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Ottawa, 18 February 1998
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Telecom Order CRTC 98-186
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Allocation of Satellite Capacity and Related Resale and Sharing
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File No.: 8622-H8-01/97
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1. HomeStar Services Inc. (HomeStar) filed an application, dated 27 February 1997 pursuant to Part VII of the CRTC Telecommunications Rules of Procedure, requesting that the Commission initiate, on an expedited basis, a public proceeding pursuant to its jurisdiction under subsection 28(1) of the Telecommunications Act (the Act) to review the manner in which Telesat Canada (Telesat) allocates satellite capacity.
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2. HomeStar submitted that the proposed proceeding should address the following issues: (1) given the interlocking ownership structure of Bell Canada Enterprises (BCE), ExpressVu Inc. (ExpressVu) and Telesat, whether, in its allocation of satellite capacity to ExpressVu, Telesat conferred an undue preference on ExpressVu; and (2) a full review of Telesat's first come, first served procedures for allocating satellite capacity under its Order Priority List (OPL) with a view to requiring that orders for RF channel service and applicants' placement on the OPL should be a matter of public record.
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3. The Commission issued Allocation of Satellite Capacity and Related Resale and Sharing Issues, Telecom Public Notice CRTC 97-13, dated 22 April 1997 (PN 97-13), which indicated that the satellite capacity situation has evolved since the current OPL process was instituted and is currently characterized by a scarcity of satellite capacity and use of the resale provisions of Telesat's tariff. The Commission noted the interlocking ownership of Telesat, ExpressVu and BCE, but concluded that the satellite capacity recently assigned to ExpressVu was for restoral of capacity lost with the partial failure of Anik E1, and found no evidence of undue preference being conferred on ExpressVu by Telesat in that case. PN 97-13 initiated a proceeding to consider whether the OPL and its associated procedures, together with current resale and sharing provisions in Telesat's tariff should be amended to ensure a fair and equitable allocation of satellite capacity in the context of the current environment of restricted supply.
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4. Submissions were received from Telesat, Canadian Satellite Communications Inc. (Cancom), Canadian Satellite Users Association (CSUA), ExpressVu, Star Choice Television Network Incorporated (Star Choice) and Stentor Resource Centre Inc. (Stentor). Parties then filed comments on the submissions and reply comments. The Director, Competition Bureau, Industry Canada (Director) also provided a comment on the record of the proceeding. Star Choice indicated that, given its proposed merger with HomeStar, the parties decided that it would be more efficient to avoid duplicative submissions.
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OPL, first come, first served principle
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5. Parties who commented endorsed the first come, first served principle of the OPL as the most appropriate procedure to assign satellite channels. HomeStar initially questioned whether this was the best approach, but did not provide an alternative. The Commission concludes that the first come, first served principle is to remain the basis for satellite channel assignment.
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Restoral of Lost Capacity
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6. All parties who commented concurred that restoral of service should take precedence over the initial assignment of capacity under the OPL. Several parties proposed that the priority of service restoral over new assignments under the OPL should be explicitly stated in Telesat's tariff governing the OPL. The Commission concludes that Telesat's tariff should be amended to reflect the precedence of restoral of service over new capacity assignment under the OPL and hereby directs Telesat to file revised tariff pages explicitly providing for this.
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Resale and Sharing
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7. All parties to this proceeding, with the exception of Star Choice, found the existing resale provisions applicable to Telesat RF Channel service to be acceptable. Most parties shared the view of the CSUA that the resale provisions contribute to the efficient use of RF Channel services. Star Choice submitted that any proposed change to a full, partial or occasional use channel assignment involving a Telesat affiliate, whether by the OPL or resale, should be publicly disclosed and provide for a 10 day comment period. Telesat, Stentor and ExpressVu argued that the singling out of Telesat affiliates was discriminatory.
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8. The Commission notes that all Full Period RF Channel service is initially allocated through the OPL and concurs with parties that the resale provisions contribute to the efficient use of RF Channel services by making available for resale capacity under contract which is in excess of Telesat customers' requirements. The Commission further notes the authority of the Commission under subsection 28(2) of the Act to review and alter satellite channel assignments if required to ensure that the objectives of the Broadcasting Act are achieved. The Commission concludes that no changes are required to the current resale and sharing provisions of Telesat's tariff.
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Scope of the OPL
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9. Star Choice proposed that the scope of service requests subject to the OPL should be expanded to include bulk partial channel and occasional use requests. Star Choice also proposed that the assignment of Direct Broadcast Satellite (DBS) channels on Telesat's planned DBS should be subject to the OPL when assigned to Telesat affiliates.
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10. CSUA agreed that bulk partial channel service is being used in some cases to provide Digital Video Compression (DVC) broadcasting service and that both partial channel and DVC services should be subject to the OPL procedure. CSUA disagreed with the proposal to make occasional use requests subject to the OPL since it would be unworkable. CSUA and other parties also disagreed with the proposal to make DBS service subject to the OPL. Telesat stated that the allocation of this capacity is one of the conditions of its DBS licence from Industry Canada.
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11. The Commission is of the view that DVC service is sufficiently competitive that the allocation provisions of the OPL are not warranted for either DVC service itself or the related bulk partial channel service. The Commission notes that the OPL would continue to apply to the assignment of the Full Period RF Channels used by Telesat and other DVC service providers.
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12. The Commission notes that DBS service will be provided by Telesat pursuant to transponder purchase agreements which have been approved by the Commission, and concludes that the application of the OPL would not be consistent with the approved agreements.
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13. The Commission concurs with the CSUA that the application of the OPL procedures to occasional use service would be unworkable and is of the view that the OPL should not be extended to apply to Occasional Use RF Channel service. The Commission concludes that the OPL procedures should continue to apply to only Full Period RF Channel service.
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OPL Fee
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14. Telesat proposed that, to discourage speculative OPL service requests, a fee equal to one month of tariff rates should apply to new OPL requests. The proposed fee would be applied to the service with interest when the service starts, would be refunded with interest if Telesat could not provide the service requested, or would be subject to forfeiture if the customer refused the service, provided that service was offered according to the customer's requirements.
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15. Cancom concurred with the concept of an OPL fee, but argued that a fee of $10,000 would be more appropriate. The CSUA supported the introduction of an OPL fee but suggested that any deposit should be in the form of a letter of credit or, alternatively, a fee of $5,000 per OPL request. ExpressVu also supported the introduction of an OPL fee.
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16. The Commission concurs that an OPL fee would discourage speculative OPL entries and would improve the OPL process. The Commission shares Cancom's concern that one month's tariff rate may be an excessive fee amount given that service requests are often made many months in advance. The Commission is also of the view that a large fee would discourage start-up companies that may have limited cash flow before they start operations.
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17. Accordingly, the Commission directs Telesat to file revised tariff pages, incorporating a fee for new OPL service requests of $10,000 per RF Channel requested. The tariff shall specify that the fee is to be applied to the service cost when a contract is signed, is to be refunded if no service is available that is compatible with the customer's requirements and the customer is removed from the OPL, and is to be forfeited if service corresponding to the request is offered but the customer does not sign a contract. The tariff shall also provide that interest is to be earned on fee amounts deposited at the interest rate specified in CRTC Tariff 8001 for Telesat's Deferred Payment Plan.
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18. Telesat's tariff currently permits customers to accept a service which does not meet all of their requirements and to maintain their position on the OPL until a suitable service becomes available. Telesat is directed to file revised tariff pages providing, in that circumstance, that the OPL fee is to be applied to the first service accepted.
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Contract Advance Commitment
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19. Under the OPL tariff, a customer must sign a contract at least three months prior to the start of service. This provision is to allow Telesat to offer a channel to other customers if the first customer does not commit to take the channel. CSUA proposed to shorten that advance commitment period to one month. ExpressVu agreed that the prior commitment period should be shortened. Telesat argued that one month was insufficient time to arrange to offer a channel to another customer if the first customer refused the service. Telesat noted that there could be a loss of revenue if a contract is not signed at the time that a channel becomes available.
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20. The Commission is of the view that the introduction of an OPL fee, which will impose a penalty for refusal of a suitable service, will make the OPL process more efficient. As a result, the Commission concurs with parties that the contract advance commitment period could be shortened. The Commission approves a reduction of the contract advance commitment period to two months and hereby directs Telesat to file revised tariff pages incorporating this reduction.
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Transparency of the OPL
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21. CSUA argued that, since Telesat is now controlled by BCE and affiliated with ExpressVu, the possibility of undue preference in the allocation of satellite channels requires that the OPL become a more public process. CSUA called for public disclosure of the customer name, amount of channels, type of service and start date of all service requests on the OPL. CSUA also argued that Telesat should make its requests for channels used by its competitive services through the OPL and that this requirement should be made explicit in Telesat's tariffs.
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22. Star Choice proposed that any OPL entries for Telesat affiliates should be publicly disclosed. The Director noted that customers should be able to make complaints concerning the operation of the OPL and, in view of the change in Telesat ownership, which, it stated, creates the appearance that Telesat may have an incentive to provide a preference to its affiliated firms, supported the CSUA proposal for public disclosure of the OPL.
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23. Cancom objected to any disclosure of customer information noting particularly the harm in disclosure of strategic plans in emerging markets. Cancom submitted that, if the Commission were to accept the CSUA proposal for disclosure, the customer name, at a minimum, should remain confidential. Stentor also argued that the disclosure of customer information could cause harm to the customer.
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24. Telesat noted that the OPL process is tariffed, that all customers with orders on the OPL are informed of their position on the list and changes to their position, and that any channels assigned are publicly disclosed through the channel assignment charts posted on Telesat's Internet site. Based on that information, Telesat contended that a customer can monitor the operation of the OPL and request a review under section 28 of the Act if necessary.
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25. Telesat argued that public disclosure of OPL entries would harm its customers by disclosing their plans in competitive markets, and would hurt Telesat by disclosing its customer lists prior to the opening of satellite service to competition. Telesat further argued that the identity of some customers could be determined from the service requests even if the names are not disclosed. Telesat submitted that since it uses the OPL to request channels for its own competitive services, it would be harmed by the disclosure of its plans in those markets.
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26. The Commission concurs with those parties that argued for additional disclosure of information concerning OPL entries in light of Telesat's affiliate relationship with customers and the current scarcity of satellite capacity. The Commission has determined that the public interest in the disclosure of OPL information, except the customer name, outweighs any harm that may result.
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27. Telesat is therefore directed to provide to the Commission, with its quarterly tracking report, a copy of the current OPL showing the customer identity, amount of channels requested, type of service, and proposed start date for each list entry. An abridged version is to be filed for the public record at the same time, which would maintain the identity of customers as confidential.
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28. The Commission considers Telesat's practice of disclosing channel assignment charts to be helpful to the OPL process and directs Telesat to continue to make the charts available in their currently abridged format, updated at least once per quarter.
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29. The Commission confirms that the OPL tariff provisions apply to all Telesat channel assignments, including those assigned to Telesat affiliates or Telesat itself. The Commission has determined that no additional specific requirements for disclosure are to apply for affiliates of Telesat or Telesat itself.
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Implementation
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30. All revised tariff pages which Telesat has been directed to file in this Order are to be filed within 30 days of the date of this Order for the approval of the Commission.
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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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