ARCHIVED -  Decision CRTC 99-147

Decision

Ottawa, 17 June 1999

Decision CRTC 99-147

Videotron (Laurentian) Ltd.

Buckingham, Masson and Angers; Lachute and Brownsburg, Quebec;Rockland, Clarence Point, Wendover, Hammond/Cheney and surrounding area, Ontario - 199804373 - 199804381 - 199806741

Applications processed by
Public Notice CRTC 1998-107
dated 14 October 1998

Summary

The Commission, by majority vote, denies the applications by Videotron (Laurentian) Ltd. (Videotron) for relief from the requirements of section 29 of the Broadcasting Distribution Regulations (the regulations).

The Commission notes that Videotron is a multiple system operator. It operates on a for-profit basis. Having examined all of the arguments raised in the applications, the Commission considers that Videotron has not shown that a derogation from the requirements of section 29 of the regulations would be warranted. The Commission considers that the split between contributions to local expression and recognized production funds set out in section 29 of the regulations is appropriate for this commercial cable licensee.

The licensee will therefore continue to be required to devote a minimum of 5% of gross revenues derived from broadcasting activities to Canadian programming, on an annual basis, for each undertaking. A portion of this money may be allocated to community programming with the remainder going to production funds, according to the formula set out in the regulations.

The requirements of section 29

1.  Section 29 of the regulations provides that Class 1 broadcasting distribution undertakings (BDUs) must contribute at least 5% of their gross revenues derived from broadcasting activities to Canadian programming unless a condition of licence provides otherwise. BDUs may use a portion of the contribution to support local expression, such as the community channel, if they elect to provide such a service. The balance of the 5% contribution must be remitted to funds that support the production of Canadian programming. The specific allocation between the amount of money that supports local expression and the amount of money directed to production funds varies according to the class of undertaking and the number of subscribers.

Buckingham, Masson and Angers

2.  Videotron's Buckingham, Masson and Angers undertaking is a Class 1 cable system with fewer than 20,000 subscribers. The regulations provide that, for this undertaking, Videotron must make the contributions set out below to funds supporting the production of Canadian programming.

3.  For the broadcast year ending 31 August 1999 and in each broadcast year after, Videotron must contribute not less than the greater of:

·  5% of gross revenues derived from broadcasting activities in that year, less any contribution to local expression made in that year; and

·  1.5% of gross revenues derived from broadcasting activities in that year.

4.  Accordingly, if Videotron elects to operate a community channel on this undertaking it may:

·  for the broadcast year ending 31 August 1999 and in each broadcast year after, deduct up to 3.5% of gross revenues derived from broadcasting activities from the total 5% contribution it would otherwise be required to make and direct them to the operations of its community channel. In such a case, it must contribute a minimum of 1.5% of such revenues to funds supporting the production of Canadian programming.

Lachute and Brownsburg; Rockland, Clarence Point, Wendover, Hammond/Cheney and surrounding area

5.  Theses undertakings are Class 2 cable systems. The regulations provide that Videotron must, in each broadcast year and for each undertaking, allocate 5% of its gross revenues derived from broadcasting activities to Canadian programming, less any contribution to local expression.

6.  Accordingly, if Videotron elects to operate a community channel, it may direct all 5% of its gross revenues derived from the broadcasting activities of each undertaking to local expression. Any of this minimum 5% not directed to local expression must be contributed to production funds.

7.  In Public Notice CRTC 1997-150, which was issued with the revised regulations, the Commission stated that it would allow exceptions to section 29 of the regulations on a case-by-case basis related to the special circumstances of a licensee's operations. The regulations provide that such exceptions may be granted by condition of licence.

The applicant's position

8.  For its Buckingham undertaking, Videotron requested authorization to contribute 1.5% to production funds and 3% to local expression. Under this proposal, Videotron's total contribution would be 4.5% instead of 5%.

9.  For its Lachute and Rockland undertakings, Videotron asked for authority to reduce its overall 5% contribution to 3.5%. Videotron proposed to allocate all of the 3.5% to local expression.

10.  Videotron stated that, if these applications were approved, its Hull, Gatineau and Aylmer undertaking would continue to provide 40% of the community programming for its Buckingham, Lachute and Rockland undertakings as well as for the community channel operated on the undertakings serving Thurso, Plaisance and Papineauville; Montebello-Fassett; and Saint-André-Avellin (the Papineau undertakings). In addition, Videotron proposed that, starting in 2000, it would contribute a minimum of 3% of its gross revenues derived from broadcasting activities to Canadian production funds and 2.2% to local expression for its Hull undertaking. Under this proposal, Videotron's total contribution would be 5.2% instead of the 5% required by the regulations.

11.  Section 29 of the regulations does not apply to Class 3 systems, such as the Papineau undertakings. Nevertheless,Videotron suggested that a contribution of 2.3% from these systems be recognized under section 29 for the purpose of contributing to local expression.

12.  Videotron stated that, if its applications were denied, it would have to close the community channel on its Papineau undertakings.

The Commission's decision

13.  Section 3(1)(e) of the Broadcasting Act (the Act) stipulates that "each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming." The regulations provide that distributors must contribute a minimum of 5% of their gross annual revenues derived from broadcasting activities as a means to achieve this fundamental objective, unless a condition of licence provides otherwise.

14.  An extensive public process resulted in the publication of Public Notice CRTC 1997-150 and the adoption of the regulations which came into force on 1 January 1998. During this process, the Commission explored the appropriate allocation between the amount of money that may be allocated to local expression and the amount that would be remitted to production funds at a national and regional level.

15.  The Commission appreciates the important service that community channels provide. That is why section 29 of the regulations allows smaller cable systems to reduce their contributions to production funds if they operate community channels.

16.  The Commission, however, continues to believe that contributions by broadcasting distribution undertakings to production funds provide essential support for the production of Canadian programming. Such support is necessary if Canadian programming is to continue to have a strong presence in a more competitive broadcasting environment. The Commission considers that subscribers will benefit from higher quality and more diverse Canadian programming on the services offered by distribution undertakings as a result of these contributions. It therefore wants to ensure that production funds receive broad support from the distribution sector.

17.  The Commission notes that Videotron is a multiple system operator and operates on a for-profit basis. Having examined all of the arguments raised in the applications, the Commission considers that Videotron has not shown that a derogation from the requirements of section 29 of the regulations would be warranted. The Commission considers that the allocation between contributions to local expression and recognized production funds set out in section 29 of the regulations is appropriate for this commercial cable licensee. The Commission therefore denies Videotron's applications.

Related CRTC documents
 Public Notice 1997-150 dated 22 December 1997: Broadcasting Distribution Regulations

 Decision CRTC 99-86: Cogeco Câble Canada inc. (denial of section 29 application)

 Decision CRTC 99-85: Westman Media Co-Operative Ltd. (approval of section 29 application)

 Decision CRTC 99-84: Campbell River TV Association (approval of section 29 application)

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Secretary General