ARCHIVED - Decision CRTC 2000-86

Decision CRTC 2000-86

Ottawa, 24 March 2000

CTV Inc. on behalf of The Sports Network Inc. (TSN), Le Réseau
des Sports (RDS) Inc. (RDS), and 2953285 Canada Inc. operating as
The Discovery Channel

Across Canada --199910899

6 December 1999 Public Hearing
National Capital Region

Summary

The Commission approves an application that will result in CTV Inc. (CTV) obtaining an 80% controlling interest in NetStar Communications Inc. (NetStar), subject, by majority vote, to a number of conditions.

The conditions address the Commission's concerns about concentration of ownership of sports broadcasting services, the level of influence exercised by NetStar's non-Canadian partner ESPN Inc. (ESPN),who will hold a 20% voting interest and a 31.54% equity interest in NetStar, and the eligibility of certain benefits proposed by the applicant. The conditions to which the Commission's approval is subject can be summarized as follows:

• CTV must, within one year of today's date, file with the Commission for approval an application to divest of its interests in the SportsNet regional sports specialty service. It must also confirm that it no longer manages SportsNet directly or indirectly, and no longer votes any of SportsNet's shares through a voting trust agreement or otherwise.

• Section 5.3.1 must be removed from the Proposed Amended Shareholders Agreement between CTV, NetStar and ESPN filed with the application. Section 5.3.1 provides ESPN with the power to suspend for three months an offer by a Canadian to NetStar's shareholders to purchase their shares so that ESPN can find an offer from another party. CTV must file, for Commission approval, a revised Amended Shareholders Agreement that reflects this requirement. The revised agreement must be received by the Commission within 90 days.

• CTV must also submit the final version of the Trademark Licence Agreement between CTV, NetStar and ESPN for the Commission’s approval within 90 days. This agreement must be amended so that Section 11 provides mutuality of terms under which the parties may terminate the agreement. It must also provide that the right to terminate without cause does not come into effect until well after three years, and must provide for a substantially longer period of time for the notice requirement to exercise that right.

As well, the Commission requires CTV to reallocate to other initiatives the $11.7 million of its benefits proposal related to coverage of the Canada Games and Les Jeux du Québec. This revised benefits package must be filed with the Commission for approval within 90 days. The Commission considers that the money allocated to broadcasting the Canada Games and Les Jeux du Québec does not qualify as a tangible benefit for the purpose of its benefits policy. It nonetheless expects the licensee to implement both of these projects since these initiatives were important components of the application and are consistent with the mandates of TSN and RDS.

The Parties

1. CTV is a major player in Canada’s television industry. Its private English-language television network reaches aproximately 99% of all English-speaking Canadian households. CTV also owns 26 individual television stations located in the Atlantic provinces, Ontario, Saskatchewan, Alberta and British Columbia.
   
2. CTV has diversified its activities in recent years, and its holdings now include interests in a number of specialty, pay and pay-per-view services. Its voting interests consist of 100% of CTV NewsNet and Talk TV, 65% of The Comedy Network, and 60% of Sports/Specials Pay-Per-View. Sports/Specials Pay-Per-View holds two licences; one for distribution by direct-to-home (DTH) satellite distribution undertakings and the other for distribution by terrestrial distribution undertakings. CTV also holds minority voting interests in SportsNet (40%) and Outdoor Life (33.3%). It controls SportsNet as its managing partner and through a voting trust agreement whereby it controls an additional 20% of SportsNet's voting shares. As well, it holds a 12% minority interest in the History and Entertainment Network.
   
3. NetStar is a pioneer and leader in Canadian specialty television. NetStar owns, directly or through a subsidiary, 100% of The Sports Network (TSN) and le Réseau des Sports (RDS) inc. (RDS), an 80% interest in The Discovery Channel (Discovery), as well as a non-controlling interest of 24.95% in Viewer's Choice Canada Inc. (Viewer's Choice), a company involved in pay and pay-per-view television services.
   
4. This transaction also includes a number of NetStar’s other subsidiary interests that are not regulated by the Commission. Dome Productions Inc., for example, provides various program production services, as well as program distribution facilities. St. Clair Group Investments Inc. is an event marketing company, while Networks North Incorporated is a publicly traded company involved in interactive television programming.
   
5. ESPN, a U.S. company, is a minority shareholder in NetStar. It operates four sports programming services in the United States, and is also active in television-related activities on the international stage. ABC Inc., an indirect subsidiary of The Walt Disney Company, owns an 80% interest in ESPN.

The Application

6. On 10 February 1999, CTV announced that it had reached an agreement with the Canadian shareholders of NetStar to purchase all of the NetStar shares not held by ESPN Sub, a wholly owned subsidiary of ESPN. These shares amount to 68.46% of NetStar’s issued and outstanding voting shares. The transaction closed on 5 March 1999.
   
7. The Commission had approved a voting trust arrangement with respect to this transaction on 3 February 1999. Under this arrangement, the votes associated with the shares purchased by CTV are held in trust by Donald G. Campbell, pending the Commission's approval of their transfer. The application filed for such approval was considered at an oral hearing in the National Capital Region that began on 6 December 1999. The Commission's decision is based on the record of the proceeding which closed on 13 December 1999.
   
8. CTV applied on behalf of TSN, RDS and 2953285 Canada Inc. operating as Discovery, for authority to effect a change of their effective control through a change in the effective control of their parent company NetStar.
   
9. As a result of this transaction, the majority of the voting shares of NetStar would be transferred to 3578704 Canada Inc. (CTV Sub), a wholly owned subsidiary of CTV.
   
10. As indicated above, the NetStar shares that were placed in trust represented a 68.46% voting interest. However, as a result of a share reorganization that would take place prior to the transfer to CTV of the NetStar shares, CTV’s voting interest in NetStar would increase to 80%. ESPN’s voting interest in NetStar, as held by ESPN Sub, would, in turn, be reduced from the former level of 31.54% to 20%, although ESPN would maintain an equity position of 31.54%.
11. The value of the transaction, as indicated by CTV, is the purchase price of $352 million. Based on the evidence filed with the application, the Commission has no concern with respect to the availability or adequacy of the required financing.
    
12. After careful consideration, the Commission approves the application subject, by majority vote, to conditions on CTV that are specified within the remaining text of this decision.
    

Issues

13. This application raised a number of issues and concerns. These can be broadly divided into three categories: the level of concentration of ownership in the provision of sports broadcast programming in Canada that would result from approval of this application, the degree of influence that the non-Canadian partner ESPN could potentially exercise over Netstar, and the eligibility of certain benefits proposed by the applicant.
    

Concentration of ownership

14. The proposed transaction would group, under one corporate umbrella, several different kinds of broadcasting undertakings that offer sports programming. The CTV network, as well as CTV’s individual television stations, can be received over-the-air by most Canadians. By itself, the CTV network currently broadcasts about 150 hours of sports on an annual basis. In addition, the applicant would control the two national sports specialty services, TSN and RDS.
    
15. CTV controls SportsNet which is licensed as a regional sports service. However, by condition of licence, SportsNet may broadcast up to 67% of its programming each broadcast week on all four of its feeds. As well, in Decision CRTC 2000-10, the Commission approved an application that allows SportsNet to deliver all four of its existing regional feeds to individual broadcasting distribution undertakings on a digital-only basis. SportsNet may, therefore, integrate substantial amounts of national programming into its schedule.
16. Outdoor Life also carries a limited amount of sports programming, and CTV has available to it an additional entry into the pay and pay-per-view market through NetStar's interest in Viewer's Choice. Under these circumstances, with approval of this application, CTV would have the potential to offer sports on numerous broadcasting platforms: on over-the-air television to approximately 99% of all English-speaking households, on both national and regional specialty services, and on a pay or pay-per-view basis. This raises concerns about CTV’s ability to dominate the provision of sports programming in Canada to the detriment of other broadcasters and, eventually, of Canadian audiences.

Concerns of Interveners

17. Both the CBC and Friends of Canadian Broadcasting (Friends) intervened against the application. They considered that, if the application were approved, CTV would have an unacceptable degree of influence in the market with respect to obtaining and showcasing sports programming.
    
18. The CBC considered that CTV’s ability to offer a large amount of sports programming through so many broadcast windows would give CTV a level of control over this type of programming that no other Canadian broadcaster could match. CTV would be able to negotiate program packages with rights holders that could include over-the-air television on a national basis, national and regional cable rights, pay-per-view opportunities, and even the provision of additional games locally on CTV’s individual stations. The CBC was concerned that this would impair its own ability to obtain the rights to valuable sports properties. At the hearing CBC stated:

In hockey, for example, CTV NetStar can offer to take all the content the league can provide for a single overall price, whether it puts all the playoffs on conventional television or not. CBC can only take a fraction of the NHL schedule.

CBC’s bid might be three times higher per game because of the higher value of conventional over-the-air coverage, but CBC could still lose the NHL rights. CTV could offer to carry hundreds more games and arrange its network specialty and local schedules to maximize its values for all games combined…Realistically, CBC or other broadcasters cannot bid against that conglomerate, particularly with no specialty partner.

19. The CBC indicated that professional sports programming plays an important role in its schedule for three reasons. First, it is popular and attracts large audiences. Second, it is more cost effective than other forms of Canadian programming, and thus enables the CBC to channel a larger portion of its parliamentary appropriation to forms of Canadian programming that have higher net costs. Third, the revenues from professional sports coverage enables the CBC to devote greater resources to cover Canadian amateur sports.
    
20. The CBC was also concerned that approval of the application would put an end to the possibility of future partnerships with TSN. The Corporation noted that it was able to match a combined bid from CTV, SportsNet and Outdoor Life for the rights to the Olympic Games by establishing a partnership with TSN. If CTV purchased NetStar and thus controlled TSN as well as SportsNet, the CBC was concerned that it would no longer be able to enter into partnerships with a sports specialty channel. This would place the Corporation at a competitive disadvantage with CTV when bidding for rights.
    
21. The Global Television Network (Global) also considered that parties in a position to offer multiple platforms to the holders of sports rights would have an advantage over other broadcasters. Global stated that sports rights holders were interested in two factors: the price that the broadcaster offered, and the level of exposure that the broadcaster could provide for the sports event. Ownership of over-the-air stations, as well as pay and specialty services, would enable a broadcaster to air an event on one platform while promoting it on others. If the application were approved, Global considered that CTV would be in a very strong position to offer both of these benefits.
    
22. Both the CBC and Friends also expressed concern that, under a scenario where one party was in such a dominant position, there could be an increased migration of sports programming from over-the-air stations to specialty, pay and pay-per-view services. This would be accomplished to the detriment of approximately 25% of Canadians who receive television programming over the air.

The Commission’s determination

23. The Commission continues to encourage the growth and expansion of broadcasters so that they are in a position to compete in a changing broadcasting environment. However, it remains concerned where such growth may result in a dominant position for one broadcaster at the expense of others in the Canadian market, be it over one type of broadcast service or one type of attractive and remunerative broadcast programming such as sports. This concern is exacerbated where, as in the case of premium sports events, the programming does not lend itself easily to subsequent broadcast windows.
24. The Commission is concerned that the power of CTV to offer holders of premium sports programming rights a comprehensive package of airtime opportunities, if exercised, would confer upon CTV an undue advantage over other broadcasters in acquiring such rights. Such a competitive advantage could be harmful to other broadcasters that want to include sports in their schedules, to the ultimate detriment of the broadcasting system and of Canadian viewers.
    
25. The Commission notes CTV’s arguments that such concerns are unwarranted. First, CTV considered that its competitive abilities to obtain major sports properties on an exclusive basis would not be enhanced by virtue of its access to over-the-air, specialty, pay and pay-per-view undertakings. According to CTV, owners of sports rights do not sell different classes of broadcast rights in one package. At the hearing, NetStar stated:

…the leagues themselves have complete control over how they package their rights and the selection of the broadcaster in each category. They break them down into national broadcast rights, national cable rights, regional cable rights, local broadcast rights.

In this instance…the CTV network would have to bid in the category of conventional rights against other conventional broadcasters. TSN would have to bid for the national cable rights as packaged by the leagues. SportsNet would have to negotiate with individual teams for local and regional rights.

It is not in the sports leagues’ interest to consolidate these packages. This would simply eliminate some of the bidders – some of the potential bidders.

26. Second, CTV indicated that big ticket sports events generally appear on conventional television stations because specialty services achieve a low level of viewing to sports events compared to the large audiences delivered by conventional stations.
    
27. These arguments, however, relate to the broadcasting environment that has developed in Canada so far. If the transaction were approved as filed, the increased and diversified shelf space for sports events enjoyed by CTV could well lead to a changed environment for the provision of sports programming. In such an environment, rights holders might well opt to sell different rights in packages to those broadcasters who could offer a variety of broadcast windows. Fair, meaningful and sustainable competition would then no longer be possible.
    
28. The Commission notes that CTV did not plan to increase sports programming on its television network, and indicated that it might even reduce such programming. CTV indicated that it would, instead, concentrate on "priority" programming as set out in the Commission’s television policy. CTV could, however, increase its sports programming to some extent on its conventional network while still fulfilling its commitments for priority programming. As well, even if CTV did not increase the amount of sports on its network, there is the possibility that the events that it did obtain could be the major sports events that most broadcasters are interested in obtaining, and that are at the core of the Commission’s concerns.
    
29. Also of concern to the Commission is a potential scenario under which, as a result of this transaction, there would be an increased migration of sports from over-the-air television to cable distribution due to the inability of over-the-air broadcasters to compete with CTV for sports programming. Under such a scenario, sports viewing opportunities for Canadians who do not subscribe to cable or to other distribution systems would be reduced.
    
30. The Commission notes CTV’s comment that TSN would actively seek to enter into partnerships with the CBC and other broadcasters if the application were approved. However, there is a compelling logic in the proposed CTV sports broadcast group using the services that it controls for partnerships when bidding for the most attractive sporting events. This could pose a threat to a healthy competitive equilibrium in the provision of sports programming by Canadian broadcasters.
31. In Decision CRTC 2000-85 issued today, the Commission approved an application by Sportscope Television Network Ltd. to broadcast limited amounts of live sports event coverage on its Headline Sports service. This might provide another potential partner for broadcasting sports events. In the Commission's view, however, the limited amount of live coverage of sports events that Headline Sports may broadcast, as well as the conditions imposed on it to ensure that it remains a service oriented to the presentation of sports highlights, results and information, will limit Headline Sport’s ability to alleviate concerns with regard to dominance.
32. The Commission notes statements made by the applicant that the merger would be advantageous because TSN and SportsNet would more likely remain complementary to each other in the programming that they present, as intended when they were licensed. The Commission also agrees that the merger would provide benefits to amateur sports via the benefits that the applicant proposed as well as increased scheduling opportunities for amateur sports events. However, when the Commission granted the SportsNet licence to CTV in 1996, it simultaneously denied TSN’s application for a regional sports service. This had the effect of ensuring that one player would not dominate both national and regional sports programming on specialty services. The Commission considers that the separate ownership of national and regional sports specialty services remains in the public interest, especially since CTV is already involved in sports broadcasting on over-the-air television, and may eventually have increased opportunities for sports broadcasting in the pay and pay-per-view sector.
    
33. In order to address the Commission’s concerns related to CTV’s potential ability to dominate in the field of sports programming and its potential unfavourable consequences for other broadcasters, the Commission, by majority, requires, as a condition of approval, that CTV file an application for Commission approval to divest its interests in SportsNet within one year of today's date. If an application for divestiture cannot be filed within one year, CTV is required to place its interest in SportsNet in trust until such an application is filed and a decision is issued by the Commission. As well, by majority, the Commission requires, as a condition of approval, that CTV confirm, within one year, that it no longer manages SportsNet directly or indirectly, and no longer votes the shares of other shareholders through a voting trust agreement or otherwise.

Influence exercised by ESPN

34. Although CTV is a large, well-established Canadian broadcaster, the Commission is concerned about the potential influence that ESPN could have on NetStar’s affairs, even though ESPN is only a minority shareholder. The Commission discussed its concerns at the hearing, based on certain terms of the Proposed Amended Shareholders Agreement and of the draft Trademark Licence Agreement filed with the application. These agreements, taken together, could lead to ESPN exercising an unacceptable level of influence over Canadian licensees.
    
35. The Commission does not solicit competing applications for transfers of ownership or control of broadcasting undertakings. It therefore has a responsibility to ensure that approval of a transaction proposed is in the interest of the public, the communities served, as well as the Canadian broadcasting system as a whole. The Commission’s ultimate goal is to ensure that the purchaser, as well as the benefits proposed, are the best possible under the circumstances and serve to enhance the attainment of legislative objectives set out in the Broadcasting Act, including those related to Canadian ownership and control of broadcasting licensees.

ESPN’s power to choose shareholders

36. Section 5.3.1 of the Proposed Amended Shareholders Agreement provides ESPN with the power to suspend for three months a bona fide offer by Canadians to Canadian NetStar shareholders to purchase their shares, so that ESPN can solicit an offer from another party more acceptable to it. This provision gives ESPN, as a minority shareholder, the ability to select who can be the majority shareholder of NetStar, albeit subject to eventual Commission approval. In fact, due to the exercise of section 5.3.1 by ESPN, the applicant was not the first purchaser of the majority of the NetStar shares held by Canadians. The manner in which a clause has been exercised by parties is a relevant factual matter that the Commission has taken into consideration.
    
37. Section 5.3.1 was included in the Shareholders Agreement that was concluded in July 1995 between NetStar, ESPN and various other Canadian shareholders. Its purpose is to protect minority shareholders. The Commission considers that this kind of minority protection may have been appropriate in an environment where ESPN was the minority shareholder that held the largest number of shares in an ownership structure that also included several other minority shareholders.
    
38. Under the proposed ownership structure, the Commission is concerned that section 5.3.1, whereby the sole minority foreign shareholder would have, in effect, the right to choose who would be the majority Canadian partner of NetStar, would potentially affect who, among Canadian parties, could bid for control of the company in the future. The Commission considers that this would reduce the possibility of ensuring that future applications brought to the Commission for the transfer of control of the undertaking are the best possible under the circumstances.
    
39. In light of this concern, a majority of the Commission requires, as a condition of approval, that section 5.3.1 be removed from the Proposed Amended Shareholders Agreement. The Commission further requires that a revised Shareholders Agreement that reflects this change, as well as those amendments proposed at the public hearing by the applicant, be filed with the Commission within 90 days.

Trademark agreement

40. Under paragraph No. 5 of the CTV Agreement to Offer filed with the application, the parties agree to change the name of TSN to ESPN Canada within 18 months of closing. The change would be effected through a Trademark Licence Agreement. A draft of this agreement was filed, but CTV indicated that the final text was still being negotiated.
    
41. The Commission is specifically concerned with Section 11 of this draft agreement, which deals with how the agreement may be terminated. Section 11.4 of the agreement specifies that, at any time after the first three years of the agreement’s term, ESPN may terminate the agreement without cause upon providing 120 days prior written notice to CTV. In that circumstance, CTV must offer to purchase all of ESPN’s shares in NetStar. At the time that the application was considered, CTV estimated the value of these shares to be $196.49 million. The draft agreement does not grant CTV any reciprocal ability to terminate without cause.
42. The Commission is concerned that ESPN, as a minority shareholder, would have the ability to terminate the Trademark Licence Agreement without cause, upon relatively short notice, leaving CTV the task of rebuilding the TSN brand or creating a new brand at considerable cost over a very short period. CTV may thus have to incur rapidly the expense of a second re-branding after as little as three years. This could be well before the costs of the first re-branding have been fully amortized. At the same time, CTV would also be required to buy ESPN’s shares. Under these circumstances, it would appear that CTV, even though it would be the majority shareholder, would have a very strong incentive to satisfy all of ESPN’s concerns in order to minimize the possibility that ESPN would terminate the agreement. This could give ESPN more influence over NetStar than would normally be the case for a minority shareholder.
    
43. In light of this concern, the Commission, by majority, requires CTV, as a condition of approval, to submit the final version of the Trademark Licence Agreement for the Commission’s approval. Section 11 of the agreement must be amended to provide mutuality of terms under which each of the two parties may terminate the agreement. It must also provide that the right to terminate without cause not come into effect until well after three years, and must provide for a substantially longer period of time for the notice requirement to exercise that right.

Benefits

44. The Commission has stated on numerous occasions that because it does not solicit competitive applications for the transfer of ownership or effective control of broadcasting undertakings, the onus is on the applicant to demonstrate that the application filed is the best possible under the circumstances. Among other things, an applicant is expected to propose a specific package of benefits that will yield measurable improvements to the communities served by the broadcasting undertaking and to the Canadian broadcasting system.
    
45. In its new policy for television Building on success – A policy framework for Canadian television (Public Notice CRTC 1999-97), the Commission set out its policy with respect to what would generally be expected of applicants by way of benefits. This policy applies to all transfers of ownership or control involving television broadcasting undertakings, including conventional, pay, pay-per-view and specialty television undertakings. The Commission stated that it will generally expect applicants to make commitments to clear and unequivocal tangible benefits representing a financial contribution of 10% of the value of the transaction, as accepted by the Commission.
46. CTV proposed a benefits package of $35.22 million, which is approximately 10% of the $352 million purchase price. The Commission notes that the appropriateness of using the purchase price as the value of this transaction for the purpose of applying its significant benefits requirement was addressed at the hearing by the applicant as well as by interveners. The Commission notes CTV's position that the Commission should use the purchase price to determine the level of tangible benefits and accepts CTV's position for the purpose of this transaction. It notes, however, the position of some interveners that the value of the transaction does not necessarily equal the purchase price, and that such an approach could be inaccurate, depending on the debt load of the enterprise. The Commission will expect applicants, in future transactions, to demonstrate that the measure they have used to determine the value of the transaction is the most appropriate under the circumstances.
    
47. The benefits proposed by CTV are divided into two categories. Benefits relating to grants and scholarships total $9.75 million, while programming benefits total $25.47 million. A list of the individual initiatives proposed as benefits in this transaction is set out in the appendix to this decision. CTV confirmed that these benefits were incremental to those already assumed by NetStar, and that these benefits would be in addition to existing conditions of licence and commitments related to each specialty service previously acquired or owned.
    
48. The Commission has no concerns with the benefits related to grants and scholarships. These projects clearly involve allocations of funds to third parties. It further notes that, in addition to the benefits proposed when the application was filed, CTV indicated that it would contribute $500,000 to the National Broadcast Reading Service known as VoicePrint. The money would be obtained from any unused portion of the grants and scholarships allocation. In the absence of such funds, the grant to VoicePrint would be a commitment over and above those set out in the application.
    
49. The Commission has, however, continuing concerns about two of the proposed programming benefits. These relate to coverage of the Canada Games and Les Jeux du Québec. On a combined basis, these two initiatives account for $11.7 million, or about one third of CTV’s total tangible benefits package of $35.22 million.
    
50. The Commission notes that both of these initiatives relate to programming that would be shown on NetStar services and would be produced by the licensee itself, not by independent producers.
    
51. While the Commission accepted similar initiatives as benefits when it approved the transfer of TSN/RDS and Discovery Channel to Canadian Telacquistion Inc., Decision CRTC 96-75 also included the following statement:

The Commission reminds the applicant in this transaction that, while the Commission will continue to assess benefits of applications on a case-by-case basis, it will also examine the proportion of benefits that are directed either to third parties or the Canadian broadcasting system as a whole.

52. The Commission considers that it is not appropriate to accept initiatives relating to broadcasting the Canada Games and les Jeux du Québec as benefits, regardless of the fact that the Canada Games were accepted as a benefit by the Commission in 1996. When the Commission accepted the Canada Games as a benefit in the last ownership transaction involving NetStar, it indicated its concern that the proposed benefits were self-serving. The Commission considers that the Canada Games and les Jeux du Québec are sports events that fit within the normal mandate of the national sports specialty services, regardless of their appeal to mainstream audiences. The Commission further notes that there would be no third party benefit to independent producers since these events would be produced by the licensee.
    
53. The Commission therefore requires CTV, as a condition of approval of this transaction, to reallocate the $11.7 million of its benefits proposal related to the Canada Games and Les Jeux du Québec to other initiatives. These new initiatives must involve payments to independent third parties not related to the licensee. The Commission further requires CTV to file this revised benefits package with the Commission for approval within 90 days. The Commission, however, expects CTV to implement its projects related to coverage of the Canada Games and Les Jeux du Québec even though the money involved in these projects has been disqualified as a tangible benefit. These projects are consistent with the mandate of TSN and RDS, and form an important part of the application.
    
54. One other benefit proposed by the applicant is similar to the Canada Games and Les Jeux du Québec in that the programming would be broadcast by the licensee and would not be independently produced. This benefit relates to Canada Cup: Women’s Hockey. The Commission, however, has decided to accept this benefit since it involves a new event that will provide national exposure for women’s hockey – a sport that is underrepresented in sports coverage.

Other Matters

55. The Canadian Cable Systems Alliance (CCSA), which represents smaller cable systems, expressed concern that TSN had, in the past, refused to deal with CCSA as the commercial representative of its members. The Commission notes CTV’s assurances that, if the application were approved, CTV would recognize CCSA as an agent for its members when negotiating affiliation agreements with TSN.
    
56. The Commission acknowledges the interventions submitted concerning this application and has considered all of them in reaching its decision.

Secretary General

Appendix to Decision CRTC 2000–86

Summary of Tangible Benefits

Dissenting Opinion of Commissioner David McKendry

I would approve without conditions CTV Inc.’s (CTV) application to acquire a majority interest in NetStar Communications Inc. (NetStar).

The application was presented by CTV on behalf of The Sports Network Inc. (TSN), Le Réseau des sports inc. (RDS) and 2953285 Canada Inc. carrying on business as The Discovery Channel (Discovery) for authority to effect a change of control in NetStar.

CTV’s acquisition of NetStar does not raise significant competition issues. Accordingly I would not require CTV to divest its 40 per cent voting interest in CTV Sports Net Inc. (Sports Net) nor would I require CTV to withdraw from voting and management agreements with Sports Net’s other shareholders. In addition, I do not find that NetStar would be controlled by a non-Canadian contrary to the Governor in Council’s Direction to the CRTC (Ineligibility of Non-Canadians).¹ Accordingly, I accept the agreements that have been finalized between CTV, NetStar, and ESPN, Inc. With respect to the trademark license agreement between CTV, NetStar, and ESPN that has not been finalized, this agreement is properly left to the parties to negotiate.

Context is important

The emerging broadcast environment is directly relevant to my approval of CTV’s application. This environment is characterized by intense domestic and foreign competition for viewers, requiring strong Canadian broadcasters capable of providing Canadians with attractive Canadian information and entertainment choices.

Technology is creating an abundance of video pathways into viewers’ homes. Canada’s major cable television systems are converting their analogue distribution systems into digital systems, creating dozens, if not hundreds, of new channels. Canadian and American digital direct-to-home satellite (DTH) distributors and digital multipoint distribution systems (MDS) have emerged to compete with cable distributors.² The growth in distribution capacity has led to the availability of more than 80 Canadian and foreign satellite programming services, fragmenting audiences and providing competition for conventional broadcasters. The share of audience to English conventional stations has fallen significantly in recent years.

The Internet is the most significant and revolutionary video pathway into homes, particularly for Canadians. Many video services, including live television, are available over the narrow bandwidth Internet infrastructure that dominates today’s residential Internet market.³ Widespread viewing of video on the Internet awaits the expansion of high bandwidth access for viewers. This expansion is underway, a development that will drive the quality of video on the Internet to the quality of video on other distribution systems.⁴

Of direct relevance to my consideration of CTV’s application, the Commission announced last year that it would not regulate new media services on the Internet. Material transmitted over the Internet that falls within the definition of broadcasting under the Broadcasting Act is exempt from regulation.⁵ CTV and other broadcasters face increasing competition from companies providing video on the Internet. For example, Canadians will have Internet access to content from large foreign distribution and content companies such as AOL Time Warner.⁶ Two of Canada’s most popular television shows, ER and Friends, are Time Warner properties. It does not stretch one’s imagination to envisage that Canadian AOL Time Warner Internet subscribers with high bandwidth access will be able to view these and other Time Warner shows⁷ on the Internet.

In transition

We are in transition to an environment of virtually unlimited global choices for entertainment and information. The policy and regulatory challenge is to facilitate the availability of Canadian choices in this environment. Once the transition is complete, the opportunity for Canadian broadcasters who are not strong may be at risk in a world where the Internet knows no borders. The Commission voiced this concern with respect to new media when it announced its decision not to regulate the Internet: "The CRTC is concerned that any attempt to regulate Canadian new media might put the industry at a competitive disadvantage in the global marketplace."⁸ The Commission defined new media services "to be those [services] that are delivered by means of the Internet."⁹

As Global Television Network stated in the Commission’s hearing to consider CTV’s application, "All of us, our company, the CTV group, all of us are trying to find our way in a new environment."¹⁰ CTV’s application responds to the new environment.¹¹ This environment requires strong Canadian broadcasters with the resources to provide Canadians with Canadian choices in an entertainment and information world that is increasingly without borders.

Competition issues raised

I turn now to the competition issues raised by CTV’s acquisition of NetStar.

The Competition Bureau’s Mergers Branch is responsible for the review of merger transactions to determine if they may result in a substantial lessening or prevention of competition in the marketplace. On December 3, 1999, the Bureau wrote Osler Hoskin & Harcourt with respect to CTV’s acquisition of NetStar:

The Competition Bureau has done an extensive review of the competitive implications of this transaction, which included speaking to market participants and industry experts. Our analysis has focussed on three distinct product markets: the distribution of programming through cable or other distribution channels, the supply of advertising space/time to advertisers, and the acquisition of premier sports broadcast rights. We have not identified any significant competition issues to date in the first two markets that would cause us to challenge the proposed transaction before the Competition Tribunal.¹²

With respect to the acquisition of premier sports broadcast rights, the Bureau said that it was unable to determine the extent to which TSN and Sports Net compete with each other for these rights. This was because the Commission "has licensed these services as complementary and it is not clear to what extent the competition between these two channels for premier sports rights respects underlying CRTC policy. … The extent of permissible and actual competition between TSN and Sportsnet may be an issue that is raised for consideration before the CRTC at the impending hearing."¹³ The Bureau also noted that the Commission was reviewing a license amendment application by Sportscope Television Network Ltd. (Sportscope), "possibly resulting in another potential purchaser for live sports broadcast rights."¹⁴ In light of these considerations, the Bureau stated that it would await the outcome of these proceedings before making a final decision.

With respect to Sportscope’s application for license amendments, the Commission has today approved the application, resulting in another potential purchaser for live sports broadcast rights.¹⁵ Sportscope will be able to broadcast about 25 hours of live sports events per week. Although the amendments place restrictions on Sportscope’s display of live sports, NetStar states these amendments introduce more competition to TSN:

THE CHAIRPERSON: … Can we take it from the fact that NetStar has not only intervened in writing … that you are concerned, and in fact that [Sportscope] will be able to achieve that to buy rights to interesting programming that will be competitive with what you show?

MR CRAIG: Madam Chair, the answer to that is yes.¹⁶

Sports Net licensed to complement TSN

Turning to the extent of competition between TSN and Sports Net, the Commisssion has clearly stated that Sports Net was licensed to complement TSN. The Commission stated in 1998:

In order to ensure a diverse offering of programming services, it has been the Commission’s practice to license no more than one specialty service per programming genre. In keeping with this policy, SportsNet has been licensed as a primarily regional sports programming service and TSN as a national sports service.¹⁷

The Commission again stated last year that Sports Net’s programming must complement TSN’s programming:

[Sports Net] was licensed as a "regionally-oriented" service, meant to provide programming that would be complementary to TSN’s programming. The Commission views with concern the activities of SportsNet which depart from the notion of complementarity.¹⁸

The Commission recently reaffirmed its practice of licensing no more than one specialty service per genre when it announced the framework policy for licensing new digital and pay specialty services:

To moderate the challenge of early digital launch, the Commission will license Category 1 services on a one-per-genre basis. Specifically, the Commission will not license a service that is directly competitive with another Category 1 service or with an existing pay or specialty service. … the Commission will not license a Category 2 service that is directly competitive with an existing pay or specialty service or with a new Category 1 service.¹⁹

Competition for rights not precluded

The notion of complementary programming does not preclude TSN and Sports Net from competing with each other for regional and national broadcast rights. In 1998 the Commission said:

TSN is a nationally oriented sports specialty service with a limited capacity to broadcast sports programming on more than one feed, and SportsNet is a regional service "primarily" focused on catering to the special interests of the "four distinct regional versions". This national versus regional distinction should guide their respective distribution and content activities.

Based on the above understanding, complementarity between TSN and SportsNet, as reflected in each licensee’s conditions of licence, should be seen to apply to broadcast programming distribution, and should not be construed as inhibiting programming acquisitions.²⁰

Clearly the Commission has not placed restrictions on TSN’s or Sports Net’s ability to bid for premium sports broadcast rights. TSN has acquired rights to certain regional National Hockey League (NHL) properties; Sports Net has acquired national cable rights to NHL properties.²¹ However, in light of the distinct programming mandated by the Commission for TSN and Sports Net, I accept CTV’s submission that TSN will continue to acquire predominantly national rights while Sports Net will continue to acquire predominantly regional rights.²² I also agree with CTV that its operation of TSN and Sports Net will facilitate adherence to the services’ complementary mandates.²³

Unified management of the services reduces the incentive of separate owners to intrude upon each other’s programming mandate, a problem that the Commission responded to last year with respect to a complaint by TSN that Sports Net had not operated within the scope of its licence.²⁴ I note that the Commission’s radio policy accepts the notion that one owner of several radio stations will likely offer different formats in the same market without regulatory intervention, a situation that is analogous to the common ownership of specialty television services.²⁵

Unified management of TSN and Sports Net may also offer more choices to viewers. According to CTV:

… in a situation where we are scheduling in a rival mode … there are many instances where, for example we go head to head with the same format of programming, i.e., soccer games, golf matches or a golf magazine show against a golf match, that in a complementary environment you would absolutely avoid … . It gives us the opportunity to make sure that the viewer has choice … .²⁶

Rights holders’ revenues

With respect to competition for premium sports broadcast rights, the primary concern of the parties opposed to CTV’s application is that CTV, TSN, and Sports Net will act together to purchase rights, reducing rights holders’ revenues. This view is expressed by the Toronto Blue Jays Baseball Club (Blue Jays), Office of the Commissioner of Baseball, Orca Bay Sports & Entertainment (Orca Bay), and the Friends of Canadian Broadcasting.

Other parties, including professional and amateur sports organizations, express support for the acquisition. This group includes the Canadian Football League (CFL), the Ottawa Senators Hockey Club (Ottawa Senators), the Canada Games Council, the Canadian Hockey Association, the International Olympic Committee, and the Canadian Independent Sports Producers Association. The Directors Guild of Canada does not oppose CTV’s application;²⁷ Global Television Network "neither supports nor opposes the application on its merits."²⁸

Some organizations representing premier sports, including the NHL, the National Football League, and the National Basketball Association, did not intervene in this proceeding.

The Blue Jays submit that CTV’s acquisition of NetStar would reduce broadcast rights fees, negatively impacting the price of baseball tickets: "Television revenues assist in keeping baseball tickets at moderate levels for sports fans as compared to other major sports in Canada."²⁹ The Office of the Commissioner of Baseball also makes this point.³⁰ I do not accept that specialty services or cable subscribers are obligated to subsidize the ticket prices of spectators at Blue Jays’ and other baseball games.

The Blue Jays assert, "A broadcasting monopoly will not be in the best interests of both the Blue Jays and baseball fans in Canada."³¹ This is correct. However, a broadcasting monopoly is not what is before us, a point that was made by the CFL:

I don’t believe that with this transfer [of NetStar to CTV] our ability to negotiate and our ability to leverage will disappear. Going back two years ago, as I said, we had four solid offers [for broadcast rights]. This transfer would only eliminate basically one of those offers, and we would still be sitting with three. I still believe that three is a good number to create a competitive atmosphere.³²

The Ottawa Senators submitted that competition between sponsors, not competition between broadcasters for rights, is a key factor with respect to team revenues:

It’s also something worth remembering that the reason why we had such a significant increase last year or the year before – last year – in our television revenues was from two reasons. One is the development of regional programming with CTV Sportsnet which had a very significant change in our revenue base because it opened the Atlantic region. The second was competition for sponsorship. It wasn’t competition between CBC and CTV and Global. It was competition between Molson and Labatt’s for being the sponsor.³³

CTV’s evidence is consistent with the CFL’s and the Ottawa Senators’ testimony:

Today, rights holders can select from a broad range of rights purchasers, including many national, regional and local conventional and specialty broadcasters as well as non-broadcasters, depending on which offers the most attractive price/exposure combination.³⁴

The company’s evidence includes tables listing the sports rights held by various broadcasters³⁵, noting that rights are also purchased by advertisers and other intermediaries.³⁶ This evidence was not refuted by other parties in this proceeding. In addition, as discussed earlier, the Commission has approved Sportscope’s application for a license amendment, resulting in another potential purchaser for live sports broadcast rights.

Orca Bay, the owner and operator of the Vancouver Canucks hockey team and the Vancouver Grizzlies basketball team, objects to approval of CTV’s application. Orca Bay did not appear at the Commission’s hearing of CTV’s application and, as a result, the Commission could not question Orca Bay with respect to its written intervention. Accordingly, I give less weight to Orca Bay’s intervention than I do to the interventions of the parties who appeared before the Commission. With respect to Orca Bay’s written intervention, the organization’s objection appears to derive in large part from a premise that TSN and Sports Net are both regional sports specialty services that directly compete with each other.³⁷ As discussed earlier, TSN and Sports Net are not permitted by the Commission to directly compete with each other with respect to programming distribution. TSN is primarily a national service; Sports Net is primarily a regional service.

Exposure of games

The Blue Jays are also concerned that fewer Blue Jays games may be on television if CTV acquires NetStar:

I wouldn’t want to see our fans being able to watch fewer games on television in the future if, for example, this application is approved.³⁸

On the other hand, the CFL sees approval of CTV’s application as an opportunity to have more games on television:

COMMISSIONER McKENDRY: What is it specifically, if we approve this application – what benefit will accrue? Is it more games on television? Is that what you are seeing or what you would like to see?

MR. GILES: That would be the primary benefit.³⁹

The Ottawa Senators also see approval of CTV’s application as an opportunity for more television exposure of the team:

If we don’t preserve the strength of the [Sports Net] regional network, we will never build the value of the teams that are not in Canada’s media centres. On the other hand if we isolate [TSN and Sports Net] into two separate ownership groups, we will never get these teams beyond the region.⁴⁰

In summary, with respect to premier sports broadcast rights, the Blue Jays, the Office of the Commissioner of Baseball and Orca Bay oppose CTV’s application to acquire NetStar. The CFL and the Ottawa Senators support the application. I agree with the CFL and the Ottawa Senators that approval of CTV’s application can increase exposure of their sports and games. The risk of less exposure appears to be insignificant. With respect to the Blue Jays, all or virtually all the team’s games are currently televised.⁴¹ As a result, the Blue Jays’ primary interest is to ensure a sufficient number of bidders to maintain or increase the fees for broadcast rights. The record of this proceeding indicates that sufficient bidders will exist for the broadcast rights of the Blue Jays and other premier sports if CTV’s application is approved. I also note that with respect to major league baseball, the monopoly in the buyer-seller relationship is the seller, major league baseball. As a result, major league baseball and other premier sports are in a strong position with respect to establishing the terms of broadcast rights, including price.⁴²

CBC’s ability to partner with TSN

The Canadian Broadcasting Corporation (CBC) is concerned that the corporation will no longer be able to partner with TSN for coverage of some major events if CTV’s application is approved.⁴³ The Commission’s approval of Sportscope’s license amendments to broadcast live sports events should provide some comfort to the CBC. According to the CBC:

Well, in a perfect world, were TSN forced to be back in independent hands, that would suit us very well. In an imperfect world, but nevertheless a better world that what is contemplated in the transaction, if Sportsnet were available to us as a potential partner on things, that wouldn’t make our lives easier but we might live with that. I think you are hearing shortly, as well, an application by Headline Sports and were their application received favourably that would suit us well also.⁴⁴

In reply to the CBC’s concerns, CTV stated:

With regard to the CBC, we are stating for the third time on the record in this hearing that we intend to honour TSN’s partnership agreements with the CBC, and that we would actively seek to partner with the CBC and other broadcasters.⁴⁵

Global neither supports or opposes

Global Television Network (Global) states in its written intervention:

Global neither supports nor opposes the application [by CTV] on its merits. It considers, however, that the Commission may not be in a position to grant approval of the application, in light of the terms of the Direction to the CRTC (Ineligibility of Non-Canadians).⁴⁶

Global submits that ESPN’s power "to suspend a bona fide offer from Canadians to Canadian NetStar shareholders for three months, and to find an offer from a party or parties more to its liking … amounts, at a minimum, to a level of participation in the effective control of NetStar that prevents the conclusion being drawn that NetStar is controlled by Canadians."⁴⁷

In this connection, Global also states:

… there is a period of time where the fundamental destiny of the enterprise shifts from the hands of the Canadian shareholder to the American shareholder. … It’s the American shareholder that has the last word on who gets to carry [the acquisition of NetStar] forward.⁴⁸

I do not accept Global’s submission. The Commission has the last word. The Commission must approve the acquisition of NetStar regardless of whether or not ESPN suspends an offer to acquire NetStar. As a result, ESPN cannot be said to be in control of NetStar by virtue of its power to suspend an offer to acquire NetStar for three months and find an offer from another party or parties. I also note that the Commission has previously approved this power with respect to an agreement between NetStar, ESPN and others.

I do not agree with the majority of Commissioners (the majority) that ESPN’s ability to seek other offers to acquire NetStar potentially reduces the number of parties that could bid for control of the company in the future. In my view, ESPN’s ability to seek other offers has the opposite effect. In addition, I regard ESPN's ability to seek other offers as reasonable method to protect the interests of a minority shareholder.

Trademark license agreement

A draft agreement exists between CTV, NetStar and ESPN with respect to the use of ESPN’s trademark by CTV and NetStar. According to CTV:

We don’t have, for one thing, a draft fully final trademark agreement. There are lots of things we still have to discuss in terms of whether this will work for us or not. We have a bit of road ahead of us on this, and we are not prepared to do that right away.⁴⁹

Based on this and other statements⁵⁰ by CTV, I conclude that CTV is taking a prudent approach to negotiating a trademark license agreement with ESPN.

With respect to ESPN’s ability to withdraw from the agreement, I note that this is a matter of negotiation:

COMMISSIONER CRAM: And you would proceed with this [license agreement] notwithstanding that under [clause] 11.4 ESPN has the right to terminate this at any time without cause after three years?

MR. FECAN: This might be another clause that we will want to talk to them about. … I think what I would say is that we will, at all times, act in the best interests of this company. That particular clause troubles me. If you will, I would like to have that negotiation with ESPN.⁵¹

Exercise of the power to unilaterally terminate under section 11.4 of the draft agreement would not place NetStar in the control of a non-Canadian contrary to the Governor in Council’s Direction to the CRTC (Ineligibility of Non-Canadians). Perhaps the section in the draft agreement is not in the best business interests of CTV, a matter that apparently concerns CTV. However, the management of CTV’s business is best left to CTV. Accordingly, I do not agree with the majority that approval of CTV’s application should be conditional on amendments to section 11.4 of the trademark license agreement.

Let CTV craft solutions

If approval of CTV’s application did, in fact, mean that NetStar would be controlled by a non-Canadian or if the application raised significant competition issues (which it does not, in my opinion), the appropriate course of action would be to deny the application, providing reasons for the denial. This approach would allow CTV, if it desired, to craft its own solutions to the problems identified by the majority and then apply to the Commission for approval. The approach would also allow CTV to take into account the interests of Sports Net’s other shareholders. These interests are impacted by the majority’s requirement that CTV divest its minority interest in Sports Net and that CTV no longer manage Sports Net and that CTV no longer vote the shares of other shareholders. For example, the other shareholders may regard CTV’s management expertise as integral to the value of their investments.

Rather than relying on CTV to develop solutions to the problems cited by the majority, the majority has crafted specific solutions for CTV, entering into business matters that should be left to the company. These matters should be left to the company because CTV has sophisticated broadcasting expertise and because CTV has established relationships with ESPN and Sports Net’s other shareholders, placing the company in the best position to craft solutions that maximize the company’s opportunities within the confines of the Broadcasting Act and protecting its business relationships with other parties. The solutions would, of course, be subject to approval by the Commission if the company submitted another application to the Commission.

No choice

The majority’s approach has left CTV with no choice but to satisfy the majority’s conditions if the company wishes to proceed with the acquisition of NetStar, regardless of the conditions’ impact on CTV’s business plans and the company’s relationship with ESPN and Sports Net’s other shareholders.

In my view, the majority’s specific conditions unnecessarily put at risk CTV’s alliance with ESPN. In this connection, I note that the Commission said earlier this year:

The Commission encourages alliances between Canadian and foreign services as an appropriate way to achieve the objectives of the Broadcasting Act.⁵²

With respect to the majority’s condition that CTV divest its interest in Sports Net, this condition is inconsistent with the policy underlying the Commission’s specialty broadcasting regulations. The regulations allow anyone to own less than 30 per cent of a specialty broadcaster without approval from the Commission⁵³, presumably because ownership up to 30 per cent does not raise significant competition issues. To be consistent with the policy underlying the regulations, the majority would only require CTV to reduce its voting interest to 29.9 per cent. For the reasons set out above, the record of this proceeding does not support requiring CTV to divest its interest in Sports Net in order to acquire NetStar. Conceding, however, purely for the purposes of this discussion, that CTV’s application does raise significant competition issues, the record does not support placing a more onerous condition on CTV than the Commission places on other broadcasters.

In summary, the record of this proceeding demonstrates that CTV’s application does not raise significant competition issues and that NetStar will not be controlled by a non-Canadian. Accordingly, I would approve without conditions CTV’s application to acquire a majority interest in NetStar.

Footnotes

¹ Order in Council P.C. 1997-486, April 8, 1997, Direction to the CRTC (Ineligibility of Non-Canadians).

² For example, DTH companies Bell Express VU LP and Star Choice Communications Inc. each offer 200 digital video and audio channels.

³ For example, see Global Television Network, transcript, volume 2, December 7, 1999, at paragraph 3541.

⁴ CTV provides CTV Newsnet in streaming video on the Internet <www.ctvnews.sympatico.ca>. Viewers must have high speed access. CTV Newsnet is a specialty television service licensed by the Commission.

⁵ Broadcasting Public Notice CRTC 1999-84, Telecom Public Notice CRTC 99-14, New Media, May 17, 1999; Public Notice CRTC 1999-197, Exemption order for new media broadcasting undertakings, December 17, 1999.

⁶ The acquisition of Time Warner Inc. by America Online Inc. (AOL) is subject to U.S. regulatory approvals and the approval of AOL and Time Warner shareholders.

⁷ Time Warner Inc.’s filmed entertainment business includes thousands of feature films and television and animated titles. The company’s cable networks business includes CNN News Group and Home Box Office. Time Warner also owns the WB Television Network.

⁸ Commission news release, CRTC Won’t Regulate the Internet, May 17, 1999.

⁹ New Media, supra, at paragraph 15.

¹⁰ Transcript, volume 2, December 7, 1999, at paragraph 3524.

¹¹ I note that the Directors Guild of Canada states that "the fit of CTV’s broadcast assets with the NetStar services makes strategic sense." Transcript, volume 2, December 7, 1999, at paragraph 2366.

¹² Letter to Mr Tim Kennish, Osler Hoskin & Harcourt, from Mr Raymond F Pierce, Acting Deputy Commissioner of Competition, Mergers Branch, Competition Bureau, December 3, 1999, at 1, emphasis added.

¹³ Id., at 1-2.

¹⁴ Id., at 2.

¹⁵ Sportscope’s service is known as "Headline Sports". The license amendments allow Sportscope to broadcast live sports events up to 15 per cent of its quarterly programming schedule. The amendments restrict the display of the events in order to maintain the service’s overall role of presenting video sports highlights as well as sports results and information.

¹⁶ Transcript, application by Sportscope to amend its licence, volume 3, December 8, 1999, at paragraphs 4133-4134. The Canadian Cable Systems Alliance also acknowledged that approval of Sportscope’s application would introduce more competition. Transcript, volume 2, December 7, 1999, at paragraph 2061.

¹⁷ Letter to Ms Suzanne Steeves, Senior Vice President, CTV Sports, and Mr Jim Thompson, President, NetStar Sports Group, December 15, 1998, at 2, emphasis in original.

¹⁸ Letter to Ms Suzanne Steeves, Senior Vice President, CTV Sports, May 6, 1999, at 1. The letter dealt with a complaint by TSN concerning distribution of multiple feeds of Sports Net by DTH distributors.

¹⁹ Public Notice CRTC 2000-6, Licensing framework policy for new digital pay and specialty services, January 13, 2000, at paragraphs 23 and 34.

²⁰ Letter to Ms Suzanne Steeves, Senior Vice President, CTV Sports, and Mr Jim Thompson, President, NetStar Sports Group, December 15, 1998, at 3, emphasis in original.

²¹ CTV Acquisition of a Majority Interest in NetStar Communications, Schedule 10: Supplementary Brief, at 40.

²² Id., at 44.

²³ Id., at 41.

²⁴ Letter to Ms Suzanne Steeves, Senior Vice President, CTV Sports, May 6, 1999, at 1.

²⁵ Public Notice CRTC 1998-41, Commercial Radio Policy 1998, April 30, 1998, at paragraph 35. I note that CHUM Limited, a conventional television broadcaster, dominates the music genre with respect to specialty television services. For example, CHUM owns and manages MuchMusic and MuchMoreMusic, complementary services.

²⁶ Transcript, volume 1, December 6, 1999, at paragraph 696. See also paragraphs 704-705.

²⁷ Transcript, volume 2, December 7, 1999, at paragraph 2366.

²⁸ Id., at paragraph 3457. I discuss later Global’s view that CTV’s application raises an issue of control by a non-Canadian.

²⁹ Id., at paragraph 2127.

³⁰ Id., at paragraph 2800.

³¹ Id., at paragraph 2130. The Canadian Broadcasting Corporation also referred to a CTV monopoly, assuming CTV’s application is approved, at paragraph 2559. This point was also put forward by Orca Bay in its November 8, 1999, written intervention.

³² Id.. at paragraphs 2935-2937.

³³ Id., at paragraph 1965, emphasis added.

³⁴ CTV Acquisition of a Majority Interest in NetStar Communications, Schedule 10: Supplementary Brief, at 42.

³⁵ Id., at appendix E.

³⁶ Id., at 43-44.

³⁷ For example, the intervention states: "Approval of the present application of CTV would permit a single owner to control both of the only regional cable sports networks currently licensed in Canada." Letter to the Commission from Mr Chris Hebb, Vice President, Broadcasting, Orca Bay Sports & Entertainment, November 8, 1999, at paragraph 13. See also paragraphs 3, 8 and 10.

³⁸ Transcript, volume 2, December 7, 1999, at paragraph 2155.

³⁹ Id., at paragraphs 2956-2957.

⁴⁰ Id., at paragraphs 1956-1957. See also paragraphs 1936, 1940 and 1998-1999.

⁴¹ Id., at paragraph 2143.

⁴² For example, see the transcript, application by Sportscope for license amendments, volume 3, December 8, 1999, at paragraphs 4080-4081 and 4151-4163, for a discussion of the fees paid for rights in relation to revenues.

⁴³ Transcript, volume 2, December 7, 1999, at paragraphs 2527-2528, 2543 and 2553.

⁴⁴ Id., at paragraphs 2574-2580, emphasis added. See also paragraph 2659. According to NetStar, the CBC has no ability to offer the broadcast rights it holds for NHL hockey, CFL football, the Olympics, Blue Jays baseball, curling and auto racing to cable networks. Transcript, application by Sportscope for license amendments, volume 3, December 8, 1999, paragraph 4128.

⁴⁵ Id., at paragraph 3589.

⁴⁶ Letter to the Commission from Mr Jim Sward, President and CEO, Global Television Network, November 12, 1999, at paragraph 3.

⁴⁷ Id., at paragraph 5.

⁴⁸ Transcript, volume 2, December 7, 1999, at paragraphs 3519 and 3520.

⁴⁹ Transcript, volume 1, December 6, 1999, at paragraphs 821 and 822.

⁵⁰ For example, see transcript, volume 1, December 6, 1999, at paragraphs 895, 900 and 909.

⁵¹ Transcript, volume 1, December 6, 1999, at paragraphs 899, 900, and 909.

⁵² Public Notice CRTC 2000-6, Licensing framework policy for new digital pay and specialty services, January 13, 2000, at paragraph 49.

⁵³ Specialty Service Regulations, 1990, at section 10.

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