ARCHIVED - Public Notice CRTC 2000-172

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Public Notice CRTC 2000-172


Ottawa, 14 December 2000


Introductory statement to Decisions CRTC 2000-733 to 2000-738: Licensing of new video-on-demand and pay-per-view services


In Decisions CRTC 2000-733 to 2000-738, the Commission approved the following applications for new video-on-demand (VOD) and pay-per-view (PPV) undertakings:



  • An application by Cogeco Cable Canada Inc. (Cogeco) for a new regional VOD service. The service will be distributed by cable systems owned or controlled by Cogeco, all of which are located in Quebec and Ontario.
  • An application by Corus Entertainment Inc./On-Demand Inc., OBCI (Corus) for a new national VOD service.
  • An application by Rogers Cable Inc. (Rogers) for a new national VOD service.
  • An application by Videon CableSystems Inc. (Videon) for a regional VOD service for distribution by cable systems owned or controlled by Videon, which are located in the prairie provinces and Ontario.


  • An application by the partners of Bell ExpressVu Limited Partnership (ExpressVu) for a national terrestrial general interest PPV service. This service will be virtually identical to the direct-to-home (DTH) PPV service that ExpressVu currently operates.
  • An application by David Cobb, OBCI (Breakaway) for a regional terrestrial and regional direct-to-home (DTH) PPV service to be known as "Breakaway." The service will offer NHL hockey games involving the Vancouver Canucks, Edmonton Oilers or Calgary Flames to subscribers of broadcasting distribution undertakings who live in British Columbia and Alberta.

Set out below is the Commission's approach underpinning the approval of these new VOD and PPV services.


Video-on-demand services


The 1997 VOD policy


In Competition and culture on Canada's information highway: Managing the realities of transition, issued on 19 May 1995, the Commission stated that "as licensed video-on-demand (VOD) programming services develop, they should be expected to offer the maximum practicable number of Canadian titles in the program categories offered by the licensee. Further, they should be expected to make a direct contribution to the development and production of Canadian programs. The specific measures for implementing these policies should be determined at the relevant licensing proceedings."


In Decisions CRTC 97-283 to 97-287, the Commission licensed five VOD services. The licences were granted to the partners of Canal Indigo, the partners of Viewer's Choice Canada, Alliance Communications Corporation and Shaw Communications Inc. on behalf of a general partnership, Allarcom Pay Television Limited (now owned by CanWest Global Communications Corp.), and Electronic Digital Delivery Inc. (now owned by Corus Entertainment Inc.)


In Public Notice CRTC 1997-83 Licensing of new video-on-demand programming undertakings, the Commission set out the regulatory framework for the five services licensed at that time. The key elements of the framework were as follows:

  • The services were subject to the Pay Television Regulations, 1990 and therefore prohibited from broadcasting advertising.
  • The services were not granted protection from the licensing of competitive services; the Commission stated that its approach would "foster fair competition and an increased reliance on market forces."
  • The services were permitted to offer programming from all content categories.
  • The English-language and bilingual VOD services were required to carry, at all times, a minimum ratio of 1:20 Canadian to non-Canadian feature film titles.
  • The French-language service, Canal Indigo VOD, was required to carry, at all times, a minimum ratio of 1:12 Canadian to non-Canadian feature film titles.
  • With respect to non-theatrical films, all five services were required to carry, at all times, a minimum ratio of 1:10 Canadian to non-Canadian titles.
  • The Commission stated that "because of the potential of VOD programming to expand in nature and scope, the Commission may decide to review the levels of Canadian content provided by these VOD undertakings after their first five years of operations."
  • The services were required to contribute 5% of their annual gross revenues to a Canadian production fund that was independent of the licensee.
  • The services were required to ensure that a minimum of 25% of the titles promoted on their promotional or "barker" channels each month would be Canadian.
  • The services were prohibited from acquiring exclusive or preferential programming rights.

None of the five services approved in 1997 have yet launched.


General approach to the current applications


Although one of the five services licensed in 1997 was affiliated to a distributor (the Alliance/Shaw VOD service), the policy adopted at that time assumed that VOD services would compete with one another for distribution.


Each of the four VOD licensees in the current round is either integrated with or affiliated to a distributor. The Commission considers that the benefits of licensing distributor-integrated or distributor-affiliated VOD services considerably outweigh the disadvantages.


A particular benefit is that an early launch of VOD services may be facilitated. In turn, an early launch would increase the attractiveness of digital technology for Canadian viewers, which should increase the penetration of the new Category 1 and Category 2 specialty services. This will provide Canadians with increased choice and diversity of programming.


The Commission is of the general view that the framework established in 1997 continues to be appropriate. However, a number of framework issues related to the VOD applications were raised at the 14 August 2000 public hearing. These issues and the resulting modifications are addressed below.


Offering programs in packages


In Public Notice CRTC 1994-118, Exemption order respecting experimental video-on-demand programming undertakings, the Commission characterized a VOD service as one that allows individual customers "to select specific programs…at any time of their choosing."


During the hearing, the VOD applicants outlined plans to sell programs both on an individual basis and in packages. As an example, one applicant suggested that it might offer three movies over a weekend for a single price of $4.99.


In its intervention, the Canadian Association of Broadcasters (CAB) expressed concerns about proposals by VOD applicants to offer packages of programming. The CAB stated:


Allowing pay-per-view (PPV) and VOD to sell programming in packages could well lead to situations in which these services would be directly competitive with existing or new services. If PPV and VOD services were allowed to bundle their programming, they would look to create programming schedules similar to those created by specialty services. PPV and VOD do not have comparable requirements in Canadian content exhibition or Canadian programming expenditure. For this reason it makes sense to limit their offering to an à la carte basis.


The Specialty and Premium Television Association (SPTV) expressed a similar concern, but indicated that PPV and VOD services should have flexibility to bundle sports events and feature films.


During the hearing, the VOD applicants argued that these concerns were unrealistic. They were of the view that the high cost of offering programs on a VOD basis would prevent VOD services from establishing pricing structures similar to those of specialty services. For example, Videon stated that, due to the high cost of distributing programming on a VOD basis, it would not be practical for them to offer a package of unlimited children's programming for $9.95 a month. After careful consideration, the Commission has determined that the VOD services should have the flexibility to offer packages of programming to their customers with appropriate safeguards.


Corus suggested that the Commission establish a time limit for programming packages offered by VOD licensees, such as 12 hours. Other applicants also submitted that VOD licensees should be permitted to make packages of programming available for a limited period of time.


The Commission considers that a time limit is an appropriate safeguard but is of the view that a 12 hour or one day limit would be overly restrictive. The Commission considers that it would be consistent with the nature of VOD services to permit the VOD services to offer programming packages where the total period during which the programming may be viewed does not exceed one week.


Range of content


In the past, the Commission has licensed VOD services without restriction on the types of programming that they may carry. While the applicants indicated that feature films would be the mainstay of their programming, all indicated that they would also offer
programming in other genres. The levels of non-feature film programming as a percentage of all programming offered to VOD customers ranged from 20% for Cogeco to 35% for Rogers and Corus.


The CAB argued that the ability of VOD services to offer new programming genres should be restricted in order to minimize competition with new or existing specialty services. The applicants stated that they would accept limits, but argued that the Commission should allow flexibility since it is unclear how the market will develop and what types of programming customers will ultimately want to view on an on-demand basis.


The Commission is not persuaded that its policy that VOD services should have the flexibility to experiment with the types of programming they offer should be modified. In its view, the time limitation on VOD programming packages is an adequate safeguard to ensure that VOD services do not compete directly with specialty services. Accordingly, the Commission will not restrict the content categories of programming that the VOD services may offer.


French-language service


At the hearing, each of the VOD applicants expressed a willingness to include French-language programming in the inventory that they will offer to customers. Each indicated that it would endeavour to obtain versions of films that include both English and French-language soundtracks so that customers may select the language that they prefer.


Cogeco indicated that, in addition to English-language programming, it would offer a significant amount of French-language programming to customers, but considered that it was not appropriate to make a formal commitment concerning the actual amount at this time. Corus indicated that in addition to English films dubbed into French, it would offer occasional French-language films in their original form. Rogers estimated that about one-third of its total inventory would be available in French. Videon indicated that it would offer French-language programming in accordance with audience demand.


The Commission considers it important that subscribers be able to select programming in the official language of their choice, especially since distributors will likely carry only one VOD service in the near-term. Accordingly, the Commission expects that, to the maximum extent possible, each VOD service make its on-demand program offering available to customers in both official languages. It also expects licensees to adhere to their commitments with respect to French-language programming.


VOD technology allows video programming to be accompanied by an alternative audio track, thus facilitating distribution of dubbed programs. The Commission acknowledges the potential ease of increasing the availability of French-language programming using such an approach. However, it considers it important that VOD operators also make programming available that has been originally produced in French, in addition to programs originally produced in English that have been dubbed into French.


Exhibition of Canadian programming


The Commission considers that a minimum of 5% of English-language feature films and a minimum of 8% of French-language feature films carried by each VOD service at any time should be Canadian. The Commission also considers that the VOD services should make available all Canadian feature films suitable for VOD exhibition. A condition of licence to this effect has been imposed on each of the new VOD licensees. These minimum levels are close percentage equivalents to the 1:20 and 1:12 minimum Canadian to non-Canadian ratios used in the 1997 decisions.


For all programming other than feature films, the Commission considers that a minimum of 20% of the titles available at any time must be Canadian. A condition of licence to this effect has been imposed on each of the new VOD licensees.These levels are higher than the obligations placed on the VOD services approved in 1997. However, the Commission is satisfied, based on the record of this proceeding, that there is an adequate supply of Canadian programming to allow licensees to meet a 20% requirement.


Financial support for independent production


Consistent with the policy framework set out in Public Notice CRTC 1997-83, the Commission is requiring each licensee to contribute a minimum of 5% of the annual gross revenues earned by its VOD programming undertaking to an existing Canadian program production fund administered independently of its undertaking. Thus, the contribution may be made to the Canadian Television Fund or to an independent production fund, as defined in the Broadcasting Distribution Regulations.


When a VOD service offers programming through a distributor to a customer, a portion of the price paid by the customer goes to the distributor. The breakdown of revenue between the distributor and the VOD service is set out in an agreement between the two parties. At the hearing, the Commission explored with applicants how it could fairly determine the gross revenue of a VOD undertaking in cases where the VOD service is affiliated to or integrated with the distributor carrying the service. Specifically, each VOD applicant was asked if it would accept an approach under which the gross revenue of the VOD service for transactions between it and affiliated or integrated distributors would be deemed to be 50% of the total retail revenues received from customers.


Rogers and Videon considered that this would be an appropriate approach. Cogeco indicated that it would be prepared to make its contribution on the assumption that 100% of the retail price would be the gross revenue of the VOD service for the purposes of calculating its financial support for independent production. Corus was of the view that the 50% provision was not necessary in its case because its VOD service was a separate legal entity and would operate independently from any distributor that carried it.


Given the competitive model under which these services will operate, the Commission considers that they should be subject, as much as possible, to similar rules. Accordingly, in the case of a VOD service that is affiliated to or integrated with a distributor, for the purposes of calculating its financial support for independent production, the VOD service's gross annual revenues will be deemed to be 50% of the total retail revenues received from customers.


Corus and Shaw operate within the same ownership group. The Commission therefore considers that the 50% rule outlined above should apply to determine the gross revenue of the Corus VOD service where that revenue results from distribution of VOD programming on Shaw's cable systems.


Length of licence term


Some applicants suggested that concerns about the possible impact of VOD services on pay and specialty services could be addressed by issuing short-term licences with flexible terms and conditions. The Commission would then review the terms and conditions at licence renewal time to determine if they were still appropriate in light of developments in the broadcasting industry.


The Commission considers that the safeguards set out in this decision are sufficient to address the interveners' concerns and is not persuaded that short-term licences are appropriate. Accordingly, the licences that are issued will be for a term ending on 31 August 2007.


Bell ExpressVu general interest terrestrial pay-per-view service


General approach to general interest PPV


When it licensed VOD services in 1997, the Commission acknowledged that such services would compete with existing PPV services. Given that VOD services and PPV services will compete in the terrestrial distribution environment, the Commission considers that the regulatory approach to general interest PPV and VOD services should generally be consistent.


Offering programs in packages


In light of the likely competitive pressure on PPV services to experiment arising from, among other things, the anticipated launch of VOD services, the Commission considers it important that PPV services have as much packaging flexibility as VOD services. Accordingly, with the exception identified in the paragraph below, the Bell ExpressVu service may offer programming packages where the total period during which the programming is to be viewed does not exceed one week.


The Commission notes, however, that some packages of events programming, such as seasonal sports or a Christmas concert series, make attractive programming packages that naturally continue longer than one week. Such programming is particularly appropriate for PPV services. For this reason, the Commission will not apply the limitation of one week to packages that are exclusively comprised of events. However, events programming must be limited to the events themselves and not include "wrap-around" programming that would tend to give the package the characteristics of a specialty service.


French-language service


Unlike VOD, PPV services offer discrete programming channels. It therefore remains appropriate to distinguish between English-language, French-language and bilingual PPV services. Bell ExpressVu has proposed a bilingual service. Consistent with the applicant's proposal, Bell ExpressVu will be subject to the same condition of licence regarding the number of French-language channels that must be offered as that to which its existing DTH PPV service is currently subject. This condition requires the licensee to offer a ratio of one French-language channel to every three English-language channels, with at least five French-language channels offered at all times.


Other areas


There are a number of other areas where the Commission finds it appropriate to adopt an approach to ExpressVu's general interest PPV service that is similar to that applied to the four new VOD services. The ExpressVu licence will include no restrictions on the program categories that may be offered. As well, ExpressVu's obligations with respect to the exhibition of Canadian programming are the same as those of the new VOD services.


Breakaway regional PPV service


The applicant indicated that this service will broadcast only NHL hockey games involving the Vancouver Canucks, Edmonton Oilers and Calgary Flames hockey clubs. The Commission has imposed a condition of licence in this regard.


Secretary General


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