ARCHIVED - Broadcasting Public Notice CRTC 2002-32

Broadcasting Public Notice CRTC 2002-32

Ottawa, 12 June 2002

Call for comments on a proposed policy framework for the distribution of digital television services

In Call for comments on a proposed policy to oversee the transition from analog to digital over-the-air television broadcasting, Public Notice CRTC 2001-62, 5 June 2001 (Public Notice 2001-62), the Commission called for comment on its proposals regarding the policy objectives and principles that should govern the transition from analog to over-the-air digital television (DTV) broadcasting.

The Commission has considered the comments received in response to its call, and has today announced a policy framework for the transition from analog to digital over-the-air television broadcasting (see A licensing policy to oversee the transition from analog to digital, over-the-air television broadcasting, Public Notice CRTC 2002-31, 12 June 2002).

In Public Notice 2001-62, the Commission had also asked various questions about what would constitute an appropriate regulatory framework for the distribution of these Canadian over-the-air digital television services and of other, optional Canadian and non-Canadian DTV services. In the present notice, the Commission examines the comments received in response to its questions. It also sets out for further public comment its preliminary conclusions regarding the policy, principles and related regulatory amendments that, during the transition period, should govern the distribution of over-the-air DTV services by broadcasting distribution undertakings, as well as the distribution of the high definition versions of licensed pay and specialty services, and of other optional and discretionary Canadian and non-Canadian DTV services.

Introduction

1.

The new over-the-air digital television (DTV) system will be based on the Advanced Television Systems Committee A/53 transmission standard that has been adopted for use in Canada as well as in the U.S. The standard defines a number of digital television formats ranging from narrow screen to wide screen, and from "low definition" to "high definition" television, or HDTV. The A/53 standard permits the transmission of either one HDTV signal, or up to five signals of lower definition television programming, within one 6 MHz television channel. When a DTV signal is used to transmit more than one program stream, the signal having the highest technical quality is called the main or primary signal. The others are called multicast, secondary or subsidiary signals. Whatever programming streams are being broadcast on a DTV channel, there remains the capacity to transmit some data as well.

3.

The proposed distribution policy framework developed by the Commission, and the principles on which it is based, represent the preliminary conclusions reached by the Commission following its consideration of comments received during the first and second stages of the public process initiated by Public Notice 2001-62. The proposed framework addresses such issues as the distribution requirements for primary and secondary DTV signals, signal duplication and placement, simultaneous signal substitution, and quality standards. Where appropriate, sections of the Broadcasting Distribution Regulations (the Regulations) and certain associated policy documents that may require amendment have been highlighted. The Commission now invites the views of interested parties on its preliminary views as well as on their implementation.

4.

The Commission's intention is that the policy framework it adopts will apply to all BDUs. It notes, however, that the proposals set out in the current notice have been drafted with only limited regard to the distinctions that exist between the distribution technologies used by cable television systems, multipoint distribution systems (MDS) and direct-to-home (DTH) satellite distribution undertakings. Accordingly, the Commission seeks comment on how its policy proposals should be adapted to take these different technologies and their particular capabilities into account. The Commission notes, in particular, the spectrum limitations MDS systems face, and invites comment on how these challenges can best be addressed.

Overview of comments received in response to Public Notice 2001-62

The over-the-air broadcasting industry

5.

The Canadian Association of Broadcasters (CAB), on behalf of the private sector over-the-air broadcasting industry, stated that broadcasters will require that their over-the-air DTV services be carried by cable distribution undertakings. The CAB argued that it would make little economic sense for a television licensee to invest in constructing new digital broadcasting facilities if its improved signal cannot reach a substantial portion of the market it is licensed to serve. The CAB added:

During the transition period, the Regulations dealing with the priority carriage of analog television signals as part of the basic service must also apply to the distribution of over-the-air DTV signals.. Priority carriage of over-the-air DTV signals is necessary to achieve a timely and successful transition to digital and return of the analog spectrum. It is the most significant catalyst for the acceleration of the transition from analog-to-digital transmission.

6.

The CAB filed with its submission a study prepared by Dr. J. S. Kraemer and R. O. Levine on behalf of the National Association of Broadcasters in the United States. According to the CAB, the U.S. experience described in the study:

.demonstrates that without priority carriage rules, the majority of Canadian DTV signals will be denied cable carriage. This would result in delays in the development of programming and in the demand for digital receivers/sets in Canada and would result in a protracted transition period.. A lengthy transition from analog to digital would put numerous policy goals at risk.. A more rapid transition to digital would avoid a prolonged period of duplicative, expensive and parallel operations of an analog and digital system. It would allow conventional broadcasters to focus their resources on meeting the demands and reflecting the concerns of their local audiences.

The cable distribution industry

7.

The Canadian Cable Television Association (CCTA), on behalf of its membership, opposed the mandatory cable distribution of over-the-air DTV, including HDTV signals. It argued that:

Given the significant challenges to be met before a market develops for DTV/HDTV, CCTA submits that there is no need to establish rules to govern the carriage of DTV/HDTV at this time.. The analog carriage rules should not automatically apply in the digital world.

8.

The CCTA submitted that there are three key policy reasons as to why the carriage of DTV/HDTV signals should not be made mandatory. First, it argued that mandatory access for local DTV/HDTV signals would lead to duplication of conventional local signals that already have 100% penetration on analog cable. It suggested that this would constitute inefficient use of capacity and would be inconsistent with the approach taken by the Commission in its digital radio policy. Second, to oblige cable distributors to set aside capacity for duplicate DTV/HDTV signals would, in the CCTA's view, reduce diversity by reducing the ability of distributors to carry Category 2 specialty services, video-on-demand and other new digital services. Third, the CCTA suggested that, until a substantial proportion of households is equipped with digital television receivers, the costs associated with the mandatory carriage of over-the-air DTV/HDTV signals would outweigh any potential benefits of such carriage to the broadcasting system. The CCTA, however, did propose that distributors be permitted to offer licensed specialty and currently authorized foreign services in high definition without triggering mandatory carriage obligations for local over-the-air HDTV stations.

The position of CTV Television Inc. and Bell ExpressVu Limited partnership

9.

The Commission also received a joint submission by CTV Television Inc. and Bell ExpressVu Limited Partnership (CTV/Bell). These two entities, one a television broadcaster and the other a distributor, submitted that the Regulations should continue to apply in the new digital environment. Specifically, they stated that BDUs should commit, during the transition period, to the distribution of priority Canadian digital services. According to CTV/Bell, this would include:

.the digital duplicates of those conventional analog television signals which are designated as priority services by sections 17, 32, and 37 of the [Regulations] or the conditions of licence of particular BDUs, as applicable. It would also entail Canadian digital services being given priority carriage over foreign digital services. To that end, BDUs should be put on notice that, if there is a shortage of capacity, they must remove either a foreign DTV or an optional Canadian DTV programming service in order to accommodate the carriage of a priority Canadian DTV service.

Digital carriage obligations - the general regulatory framework

10.

Section 17 of the Regulations establishes, among other things, the rules applicable to Class 1 and Class 2 licensees with respect to the distribution of local, regional and extra-regional television services. According to the CAB, these rules pertain to both analog and digital over-the-air television services. It argued that separate distribution requirements for DTV services are thus unnecessary, ".although a few minor technical amendments to certain provisions of the [Regulations] might be needed".

11.

Given the neutrality of the language of the Regulations with respect to the use of technology, it is the Commission's determination that the existing Regulations, including the requirements of section 17, apply equally to analog and digital transmissions. The issue is whether the requirements of section 17 of the Regulations should apply equally to both the analog and the digital version of a service, or whether the Regulations should be amended.

12.

As noted above, the CCTA's principal argument on this matter was that DTV services would essentially be duplicates of analog services, and that BDUs should thus not be obliged to distribute them.

13.

In the CAB's view, however, there are several compelling arguments in favour of extending to DTV services the same regulatory treatment as that now given analog services. The CAB, for example, noted that the language of the Broadcasting Act (the Act), like that of the Regulations, is technology neutral. A further argument advanced by the CAB is based on the considerable costs broadcasters will incur in building and operating digital facilities. The CAB submitted that a broadcaster be afforded every opportunity to re-coup these costs by having its DTV service reach all of the potential viewers in the market it is licensed to serve, including those who receive that signal through a BDU. According to the CAB, without priority carriage, "the DTV signals will be invisible to approximately 75% of Canadian viewers that receive their broadcast signals from a BDU rather than directly from the originating stations using an antenna". The CAB emphasized in this regard the financial importance to television licensees of the signal substitution rights established by the Regulations.

14.

In the Commission's view, requiring BDUs to distribute digital television services would be wholly consistent with the objective of section 3(1)(t)(i) of the Act. This section stipulates that BDUs "should give priority to Canadian programming services and, in particular, to the carriage of local stations". The distribution of DTV services would also be consistent with section 3(1)(d)(iv) of the Act which stipulates that the Canadian broadcasting system should "be readily adaptable to scientific and technological change".

15.

Regarding the CCTA's argument that DTV services would essentially duplicate analog services, the Commission believes that consideration must be given to the fact that one of the purposes of introducing digital technology is to provide viewers with a much superior technical format. The Commission also notes its determination announced in Public Notice 2002-31 that DTV will be treated as a replacement technology for analog. Based on these two considerations, the Commission believes it is reasonable that technology be taken into account in considering whether the service delivered by an analog signal is comparable to, or is a true duplicate of, the service broadcast on a DTV signal.

16.

The current penetration of home digital television receivers is low and may only grow slowly during the initial stages of the transition. However, the Commission considers that the greater the opportunity that consumers have to be exposed to the superior technical quality of HDTV, the greater the incentive they will have to purchase the DTV television receivers that will allow them to enjoy its advantages. In the Commission's view, the business case facing digital broadcasters is already a difficult one. Without mandatory cable carriage of DTV services and its impetus in promoting the sale of digital television receivers, the business challenges facing broadcasters will become more difficult.

17.

The Commission notes that the existing priority carriage obligations of BDUs are not dependent on channel capacity. In the past, this offered BDU licensees a strong incentive to upgrade the channel capacity of their undertakings, since the only alternative method of creating space for new priority services was to discontinue carriage of optional services.

18.

The Regulations nevertheless allow exceptions to be made, by condition of licence, to the carriage requirements contained therein. The Commission intends to retain this flexibility in the Regulations, as it would enable distributors facing a capacity shortage to file applications for exceptions based on their particular circumstances. This flexibility would also permit the Commission to set such deadlines as it deems appropriate for licensees to complete upgrades of their distribution capacity.

Accordingly, the Commission has reached the following preliminary conclusion:

· Except as provided pursuant to a condition of licence, a BDU's regulatory obligations to distribute the primary¹ digital signal of a licensed, over-the-air television service should essentially match those that currently apply to the distribution of the analog version of the service.

· Given the capacity constraints some distributors may face, DTV broadcasters would be expected to provide affected BDUs with reasonable notice of the date they intend to go on air.

Proposed distribution policies

Establishing priorities for the distribution of DTV services - Definitions of a local, regional and extra-regional DTV station

The current priority carriage criteria for terrestrial BDUs are established by reference to the official contours of analog television stations in relation to the service area boundaries of BDUs. The Commission proposes that the carriage priorities assigned to DTV services be defined in a similar manner, by reference to DTV contours.

Some parties had suggested that the Commission define the carriage priority of a DTV service based on the official contours of its analog equivalent. The Commission does not consider that such an approach would be appropriate. For example, the technical parameters of a DTV signal might produce contours that encompass areas significantly smaller than the areas enclosed by the official contours of the analog version of the signal. Adopting this suggestion could thus create situations where the coverage area of an over-the-air digital signal is smaller than the area within which it would receive priority carriage by BDUs. Moreover, the Commission notes that the use of analog contours for this purpose would become increasingly irrelevant as time passes and DTV becomes the dominant technology used in transmitting television signals. Accordingly, the Commission rejects this approach and invites comments on the alternatives outlined below.

The Department of Industry, in its Broadcasting Procedures and Rules (BPR) Part 7, Issue 1, has established the technical criteria designed to produce a "digital service area contour" that would replicate the existing Grade B official contour of each analog television station. There is, however, no digital equivalent of the analog Grade A official contour. One possible means of addressing this would be to define a local digital television station as a station whose digital service area contour encloses all or substantially all of the licensed area of the BDU. The Commission considers that the results of using such a definition would largely replicate the results achieved by the current definition of a local television station in relation to any given BDU, as set out in section 1 of the Regulations.

Under this proposal, the definitions of local, regional and extra-regional digital television stations would incorporate the Department of Industry's definition of digital service area contour, and would be as follows:

a) A local digital television station, in relation to a BDU, is one whose digital service area contour encloses an area that includes a minimum of 95% of the households in the BDU's licensed service area.

b) A regional digital television station is one whose digital service area contour encloses any part of the licensed service area of the distribution undertaking.

c) An extra-regional digital television station is one whose digital service area contour does not include any part of the licensed service area of the distribution undertaking, but does include any point located 32 km or less from the local head end of the undertaking.

24.

As one alternative approach to the proposal described above, a Grade A contour for a digital television station could be defined as the contour enclosing an area within which a certain minimum field strength is achieved - perhaps six decibels above the field strength obtained at the perimeter of the digital service area contour defined by the Department of Industry. This option, however, would require an amendment to the Department of Industry's BPR Part 7.

25.

The Commission seeks comment on these or on other possible alternatives, including suggestions as to how, under the first of the two proposals outlined above, a household might be defined for the purpose of defining a local digital television station.

26.

Whatever new definition is used, there may be circumstances where its application creates inequitable obligations for BDUs or undue advantages for broadcasters. Such circumstances could arise, for example, in highly populated areas such as Southern Ontario where the service areas of BDUs often abut one another and where there is a large number of television transmitters. Accordingly, the Commission considers that the Regulations should allow for the granting of exceptions to mandatory carriage requirements in such circumstances.

Position of DTV services in a BDU's channel line-up

The technology

27.

The Commission expects that BDUs, for reasons of spectrum efficiency, will choose to re-modulate² over-the-air DTV services before distributing them. As a consequence, all such services would be distributed within the digital portion of a BDU's channel line-up, rather than in the analog portion. Thus, in order to receive the DTV services from a BDU, a subscriber would have to rent or purchase a set-top box capable of converting the digital signals for viewing on a DTV or analog television receiver. In the alternative, a subscriber would have to possess a cable-ready DTV television receiver.

Regulatory implications

28.

The Regulations require a BDU licensee to distribute local, regional, extra-regional and other television services in accordance with a specified order of priority, as part of the basic service, beginning with the basic band. Imposing this requirement with respect to the carriage of over-the-air DTV services would disrupt the current basic service line-ups of BDUs and virtually all of their analog tiers. Among other things, such a requirement would also oblige BDUs to install new tier traps throughout their systems.

29.

In order to minimize any such disruption, the CAB proposed that there should be no requirement for distributing a DTV service in any order of priority with regard to channel placement, so long as all digital services carried on a given BDU are accessible through the set-top box. The CAB added:

Sound public policy dictates that Canadian DTV signals receive prominence in a digital environment. During the transition period, this may be achieved through the creation of navigation and menu systems that give prominence to these digital Canadian services.

30.

The Commission agrees with this approach, and notes that there was broad acceptance for it among other parties. Accordingly, the Commission is of the view that:

· Distributors should be free to place digital over-the-air services in their channel line-ups, without regard to their priority status, as long as the services are included as part of the basic service, and thus available to all subscribers.

· Distributors and television broadcasters should cooperate in the creation of navigation and menu systems that give prominence to digital Canadian services.

Duplication of analog and digital versions of mandatory Canadian services

31.

HDTV receivers and digital set-top boxes have only a very limited penetration in the homes of Canadian cable subscribers. Thus, in the case of any mandatory television service, that is to say, any television service that must be carried by a BDU under the Regulations or by a condition of licence, the Commission expects that the distribution of both the analog version and of its digital counterpart will be required for some time. However, in order to minimize the impact on channel capacity and encourage the roll-out of digital technology, the Commission intends to permit a BDU to cease carriage of the analog version once all, or substantially all, of its subscribers either have DTV receivers or are equipped with set-top boxes that can convert digital signals to analog. The vacated 6 MHz analog channel would then become available for other uses. However, once the channel occupied by an analog service is no longer required for this purpose, the Commission would treat it as an "available channel", as defined in section 1 of the Regulations, in applying the access provisions of section 18 of the Regulations (the Access Rules). Accordingly, the Commission proposes that:

· A BDU would not be required to distribute the analog version of a mandatory television service once all, or substantially all, of its subscribers are equipped with a DTV receiver or have a set-top box capable of converting the digital version of the service to analog.

32.

As indicated above, the Commission's intent is that all, or substantially all, of a BDU's subscribers must have either a DTV receiver or a set-top box before a BDU would be permitted to cease the distribution of an analog service. Because it will likely be necessary to establish a practical and measurable threshold, the Commission invites comment on what would constitute such a threshold.

Carriage of optional and discretionary, Canadian and non-Canadian, digital television services

33.

The CCTA suggested that "distributors should not be required to obtain any additional authorization to carry HD feeds of Canadian discretionary or foreign services that are already licensed or authorized for distribution." The CAB, however, argued that the distribution of non-Canadian digital services should not be authorized until the Commission has established "a framework for DTV services and for the digital duplication and migration of licensed Canadian programming services". The CAB added that, even if a BDU was authorized to distribute a non-Canadian digital service, the BDU should be required to re-allocate the capacity used for such distribution to the carriage of a priority Canadian digital service if capacity is not otherwise available. It argued further that authority to distribute a non-Canadian DTV service should be subject to the condition that the rights holder of a program broadcast by that service not withhold from Canadian television licensees the digital broadcasting rights for that program. Finally, the CAB stated that BDUs should be authorized to distribute only U.S. 4+1 DTV services that originate within the same time zone as the priority Canadian digital programming services distributed by the BDU.

34.

The Commission considers that, if higher quality services are available in one location, pressure will build quickly to ensure that they are available everywhere. The Commission also believes that the interests of Canadian broadcasters and Canadian program producers would be well served by any measure that speeds the introduction of DTV technology to the home.

35.

Accordingly, and except as qualified below, the Commission proposes to permit BDUs to add the distribution of the digital version of an authorized Canadian or non-Canadian service without having to seek further authorization from the Commission. Under this proposal, the addition of such a digital version would be subject to the Access Rules and the Distribution and linkage requirements. This is due to the limited capacity of many BDUs, and the fact that a single HDTV signal will occupy the bandwidth of 4 or 5 digitized analog signals. It would also be subject to the stipulation that the digital version be an A/53 upgrade furnished by the program provider. That is to say, the digital version must not be merely a technical duplication of the analog version, although it is recognized that the amount of high definition programming contained in the A/53 digital version may be quite limited in the early stages of the transition. Further, any condition of licence that currently applies to the distribution by a BDU of an optional and/or a discretionary analog service would also apply to the digital version of the service.

36.

In the case of a new A/53 digital service that does not have an analog version, or the analog version of which has not been authorized for distribution, or for a non-Canadian service the digital rights for which are sold separately from the analog rights, an authorization for distribution would first have to be obtained from the Commission. For example, as is currently the case with analog services, a Canadian sponsor wishing the Commission to add a new, digital non-Canadian service to the Lists of eligible satellite services (the Lists) would be required, in its request to the Commission, to include a statement from the non-Canadian service provider that it does not hold, will not obtain, and will not exercise, preferential or exclusive digital programming rights in relation to the distribution of programming in Canada.

· A BDU's authority to distribute an optional and/or discretionary television service, whether it is an over-the-air service, a pay or specialty television service, or a service that appears on the Lists, would be interpreted as including authority to distribute the primary signal of the A/53 version of that service, as furnished by its provider. This authority would be subject to the Access Rules and the Distribution and linkage requirements. It would also be subject to the requirement that the primary signal be an A/53 upgrade of the analog signal.

· Any condition of licence that applies to the authority to distribute an optional and/or a discretionary analog service would also apply to the corresponding A/53 digital version of the service.

38.

The above proposals may require amendments to the Lists and to the Distribution and linkage requirements. The Commission acknowledges the possibility that the digital version of an authorized non-Canadian service might evolve over time, and emerge as a separate and distinct programming service. The Commission therefore invites comments on how best to determine if or when the programming contained in the digital feed of a service has become sufficiently distinct from, or non-duplicative of, the programming contained in the analog version to conclude that it has become a separate and distinct service.

Carriage - Multicast (i.e. secondary or subsidiary) services

39.

Apart from its ability to deliver the superior picture quality of HDTV programming, DTV technology presents an opportunity for broadcasters to experiment with the delivery of other services that would potentially benefit consumers and the broadcasting system as a whole. These might include new, innovative forms of multicast programming. They might also include data transmission services. Both could provide commercial opportunities for the broadcasting industry. At the very least, such services could generate revenues to offset a portion of the costs incurred by a broadcaster in making the transition to digital. The Commission notes in this regard that DTV technology provides the means to encrypt signals, thereby addressing payment and copyright issues.

40.

Multicast programming services, however, do give rise to potential concerns, including those related to their potential impact on the current broadcasting environment, whether they are advertiser-supported, subscription-based, or both. Use of DTV technology to deliver multicast services, potentially in preference to the broadcast of HDTV programming, might also have the effect of discouraging the introduction of HDTV by the industry and the purchase of HDTV receivers by consumers. Cable carriage of multicast programming that duplicates existing services would also consume distribution capacity that could be used for other new and innovative services.

41.

In Public Notice 2002-31, the Commission announced that, as a matter of policy, it would consider applications for licences to broadcast multicast services on a case-by-case basis. It added that it would be predisposed to license new services in preference to those that would merely duplicate the services of existing over-the-air television stations, or those of specialty or pay television undertakings. Consistent with this approach, the Commission considers that case-by-case consideration should also be given to applications by BDUs proposing the distribution of multicast services. Further, the Commission would be predisposed to grant authority to distribute multicast services that are new services. Distribution options could include mandatory carriage, optional carriage, or no carriage. This approach would prevent the duplication that would result from the distribution of low definition digital versions of existing analog services and limit any potential disruption of contracts between BDUs and the providers of pay and specialty television services.

42.

Further, the Commission considers that the authority to carry a non-Canadian DTV service, as proposed in paragraphs 35 and 36, would extend only to the primary signal transmitted on the DTV channel. Thus, a BDU licensee would require prior approval if it wishes to distribute a multicast service that is transmitted as part of the digital signal of a non-Canadian service.

43.

Accordingly, under the Commission's proposed policy with respect to the distribution of multicast services:

· Determinations concerning whether and under what terms a licensed multicast service might be authorized for distribution by a BDU would be reached by the Commission, on a case-by-case basis, at the time it considers the licence application for the multicast service.

· The Commission would be disposed to authorize the distribution of new and innovative multicast services in preference to those that merely duplicate other services.

· A BDU would be required to obtain prior authority if it wished to distribute a multicast service that was transmitted as part of the digital signal of a non-Canadian service.

· The distribution of high definition programming should take precedence over the distribution of multicast services.

44.

To deal with multicast services that the Commission determines must be distributed, the Commission would either add a new category of designated priority service to the Regulations or require such distribution by a particular BDU or BDUs pursuant to section 9(1)(h) of the Act. To accommodate multicast services that the Commission determines may be distributed, the Commission would add a new category of designated optional service to the Regulations.

Data Services

45.

A 6 MHz over-the-air DTV channel has the capacity to transmit a significant amount of broadband data, particularly when it is being used to broadcast only one low definition programming service. While the potential of this data transmission capacity to generate significant revenue for the broadcasting industry is unclear, there was general agreement among parties that contracts for the distribution of such data should be arranged through negotiations. The Commission would not view the involvement of television broadcasters and distributors in data transmission as a concern if measures were taken to ensure that, as a matter of policy, adequate digital distribution capacity is allocated to programming and related services. To assist in this regard, the CAB stated that it "would accept a requirement that broadcasters identify any non-programming material in the signal that is not related to the DTV programming service so that it may be deleted by the BDU."

46.

The CCTA noted that the Regulations now require BDUs to distribute all non-programming data that is directly related to the program being aired. It added that this requirement is further reflected in the Digital Code of Conduct proposed by the CCTA earlier this year. To the extent that there remains any uncertainty about what is meant by "program-related data", the CCTA recommended that the Commission adopt the test used by the Federal Communications Commission (FCC) in the United States for making determinations as to what constitutes program-related information. Under that test, referred to as the "WGN test", the following three criteria must be met. In order for data to qualify as program-related, first, the broadcaster's intention must be that the information be seen by the same viewers as those who are watching the video signal; second, the information must be available during the same interval of time as the video signal; and third, the information must be an integral part of the program.

47.

In the Commission's view, the suggestions of the CAB and CCTA are consistent with section 9(1)(g) of the Act, which empowers the Commission to require that BDUs give priority to the carriage of broadcasting. The suggestions are also consistent with section 7 of the Regulations which prohibits a distributor from altering a programming service in the course of its distribution other than in certain specific circumstances. Accordingly, as part of its framework for the distribution of digital television programming, the Commission proposes the following:

· A BDU would be required to give priority to the distribution of broadcasting services over non-broadcasting services.

· A BDU's authority to distribute any service, whether this authority is contained in the Regulations or is granted by a condition of licence, would not include the authority to distribute any non-broadcasting material that is unrelated to the programming service associated with that service.

· Distributors would be permitted to delete the subsidiary signals of a programming service in the course of distributing the service unless the subsidiary signals are, themselves, programming services or are related to the programming service being distributed.

Simultaneous substitution

48.

In their comments, broadcasters emphasized the importance they place on the extended reach that carriage by BDUs gives to their television services. They also stressed the value they attach to their ability to request the substitution of their programs against the same programs when broadcast simultaneously by other Canadian stations of lower priority and, more particularly, by non-Canadian stations. In its submission, the CAB estimated that the simultaneous substitution requirements contained in the Regulations allow Canadian television broadcasters to earn more than $150 million annually in advertising revenue that would otherwise have left the country. According to the CAB:

49.

The CCTA opposed mandated substitution. It submitted that simultaneous substitution "should only apply once a critical mass of cable subscribers can actually receive an HDTV signal". It claimed that there is no proven technology currently available on a commercial basis to permit substitution of one HDTV signal over another in the compressed MPEG format. It also suggested that, until the DTV/HDTV audience reaches a significant size, it would be of no value to advertisers.

50.

CTV/Bell, in addressing the first of the CCTA's points noted above, stated that, in a digital environment, simultaneous substitution should, in many respects, be easier for BDUs to implement than in the current analog environment. CTV/Bell proposed that:

All BDUs should be prepared to provide conventional broadcasters with not only simultaneous substitution, but also non-simultaneous substitution. In such circumstances, the replacement programming would have to be delivered directly to the BDU in real time and the broadcaster must have obtained the appropriate rights for the replacement programming.

51.

The existing substitution requirements recognize the rights purchased by Canadian broadcasters for the programming that they broadcast to viewers in their licensed service areas. The Commission acknowledges that granting full substitution rights to digital television services in accordance with the order of priority set out in section 17 of the Regulations would impose additional operational complexities and costs on Canadian distributors. Nevertheless, given the difficult business case broadcasters face in making the transition to DTV, there is little doubt that the protection of simultaneous signal substitution rules will be crucial, particularly for English-language television broadcasters. Accordingly, the Commission considers that, as a matter of principle, the licensee of an over-the-air digital television service carried by a BDU in accordance with the provisions of section 17 of the Regulations should have the same substitution rights as the licensee of an analog service having the same priority under those provisions. As for non-simultaneous substitution, the Commission considers that this falls outside the scope of this proceeding.

52.

The program service deletion and substitution provisions of section 30(2) of the Regulations apply where the service of the licensee making the substitution request is at least comparable to that of the lower priority service. This raises the question of how the term "comparable' should be defined in the case of digital services, and whether the definition should encompass the technical formats. The term is defined in section 1 of the Regulations as follows:

"comparable", in respect of two or more programming services, means that not less than 95% of the video and audio components of those programming services, exclusive of commercial messages and of any part of the services carried on a subsidiary signal, are the same.

53.

While there was general agreement with the principle that a high quality signal should not be replaced with a low quality one, there was considerable discussion as to the details. For example, the CAB proposed that the rules should permit certain digital program formats, namely those defined in the A/53 standard as 720P and 1080I, to be substituted by program material in the 480I digital format, provided that the 480I format programming was not analog. For its part, the CCTA suggested that the above definition of comparable should be amended to conclude with the phrase "and equivalent in signal quality".

54.

The Commission has considered the CAB's proposal. Although it agrees that A/53 digital programming, regardless of its format, should not be substituted by analog programming, it notes that the 480I format provides substantially less viewing quality than the 720P and 1080I formats. With respect to the CCTA's suggestion that the definition of comparable be modified, the Commission considers that this proposal has considerable merit and accords with the principle cited above, namely that a high quality signal should not be replaced with a low quality one.

55.

One of the purposes of the digital transition is to upgrade the technical standard in order to bring superior picture and sound quality to television viewers. Viewers who purchase HDTV sets will expect and demand the highest quality available. In the Commission's view, it is reasonable that the technical format should be taken into account in considering whether or not services are comparable.

56.

Consequently, as a minimum, the Commission considers that, for the purpose of the definition, the phrase "equivalent in signal quality" should be taken to mean "in the identical or a superior format". This should forestall most definitional disputes, but perhaps not all, because signal quality also depends on a number of other factors, including the data rate and the compression algorithms used, as well as the subjective impressions of signal impairments, which are difficult to quantify.

57.

Accordingly, the Commission proposes the following policy approach.

Substitution rights for the primary digital service

· An over-the-air digital television service distributed by a BDU would have the same substitution rights as any analog service having the same level of priority under the Regulations, subject to the following qualification concerning the definition of "comparable".

· The definition of "comparable" contained in the Regulations would be amended to conclude with the phrase "and equivalent in signal quality". Consequently, a BDU would only be required to carry out a substitution where the quality of the signal provided by the broadcaster making the request is the same as or is higher than the quality of the signal to be replaced.

Substitution rights for a multicast (i.e. secondary and subsidiary) service licensed as a conventional, over-the-air television service

· A multicast service that is licensed as a conventional, over-the-air television service and that is distributed by a BDU would have the same level of priority under the Regulations as the primary DTV service for the purpose of determining substitution rights.

Substitution rights for a multicast service licensed as other than a conventional, over-the-air television service

· The substitution rights of a multicast service licensed as other than a conventional, over-the-air television programming service would be determined on a case-by-case basis at the time of licensing, as part of the Commission's consideration of whether the service should be authorized for distribution by BDUs.

Distribution Quality Standards

58.

In Public Notice 2001-62, the Commission asked if regulatory measures were needed to address quality of service standards for the carriage of A/53 signals by BDUs.

59.

Distributors suggested that regulatory measures would not be necessary, as the marketplace would ensure that adequate standards are met. The CCTA did agree, however, that "when an HDTV signal is delivered to a BDU, broadcasters are entitled to expect that the BDU would not degrade the quality of the distributed signal".

60.

Broadcasters were not confident that regulatory measures would prove to be unnecessary. The CAB stated that BDUs ".must be prohibited from altering the technical quality and reliability of A/53 signals". The Canadian Broadcasting Corporation argued that "transparency should be a requirement in order that subscribers receive the full benefit of digital television".

61.

As the Commission has noted, one of the purposes of the digital transition is to upgrade the technical standard, and viewers will demand the highest quality available. Technical quality is therefore a matter of regulatory concern. Accordingly, as a matter of policy, the Commission considers that:

· A DTV signal distributed by a BDU to its subscribers should be of the same quality and in the same format as that received by the BDU, without any degradation.

Carriage of DTV services by direct-to-home (DTH) satellite distribution undertakings

62.

Most aspects of the Commission's proposed framework for the distribution of digital over-the-air television services apply to the carriage of over-the-air DTV services by terrestrial BDUs, such as cable television systems and multipoint distribution system (MDS) undertakings. The existing basic service carriage rules for DTH differ considerably from those that apply to terrestrial BDUs. The current regulatory approach reflects the Commission's desire to encourage the growth of DTH as a viable, competitive alternative to cable. The Commission established the policy framework for DTH operators in Introductory statement - Licensing of new direct-to-home (DTH) satellite distribution undertakings, and new DTH pay-per-view (PPV) television programming undertakings, Public Notice CRTC 1995-217, 20 December 1995. In that notice, the Commission stated that it had:

.been mindful of the requirements of the Act, and the need to establish a competitive balance among new and existing distribution undertakings. Indeed, a key challenge for the Commission in this proceeding has been to implement a policy framework for DTH satellite distribution undertakings that maximizes contributions to the Canadian broadcasting system, while encompassing sufficient flexibility to support the competitive entry of a new satellite digital distribution technology.

63.

Pursuant to section 37 of the Regulations, DTH operators are currently required to provide a basic service consisting of at least one English- and one French-language CBC station, and at least one affiliate of each network licensed on a national basis. Further, the Regulations stipulate that, where DTH operators distribute a channel that comprises the proceedings of the House of Commons, it must be offered on basic unless the service operator agrees to discretionary carriage. As in the case of cable, effective 1 September 2002, DTH operators will be required to distribute the proceedings of the House of Commons as part of the basic service.³

· Consistent with the approach that the Commission proposes to take with respect to the carriage of DTV services by terrestrially-based BDUs, the Commission considers that DTH licensees should likewise be required to distribute the DTV versions of the analog services that they must currently distribute as part of the basic service.

Provision of service - an interim solution

64.

The Commission believes that conventional, unencrypted, advertiser supported, over-the-air television services must continue to be available to Canadians. Viewers must not become disenfranchised through the replacement of today's analog telecasts by DTV. In its announcement today of a policy to oversee the transition from analog to digital over-the-air television broadcasting, the Commission has strongly encouraged broadcasters to provide digital coverage that matches their current analog coverage, within the constraints of the Department of Industry's allotment plan. While distribution of the new digital services by the country's BDUs will be very important, reception of such services through a BDU cannot serve as a substitute for free, over-the-air service.

65.

That being said, the Commission is of the view that it would be in the public interest to extend the new digital A/53 services to Canadians as expeditiously as possible. The Commission notes in this regard the proposal advanced by CTV/Bell for an interim approach whereby, pending construction of a DTV over-the-air transmitter, the service of a transitional digital television undertaking might be delivered by direct feed to a BDU's uplink facilities or its head end for distribution to subscribers.

66.

In order to hasten the delivery of DTV services to Canadians, the Commission would be predisposed to adopt such an approach for an interim period of between 12 and 18 months, while the licensees of transitional digital television undertakings constructed their over-the-air facilities. Applicants for transitional DTV licences who wished to take advantage of this interim method of delivering their DTV services to BDUs would be required to submit with their applications specific proposals and timeframes for the construction of conventional DTV broadcast facilities. Furthermore, any such interim carriage arrangements authorized by the Commission would be subject to conditions of licence requiring that construction of these facilities be completed, and that they be in operation, within specified deadlines. Such interim carriage arrangements would not be mandated by the Regulations. Instead, they would be the subject of negotiations between the broadcaster and the BDU concerned.

Call for comments

The Commission invites comments that address its proposed policy framework and any issues or questions relating to its implementation, taking into account any differences that exist between distribution technologies. The Commission will accept comments that it receives on or before 9 September 2002.

The first and second stage comments received in response to Public Notice 2001-62 form part of this proceeding.

The Commission will not formally acknowledge comments. It will, however, fully consider all comments and they will form part of the public record of the proceeding, provided that the procedures for filing set out below have been followed.

Procedures for filing comments

Interested parties can file their comments on paper, on diskette or by email. Submissions longer than five pages should include a summary.

Parties wishing to file their comments on paper or on diskette should send them to the Secretary General, CRTC, Ottawa, K1A 0N2.

Parties wishing to file of their comments by email can do so by sending them to procedure@crtc.gc.ca 

Electronic submissions should be in the HTML format. As an alternative, those making submissions may use "Microsoft Word" for text and "Microsoft Excel" for spreadsheets.

Please number each paragraph of your submission. In addition, please enter the line ***End of document*** following the last paragraph. This will help the Commission verify that the document has not been damaged during transmission.

The Commission will make comments filed in electronic form available on its web site at www.crtc.gc.ca in the official language and format in which they are submitted. All comments, whether filed on paper or in electronic form, will be available in the public examination file.

The Commission encourages interested parties to monitor the public examination file (and/or the Commission's web site) for additional information that they may find useful when preparing their comments.

Examination of public comments and related documents at the following Commission offices during normal business hours

Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage, Room G-5
Hull, Quebec K1A 0N2
Tel: (819) 997-2429 - TDD: 994-0423
Fax: (819) 994-0218

Bank of Commerce Building
1809 Barrington Street
Suite 1007
Halifax, Nova Scotia B3J 3K8
Tel: (902) 426-7997 - TDD: 426-6997
Fax: (902) 426-2721

405 de Maisonneuve Blvd. East
2^nd Floor, Suite B2300
Montréal, Quebec H2L 4J5
Tel: (514) 283-6607 - TDD: 283-8316
Fax: (514) 283-3689

55 St. Clair Avenue East
Suite 624
Toronto, Ontario M4T 1M2
Tel: (416) 952-9096
Fax: (416) 954-6343

Kensington Building
275 Portage Avenue
Suite 1810
Winnipeg, Manitoba R3B 2B3
Tel: (204) 983-6306 - TDD: 983-8274
Fax: (204) 983-6317

Cornwall Professional Building
2125 - 11^th Avenue
Room 103
Regina, Saskatchewan S4P 3X3
Tel: (306) 780-3422
Fax: (306) 780-3319

10405 Jasper Avenue
Suite 520
Edmonton, Alberta T5J 3N4
Tel: (780) 495-3224
Fax: (780) 495-3214

530-580 Hornby Street
Vancouver, British Columbia V6C 3B6
Tel: (604) 666-2111 - TDD: 666-0778
Fax: (604) 666-8322

Secretary General

² The over-the-air A/53 transmissions will use 8-VSB (8 level vestigial side-band) modulation while they will likely be distributed on cable using 256 QAM (Quadrature Amplitude Modulation)

³ The distribution of the proceedings of the House of Commons on CPAC, Public Notice CRTC 2001-115, 6 November 2001