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Broadcasting Decision CRTC 2005-460
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Ottawa, 9 September 2005 |
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Vidéotron ltée, on behalf of itself and
its subsidiaries CF Cable TV Inc. and Videotron (Regional) Ltd. |
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Montréal, Québec, Saguenay (Chicoutimi
sector), Sherbrooke, Trois-Rivières (Cap-de-la-Madeleine sector),
Victoriaville, Montréal/Laval and Gatineau (Buckingham, Hull and
Terrebonne sectors), Quebec1 |
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Application 2003-1177-0
Broadcasting Public Notice CRTC 2004-48
9 July 2004 |
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Proposed amendments to conditions of licence
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In this decision, the Commission
denies the application by Vidéotron ltée, on behalf of itself and
two subsidiaries, for amendments to the conditions of licence of various
cable broadcasting distribution undertakings (BDUs) in Quebec. The
proposed amendments would have permitted the BDUs to insert commercial
advertising, including messages promoting affiliated broadcasting
services, in 50% of the local availabilities contained in the signals of
three U.S. satellite programming services. |
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Introduction
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1. |
In Broadcasting Public Notice CRTC 2004-48,
9 July 2004 (Public Notice 2004-48),
the Commission announced receipt of an application by Vidéotron ltée
(Vidéotron), on behalf of itself and two subsidiaries, for amendments
to the conditions of licence of various cable broadcasting distribution
undertakings (BDUs) in Quebec. The proposed amendments would have
permitted the BDUs to insert commercial advertising, including messages
promoting affiliated broadcasting services, in 50% of the local availabilities
contained in the signals of three U.S. satellite programming services,
namely A&E, CNN and TLC. "Local availabilities", in
the context of this decision, refers to the approximately two minutes
per hour of air time set aside in the programming of these and certain
other U.S. satellite programming services for use by distributors
in the United States. |
2. |
In Public Notice 2004-48,
the Commission noted that the Vidéotron application raised issues
similar to those raised in a proposal by the Canadian Cable Telecommunications
Association (CCTA) announced on the same date (see Proposal by
the Canadian Cable Television Association to amend the policy regarding
the use of local availabilities - Call for comments, Broadcasting
Public Notice CRTC 2004-47,
9 July 2004 (Public Notice 2004-47).
Specifically, the CCTA had requested that cable BDUs be permitted
to use the local availabilities contained in the programming of twelve
popular U.S. satellite programming services for the insertion of commercial
advertising, as well as other messages promoting BDU or BDU-affiliated
non-programming services, including telephony services. Accordingly,
the Commission announced that it would consider Vidéotron’s application
in light of the comments received as a result of the call for comments
on the CCTA’s proposal. |
3. |
The present decision on Vidéotron’s application
is one of three documents issued today that address the use of local
availabilities. In Determinations on a request by the Canadian
Cable Telecommunications Association for an amendment to the Commission’s
policy regarding the use by cable broadcasting distribution undertakings
of local availabilities contained in the signals of U.S. satellite
programming services, Broadcasting Public Notice CRTC 2005-88
(Public Notice 2005-88),
the Commission rejects the request by the CCTA that the Commission
amend its policy regarding the use by cable BDUs of the local availabilities.
As a further matter, in Tools to promote and improve the visibility
of services whose national distribution is required pursuant to section
9(1)(h) of the Broadcasting Act, Broadcasting Public Notice CRTC
2005-89, the Commission
sets out its determinations regarding appropriate mechanisms, including
the use of local availabilities, to promote and improve the visibility
of Canadian programming services, the carriage of which by BDUs is
mandatory pursuant to section 9(1)(h) of the Broadcasting Act
(the Act). |
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Current local availabilities policy
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4. |
The current policy governing the use of
local availabilities by Canadian BDUs was first articulated by the
Commission in Proposal to insert certain promotional material in
the local availabilities of U.S. satellite services, Decision
CRTC 95-12, 18 January 1995 (Decision
95-12). In that decision, the Commission
stated that it was not prepared to consider applications to use local
availabilities for the broadcast of commercial advertising. The Commission,
however, did authorize Rogers Cable TV Limited, by condition of licence,
to insert, at its option, certain promotional material as a substitute
for the messages contained in the local availabilities of non-Canadian
satellite services. Over the years, the Commission has approved other
applications by BDUs so that today, the majority of them, including
direct-to-home (DTH) BDUs, have conditions of licence authorizing
the use of local availabilities for the distribution of promotional
material. |
5. |
The policy requires that at least 75% of
the local availabilities be made available for use by licensed Canadian
programming services for the insertion of messages promoting their
respective services, or be used by BDUs for the distribution of unpaid
Canadian public service announcements and of messages promoting the
community channel. A maximum of 25% of the local availabilities may be
used by BDUs for the promotion of discretionary programming services and
packages, customer service information, channel realignments, cable FM
service and additional cable outlets. |
6. |
On various occasions, the Commission has
provided clarification regarding certain aspects of its policy. In
Application to insert certain promotional material in the local
availabilities of U.S. satellite services, Decision CRTC 98-271,
10 August 1998, the Commission concluded that BDUs should not be prohibited
from charging a fee to recover the costs they incur in inserting promotional
material of licensed programming services in the local availabilities
of U.S. satellite services. In Advertising Internet services on
community channels or during "local availabilities",
Public Notice CRTC 1999-93,
27 May 1999, the Commission clarified that "the list of services
that a BDU may promote, which are referred to in the condition of
licence, does not include a non-programming service that is available
on a commercial basis." In Building on Success - A Policy
Framework for Canadian Television, Public Notice CRTC 1999-97,
11 June 1999 (Public Notice 1999-97),
the Commission determined that BDUs "may not charge Canadian
programming services an amount in excess of their share of the direct
costs associated with the insertion of promotional material in the
local availabilities of foreign satellite services." Further,
in Subsidiaries of Shaw Communications Inc. and Bragg Communications
Incorporated – Non-compliance concerning the use of local availabilities,
Broadcasting Decision CRTC 2003-383,
11 August 2003, the Commission clarified that "the relevant condition
of licence pertaining to local availabilities does not permit mentions
‘in passing’ of services that may be offered by a broadcasting distribution
undertaking, such as Internet or telephony services, that are not
specifically mentioned in the condition of licence." |
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Vidéotron’s application and supporting rationale
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7. |
In its application, Vidéotron proposed to
use 50% of the local availabilities contained in the programming of the
three U.S. English-language satellite services for the insertion of
commercial advertising. The remaining 50% of the local availabilities
would continue to be available for the promotion of Canadian programming
services and the community channel, and for the broadcast of unpaid
public service announcements. Vidéotron indicated that it would place no
restrictions on access to those availabilities, and if they were
oversubscribed, a "first come, first served" principle would be applied
to ensure an equitable and balanced distribution. |
8. |
Vidéotron proposed to charge advertisers an
average fee of $30 for 30 seconds of air time. It estimated that half of
the local availabilities on the three U.S. satellite programming
services would make approximately 52,000 half-minute spots available to
it for this purpose each year. Based on a projected sell out rate of
75%, Vidéotron estimated that it would generate additional revenues of
approximately $1.17 million annually. |
9. |
According to Vidéotron, the U.S. satellite
programming services provide the local availabilities to Vidéotron’s
cable BDUs without fee or other consideration. The applicant stated,
however, that to prevent the possibility that advertising revenues might
be exported, it would accept a condition of licence that would prohibit
it from compensating the U.S. satellite services for advertising
revenues derived from its use of the local availabilities for the
insertion of commercial messages. |
10. |
Vidéotron stated that it would accept a
further condition of licence requiring that 5% of all revenues generated
by its sale of commercial advertising inserted in the local
availabilities be directed to the creation of Canadian programming. It
further indicated that all of the commercial advertising inserted in
these local availabilities for distribution in the primarily francophone
markets served by its BDUs would be in English. |
11. |
In support of its application, Vidéotron
stated that, while increased competition has prevented cable BDUs from
raising the fees they charge for basic service, they have nevertheless
been obliged to [TRANSLATION] "…make enormous investments to upgrade
their system capacity" and have had to "subsidize each and every digital
subscriber." Vidéotron argued further that the conditions and needs of
the French- and English-language broadcasting industries differ
sufficiently to enable the Commission to approve its application
independently of any decision reached concerning the CCTA’s proposal. |
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Interventions
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12. |
The Commission received 18 interventions
in response to Public Notice 2004-48
announcing Vidéotron’s application. All but one intervener (Cogeco
Cable Inc.) expressed opposition to the proposal. All of the 18 interventions
were also filed as comments in response to Public Notice 2004-47
announcing the CCTA’s proposal. With three exceptions, the interventions
that were filed with respect to the Vidéotron application did not
address that application specifically, but rather discussed matters
that the interveners considered as being the broader issues raised
by the two proposals. Hence, the arguments made in these interventions
essentially duplicated those made in the comments filed to the CCTA
proposal. These arguments were largely focused upon what most interveners
viewed as the negative implications of permitting cable or other BDUs
to use local availabilities for the insertion of commercial advertising
and messages promoting affiliated non-programming services. |
13. |
The three exceptions mentioned above were
the interventions filed by the Canadian Association of Broadcasters
(CAB), CTV Inc. (CTV), and Bell ExpressVu2,
each of whom specifically addressed the Vidéotron application in their
comments. Bell ExpressVu was concerned that approval of Vidéotron’s
application would have a negative impact on the revenues of specialty
and conventional television services. In its intervention, CTV suggested
that, with approval of the application, Vidéotron might earn in the
range of $25 million to $29 million per year. It added that that the
advertising revenue that BDUs would earn "will likely be generated from
a reallocation of revenues from existing Canadian conventional and
specialty services to the new U.S. inventory." |
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Commission’s analysis and determinations
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14. |
The Commission notes that Vidéotron did not
propose to use the local availabilities to distribute messages promoting
affiliated non-programming services. The Commission also notes that
Vidéotron differentiated its application from the CCTA proposal on
the basis of the relatively smaller revenue impact of the former and
the distinctions that exist between the English- and French-language
broadcasting industries. Nevertheless, as indicated in Public Notice
2004-47, the Commission
considered Vidéotron’s application in light of the interventions filed
to that application, and of the further comments received pursuant
to its call for comments on the CCTA’s proposal. |
15. |
Based on its consideration of all of the
evidence, including its analysis of the issues identified by the parties
commenting on the CCTA’s proposal, the Commission, in Public Notice
2005-88, announced
its determination to reject that proposal and to maintain its existing
policy respecting the use of local availabilities by BDUs. Among the
concerns noted by the Commission as reasons for this determination
was the lack of evidence that the cable BDU industry needs the revenues
that would be generated through the proposed use of the local availabilities.
More significant, however, was the Commission’s concern for any potential
negative impact that implementation of the proposal might have on:
the ability of Canadian programming services to meet their obligations
under the Act; the interest that potential entrants might have in
applying for a licence; the ability of newly-launched services to
establish themselves; the promotional opportunities that would remain
available to Canadian programming services; the attainment of the
Commission’s policy objectives; and the structure of the Canadian
broadcasting system. In this latter regard, the Commission concluded
that the CCTA had not demonstrated clear and substantial benefits
to the Canadian broadcasting system to justify the fundamental change
to the system that approval of its proposal might bring about. In
the Commission’s view, most of the concerns identified by the Commission
as reasons for denial of the CCTA’s proposal apply as strongly to
the Vidéotron application. |
16. |
Based on data gathered by BBM Canada
regarding the hours of viewing to the three U.S. satellite programming
services concerned in the markets identified by Vidéotron, and on the
Commission’s calculation of the average revenue per hour of viewing
earned by the most popular Canadian specialty services, the Commission
estimates that the revenues that might be generated by Vidéotron’s
application, and thus its economic impact, would not be greater than
Vidéotron’s own estimate. Nevertheless, as CTV argued in its
intervention, approval of Vidéotron’s application could still result in
the redirection of a certain number of advertising dollars away from
conventional and specialty television broadcasters, thus giving rise to
many of the Commission’s concerns noted above. |
17. |
As for Vidéotron’s argument that the
distinctions between the conditions and needs of the English- and
French-language broadcasting industries support approval of its
application, the Commission notes that Quebecor Media Inc. (Quebecor)
offered a somewhat similar argument in its comment on the CCTA’s
proposal. According to Quebecor, the CCTA’s proposal would have a
negligible negative impact on the French-language market and argued
that, even were the Commission to conclude that the policy change would
not be beneficial nationally, implementation of the proposal should be
considered in the French-language market where non-Canadian programming
is less popular among viewers than Canadian programming. |
18. |
In the Commission’s view, the fact that
Vidéotron operates in francophone markets does not diminish the
potential implications that its application has for existing and future
programming services and for the attainment of the Commission’s policy
objectives. Further, the Commission finds that the end result of
allowing Vidéotron, a cable distributor, to generate revenues from the
sale of commercial advertising would be a fundamental change to the
structure of the broadcasting system, but that no clear and substantial
benefits to justify such a fundamental change have been demonstrated by
the applicant. |
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Conclusion
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19. |
In light of all the foregoing, the
Commission denies the application by Vidéotron ltée, on behalf of
itself and two subsidiaries, for amendments to the conditions of licence
of cable BDUs serving various communities in Quebec to allow the
distribution of commercial advertising and of messages promoting
affiliated broadcasting services in 50% of the local availabilities of
three U.S. satellite programming services. |
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Secretary General |
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This decision is to be appended to each
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: http://www.crtc.gc.ca
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Footnote:
The areas listed exclude some that were inadvertently listed
in Broadcasting Public Notice CRTC 2004-48,
9 July 2004.
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. |
Date Modified: 2005-09-09 |