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ARCHIVED - Decision CRTC 2000-169

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Decision CRTC 2000-169
Ottawa, 17 May 2000
Rogers Ottawa Limited/Limitée
Ottawa East and Ottawa West, Ontario
– 199906434 – 199906418
Applications processed by
Public Notice CRTC 1999-159
dated 21 September 1999
Summary
The Commission, by majority vote, denies the applications by Rogers Ottawa Limited/Limitée (Rogers) for relief from the requirements of section 29 of the Broadcasting Distribution Regulations (the regulations).
The Commission notes that Rogers is a wholly-owned subsidiary of Rogers Communications Inc., the largest multiple system operator in Canada. It has diversified holdings and operates on a for-profit basis. Having considered all of the arguments raised in the applications, the Commission considers that Rogers 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.

2.

Rogers operates two Class 1 cable systems, each with 60,000 or more subscribers, serving Ottawa East and Ottawa West, respectively. Pursuant to the regulations, Rogers must make the contributions for each undertaking to funds supporting the production of Canadian programming as set out below.

3.

For the broadcast year ending 31 August 2000 and in each broadcast year after, Rogers 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.

4.

Accordingly, if Rogers elects to operate a community channel, it may:
  • for the broadcast year ending 31 August 2000 and in each broadcast year after, 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.

5.

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

6.

Rogers asked for authorization to increase its contribution to local expression, or community programming, from 2% to 4%. Under this proposal, Rogers would reduce its contribution to production funds from 3% to 1%.

7.

Currently, Rogers provides two community programming channels in Ottawa: Community 22 in English and TVC 23 in French. In 1991, Rogers made a commitment to launch a separate and distinct French-language community channel in Ottawa as part of the five-year benefits package related to its acquisition of Skyline Cablevision Limited (Decision CRTC 91-317). Subsequently, as part of the benefits package associated with its acquisition of Maclean Hunter Limited in 1994, Rogers extended, until 1999, its commitment to provide a French-language community channel (Decision CRTC 94-923). In recognition of the bilingual nature of the Ottawa market, Rogers intends to continue delivering community programming in both official languages on two separate channels. Rogers argued that the 2% contribution to local expression allowed by the regulations cannot provide sufficient funding to maintain the level of community programming offered by its two channels.
Interventions

8.

The Canadian Television Fund, the Canadian Film and Television Production Association, the Specialty and Premium Television Association and the Canadian Association of Broadcasters submitted interventions opposing these applications. The interveners argued that the Commission must enforce the funding mechanisms established by the regulations if the Canadian Television Fund is to fufil its mandate. They maintained that contributions by broadcasting distribution undertakings to Canadian programming are essential to ensure that there is sufficient high-quality Canadian programming in under-represented categories. The interveners also expressed concern that approval would create a precedent that would encourage similar requests from other cable licensees. They further claimed that the community channel provides a competitive advantage for cable operators.

9.

Rogers responded that approval would not set a precedent because the special circumstances present in Ottawa, stemming from the fact that two separate community channels have been operating in that community for some time, do not exist elsewhere in Canada. It argued that Anglophones and Francophones in Ottawa are accustomed to voicing their views and concerns in their own language on a dedicated community channel. Rogers added that its projected contributions to production funds will increase from $26.1 million in 1996 to $28 million in 2000, making up for any redirection of contributions towards community programming in Ottawa.
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, especially in areas where they are the only source of local television programming. That is why section 29 of the regulations allows cable systems to reduce their contributions to production funds if they operate community channels.

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 Rogers is a wholly owned subsidiary of Rogers Communications Inc., the largest multiple system operator in Canada. It has diversified holdings and operates on a for-profit basis. Having considered all of the arguments raised by Rogers in its applications, the Commission considers that the applicant 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 a licensee in Rogers' situation. Accordingly, the Commission, by majority vote, denies Rogers' applications.

15.

The Commission notes that TVC 23 serves a sizeable, minority French-language community in Ottawa. There are many business and other incentives for Rogers to continue serving its French-language and English-language subscribers appropriately. Accordingly, the Commission expects Rogers to continue to serve Anglophones and Francophones through its community channel offerings.
Related CRTC document

• Public Notice 1997-150 - Broadcasting Distribution Regulations

Secretary General
This decision is available in alternative format upon request, and may also be examined at the following Internet site: www.crtc.gc.ca

 

Dissenting opinion of Commissioner Stuart Langford
I disagree with the majority decision in this matter and would grant the applicant the relief sought. To deny this application is to run the risk of losing the best example in Canada of local programming that captures the spirit of the Broadcasting Act by accurately reflecting the needs and circumstances of the bilingual community served.
Section 29 of the Broadcasting Distribution Regulations (the regulations) requires Class 1 and Class 2 licensees to contribute 5% of their gross annual revenues generated by broadcasting activities (gross) to Canadian programming unless a condition of licence provides otherwise. A formula is then set out by which a licensee may direct a proportion of its required contribution (2% of gross in the case of the applicant) to local expression, in effect, the licensee's community channel. This requirement, however, and the formula that accompanies it, are not set in stone.
The Commission has the discretion to order exceptions by way of conditions of licence. It is an application by Rogers Ottawa Limited/Limitée (Rogers Ottawa) urging the Commission to exercise this discretion by allowing Rogers Ottawa to contribute 4% rather than 2% of gross to local expression and the Commission's denial of that request that give rise to this dissent.
Rogers Ottawa purchased Skyline Cablevision which serves the east half of the National Capital Region in 1991. It acquired the cable company serving the west half in 1994 when it purchased Maclean Hunter. Both are Class 1 systems; each serves approximately 120,000 customers.
Sensitive to the demographics of the region and the model role the nation's capital should play in giving life to Canada's official bilingualism policy, Rogers Ottawa, undertook, when it applied to the Commission for approval of its 1991 purchase of Skyline Cablevision, to launch a separate and distinct French-language community channel in the region. It made good on that undertaking, establishing Rogers TVC 23 (TVC 23), the only local alternative to traditional Francophone media available in the area.
The undertaking made in 1991 was a five year commitment but in 1994, Rogers Ottawa agreed to extend the sunset date for this commitment until 1999. Time is up. Unless the Commission exercises the discretion open to it to relieve Rogers Ottawa from the burden of operating two community channels while at the same time contributing millions of dollars each year to programming under section 29 of the regulations, TVC 23 may fade to black. Such a development would be a body blow to two of the foundation stones of Canadian broadcasting law and policy, "¼ to safeguard, enrich and strengthen the cultural, social and economic fabric of Canada,"1 and to offer Canadians "a range of broadcasting services in English and in French."2
No other cable distributor in Canada maintains two separate community channels serving two linguistic markets. Given the bilingual nature of the National Capital Region, TVC 23 and its English-language counterpart, Rogers Community 22, fill important needs for local viewers. However, the operation of not one but two community channels has had a considerable impact on the applicant's profit margins. Despite the financial downside, though, Rogers Ottawa has not scrimped.
Under the section 29 formula noted above, Rogers Ottawa is entitled to direct around $2 million annually from production fund contributions to local programming. In fact, the record demonstrates that since 1994 Rogers Ottawa has exceeded this allowed funding of its community channels by about $1.5 million. If it is to maintain the high standards that characterize its French and English community channels, Rogers Ottawa knows that it will have to spend more than the amount allowed it under the section 29 formula. Two percent of gross annual broadcasting revenues over the next five years amounts to around $2 million. To do the job properly, Rogers Ottawa estimates that it will be forced to spend twice that amount.
Where is the $4 million dollars to come from? The applicant would like to shift two of the $3 million it contributes annually to Canadian production funds, as required by section 29 of the regulations, to its community channels. In Public Notice CRTC 1997-150, (PN 1997-150) the Commission reserved for itself the discretion to grant such an exception to the section 29 requirements. Rogers Ottawa believes the maintenance of its unique, culturally responsive, local undertakings in the National Capital Region merits the exercise of that discretion. I agree.
In the past, few such exceptions have been granted -- three, to be exact -- all to non-profit licensees. No one would confuse Rogers Communications Inc., the corporate empire of which Rogers Ottawa is a part, with a not-for-profit service organization but, though until now it has exempted only such licensees, nothing in PN 1997-150 so limits the Commission's discretion. The Commission has been quite correctly reluctant to interpret its discretionary powers too widely lest it create a situation where the exceptions become the rule and the original purpose of the section 29 contribution scheme is lost. The risks inherent in granting this application, in my view, fall far short of inviting such a catastrophe.
First of all, this application, if allowed, would not set the sort of precedent that would bring every cable distribution undertaking in the country knocking on the Commission's door seeking relief. Only Rogers Ottawa finances two local channels, one French the other English. No other applicant could find comfort in a decision to grant this request. As well, this is not an application to shift two fifths of the section 29 contributions made by Rogers Communications Inc. as a whole. That figure in 1999 alone, was in excess of $26 million. The projections for 2000 are over $28 million. The impact on Canadian programming funds of granting this application will be minimal and it is clear from the record that Rogers Ottawa sees the National Capital situation as a one-off application, not as some sort of thin edge of the wedge or first step away from funding Canadian production by way of the section 29 formula.
The risks inherent in not granting this application are, in my judgement, too high. Rogers Ottawa's extended five year undertaking to operate twin community channels has expired. It is under no obligation to continue but under considerable pressure from its shareholders, one must assume, to take reasonable steps to generate improved profits. It is also under pressure from competitors in the area attempting to entice its customers to switch from cable to direct-to-home satellite service or multi-point distribution (so-called "wireless cable") delivery.
The Commission quite rightly sees such competition as in the interests of Canadian consumers but there are downsides. Squeezed by market challengers, any product or service provider will naturally examine all cost-cutting options. Rogers Ottawa is no exception. How long will it be before it feels required to abandon one of its community channels - most likely, given the demographics of the area, TVC 23 - or to operate both as little more than repeat facilities running programs produced elsewhere? Should this happen, the national capital's residents would be much the poorer for it and the Canadian broadcasting system would lose the best example it now possesses of bilingualism in operation.
The majority's reference in paragraph 15 of its decision to "¼ the business and other incentives for Rogers to continue serving its French-language and English-language subscribers appropriately" will bring cold comfort to the applicant. The majority's reference in the same paragraph to what it "expects" Rogers Ottawa to do by way of serving French- and English-language viewers through its community channels in the future is not legally enforceable.
Local expression, already the victim of a thousand cuts across the country, should not be further weakened and Canada should not be stripped of the one example it has of functionally bilingual broadcasting undertakings at a community level. Such an outcome is unthinkable. No prudent approach to risk management I can envisage leads me to conclude that a shift of 2 million dollars from Canadian programming nationally to Canadian programming at a local level is too high a price to pay for the maintenance of what Rogers Ottawa has created, the jewel in the crown of community programming in this officially bilingual country.
_______________________________________

1 The Broadcasting Act, 1991, c.11, s.3(1) (d)(i)
2 Ibid, s.3(1)(k)

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