Broadcasting - Commission Letter addressed to Lecia Simpson (TELUS)
Ottawa, 25 April 2022
BY EMAIL
Ms. Lecia Simpson
Director, Regulatory Affairs
TELUS
215 Slater Street, 5th Floor
Ottawa (ON) K1P 0A6
lecia.simpson@telus.com
Re: Evaluation of TELUS Communications Inc.’s community programming services
Dear Ms. Simpson:
Background
In Broadcasting Decision 2018-267, the Commission found that TELUS Communications Inc. (TELUS) had not met the policy objectives set out in Broadcasting Regulatory Policy 2010-622 and Broadcasting Regulatory Policy 2016-224 (together, the Community TV Policy) in the way that it funds and produces programming that qualifies as local expression and in particular, local and access programming. The Commission was concerned that TELUS’ community television model did not allow for a significant amount or a wide variety of locally produced and reflective programming to be produced by a range of individuals within a community.
As part of its decision, the Commission indicated that it would closely monitor the way that TELUS funds and produces programming that qualifies as local expression.
With a letter dated 5 February 2021, Commission staff initiated a process to verify the operations of TELUS’ on-demand community programming services offered by its undertakings in Alberta and British Columbia. In particular, TELUS was requested to provide a list of community programs that it had added to its on-demand community programming outlets during the period of 1 September 2019 to 31 August 2020 for its Edmonton and Grand Prairie undertakings in Alberta and its Penticton, Vancouver and Victoria undertakings in British Columbia. Among other things, TELUS was to ensure that the data provided for the five aforementioned undertakings matched what TELUS reported in its annual returns Footnote1 .
On 22 March, 12 May and 10 September 2021, TELUS provided the above-noted lists of programs and answered several Commission staff requests for information regarding these programs and addressed the Commission’s concerns set out in Broadcasting Decision 2018-267. The following summarizes the Commission’s analysis and determinations.
Issues uncovered during the verification
In preparing responses to the Commission regarding the above, TELUS identified several errors that it had previously made in its annual return filings to the Commission, including the following:
- Some programs were misattributed to the incorrect undertaking;
- Some expenses were miscategorised;
- Some sponsorship revenues were accounted for as programming expenses;
i) Misattributed programming
TELUS submitted that it had misallocated some programs to the incorrect undertakings. For example, the hours and expenses associated with the programs “Jesse Jam” and “Fringe Fest”, which were produced in Edmonton, and “Building Bisschop”, which was produced in Calgary, were incorrectly attributed to its Vancouver undertaking. Footnote2
TELUS’ condition of licence 4 states that the licensee shall make, in each broadcast year, a contribution of not less than 4.7 % of its gross revenues derived from broadcasting activities in the licensed area in the previous broadcast year to Canadian programming, less any contribution to local expression Footnote3 made by the licensee in the licensed area in the current broadcast year. The Commission notes that the proper attribution of the programs noted above and their associated expenses would result in the Vancouver undertaking contributing less than the amount required by its conditions of licence.
TELUS requested that it be permitted to correct the error by taking advantage of the flexibility provided in the Community TV Policy to transfer an equivalent contribution amount from its Vancouver serving area to its Edmonton serving area. If allowed to use this flexibility, TELUS’ Vancouver undertaking would in effect increase its local expression expenses by an amount equivalent to the expenses it transferred to Edmonton and comply with its contribution requirement.
In this regard, the Commission notes the following points:
- The Community TV Policy allows licensed terrestrial BDUs to allocate up to 50% of their contribution to local expression to community programming made in other markets.
- In Broadcasting Regulatory Policy 2017-278, the Commission specified that the intention of the Community TV Policy was for money to flow from urban markets to smaller markets to better sustain community channels in those areas.
- In Broadcasting Decision 2020-356, the Commission also specified that the intention of the Community TV Policy was to allow money to flow from urban (i.e., metropolitan) markets to smaller (i.e., non-metropolitan) markets.
- In this case, TELUS requested that it be allowed to use the flexibility in the Community TV Policy to transfer an amount it is required to contribute to local expression from Vancouver, which is a metropolitan market, to Edmonton, which is also a metropolitan market.
- The Commission also notes that TELUS’ request to take advantage of this flexibility is to fix an error after the fact rather than making a conscious choice to transfer allowable contribution from its Vancouver undertaking to its Edmonton undertaking in order to cater to the needs of the community.Footnote4
In this case, because TELUS is requesting permission to after the fact transfer a portion of its contribution to local expression from one metropolitan market to another, the Commission considers that accepting TELUS’ request would be contrary to the intention of the Community TV Policy.
Consequently, the Commission finds TELUS’ Vancouver BDU in non-compliance with condition of licence 4 for the 2019-2020 broadcast year. In particular, the Vancouver BDU did not make the minimum 4.7% contribution to Canadian programming. The Commission requires TELUS to make the necessary amendments to its 2019-2020 broadcasting year annual return forms, provide the Commission with a detailed explanation of what changes were made to the forms, confirm the shortfall to be made up Footnote5 and make-up any resulting shortfall payment to the Canada Media Fund (CMF) within 30 days of the date of the Commission’s decision, providing evidence to the Commission of any additional payments made to the CMF within 60 days of the date of the Commission’s decision.
ii) Miscategorized expenses
TELUS submitted that some of its outreach expenses Footnote6 were miscategorized as direct programming expenses due to a misunderstanding of what constituted a technical expense. TELUS indicated that it has made changes to its accounting systems to correct this going forward.
In Broadcasting Decision 2020-356, issued after the end of the broadcast year considered as part of this verification exercise, the Commission clarified that technical costs such as the purchase of video on demand servers and user interface software are not eligible to be claimed as direct programming expenses. TELUS did not specify which of its outreach expenses were miscategorized. The Commission expects that going forward TELUS will comply with the clarifications specified in Broadcasting Decision 2020-356. The Commission will track this going forward.
iii) Misreporting of sponsorship revenues
The Community TV Policy requires that all revenues generated by sponsorship advertising be reinvested in the operation of the community channel (or in this case of TELUS’ on-demand outlets).
TELUS submitted that it inadvertently accounted for sponsorship to support its community channel as an access programming expense in its annual returns instead of sponsorship revenues that should have been reinvested in community programming. To correct this accounting error, TELUS provided evidence that it had made a payment of an equal amount to Canadian programming Footnote7 in March 2021.
While the Commission considers that it would have been preferable that this amount be spent on community programming as envisioned by the Community TV Policy, the Commission considers TELUS’ alternative approach reasonable given that the accounting error occurred almost two years ago. The Commission considers that this issue has been acceptably addressed.
Addressing the Commission’s concerns
In reaching its determinations, the Commission drew on the following observations with regards to the information provided by TELUS during this verification process:
- While the Commission is somewhat concerned that program expenses incurred during the broadcast year for programs that were not available for viewing until sometime after the end of the year in question, the Commission acknowledges that the COVID pandemic likely played a part in this. The Commission will continue to monitor this situation on a going-forward basis.
- With the caveat noted above, TELUS appears for the most part to have met its local and access programming requirements for the five undertakings in question.
- The lists of programs for the five undertakings in question show a trend towards a larger amount of community programming and more variety in programming at an overall lower cost per hour than in previous years, though the cost per program is still significantly higher when compared to community programming provided by BDUs on linear community channels.
- It appears that TELUS has made more substantial improvements in the year being audited when compared to previous years and more so in the larger markets than in the smaller markets where the progress is less apparent.
- TELUS had indicated that it would be implementing several measures to address the issues noted above and further enhance its community program offering including:
- Launching new initiatives to specifically target members of the community with no experience in broadcasting who wish to create local content; and
- Instituting regional managers who would act as specific points of contact to facilitate submissions of programming ideas and would be responsible for conducting outreach and meeting a target number of programming hours for each community for each broadcast year, particularly in its smaller BDU service areas.
Determinations
Based on the above, the Commission cannot conclude that the measures put in place by TELUS to address the policy concerns expressed by the Commission in Broadcasting Decision 2018-267 have been entirely successful to date. In particular, the Commission still has some concerns with the multiple inconsistencies in the reporting and the fact that what progress was made did not appear until the most recent broadcast year and occurred mostly in the larger BDU service areas. In these regards, the Commission notes that TELUS announced additional measures it would implement in order to address some the remaining issues.
As noted earlier, the Commission denies TELUS’ request to transfer any eligible contributions to local expression from Vancouver to Edmonton. Consequently, the Commission finds TELUS’ Vancouver BDU in non-compliance with condition of licence 4 for the 2019-2020 broadcast year. In particular, the Vancouver BDU did not make the minimum 4.7% contribution to Canadian programming. TELUS is directed to make the necessary amendments to the 2019-2020 broadcasting year annual return forms, provide the Commission with a detailed explanation of what changes were made to the forms, confirm the shortfall to be made up and make-up any resulting shortfall payment to the CMF within 30 days of the date of the Commission’s decision, providing evidence to the Commission of any additional payments made to CMF within 60 days of the date of the Commission’s decision.
Finally, the Commission considers that in order to fully assess TELUS’ response and remedial actions to Broadcasting Decision 2018-267, a subsequent examination will be necessary. The conduct of this further examination will take place as part of TELUS’ next licence renewal.
Yours sincerely,
Original signed by
Claude Doucet
Secretary General
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