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Broadcasting Decision CRTC 2006-23
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Ottawa, 31 January 2006
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Shaw Pay-Per-View Ltd. Across Canada
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Application 2004-1530-9
Broadcasting Public Notice CRTC 2005-55
7 June 2005
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Terrestrial pay-per-view service - Licence renewal
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The Commission renews the broadcasting licence for Shaw Pay-Per-View Ltd.'s (Shaw) English-language general interest terrestrial pay-per-view (PPV) programming undertaking, from 1 February 2006 to 31 August 2010, and approves the licensee's request for a licence amendment that will allow this PPV undertaking to be distributed across Canada.
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This short-term licence renewal will enable the Commission to next consider the renewal of this licence at the same time as Shaw's licence for its direct-to-home PPV programming undertaking.
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The details regarding the licensee's specific proposals for the new licence term, and the conditions of licence and other obligations determined by the Commission are set out below.
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The application
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1.
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The Commission received an application by Shaw Pay-Per-View Ltd. (Shaw) for the renewal of the broadcasting licence for its regional, English-language general interest terrestrial pay-per-view (PPV) programming undertaking.
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2.
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Shaw's terrestrial PPV service offers primarily sports, drama and music, and dance programming but also provides some programming from all the categories set out in Item 6 of Schedule I of the Pay Television Regulations, 1990, as amended from time to time.
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3.
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The Commission received interventions in support of Shaw's terrestrial PPV service's licence renewal as well as interventions that commented on or opposed Shaw's requests for licence amendments.
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4.
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Bell Canada filed an intervention that raised concerns regarding the 5:1 rule set out in section 18(14) of the Broadcasting Distribution Regulations (the Regulations).
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5.
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The comments and concerns expressed by the interveners and the Commission's determinations with respect to these and other matters are discussed below.
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Request for national distribution
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6.
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Currently, Shaw is authorized to offer its regional terrestrial PPV service to cable broadcasting distribution undertakings (BDU) in western Canada. Shaw requested an amendment to its broadcasting licence that would enable it to offer its terrestrial PPV service across Canada. Shaw confirmed that it would continue to offer the PPV programming that currently comprises its regional terrestrial PPV service, and that it would not acquire exclusive PPV rights.
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7.
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As a complement to this request, Shaw stated that it would make French-language PPV programming available to BDUs wishing to provide French-language content to their subscribers and that it would accept the following condition of licence:
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If the licensee offers French-language programming, the licensee shall ensure that its agreements with the operators of licensed or exempt terrestrial distribution undertakings operating in Francophone markets provide that, in each broadcast year, the following is made available by these licensees to their PPV subscribers:
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a minimum of 20 Canadian feature films in the original French-language version, or dubbed in French, which have been exhibited in theatres in French-language markets, including all new Canadian feature films suitable for PPV exhibition that meet the Industry code of programming standards and practices governing pay, pay-per-view and video-on-demand services;
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a minimum of six French-language events in each of years one and two of operation, eight in each of years three and four, ten in each of years five and six, and twelve in year seven of operation; and
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yearly minimum percentages of Canadian programming as follows: 8% of feature film titles, and 20% of all program titles other than feature films.
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Request to amend Canadian programming expenditure requirements
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8.
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Under its current condition of licence, Shaw must, over the course of the licence term, invest in the production of Canadian films, the greater of $2.4 million, or 30% of Shaw's share of the gross revenues derived from the exhibition of feature films and events distributed by the BDU affiliates of the PPV service. This investment must be exclusive of any expenditure made by the licensee on the promotion of such films.
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9.
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For the purpose of this condition of licence, Shaw calculates its gross revenues as the total amount remitted to it by terrestrial BDUs that receive retail PPV revenues from subscribers. The licensee allocates the retail PPV revenues collected by terrestrial BDUs into two components: the amount paid to third-party suppliers for content, or the cost of goods sold, and the residual. The licensee's practice has been to set its gross revenues at a level sufficient to cover the cost of goods sold plus one-half of the residual amount.
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10.
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Shaw requested that, during the new licence term, it be subject to a condition of licence requiring that it devote 5% of its annual gross revenues to existing, independently-administered Canadian production funds. It also proposed that, for the purpose of this condition of licence, its annual gross revenues would be deemed to be 50% of the total retail revenues received from subscribers.
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11.
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In support of its request, Shaw submitted that it is seeking competitive equity with comparable PPV and video-on-demand (VOD) licensees. Shaw contended that the proposed condition of licence is similar to that imposed on other PPV and VOD services and that the proposed method of calculating its gross revenues would be consistent with the Commission's determination for VOD services that are affiliated to or integrated with a distributor, as set out in Introductory statement to Decisions CRTC 2000-733 to 2000-738: Licensing of new video-on-demand and pay-per-view services, Public Notice CRTC 2000-172, 14 December 2000 (Public Notice 2000-172).
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12.
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Shaw further noted that, in Decision CRTC 2000-183, 6 June 2000, the Commission approved licence amendments for the national French-language terrestrial and direct-to-home (DTH) PPV services, each known as Canal Indigo, which reduced the required percentage of their gross revenues that must be contributed to Canadian programming from 10% to 5%. Shaw also referred to LOOK - MDS licence renewal, Broadcasting Decision CRTC 2004-347, 16 August 2004, and Craig - MDS licence renewal, Broadcasting Decision CRTC 2004-349, 16 August 2004, in which the Commission approved requests by LOOK Communications Inc. (LOOK), and by Craig Wireless International Inc. (Craig), the licensees of multipoint distribution system BDUs, to reduce the respective annual percentage of their total subscriber revenues that must be devoted to support Canadian programming; namely from 7% to 5% for LOOK, and from 6% to 5% for Craig.
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Interventions
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13.
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Astral Media Inc. (Astral), the Alberta Motion Picture Industry Association (AMPIA), the Directors Guild of Canada (DGC), the Alliance of Canadian Cinema Television and Radio Artists (ACTRA) and Rogers Cable Communications Inc. (Rogers) filed interventions in connection with Shaw's proposed licence amendments.
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14.
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Astral has ownership interests in the national French-language terrestrial and DTH PPV Canal Indigo services and in the regional English-language terrestrial and DTH PPV services known as Viewer's Choice that operate in eastern Canada. In Astral's view, approval of Shaw's request for authority to distribute its terrestrial PPV service across Canada would have a negative financial impact on the Canal Indigo and Viewer's Choice services.
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15.
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Astral also submitted that the condition of licence proposed by Shaw with respect to French-language programming is not consistent with the current conditions of licence and other requirements imposed on other general interest PPV services. Astral contended that Shaw did not make a minimum commitment with respect to the ratio of French-language to English-language channels to be offered on its terrestrial PPV service. Astral also stated that Shaw did not propose to abide by a requirement to remit all gross revenues derived from the broadcast of Canadian French-language feature films to the distributor and providers, with a minimum of 60% to the programming providers, a requirement that is imposed, by condition of licence, on the Canal Indigo services. Further, Astral argued that the ratio of Canadian to non-Canadian French-language events proposed by Shaw is much lower that the ratio imposed on other comparable PPV services and that Shaw should be required to maintain a 12:20 ratio for Canadian to non-Canadian French-language events.
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16.
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The DGC did not oppose the proposed method of calculating annual gross revenues. However, the DGC, AMPIA and ACTRA opposed Shaw's request for an amendment to its condition of licence that would reduce its required expenditures on Canadian programming. In their view, approval of the proposal would result in a significant loss in funding for Canadian independent production. The DGC and AMPIA also submitted that Shaw's request for national distribution should only be approved if it agrees to maintain its current requirements with respect to investments in Canadian film production.
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17.
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The DGC contended that the cases referred to by Shaw are different from the present case and should not be cited as evidence to justify Shaw's request to reduce its contributions to Canadian programming. The DGC submitted that the Commission approved the previous applications because those particular licensees were operating new services and experiencing significant financial difficulties. Furthermore, in the DGC's view, the circumstances regarding Shaw's terrestrial PPV service have not changed since 1999 when the Commission denied a previous request to reduce the licensee's Canadian programming expenditures requirements, in Licence for "Home Theatre" pay-per-view television service amended and renewed, Decision CRTC 99-43, 26 February 1999, on the grounds that the licensee had not demonstrated that any financial harm would result from maintaining the existing condition of licence and that approval of the proposal would have a significant negative impact on Canadian programming.
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18.
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In its intervention, Rogers, the licensee of the national English-language terrestrial PPV sports/specials service known as Rogers Sportsnet PPV, indicated that it neither supported nor opposed Shaw's requests. Rogers, however, commented that, if the Commission were to approve Shaw's requests, the Commission should also be favourably disposed to approving any future application by Rogers to amend the licence for its PPV service in order to provide it with authority to operate a general interest PPV service that would include the distribution of feature films.
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Licensee's replies
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19.
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In response to Astral, Shaw submitted that the intervener did not provide any detailed financial projections to support its claim that the distribution of Shaw's terrestrial PPV service on a national basis would have a negative financial impact on Viewer's Choice and Canal Indigo. Shaw also noted that Astral had raised similar concerns in its opposing intervention to an application by the partners of Bell ExpressVu Limited Partnership1 (Bell ExpressVu) for a new national terrestrial PPV service, which was approved by the Commission in New national terrestrial pay-per-view service, Decision CRTC 2000-737, 14 December 2000. In addition, Shaw pointed out that Bell ExpressVu's terrestrial PPV service is not subject to any restrictions that limit it to providing its service to small BDUs, and that Bell ExpressVu, which is a direct competitor with Shaw in providing terrestrial PPV services, did not oppose the national distribution of Shaw's terrestrial PPV service.
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20.
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Shaw submitted that, in Public Notice 2000-172, the Commission established an open and competitive licensing regime for national terrestrial and DTH PPV services as well as VOD services that compete directly with PPV services. Shaw further noted that, in Call for applications for a broadcasting licence to carry on a national general interest pay television undertaking, Broadcasting Public Notice CRTC 2005-6, 14 January 2005, the Commission called for applications for new national general interest pay television undertakings that would compete with the existing pay television services.
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21.
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Shaw maintained that approval of its request for authority for national distribution would provide its terrestrial PPV service with regulatory and competitive parity with other PPV licensees that are authorized to offer their services on a national basis, and result in competitive benefits to BDU PPV affiliates and their subscribers.
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22.
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In response to the concerns raised by Astral regarding the proposed condition of licence regarding French-language programming, Shaw made commitments to maintain a ratio of one French-language channel to three English-language channels and to remit 60% of its gross revenues earned from the exhibition of French-language films to the programming providers. It noted that these commitments are consistent with the requirements imposed on Bell ExpressVu's terrestrial PPV service. However, Shaw submitted that Bell ExpressVu's terrestrial PPV service is not subject to a requirement to abide by a 12:20 ratio for Canadian to non-Canadian French-language events. Accordingly, Shaw did not agree to maintain such a ratio in this regard.
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23.
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In response to the concerns raised by the DGC, AMPIA and ACTRA regarding the proposed amendment to its Canadian programming expenditure requirements, the licensee submitted that, while the Commission has amended the original contribution formulas of other licensees seeking competitive equity, Shaw's terrestrial PPV service's current contribution formula has not changed since it was originally imposed in Decision CRTC 90-78, 5 February 1990, which authorized the operation of the service on an experimental and temporary basis. According to Shaw, the formula reflects the Commission's concerns in 1990 that a PPV service might draw revenues away from general interest pay television networks and consequently reduce their contributions to Canadian programming. Shaw contended that such a situation did not occur and that the policy concerns on which the existing contribution formula is based are therefore no longer valid.
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24.
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Shaw also pointed out that its terrestrial PPV service is the only PPV or VOD service that is subject to a condition of licence requiring that, over the course of the licence term, it invest in the production of Canadian films, the greater of $2.4 million or a 30% share of the gross revenues derived from the exhibition of feature films and events distributed by the BDU affiliates of the PPV service. Shaw further maintained that its contributions to Canadian programming are the highest proportional contribution among all PPV and VOD licensees.
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Commission's analysis and determinations
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Request for national distribution
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25.
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In Public Notice 2000-172, the Commission reaffirmed that its approach is to foster fair competition and an increased reliance on market forces. The Commission considers that granting Shaw the authority to offer its terrestrial PPV service across Canada will enable the licensee to be fully competitive with other PPV services that are licensed to operate on a national basis. Furthermore, in the Commission's view, authorizing the national distribution of Shaw's terrestrial PPV service may enable the licensee to generate more gross revenues and consequently increase its contributions to Canadian program production. Accordingly, the Commission approves the request by Shaw to amend the broadcasting licence for its terrestrial PPV programming undertaking in order to authorize its distribution across Canada.
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26.
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In accordance with the commitments made by Shaw in its application and in its response to Astral's intervention, the Commission is imposing conditions of licence with respect to the minimum levels of French-language programming, minimum percentages of Canadian programming, minimum ratios of French-language to English-language channels, and requiring the licensee to remit 60% of the gross revenues earned from the exhibition of French-language films to the programming providers. The conditions of licence are set out in the appendix to this decision. The Commission considers the foregoing conditions of licence are sufficient and that it is, therefore, not necessary to impose a 12:20 ratio for Canadian to non-Canadian French-language events on Shaw's terrestrial PPV service.
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Request to amend Canadian programming expenditure requirements
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27.
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The Commission notes that the licensees of all other terrestrial and DTH PPV services are subject to conditions of licence requiring that they devote 5% of their annual gross revenues to the funding of Canadian independent production. The Commission considers that, in the interest of competitive equity, it is appropriate to impose a condition of licence on Shaw's terrestrial PPV service requiring that it devote 5% of its annual gross revenues to Canadian independent production. While this condition of licence will reduce the licensee's required contributions to Canadian programming, it will enable it to achieve parity with other PPV services. Accordingly, the Commission approves the licensee's request to amend its condition of licence in order to be allowed to reduce its Canadian programming expenditures requirements to 5% of its annual gross revenues.
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28.
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At the same time, the Commission notes that the methodology currently used by the licensee for calculating its gross revenues is consistent with the Commission's treatment of other terrestrial and DTH PPV licensees. Although the Commission has deemed gross annual revenues for affiliated VOD undertakings to be 50% of the total retail revenues received from customers, it has not applied this definition to any terrestrial or DTH PPV service. In practice, gross revenues for terrestrial and DTH PPV services are deemed to be the programming service's total revenues, as reported in the licensee's annual returns. The Commission finds that it is appropriate to require the licensee to maintain its current method of calculating its gross revenues for the purpose of this condition of licence.
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29.
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In light of the above, the Commission is imposing a condition of licence, as set out in the appendix to this decision, requiring the licensee to devote at least 5% of its annual gross revenues derived from its PPV broadcasting activities to one or more independently-administered Canadian production funds, to support the development of Canadian programming. The licensee's annual revenues must be calculated on a basis that is consistent with its past practices, as described in paragraph 9 above.
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Adult programming
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30.
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In Industry code of programming standards and practices governing pay, pay-per-view and video-on-demand services, Broadcasting Public Notice CRTC 2003-10, 6 March 2003 (Public Notice 2003-10; Industry code of programming standards), the Commission approved and announced a new code in order to more effectively address the broadcast of adult programming on pay, PPV and VOD services.
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31.
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The Commission notes that Shaw included a copy of its internal policy on adult programming as part of its licence renewal application, as contemplated in Public Notice 2003-10.
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32.
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The Commission expects the licensee to adhere to its internal policy on adult programming. Further, the Commission is imposing a condition of licence, as set out in the appendix to this decision, requiring the licensee to abide by the Industry code of programming standards.
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Offering programs in packages
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33.
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Consistent with the Commission's approach set out in Public Notice 2000-172, the Commission expects that, with the exception of the events programming identified in the paragraph below, the licensee will only offer programming packages where the total period during which the programming is to be viewed does not exceed one week.
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34.
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The Commission recognizes that some packages of events programming, such as seasonal sports or a Christmas concert series, make attractive programming packages that naturally continue longer than one week and that such programming is particularly appropriate for PPV television services. For this reason, the Commission will not apply the limitation of one week to packages that are exclusively comprised of events. The Commission, nevertheless, expects that the events programming will be limited to the events themselves and not include "wrap around" programming that would tend to give the package the characteristics of a specialty service.
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Cultural diversity
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35.
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The Commission expects the licensee to endeavour, through its programming and employment opportunities, to reflect the presence in Canada of cultural and racial minorities, Aboriginal peoples, and persons with disabilities. The Commission further expects the licensee to ensure that the on-screen portrayal of such groups is accurate, fair and non-stereotypical.
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Employment equity
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36.
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Because this licensee is subject to the Employment Equity Act and files reports concerning employment equity with theDepartment of Human Resources and Skills Development, its employment equity practices are not examined by the Commission.
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Service to persons who are deaf or hard of hearing
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37.
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The Commission is committed to improving service to viewers who are deaf or hard of hearing, and has consistently encouraged broadcasters to increase the amount of closed captioned programming they broadcast. The Commission generally requires all broadcasters to offer a minimum percentage of closed captioned programs.
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38.
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In the present case, Shaw made a commitment to close caption 90% of all English-language programming beginning in the first year of the new licence term. The licensee also made a commitment to close caption 90% of all French-language programming by the end of the new licence term. The licensee indicated that it would adhere to these commitments by conditions of licence.
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39.
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Consistent with the Commission's general approach and with the licensee's commitments, the Commission is imposing conditions of licence requiring the licensee to close caption at least 90% of all English-language programming aired during the broadcast year, beginning no later than 1 September 2006, and at least 90% of all French-language programming aired during the broadcast year, beginning no later than 1 September 2009. The conditions of licence are set out in the appendix to this decision.
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40.
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The Commission expects the licensee to focus on improving the quality, reliability and accuracy of its closed captioning, and to work with representatives of the deaf and hard of hearing community to ensure that captioning continues to meet that community's needs.
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Service to persons who are blind or whose vision is impaired
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41.
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The Commission is committed to improving the television service available to persons with visual impairments through the provision of audio description and video description (also known as described video).
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42.
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Shaw stated that its PPV programming is digitally encoded and distributed to digital set top boxes. It explained that the hardware and software involved in this digital system is not yet capable of supporting the delivery or reception of audio description and video description, or of providing access to a secondary audio programming channel.
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43.
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The Commission has noted Shaw's comments regarding the challenges it faces in providing service to persons with visual impairments. Nevertheless, consistent with the Commission's general approach to service to persons who are blind or whose vision is impaired, the Commission expects Shaw to:
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- provide audio description (defined as the provision of basic voice-overs of textual or graphic information on screen) wherever appropriate;
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- acquire and broadcast the described versions of a program wherever possible; and
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- take the necessary steps to ensure that its customer service responds to the needs of viewers who have visual impairments.
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Bell Canada's intervention
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44.
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In its intervention, Bell Canada raised a concern with respect to the 5:1 rule set out in section 18(14) of the Regulations. Under this rule, Class 1, Class 2 and DTH BDU licensees must distribute at least five unrelated Category 2 services for each related Category 2 service it distributes. For the purpose of this rule, a Category 2 service includes any PPV service, the distribution of which started on or after 1 February 2001. Bell Canada's concern stems from the fact that Shaw's PPV service launched prior to that date and is therefore not subject to the 5:1 rule. In Bell Canada's view, this gives Shaw's terrestrial PPV service a competitive advantage over other PPV services that are subject to the 5:1 rule.
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45.
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In response, Shaw submitted that Bell Canada's concern is not related to the present application, but rather to the applicability of the Regulations. Shaw maintained that there is no basis for applying the 5:1 rule to its service and that the present application is not the proper process to raise this issue.
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46.
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The Commission notes that the Regulations, including the 5:1 rule, were adopted following an extensive public process. The 5:1 rule, which also applies to VOD services, was established to ensure that new, unrelated services would be treated fairly by distributors. Given that Shaw's PPV service was distributed prior to 1 February 2001, the Commission is satisfied that it is appropriate that it not be subject to the 5:1 rule. Furthermore, the Commission is not persuaded that it is necessary to review this provision of the Regulations.
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Conclusion
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47.
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On the basis of its review of this licence renewal application, the Commission renews the broadcasting licence for Shaw Pay-Per-View Ltd.'s national, English-language general interest terrestrial pay-per-view programming undertaking, from 1 February 2006 to 31 August 20102. This short-term licence renewal will enable the Commission to next consider the renewal of this licence at the same time as the licence for Shaw's DTH PPV service.
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48.
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The licence for Shaw's terrestrial PPV service will be subject to the conditions specified therein and to the conditions set out in the appendix to this decision.
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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 in PDF format or in HTML at the following Internet site: www.crtc.gc.ca
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Appendix to Broadcasting Decision CRTC 2006-23
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Conditions of licence
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1. The service shall consist of programming drawn from categories 6 (Sports), 7 (Drama and comedy) and 8 (Music and dance), but shall also include programming from all the categories set out in Item 6 of Schedule 1 of the Pay Television Regulations, 1990, as amended from time to time.
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2. In markets where a bilingual service is offered, the licensee shall maintain the channels in a ratio of French to English of 1:3, with a minimum of 5 French-language signals in addition to the French-language barker channel.
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3. With respect to English-language programming, the licensee shall, through its agreements with the operators of licensed or exempt terrestrial broadcasting distribution undertakings, ensure that in each broadcast year, the following is made available by these licensees to their PPV subscribers:
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a) a minimum of 12 Canadian feature films (including all new Canadian feature films suitable for PPV exhibition that meet the Industry code of programming standards and practices governing pay, pay-per-view and video-on-demand services);
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b) a minimum of 4 English-language Canadian-based events; and
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c) the following minimum percentages of Canadian programs: 5% of feature film titles, and 20% of all program titles other than feature films.
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4. With respect to French-language programming, the licensee shall, through its agreements with the operators of licensed or exempt terrestrial broadcasting distribution undertakings, ensure that, in each broadcast year, the following is made available by these licensees to their PPV subscribers:
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a) a minimum of 20 Canadian feature films in the original French-language version, or dubbed in French, which have been exhibited in theatres in French-language markets (including all new Canadian feature films suitable for PPV exhibition that meet the Industry code of programming standards and practices governing pay, pay-per-view and video-on-demand services);
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b) a minimum of 12 French-language events; and
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c) the following minimum percentages of Canadian programs: 8% of feature film titles, and 20% of all program titles other than feature films.
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5. The licensee shall ensure that both English-language and French-language Canadian feature films are scheduled, repeated and promoted in the same manner as non-Canadian feature films.
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6. The licensee shall contribute at least 5% of its annual gross revenues derived from its PPV broadcasting activities to one or more independently-administered Canadian production funds, to support the development of Canadian programming, provided that these funds meet the criteria set out in Contributions to Canadian programming by broadcasting distribution undertakings,Public Notice CRTC 1997-98, 22 July 1997, as amended from time to time. Contributions shall take the form of monthly instalments, to be remitted within 45 days of month's end, and representing a minimum of 5% of that month's gross revenues.
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7. The licensee shall remit to the rights holders of all English-language Canadian films and two Canadian-based events per year, 100% of the gross revenues earned by the licensee from the exhibition of these films and events. With respect to French-language Canadian feature films, the licensee shall remit 100% of the gross revenues earned by the licensee from the exhibition of these films to distributors and providers, with a minimum of 60% to the programming providers.
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8. The licensee shall not enter into an affiliation agreement with the licensee of a terrestrial broadcasting distribution undertaking, unless the agreement incorporates a prohibition against linkage of the licensee's service with any non-Canadian discretionary service.
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9. With respect to English-language programming, the licensee shall provide closed captioning for not less than 90% of all programming aired during the broadcast year, beginning no later than 1 September 2006.
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10. With respect to French-language programming, the licensee shall provide closed captioning for not less than 90% of all programming aired during the broadcast year, beginning no later than 1 September 2009.
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11. The licensee shall adhere to the Pay Television Regulations, 1990,as amended from time to time.
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12. The licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' Sex-role portrayal code for television and radio programming, as amended from time to time and approved by the Commission. The application of the foregoing condition of licence will be suspended as long as the licensee remains a member in good standing of the Canadian Broadcast Standards Council.
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13. The licensee shall adhere to the Industry code of programming standards and practices governing pay, pay-per-view and video-on-demand services, as amended from time to time and approved by the Commission.
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14. The licensee shall adhere to the Pay television and pay-per-view programming code regarding violence, as amended from time to time and approved by the Commission.
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For the purpose of the above conditions of licence, "broadcast year" means that period between 1 September in any year and terminating the following 31 August.
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Footnotes: Bell ExpressVu Inc. (the general partner), and BCE Inc. and 4119649 Canada Inc. (partners in BCE Holdings G.P., a general partnership that is the limited partner), carrying on business as Bell ExpressVu Limited Partnership
The licence was renewed to 30 November 2005 in Administrative renewal, Broadcasting Decision CRTC 2005-422, 18 August 2005, and, subsequently to 31 January 2006 in Administrative renewal, Broadcasting Decision CRTC 2005-‑539, 9 November 2005.
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Date Modified: 2006-01-31