ARCHIVED - Broadcasting Public Notice CRTC 2002-7

Broadcasting Public Notice CRTC 2002-7

Ottawa, 12 February 2002

Bulk billing by direct-to-home satellite distribution undertakings

In this notice, the Commission announces its intention to permit direct-to-home (DTH) distributors, upon application, to engage in the practice of bulk billing on the same basis as cable undertakings. The Commission invites DTH licensees to file applications for licence amendments that would remove the restrictions that prohibit them from engaging in bulk billing. The term "bulk billing" describes the practice whereby the owner or management of a multiple-unit dwelling acquires programming services from a broadcasting distribution undertaking (BDU) on a wholesale basis for redistribution to the residents of the building.

1.

In Decision CRTC 2001-521 dated 24 August 2001, the Commission dealt with a complaint filed by Rogers Cable Inc. (Rogers), alleging that Star Choice Communications Inc. (Star Choice) had breached the terms of its DTH distribution licence by entering into bulk billing arrangements with owners of various multiple-unit dwellings (MUDs) in and around Toronto. Rogers cited Decision CRTC 96-529, which awarded Star Choice its DTH licence, but restricted Star Choice's authority to distribute programming services, as follows:

The service herein authorized, to be known as Star Choice, will derive its revenues entirely from subscription fees, and will provide programming services exclusively to individual subscribers in all parts of Canada on a DTH basis. (emphasis added by Rogers)

2.

In Decision 2000-521 the Commission expressed concern that the inability of DTH providers to engage in the practice of bulk billing without restrictions, as cable companies currently do, may place DTH providers at a competitive disadvantage relative to other types of distribution undertakings. Accordingly, it issued on the same date Public Notice CRTC 2001-96 seeking comment on this issue.

3.

In that public notice, the Commission expressed its preliminary view that the public interest would best be served by permitting cable and DTH distributors to engage in the practice of bulk billing on the same basis. Since bulk billing by DTH licensees would not involve the distribution of their programming services exclusively to individual subscribers, the Commission noted that this would require amendments to the DTH licences currently held by Star Choice and Bell ExpressVu Limited Partnership (Bell ExpressVu).

Positions of the parties

4.

In response to PN 2001-96, the Commission received comments from Rogers, Bell ExpressVu, Star Choice and Image Digital Cable Television. Bell ExpressVu argued that there is no policy rationale for allowing cable licensees, and not DTH licensees, to engage in bulk billing. According to Bell ExpressVu, to do so would run counter to the goal of competition and would not benefit customers. Bell ExpressVu argued that bulk billing would allow a service provider to design its packaging in a way that maximizes its appeal to potential customers, and that "creative new marketing arrangements have obvious advantages" for the residents of multiple-unit dwellings.

5.

Star Choice stated that there is considerable demand for bulk billing arrangements by building owners and associations, characterizing these arrangements as "an important means of distinguishing between service providers in a competitive marketplace". Star Choice added that the current limitation on bulk billing by DTH providers has hampered its ability to compete on an equal footing with cable distribution undertakings in MUDs.

6.

The comment by Image Digital Cable Television also supported the Commission's preliminary view, but urged the Commission to go further and allow multipoint multi-channel distribution service (MMDS) operators to engage in bulk billing.

7.

Rogers did not support the Commission's preliminary view. Rather, it argued that the Commission should restrict the use of bulk billing arrangements by all BDUs, including cable, on a going-forward basis, on the grounds that these arrangements may constitute an undue preference or disadvantage. In Rogers' view, the practical effect of bulk billing arrangements is akin to exclusive access agreements. Rogers noted that MUD customers generally pay for bulk services through their rent. It argued that this constitutes a disincentive both for customers to buy services from another BDU, and for building owners to provide access to other BDUs. Rogers added that, "consistent with a policy supporting end-user choice, such arrangements should not be permitted in those multiple dwelling units where it is technically feasible for another BDU to offer its service on a competitive basis to end-users".

The Commission's determination

8.

The Commission confirms its preliminary view that the public interest would best be served by permitting cable and DTH distributors to engage in the practice of bulk billing on the same basis. Bulk billing arrangements have been used by cable for some time as a marketing tool that can, in the Commission's view, provide consumers with both convenience and cost savings. Accordingly, the Commission intends, upon application, to remove the current restrictions on DTH undertakings so as to permit them to enter into bulk billing arrangements on the same basis as cable undertakings.

9.

At the same time, the Commission will wish to ensure that bulk billing contracts not result in exclusive access arrangements or otherwise restrict end-user choice. The Commission considers bulk billing arrangements that have the effect of excluding other service providers from distributing broadcasting services in MUDs, in circumstances where the provision of such services to end users on a competitive basis would otherwise be technically feasible, would amount to undue preference, contrary to section 9 of the Broadcasting Distribution Regulations (the Regulations).

10.

With regard to buildings where it is not technically feasible for more than one distributor to provide service, the Commission considers that the provisions of paragraph 81 of Public Notice CRTC 1997-150 would apply mutatis mutandis.

11.

As noted above, licence amendments are required in order to permit DTH undertakings to offer bulk billing services on the same basis as cable undertakings. DTH licensees may file applications for these amendments and these will be dealt with on an expedited basis.

12.

With respect to the comment submitted by Image Digital Cable Television, the Commission notes that the current licences held by MMDS operators do not prohibit them from engaging in bulk billing arrangements that are otherwise consistent with the undue preference provisions contained in section 9 of the Regulations.

Secretary General

This document is available in alternate format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca