ARCHIVED -  Public Notice CRTC 1998-89

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Public Notice

  Ottawa, 19 August 1998
  Public Notice CRTC 1998-89

Broadcasting Distribution Undertakings: Confidentiality of Information Filed in Annual Returns and in Applications for New Licences

  1. This public notice sets out the Commission's policy regarding:
  a) the confidentiality of the annual returns that licensees of broadcasting distribution undertakings (BDUs) are required to file in accordance with section 11 of the Broadcasting Distribution Regulations (the regulations), and
  b) the information that the Commission will require of applicants for licences to operate new BDUs and the Commission's treatment of that information with respect to confidentiality.
  2. The Commission notes that these determinations respond to comments contained in a letter dated 20 March 1998 from the Canadian Cable Television Association (the CCTA) requesting that the Commission keep confidential the 1997 cable annual return data, and all future data of a similar nature to be filed by cable licensees. The CCTA argued that public disclosure of this information would harm cable operators in a competitive environment.
  3. Moreover, in a letter dated 3 March 1998 to NBTel Inc. (formerly The New Brunswick Telephone Company, Limited), the Commission stated that it would issue broad guidelines as to what information it will require in applications for broadcasting distribution licences and how it will treat that information with respect to confidentiality.
  Confidentiality of BDU Annual Returns
  4. In recognition of the fact that cable undertakings have, until recently, operated as effective monopolies, the Commission has maintained an open public process in which all of the information filed in a cable undertaking's annual return, including the financial statements, have been made available to the public. In contrast, because radio and television undertakings have been licensed on a competitive basis, their annual returns have generally been kept confidential so as not to prejudice their ability to compete for revenues with other such undertakings operating in their markets. As effective monopolies, there has not been any comparable "competitive" public interest justification for keeping the annual returns of cable licensees confidential in the past, particularly in view of cable's access to regulated fee increases.
  5. As a result of the Commission's policy of promoting and licensing competitors in the delivery of distribution services, cable's monopoly has begun to erode. The question must therefore be asked whether it is appropriate that the information contained in the annual returns of BDUs continue to be disclosed.
  6. The CCTA argued that the financial, market and technical information licensees are required to file in their annual returns is highly disaggregated and would be of value to a competitor. Moreover, because the information is system-specific, its disclosure would prejudice a cable operator's competitive position and cause it specific and direct harm. Specifically, the CCTA submitted that disclosure of the annual return information would significantly enhance the ability of existing and future competitors to target certain market segments and areas of a cable operator's business.
  7. The Commission considers that the disaggregated information reported in the cable annual return may be of value to the operators of other distribution undertakings in a competitive environment. Therefore, and for the same reasons it accords confidential treatment to radio and television annual returns, it is the Commission's view that the public interest would best be served by treating a BDU's annual return as confidential in certain circumstances, for example where disclosure might prejudice the BDU's ability to compete and contribute positively to the broadcasting system.
  8. The Commission recognizes, however, that incumbent cable distribution undertakings continue to dominate in all or most markets at this time, and that effective competition will take time to develop. In the policy framework for the new regulations, the Commission determined that, in light of this continuing market dominance, individual Class 1 cable undertakings will remain rate regulated until competitive market forces are sufficient to provide an effective alternative to regulatory price controls. Under the regulations, this benchmark is reached once the incumbent has lost 5% or more of the dwelling units to which it provided service on the date that the basic service of another licensed distribution undertaking first became available in its licensed area.
  9. The Commission therefore considers that, as a matter of general policy, in order to ensure active and informed participation by interested parties, the public interest will best be served by granting confidentiality for the annual returns of all BDU's except those that are rate regulated. Therefore, the Commission will continue to disclose information contained in the annual returns of a rate regulated BDU until such time as there is sufficient competition in the individual undertaking's market and the undertaking is rate deregulated in accordance with section 47 of the regulations. Specifically, the annual returns of an individual rate regulated BDU will be treated as confidential commencing with the return filed for the broadcast year during which the undertaking becomes rate deregulated.
  10. In keeping with the above, and consistent with its policy of encouraging the development of alternative competition in the delivery of communications services to the home, the Commission generally considers that the public interest will best be served by a policy of treating as confidential the annual returns of new entrants, whose rates are not regulated.
  Information that applicants for new BDUs will be required to file in support of their applications
  11. Fundamental to the Commission's mandate under the Broadcasting Act (the Act) to regulate and supervise all aspects of the broadcasting system, has been its policy to require that an applicant clearly demonstrate in its application that it has the necessary financial, technical, marketing and management resources, plans and expertise so that, if licensed, it will be able to implement its authority within a reasonable time frame and meet its other licence commitments and obligations. The Commission has long considered that a comprehensive application, including a detailed business plan, is the best evidence to assess these resources, plans and expertise.
  12. Although the Commission is convinced of the benefits of encouraging a strong competitive distribution market, it does not believe that this will come about through its licensing of any and all applications. Whether or not it will be competing with other undertakings, an applicant for a broadcasting licence assumes responsibility for implementing its authority promptly and for fulfilling all other commitments and obligations that may be imposed in the public interest under the Act. For this reason, the Commission will continue to give careful consideration to all applications for new BDUs as the industry enters the new competitive environment. Its objective will not be necessarily to license as many competitors as possible, but rather to license as many as can demonstrate that they can contribute positively to the broadcasting system.
  13. Accordingly, the Commission will continue to require each applicant for a licence to carry on a new Class 1 or Class 2 BDU to file with its application a business plan that is commensurate with the service that it is proposing. The business plan must have sufficient detail to enable the Commission to ascertain that the applicant, if licensed, has the necessary financial, technical, marketing and management resources, plans and expertise that will allow it to commence operations without delay and to contribute positively and effectively to the creation and sustainment of healthy com-petition, to the benefit of the broadcasting system, consumers and the industry.
  14. For the convenience of applicants, a new form entitled Application to Obtain a New Broadcasting Licence to Carry on a Distribution Undertaking has been developed and may be obtained by contacting the Commission. Applicants are encouraged to use the form, as it sets out all of the information that must be filed in order for an application to be considered by the Commission as generally being complete. Although a special or supplementary brief is not required, the Commission encourages applicants to submit such briefs or whatever additional information they believe may enhance or clarify their application.
  15. In order to reduce the regulatory burden for smaller undertakings, applicants proposing new Class 3 undertakings generally need not submit the financial information set out in section 7 of the application form. If, however, the application is for a new wireless Class 3 undertaking that would be technically mutually exclusive with that of another prospective new licensee (i.e. is competing for use of the same frequency spectrum), the entire application form must be completed and filed with the Commission. The purpose of requiring applicants in these competing situations to file the financial information set out in section 7 of the application form is to better enable the Commission to assess the relative merits of each application with a view to licensing the best proposal. Similarly, applicants proposing new subscription television systems, or undertakings that would only rebroadcast the radio communications of one or more other licensed undertakings generally need not submit the financial information required in section 7 of the application unless their proposals are technically mutually exclusive with those of another applicant.
  16. In addition to the requirements set out above in paragraphs 13 to 15, the Commission reserves the right to require such further information from an applicant as it deems necessary for the proper consideration of the application.
  The confidential treatment of information filed in an application
  17. With the exception of the actual costs of acquiring or producing specific programs and those items specifically provided for under section 20 of the CRTC Rules of Procedure, Commission policy has been to require applicants for new programming and distribution undertakings to make their applications available on the public file. Even in competitive radio and television markets, the Commission has required the public disclosure of an applicant's business plan, thereby making this business plan available to the applicant's potential competitors. In the Commission's view, the public interest is best served by having an open and transparent licensing process, one that benefits from the informed public participation of interested parties, including consumers' groups, other licensees, applicants, programmers and distributors, and members of the public.
  18. With the opening up of the broadcasting distribution market to competition, some parties have argued that the business plan, financial projections and assumptions of a prospective new BDU licensee should be kept confidential in order to avoid the possibility of prejudicing its competitive position.
  19. The Commission, however, is not convinced that it would be appropriate to grant blanket confidentiality to such an integral part of an application. Rather, the Commission considers that the public interest in licensing sustainable competition will best be served by ensuring that as much information as possible is on the public file in order to ensure the active and informed participation of these same interested parties in the licensing process.
  20. Accordingly, the Commission's general disposition in dealing with requests for confidentiality will be to continue to require that all of the information filed in an application for a new BDU licence be placed on the public file, unless the applicant can demonstrate to the satisfaction of the Commission that the public interest will best be served by keeping the information confidential.
  21. In Circular No. 429 issued today, the Commission has outlined the guidelines that it has followed and intends to follow with respect to confidentiality requests from licensees, and from applicants proposing to carry on new broadcasting undertakings.
  Laura M. Talbot-Allan
Secretary General
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