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Broadcasting Decision CRTC 2003-596
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Ottawa, 5 December 2003
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Star Choice Television Network Incorporated
Across Canada
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Application 2001-2657-5
Public Hearing in the National Capital Region
20 October 2003
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Request for a licence amendment that would delay imposition of requirements for the distribution of small market television stations
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The Commission approves in part a request by Star Choice Television Network Incorporated, presented in the context of its licence renewal application, for an amendment to the conditions of licence of its direct-to-home broadcasting distribution undertaking. The proposed amendment would have extended, from 31 December 2003 to a date no later than 30 days following the commercial deployment of Anik F2, the deadline by which this licensee must either have added the distribution of eight small market, independently-owned television stations, or resumed its obligations to fulfil requests by television licensees for simultaneous and non-simultaneous program deletion. Instead, the Commission has amended the conditions of this licence by extending the deadline to the first to occur of (i) the date 30 days following the commercial deployment of Anik F2 or (ii) 29 February 2004.
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Background
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1.
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Star Choice Television Network Incorporated (Star Choice) is one of two direct-to-home (DTH) broadcasting distribution undertakings (BDUs) authorized to deliver programming services via satellite directly to subscribers throughout the country. Under conditions 4(b)(ii) and 5(b) of its licence, Star Choice is required to perform the simultaneous and non-simultaneous deletion of certain programming upon request by a licensed Canadian television programming undertaking. In Licence amendment for Star Choice - relief from requirements for simultaneous and non-simultaneous program deletion, Broadcasting Decision CRTC 2003-258, 16 July 2003 (Decision 2003-258), the Commission suspended those conditions of licence on the condition that Star Choice fulfil a set of measures appended as a schedule to its licence, and described by the Commission as constituting an alternative to those conditions of licence.
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2.
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The Commission also approved a similar licence amendment for the other national DTH licensee, a partnership carrying on business as Bell ExpressVu Limited Partnership (see Licence amendment for ExpressVu - relief from requirements for simultaneous and non-simultaneous program deletion, Broadcasting Decision CRTC 2003-257, 16 July 2003).
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3.
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The Commission developed the alternative measures following a public process it initiated in 2001. The public process was held to investigate concerns about the impact of the distribution of optional local television signals by the two DTH BDUs on smaller market television stations across Canada. The process, however, came to include consideration by the Commission of applications for licence amendments filed by these DTH licensees in 2002. As indicated above, the proposed licence amendments were for the suspension of existing licence conditions regarding simultaneous and non-simultaneous program deletion. The public process culminated in publication of the above decisions and of Direct-to-home (DTH) broadcasting distribution undertakings - simultaneous and non-simultaneous program deletion and the carriage of local television signals in smaller markets, Broadcasting Public Notice CRTC 2003-37, 16 July 2003 (Public Notice 2003-37).
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4.
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One of the alternative measures approved by the Commission was a requirement that Star Choice add to its distribution the services of 13 small market, independently-owned television stations. In Public Notice 2003-37, the Commission noted that the Canadian Association of Broadcasters (CAB) had identified four of these stations as requiring distribution on an urgent basis. Accordingly, the Commission required Star Choice to add the distribution of those four services immediately. The remaining nine television services were to be chosen by Star Choice, in accordance with certain selection criteria, from a list of 15 television stations identified in Appendix A to the schedule attached to Decision 2003-258. The schedule contained the further stipulation that distribution of these nine television services was to commence no later than the first to occur of (i) 60 days following the commercial deployment of Anik F2 or (ii) 31 December 2003. The Commission understands that the four television services identified by the CAB as requiring carriage on an urgent basis are, in fact, now being distributed by Star Choice, as is the signal of one of the remaining nine television stations.
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5.
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On 6 August 2003, Star Choice advised the Commission as follows:
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We have been informed by Telesat that the launch [of Anik F2] is now scheduled for May 1, 2004 and that it is anticipated to become commercially operational 90 days later.
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Accordingly, Star Choice submitted that it would be unable to meet the deadline set out in the schedule attached to Decision 2003-258 for the distribution of all of the small market television signals. It requested that the Commission consider, as part of the Star Choice application for licence renewal, an amendment to the schedule that would extend the deadline to ".no later than 30 days after the commercial deployment of Anik F2, or earlier to the extent practical."
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6.
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In Broadcasting Notice of Public Hearing CRTC 2003-8, 21 August 2003, the Commission announced Star Choice's application for licence renewal and invited comments on various matters pertaining to that application, including the request by Star Choice for the licence amendment noted above. The Commission heard the application at the public hearing in the National Capital Region on 20 October 2003.
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7.
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At the 20 October 2003 hearing, the Commission advised the applicant and interested parties that, as it would be unable to complete its deliberations and issue a comprehensive decision on the licence renewal application by Star Choice in advance of 31 December 2003, it would likely issue a decision on the proposed amendment separately from its decision on the licence renewal application. This decision thus deals solely with the proposed licence amendment. A decision concerning all other aspects of the licence renewal application by Star Choice, including any other substantive issue arising with respect thereto, will be published at a later date.
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8.
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In the following sections of this decision, the Commission reviews the portions of the interventions filed by interested parties to the renewal application that were specifically addressed to the applicant's proposed licence amendment. The Commission also examines Star Choice's replies thereto, and sets out the determinations it has reached on the matter.
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Positions of interveners
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9.
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Télé Inter-Rives ltée (TIR), Jim Pattison Industries Ltd. (Pattison) and the CAB filed interventions that objected to Star Choice's proposal to delay distribution of the small market, independently-owned television stations beyond the existing deadline of 31 December 2003. Several other parties filed interventions in which they alleged that Star Choice had access to sufficient satellite capacity to distribute the required stations.
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10.
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TIR, owner of four of the fifteen small market, independently-owned television stations identified for potential carriage by Star Choice in Decision 2003-258, noted that the applicant did not provide evidence that there is no satellite capacity available from Telesat that Star Choice might use to distribute the services in question. TIR also submitted that Star Choice offered 19 U.S. television network signals occupying the capacity of two satellite transponders, in addition to various non-programming and other non-Canadian services. It suggested that any of these services could be displaced to accommodate the required stations.
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11.
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Pattison, owner of three of the fifteen stations, concurred with TIR's contention that Star Choice should be required to remove non-programming services, or non-Canadian television services if necessary, in order to distribute the required television services. It further argued that it is in the public interest to have these small market, independently-owned stations distributed as soon as possible, since they offer local programming, specifically news programming, that is of particular importance to their local audiences. Pattison indicated that, in the face of shrinking advertising revenues, a further delay in the distribution of its services by Star Choice would exacerbate Pattison's difficulties in meeting its local programming commitments.
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12.
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The CAB, like TIR, noted the 19 U.S. television network services and other non-Canadian and non-programming services offered by Star Choice. The CAB also suggested that there is sufficient satellite capacity available to the applicant to enable it to distribute the required services. The CAB proposed that, before any delay is approved, Star Choice be required to file written confirmation from Telesat that there is no satellite capacity available to distribute the required services. The CAB further alleged that, "a number of months" prior to publication of Decision 2003-258, Star Choice had been aware that the launch of Anik F2 would be delayed, but failed to inform the Commission of this fact. The CAB requested that, should the Commission extend the deadline set by Decision 2003-258, Star Choice be required to pay additional punitive compensation to the licensees of the small market, independently-owned stations amounting to $0.05/month/subscriber for each of the required stations whose signal was not distributed by Star Choice by 31 December 2003.
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13.
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In its appearance at the 20 October 2003 hearing, Telesat indicated that there is currently no unutilized capacity on either Anik F1 or Anik E2R, these being the two satellites used by Star Choice to distribute services. It noted, however, that one transponder on Anik E2R carries only occasional traffic, which could be shuffled and/or moved to a foreign satellite, although with some difficulty and at some additional cost. Telesat estimated that, if required, it could shuffle traffic on other transponders of both satellites to provide the equivalent of up to two transponders of available capacity. Again, however, it noted that this would involve unspecified difficulties and costs.
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Star Choice's response to interventions
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14.
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In its reply to interventions, Star Choice noted that it could do little to influence the timing of the launch of Anik F2. It also indicated that, while it may be able to obtain additional capacity from Telesat prior to the launch of Anik F2, the cost of this capacity would be prohibitive. Star Choice added that it would have to pay an additional unspecified premium on expenses related to backhauling and uplinking the required stations, and would absorb further costs to move these services over to Anik F2 following the deployment of this satellite. According to the applicant, none of these expenses would be recoverable, nor would the net cost be significantly reduced by elimination of the approximately $18,000 per month that, pursuant to the alternative measures set out in Decision 2003-258, it is required to remit to the licensees of the small market, independently-owned stations until such time as their signals are distributed.
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15.
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Star Choice indicated that, should the Commission not extend the 31 December 2003 deadline for carriage of the required stations, and given the prohibitive cost of purchasing additional satellite capacity, its only option would be to free up the necessary capacity by ceasing the distribution of a number of existing services. It stated that this would have a potential impact, both on its own subscribers and on the subscribers of cable BDUs across Canada that obtain distant signals from the satellite relay distribution undertaking (SRDU) operated by its affiliate, Canadian Satellite Communications Inc. (Cancom). According to the applicant, the non-Canadian, non-programming and high definition services it distributes are necessary to the provision of the SRDU service, and their displacement, as proposed by interveners, would create a significant consumer backlash.
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16.
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In response to Commission questioning at the hearing, Star Choice stated that it would use satellite capacity currently allocated to network management to distribute the services of four additional small market, independently-owned stations. Star Choice did not indicate whether there would be any additional costs associated with implementing this commitment. However, it did specify that, because of the need to make arrangements for backhauling and uplinking these services, it could only commit to add their distribution by February 2004. Under the applicant's proposal, the four services that would remain without distribution at that time would be added within 30 days of the commercial deployment of Anik F2. Star Choice also indicated it would be willing to file reports with the Commission on the status of these commitments.
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Commission's analysis and determination
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17.
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The determinations set out in Decision 2003-258, including the set of alternative measures described above, were based in part on what the Commission understood to be the applicant's firm commitment, as set out in a letter to the Commission dated 28 October 2002, to distribute the services of all of the required small market, independently-owned television stations by no later than 31 December 2003, regardless of whether or not Anik F2 had then been deployed. The Commission notes that information provided by Star Choice in the printed version of its opening remarks at the 20 October 2003 hearing indicated that, less than two months following the filing of that letter, and more than seven months before publication of Decision 2003-258, the applicant had learned that the deployment of Anik F2 would be delayed until at least 31 January 2004. Star Choice, however, did not inform the Commission of this delay at the time it first learned of it, nor did it suggest an amendment to the deadline for distribution set out in its letter of 28 October 2002.
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18.
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The Commission has considered three issues in assessing the proposed licence amendment:
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- the likelihood of further delays in the entry of Anik F2 into commercial operation;
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- the impact on the licensees of, and on the audiences served by, those small market, independently-owned television stations whose carriage by Star Choice could be delayed beyond the original deadline of 31 December 2003; and
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- the impact on Star Choice of a requirement that it add the distribution of these stations before the date on which Anik F2 becomes commercially operational.
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19.
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With respect to the first of these issues, both the applicant and Telesat noted that there have already been several delays in the launch of Anik F2, and both acknowledged that further delays are possible. Thus, under the proposed licence amendment, four of the television services might not be distributed by Star Choice until the fall of 2004 or beyond.
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20.
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As for the second issue, in addressing the impact of a prolonged delay on the stations and audiences concerned, one of the station owners potentially affected (Pattison) indicated that it counted on carriage by Star Choice to assist in reversing the year-over-year decline in advertising revenues it has experienced and the impact of this decline on its ability to offer news and other local programming.
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21.
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In Public Notice 2003-37, the Commission noted the decline in revenues earned by small market, independently-owned television stations over the past five years, and found that this was due, at least in some measure, to the migration from over-the-air to DTH viewing. The Commission also noted the greater difficulties that small market, independently-owned stations have encountered in coping with these declines as a consequence of their access to fewer resources, and their lesser ability to benefit from economies of scale, in comparison with stations belonging to larger ownership groups.
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22.
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In light of such concerns, the Commission considers that the licence amendment proposed by Star Choice would have a negative impact on those television licensees whose signals remain undistributed. Although the incremental impact is not readily quantifiable, any delay postpones the date on which the licensees can expect to benefit from the increased audience and advertising revenue potential that carriage by Star Choice would bring about.
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23.
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The third issue concerns the impact on Star Choice of a requirement that it add the distribution of the four remaining services before the date on which Anik F2 becomes commercially operational. Star Choice submitted that the cost of acquiring the satellite capacity required to accommodate all of the services, together with the further expenses associated with backhauling and uplinking these services, would be prohibitive. Although it would remain Star Choice's option to absorb those costs, the Commission accepts the applicant's conclusion that, faced with such a requirement, its choice would be to displace existing services. The Commission also accepts that the displacement of services that attract large audiences, even if only on a temporary basis, could have an adverse impact on Cancom's SRDU customers.
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24.
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In the Commission's view, however, the likely consumer backlash or other negative impact resulting from the displacement of certain other types of services would be considerably less. It notes in this regard that Star Choice currently uses a significant amount of satellite capacity for the distribution of multi-channel pay-per-view services. The Commission is of the view that there would likely be little or no impact on the majority of the customers served by either Cancom or by the DTH BDU operated by Star Choice if a portion of this capacity was temporarily reassigned to the distribution of the services of the four small market, independently-owned television stations that, under Star Choice's proposal, would otherwise remain undistributed at the end of February 2004.
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25.
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In light of the above, and taking into account the potential for further delays in the launch of Anik F2, the Commission finds that there is a need for a fixed deadline by which all of the required services must be distributed. Accordingly, the Commission approves in part Star Choice's application for licence amendment, and amends section 1(b) of the schedule to Decision 2003-258, as incorporated by reference in Star Choice's condition of licence 5(d)(i), to read as follows:
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Subject to sections 6 and 9, the licensee shall, beginning on the first to occur of (i) 30 days after the commercial deployment of Anik F2 or (ii) 29 February 2004, distribute the programming services of two (2) television stations for each of the ownership groups listed in Appendix A, except that, in the case of an ownership group for which Appendix A lists a single television station, the licensee shall distribute the programming of that station. Each station required to be distributed pursuant to this agreement shall be distributed to those subscribers who reside within the Grade B contour of that station. The licensee shall file a report with the Commission, by 29 February 2004, describing its compliance with this direction.
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Secretary General
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This decision is to be attached to the licence. It is available in alternative format upon request and may also be examined at the following Internet site: www.crtc.gc.ca
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Date Modified: 2003-12-05
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