ARCHIVED -  Decision CRTC 99-149

Decision

Ottawa, 17 June 1999

Decision CRTC 99-149

Delta Cable Communications Ltd.

Delta, British Columbia - 199802442

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

Summary

The Commission, by majority vote, denies the application by Delta Cable Communications Ltd. (Delta Cable) for relief from the requirements of section 29 of the Broadcasting Distribution Regulations (the regulations).

The Commission notes that Delta Cable operates on a for-profit basis. In addition, the Commission notes that Delta, which is located close to Vancouver, is not an isolated community. Having examined all of the arguments raised in the application, the Commission considers that Delta Cable 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. 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.

2.  In this case, Delta Cable operates a Class 1 cable system with more than 20,000 but fewer than 60,000 subscribers. Pursuant to the regulations, Delta Cable must make the contributions set out below to funds supporting the production of Canadian programming.

3.  For the broadcast year ending 31 August 1999, Delta Cable 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.

4.  For the broadcast year ending 31 August 2000, and each broadcast year thereafter, Delta 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.

5.  Accordingly, if Delta Cable 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.

6.  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

7.  In its application, Delta Cable asked to be relieved of its obligation to contribute more than 2% of gross revenues derived from broadcasting activities to the production of Canadian programming. Specifically, it requested an exemption from the requirements of section 29 of the regulations to allow it to reduce its contributions to Canadian production funds by 0.5% for the year ending 31 August 1999, and 1% for every year after. In subsequent correspondence as part of the application process, Delta Cable requested a complete exemption from section 29 of the regulations. Under Delta Cable's proposal, there would be no contribution to production funds, as section 29 provides.

8.  Delta Cable argued that it would be more beneficial to its subscribers for it to contribute monies to community programming, rather than to Canadian production funds. On the other hand, Delta Cable stated that, if this application were not approved, it would have to reduce its contributions to community programming and increase its subscriber fees. Delta Cable did indicate, however, that it would continue to operate its community channel, should its application be denied.

9.  Delta Cable also stated that, if the application were approved, it would commit a minimum of 5% of its gross revenues derived from broadcasting activities to the community channel and create at least 9 hours of original programming each week "for the foreseeable future".

The Commission's decision

10.  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.

11.  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.

12.  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. In this context, the Commission notes the interventions on this application submitted by community members and organizations, as well as public officials, indicating that Delta Cable's community channel provides a vital service to the community.

13.  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.

14.  The Commission notes that Delta Cable operates on a for-profit basis. In addition, the Commission notes that Delta, which is located close to Vancouver, is not an isolated community. Having considered all of the arguments raised in the application, the Commission considers that Delta Cable 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 Delta Cable's application.

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