ARCHIVED -  Letter

BY E-MAIL

Johanne Saint-Laurent
Senior Vice-President, Business Affairs
Les Chaînes Télé Astral and
Vice-President, Director General
Astral Télé Réseau
1800 McGill College Avenue, Office 1600
Montreal, Quebec H3A 3J6
jsaint-laurent@astral.com

Louma Haffar
Senior Advisor, Regulatory Affairs - Broadcasting
Québecor Média inc.
612 Saint-Jacques Street, Montreal, Quebec H3C 4M8
louma.haffar@quebecor.com

Dear Mesdames:

Re: Request by Astral for final offer arbitration between Astral and Videotron (file number 8622-A124-201304907)

In accordance with paragraph 23 of Broadcasting and Telecom Information Bulletin
CRTC 2009-38 (Information Bulletin 2009-38), this letter is to advise the parties that Astral Media Inc’s (Astral Media) application for final offer arbitration (FOA) with respect to a dispute relating to the renewal of its affiliation agreements with Vidéotron S.E.N.C. (Vidéotron) has been accepted by the Commission.

This letter sets out the dates upon which the final offer arbitration process is to be conducted, details the disputed matters and indicates the procedure to be followed.

Astral’s application

On 6 March 2013, Astral Media Inc. (Astral) filed an application under section 12 of the Broadcasting Distribution Regulations, in which it requested that the Commission resolve a business dispute between Astral and Vidéotron relating to the renewal of affiliation agreements for eight specialty television services and five pay television services. Astral requested that the dispute be resolved by an FOA. On 13 March 2013, Astral completed its application by providing additional information about the dispute and describing the issues for which it was requesting Commission arbitration.

To accommodate Vidéotron’s proposals as set out below, in a letter dated 5 April 2013, Astral proposed two separate and simultaneous FOA processes: the first regarding the affiliation agreements for its eight specialty television services, and the second regarding the affiliation agreements for its five pay television services.

Vidéotron’s response

In its response of 22 March 2013, and its letter of 10 April 2013, Vidéotron conceded that the Commission’s assistance is required to resolve the dispute. However, Vidéotron proposed another mechanism: it suggested that the Commission hold an expedited hearing first to examine the affiliation agreements for the eight specialty television services, because the issues to be resolved with regard to these services are not exclusively monetary. Vidéotron also proposed that the Commission hold an FOA process for each pay television service once a decision has been made on the specialty television services.

Should the Commission not approve Vidéotron’s proposal, it suggested that three separate and simultaneous FOA processes be initiated for the pay television services, grouped by the nature of their content and their distribution model. Vidéotron proposed one process for TMN/HBO and Super Écran, another for Family/Disney Jr. and TMN Encore and a third for Cinépop.

The process

After having examined Astral’s application and Vidéotron’s response, the Commission has decided to hold four separate and simultaneous FOA processes to resolve the dispute:

• one process regarding the affiliation agreement for the eight specialty television services;
• one process regarding the TMN/HBO and Super Écran pay television services;
• one process regarding the Family/Disney Jr. and TMN Encore pay television services; and
• one process regarding the Cinépop pay television service.

The Commission considers that an expedited hearing is not necessary in this case. Among other things, it is not convinced by Vidéotron’s arguments that there are issues to be resolved that have not already been considered by the Commission in previous proceedings. The Commission considers that the issues to be resolved are exclusively monetary. As such, final offer arbitration is the appropriate mechanism for this case.

In accordance with the FOA process established in Broadcasting and Telecom Information Bulletin 2009-38, the matters upon which the Commission will make a determination are as follows:

For each programming service,

1. wholesale rates for the linear distribution of the services in question, for each year set out in the agreements;
2. wholesale rate for the multiplatform distribution of the services in question, for each year set out in the agreements; and
3. term of the agreements.

The Commission requires that, by 16 May 2013, the parties individually submit their final offers in response to the above-mentioned disputed matters. As set out above, the Commission will hold four separate FOA processes. It orders the parties to file six complete drafts of the affiliation agreements: one regarding all eight specialty television services and five regarding each pay television service. To enable the Commission to examine the offers in context, all agreements must reflect the parties’ final offers.

These final offers must be accompanied by supporting documentation. The entire submission must not exceed 20 pages.

To complete the record, by 16 May 2013, parties are required to provide answers to the series of questions appended to this letter.

By 21 May 2013, once the Commission considers that all offers respond to the identified disputed matters, the Commission will forward to each of the parties a copy of the other party’s offer and responses to the questions.

The parties will have until 27 May 2013 to file observations on the other party’s final offers and responses to the questions. However, they will not be authorized to amend their original offers.

For each of the four FOA processes, the Commission will examine the final offers provided by the parties, and for each process, will select one in its entirety. As set out in Information Bulletin 2009-38, final offer arbitration will result in a binding determination.

Confidentiality

As noted in paragraphs 40 and 41 of Information Bulletin 2009-38, existing Commission confidentiality rules and practices will apply during final offer arbitration proceedings.

Pursuant to sections 30 to 34 of the Canadian Radio-television and Telecommunications Rules of Practice and Procedure (the Rules of Procedure), where a party files information with the Commission in confidence, the party must provide sufficient details as to the nature and extent of the specific direct harm that it considers would result from the disclosure of the information subject to the confidentiality claim. It must also provide reasons why the disclosure of the information would not be in the public interest. The party must also file an abridged version of the document for the public record.

Where the Commission is of the opinion that any specific direct harm likely to result from public disclosure is not sufficient to outweigh the public interest in disclosing the information, it may place information designated as confidential on the public record, on the Commission’s own initiative, or at the request of a party, after providing the party filing the information an opportunity to file a response with the Commission.

Further, pursuant to the Rules of Procedure, as this proceeding relates to matters under the Broadcasting Regulatory framework, where the Commission determines that the information should be disclosed, and the party filing the information confirms its designation of the information as confidential, the information will not be disclosed and will not be considered by the Commission in its determinations.

Mandatory mediation

On a date to be indicated, the Commission will hold a mandatory mediation session for each arbitral proceeding after the written record is complete. Parties should familiarize themselves with the Commission’s expectations with respect to their participation in the mediation as set out in paragraph 129 of Broadcasting Regulatory Policy CRTC 2011-601.

Filing of documents

Any documents filed with the Commission should be filed via the secure service “My CRTC Account (GCKey or Partner Log In)” using the “Broadcasting Online Form and Cover Page” on the web page.

Responsibilities of the parties

Parties may contact Claude Brault at 819-997-6064 or at claude.brault@crtc.gc.ca if they require additional information regarding the organization and conduct of the hearing.

Where a document is to be filed or served by a specific date, the document must be actually received, not merely sent, by that date. In addition to filing with the Commission, all copies of submissions are to be sent to claude.brault@crtc.gc.ca.

Original signed by John Traversy

Secretary General

John Traversy

c.c. C. Brault, CRTC, claude.brault@crtc.gc.ca
Laurence J.E. Dunbar, Fasken Martineau, ldunbar@fasken.com
Louma Haffar, Québecor Média, Louma.Haffar@quebecor.com
Dany Meloul, Les Chaînes Télé Astral, dmeloul@astral.com
Natalie Dorval, Astral Media Inc, ndorval@astral.com
Astral

1. Provide a copy of all affiliation agreements with Vidéotron that expired on
31 December 2012, regarding the programming services in question.
2. Provide a copy of the most recent affiliation agreement regarding the programming services in question with (i) Cogéco in Québec and (ii) Bell Télé in Québec. Describe and justify the differences, as applicable, between these agreements and those you have proposed as a final offer to Vidéotron.
3. For each of the services included in your final offer, provide the following revenues for the last three years: (i) subscription, (ii) advertising, (iii) other, and (iv) total.
4. As applicable, provide all assumptions and methodology supporting the multiplatform tariffs proposed for each programming service.
5. For each programming service, as applicable, confirm that the proposed tariff for access to multiplatform rights does not limit the quality and quantity of the rights granted. If this is not the case, describe any limits imposed.
6. For each year of the agreement term, describe the impact that your final offer will have on the (i) subscription and (ii) advertising revenues of each programming service involved in this process, compared to those from the last year of the current contract. Include all assumptions and methodology (such as the predicted number of subscribers).
7. Explain, with supporting arguments, the term you are proposing for the affiliation agreements.
8. (a) For each programming service included in your final offers and for which you are proposing a wholesale tariff that varies based on the penetration rate, provide all assumptions and methodology supporting this variation. Justify this variation.
(b) Indicate whether the variation in question includes a component to recover a loss of advertising revenues due to a decrease in the penetration rate.

(c) As applicable, for each programming service, provide the percentage of advertising revenue losses that you propose to recover by increasing the wholesale rate. Justify this percentage.

(d) Explain how the tariff structure proposed by Astral in its final offers includes a fair share of the financial consequences that may result from increased choice being offered to consumers.

9. Explain, with supporting arguments, how each of your final offers is consistent with the Broadcasting Act and the Code of conduct for commercial arrangements and interactions appended to Broadcasting Regulatory Policy CRTC 2011-601.

Vidéotron

1. Explain how each of the Astral programming services in question are currently offered to Vidéotron subscribers. Include the current price for each option.
2. As applicable, provide all assumptions and methodology supporting the multiplatform tariffs proposed for each programming service.
3. For each programming service, as applicable, confirm that the proposed tariff for access to multiplatform rights does not limit the quality and quantity of the rights granted. If this is not the case, describe any limits imposed.
4. In its letter of 22 March, Vidéotron indicates that the affiliation agreement proposed by Astral for Category A specialty services compromises the viability of the current economic model for the services offered. Explain this comment, with supporting arguments.
5. For each year of the agreement term, describe the impact that your final offer will have on the subscription revenues of each programming service involved in this process, compared to those from the last year of the current agreement. Include all assumptions and methodology (such as the predicted number of subscribers).
6. Explain, with supporting arguments, the term you are proposing for the affiliation agreements.
7. (a) For each programming service included in your final offers and for which you are proposing a wholesale tariff that varies based on the penetration rate, provide all assumptions and methodology supporting this variation. Justify this variation.
(b) Indicate whether the variation in question includes a component to recover a loss of advertising revenues due to a decrease in the penetration rate.

(c) As applicable, for each programming service, provide the percentage of advertising revenues that you propose to recover by increasing the wholesale rate.

(d) Demonstrate how your final offers distribute fairly between the parties the financial consequences that may result from increased choice being offered to consumers.

8. Explain, with supporting arguments, how each of your final offers is consistent with the Broadcasting Act, the Code of conduct for commercial arrangements and interactions and the commercial agreements appended to Broadcasting Regulatory Policy
CRTC 2011-601.

Date modified:

2013-05-03