ARCHIVED -  Public Notice CRTC 1999-89

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Public Notice CRTC 1999-89

Ottawa, 21 May 1999

Licensing of new French-language specialty television undertakings – Introductory statement


Following the 7 December 1998 public hearing in Montréal, the Commission has decided to award licences to four new French-language specialty programming services, to be made available as a group on an exclusively French-language tier, effective 10 January 2000. In this introductory statement to the decisions published today, the Commission sets out the choices it has made and examines the terms and conditions that will govern the operation of these undertakings.

Approved applications

1. At the public hearing which began on 7 December 1998 in Montréal, the Commission considered 17 applications for licences to operate French-language specialty television undertakings. In decisions CRTC 99-109 to 99-112 published today, the Commission grants approval to four of these applications to provide the following services:

Canal Fiction (Alliance Atlantis Communications Inc. and Premier Choix Networks Inc., on behalf of a company to be incorporated), a service devoted to great drama programs of yesterday and today.

Canal Z, aux limites du savoir (Radiomutuel Inc.), a service devoted to science, technology and computer science.

Canal Histoire (Alliance Atlantis Communications Inc. and Premier Choix Networks Inc., on behalf of a company to be incorporated), a service devoted to history and recent events.

Canal Évasion (3403688 Canada Inc., BCE Inc. or a wholly-owned subsidiary, Serdy Direct Inc., TVA Group Inc., Media Overseas, Pathé/Canal Voyage France), a service dedicated to programs on travel, tourism and adventure.

2. In Decision CRTC 99-113 published today, the CRTC has denied 13 other applications considered at the public hearing. Further, in Public Notice CRTC 1999-90, the Commission sets out amended distribution and linkage requirements.


Objectives of the Commission

3. Since 1987, the Commission has approved the operation of 11 French-language specialty programming services. Today’s four approvals will thus increase to 15 the number of French-language specialty services available in Canada. By comparison, there are currently 29 approved English-language specialty services and five approved specialty services in other languages.

4. Since its approval of the first specialty services in 1984, the Commission has sought to achieve a reasonable balance in the supply of French-language and English-language specialty services to the Canadian public. In the pursuit of this objective, it has had to take into account the different characteristics of the French-language and English-language markets, as per the provisions of the Broadcasting Act (the Act).

5. In examining the present applications, the Commission’s primary goals were to obtain a group of diversified and complementary services that could be made available to subscribers at an affordable cost. These services had to appeal to the interests of the greatest possible number of viewers while strengthening the French-language component of the Canadian broadcasting system.

6. The applications were analysed according to the licensing criteria set out by the Commission in Public Notice CRTC 1997-33, Public Notice CRTC 1998-46 and in Notice of Public Hearing 1998-7-2. The Commission took two fundamental criteria into account: available channel capacity and costs. By so doing, it sought to ensure that a new group of French-language specialty services might be made available to subscribers at an affordable cost, while taking into account the limited channel capacity of most distribution undertakings in analog mode. The Commission generally envisions a total retail price of about six dollars in francophone markets. It also gave particular attention to proposals that would add to the diversity of programming available in the francophone market. The Commission also expected the approved undertakings to have the resources necessary to make a significant contribution to the achievement of the objectives set out in the Act, by offering quality programs that make as much use as possible of Canadian talent and Canadian resources.

Characteristics of the French-language market

7. One of the main characteristics of the French-language market is its relatively small size in relation to the English-language market, as illustrated by the number of potential cable distribution subscribers. Cable distribution is still the predominant distribution method in the marketplace; while there are approximately 6.6 million subscribers in the English-language market, the number of potential subscribers in the French-language market is only about 2 million. Another characteristic feature of the French-language market is the level of cable market penetration, which is on average 10% less in the French-language market. Among the reasons for this is the fact that fewer French-language services are available as compared to English-language services. Rates and costs for services are also generally higher on the French side because the market is smaller.

8. Conversely, the available channel capacity of cable distribution systems in analog format, albeit limited, seems to be greater in the French-language market than in the English-language market. Indeed, this is one of the factors behind the Commission’s decision to consider the possibility of approving new French-language specialty services, whereas its consideration of applications for English-language specialty services has been postponed. The Commission also saw an opportunity to correct the imbalance that exists in the supply of French-language specialty services by expanding the range of services now available.

Available channel capacity in the cable distribution industry

9. In approving these new services, the Commission took into account current distribution market realities. As stated above, this market is largely dominated by cable distribution undertakings. Distribution in analog format is the most widespread form of distribution. Moreover, digital services are currently available only to a very small number of subscribers. Distribution in analog format still continues to limit cable distributors’ channel capacity.

10. In order to assess the distribution industry’s ability to accommodate new specialty programming and pay television services, the Commission, in Public Notice CRTC 1997-33-2, asked all Class 1 distribution undertaking licensees with 20,000 or more subscribers for information on their available channel capacity.

11. This information included analog channel capacity, a description of plans and timeframes for the deployment of digital technology, the number of households served on a digital basis, progress towards implementation of digital service, and the projected date for digital utilization by broadcasting and/or telecommunications services.

12. Concerning the available analog channel capacity of cable distribution systems, the reports filed indicate that 78% of subscribers in Quebec are currently served by systems with four or more vacant channels and that 55% of these subscribers are in fact served by systems with six or more vacant channels. Conversely, a number of other systems have no vacant channels. Furthermore, these data do not take into account the obligation of cable distribution systems to distribute the Aboriginal Peoples Television Network (APTN) starting 1 September 1999.

13. At the public hearing, the Commission discussed issuing a certain number of licences for analog distribution. Vidéotron Limitée (Vidéotron) and Cogeco Câble Canada Inc. (Cogeco) stated that they preferred digital distribution in order that they might be able to develop an interesting line-up of French-language offerings in this new format. Even though Vidéotron and Cogeco preferred distribution in digital mode, they assured the Commission that, if a certain number of services were approved for distribution in analog mode, they would endeavour to distribute them.

Terms of distribution

14. In Public Notice CRTC 1998-46 announcing last December’s public hearing, the Commission made the following statement: "The Commission is of the opinion that French-language services aimed at Francophone subscribers should have priority over licensed English-language specialty services, in French-language markets." Over the years, Francophones have clearly demonstrated their preference for programs in their language. Year after year, French-language television programs have held the top places in viewer surveys. Accordingly, the Commission feels it is entirely possible to ensure the success of the new specialty services by offering them in a group on an exclusively French-language discretionary tier.

15. Nearly all of the applicants had requested distribution on the existing discretionary tier and/or on a new discretionary tier. Moreover, all of the applicants planned for distribution on a discretionary tier of moderate or high penetration in order to ensure the viability of their projects. All of the applicants also considered that the distribution of new French-language specialty services in digital format would not be viable, because the level of penetration would be insufficient.

16. During the hearing, the Commission discussed with representatives of the cable distribution industry the creation of a second discretionary tier made up exclusively of French-language programming services. Vidéotron and Cogeco expressed the opinion that the only way to ensure the success of a new tier would be to offer good value for the money. The Canadian Cable Television Association (CCTA) and the Association des câblodistributeurs du Québec (ACQ) stated that they were in favour or creating a second tier and saw no problem in having cable distributors offer a new discretionary tier made up exclusively of French-language programming services.

17. The Commission has decided to grant full discretionary status to the four specialty program services approved today when they are distributed in French-language markets. This means that Class 1 licensees and Class 2 licensees that distribute these services and operate in French-language markets must offer these specialty programming services on a discretionary basis and only on a single tier. Further, subscribers must not be required to subscribe to another discretionary tier in order to have access to the new French-language tier. For the purposes of this public notice and for the distribution and linkage requirements published today in Public Notice CRTC 1999-90, a French-language market shall refer to a Francophone market as defined in paragraph 18(4)(a) of the Broadcasting Distribution Regulations (the regulations).

18. French-language markets: The four new programming services, that is, Canal Histoire, Canal Z, Canal Évasion and Canal Fiction, must be part of the same discretionary tier, and this new discretionary tier must consist exclusively of French-language programming services. Class 1 and Class 2 distribution undertakings will therefore have the opportunity to add further French-language programming services if they so desire, including non-Canadian French-language services, as long as the above-mentioned distribution and linkage requirements are satisfied. If one of the programming services approved today is not in operation on the projected date of implementation, distribution undertakings may offer the new tier without waiting for that service to commence broadcasting.

19. Other markets: For the distribution of these new specialty services by distribution undertakings in English-language markets, the Commission has granted modified dual status. When a service with modified dual status is distributed by a distribution undertaking, it must be distributed on a discretionary tier, unless the distribution undertaking and the programming undertaking agree to distribute it as part of the basic service. These terms of distribution are set out in Public Notice CRTC 1999-90 pertaining to distribution and linkage which accompanies this introductory statement and the CRTC decisions published today.

20. The Commission wishes to remind the approved programming undertakings that the regulations require that 60 days’ notice be given to the affected programming services in the event of any realignment of channels. Consequently, the Commission expects programming undertakings to notify distribution undertakings at least 90 days in advance of the date of implementation of their service.

21. The Commission has chosen 10 January 2000 as the launch date for these new services. It has noted the applicants’ commitments to ensure the success of this launch, including the allocation of substantial funds for promotion and the offer to potential subscribers of a free trial period of at least three months. In addition, the applicants have proposed wholesale rates that seem reasonable in the light of the commitments that they have made. The Commission expects the distribution undertakings to negotiate in good faith with the four new approved licensees concerning the rates and the launch terms of these services with a view to guaranteeing the quality of the programming that they have committed to provide. The Commission intends to monitor the situation closely.

Licensing framework

22. The Commission sought to approve as many new French-language specialty programming services as possible, while taking into account the specific limitations of the French-language market. It wishes to emphasize the quality of the applications that were submitted to it. The applications were each examined in a way that assessed all of their aspects.

23. As mentioned at the start of this public notice, Canal Évasion will be devoted to tourism, adventure and travel; Canal Z will carry programs focusing on themes associated with science and technology; Canadian and international history will be central to the interests of Canal Histoire; and Canal Fiction’s content will focus on great drama programs of yesterday and today. The four approved applications form a group with as broad an appeal as possible and have the potential to interest both families and television viewers of all ages. The viewership garnered by similar programs broadcast by conventional networks demonstrates the appeal of this type of programming.

24. As noted previously, according to the information supplied to the Commission on the analog channel capacity of cable distributors, the majority of undertakings serving the French-language market have at least four to six vacant channels. The number of new services that can be approved is also limited by the need to keep the cost of subscribing to the new tier down to a reasonable level. In order to ensure that this tier can be offered to subscribers at an affordable cost, the Commission decided that a maximum of four new services could be approved. This decision takes account of the overall cost of the four approved services, in the light of their proposed wholesale rates. The Commission also took into consideration the impact of the proposed services on existing conventional television services.

25. Since the new French-language tier will, in all probability, consist of a limited number of services, the Commission has chosen services that can attract the widest possible audience. It therefore opted for accessible content that focuses more on entertainment than on general information. It also sought to strike a balance with what is already available, so that the new program offering is clearly distinguishable from the services provided by conventional television stations. Some proposed types of programming, such as those focusing on the arts in general, would have been of high quality and directed to a more limited audience, but their relatively high cost would have made the tier less affordable to subscribers.

26. The Commission paid particular attention to the diversity and complementarity of the programs proposed by each applicant and to their respective contributions to Canadian programming and to strengthening the Canadian broadcasting system. The Commission also took into account concerns pertaining to vertical integration, particularly where a distribution undertaking held a direct or indirect share in the proposed programming undertaking and in light of the fact that distributors’ present limited channel capacity makes the risk of undue preference all the greater.

27. Some of the applications denied today involve substantial participation by TVA Group Inc. (TVA). Given the close corporate relationship that exists between TVA and Vidéotron, which is the largest distributor in Quebec, the Commission felt there was a strong possibility of commercial practices that could potentially lead to an undue preference. With a view to maintaining a healthy competitive environment, the Commission has denied those applications in which the potential for undue preference was excessive due to vertical integration with a distribution undertaking, in light of cable's dominant position in the market.

28. In the case of Télé-Ha!Ha!, which would have certainly proved attractive to many viewers, the Commission was concerned with the potential for undue preference. TVA plays a leading role in French-language television, controlling 40% of the audience. Distribution is largely dominated by Vidéotron which services 75% of Quebec subscribers. Even though both are public companies whose shares are traded on the stock exchange, this does not change the fact that le Groupe Vidéotron holds 99.8% of TVA's voting shares. In addition, the Commission wanted to minimize the impact that Télé-Ha!Ha! could have had on comedy programming already offered by other television broadcasters.

Competitive applications

29. Some of the applications denied today were competitive with other applications in terms of the type of programming services they proposed. After carefully reviewing the characteristics of each of these applications, the Commission has approved the applications that best satisfied the licensing criteria.

Câblo G

30. One of the criteria considered by the Commission concerned the possible impact of the proposed service on existing conventional television services. This criterion played a determining role in the denial of the application filed by Câblo Distribution G Inc. (Câblo G). Câblo G operates a number of small cable distribution systems in the Gaspé region of Quebec. It submitted a regional television proposal that would link various localities in the Gaspé region through community channels. In opposing interventions, Télévision de la Baie des Chaleurs, which is the licensee for station CHAU-TV Carleton, as well as a number of radio stations in the region, emphasized the fragile nature of the regional economy and its limited advertising resources. The Commission found that the proposed service could have a negative impact on existing broadcasters by further segmenting an already limited advertising pie.

The four new licensees

31. The ownership of the services approved today is characterized by the direct or indirect participation of Radiomutuel Inc. (Radiomutuel), BCE Inc. (BCE), Premier Choix Networks Inc. (Premier Choix), Alliance Atlantis Communications Inc. (Alliance/Atlantis) TVA and Serdy Direct Inc. The Commission notes that Alliance/Atlantis was created as the result of the merger of the Alliance Communications Corporation with Alliance Atlantis Communications Inc., which was approved recently. Premier Choix is a subsidiary of Astral Communications Inc. (Astral). These are top-notch diversified Canadian companies. They are active in the production, broadcasting or distribution of programs and have considerable expertise in their respective fields. Also involved in the ownership of Canal Évasion are Media Overseas and Pathé/Canal Voyage France.

32. In approving these applications, the Commission took account of the benefits that will result in terms of strengthening the Canadian broadcasting system. In a broadcasting environment that is highly competitive at the local, national and international levels, it is important to demonstrate that we are in possession of sound expertise and substantial resources. The Commission also believes that the partnerships proposed within these applications hold a wealth of promise for the future. By forming such associations, these producers, broadcasters or distributors create stronger and more competitive undertakings. Such partnerships between undertakings that are already well established in their markets, both French-language and English-language, generate synergies that will make it possible to finance programs of better quality that can carve out a niche for themselves on the national and international scenes.

Ownership structure

33. Over the years, Canadian broadcasting undertakings have successfully met the challenge of serving a small and widely dispersed population within the North American milieu. This challenge is even more acute in the French-language market, where the potential viewing audience is no more than about seven million people. Accordingly, the Commission’s decisions have always sought to maintain a balance between strengthening existing undertakings and adding to the diversity of available broadcasting services.

34. TVA, Radiomutuel, BCE and Premier Choix are leading players in the French-language market. In approving these applications, the Commission considered the risks associated with increased concentration in the ownership of broadcasting undertakings. In particular, it examined the risks of undue preference and anticompetitive practices that might arise as a result of such concentration. TVA occupies a predominant position in the French-language conventional television market. It also has close corporate ties with Vidéotron. Conversely, the distribution undertakings in which BCE is a participant have relatively few subscribers and therefore do not generate similar concerns.

35. The evolution of the French-language broadcasting market is such that a relatively small number of players have come to the fore in their respective areas of activity over the years. Since the beginning of television the French-language television network of the Canadian Broadcasting Corporation has played a leading role and attracted a large share of Francophone viewership. Its programs make an important contribution to francophone culture in Canada and showcase many Canadian artists in different fields. As mentioned earlier, TVA, for its part, leads the French-language television sector with its audience share of some 40%. Radiomutuel and Télémédia Communications Inc. for the most part share the French-language AM and FM private radio market. The distribution sector is largely dominated by Vidéotron, which serves nearly 75% of cable distribution subscribers.

36. The Commission has allowed this ownership structure for broadcasting undertakings in the French-language market to develop in light of the market’s relatively limited resources. Solid and experienced undertakings are thus able to provide the Francophone audience with broadcasting services that compare favourably to those available elsewhere in Canada and even abroad. In awarding new licences today in which BCE and Premier Choix are participants, the Commission sees an opportunity to improve the balance of power in the French-language market, while alleviating possible concerns regarding concentration and vertical integration.

37. Although the participation of Astral and Alliance/Atlantis raises the issue of concentration of ownership in specialty services, the Commission is of the opinion that the resources and experience of these businesses, and the synergies stemming from their involvement, will guarantee the quality and diversity of the proposed programming, generate consumer interest, and promote healthy competition between French-language specialty services.

38. Participation of distribution undertakings in the ownership of specialty services could raise concerns relating to vertical integration and concentration of ownership. In this context, the ownership of Canal Évasion could generate some concerns about the risk of undue preference because of the participation of BCE (50.1%) and TVA (10%).

39. BCE Inc. is a public corporation with subsidiaries in broadcasting (e.g., Bell Satellite Services Inc. (BSSI), which is primarily involved in satellite distribution) and telecommunications (e.g., Bell Canada). Among other things, BSSI owns a national direct-to-home satellite (DTH) pay-per-view service and a satellite relay distribution undertaking (SRDU). BSSI has access to a huge market via satellite but currently does not occupy a dominant position in the broadcasting distribution market. It has fewer than 150,000 subscribers across Canada, about 20% of whom are in the French-language market. Unlike Vidéotron Ltée, BSSI does not occupy a predominant position in the broadcasting market.

40. Vidéotron, conversely, is a cable distributor that occupies a predominant position in the cable distribution market. Regarding the participation of TVA in Canal Évasion, the Commission notes that a corporate link exists between that company and Vidéotron through Groupe Vidéotron Ltée, as noted above. Although TVA’s proposed participation level of 10% of voting shares is relatively low, the Commission feels it would be advisable to limit such participation to that level by condition of licence, in the light of TVA’s predominant position in the French-language conventional television market and its corporate link to Vidéotron. Accordingly, the licensee will not be able to increase TVA’s voting participation in Canal Évasion without first obtaining the Commission’s approval.

Looking ahead

41. In the last round of licensing of new specialty services in 1996, the Commission approved 17 English-language services and 4 French-language services. As stated earlier in this notice, the 4 new services approved today will increase to 15 the number of French-language specialty services available in the French-language market. The Commission believes that, in terms of quantity, quality and variety, the French-language specialty services that are now available strike a reasonable balance with the available English-language services.

42. This array of French-language specialty services will strengthen competition in the French-language market and will provide consumers with access to a more diversified choice of programming. The applicants’ Canadian content commitments will provide an undeniable boost to Francophone creators and to the French-language independent production industry. Further, this will be in terms of television programming that will showcase a wide array of talent.

43. As noted in Public Notice CRTC 1999-19 dated 3 February 1999, entitled Call for comments on a licensing framework for new pay and specialty services, any new application of this type for French-language or English-language services will be reviewed within the context of the new licensing framework that may eventually be established.

Related CRTC documents

Public Notice 1999-19 dated 3 February 1999: Call for comments on a licensing framework for new pay and specialty services.

Notices of Public Hearing 1998-7, 1998-7-1, 1998-7-2 and 1998-7-3 dated 2 and 8 October and 16 November 1998.

Public Notice 1998-79 dated 30 July 1998: Revised process for consideration of new English-language pay and specialty television applications.

Public Notice 1998-46 dated 8 May 1998: Public hearing for new French-language specialty services.

Public Notices 1997-33, 1997-33-1 and 1997-33-2 dated 27 March, 30 June and 11 December 1997: Timetable for the Commission's consideration of applications for new specialty and pay television services—Clarification of Public Notice CRTC 1997-33—Postponement of public hearing to consider new specialty and pay television applications.

Public Notice 1996-120 dated 4 September 1996: Introductory statement--licensing of new specialty and pay television undertakings.

Secretary General

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