ARCHIVED - Broadcasting - Commission Letter to Torstar Corporation Alleging Breaches ofSections 21(3) and 9 of the Broadcasting Distribution Regulations Against WesternCo-Axial Limited, now called Cableworks Communications Inc.
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LetterOttawa, 31 May 2000
Our File: CCB #990707CC054L
Mr. David C. Wetherald and
Mr. Christian Jolivet Re: Complaint by Torstar Corporation Alleging Breaches of Sections 21(3) and 9 of the Broadcasting Distribution Regulations Against Western Co-Axial Limited, now called Cableworks Communications Inc. Dear Mr. Wetherald and Mr. Jolivet: On 30 June 1999 Torstar Corporation ("Torstar") filed a complaint against Western Co-Axial Limited ("Western"),1 alleging that Western had conferred an undue preference on Rogers Cablesystems ("Rogers") and subjected Torstar to an undue disadvantage, in violation of section 9 of the Broadcasting Distribution Regulations ("the Regulations"). In its initial complaint, Torstar also alleged that Western was not in compliance with its obligation to provide access to third party exempt programming services (Section 21(3) of the Regulations). Torstar, the parent company of Torstar Electronic Publishing, operates an exempt programming service known as Toronto Star Television ("TSTV") which is distributed on various Toronto-area cable systems. Torstar has requested access tothe Westernsystem located in Hamilton, Ontario. Western has refused this access request, while continuing to distribute the exempt programming service, The Shopping Channel ("TSC"), which is owned by Rogers. Subsequent to filing its complaint, Torstar was informed that Western had been engaged in ongoing negotiations with another exempt programming service, Northern Response Canada (Northern). Western denied access to TSTV on the grounds that Northern was ahead of TSTV on a "first come, first served basis". Torstar therefore amended its complaint to include the allegations that Western conferred an undue preference on Northern and subjected TSTV to an undue disadvantage. Positions of Parties Torstar argued, among other things, that the "first come, first served" requirement was not intended to allow a person to stand indefinitely in the way of other parties who are prepared to proceed. Further, Torstar submitted that "first come, first served" should apply not simply to the first person to express interest, but rather to the first person who expresses an interest and is ready, willing and able to provide service in a reasonably expeditious period. Torstar noted that Northern's expression of interest, dated 23 May 1996, was essentially a form letter sent to at least two cable operators. Torstar argued that its own expression of interest, dated 8 April 1999, was unconditional, and it was ready at all times to distribute its service. In response, Cogeco (on behalf of Western) argued, among other things, that Northern was the first interested party to file a request for distribution of an exempt service to Western. Further, it stated that Northern and Western negotiated in good faith from 27 July 1998 until they reached an agreement on 1 August 1999.2 Cogeco noted that Cableworks had no direct or indirect interest in Northern's service (nor in the TSC service controlled by Rogers) and had no incentive, at any time, to discriminate against Torstar. Cogeco argued that Northern had priority over Torstar's application and maintained interest in the distribution of its service until it reached an agreement with Western on 1 August 1999. As part of the Commission's process, TSC and Northern were provided with an opportunity to comment and Torstar was given an opportunity to reply. TSC stated that it was unable to comment on the timing issues related to the addition of a third-party exempt programming service, but stated that Western was carrying both TSC and Northern and has fulfilled the Commission's access requirements. Northern argued that the facts clearly indicate that no undue preference was granted to Northern, nor was an undue disadvantage imposed on Torstar. Among other things, Northern stated that its letter to Western dated 23 May 1996 demonstrated that its expression of interest was subject to Commission decisions that were yet to be released at the time. Northern had stated in the 23 May 1996 letter that "We understand that access decisions will depend on the number of new specialty services that the CRTC licenses, the final rate structure determined for exempt services and the ultimate trigger date for first come first serve applications." On this basis, Northern argued that Torstar's attempt to characterize Northern's interest as conditional is untenable and without basis. Northern stated that it and Western were negotiating in good faith towards reaching an agreement at all times. The Commission's Decision The Commission notes that section 21(3) of the Regulations is limited to circumstances where the distribution undertaking in question, or its affiliate, has an ownership interest, directly or indirectly, in the exempt programming undertaking. Given that Western has no interest in TSC, section 21(3) does not apply. However, in Public Notice CRTC 1997-150, dated 22 December 1997, the Commission also indicated that the following circumstance could constitute an undue preference or disadvantage:
The Commission noted that, for example, two cable companies and their affiliates, or two telephone companies and their affiliates, would be of "similar type". TSTV, owned by Torstar, is an "independently-owned exempt programming service". TSC, on the other hand, is owned by Rogers Communications, which is the parent company, and therefore an affiliate, of Rogers Cablesystems. Since Western is a "similar type of entity" to Rogers, in terms of carriage status for Western, TSC is considered to be cable-owned, rather than independently-owned. The Commission notes that in situations where a licensee distributes services of an exempt programming undertaking in which a similar type of distribution undertaking has control of 15% or more of the exempt undertaking, there is no automatic requirement for the licensee to make an equal number of analog channels available for the distribution of the services of other exempt programming undertakings. Such a requirement could be imposed, however, where there is evidence of undue preference or undue disadvantage. Therefore, there is a rebuttable presumption that the distributor make available a channel to at least one independently-owned exempt programming service on a "first come, first served" basis. It is to be noted that the distributor in this case has not attempted to rebut this presumption that is raised by its being a similar type of entity. Turning to whether the "first come, first served" policy has been offended, the record of this proceeding demonstrates that Western received its first expression of interest from a third party exempt service (Northern) on 23 May 1996, approximately one month after the issuance of Public Notice CRTC 1996-603 and prior to Torstar's first expression of interest on 8 April 1999. Formal negotiations do not appear to have begun with Northern until 27 July 1998. This delay was the result of, among other things, Northern's interest in awaiting the outcome of the Commission's specialty licensing decisions in 1996, the release of the access rates and the time required for Northern to develop its service. The key issue in this case is whether, on the facts, Western's selection and distribution of Northern's, rather than Torstar's, exempt service was in keeping with the "first come, first served" policy established in Public Notice CRTC 1996-60 and if not, whether there has been a breach of section 9. The Commission considers that, while a great deal of time did pass before a third party exempt service was distributed, which may have served the interests of the distributor, the record does not support a conclusion that the delay amounted to a misapplication of the "first come, first served" policy, or to an undue preference or undue disadvantage. Accordingly, the Commission finds that Western is not in breach of section 9. The selection process may have been protracted, but ultimately it did result in the "first come" party actually being given access. While the Commission is satisfied that in this case no undue preference or undue disadvantage has been conferred, it is of the view that clarification of the "first come, first served" policy is required. Accordingly, the Commission has today released Public Notice CRTC 2000-72 to address this matter. In accordance with Commission policy, all correspondence relating to this matter will be placed on a public examination file. Sincerely,
Ursula Menke
cc: David Flynn - Northern Response Footnotes1 On 30 September 1999, subsequent to the filing of the complaint, Western became a wholly owned subsidiary of Cogeco Cable Systems Inc. (Cogeco), and was re-named Cableworks Communications Inc. (Cableworks). 2 Western informed TSTV in a 12 July 1999 letter that it had been negotiating with Northern for the carriage of its exempt programming service since 27 July 1998. 3 Access Rules for Broadcasting Distribution Undertakings, 26 April 1996, which, among other things, addressed certain matters relating to the distribution of exempt programming services. |
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