ARCHIVED -  Public Notice CRTC 1999-29

Public Notice CRTC 1999-29

See also: 1999-29-1

Ottawa, 16 February 1999

Contributions to Canadian Programming by Broadcasting Distribution Undertakings

Summary

1. The Broadcasting Distribution Regulations (the regulations) provide that Class 1 and Class 2 licensees, as well as direct-to-home (DTH) satellite distribution undertakings, may direct up to 20% of their required contributions to Canadian programming to one or more independent production funds. This public notice clarifies and provides supplementary details relating to the Commission’s operating principles and guidelines for determining what constitutes an eligible independent production fund and for assessing the eligibility of contributions made by broadcasting distribution undertakings (BDUs). These clarifications supplement the information provided in Public Notice CRTC 1997-98 Contributions to Canadian Programming by Broadcasting Distribution Undertakings which remains in effect.

2. In addition, this notice describes the manner in which BDUs or independent production funds may obtain prior confirmation that particular funds are eligible under the contributory regime prescribed by the regulations.

Background

3. Section 29(2) and section 44 of the regulations stipulate that if a licensee is required under these sections to make a contribution to Canadian programming, it shall contribute (a) to the Canadian production fund at least 80% of its total required contribution; and (b) to one or more independent production funds, the remainder of its total required contribution.

4. The regulations define the "Canadian production fund" as the Canada Television and Cable Production Fund, or its successor. The Canadian production fund is currently administered by the Department of Canadian Heritage and is now named the Canadian Television Fund (CTF). An "independent production fund" is defined as a production fund, other than the Canadian production fund, that meets the criteria listed in Public Notice CRTC 1997-98 as amended from time to time.

5. In that Notice, the Commission indicated that a BDU may direct up to 20% of its total contribution to one or more new or existing independently-administered funds provided each fund meets the following criteria:

· the fund is a permanent fund;

· recoupments of equity payments or loans are reinvested in the fund;

· a maximum of 5% of the contributions received from BDUs is spent on fund administration;

· BDU contributions do not serve to fund programs in categories 1 (News), 3 (Reporting and Actualities), or 6 (Sports);

· productions receiving funding have obtained a licence fee; and

· productions receiving funding achieve eight points out of ten for Canadian content certification as set out in Public Notice CRTC 1996-51 dated 3 April 1996.

6. The Commission notes that the points system for Canadian content is addressed more fully in Public Notice CRTC 1994-10 dated 10 February 1994. Those interested in the points system should consult that public notice as well.

7. Since the Commission issued Public Notice CRTC 1997-98, it has received a number of requests to clarify some of the criteria set out in that notice in order to ensure that contributions made by BDUs comply with the requirements set out in sections 29 or 44 of the regulations.

8. Accordingly, the Commission is providing clarifications with respect to the types of independent production funds that are eligible to receive contributions under the regulations. All of the criteria set out in Public Notice CRTC 1997-98 will continue to apply. Only those criteria needing further clarification are addressed below.

Clarifications

An independent fund

9. The Commission is of the opinion that any production fund that receives and administers contributions from BDUs must be constituted and operate at arm’s length from its contributors. The Commission will consider that funds are independently-administered for the purpose of receiving and administering contributions from BDUs when they meet the following requirements:

a) Composition of the Board

· All members of the Board must be Canadian, as defined in Direction to CRTC (Ineligibility of Non-Canadians).

· No more than one third of the members of the Board may be members representing BDUs.

· Representatives of BDUs shall have the right to cast no more than one-third of the votes in a meeting.

· All decisions must be made by majority vote.

b) Funding Decisions

· The Board shall ensure that all monies are directed to fund the types of productions contemplated in Public Notice CRTC 1997-98, subject to the clarifications contained in today's notice.

· The Board shall have sole and exclusive responsibility for its funding decisions.

· The Board shall establish an effective and efficient process to ensure that applications for funding of productions are appraised objectively.

· The Board shall supervise the implementation of its funding decisions.

The fund is a permanent fund

10. The Commission considers that the mere absence of an expiry date is insufficient for a fund to qualify as a "permanent fund". The Commission considers that permanence includes making provision for the distribution of the fund upon its dissolution so that the monies are directed to other qualifying production funds. Therefore, in order to be considered a permanent fund, the constituting documents of the fund should provide that, upon dissolution, monies held by the fund are to be transferred to one of the following:

(a) the Canadian production fund, as defined in the regulations; or

(b) another eligible independent production fund, as defined in the regulations.

11. Where provision is made for the transfer of contributions to a specific independent production fund [under (b) above], provision should also be made that, in the event that such a fund no longer exists at the time of dissolution, the contributions will be transferred to the Canadian production fund.

Recoupments of equity payments or loans are reinvested in the fund

12. Recoupments of equity payments or loans must be reinvested in the fund and not flow through to BDUs.

13. Recoupments of equity payments include: (i) any recoupment, refund or distribution of capital that a fund receives on account of its equity investment in a production, and (ii) any dividends or other benefits received by a fund on account of any equity investment.

14. Recoupments of loans include: (i) any repayment of a loan made by a fund, and (ii) any interest payments received by a fund on account of a loan.

15. In addition, since the purpose of the contribution regime is to allow contributions to be funnelled directly to eligible productions, all contributions to production funds, and any recoupments on equity or loans, must be directed to productions within a period of two years from the date of the contribution or the recoupment. A scheme whereby only the recoupments or interest earned are used to finance productions would not achieve the purpose intended under this contributory regime.

BDU contributions do not serve to fund programs in categories 1 (News); 3 (Reporting and Actualities) or 6 (Sports)

16. The definitions of categories referred to in this criterion are found in Schedule 1 of the Television Broadcasting Regulations, 1987.

Productions receiving funding have obtained a licence fee

17. In imposing this criterion, the Commission’s intention was to ensure that funds were not being used to finance pilot programs that had not first obtained a licence fee from any broadcaster. Therefore, where pilot programs are concerned, only those for which a licence fee has already been paid will be eligible to receive funding.

Application of guidelines

18. These guidelines apply to all existing and new production funds. In order for their contributions to be recognized under the regulations, BDUs must ensure that the production funds to which they choose to contribute meet all the criteria set out in Public Notice CRTC 1997-98, as clarified in this public notice.

19. As stated in Public Notice CRTC 1997-98, BDUs may direct their contributions to independent production funds designed to assist productions such as educational or informational programs, documentaries, programs produced by Aboriginal producers and many other types of programs that do not currently have access to the Canadian production fund. However, independent production funds may also serve to finance productions that would otherwise qualify under Canadian production fund guidelines.

Reporting mechanism

20. In Circular No. 426, the Commission indicated that licensees must provide, when filing their Annual Returns, a reconciliation of their contributions to qualifying production funds and, where applicable, to local expression. Their auditors must also attest that they have complied with the requirements of sections 29 and 44 of the regulations, as applicable.

21. This reporting mechanism will allow the Commission to monitor the compliance of BDUs with sections 29 or 44 of the regulations.

Confirmation of eligibility of independent production funds

22. The Commission will, upon application, provide prior confirmation of the eligibility of independent production funds for the purpose of receiving and administering up to 20% of the total contribution to Canadian programming. This will provide licensees with certainty that their contributions are directed to eligible independent production funds as contemplated under the regulations.

23. In order to obtain this prior confirmation from the Commission, BDUs or independent production funds must file the relevant information outlined in the attached form entitled Request for certification of eligibility of independent production fund. Submission forms are also available from the Commission upon request and on the Commission’s website at www.crtc.gc.ca. Completed forms should be addressed to the Secretary General, CRTC, Ottawa, K1A ON2.

24. The Commission will send the applicant a written confirmation or denial of eligibility based on the information provided. Parties will also be expected to file all information pertaining to any change that may affect the eligibility of an independent production fund to receive and administer the portion of contributions to BDUs that may be directed to them.

25. A list of eligible funds will be available on the Commission’s website as soon as such confirmations are made by the Commission. The Commission will also retain the information on a public file.

Filing of information concerning funds

26. The Commission expects licensees of BDUs who wish to make contributions to independent production funds for the purpose of complying with the regulations to file with the Commission the information set out in the attached form by 23 April 1999. The information should relate to each independent production fund to which the licensee intends to contribute. Information for new funds should be filed with the Commission upon establishment in order to ensure their eligibility to receive and administer contributions from BDUs.

Secretary General

This document is available in alternative format upon request, and may also be viewed at the following Internet site: http://www.crtc.gc.ca