ARCHIVED - Broadcasting Decision CRTC 2002-319

Broadcasting Decision CRTC 2002-319

Ottawa, 18 October 2002

Complaint by the Black Market Coalition alleging that CTY Telecom is operating an unlicensed broadcasting distribution undertaking

In this decision, the Commission finds that the record of its proceeding does not support a conclusion that CTY Telecom is carrying on an unlicensed broadcasting distribution undertaking in Canada, in contravention of section 32 of the Broadcasting Act. The Commission has, however, forwarded a copy of the complete record of this proceeding to the Department of Industry to allow it to take any necessary action with respect to CTY Telecom pursuant to the Radiocommunication Act.

Background

1.

On 28 March 2002, the Canadian Cable Television Association (CCTA), on behalf of the "Black Market Coalition"¹ (the Coalition), filed a complaint with the Commission. The complaint alleged that that CTY Telecom (CTY) was operating an unlicensed broadcasting distribution undertaking (BDU) in contravention of section 32 of the Broadcasting Act (the Act). The Coalition therefore requested that, following a public hearing, the Commission issue a mandatory order against CTY, requiring it to cease and desist its unauthorized activities.

2.

The Commission initiated a written proceeding to deal with the complaint, wherein CTY was provided an opportunity to respond to the Coalition's allegations, and the Coalition was given an opportunity to reply.

The CTY undertaking

3.

The record of this proceeding reveals the following relevant facts about the activities of CTY:

• CTY is a trade name used by 1437158 Ontario Inc. On its website, CTY describes itself as "a Direct TV Canada Company." CTY's operations are headquartered in Toronto, with offices in Vancouver and Montréal, and it employs 12 sales staff as well as a number of technicians. CTY also maintains an address in Houston, Texas.

• Dish Network is a U.S. direct broadcast satellite service owned by EchoStar Communications Corporation (EchoStar). EchoStar, through Dish Network, provides customers with access to up to 500 channels of American and international programming.

• CTY purchases Dish Network's satellite equipment, consisting of a satellite dish, a receiver, a remote, and an access card, from various Canadian wholesalers.

• CTY sells home entertainment systems that consist of a large screen television set, an audio unit, and a satellite dish equipped with the card necessary to have access to EchoStar's programming service. CTY customers may purchase either the complete system or only the satellite unit together with the access card.

• CTY customers require an address in the United States in order to subscribe to any one of EchoStar's programming packages. For Canadians without a U.S. address, CTY programs the access card relying on its own address in Houston, Texas.

Details of the complaint

4.

The Coalition alleged that CTY's operations went far beyond the sale of decoding equipment and access cards and that it was, in fact, operating a full service BDU in Canada. The Coalition submitted that CTY was essentially operating as an unlicensed competitor to licensed Canadian BDUs. As a result, the Coalition argued that CTY was in contravention of section 32 of the Act.

5.

Section 32 of the Act states, in part:

32.(1) Broadcasting without or contrary to licence. - Every person who, not being exempt from the requirement to hold a licence, carries on a broadcasting undertaking without a licence therefor is guilty of an offence punishable on summary conviction and is liable

(a) in the case of an individual, to a fine not exceeding twenty thousand dollars for each day that the offence continues; or

(b) in the case of a corporation, to a fine not exceeding two hundred thousand dollars for each day that the offence continues.

6.

The Coalition submitted that CTY's operation was, in fact, a broadcasting distribution undertaking as defined in section 2 of the Act. The definition reads as follows:

"distribution undertaking" means any undertaking for the reception of broadcasting and the retransmission thereof by radio waves or other means of telecommunication to more than one permanent or temporary residence or dwelling unit or to another such undertaking.

7.

The Coalition argued that, in the case of CTY, the undertaking consisted of a commercial arrangement whereby CTY, for a monthly fee, provided the dish and the access card required to enable viewers to receive retransmitted broadcasting signals. The Coalition maintained that these signals were received by the dishes and retransmitted to receivers in customers' homes, where customers could have access to Dish Network's programming through the use of the access cards provided by CTY.

8.

The Coalition maintained that CTY was a BDU since, for commercial purposes, it intercepted a broadcast and made that broadcast available to paying customers. It argued that CTY should not be exempted from the licensing and regulatory provisions of the Act simply because it made the broadcast available by the provision of access cards unauthorized by the service provider. The Coalition also suggested that, even if the Commission were to decide that the activities of CTY did not meet the definition of a "distribution undertaking," the Commission could still find that CTY was operating some other type of undertaking that constituted a broadcasting undertaking.

CTY's position

9.

In its response to the complaint, CTY submitted that, as long as an entity did not provide retransmission, uplinking or scrambling facilities for a U.S. satellite service offered to direct-to-home (DTH) subscribers, the entity's marketing activities on behalf of such a service would not require licensing by the Commission. CTY also noted that the transmission of programs was a prerequisite for a broadcasting undertaking to exist.

10.

CTY stated, among other things, that it was not involved in the origination and uplinking of a broadcast signal, in causing a signal to be transmitted to Canada, in the clearance of the necessary copyright licences or in the ownership of broadcasting receiving apparatus. It submitted that it was not related to Direct TV (U.S.) or EchoStar, and did not maintain a contractual relationship with Direct TV (U.S.). Further, CTY submitted that it did not share its revenues with anyone, nor was it controlled or in a contractual relationship with an American or any other broadcaster.

11.

CTY maintained that, rather than being a full service BDU, as alleged by the Coalition, its activities involved the sale of satellite equipment and an access or "smart" card. CTY stated that it was not an unregulated competitor to licensed BDUs, but was rather a storefront business with a sales staff that sold satellite equipment. CTY stated that it was in no way connected to any entity that was a broadcasting undertaking.

12.

In response to the Coalition's allegation that CTY offered a comprehensive package of U.S. programming for a monthly fee, CTY maintained that the fee it charged was not a subscription fee. Rather, it submitted, the fee was a monthly payment by customers to finance the purchase of satellite equipment. CTY stated that it offered no programming whatsoever, and that all it did was describe the programs that its equipment would allow a consumer to receive.

13.

CTY argued that it was not in the public interest to have this matter proceed to a hearing, stating:

The facts are clear that CTY was engaged in the sale, installation of grey market and black market satellite. [sic] .[T]here is nothing further for the Commission to uncover with respect to the scope of CTY's activities and operations.

The Commission's determination

14.

The Commission considers that a BDU licensed under the Act performs a number of key activities. These include the selection of signals that are to be distributed; the gathering of these signals, including making all the necessary technical and signal licensing arrangements; the packaging of these signals; and the distribution of these signals to the public.

15.

It is not clear that CTY performs all, or even any, of these functions. According to the record of this proceeding, CTY acquires Dish Network hardware capable of receiving Dish Network's signals and sells the hardware to customers in Canada. CTY also acquires access cards and, through its address in Houston, Texas, is able to have Dish Network authorize these cards for CTY's Canadian customers. In the Commission's view, these activities appear to be no different than those of any other so-called "grey market" dealer in Canada. Since CTY has also clearly admitted, in its letter of 27 May 2002, that it was engaged in "black market satellite," the Commission considers that CTY may also be involved in providing access cards unauthorized by Dish Network to its customers; activities generally considered as black market activities.

16.

The Commission considers that there is insufficient evidence on the record to sustain a finding that CTY selects, gathers, packages, or distributes signals. In the Commission's view, CTY appears to be making it possible for residents of Canada to have access to a package of signals offered by a U.S. direct broadcast satellite service. The Commission notes that Dish Network is not authorized to distribute services in Canada. Therefore, there is no legal manner in which CTY could offer access in Canada to Dish Network's signals. While the Coalition has argued that CTY was a BDU given that the CTY website stated, among other things, that it "delivers" satellite channels, this appears to the Commission to be marketing terminology designed to indicate to potential CTY customers the services that can be received. The Commission does not consider that this marketing information, when examined in the context of the complete record of this proceeding, sustains the allegation that CTY is involved with the actual selection, gathering, packaging or distribution of these signals that would make it a BDU licensable in Canada.

17.

In light of the above, the Commission finds that the record does not support a conclusion that CTY is carrying on a distribution undertaking in Canada without a licence, and its activities are therefore not subject to the Act. The Commission will therefore not institute any proceeding with regard to the issuance of a mandatory order.

18.

The Commission emphasizes that it does not condone the grey and black market activities clearly admitted to by CTY in the course of this proceeding. On the contrary, the Commission is extremely concerned about the activities of grey and black market dealers and the negative effect that these activities have on the Canadian broadcasting system. It is committed to take all measures at its disposal to limit such activities. In this regard, the Commission notes that black and grey market activities have been declared by the Supreme Court of Canada, in Bell ExpressVu Limited Partership vs Richard Rex et al², to be contrary to the provisions of the Radiocommunication Act. The Commission has, therefore, forwarded a copy of the complete record of this proceeding to the Department of Industry, the body responsible for administering the Radiocommunication Act, to allow it to take any action it considers appropriate with respect to CTY's activities, including the transmittal of this record to enforcement authorities. Further, the Commission has notified Dish Network of CTY's activities, and has inquired whether such activities have been undertaken with Dish Network's knowledge and/or consent.

Secretary General

² (2002) 212 D.L.R. (4^th) 1