ARCHIVED - Broadcasting Procedural Letter Addressed to Ann Mainville-Neeson and Susan Wheeler (TELUS Communications Company and Rogers Media Inc.)

BY EMAIL

Ms. Ann Mainville-Neeson
Vice President, Broadcasting Policy and Regulatory Affairs
TELUS Communications Company
Ann.Mainville-Neeson@telus.com

Ms. Susan Wheeler
Vice-President, Regulatory, Media
Rogers Media Inc.
susan.wheeler@rci.rogers.com

Dear Madams,

Re: Request for final offer arbitration (2017-0309-1) with respect to Rogers Media services

This is with respect to the application for final offer arbitration (FOA) from TELUS Communications Company (TELUS), with respect to the carriage of Rogers Media Inc. (Rogers) specialty services Sportsnet and Sportsnet ONE (the Services).

In a letter dated 6 March 2017, TELUS filed for FOA, pursuant to Sections 12 to 15 of the Broadcasting Distribution Regulations (the BDU Regulations). TELUS submitted that the dispute meets all the criteria for resolution by FOA set out in Broadcasting and Telecom Information Bulletin 2013-637 (Information Bulletin 2013-637). TELUS noted that despite lengthy and protracted negotiations between the parties, the parties remain far apart and are at an impasse in respect of an agreement for the distribution of the Services.

In a response dated 13 March 2017, Rogers submitted that it does not support the application for FOA. Rogers argued that this application is not suitable for FOA, as reasonable commercial efforts to resolve the outstanding issues have not been made prior to requesting FOA. Rogers submitted that the Commission should therefore require mediation.

In a letter to the parties dated 24 March 2017, Commission staff suspended the application noting that the Commission has consistently encouraged parties to use all available means to arrive at a mutually acceptable solution prior to applying for the dispute resolution processes. Considering it worthwhile to explore another attempt at a negotiated solution, staff requested that the parties participate in a two consecutive day staff-assisted mediation session.

The parties participated in staff-assisted mediation, as requested.

In a letter dated 12 April 2017, TELUS requested that the Commission rule on its request for FOA on an expedited basis, arguing that any further delays hamper TELUS’ right to avail itself of the Commission’s dispute resolution services. TELUS noted that it participated in a mediation, as required, but that no agreement was reached between the parties. TELUS also proposed the term over which the rates to be determined should apply, as well as the rate structure for the distribution of the Services in a package.

In a reply dated 18 April 2017, Rogers maintained that it does not support TELUS’ request for FOA and indicated its intent to withdraw from the Commission’s dispute resolution process. Rogers indicated that it has decided not to renew its affiliation agreement with TELUS for the distribution of the Services and that, accordingly, it expects TELUS to cease the distribution of the Services within 60 days. Rogers argued that the same regulatory approach must apply to programming services as which applies to BDUs, so that each can choose not to renew an affiliation agreement where it is not in its interest to do so. Rogers relied on the Avis de recherche decisions^Footnote1 to support this position.

In a response dated 19 April 2017, TELUS submitted that Rogers’ attempt to foreclose access to its Services by a competitor is in direct contravention of the spirit and intent of the vertical integration framework, and that it would also constitute an undue preference under s. 10.1 of the Specialty Services Regulations, 1990 (the Specialty Regulations) and s. 3 of the Digital Media Exemption Order. TELUS argued that Rogers’ refusal to provide programming services to TELUS unless it agrees to pay the requested fees is an example of strong-arming and an attempt to raise its rival’s costs.

In a further response dated 21 April 2017, Rogers argued that its decision to withdraw from the dispute resolution process is entirely consistent with section 13 of the Wholesale Code, the relevant dispute resolution provisions in the Specialty Regulations and the BDU Regulations, and the determinations made by the Commission in the Avis de recherche decisions. Rogers also argued that TELUS has not presented any credible evidence that Rogers’ decision not to renew its agreement with TELUS would have an anti-competitive impact on TELUS. Finally, Rogers submitted that it is inappropriate for TELUS to make an allegation of undue preference in a proceeding that involves a request for FOA, which should be considered via a Part 1 Application proceeding.

Procedural clarifications

Sections 12.1 and 15 of the BDU Regulations state:

12.1 If there is a dispute between the licensee of a distribution undertaking and the operator of a licensed programming undertaking or an exempt programming undertaking concerning the carriage or terms of carriage of programming originated by the programming undertaking — including the wholesale rate and the terms of any audit referred to in section 15.1 — one or both of the parties to the dispute may refer the matter to the Commission.

…

15 The Commission may, after accepting a referral of a matter for resolution under section 12, render a decision concerning any unresolved matters, including the wholesale rate.

Accordingly, the dispute resolution process can be initiated upon one party’s request. Further, it is at the Commission’s discretion to compel a party to dispute resolution, which includes rendering determinations on wholesale rates pursuant to section 15 of the BDU Regulations.

The standstill rule, set out in Section 11 of the Specialty Regulations,specifies that:

11 (1) During any dispute between a licensee and a person licensed to carry on a distribution undertaking or the operator of an exempt distribution undertaking concerning the carriage or terms of carriage of programming originated by the licensee or concerning any right or obligation under the Act, the licensee shall continue to provide its programming services to the distribution undertaking at the same rates and on the same terms and conditions as it did before the dispute.

(2) For the purposes of subsection (1), a dispute exists from the moment that written notice of the dispute is provided to the Commission and served on the other undertaking that is party to the dispute and ends when an agreement settling the dispute is reached by the concerned undertakings or, if no such agreement is reached, when the Commission renders a decision concerning any unresolved matter.

The Commission clarifies that a party cannot withdraw unilaterally from the dispute resolution process. Rather, as set out above, the dispute ends and the standstill is lifted only upon disposition by the Commission, in the absence of an agreement between the parties.  Regarding Rogers’ assertion that the Avis de recherche decisions “permitted Bell and Videotron to withdraw from dispute resolution”, the Commission points out that the Avis de recherche decisions represent the Commission’s final determinations, in which the Commission ended the disputes and lifted the standstill that was in effect while the disputes were underway.

Regarding section 13 of the Wholesale Code, BRP 2015-438, the Commission reminds parties that, where they agree to renew an expired affiliation agreement, both parties are required to refer a matter for dispute resolution pursuant to sections 12 to 15 of the BDU Regulations, by 120 days preceding the expiry date of the agreement.

The Commission clarifies that this section of the Wholesale Code does not, however, preclude a party from otherwise initiating dispute resolution, including pursuant to any of the dispute resolution provisions or the undue preference regulations.

Decisions

In this case, notice of a dispute was provided to the Commission, by way of TELUS’ 6 March 2017 letter requesting dispute resolution. The standstill rule is thus in effect, pursuant to section 11 of the Specialty Regulations. As a result, Rogers must continue to provide its services to TELUS at the same rates and on the same terms and conditions as it did before the dispute.

In deciding whether to proceed to FOA to resolve this dispute, the Commission has taken into consideration the concerns regarding access to programming owned by vertically-integrated entities that the vertical integration framework (BRP 2011-601) sought to address in establishing the precursor to the Wholesale Code.

In addition, it has examined the concerns raised in the context of Rogers’ licence renewal in 2014 (Decision 2014-399):

The acquisition of the NHL broadcast rights by Rogers is similar to the acquisition of premium programming services by BCE and Corus since the acquired broadcast rights are extensive in terms of length of time and broadcast opportunities, and relate to premium content that is very lucrative and attractive to subscribers. The very nature of the content acquired could create a potential for Rogers to use its market power in an anti-competitive manner in its negotiations with parties over the terms and conditions for the distribution of its services, in particular, Sportsnet and Sportsnet 360.

Having considered a) the parties have been unable to resolve the dispute by alternative methods, b) the dispute is exclusively monetary and otherwise meets the criteria for dispute resolution set out in paragraph 4 of Information Bulletin 2013-637, c) Rogers has both the opportunity and incentive to engage in anti-competitive behaviour, and d) the potential negative impact on TELUS and on the availability of programming to Canadians should the dispute remain unresolved, the Commission considers that FOA is the appropriate method of dispute resolution in this case.

Accordingly, pursuant to sections 12 to 15 of the BDU Regulations and Information Bulletin 2013-637, the Commission accepts the request for FOA by TELUS, to resolve its dispute with Rogers for the distribution of the Services.  The Commission notes that it is prepared to address any compliance issues as they arise, including with respect to sections 12 to 15 of the BDU Regulations, sections 10.4 and 11 of the Specialty Regulations, as well as the relevant undue preference regulations.

With respect to the 60-day notice provided to TELUS by Rogers for discontinuing provision of the Services, the Commission is of the view that such notice of a change to the existing terms and conditions of carriage of the Services by a BDU is inappropriate within the context of the standstill rule. Accordingly, the Commission finds that the standstill rule has the effect of suspending the 60-day notice provided by Rogers to TELUS, until the standstill is lifted by the Commission.

Scope of the FOA proceeding

The Commission considers that the record is insufficient at this time for it to select a scope for the FOA proceeding. Accordingly, each party must file with the Commission its desired scope for the FOA proceeding within five (5) days of the date of this letter, with supporting rationale. The letter should address, at a minimum a) the types of rates to be determined by the Commission in the FOA proceeding, b) the term to which the wholesale rates should apply, and c) the structure of the offers to be filed.

Prior to filing their submissions, parties are encouraged to work bilaterally, and engage Commission staff if desired, in order to attempt to agree on a scope to be proposed for the FOA proceeding. It is noted however that it is within the purview of the Commission to select the scope in FOA.

The Commission will issue the conduct letter for the present FOA process, following the parties’ submissions on scope. The conduct letter will set out the dates upon which the FOA process is to be conducted, the matter(s) upon which the Commission will make a determination, and the procedure to be followed.

Yours sincerely,

Danielle May-Cuconato
Secretary General

Date modified:

2017-06-09