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ARCHIVED - Decision CRTC 2000-220

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Decision CRTC 2000-220
Ottawa, 6 July 2000
Craig Broadcast Systems Inc., on behalf of a company to be incorporated, under the name of SkyCable Pacific Inc.
Victoria, Vancouver, Abbotsford, Chilliwack, Penticton, Kelowna and Vernon, British Columbia
- 199807541
Look Communications Inc.
Victoria, Vancouver and the Lower Mainland, Abbotsford, Chilliwack, Kamloops, Vernon, Kelowna and Penticton, British Columbia - 199913249
21 February 2000 Public Hearing
in Vancouver
New MDS radiocommunication distribution undertaking for British Columbia

1.

The Commission approves the application by Craig Broadcast Systems Inc., on behalf of a company to be incorporated, under the name of SkyCable Pacific Inc. (SkyCable), for a licence to carry on a radiocommunication distribution undertaking to serve Victoria, Vancouver, Abbotsford, Chilliwack, Penticton, Kelowna and Vernon. The undertaking will transmit broadcasting services in encrypted mode to subscribers by means of a digital multipoint distribution system (MDS). The seven transmitters will utilize effective isotropic radiated powers as set out below:

 

Transmitter location

EIRP
(watts)

PIRE
(watts)

Vancouver 83 83
Victoria 61.6 61,6
Abbottsford 44.7 44,7
Chilliwack 102.5 102,5
Kelowna 77 77
Penticton 50.2 50,2
Vernon 31.2 31,2

2.

Subject to the requirements of this decision, the Commission will issue a Class 1 licence to SkyCable expiring 31 August 2006. The operation of this undertaking will be regulated pursuant to the Broadcasting Distribution Regulations (the regulations)and the licence will be subject to the conditions specified in this decision and in the licence to be issued. The applicant indicated that it would provide service from all seven transmitters listed above within twelve months of licensing.

3.

In accordance with its commitments, SkyCable is to submit applications to amend its licence to extend service to Kamloops, Nanaimo and the Hope Region. A condition of licence to this effect is included in the appendix to this decision. SkyCable indicated that it intended to serve these areas within 24 to 30 months after receiving a licence.

4.

The Commission denies the application by Look Communications Inc. (Look) for an MDS service. Look's application was mutually exclusive with SkyCable's on a technical basis. Accordingly, it was only possible for the Commission to approve one of the applications.
Background
The public process

5.

At the 21 February 2000 public hearing in Vancouver, the Commission considered two applications for new MDS systems to serve various communities in British Columbia.

6.

The Commission initiated the process for dealing with these applications after it received an application from SkyCable. Consistent with its practice, the Commission issued Public Notice CRTC 1999-142 calling for competing applications to provide MDS services. The application by Look was received in response to this call.
SkyCable's application

7.

SkyCable, through a related company, currently provides an MDS service to about 12,000 households in Manitoba. As it launched this service in 1996, its management now has about four years experience in operating and marketing MDS services in Canada. As well, SkyCable operates MDS systems in California and in New Zealand.

8.

The applicant's proposed service area, which includes Victoria, Vancouver, Abbotsford, Chilliwack, Penticton, Kelowna and Vernon, covers about 70% of the population of British Columbia. SkyCable proposed to serve these communities using seven distribution sites. As well, the applicant indicated that it would launch additional distribution sites to serve Kamloops, Nanaimo and Hope within 24 to 30 months of licensing.

9.

SkyCable proposed a basic service package that would include 29 to 33 video channels priced at $17.99 per month. The cost of the antenna and decoder equipment would be included as part of this price. The applicant indicated that it would assume all installation costs, and that there would be no installation fee charged to customers. Additional decoders could be rented at $8.49 per month. Consumers would be able to obtain specialty channels either through purchasing theme packages, or by building their own pick and pay packages.
Look's application

10.

Over the past two years, Look has launched MDS systems in several major Quebec and Ontario markets. At the hearing, Look indicated that it had about 40,000 subscribers. Its total potential market, under its current licences, is about 6.2 million homes.

11.

The applicant's proposed service area, which includes Victoria, Vancouver and the Lower Mainland, Abbotsford, Chilliwack, Kamloops, Vernon, Kelowna and Penticton, would take in approximately 80% of households in British Columbia. Service would be provided from nine distribution sites.

12.

Look proposed to offer its basic service, which would include 26 video channels and a pay audio service, for $20.95. The price would include the digital set-top box, the antenna and a universal remote control. Look further proposed to charge customers a $125 installation fee. Additional decoders would be available at a cost of $9.95 per month. Look subscribers would be able to select a personal specialty service package through a pick and pay option.
Assessment of applications

13.

In evaluating the two applications, the Commission has taken into account a number of factors. These include the range of services that would be provided, the proposed subscriber fees, the coverage areas, the viability of the business and marketing plans, and the projected subscriber levels, including the projected ratios of subscribers to be drawn from cabled and non-cabled areas.

14.

Further, the Commission gave particular consideration to determining which applicant would be able to compete most effectively with cable undertakings, as well as with direct-to-home (DTH) licensees operating in the same market.

15.

The Commission considers that both applicants are experienced MDS operators, have submitted strong applications and are capable of providing a high quality MDS service to customers in British Columbia. However, as the applications are mutually exclusive on a technical basis, it is only possible to license one.

16.

After carefully considering both proposals, the Commission has decided to license the application by SkyCable.

17.

The Commission considers that the SkyCable's plan to market its service, which includes a commitment not to charge subscribers any installation fee, eliminates a significant barrier that discourages potential customers from considering MDS as an alternative to cable service or to DTH satellite services. At the hearing, SkyCable indicated that the decision not to charge an installation fee was based on its experience in marketing MDS in Manitoba. SkyCable began its business in Manitoba with a $200 installation fee, but finally discontinued this practice. It also refunded to its subscribers the $200 paid as a deposit on customer equipment. The applicant explained:
We realized that the service is great, the picture is great, but there is just not enough - you need a compelling reason to make people switch. The compelling reason that we have discovered is you need a reliable service, you need it to be priced cheaper than the incumbent cable companies, and you cannot charge hook-up fees.

18.

The Commission further notes that SkyCable has proposed the lowest basic service rate of the two applicants, as well as the lowest rate for additional decoders. It has been able to do this by investing less heavily in its infrastructure. SkyCable indicated that, by being a "lean and mean" operation, it would be able to pass savings on to consumers and therefore compete more effectively with cable and DTH services.

19.

The Commission further considers that licensing SkyCable in British Columbia will provide the company with a large number of additional potential subscribers, enabling it to grow beyond its current base in Manitoba. Thus, SkyCable will have an opportunity to establish itself as a major MDS player. This will encourage the development of a competitive MDS industry in Canada.
The SkyCable service
Signal carriage

20.

In addition to broadcasting services that must be carried under the regulations, the Commission authorizes SkyCable to distribute broadcasting services as set out in the appendix to this decision.

21.

These authorizations include authority for the licensee to:
  • distribute on the basic service of all of its transmitters, the signals of the four U.S. commercial networks as well as PBS, as received from specified stations in Seattle and Tacoma, Washington;
  • distribute on the basic service of all of its transmitters, the DMX pay audio service;
  • distribute, on the basic service of its transmitters serving Vancouver, Victoria, Abbotsford and Chilliwack, the signals of the independent U.S. stations KSTW-TV Tacoma/Seattle and KVOS-TV Bellingham.

22.

At the hearing, concerns were raised about the possible carriage of distant signals into the interior of British Columbia. The applicant indicated that it would not carry distant signals into that area.

23.

The Commission is also approving the licensee's request to be relieved from the requirements of section 17 of the regulations that would obligate it to carry the signal of the religious television station licensed to the B.C. Conference of Mennonite Brethren Churches. The Commission notes that this low-power station was established primarily to make the church services of Clearbrook Mennonite Brethren Church in Abbotsford available to older members of the congregation who are no longer able to attend church services in person.

24.

The Commission further approves SkyCable's request to be relieved from the requirements of section 22(1) of the regulations. This section generally requires the distribution of all local radio stations. SkyCable indicated that, because of limitations on the spectrum available, it would have to reduce the video and data services it distributed, if it were required to distribute local radio signals. The Commission notes that the licensee will distribute the DMX digital audio service as part of its service.

25.

The Commission notes that SkyCable has confirmed that it will respect requirements relating to simultaneous substitution set out in section 30 of the regulations, in each of its markets and sub-markets.
Local expression

26.

Under section 29 of the regulations, Class 1 broadcasting distribution undertakings (BDUs) must contribute at least 5% of their gross revenues from broadcasting activities to Canadian programming. 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 that which must flow to production funds varies according to the class of the undertaking and the number of subscribers.

27.

An undertaking the size of the new SkyCable system would generally be required to make annual contributions to Canadian programming that would total 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.

28.

Accordingly, if SkyCable chose to provide an outlet for local expression, it could, for each broadcast year, deduct up to 2% of gross revenues derived from broadcasting activities from the total 5% contribution it would otherwise be required to make. It could then direct up to 2% to the operation of its outlet for local expression. In such a case, it would contribute a minimum of 3% of gross revenues derived from broadcasting activities to funds supporting the production of Canadian programming.

29.

In its application, the licensee proposed to initiate a service called the Open Access Network for Community-based Development and Learning (the Open Access Network) as an outlet for local expression. SkyCable therefore proposed to allocate 2% of gross revenues from broadcasting activities to this project, and send 3% of such revenues to qualifying production funds.

30.

SkyCable indicated that the Open Access Network would be a bundled service that would include a conventional video channel operated as part of the MDS service, coupled with a high-speed interactive component.

31.

SkyCable indicated that the service would be operated by a third party not-for-profit organization that would be engaged on a contract basis. This organization would assemble and package educational programming using material provided by a variety of educational institutions. Members of the community would also have an opportunity to submit material to be broadcast on the channel. SkyCable would also engage a senior level staff member to manage the Open Access Network, but would not count the salary of this staff member as part of the proposed 2% allocation to local expression. As well, the licensee would establish an advisory board that would help determine and develop program content, obtain resources, provide training and facilities, and supervise the program co-ordinator and volunteers.

32.

In Public Notice CRTC 1997-25 New Regulatory Framework For Broadcasting Distribution Undertakings, the Commission indicated that all terrestrial distributors should be given the opportunity to present innovative proposals for providing outlets for local expression. The appropriateness of such proposals would be assessed at the time of licensing or licence renewal.

33.

However, while recognizing the innovative nature of SkyCable's proposal, the Commission is concerned that the Open Access Network does not fulfil the primary purpose of an outlet for local expression. The Commission considers that such an outlet should provide access to members of the community served to allow them the opportunity to reflect their community. In reviewing the applicant's proposal, the Commission finds that much of the programming would not truly be an expression of the community as it sees itself. The Commission also finds that a large portion of the proposed programming would be educational in nature and considers that the outlet for local expression is not the proper vehicle to distribute educational programming.

34.

Accordingly, the Commission is authorizing SkyCable, by a condition of licence set out in the appendix to this decision, to offer a special programming channel to carry educational programming. Expenditures on this channel will not, however, be eligible to be considered as part of the required 5% contribution to Canadian programming. The licensee would, however, be permitted to devote up to 2% of its gross revenues from broadcasting activities to a channel that provided a direct means for local expression, if it chose to establish such a service. Until then, the entire 5% contribution requirement shall be remitted to qualifying production funds.

35.

The Commission is also attaching a condition of licence requiring SkyCable to adhere to the Cable Community Channel Standards and the Canadian Association of Broadcaster's Code Regarding Violence in Television Programming. These standards will apply to community programming, or any other programming that the licensee originates.
Other matters
Launching the service

36.

The licence will only be issued and effective when the undertaking is ready to begin operation. When the licensee has completed construction and is prepared to commence operation, it must advise the Commission in writing. If the undertaking is not constructed and ready to operate within 12 months of today's date, extensions to this time frame may be granted provided that the licensee applies in writing to the Commission before the 12-month period or any extension of that period expires.

37.

The Department of Industry has advised the Commission that the proposed transmitters are conditionally technically acceptable.
Employment equity

38.

The Commission notes that this licensee is subject to the Employment Equity Act that came into effect on 24 October 1996, and therefore files reports concerning employment equity with Human Resources Development Canada.
Secretary General

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


Appendix to Decision CRTC 2000-220 

 

Conditions of licence
1. For the purposes of the Broadcasting Distribution Regulations (the regulations), the "licensed area" shall be the market area served by each of the licensee's transmitters, as set out in the approved application.
2. a) The licensee is authorized to distribute, on the basic service, the signals of the four commercial U.S. networks and PBS from the following sources:
  • KOMO-TV (ABC)
    Seattle, Washington
  • KING-TV (NBC)
    Seattle, Washington
  • KIRO-TV (CBS)
    Seattle, Washington
  • KCPQ (FOX)
    Tacoma, Washington
  • KCTS-TV (PBS)
    Seattle, Washington
b) The licensed is authorized to distribute the signals of the independent U.S. stations KSTW-TV Tacoma/Seattle and KVOS-TV Bellingham, Washington on the basic service only on the transmitters providing service to Victoria, Vancouver, Abbotsford and Chilliwack.
c) The licensee is authorized to distribute the DMX pay audio service on its basic service.
d) The licensee is relieved from the requirement of section 17 of the regulations to carry the religious television station in Abbotsford licensed to the B.C. Conference of Mennonite Brethren Churches.
e) The licensee is relieved from the requirement of section 22(1) of the regulations to carry radio signals.
f) The licensee is authorized to distribute a special educational programming service, where the programming falls within section 6(5)(A) or 6 (5)(B) of Schedule I, to the Television Broadcasting Regulations, 1987, and where the programming includes no advertising material as defined in the Television Broadcasting Regulations, 1987, as amended from time to time.
g) With respect to community programming and any other programming of a service that it originates, the licensee shall adhere to the Cable Community Channel Standards, and the guidelines on the depiction of violence in television programming set out in the Canadian Association of Broadcasters' Voluntary Code Regarding Violence in Television Programming, as amended from time to time and approved by the Commission.
4. The licensee shall, within one year of the date of this decision, submit applications to the Commission to amend its licence to establish transmitters to provide service to Kamloops, Nanaimo and Hope.
Date modified: