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

Ottawa, 30 June 2017

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 Madam,

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

This letter is to establish the scope for the final offer arbitration (FOA) proceeding between TELUS Communications Company (TELUS) and Rogers Media Inc. (Rogers Media) for the distribution of Sportsnet and Sportsnet ONE (the Sportsnet Services). In addition to setting out the matter upon which the Commission will make a determination, this conduct letter sets out the dates upon which the FOA is to be conducted and the procedure to be followed. 

This letter should be read in conjunction with the Commission’s letter dated 9 June 2017 in which, pursuant to sections 12 to 15 of the Broadcasting Distribution Regulations and Broadcasting and Telecom Information Bulletin CRTC 2013-637 (Information Bulletin 2013-637), the Commission accepted the request for FOA by TELUS, to resolve a dispute with Rogers Media. In the 9 June 2017 letter, the Commission asked parties to submit their preferred scope for the FOA proceeding, with supporting rationale.

The Commission strives to release FOA decisions as expeditiously as possible. However, any procedural issues that arise may result in delays to the applicable timelines (see details in the attached Procedural Appendix).

Parties’ submissions

On 14 June 2017, the parties filed their preferred scope for the FOA proceeding, as requested. Both parties noted that while they agreed on a number of elements related to the scope (such as the term to which the wholesale rates apply and structure of the rate card, and the exclusion of standalone rates), they could not agree on whether or not to ask the Commission to include the rights to TV Everywhere (TVE)Footnote1 and 4K content in the FOA process.

In its submission, TELUS argued that the rights to distribute TVE and 4K content should be included in the scope of this FOA. In support of its position, TELUS argued, among other things, that TVE and signal quality improvements are integral to the distribution of linear services. Noting that most other agreements include the TVE and 4K rights in the same rate as what is charged for the linear signal, TELUS also argued that it would have no frame of reference for valuing the linear signal on its own without what it considers to be other integral components. TELUS also argued that it should not have to wait for the outcome of a subsequent FOA to know the full rate applicable to the distribution of the service. TELUS considered that if TVE and 4K rights are excluded from this FOA, there is a high likelihood that a subsequent FOA will be necessary.

While Rogers expressed disagreement with the Commission’s decision to accept TELUS’ request for FOA, it submitted, on a without prejudice basis, that the rights for TELUS to distribute TVE and 4K content should be excluded from the FOA, and the rates for such distribution left to commercial negotiations between the parties. Rogers argued that the FOA proceeding should be limited to setting out wholesale rates that would cover the SD and HD versions of the linear channels, as well as access to content from the linear channels on the Sportsnet Now app and Sportsnet.ca website on an authenticated basis.  Rogers maintained that this limited scope would allow both parties and the Commission to focus on the issue of greatest value and importance and conduct a clear, simple and transparent FOA process that is not overly complicated by ancillary issues that should be able to be resolved once the linear wholesale rates are established by the Commission.

On 14 June 2017, Rogers also filed with the Commission a request that the Commission hold the FOA proceeding in abeyance until such time as it has considered and determined whether it wishes to pursue its rights of appeal.

In a response dated 19 June 2017, TELUS opposed Rogers’ request to hold the FOA process in abeyance. TELUS argued that Rogers’ request does not provide any information that would support a stay of proceedings at this time and, specifically, that Rogers has not met the three-part test for granting a stay, adopted both by the Commission and by courts.

Decisions

Consistent with its past practices in FOA, the Commission is of the view that a scope which limits the matters on which the Commission must render a determination to the fewest yet most significant monetary elements is appropriate.

Accordingly, in accordance with paragraph 21 of Information Bulletin 2013-637, the matter upon which the Commission will make a determination is as follows:

For clarity, in this case the wholesale rates will cover the provision of standard definition (SD) and high definition (HD) versions of the linear channels, as well as access to content from the linear channels on the Sportsnet Now app and Sportsnet.ca website on an authenticated basis.

The Commission hereby notifies the parties that the other issues relating to the distribution of the Sportsnet services by TELUS (such as rates for standalone, TVE and 4K distribution) will not be determined by the Commission in the context of this proceeding and should be resolved through negotiations between the parties.  Based on the submissions of the parties, the Commission is however requesting information from the parties regarding the value of these other rate elements, in order to more accurately assess the final offers against other agreements that may be in effect in the market.

The Commission will examine the final offers submitted by the parties and will select one in its entirety.Footnote2  The Commission’s decision will be binding on the parties.

With respect to Rogers’ request for an abeyance, the Commission, notwithstanding the use of the term “abeyance”, considers that the request is a request for a stay and has evaluated it on that basis. The Commission, in determining applications for a stay, applies the criteria set out in RJR-MacDonald Inc. v. Canada (Attorney General) [1994] 1 S.C.R. 311. Consequently, in order for an applicant to be granted a stay an applicant must demonstrate that all three of the following criteria are met: a) there is a serious issue to be determined; b) the party seeking the interim relief will incur irreparable harm if the relief is not granted; and c) the balance of convenience, taking into account the public interest, favours granting a stay.

In its application, Rogers failed to provide any evidence or rationale as to why, in the circumstances of this proceeding, a stay is required. Nothing in Rogers’ application demonstrated that taking time to consult outside counsel in order to assess whether to appeal a procedural determination meets any of the three criteria noted above.  Accordingly, the Commission denies Rogers’ request to hold the FOA proceeding in abeyance.

Documents to be provided

The Commission requires that the parties each file their final offers with the Commission by 20 July 2017.  Refer to the attached Appendix for the procedure to be followed in the filing of documents, in addition to Information Bulletin 2013-637.

When preparing your arguments, please refer, where applicable, to the criteria for fair market value set out in the Wholesale Code, Broadcasting Regulatory Policy CRTC 2015-438. As noted in the Interpretation of the Wholesale Code, Broadcasting Information Bulletin CRTC 2015-440, the Commission will determine which fair market value factors are applicable in a given case and assess proposed rates or final offers in relation to those factors.  In addition, the Commission will apply, where appropriate, a public interest test that examines whether the proposed wholesale rates are consistent with the relevant public policy objectives.

To complete the record, TELUS is also required to provide the following information, by 20 July 2017:

  1. the most recent affiliation agreement reached with Rogers Media regarding the Sportsnet Services;
  2. the average monthly TELUS subscribers to the Sportsnet Services when offered (a) in a linear package, and (b) on a standalone basis, by month, for the period 1 September 2015 to the present, as well as the applicable penetration levels;
  3. the average monthly total TELUS television service subscribers, by month, for the period 1 September 2015 to the present;
  4. the current wholesale rates paid by TELUS for the Sportsnet Services when offered (a) in a linear package, and (b) on a standalone basis;
  5. the wholesale rates paid by TELUS for other sports services (Canadian and non-Canadian) when offered in linear packages;
  6. the average monthly number of subscribers to each sports service (Canadian and non-Canadian) distributed by TELUS, by month, for the period 1 September 2015 to the present;
  7. the current number of subscribers to each package offered by TELUS that includes a sports service, as well as the list of the services offered within such packages;
  8. the retail rate for each preassembled package offered by TELUS that includes a sports service, and the individual wholesale rates for each service offered within such packages;
  9. the tuning or viewership to the Sportsnet Services and to each sports service offered by TELUS, including where available (a) set-top-box data, (b) average minute audience, and (c) total hours tuned, by month, for the period 1 September 2015 to the present;
  10. estimates or the actual amounts, if available, of the value for TVE and 4K distribution of other sports services carried by TELUS, with supporting rationale; and
  11. estimates of the value for TVE and 4K distribution of the Sportsnet Services in the context of their carriage by TELUS, with supporting rationale.

To complete the record, Rogers Media is also required to provide the following information by 20 July 2017:

  1. all current affiliation agreements between Rogers Media and other broadcasting distribution undertakings (BDUs) for the distribution of the Sportsnet Services;
  2. the effective wholesale rates paid by all BDUs to Rogers Media for the Sportsnet services, broken down by distribution (a) in linear packages, and (b) on a standalone basis;
  3. for each entity operating licensed or exempt BDUs that distributes the Sportsnet Services, the number of subscribers, the effective penetration levels and volume discounts, if any, by month, for the period 1 September 2015 to the present;
  4. the tuning or viewership for the Sportsnet Services, including (a) average minute audience, and (b) total hours tuned, by month, for the period 1 September 2015 to the present;
  5. estimates or the actual amounts, if available, of the value for TVE and 4K distribution paid by other entities distributing the Sportsnet Services, with supporting rationale; and
  6. estimates of the value of TVE and 4K distribution of the Sportsnet Services in the context of their carriage by TELUS, with supporting rationale.

By 25 July 2017, once Commission staff has confirmed that the offers respond to the identified matter, Commission staff will forward to each party a copy of the other party’s offer.

The parties will have until 31 July 2017, to file comments on the other party’s final offer with the Commission, and to serve a copy of these comments on the other party.  However, the parties will not be authorized to amend their offers.

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 that same webpage and quoting the application number noted above.

Responsibilities of the parties

The parties may contact Julia Bresee at 819-997-1194 or at julia.bresee@crtc.gc.ca if they require additional information regarding the organization and conduct of the final offer proceeding.

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 via “My CRTC Account”, the parties must send copies of all the documents in question to julia.bresee@crtc.gc.ca.

Yours sincerely,

Danielle May-Cuconato
Secretary General


Procedural Appendix

Parties should be aware that deviation from the final offer arbitration process set out in Information Bulletin CRTC 2013-637 may result in delays to the applicable timelines.

General process

As set out in the Information Bulletin CRTC 2013-637, FOA usually involves a two-step process: (1) the submission of the final offer and (2) comments.

Parties are responsible for including concise supporting arguments stating all the facts when they file their final offers.  Since the purpose of the comments is to allow each party to comment on the other party’s final offer, procedural fairness requires that the parties’ entire positions be put forth at the beginning of the process (i.e., as part of the final offer).  It is inappropriate to file new evidence and formulate new arguments as part of the comments, if such evidence or arguments could have been filed or formulated when filing the final offers.

Accordingly, the process does not generally provide for parties to file a reply to comments as part of the usual final offer arbitration process.

In the event that a party considers that new evidence or argument has been filed in the context of the comment phase, parties may request from the Commission, in writing, a right of reply, with supporting rationale for the request.

Filing of documents

Generally, there are three versions of each document filed with the Commission in the context of an FOA proceeding:  a version to be placed on the public record (which generally omits details pertaining to the final offers, for instance), a version to be provided to the other party to the FOA (which generally omits certain details which are commercially sensitive), and a full version (containing all confidential information) for the CRTC.

The onus is on each party to ensure that its own sensitive information has been treated appropriately by the other party to the FOA, in reviewing the public versions submitted to the CRTC.

In submitting their filings, parties must clearly designate each version, by marking “Public version”, “Confidential CRTC version” or “Confidential version for party X” at the top of every page of the submission.

Parties must follow the following naming convention in filing documents via GC key:

All public versions of documents must be provided at the same time as the confidential version, as well as any translations that may be provided.

Confidentiality

In accordance with paragraph 40 of Information Bulletin CRTC 2013-637, existing Commission confidentiality rules and practices will apply throughout the FOA proceedings.  The applicable rules and practices are set out in the Canadian Radio-television and Telecommunications Commission Rules of Practice and Procedure (the Rules) and described in Broadcasting and Telecom Information Bulletin 2010-961.

Section 31(1) of the Rules provides that in broadcasting matters, a party may designate information related to the following as confidential:

  1. information that is a trade secret;
  2. financial, commercial, scientific or technical information that is confidential and that is treated consistently in a confidential manner by the person who submitted it; or
  3. information the disclosure of which could reasonably be expected
    1. to result in material financial loss or gain to any person;
    2. to prejudice the competitive position of any person; or
    3. to affect contractual or other negotiations of any person.

Section 31(2) of the Rules provides that the party must make the designation at the time that they file the document that contains the information. Moreover, the party that designates information as confidential must provide reasons, as well as any supporting documents, why the disclosure of the information would not be in the public interest, including why the specific direct harm that would be likely to result from the disclosure would outweigh the public interest.

[These sections are only an excerpt of the applicable Rules.]

Matters with respect to confidentiality can be set out in a covering letter to the party’s final offer or comment submission, and will not be counted towards the page limits set out in Information Bulletin 2013-637.

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