Search

Broadcasting Public Notice CRTC 2003-11

Ottawa, 6 March 2003

Review of exemption orders respecting experimental video-on-demand programming undertakings, video games programming service undertakings and teleshopping programming service undertakings

Background

1. In Policy regarding the use of exemption orders, Public Notice CRTC 1996-59, 26 April 1996,the Commission stated that it would normally review exemption orders between five and seven years following the date on which they were issued. In Review of exemption orders for Experimental Video-on-Demand Programming Undertakings, Video Games Programming Service Undertakings and Teleshopping Programming Service Undertakings, Public Notice CRTC 2002-20, 26 April 2002 (Public Notice 2002-20),the Commission announced that, consistent with this approach, it would review the following three orders:

2. The review proceeding conducted pursuant to Public Notice 2002-20 provided for the submission of written comments in two stages. The Commission received comments from the following: Bell ExpressVu Limited Partnership (Bell ExpressVu); the Canadian Association of Broadcasters (CAB); the Canadian Cable Television Association (CCTA); Northern Response (International) Ltd. (Northern); Quebecor Media Inc.(Quebecor); QVC, Inc. (QVC); The Shopping Channel, a division of Rogers Broadcasting Limited (Rogers); TELUS Communications Inc. (TELUS); and Torstar Corporation (Torstar). In this notice, the Commission announces the outcome of its review of each of the three exemption orders.

Experimental VOD exemption order

3. The purpose of these programming undertakings, as described in the VOD exemption order, is to "conduct a limited field trial or experiment in order to test and develop the technology for providing a VOD programming service and to determine the technical feasibility of delivering such a service".

Views of the parties

4. TELUS proposed that this order be retained, but with certain changes. Among other things, TELUS argued that exemption criteria 3 and 7 set out in the existing order are unnecessarily restrictive and inconsistent with the competitive, open-entry policy framework adopted by the Commission for the licensing of commercial VOD undertakings.

5. Criteria 3 and 7 of the experimental VOD exemption order are as follows:

3. The undertaking uses the facilities of a Canadian carrier, as defined by the Telecommunications Act or a distribution undertaking licensed or exempted by the Commission.

7. The undertaking obtains the right to distribute its programming exclusively:

  1. from a pay-per-view programming undertaking licensed by the Commission to operate in the territory in which the experiment is conducted, in respect of any feature motion picture film;
  2. from the educational institutions or others who hold the appropriate rights, in respect of programming consisting of course materials; and
  3. from a programming undertaking licensed by the Commission, in respect of any other programming originally intended for broadcast by conventional television stations.

6. TELUS was of the view that the experimental VOD exemption order should be amended through the deletion of exemption criterion 3. It further proposed that exemption criterion 7 be replaced by one containing language that would permit experimental VOD undertakings, among other things, to offer programming from all content categories and to obtain VOD content directly from VOD rights holders. The CCTA, however, suggested that, rather than amend the order, the Commission should revoke it. The CCTA noted the Commission's preparedness, under its VOD licensing framework, to license competitive VOD services without regard to the number of such services. In the CCTA's view, because of the relatively limited barriers to entry, the experimental VOD exemption order no longer serves a useful purpose.

The Commission's analysis and determination

7. The Commission's 1994 exemption of experimental VOD services was based on its determination, under section 9(4) of the Broadcasting Act (the Act), that the licensing of, or application of the regulations to, those carrying on such experimental undertakings would not have contributed in a material manner to the implementation of the broadcasting policy as set out in the Act. The Commission was also of the view that exemption would provide potential VOD operators with a flexible and uncomplicated opportunity to assess technology and marketing strategies.

8. The Commission agrees with the CCTA that the implementation of the Commission's licensing framework for non-experimental VOD undertakings has made the experimental VOD exemption order unnecessary. Although there are eight licensed VOD undertakings currently in operation, no party indicated that any undertaking was operating pursuant to the experimental VOD exemption order. Accordingly, the Commission revokes the experimental VOD exemption order, effective immediately.

Video games exemption order

9. The purpose of these programming undertakings, as set out in the video games exemption order, is "to provide the subscribers of cable distribution undertakings with programming consisting of software and related information distributed through the facilities of those distribution undertakings, to enable the subscribers to select and play video games using facilities located at their premises".

Views of the parties

10. TELUS suggested that developments occurring in the years since the video games exemption order was issued in 1995 have removed any reason for retention of the order. Among other things, TELUS noted that there are no broadcasting distribution undertakings (BDUs) currently providing video game services pursuant to the exemption order. TELUS noted that the Internet, and not cable, has emerged as the distribution network of choice for on-line games, and will likely continue in this role. Quebecor and Bell ExpressVu were also of the view that the order should be revoked.

The Commission's analysis and determination

11. Based on its review, the Commission is satisfied that the video games exemption order no longer has any practical application or purpose. Accordingly, the Commission revokes the video games exemption order, effective immediately.

Teleshopping exemption order

12. The purpose of these undertakings is to provide distribution undertakings with programming that is intended to sell or promote goods and services.

13. None of the comments submitted with respect to the teleshopping exemption order suggested that it be revoked. Parties did, however, raise issues and suggested amendments touching on four different topics, these being:

14. The Commission, having completed its review, remains satisfied that the licensing of, or the application of the regulations made pursuant to the Act to, teleshopping program service undertakings (teleshopping undertakings) will not contribute in a material manner to the implementation of the Act's broadcasting policy for Canada. Accordingly, the teleshopping exemption order shall remain in effect. However, based on its review of the various issues raised in the comments filed in response to Public Notice 2002-20, the Commission finds that certain amendments to the order are appropriate. These issues, the views of the parties with respect to each, and the Commission's determinations are set out below. The teleshopping exemption order, as amended, is appended to this notice.

Requirement that the operators of teleshopping services be Canadian

15. Criterion 1 of the teleshopping exemption order states:

The Commission would not be prohibited from licensing the undertaking by virtue of any Act of Parliament, of the Direction to the CRTC (Eligible Canadian Corporations) or of any other direction to the Commission by the Governor in Council.

16. The Direction to the CRTC named in criterion 1 was replaced by Direction to the CRTC (Ineligibility of Non-Canadians), Order in Council P.C. 1997-486, April 8, 1997. Both Directions to the Commission state that no broadcasting licence may be issued, amended or renewed by the Commission where the applicant is a non-Canadian as defined.

Views of the parties

17. QVC owns and operates teleshopping programming services in the United States, Germany, Japan and the United Kingdom. QVC argued that the requirement, applicable to the operators of all licensed broadcasting undertakings, that they be Canadian, should be removed or relaxed significantly in the case of exempt teleshopping undertakings. QVC argued that teleshopping undertakings do not compete with other programming undertakings, but with retail stores, and that the latter are not subject to foreign ownership restrictions. It claimed further that removal or relaxation of the requirement could provide significant benefits to Canada and Canadian consumers, and that the participation of non-Canadian interests in the industry could enable teleshopping services to provide new products.

18. Three parties, Rogers, Torstar and the CAB, disagreed with the views expressed by QVC. Both Rogers and Torstar opposed the removal or relaxation of the requirement and suggested that any changes should only be considered as part of a larger overall policy review. According to Rogers, QVC's comment that teleshopping services compete with retail stores and not with other programming services is misleading. Rogers also suggested that, although QVC does not intend to locate in Canada or employ Canadians, its extensive teleshopping operations in the United States provide the base that would potentially enable it to dominate the Canadian market. According to Torstar, increased foreign ownership of teleshopping undertakings operating in Canada would not have ensured the greater success of such undertakings or enabled them to offer a broader range of products to Canadian consumers. The CAB stated that such a change would set a dangerous precedent.

The Commission's analysis and determination

19. In the Commission's view, QVC's proposal that the Canadian nationality requirement be removed or relaxed in the case of the operators of exempt teleshopping services was not accompanied by any convincing evidence that this would provide benefits to Canada and Canadian consumers, or enable teleshopping services to provide new products. The Commission further considers that removal of the existing requirement would likely result in the importation of existing U.S. services involving limited, if any, Canadian participation and making minimal use of Canadian resources.

20. In light of the above, the Commission has decided to retain criterion 1 of the teleshopping exemption order unaltered, except through substitution of the words "Direction to the CRTC (Eligible Canadian Corporations)" by "Direction to the CRTC (Ineligibility of Non-Canadians)".

Combination of teleshopping services with other exempt services

21. In Proposed revisions to certain exemption orders, Public Notice CRTC 1999-133, 12 August 1999 (Public Notice 1999-133), the Commission stated that it would permit a BDU to distribute an exempt still image programming service and an exempt teleshopping service on the same channel. It emphasized, however, that it was not prepared to give blanket approval for other combinations of exempt services on one channel:

Any other proposal involving the distribution of more than one exempt service on a single channel must be submitted for prior approval. The Commission is concerned that some combinations might result in a hybrid service that goes beyond what was intended by the exemption orders.

22. Subsequently, in Exemption order respecting still image programming service undertakings, as set out in the Appendix to Final revisions to certain exemption orders, Public Notice CRTC 2000-10, 24 January 2000 (Public Notice 2000-10), the Commission confirmed that a still image programming service "may be combined with the service of an undertaking exempted under the Exemption order respecting teleshopping programming service undertakings on a single channel of a distribution undertaking".

Views of the parties

23. The CAB suggested that the Commission should clarify its position with respect to the combination of an exempt service with other types of programming services on a single channel. It noted that some BDUs distribute as many as four separate and distinct services on one channel, including a television listing service, a barker channel, a still image service and a teleshopping service. The CAB considered that such a combination yields "what is in effect a new local advertising channel containing both still image and full motion advertising for a wide range of goods and services".

24. Torstar suggested that the Commission maintain its policy regarding hybrid services, as described in Public Notice 1999-133 and later confirmed in Public Notice 2000-10. The CCTA also supported the Commission's current policy, and indicated that it did not share the CAB's views about the combination of exempt and authorized services on one channel. According to the CCTA, such combined service channels have offered cable subscribers an important source of information for many years, and are in full compliance with the Commission's policy. It also argued that the practice represents efficient use of scarce analog capacity.

The Commission's analysis and determination

25. The Commission has considered the views of parties on this issue, and is satisfied that its policy permitting a BDU to distribute an exempt still image programming service and an exempt teleshopping service on the same channel is reasonable and appropriate. Regarding the comments of the parties about the combination, on a single channel, of a teleshopping service, a still image programming service, and a non-programming (television listing) service, the Commission agrees with the CCTA that this practice does appear to represent efficient use of scarce analog channel capacity.

26. Accordingly, it amends the teleshopping exemption order to include the following as criterion 10:

10. The service of the undertaking is not combined on a single channel of a distribution undertaking with any other exempt services, except as allowed in Exemption order respecting still image programming service undertakings,as approved in Final revisions to certain exemption orders, Public Notice CRTC 2000-10, 24 January 2000.

Infomercials

27. Criterion 4 of the teleshopping exemption order states as follows:

4. The undertaking provides a programming service consisting exclusively of programming intended to sell or promote goods and services. No part of the undertaking's programming includes programming as described under item 6 of Schedule 1 of the Specialty Services Regulations, 1990.

28. In Building on success - A policy framework for Canadian television, Public Notice CRTC 1999-97, 11 June 1999, the Commission stated that it would authorize specialty services to carry infomercials. To permit this, the Commission subsequently revised the program categories set out under item 6 of Schedule 1 of the Specialty Services Regulations, 1990 to include infomercials. As an unintended consequence of this change, the list of programming categories that services operating under the teleshopping exemption order are specifically precluded from providing under criterion 4 came to include infomercials.

Views of the parties

29. Both Rogers and QVC noted that infomercials are clearly intended to sell or promote goods and services, and thus match precisely the type of programming that teleshopping services provide. Both parties noted the Commission's inclusion of infomercials as one of the program categories that specialty services are permitted to broadcast, and the inadvertent result of this change, namely the removal of infomercials from the list of program categories that teleshopping services may provide. QVC suggested that teleshopping services should be permitted to include infomercial programming between midnight and 6:00 a.m. Rogers, however, requested that the teleshopping exemption order be amended to permit teleshopping services to offer infomercials without restriction.

The Commission's analysis and determination

30. The Commission agrees with Rogers and QVC that infomercials are intended to sell or promote goods and services. The Commission therefore considers that they are wholly consistent with the purpose of exempt teleshopping undertakings, and that their inclusion in the programming of such undertakings should be permitted, without restriction as to the hours during which they may be broadcast.

31. Accordingly, the Commission amends criterion 4 to read as follows:

4. The undertaking provides a programming service consisting exclusively of programming intended to sell or promote goods and services. The undertaking's programming does not include programming as described under item 6 of Schedule 1 of the Specialty Services Regulations, 1990, with the exception of infomercials, as defined in Amendment to the Television Broadcasting Regulations, 1987 to permit, by condition of licence, the airing of "infomercials" during the broadcast day, Public Notice CRTC 1994-139, 7 November 1994.

Requirement for program identification announcements

32. Criterion 9 of the teleshopping exemption order states:

9. The undertaking identifies its programming by including, once every 30 minutes, a clear and prominent written and oral announcement that the programming is intended to sell or promote goods and services.

Views of the parties

33. Two parties offered comments with regard to criterion 9. Northern suggested that the thirty-minute identification requirement may no longer be necessary as the public is sufficiently familiar with teleshopping services to know that their purpose is to sell or promote goods and services. QVC argued that such announcements were unnecessary except for those infomercial programs where it may not be clear to the viewer that the program is a commercial advertisement.

The Commission's analysis and determination

34. The identification requirement set out in criterion 9 was intended as a means to inform people who randomly tune in to a teleshopping service about the nature of the service. The Commission considers that this information continues to be of use and importance to viewers.

35. Accordingly, the Commission retains criterion 9 without change.

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

Appendix to Broadcasting Public Notice CRTC 2003-11

Exemption Order Respecting Teleshopping Programming Service Undertakings

The Commission, pursuant to subsection 9(4) of the Broadcasting Act (the Act), by this order, exempts from the requirements of Part II of the Actand any regulations, those persons carrying on broadcasting undertakings of the class defined by the following criteria:

Purpose

The purpose of these programming undertakings is to provide distribution undertakings with programming that is intended to sell or promote goods and services.

Description

1. The Commission would not be prohibited from licensing the undertaking by virtue of any Act of Parliament, of the Direction to the CRTC (Ineligibility of Non-Canadians) or of any other direction to the Commission by the Governor in Council.

2. The undertaking meets all technical requirements of the Department of Industry and has acquired all authorizations or certificates prescribed by the Department.

3. The undertaking does not broadcast programming that is religious or political in nature.

4. The undertaking provides a programming service consisting exclusively of programming intended to sell or promote goods and services. The undertaking's programming does not include programming as described under item 6 of Schedule 1 of the Specialty Services Regulations, 1990, with the exception of infomercials, as defined in Amendment to the Television Broadcasting Regulations, 1987 to permit, by condition of licence, the airing of "infomercials" during the broadcast day, Public Notice CRTC 1994-139, 7 November 1994.

5. The undertaking's programming complies with the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) "Sex-Role Portrayal Code for Television and Radio Programming", the provisions of the CAB's "Broadcast Code for Advertising to Children" and the guidelines on the depiction of violence in television programming set out in the CAB's "Voluntary Code Regarding Violence in Television Programming", as amended from time to time and approved by the Commission.

6. The undertaking provides its programming without charge to any distribution undertaking receiving the service.

7. The undertaking's programming originates in Canada, and the undertaking makes predominant use of Canadian creative and other resources in the creation and presentation of its programming.

8. The undertaking's programming complies with sections 3, 3.1, 4 and 5 of the Specialty Services Regulations, 1990, as amended from time to time. 9. The undertaking identifies its programming by including, once every 30 minutes, a clear and prominent written and oral announcement that the programming is intended to sell or promote goods and services.

10. The service of the undertaking is not combined on a single channel of a distribution undertaking with any other exempt services, except as allowed in Exemption order respecting still image programming service undertakings,as approved in Final revisions to certain exemption orders, Public Notice CRTC 2000-10, 24 January 2000.

Date modified: