ARCHIVED - Broadcasting - Commission Letter to Shaw Communications Inc. Alleging a Breachof Section 9 of the Broadcasting Distribution Regulations by Look Communications Inc.Complaint by Shaw Communications Inc. Alleging a Breach of Section 9 of theBroadcasting D

Letter

Ottawa, 7 April 2000

Our File:  CCB# 981126CC088L-1
               6640-04RC57-3

Mr. Ken Stein
Senior Vice President
Corporate and Regulatory Affairs
Shaw Communications Inc.
244 Newkirk Road
Richmond Hill, Ontario
L4C 3S5
FAX: (905) 780-6456

and

Mr. David Parkes
President & C.E.O.
Look Communications Inc.
5415 Dundas Street West
Suite 207
Toronto, Ontario
M9B 1B5
FAX: (416) 233-5945

Re: Complaint by Shaw Communications Inc. Alleging a Breach of Section 9 of the Broadcasting Distribution Regulations by Look Communications Inc.

Dear Mr. Stein and Mr. Parkes:

On 20 November 1998, the Commission received a complaint from Shaw Communications Inc. (Shaw), alleging that Look Communications Inc. (Look) had entered into an exclusive arrangement with Orsa Investments Ltd. (Orsa) to supply television services to Orsa's 123 rental unit dwelling (the Building). In Shaw's view, this constituted an undue preference contrary to section 9 of the Broadcasting Distribution Regulations (the Regulations). Shaw had, prior to Orsa's agreement with Look, provided cable television service in the Building to 97 subscribers and Internet services to one customer.

According to Shaw, it had several discussions with Orsa to explore the possibility of allowing Shaw to continue to provide service to those tenants who wanted to receive Shaw's service. Shaw also offered to rewire the Building to improve the quality of service to the tenants, however, Orsa ultimately accepted Look's exclusive offer.

By letter dated 14 October 1998, Orsa notified Shaw that its service was no longer required in the Building and requested that Shaw completely disconnect service within 24 hours. Shaw asked Orsa to reconsider its request that Shaw remove its existing cables in the Building, and noted that they would require their own cables in order to be able to provide their Internet service to tenants in the Building.

Shaw received a petition dated 18 October 1998 from about 49 tenants in the Building stating that they were very dissatisfied with the quality of antenna feed, and that they should be given the choice of cable providers.

On 3 November 1998, Shaw disconnected its signal.

Positions of Parties

Shaw alleged that Look had granted itself an undue preference, and subjected Shaw to an undue disadvantage, by entering an exclusive agreement with Orsa to provide service to its tenants, contrary to section 9 of the Regulations.

Shaw stated that the Commission, in Public Notice CRTC 1997-150, specifically identified the situation where a broadcasting distribution undertaking (BDU) distributes programming services to a multi-unit dwelling (MUD) pursuant to an exclusive contract as constituting an undue preference. Shaw stated that it is technically feasible for both Shaw and Look to provide competitive access to the individual units at the Building.

Shaw submitted that the Commission should immediately order Look to stop providing service at the Building until such time as the tenants in the building are able to have access to Shaw's service and the services of other licensed BDUs of their choosing.

In its reply, Look stated that it is up to the building owner to decide what, if any, service supplier should be allowed to access the building. Look stated that it had been providing service to the Building with excellent feedback from the owner and the tenants regarding the quality of signal and service. Look also stated that "it is quite unclear under what conditions the so-called Shaw petition was pieced together''.

In its intervention, Orsa also stated that the property owner has the right to decide who will operate businesses from the building, who will contractually service the building, and what media will provide a signal for video entertainment in the building. Orsa noted that it wanted an exclusive arrangement with one service provider in order to avoid multi-wire distribution and to minimize the wear and tear on the premises.

In reply, Shaw submitted that Look's answer constituted a clear admission that it has conferred on itself an undue preference. With respect to Orsa's intervention, Shaw acknowledged that in the past years, including the years prior to Shaw's assumption of service, there had been problems with the provision of cable to the Building. Shaw stated that it had done its best to resolve those issues.

Shaw submitted that Look and Orsa overlooked that tenants are being denied the benefits of the regulations, and ignored the public interest and the policy that underlies the building access rules, "which is to ensure that each Canadian television viewer has access to the BDU of his or her choice''. Shaw stated that the Commission has adopted a similar regime in the telecommunications context.

Contrary to Orsa's position in its answer, Shaw submitted that Orsa would not have insisted on exclusivity, and that it was Look that demanded exclusive access.

Shaw also stated that "no one connected with Shaw had any involvement in creating the letter [i.e. petition dated 18 October 1998] or in circulating it to the tenants''.

The Decision of the Commission

In Public Notice CRTC 1997-150, the Commission stated its view that, in the case of a multiple-unit dwelling where it is technically feasible to provide competitive access to individual units, an exclusive contract between the building owner and a BDU would generally constitute an undue preference in contravention of section 9 of the Regulations.

Having reviewed closely all materials submitted by the parties in the matter of this complaint, the Commission, by majority vote, has determined that the facts clearly disclose that Look is conferring an undue preference upon itself, in contravention of section 9 of the Regulations. It is technically feasible to provide competitive entry to the building in question. Given the impact of the exclusive agreement, which is to restrict end-user choice, the Commission finds that the preference conferred by Look upon itself is undue. Accordingly, the Commission directs Look to take whatever steps are necessary to ensure that end-users in individual units can be served by the broadcasting distribution undertakings of their choice.

Sincerely,

Ursula Menke
Secretary General

cc: Orsa Investments

Dissenting Opinion of Commissioner David McKendry

On November 20, 1998, Shaw Communications Inc. (Shaw) filed a complaint with the Commission against Look Communications Inc. (Look). Shaw submitted that Look's arrangement with ORSA Investments Ltd. (ORSA) to supply television services on an exclusive basis to a multi-unit dwelling owned by ORSA constituted an undue preference, contrary to section 9 of the Broadcasting Distribution Regulations (Regulations). Section 9 states:

No licensee shall give an undue preference to any person, including itself, or subject any person to an undue preference.

The record does not show that Look has given an undue preference to itself. It does show that ORSA had sufficient and correct knowledge about the competitive alternatives to Look. Based on that knowledge, including competitive proposals by Shaw and Look, ORSA selected Look to provide service. There is no conclusive evidence that Look demanded exclusive access to ORSA's building. In fact, the record shows that ORSA decided "to give exclusivity to the best proposal."¹ As a result, it cannot be said that Look gave itself an undue preference. Look was selected by ORSA.

If ORSA had insufficient or incorrect knowledge about the competitive alternatives to Look due to Look's assertions or behaviour, one might be able to sustain a position that Look had given an undue preference to itself. However, this is not the case. It is abundantly clear on the record that ORSA was well informed about Shaw's television services. Shaw or its predecessors supplied services to ORSA's building for at least 17 years² before ORSA entered into an exclusive arrangement with Look. In addition, ORSA gave Shaw an opportunity to make a proposal to continue the provision of cable television service.³

Direct experience with Shaw

With respect to the service provided by Shaw to ORSA, ORSA's January 5, 1999, letter to the Commission states:

ORSA and the cable companies of the past 17 years have had many frustrating and unresolved discussions and appeals to provide service to the said property.⁴

ORSA states that it has been "very dissatisfied" with Shaw's service.⁵ The problems identified by ORSA include unsightly cables hanging in the hallways. According to ORSA, the municipality had to issue work orders in order to have some of the problems corrected. ORSA states that on January 23, 1998, Shaw requested ORSA to give Shaw and easement in perpetuity that would be registered against the building's title. ORSA refused, stating that it would agree to Shaw owning the distribution system.

With respect to exclusive access, ORSA states that Shaw proposed a much longer period for exclusive access than the period proposed by Look:

Shaw was looking for exclusivity with a 15 year commitment and a lifetime ownership of the cable distribution. We elected to go with Look because they offered the best proposal. We had the choice of a variable time horizon and a three year minimum commitment and no strings attached. After the three years we could go back into the market and re-evaluate the industry and select a service provider that will suit our needs at that time.⁶

ORSA also states:

Look was prepared to run the cable where we had requested, whereas Shaw said they couldn't do it.⁷

Clearly ORSA made its decision to select Look on the basis of direct experience with Shaw over many years and after giving Shaw and Look an opportunity to make proposals to ORSA. In my view, this is a situation that the Commission should applaud rather than frustrate.

Generally accepted and common practice

As Look states, it is a generally accepted and common practice for building owners to make decisions about the provision of services to their buildings:

There are a number of multi-dwelling unit buildings throughout the Look licensed areas whose owners have chosen to forego the benefits of cable television service. Some of these owners have chosen to develop their own MATV and SMATV systems and/or opted for the services of another licensed supplier such as a direct-to-home satellite company or, indeed, Look Communications Inc. We would not consider these decisions on behalf of property owners to constitute undue preference. These property owners are simply rendering decisions in the best interest of both themselves and their tenants and/or fellow condominium owners.⁸

No conclusive evidence

As I noted earlier, conclusive evidence does not exist on the record that Look demanded access to ORSA's building on an exclusive basis. In fact, the record shows that it was ORSA's decision to give exclusivity to the BDU with the best proposal to provide service:

At this [August 24, 1998, meeting with Shaw] John Ordanis [from ORSA] reiterated that we, the owners of the building, have been very dissatisfied with the service and we have decided to give exlusivity to the best proposal.⁹

Shaw goes no further than asserting that "it seems likely" that Look demanded exclusive access and that Shaw "assumes" that Look demanded exclusive access:

It seems likely that Orsa, in negotiating its agreement with Look, would not have required Look to be the exclusive supplier of cable television service in the Building. Therefore, Shaw assumes that it was Look that demanded exclusive access to the tenants in the Building, contrary to section 9 of the BDU Regulations.¹⁰

.
As noted above, it seems likely that Look demanded and obtained access to the Building on an exclusive basis.¹¹

"Seems likely" and "assumes" are not an adequate foundation on which to convict Look and to indirectly fetter ORSA's ability to use its property and carry on its business, particularly in light of ORSA's clear statement that it decided to give exclusivity to the BDU with the best proposal to provide service.

A way station

In my opinion, section 9 of the Regulations does not give the Commission the power to, in effect, order access to a building if the owner of the building refuses access. The majority's decision does indirectly what it cannot do directly - that is, exercise jurisdiction over ORSA.

The majority conscripts Look to do indirectly what the Commission cannot do directly: that is, force ORSA to grant access to Shaw. The majority states:

Accordingly, the Commission directs Look to take whatever steps are necessary to ensure that end-users in individual units can be served by the broadcasting undertakings of their choice. (Emphasis added.)

One might argue that the majority's decision merely ensures that the licensee, a body clearly within the Commission's jurisdiction, complies with the Commission's broadcasting policy. However, such an argument fails to acknowledge that the decision is only a way station on the track to the decision's ultimate destination: the building and its owner, entities over which the Commission has no jurisdiction.

An impossible task?

Perhaps Look can persuade ORSA through non-confrontational means to grant access to Look's competitors in spite of ORSA's clear and informed statement that it does not want to grant access to Shaw.

Look's task will be very difficult, perhaps impossible, if ORSA believes that its property rights have paramountcy over the rights of BDUs. Based on ORSA's decision to grant access to Look rather than to Shaw and to require Shaw to remove its wires from the hallways of the building, I assume that ORSA believes that its property rights are paramount. I also note Look's statements:

Participants in the [CRTC's] CISC process also include the owners and managers of multi-dwelling unit buildings. It is evident from their participation that they very much consider themselves as the final decision-makers with respect to both service provision and the configuration of inside wiring in their properties.¹²

If Look cannot persuade ORSA through non-confrontational means to grant access to Look's competitors, Look will have no choice but to withdraw (or threaten to withdraw) service to ORSA's building in the expectation that the absence of service will bring ORSA into line. Unfortunately the withdrawal of service will leave the tenants without television and other services that may include security services¹³ until ORSA decides to comply with the obligation imposed on Look by the majority.

If Look ceases to provide service to ORSA's building for any reason, Look apparently will still be bound by the majority's decision that "directs Look to take whatever steps are necessary to ensure that end-users in individual units can be served by the broadcasting undertakings of their choice." The majority's decision is not conditional on Look wanting to or being in a position to provide service to ORSA's building. This is an undue and unfair burden to place on Look.

In summary, based on the record of this proceeding, I do not find that Look has given an undue preference to itself because:

• ORSA had sufficient and correct knowledge about the competitive alternatives to Look,

• Look was selected by ORSA after it received competitive proposals from Shaw and Look,

• Look did not engage in misleading marketing practices or other anti-competitive behaviour in order to obtain access to ORSA's building, and

• Conclusive evidence does not exist that Look demanded exclusive access to ORSA's building.

In addition, I find that section 9 of the Regulations cannot be used, in effect, to order access to a building by a BDU if the owner refuses access.

Footnotes

¹ Letter to the Commission from Mr Tom Ordanis, President, ORSA Investments Ltd., January 5, 1999, at 4. Emphasis added.

² Id., at 2. This letter indicates a period of 17 years. A January 5, 1999, letter to the Commission from Mr R Scott Colbran, President & C.E.O., Look Communications Inc., January 5, 1999, at paragraph 7, indicates a period of 28 years. Apparently service was originally provided by York Cablevision Limited, a company subsequently acquired by Shaw. Id., at 2. This letter indicates a period of 17 years. A January 5, 1999, letter to the Commission from Mr R Scott Colbran, President & C.E.O., Look Communications Inc., January 5, 1999, at paragraph 7, indicates a period of 28 years. Apparently service was originally provided by York Cablevision Limited, a company subsequently acquired by Shaw.

³ Letter to the Commission from Mr Ken C Stein, Senior Vice President, Corporate & Regulatory Affairs, Shaw Communications Inc., November 20, 1998, at paragraphs 3 and 4. Letter to the Commission from Mr Ken C Stein, Senior Vice President, Corporate & Regulatory Affairs, Shaw Communications Inc., November 20, 1998, at paragraphs 3 and 4.

⁴ Letter to the Commission from Mr Tom Ordanis, President, ORSA Investments Ltd., January 5, 1999, at 2. Letter to the Commission from Mr Tom Ordanis, President, ORSA Investments Ltd., January 5, 1999, at 2.

⁵ Id., at 4. Id., at 4.

⁶ Id., at 8. Id., at 8.

⁷ Id., at 4. Id., at 4.

⁸ Letter to the Commission from Mr R Scott Colbran, President & C.E.O., Look Communications Inc., January 5, 1999, at paragraph 4. Letter to the Commission from Mr R Scott Colbran, President & C.E.O., Look Communications Inc., January 5, 1999, at paragraph 4.

⁹ Letter to the Commission from Mr Tom Ordanis, President, ORSA Investments Ltd., January 5, 1999, at 4. Letter to the Commission from Mr Tom Ordanis, President, ORSA Investments Ltd., January 5, 1999, at 4.

¹⁰ Id., at paragraph 12, emphasis added. Id., at paragraph 12, emphasis added.

¹¹ Letter to the Commission from Mr Ken C Stein, Senior Vice President, Corporate & Regulatory Affairs, Shaw Communications Inc., January 18, 1999, at paragraph 15, emphasis added. Letter to the Commission from Mr Ken C Stein, Senior Vice President, Corporate & Regulatory Affairs, Shaw Communications Inc., January 18, 1999, at paragraph 15, emphasis added.

¹² Letter to the Commission from Mr R Scott Colbran, President & C.E.O., Look Communications Inc., January 5, 1999, at paragraph 5. Letter to the Commission from Mr R Scott Colbran, President & C.E.O., Look Communications Inc., January 5, 1999, at paragraph 5.

¹³ For example, Shaw proposed to supply and install two surveillance cameras. Letter to the Commission from Mr Ken C Stein, Senior Vice President, Corporate & Regulatory Affairs, Shaw Communications Inc., November 20, 1998, appendix A. For example, Shaw proposed to supply and install two surveillance cameras. Letter to the Commission from Mr Ken C Stein, Senior Vice President, Corporate & Regulatory Affairs, Shaw Communications Inc., November 20, 1998, appendix A.