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Broadcasting Decision CRTC 2003-23
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Ottawa, 24 January 2003
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Vision TV: Canada's Faith Network/Réseau religieux canadien
Across Canada
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Application 2002-0155-9
Broadcasting Public Notice CRTC 2002-25
15 May 2002
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Application for an increase in Vision TV's wholesale rate
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The Commission, by majority vote, approves in part an application by Vision TV: Canada's Faith Network/Réseau religieux canadien to amend a condition of the licence for Vision TV to increase the service's monthly wholesale rate. The wholesale rate for Vision TV will increase from $0.08 to $0.10 per subscriber per month, effective 1 March 2003.
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The application
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1.
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The Commission received an application from Vision TV: Canada's Faith Network/Réseau religieux canadien (Vision CFN) to increase the wholesale rate for the specialty service known as Vision TV from $0.08 to $0.11 per subscriber per month. Vision TV is a national, English-language, multi-faith specialty programming service that operates on a not-for-profit basis. Vision TV offers two types of programming. "Mosaic" programming is produced or acquired by participating faith groups who pay for the distribution of the programming on Vision TV. "Cornerstone" programming is acquired or produced by the licensee, with content focussed on faiths, cultures, moral issues and social concerns. Vision TV is distributed on a "dual status" basis. This means that broadcasting distribution undertakings must distribute Vision TV as part of the basic service, unless Vision CFN consents in writing to the distribution of Vision TV as a discretionary service.
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2.
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Vision CFN, through its subsidiary Vision TV Digital Inc., also controls the digital Category 1 specialty service ONE: the Body, Mind and Spirit Channel which launched in September 2001. The Commission has also approved applications by Vision CFN for a digital Category 2 service to be known as Celebration: Vision Inspired Music and for a digital Category 2 service to be known as The Christian Channel. The Category 2 services have yet to begin operation.
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Background - Licensing history relating to the financial aspects of Vision TV's operations
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3.
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In Decision CRTC 87-900, 1 December 1987 (Decision 87-900), the Commission awarded the Canadian Interfaith Network a licence to operate a national, English-language, multi-faith specialty programming service to be known as Vision TV that would operate on a not-for-profit basis. Vision TV was to be made available free of charge to subscribers. Vision TV was permitted to broadcast up to six minutes of national advertising material per hour, but advertising was restricted to "goods and services related to the religious, ethical or moral lives of Canadians."
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4.
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In Authority to Implement a Wholesale Rate, Decision CRTC 93-580, 3 September 1993, the Commission approved, in part, an application for a monthly wholesale rate for Vision TV to be charged for each subscriber. The licensee applied for a rate of $0.10, but the Commission determined that a rate of $0.08 per subscriber per month was adequate at the time to "maintain and to enhance its Canadian programming."
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5.
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As part of its application for licence renewal in 1994, Vision CFN applied to increase the wholesale rate for Vision TV from $0.08 to $0.10 per subscriber per month. In Licence Renewal for Vision TV, Decision CRTC 94-655, 18 August 1994, the Commission denied the proposed rate increase on the basis that the licensee had not presented any new evidence to warrant an increase in the wholesale rate. The Commission did, however, remove restrictions set out in Decision 87-900 that limited advertising broadcast by Vision TV to the advertising of goods and services related to the religious, ethical or moral lives of Canadians.
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6.
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In its application for licence renewal considered at a 19 June 2001 public hearing, Vision CFN proposed to increase the monthly wholesale rate for Vision TV from $0.08 to $0.15 per subscriber per month. In support of the application, the licensee cited increases to its costs. It further indicated that the proposed increase was needed to maintain the existing level of its service and to enable Vision TV to bring about an "increase in programming unique to the system." The licensee stated it had been necessary to increase the number of times that Canadian programs were repeated on the service, thus decreasing the diversity of Vision TV's programming. Vision CFN also stated that its inability to introduce fresher programming into Vision TV's schedule was reducing the service's audience, thereby decreasing Vision TV's ability to meet revenue targets.
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7.
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In Short-term licence renewal for Vision TV: Canada's Faith Network, Decision CRTC 2001-669, 2 November 2001 (Decision 2001-669), the Commission renewed the licence for Vision TV for a term of 33 months, from 1 December 2001 to 31 August 2004. The decision noted that the licensee had been found in non-compliance with requirements related to the broadcast of Canadian programming. The Commission indicated that it would use the shorter licence term to assess the effectiveness of mechanisms intended to ensure the licensee's compliance with its condition of licence concerning the exhibition of Canadian content.
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8.
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In Decision 2001-669, the Commission denied the proposed wholesale rate increase for Vision TV stating: "Based on the available evidence, the Commission is not convinced of the appropriateness of an increase in Vision TV's wholesale rate at this time, and, accordingly, denies the applicant's request."
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Applicant's rationale for the rate increase proposed in the current application
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9.
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In its current application, Vision CFN set out economic reasons for the proposed rate increase, as well as reasons why the increase would be in the public interest and in accordance with the objectives set out in the Broadcasting Act (the Act). It considered that a rate increase was justified, on economic grounds, because:
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- Vision TV is an independent stand-alone service that operates on a not-for-profit basis. As such it does not have the same ability as other specialty services to raise capital or amortize costs over multiple services.
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- Vision TV operates frugally, with operating expenses well below the average for specialty services.
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- The licensee currently has insufficient resources to establish and maintain a reserve fund, manage cash flow, plan for contingencies, finance infrastructure and preserve the operational integrity of the service.
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- Financial projections for Vision TV indicate that there will be no improvement in its financial situation without the proposed rate increase. The applicant submitted that Vision TV was experiencing a financial crisis that could not be alleviated by internal remedies, and that its revenues would not grow sufficiently to alleviate the financial crisis unless the rate increase were approved.
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- A three cent increase in the wholesale rate is a reasonable response to address its economic needs.
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10.
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The applicant further considered that its proposed rate increase was in accordance with the public interest and the objectives of the Act for the following reasons:
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- The rate increase would support the public policy goals of promoting tolerance and understanding by ensuring that Vision TV continued to provide balanced multi-faith, multi-cultural programming that is accessible to as many Canadians as possible. The applicant submitted that, without a rate increase, the balance and diversity of the programming on Vision TV would be at risk.
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- Vision TV, because of its not-for-profit nature, offers programs that fulfil public policy objectives but may not appeal to broad audiences, and therefore do not attract high levels of advertising revenues. The applicant submitted that increased subscription revenues were necessary to support such programming.
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11.
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The applicant indicated that approval of the application would result in an additional $5.5 million expenditure on Canadian programming over five years. A portion of this amount would go to support in-house productions, but the majority would be spent on independent productions representing a diversity of cultures and all regions of Canada. Vision CFN submitted that a significant demand exists for such funding, but that, due to a lack of resources, Vision TV had only been able to offer funding to a fraction of the producers who had presented programming proposals in 2002.
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12.
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The applicant also proposed to spend $2.275 million over five years on closed captioning equipment, on upgrading program and contract management software, and on studio and production equipment compatible with a digital environment, if its application were approved. It submitted that an upgrade of its studio facilities and equipment would enable it to better support independent producers, Mosaic clients and Canadian faith groups in bringing new programs to fruition.
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13.
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According to the applicant, some of the revenues generated by the proposed rate increase would be earmarked for increases in various types of operating expenses and as contributions to a reserve fund. The reserve fund, amounting to approximately $6 million over five years, would be used, in part, to facilitate cash flow management, including management of aged receivables.
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Interventions
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14.
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The Commission received 23 interventions in connection with the Vision CFN application. Eighteen interventions from diverse religious and cultural groups and small independent producers supported the application. The supporting interveners emphasized the unique nature of Vision TV's service, and the success that Vision TV has enjoyed in assembling and broadcasting a schedule of religious and multi-cultural programming that reflects Canada's diversity and makes use of programming from independent producers. The interveners considered that approval of the rate increase would allow Vision TV to continue to provide such high quality programming.
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15.
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The Canadian Independent Film Caucus (CIFC), and its Atlantic and British Columbia chapters, were among those submitting supporting interventions. However, these interveners expressed concern about recent decreases in the broadcast, by Vision TV, of independently-produced documentaries dealing with social issues. The CIFC considered that Vision TV should recommit itself to the broadcast of such programming, and to maintaining a strong regional presence through its regional offices and staff.
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16.
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Three parties, the Canadian Cable Television Association (CCTA), Bell ExpressVu Limited Partnership (Bell ExpressVu) and Trinity Television Inc. (Trinity) commented on the application without specifically supporting or opposing it. The CCTA submitted that Vision CFN may have underestimated Vision TV's future growth in advertising revenues, and expressed concern that revenues flowing from the proposed rate increase might be used to recover expenses relating to the launch of Vision CFN's new digital services. The CCTA suggested that "a more modest increase would provide sufficient surpluses to address normal cash flow requirements."
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17.
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Bell ExpressVu submitted that, if a rate increase were approved, "the Commission should strike a fair balance between the viewers of this service and the requirement for fiscal responsibility that should be incumbent on all programming services which receive the benefit of universal access."
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18.
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Trinity Television submitted that, if a rate increase were approved, the Commission should encourage Vision CFN to allocate a portion of the new revenue to strengthen its relationship with the producers of Mosaic programming.
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19.
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The application was opposed by the Canadian Cable Systems Alliance (the CCSA) and by Vidéotron ltée (Vidéotron). The CCSA considered that the combination of Vision TV's dual status carriage arrangement and the size of its viewing base should be enough to allow the service to operate on a not-for-profit basis without adding to the costs borne by the consumer. The CCSA further considered that viewers should not have to bear the cost of establishing a reserve fund for Vision TV. Vidéotron considered that the Commission should reduce the wholesale rate for all specialty services that currently enjoy dual or modified dual status distribution arrangements.
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20.
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Vision did not submit a reply to the interventions.
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The Commission's analysis and determination
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21.
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The Commission considers that Vision TV is a unique service that provides programming that contributes significantly to the fulfilment of the Act's objectives. It accomplishes this by:
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- providing diverse programming not offered elsewhere in the broadcasting system;
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- providing programming that reflects Canada's cultural diversity;
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- providing a smaller independent voice within the Canadian broadcasting system and a window for programs by small independent producers.
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22.
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The Commission is of the view that Vision TV's programming, which is not designed to appeal to broad audiences, limits the potential advertising revenue that is available to the service. Further, Vision TV is unable to broadcast advertisements in its Mosaic programs, which constitute close to half of its schedule. This more limited ability to attract advertising revenues is reflected in the 2001 financial return for Vision TV. The return indicated that advertising revenue accounted for a small proportion of the total revenues for Vision TV, compared to the average for English-language specialty services in the same year. Although Vision TV has shown annual growth in total advertising revenues, the Commission considers that, because of the nature of its service, advertising revenue will continue to constitute a smaller portion of Vision TV's total budget than it does for specialty services that appeal to a more mainstream audience. Therefore, if Vision TV is to improve its programming, it must find revenues from other sources.
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23.
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One alternative that the licensee might use to increase revenue would be to increase the rates that it charges various faith groups to buy time on Vision TV to broadcast their Mosaic programming. Vision CFN indicated that it had explored this option, but was concerned that an increase in Mosaic rates would result in the disappearance of Mosaic programming provided by smaller religious groups. The Commission considers that the provision of programming from a variety of Canadian religious perspectives, including those of smaller groups, is an essential component of Vision TV's mandate.
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24.
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In light of the above, the Commission considers that, because of the nature of the service that it provides, it will be necessary for Vision TV to continue to rely on its wholesale fee for a large proportion of its revenue. On the other hand, in light of the stability of that revenue, the Commission does not consider that a rate increase should be granted to support the reserve fund proposed by the applicant. Nor does the Commission consider that, on the evidence, Vision TV should be granted a rate increase to support increases in its operating expenses, other than those related to programming.
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25.
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The Commission considers that it is important that Vision TV be able to maintain, and even improve, the quality of its programming. The Commission is satisfied that, absent a rate increase, Vision TV would not be able to continue to provide programming that enables it to fulfil its role in contributing to the achievement of the objectives discussed above. The Commission is prepared, therefore, to approve a rate increase that will fund the incremental expenditures over five years proposed by the applicant for programming, as well as the $2.275 million to be spent on the new capital expenditures that will serve to improve Vision TV's programming performance.
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26.
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The Commission notes the concerns expressed by interveners about decreases in the broadcast of documentaries on social issues on Vision TV, and of the importance of strengthening relationships with producers of Mosaic programming. The Commission expects the licensee to continue to include documentaries on social issues in Vision TV's programming schedule, and to build strong relationships with Mosaic programming producers. The Commission will review the licensee's performance in these areas at the time of Vision TV's licence renewal.
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27.
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A rate increase of $0.02 per subscriber per month will generate, on the basis of the applicant's subscriber projections, approximately $9.3 million over five years. The Commission notes that, even with a $0.02 increase, Vision TV's wholesale fee would still be among the lowest of the English-language specialty services.
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28.
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The Commission, therefore, by majority vote, approves in part an application by Vision TV: Canada's Faith Network/Réseau religieux canadien to amend a condition of the licence for Vision TV to increase the service's monthly wholesale rate. Accordingly, by condition of licence, commencing 1 March 2003, the Commission authorizes the licensee to charge broadcasting distribution undertakings distributing Vision TV a maximum of $0.10 per subscriber per month when it is distributed as part of the basic service.
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29.
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The Commission further requires, by condition of licence, in the period beginning 1 March 2003 and ending 31 August 2003, and in each broadcast year thereafter, that, in addition to the 45% of gross revenues it is required to expend on programming pursuant to condition of licence number 9, Vision CFN further expend 25% of the revenues generated by the rate increase approved in this decision on programming. Thus, 70% of this increase will effectively be spent on programming. Vision CFN shall file with its annual return a separate report demonstrating to the satisfaction of the Commission that it has fulfilled this condition of licence.
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Secretary General
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This decision is to be appended to the licence. It is available in alternative format upon request, and may also be examined at the following Internet site: http://www.crtc.gc.ca
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Dissenting opinion of Commissioner Barbara Cram
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Vision
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I respectfully disagree with my colleagues in the majority. In my view this decision creates a troubling precedent, creates greater regulatory uncertainty and is contrary to the trend of a market-driven consumer choice broadcasting system.
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First, a little history. Vision TV: Canada's Faith Network/Réseau religieux canadien (hereinafter called "Vision") was licensed in response to a call by the Commission for "a new broadly-based network programming service devoted to serving the varied religious practices and beliefs of Canadians, on a national interfaith basis".
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The applicant stated no money would be paid by subscribers because:
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"you shouldn't have to pay to walk through a church, temple or a mosque door. Neither should you have to pay to receive a full and balanced representation of faith views"
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Vision was licensed to air interfaith religious programming. (Decision 87-900)
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In Decision 93-580, Vision requested a wholesale subscriber rate of 10 cents citing the new Religious Broadcasting policy (P.N. CRTC 1993-78, 3 June 1993).
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It anticipated losing its Mosaic programming, losing viewership stating it needed these revenues to "maintain and enhance its Canadian programming to solidify its viewership and compete." Vision stated its 'thrust and priorities have not changed' and that its programming continued to focus on "spirituality, ethics, and values".
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The Commission fixed a wholesale rate of 8 cents based upon the amount of financial resources required. In exchange Vision's commitment was that 80% of the revenue generated by subscriber fees would go to programming improvements such as extending the schedule, having 4 times the amount of original Canadian programming, adding a children's programming block, having a distance learning block for theology schools and reducing repeats to an original plus 2 repeats. Vision was required to provide an implementation plan for these commitments at its renewal the next year. Twice the decision spoke to the fact that the Commission would not foresee any subsequent increases to the wholesale rate as being required.
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The next year, in Decision 94-655 Vision had its first substantive renewal. In response to complaints, without finding non compliance, the Commission added the definition of religious programming to the Condition of Licence such that the nature of service read "programming shall consist exclusively of interfaith, religious programming which is related to, inspired by, or arises from a person's spirituality, including related moral or ethical issues."
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The Commission did make findings in three areas:
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a. There was non-compliance in Canadian content expenditures for 4 out of 5 years. The decision stated Vision's claim that they would be in compliance by August 1994.
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b. There was non-compliance in that Vision, notwithstanding its initial reports, did not log its closed captioning until August 1995.
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c. It found there was inadequate supervision of some of its Mosaic programming. In particular Vision was airing infomercials of 40 minutes length as Mosaic programming. It breached the 'high standard' requirement in that some of its Punjabi Sikh programming advocated the establishment of an independent Sikh state, and condoned the purchase of bullets to defend the Sikh faithful from the state.
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The Commission also noted the complaints of gay and lesbian associations that a particular program promoted hatred of homosexuals. As to this latter Vision claimed it was very sympathetic and stated it involved "those groups" on an ongoing basis. (It should be noted this issue was discussed as Vision was not then a member of the Canadian Broadcasting Standards Council (hereinafter called the CBSC). Vision subsequently joined the CBSC.)
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Vision was refused an application for a 2 cent increase. It provided plans for compliance with its commitments regarding the 1993 rate. A full 7 year renewal was given.
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In Decision 97-660 Vision was allowed to increase its advertising from 6 to 12 minutes per hour.
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In Decision 2000-40 Vision's application for 20 hours local programming and local advertising was refused.
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In Decision 2001-669, Vision's licence was up for its second substantive renewal. There was no change to its nature of service.
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Vision was found in non-compliance of its Canadian content for 4 years during the broadcast year and also during the evening broadcast period of 1998-99. Its licence was renewed for 33 months and more stringent requirements as to reporting and monitoring were required.
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Vision had requested a 7 cent increase in its wholesale rate with reasons bearing a striking resemblance to those advanced in its 1993 application. Vision stated its audience had been declining in size because in part it had to increase the level of repeats. The decision stated "the Commission finds the data (audience) inconclusive on this issue, particularly with respect to the size of the licensee's primary target demographic of those 50 years of age or older". Indeed, at paragraph 543 of the transcript of the hearing in June 2001, the Vision witness refers to the fact that the 50 plus demographic which is nearly 50% of their audience is a "fast-growing demographic group".
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It is not at all clear to me why Vision had increased its repeats given its commitments in 1994 to limit the repeats to two repeats per original. Again Vision stated it needed the increase to obtain new programming to "replenish" its Canadian content but would this have been necessary if it had lived up to its commitment in 1993 to have 4 times the amount of original Canadian programming?
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In refusing the increase the Commission referred to Vision's revenues having increased, "especially those most closely associated with audience size". It stated its reluctance to grant increases based on projected or potential decreases in revenues.
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This decision, Decision 2001-669 was issued 2 November 2001. On 28 February 2002, Vision filed this application for a 3 cent increase.
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One further note. In its Decision 01/02-0617 the CBSC found Vision in breach of its standards for a telecast on February 24, 2002 for certain anti-gay and anti-lesbian comments. Vision's response referred to the comments being made 'within a framework of responsibility" and that the individual was stating his "understanding of biblical sexual injunctions" and didn't suggest any harm be done to them. Vision also apologized. The CBSC found that "intolerant comment can find no salvation by wrapping itself in religious garb". It should be noted, absent the CBSC, this issue would have come to the Commission for adjudication. Given the nature of the statements, some of which are quoted by my colleague, Commissioner Langford in his dissent, it would appear to me that the Commission decision would likely have been the same as that of the CBSC.
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Two comments must be made to the decision of the majority before the context is complete:
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a. It is my respectful view that whilst the Commission should commend a broadcaster for reflecting Canada's cultural diversity, no monetary recompense should be awarded for same. Reflecting Canada's rich diversity is a duty and obligation of all broadcasters. Cultural diversity is a fundamental element. This duty and obligation accompanies the privilege to be a broadcaster in the Canadian broadcasting system. Extra money should not be given to reflect our diversity because this treats diversity as an option.
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Further, Vision's nature of service has not been changed. Vision continues to be required to provide interfaith religious programming. It, along with all other broadcasters, is required to reflect its Canadian identity which includes Canada's multicultural richness in fulfilling its nature of service.
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b. The majority decision, in my view, understates the position of some of the interveners, in particular the Canadian Independent Film Caucus and its Atlantic and British Columbia chapters. In addition to the concerns stated, there was also a concern that Vision had recently restricted its proposal calls to Ontario based producers only. I would anticipate the Atlantic and B.C. Chapters would not support an increase if this concern was not addressed.
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Given this context, my concerns with the majority decision are as follows:
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A. The timing and precedent are, at best, disturbing.
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Four months after a decision based on a full public hearing is issued, a paper application is filed and handled as a paper application. The second decision essentially overturns the first. Whilst the Commission is fully entitled to do so, it is my respectful view that this should only be done in the very clearest of circumstances. It is my view this is not the case. No objective measures, in either trend or substance have changed. Vision's revenues are still increasing and audience numbers are still increasing.
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B. There is an objective basis for refusal.
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There is no objective basis for this increase nor does the majority purport there is. Indeed, all of Vision's main revenue segments have grown between 2000 and 2001 with Mosaic sales up by 4.3%, subscriber and DTH revenues up by 4.5%, and advertising revenues by 10.3%. Particularly given the fragmenting universe this is a success story. Even Vision's own projections on a 'denial scenario' project a modest surplus over the next 5 years.
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And the cup could be more than one half full. Vision's primary demographic, the over 50's, is one of the fastest growing demographics and advertisers have just recently realized their value. Vision itself has begun some new initiatives such as a Foundation, and new fund raising which they anticipate will bear fruit in 2003. No questions were asked as to the potential income these could produce.
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At the end of the day we also cannot underestimate the value of Vision's privileged position in the system, carriage on analog basic and its guaranteed income from all of the basic subscribers. Finally, it may be possible that the Commission may order Vision to be carried on a digital basic (Broadcasting P.N. 2002-48). Vision's revenues could increase by just under one million per year as a result.
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C. Subjective reasons for an increase are a slippery slope.
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The reasons of the majority for the increase are troubling in their subjective nature. Unfortunately, for every subjective reason for an increase, in my view there is a countervailing reason against an increase.
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If the fact that Vision is a smaller independent voice constitutes a valid reason, does this mean all other smaller "voices" should be given an increase notwithstanding their profitability and the "larger voices" should not, again notwithstanding their profitability? It may be true that Vision has a lower proportion of advertising revenue than the other specialties, but by the nature of its programming and its status, it can and does solicit and fund raise, something the other specialties do not do. Vision does and has raised its rates for Mosaic programming annually. The last annual increase of 3% resulted in a loss of some 9 Mosaic clients; however, it should be remembered that in the previous year notwithstanding an increase, revenues from this source increased by 4.3%. I agree with the majority decision that Vision must find revenue from other sources and it is in the process of doing so. At page 8 of the application Vision refers to its initiatives including more on-air campaigns and the creation of a new Foundation. It has added new Board members to specifically assist in fundraising and exploring joint ventures. It is reviewing its communications strategy and relationships with advertisers. No specific projections were given for each initiative. It is true that Vision has been in a deficit position 3 out of the last 5 years; however at the same time it lent monies to its related digital networks.
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The majority states that 70% of this increase is for Vision to be able to maintain and even improve the quality of its programming. How do we assess or monitor this? Quality is in the mind of the beholder. Audience cannot be an indicator because the view in the majority decision is that this programming is not designed to appeal to broad audiences. Likewise, advertising revenues cannot be an indicator because these revenues follow audiences. Further Vision has offered no commitments as it did in 1993, such as more original Canadian content, fewer repeats, new programming blocks, distance learning or the like.
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Vision is obtaining 2.275 million dollars for new capital expenditures. The application refers to a fully digital master control and updating studio and production equipment to digital, amongst others. Will the Commission now approve increases in wholesale rates for other specialties for them to upgrade their facilities to digital? This appears incongruous especially when all other members of the broadcasting system must find the capital to upgrade to digital or be unable to compete. Vision is not required to use this money for any specific capital outlay. If it uses it for upgrading to digital, it will have revenues from leasing its excess capacity to its related diginets.
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It is my view that the repercussions of subjective reasons for an increase in the wholesale rate lead to a lack of accountability. To the basic subscriber or payor, there is no way value can be assured for the money.
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D. The raison d'etre of the service - promoting tolerance.
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Finally, the precedents of Genex (Decision 2002-190) and Rogers Broadcasting (Decision 2002-364) should also apply in this situation. On both of its two substantial renewals Vision has been in non-compliance of its core Canadian content commitments, the first as to expenditures, the second as to programming. Further, in its first renewal, the Commission reminded Vision of its high standard requirements and further specifically referred to allegations of problems with hatred of homosexuals. In 2002, the CBSC found Vision had breached the relevant code in relation to gays and lesbians. This is all the more troubling because both the Commission and Vision itself refer to the role Vision plays in the public policy goals of promoting tolerance and understanding.
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In the Rogers Broadcasting decision referred to above, the Commission dealt with a complaint a second time that Rogers was not fully respecting the guidelines regarding provision of service to the community it was licensed to serve. Rogers was denied its application.
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In my view this application is far more cogent. This breach goes to the core of the service itself. The raison d'être of interfaith religious programming is to promote tolerance and understanding.
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For these reasons I would have refused this application.
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Dissenting opinion of Commissioner Stuart Langford
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I disagree with the majority and would have denied the application by Vision TV : Canada's Faith Network (Vision) to increase its wholesale rate. By allowing Vision's application, albeit in part rather than wholly, the majority has responded to a professed need which on the record remains unsubstantiated. As well, the majority has established a precedent the Commission may eventually regret, one that is bound to tempt other programmers to rely on captive Canadian consumers rather than upon their own business acumen to solve future financial problems.
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Did we say free?
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Vision's licensing history is set out in paragraphs 3 through 8 of the majority decision. The story it tells is far from salutary. It is one of exaggerated claims, unfulfilled promises and shifting priorities.
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In Decision CRTC 87-900 (Decision 87-900) Vision was licensed on the basis of an application that promised to provide Canadians with free, multi-faith programming, in the public interest, with limited advertising, in exchange for the privilege of basic carriage by Canada's broadcasting distribution undertakings (BDUs). Vision got what it wanted, access to the millions of households serviced by cable and, later, by direct-to-home (DTH) satellite. Very soon, however, Vision demonstrated that it preferred not to deliver on its side of the bargain.
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First to be jettisoned was the promise of free programming. In 1993 Vision applied for a 10 cent a month wholesale rate and was granted 8 cents. Suddenly, millions of Canadians found themselves paying for a service that only a few thousand of them watched. A year later, Vision came looking for 2 cents more. The Commission said no, but opened another revenue stream to Vision's operators by greatly increasing its authority to sell advertising.
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Not satisfied, Vision returned twice more to seek the Commission's blessing for further revenue enhancing proposals: to sell local advertising and to almost double its monthly subscriber rate from 8 to 15 cents. Both applications were denied. In the latter case, the Commission found as a fact that Vision's claims of need were not supported by the evidence on the record: " .during the period in which Vision TV asserts that its audience levels have decreased, its revenues have been increasing." (Decision CRTC 2001-669) The Commission also found as a fact that for much of its previous licence term Vision had not been in compliance with its condition of licence regarding Canadian content levels.
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Details, details.
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It would now appear that with a little help from the Commission, Vision may have solved its compliance problems, at least in the short term. In an unprecedented decision sent to Vision in letter form on October 17, 2002, the Commission agreed to temporarily recognize as Canadian 128 episodes of 51 programs to which Vision holds broadcast rights. The decision was made after Vision revealed that though it honestly believed the programs qualified for Canadian certification, applications for certification had never been completed and, now, could not be completed as Vision had either misplaced or never obtained the necessary paperwork to do so.
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Crisis in Black
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If the program sourcing and compliance monitoring divisions have now been whipped into shape at Vision, no such metamorphosis has yet occurred in accounting. There remains a marked schism between what Vision's financial records reveal and how its senior management interprets those records. Despite ample evidence to the contrary, Vision continues to cry poor and to call on the Commission to benefit it and its few viewers by saddling Canadians generally with the burden of improving its bottom line.
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Vision based the application resulting in today's majority decision on claims of "financial crisis". The record demonstrates no such crushing problem. By its own figures (response of April 5, 2002 to CRTC interrogatories) projected revenues for the 2002-2003 broadcast year are up on all fronts: broadcast sales up 3%, subscriber and DTH revenues up 2%, advertising up 7% and donations up 15%. Expenses are also projected to rise, but not by much: programming up 3%, technical up 5%, sales up 2.5% and administration up 2.5%. Again, by its own figures, the applicant projects that even if the Commission were to deny its request for a rate increase, Vision would finish in the black in each of the next five years, 2003 to 2007. For a non-profit organization, turning a profit hardly constitutes a crisis, always presuming that the amount is not high enough to raise eyebrows at Revenue Canada.
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Questions, questions
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While the record demonstrates nothing like a financial crisis, it does raise a number of questions. Unfortunately, it supplies few answers. For example, what is the financial relationship between Vision and its different wholly or partially owned digital specialty services? The application reveals that Vision has loaned $252,458.00 to these new licensees. In the April 5, 2002 letter previously referred to, Vision offers this explanation : "The loan was extended to Vision TV Digital Inc. to fund the pre-operation start-up costs of the Category 1 digital channel 'ONE : the Body, Mind and Spirit channel' and the Category 2 channel 'Celebration.'" With respect, that explanation is no explanation at all.
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Where did the quarter million dollar loan come from? Did it come from subscriber revenues, from the 8 cents per month that well in excess of 9 million Canadians contribute willingly or not to keeping Vision solvent? That money, according to Decision CRTC 93-580 which approved the 8 cent rate was to be used to "maintain and to enhance Canadian programming." Should a not-for-profit broadcaster be encouraged to redirect marked funds into growth enterprises? Should it be allowed to? If it were spending the money on programming as the Commission directed, would it require further funds for programming at this time?
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Over the 14 month period spanning August 2000 to October 2001, staffing levels at Vision jumped by 31.4%. Employees numbered 51 on August 31, 2000 and 67 in October the next year. Why the nearly one-third increase? Might the greatly expanded payroll explain Vision's sense of "financial crisis"? Could some of these salary dollars have been better applied to programming? If they were redirected to program purchases and production, would Vision be looking for a further handout from Canadian television viewers?
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Again, in its April 5, 2002 reply to Commission interrogatories, Vision makes a statement on revenue shortfalls that raises rather than answers questions. In "Notes" to Appendix H of its reply, Vision states : "After the first six months of this fiscal, Advertising revenue and donations were each down approximately 19% from the same period in the prior year." The note then proceeds to say that while Vision is "hopeful" that donations will rise in the future, it "is not projecting increases in these areas over the full year." In the next appendix, however, Vision appears to do just that, projecting an ".increase of 15% per annum . based on new position of Resource Development Officer." Why the apparent contradiction?
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The above examples of what might be termed questions-left-hanging by this application by no means constitute an exhaustive list. The record is characterized by uncertainty. The famous words of Winston Churchill describe the record perfectly: "It is a riddle, wrapped in a mystery, inside an enigma." What is required is a thorough examination of the facts, the applicant's contentions and the alternatives open to the Commission. What is required is the examination of witnesses.
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What's the rush?
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Interestingly enough, the opportunity for just such a thorough examination is but a year away. Vision's current licence term expires in August, 2004. Before then, Vision's principals will be in front of the Commission to respond to inquiries, among other things, into the very sort of questions this application raises. In my view, consideration of a rate increase should have been adjourned until that time. There is no "financial crisis" at Vision, the record is clear on that. Vision's own projections anticipate a positive cash flow with or without the rate increase granted today by the majority. What's the rush?
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The majority decision does not say. It is silent on the issues of timing and urgency, primarily focusing instead on two other matters: first, comparisons between Vision's revenues and expenses and those of other specialty services and, second, the quality and diversity of Vision's programming. With the greatest respect, the comparisons are of questionable value and the quality of some of Vision's programming is debatable, to say the least.
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Apples and oranges
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There is virtually nothing to be learned from comparing Vision to most other specialty services. Vision enjoys the luxury and security of basic carriage. That means that each and every one of the more than 9 million households in Canada that subscribes to cable or DTH contributes 8 (soon 10) cents per month to have Vision delivered to its television set. Everyone pays, but almost no one watches.
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Audience statistics show that, on average over the past 4 years, Vision is watched by fewer than one half of 1% of all viewers with access to Vision via cable or DTH. The total available cable and DTH audience, based on a calculation of 2.5 viewers per household, is in excess of 23 million Canadians. At any given time on any given day only a few thousand of them are tuned to Vision. To rephrase an old Biblical message, many are charged but few are interested.
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Typical specialty services, on the other hand, enjoy no such access to the general public's pockets. They are almost all carried on a discretionary basis, either as stand-alone services or as part of a tier or group of signals that Canadians buy only if they wish to do so. The average specialty service must garner market share with an attractive product offered at an acceptable price. If it cannot meet this entrepreneurial challenge, it fails. Vision faces no such barrier to success. It has a guaranteed revenue source, 9 million plus Canadian subscribers, and judging by this application and the history set out in paragraphs 3 to 8 of the majority decision, Vision, like Charles Dickens' Oliver Twist, is not shy about asking for more.
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Casting out devils
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Nor is Vision reluctant to wrap its application in comforting words like diversity, tolerance, understanding and co-operation. It portrays itself as a champion of the public interest, providing "balanced programming about the varied religious practices and beliefs of Canadians.related to, inspired by or arising from persons' spirituality including related moral or ethical issues." (Vision application, February 28, 2002, page 2) Perhaps, but not necessarily.
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On at least one occasion during Vision's current licence term its programming appears to have been quite the other thing: not tolerant but abusive, not understanding but hurtful, not balanced but destructively one-sided. On February 24, 2002, Vision aired an episode of Power Today hosted by evangelist R.W. Schambach. It contained a vicious attack against the gay and lesbian community, so vicious, that following a complaint to it, the Canadian Broadcast Standards Council (CBSC Decision 01/02-0617) branded the program as unacceptable and declared that "intolerant comment can find no salvation by wrapping itself in religious garb."
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Consider this sampling of the wisdom of the Reverend Schambach : "You don't have to go out in the world to find homosexual devils. They're in the Church. I'm not gonna get on that world; I'm gonna get on that Church first. Before we can help the world we gotta clean up the Church. You can't, you can't even tell who's playing the organ in some churches. Whether it's a man or a woman. Demon possessed, a homosexual. I know you don't like to hear it! They don't like me to air this on television. But I don't care what they like. I am not politically correct! God's given me the power to cast out devils and if you are a homosexual, I can deliver you! And I can set you free! Hallelujah!"
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One swallow, as the old saying goes, does not make a spring. Hopefully the Reverend Schambach's approach to tolerance, diversity and a balanced outlook is atypical of Vision's programming. Hopefully. It is an issue that merits examination. By denying itself the opportunity to question Vision's principals, by not waiting the short time until the Commission will have that opportunity, the majority, in my view, may have unwittingly rewarded Vision when perhaps a reminder of first principles would be more in order.
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What next?
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Finally, it is difficult not to worry about the precedential impact of the majority decision. What general message is telegraphed by this specific ruling? A good many broadcasting services face difficult financial futures. Will they interpret the majority's decision in this matter as standing for the proposition that failure is not an option, that as long as a broadcaster can tie a request for assistance to programming it will not be denied, that sound or unsound business practices are irrelevant, that the Commission is predisposed to regard consumers as Peter, licensees as Paul, and to take from Peter and give to Paul whenever Paul is in financial difficulty, real or perceived?
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The majority decision leaves more questions unanswered than answered. In disposing of one problem in haste, it almost certainly condemns the Commission to a future of attempting to resolve innumerable others at leisure. In a contest between the rights of many and the desires of a select few, the majority decision comes down on the side of the few. Over 9 million Canadians will pay more so that Vision's programmers may serve a few thousand viewers as they prefer. This does not strike me as an acceptable exchange. Accordingly, I dissent from the majority. I would have denied Vision's application and dealt with any request for a rate increase as part of the upcoming licence renewal process where all pertinent issues can be adequately canvassed.
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Dissenting opinion of Commissioner Cindy Grauer
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I agree with my colleagues Commissioners Cram and Langford in their dissenting opinions and for the reasons they have articulated would not have approved an increase in the wholesale rate for Vision TV at this time without a comprehensive review of their financial statements, and business and programming plans.
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This service has not demonstrated that it has always lived up to its commitments and conditions of licence. It has not demonstated that it appreciates the need for accountability.
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I would have adjourned consideration of this application and considered it simultaneously with Vision TV's licence renewal which is just one year away. Approval of increases to subscriber fees of a service carried on basic is, in essence, similar to approving a tax increase for basic cable subscribers who have no choice as to whether they want to pay for or receive the service.
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The Commission has a duty to Canadians to represent their interests and carefully scrutinize and review requests for rate increases. Even a cursory review of the record demonstrates that the sort of « pressing need » that might necessitate dispensing with such a review does not exist. Vision TV is operating in the black. Revenues have exceeded expenses over the past three years and are projected to continue doing so over the next 5 years.
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There exists no « financial crisis » at Vision. What exists are a good many questions about Vision TV's programming, business and financial priorities. Until the opportunity presents itself for a throrough review of this licencee's past performance and future goals, any increase in subscriber fees is inappropriate.
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Date Modified: 2003-01-24
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