ARCHIVED -  Decision CRTC 99-148

Decision

Ottawa, 17 June 1999

Decision CRTC 99-148

Regional Cablesystems Inc. (formerly, Northern Cable Holdings Limited, and Sudbury Cable Services Ltd.)

Timmins and Sudbury, Ontario - 199803961 - 199803979

Applications processed by
Public Notice CRTC 1998-103
dated 8 October 1998

Summary

The Commission, by majority vote, denies the applications by Regional Cablesystems Inc. (Regional) (formerly, Northern Cable Holdings Limited and Sudbury Cable Services Ltd.) for relief from the requirements of section 29 of the Broadcasting Distribution Regulations (the regulations).

The Commission notes that Regional is a multiple system operator. It operates on a for-profit basis. Having considered all of the arguments raised in the applications, the Commission considers that Regional has not shown that a derogation from the requirements of section 29 of the regulations would be warrented. 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. 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.

Timmins

2.  Regional operates a Class 1 cable system serving less than 20,000 subscribers at Timmins. Pursuant to the regulations, Regional 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, Regional 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 Regional elects to operate a community channel, 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.

Sudbury

5.  Regional operates a Class 1 cable system with more than 20,000 but fewer than 60,000 subscribers at Sudbury. Pursuant to the regulations, Regional must make the following contributions to funds supporting the production of Canadian programming.

6.  For the broadcast year ending 31 August 1999, Regional 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

·  2.5% of gross revenues derived from broadcasting activities in that year.

7.  For the broadcast year ending 31 August 2000 and each broadcast year thereafter, Regional 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

·  3% of gross revenues derived from broadcasting activities in that year.

8.  Accordingly, if Regional elects to operate a community channel, it may:

·  for the broadcast year ending 31 August 1999, deduct up to 2.5% 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 2.5% of such revenues to funds supporting the production of Canadian programming; and

·  for the broadcast year ending 31 August 2000, and for each year thereafter, deduct up to 2% 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 3% of such revenues to funds supporting the production of Canadian programming.

9.  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

10.  The applicant requested authorization to allocate the entire 5% of gross revenues derived from broadcasting activities to community programming for each undertaking. Under this proposal, there would be no contribution to production funds, as section 29 provides.

11.  Regional operates some 27 community channels on Class 1 systems throughout northeastern Ontario, including the Sudbury and Timmins undertakings, as well as five community channels on Class 2 systems and 20 on Class 3 systems. Regional stated that the Sudbury and Timmins community channels provide indirect support to those offered on its other undertakings. In addition, Regional indicated that in some smaller communities its community channel provides the only local programming. Regional stated that, if these applications were not approved, there would be a reduction in the budgets for these community channels.

12.  On the other hand, Regional stated that, if these applications were approved, it would maintain its existing community channels and increase the level of community programming for the various districts and communities that it serves.

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, especially in areas where they are the only source of local television programming. That is why section 29 of the regulations allows smaller cable systems to reduce their contributions to production funds if they operate community channels. In this context, the Commission notes the interventions to these applications indicating that the applicant's community channels are important sources of local news and information.

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 Regional is a multiple system operator. It operates on a for-profit basis. Having considered all of the arguments raised in the applications, the Commission considers that Regional 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 these 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)

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

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Secretary General