canadian services, and;
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b) the licensee shall distribute the signals of all conventional, Canadian, French-language television services that purchase national program rights. These services exclude the French-language television network service of the Canadian Broadcasting Corporation (CBC).
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For the purpose of this condition, non-Canadian services of the same affiliation will be counted as a single service.
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22. The Commission notes that the signals that Star Choice is authorized to distribute by condition of licence also appear in the List of Part 2 Eligible Satellite Services and/or the List of Part 3 Eligible Satellite Services, as appropriate, issued today in Public Notice CRTC 1998-61. Class 1 and Class 2 licensees are reminded that, in accordance with the Distribution and Linkage Requirements for Class 1 and Class 2 licensees (Public Notice CRTC 1997-151 dated 22 December 1997), a condition of licence is required in order to distribute these signals as part of the basic service.
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23. The Commission also notes that Star Choice and Cancom both indicated that they did not require exclusivity with respect to the programming services they will offer. Accordingly, the Commission is disposed to deal expeditiously with applications by either licensee to distribute any service that has been authorized, by condition of licence, for distribution by the other.
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24. The Commission's exclusion of the CBC French-language television network service from those that SRDU licensees are required to distribute is in recognition of the fact that, although the CBC is a purchaser of national program rights, this service is already generally available to BDUs via satellite. The Commission encourages the licensee, as resources permit, to increase the range of French-language television services, and to seek authorization for the distribution of English- and French-language radio programming services.
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25. The Commission notes the concerns expressed in interventions regarding the reception quality of SRDU signals, particularly in Canada's High Arctic. The Commission expects the licensee to ensure, as resources permit, that its signals are available for reception in all communities in Canada. This expectation does not apply to duplicate network signals or signals that are relevant only for a particular region.
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26. By condition of licence, the licensee must provide its service to all of the following undertakings whose operators are willing to enter into affiliation agreements with it:
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i) terrestrial BDUs that are licensed by the Commission or operating in accordance with an exemption from licensing granted by the Commission; and,
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ii) licensed DTH distribution undertakings (for retransmission to DTH subscribers only).
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27. It is a condition of licence that the licensee shall not delete, curtail or alter the programming services which it distributes to BDU's in any manner from the form in which they are transmitted for public reception by the originating broadcasters, except such alterations as are incidental to the transmission of the services using digital video compression technology and except as may be authorized or required by the Commission in writing.
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28. In its application, Star Choice proposed that its rates not be regulated, and indicated rates would be subject to competitive forces. Star Choice stated at the hearing that monthly prices for signals would be based on the number of signals, number of subscribers and length of contract.
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29. As discussed in Public Notice CRTC 1998-60, the Commission has determined that regulation of the rates charged by SRDUs is not appropriate at this time. Nevertheless, as mentioned earlier in this decision, there exists uncertainty surrounding the future ownership structure within the Canadian SRDU industry. The Commission therefore emphasizes that it is prepared to reconsider the possibility of regulating the rates charged by SRDUs at the time it considers the licence renewals of Cancom and Star Choice in two years.
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Contribution to Canadian programming
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30. Consistent with the Commission's policy framework for SRDUs, and as agreed to by the SRDU applicants at the hearing, all Canadian SRDUs are required to contribute a minimum of 5% of the annual gross revenues derived from their broadcasting activities to the creation and presentation of Canadian programming.
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31. This is the same level of contribution that the regulations require of all BDUs, with the exception of Class 3 terrestrial distributors. It also approximates the amount that Cancom currently contributes to Canadian programming on an annual basis through a number of initiatives. These initiatives chiefly take the form of financial contributions to parties who might otherwise have difficulty obtaining funding, including groups active in Aboriginal and French-language broadcasting and in programming involving distance learning.
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32. Accordingly, the Commission requires Star Choice, by condition of licence, to contribute a minimum of 5% of its annual gross revenues derived from broadcasting activities to the creation and presentation of Canadian programming.
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33. Star Choice is also required, by condition of licence, to file a report for the Commission's approval within three months of the date of this decision, identifying the recipient(s) of its contributions to the creation and presentation of Canadian programming, as well as the projected annual amounts that Star Choice intends to allocate to each and the timing of such contributions, if the contribution is to a recipient other than a production fund. Contributions directed to a production fund are required to be made on a monthly basis, the first payment to be made within 45 days of the end of the month in which Star Choice commences operation and, thereafter, within 45 days of each month's end. As a matter of policy applicable to any licensed SRDU, the Commission has decided that funds allocated to subsidize the provision of decoder equipment to BDUs are not eligible contributions.
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Undue preference and dispute resolution
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34. The licensee, by condition of licence, shall not give an undue preference to any person, including itself, or subject any person to an undue disadvantage.
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35. In this regard, the Commission has considered requests from various parties that it require SRDU licensees to file affiliation agreements. The Commission has decided not to do so at this time, but may require that such agreements be filed, on a case by case basis as may be necessary. The Commission may, on request, grant confidentiality concerning all or part of such agreements that it requires be filed in relation to a specific complaint.
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36. It is a condition of licence that, if there is a dispute between the licensee and a distribution undertaking, whether operating by licence or by exemption order, concerning the terms under which programming services are or may be provided, then the licensee shall submit to a dispute resolution process, if the Commission so requires.
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37. 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.
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38. This authority will only be effective and the licence will only be issued at such time as the construction of the undertaking is completed and it is prepared to commence operation. If the construction is not completed within twelve months of the date of this decision or, where the applicant 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.
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39. The Commission acknowledges the numerous interventions submitted with respect to the Star Coice application, and has taken into consideration the comments contained therein and Star Choice's replies.
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This decision is to be appended to the licence.
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Laura M. Talbot-Allan
Secretary General
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This document is available in alternative format upon request.
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Appendix to Decision CRTC 98-172
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Signal authorized for distribution by Star Choice
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Canadian Television Services
CHAN-TV (CTV) Vancouver
CHBC-TV (CBC) Kelowna
CBXFT (SRC) Edmonton
CFRN-TV (CTV) Edmonton
CITV-TV (IND) Edmonton
CBRT (CBC) Calgary
CBLT (CBC) Toronto
CFMT-TV (IND) Toronto
CIII-TV (GLOBAL) Toronto
CITY-TV (IND) Toronto
CFTO-TV (CTV) Toronto
TVOntario (TVO and TFO) Toronto
CHCH-TV (IND) Hamilton
Ontario Legislative Assembly Proceedings
CPAC (IND) Ottawa
CFCF-TV (CTV) Montréal
CFJP-TV (TQS) Montréal
CFTM-TV (TVA) Montréal
CBFT (SRC) Montréal
CFTU-TV (IND) Montréal
CJNT-TV (IND) Montréal
Télé-Québec (STQ) Montréal
Quebec National Assembly Proceedings
Atlantic Satellite Network (ASN) Halifax
CBHT (CBC) Halifax
CJCH-TV (CTV) Halifax
CJON-TV (CTV) St. John's
U.S. Television Services (4 + 1)
WKBW-TV (ABC) Buffalo, New York
WIVB-TV (CBS) Buffalo, New York
WGRZ-TV (NBC) Buffalo, New York
WUTV (FOX) Buffalo, New York
WNED-TV (PBS) Buffalo, New York
KXLY-TV (ABC) Spokane, Washington
KREM-TV (CBS) Spokane, Washington
KHQ-TV (NBC) Spokane, Washington
KAYU-TV (FOX) Spokane, Washington
KSPS-TV (PBS) Spokane, Washington
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