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ARCHIVED - Decision CRTC 2000-76

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Decision CRTC 2000-76

Ottawa, 20 March 2000
Câblevision du Nord de Québec inc.
Rouyn-Noranda, Quebec – 199906898
Application processed by
Public Notice CRTC 1999-159
Dated 21 September 1999
Summary
The Commission, by majority vote, denies the application by Câblevision du Nord de Québec inc. (Câblevision du Nord) for relief from the requirements of section 29 of the Broadcasting Distribution Regulations (the regulations).
Having considered all of the arguments raised in the application, the Commission considers that the licensee 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.

Câblevision du Nord operates a Class 1 cable system serving less than 20,000 subscribers at Rouyn-Noranda. Pursuant to the regulations, Câblevision du Nord must make the contributions set out below to funds supporting the production of Canadian programming.

3.

For the broadcast year ending 31 August 2000 and in each broadcast year thereafter, Câblevision du Nord must contribute to funds that support the production of Canadian programming, 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
  • 1.5% of gross revenues derived from broadcasting activities in that year.

4.

Accordingly, if Câblevision du Nord operates a community channel, it may:
  • for the broadcast year ending 31 August 2000 and in each broadcast year thereafter, deduct up to 3.5% 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 1.5% 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.

The applicant requested authorization to allocate the entire 5% of gross revenues derived from broadcasting activities to community programming. Under this proposal, there would be no contribution to production funds, as section 29 provides.

7.

In support of its application, Câblevision du Nord submitted that its contribution to local programming, which exceeds the requirement of 5%, means more to its subscribers than any contribution made to an external fund. The applicant maintains that the Rouyn-Noranda region is not well served in terms of local programming and that it broadcasts on its community channel, twelve hours of programming per day. Câblevision du Nord added that it contributes, through its investment in community programming, to the creation and support of twelve full-time staff positions and about twenty part-time positions. It argued that were it not for the distribution of a U.S. signal on its undertaking prior to 1981, it would qualify as a Class 3 undertaking, as do the other undertakings in the region. As such, it would be relieved from the requirements of section 29 of the regulations.
The Commission’s decision

8.

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.

9.

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.

10.

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 smaller cable systems to reduce their contributions to production funds if they operate community channels. In this context, the Commission notes the interventions to this application indicating that the applicant’s community channel is an important source of local news and information.

11.

The Commission has also considered the opposing interventions submitted by the Canadian Association of Broadcasters and the Canadian Film and Television Production Association. Like these two associations, the Commission believes that contributions by BDUs 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 wishes to ensure that production funds receive broad support from the distribution sector.

12.

Having considered all of the arguments raised by the applicant, the Commission denies this application. The Commission considers that Câblevision du Nord has not shown that a derogation from the requirements of section 29 of the regulations would be warranted. Futher, the Commission notes that, in 1998 and 1999, the licensee did not remit 1.5% of its revenues to funds suppporting the production of Canadian programming, as required under section 29 of the regulations. 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 licensee is therefore required to make the unpaid contributions for 1998 and 1999, as required by the regulations.
Related CRTC document

• Public Notice CRTC 1997-150 – Broadcasting Distribution Regulations

Secretary General
This decision is available in alternative format upon request, and may also be viewed at the following Internet site:

www.crtc.gc.ca


Dissenting opinion from Commissioner
Stuart Langford
I disagree with the majority decision and would grant this application. To deny the applicant's request for relief from the provisions of Section 29 of the Broadcasting Distribution Regulations (the regulations) as the majority has done, is to penalize the applicant on the basis of what amounts to no more than an anachronistic technicality.
Cablevision du Nord de Québec (CNQ) operates broadcasting distribution undertakings (BDUs) in remote and underserved northern areas of Quebec. The record of this application demonstrates that in an effort to bolster the minimal amounts of local programming available to subscribers in the region it serves, CNQ has consistently spent more on local programming than the minimum requirements set out in the regulations. CNQ has a commendable history of meeting the obligation contained in sub-section 3(1)(e) of the Broadcasting Act. That sub-section reads as follows: "each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming."
The applicant's four community channels at Rouyn-Noranda, Val d'Or, La Sarre and Ville-Marie provide subscribers with an average of 12 hours of local programming each day. The sum total of local programming available to viewers from other sources is only about eight and a half hours per week and consists almost exclusively of local news and information programming in the usual six and eleven o'clock p.m. time slots. But for CNQ's community channel contributions, local viewers would have to be described as underserved by any standard of measurement. This fact alone makes CNQ's application meritorious. What in my view makes it virtually undeniable is the applicant's unique status as a BDU.
In my view,CNQ should be a Class 3 system and, therefore, not subject to the contribution requirements set out in section 29 of the regulations. The company's efforts to better serve its subscribers in the early days, however, when obtaining a variety of signals in underserved areas was difficult, have returned in the form of a legal technicality to haunt it. The Cable Television Regulations, 1986 stated that any cable system that as of April 14, 1981 received a U.S. signal over the air orby microwave could not be considered a Part III licensee. CNQ had done just that, it had gone to the trouble of obtaining a U.S. signal for its subscribers and, now, for its pains it finds itself artificially designated as a Class 1 system and, therefore, captured by the provisions of section 29. This need not be the case.
Though section 29 of the regulations sets out as a general rule that Class 1 BDUs must contribute to funds supporting the production of Canadian programming, this stipulation is not absolute. In Public Notice 1997-150, which was issued with the revised regulations, the Commission stated that it would allow exceptions to the section 29 contribution requirements on a case-by-case basis where special circumstances warranted. In my view CNQ's situation is just such a special circumstance and the majority erred in not exercising its discretionary power.
The purpose of section 29 is clear, to require large BDUs to make an extra commitment to Canadian programming in partial return for the privilege of possessing a distribution licence capable of earning the profit margins traditionally associated with large systems. CNQ, operating as it does in a remote and underserved area, is not typical of the type of undertaking envisaged in any reasonable interpretation of section 29. It has under 10,000 subscribers at a time when it is not unusual to see a Class I BDU serve as many as ten times that number of viewers or even more. CNQ is caught by the new regulations only because of a now anachronistic provision in the old ones. If ever there was a case for the Commission to exercise its discretion for equitable purposes, this is it.
I would have allowed this application and granted CNQ the relief sought. To do otherwise results, in my view, not only in an inequity but, as well, in a situation where the discretionary power reserved by the Commission in Public Notice 1997-150 becomes so limited by precedent as to be practically non-existent.
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