|
Broadcasting Public Notice CRTC 2005-61
|
|
Ottawa, 16 June 2005 |
|
Introduction to Broadcasting Decisions CRTC 2005-246 to 2005-248:
Licensing of new satellite and terrestrial subscription radio undertakings
|
|
This public notice serves as an introduction
to Broadcasting Decisions CRTC 2005-246 to 2005-248 of today’s date in which
the Commission approves, subject to certain conditions of licence,
applications by Canadian Satellite Radio Inc. (CSR), SIRIUS Canada Inc.
(Sirius Canada), and CHUM Limited, on behalf of a corporation or a
partnership to be established (CHUM/Astral), for licences to operate new
radio undertakings that will each provide a package of radio channels to
subscribers for a monthly fee. |
|
The programming of the CSR and Sirius Canada
undertakings will be delivered primarily by satellite, with terrestrial
transmitters as required to fill in gaps in coverage. Each of these
undertakings will provide a mix of Canadian-produced channels and
non-Canadian produced channels. |
|
The service of the CHUM/Astral undertaking
will be delivered entirely by terrestrial transmitters and all channels will
be Canadian-produced. |
|
In this notice, the Commission also provides
a licensing framework for satellite subscription radio undertakings. Approval
of the CSR and Sirius Canada applications is conditional upon the applicants
filing, within 150 days of the date of the decisions, written confirmation of
their acceptance of the terms and conditions set out in the licensing
framework and the decisions, including any necessary revisions to their
agreements with their US partners. Failure to provide such confirmation
within the required timeframe shall render these decisions null and void. |
|
Background
|
1. |
In Call for applications for a broadcasting
licence to carry on a multi-channel subscription radio programming
undertaking, Broadcasting Public Notice CRTC
2003-68, 23 December 2003, the Commission
announced that it had received applications for a licence to carry on a
satellite audio distribution undertaking. |
2. |
Consistent with the procedures generally
followed by the Commission in such cases, it called for applications from
other parties wishing to seek authority to carry on such an undertaking, or
some other form of subscription radio undertaking. The Commission
subsequently gazetted three applications for licences to carry on
subscription radio services, distributed by satellite and/or terrestrial
transmitters for direct reception by subscribers. These applications were
considered at a public hearing in the National Capital Region, which
commenced on 1 November 2004. |
3. |
In the call for applications, the Commission
stated that, since there are no subscription radio undertakings currently
licensed for operation in Canada, it was seeking comment on a number of
issues, in order to ensure that the policy objectives of the Broadcasting
Act (the Act) would be met. These issues included the appropriate levels
of Canadian content and French-language programming that should be provided
by the proposed services, support for Canadian talent development (CTD), and
the impact that the licensing of these new services would have on existing
licensed audio services. |
4. |
Since each of the proposals was based on a
different technology platform utilizing a discrete spectrum assignment, the
applications were not competitive on technical grounds. Therefore, the
Commission also sought comment on how many subscription radio services, if
any, the Canadian market could support. |
|
The applications
|
|
Canadian Satellite Radio Inc.
|
5. |
Canadian Satellite Radio Inc. (CSR) is owned and
controlled by John Bitove, a Canadian citizen and resident. CSR proposed to
offer the service of XM Satellite Radio Inc. (XM), currently operating in the
United States (US), across Canada, on a subscription basis. Under the terms
of its agreement, XM would make available four of its 101 audio channels to
enable CSR to provide two all-Canadian music channels, one in English and one
in French, an English-language comedy channel, and a French-language
news/talk channel. |
6. |
CSR submitted a study with its application that
it commissioned Telesat Canada to prepare regarding the provision of
satellite radio service in Canada (the Telesat Study). The Telesat Study
stated that the construction, launch and operation of a Canadian-owned
satellite for the provision of digital radio services appears to be
uneconomical at the present time, and could not be accomplished prior to 2010
due to international regulatory and spectrum allocation impediments. |
7. |
CSR therefore concluded that the most
cost-effective and technologically-appropriate means to provide satellite
radio service to Canadians would be to use existing satellites through an
alliance with XM. |
8. |
At the public hearing, CSR committed to launch
its service with a fifth Canadian-produced channel offering multicultural
multilingual programming, and to add three more Canadian-produced channels by
the end of its fifth year of operation if additional satellite bandwidth is
available from XM. The applicant also advised that, since it had submitted
its original application, XM had increased the number of non-Canadian
programming channels it distributes to 122. |
9. |
CSR made a commitment that 1,872 original hours
per year, or 36 hours per week, of "lateral programming" would be broadcast
on the non-Canadian music channels. The applicant defined lateral programming
as Canadian-produced programs featuring Canadian artists that would be
broadcast on channels originated by XM. |
10. |
CSR estimated that Canadian selections currently
represent approximately 2.5% of all selections that are broadcast on XM’s
music channels. CSR made a commitment that, if licensed, it would ensure that
7% of all new weekly additions to the playlists for XM’s channels would be
Canadian selections. |
11. |
In its original application, CSR undertook to
spend $4.1 million on CTD initiatives in its first licence term. In May 2004,
this commitment was increased to $19.75 million, and at the hearing CSR
commited to a minimum contribution of 4% of projected revenues and no less
than $1.2 million per year. CTD contributions would be allocated equally
between initiatives for the development of English- and French-language
talent. |
12. |
CSR also stated that it would increase its CTD
contributions by 1% of revenues for each of the three new Canadian-produced
channels that it undertook to add by the fifth year of operations in the
event that such a channel did not launch due to lack of satellite capacity. |
13. |
In its application, CSR noted that US satellite
coverage of virtually all of Canada’s population, combined with Canada’s
access to US consumer electronics markets, has created the environment
necessary for a satellite radio grey market to develop in this country. The
"grey" market refers to Canadian subscribers who are receiving unauthorized
signals by paying monthly fees, but are using US addresses to subscribe. The
applicant submitted that unless there is a licensed Canadian alternative, the
growth of the satellite radio grey market in Canada may be even greater than
the satellite television grey market, since the hardware is cheaper. It noted
that Canadians own ten times as many radio as satellite television units. CSR
stated that a satellite radio grey market means lost revenues and
opportunities for the Canadian music and broadcasting industries, and results
in the inability to protect Canadian culture since grey market services are
not subject to any Canadian content requirements. |
|
SIRIUS Canada Inc.
|
14. |
Upon licensing, SIRIUS Canada Inc. (Sirius
Canada) would be owned by three corporations, with the Canadian Broadcasting
Corporation (CBC) and Standard Radio Inc. (Standard) each holding a 40%
voting interest, and Sirius Satellite Radio Inc. (Sirius), an American
corporation, holding a 20% voting interest. Sirius Canada originally proposed
to distribute the CBC’s existing Radio One and La Première Chaîne radio
services, two new channels (one in English and one in French) produced by the
CBC, and 74 US channels provided by Sirius, the other company that provides a
satellite radio service in the US. |
15. |
Subsequent to the filing of its application,
Sirius Canada proposed to add a fifth Canadian-produced channel that would be
programmed by Standard, and, at the hearing, the applicant indicated that it
would add three more Canadian-produced channels to its service when it has
300,000 subscribers, or if additional satellite capacity becomes available.
It further advised that the number of programming channels that would
originate from its US partner had increased to 120. |
16. |
Sirius Canada committed to contribute 5% of the
revenues from its service to CTD initiatives, and stated that this commitment
is consistent with the general standard adopted for broadcasting distribution
undertakings set out in the Broadcasting Distribution Regulations (the
BDU Regulations). |
17. |
Based on Sirius Canada’s revenue projections for
the first licence term, this would represent $21.5 million over 7 years in
contributions to CTD. Sirius Canada also proposed to allocate its CTD
contributions equally between initiatives for the development of English- and
French-language talent. |
18. |
In its application, Sirius Canada also warned
that, in the absence of a Canadian alternative, the development of a
satellite radio grey market is not a theoretical possibility, but a reality.
This applicant submitted that evidence suggests that the grey market in US
satellite radio services has begun to develop in Canada, but that through
approval of its application, the Commission could ensure that it does not
become firmly established. |
|
CHUM Limited, on behalf of a corporation or partnership to be established
(CHUM/Astral)
|
19. |
CHUM/Astral, a corporation or a partnership to
be established in which CHUM would hold an 80.1% voting interest and the
remaining 19.9% will be held by Astral Media Radio inc., proposed a
subscription radio service that would initially offer 50 music channels
through the use of digital terrestrial transmitters. Ten of these channels
would be in the French language. The applicant stated that all of the
channels would be Canadian-produced and would generally fulfil the weekly
requirements for Canadian musical selections and French-language vocal
musical selections that apply to conventional radio stations. Under the terms
of the Radio Regulations, 1986 (the Radio Regulations), radio
licensees, subject to conditions of licence, must devote, during each
broadcast week, at least 35% of musical selections from content category 2
(Popular Music), at least 10% of musical selections from content category 3
(Special Interest Music) and at least 7% of musical selections played during
ethnic programming periods to Canadian selections. The Commission further
allows "oldies" stations, by condition of licence, to devote 30% of musical
selections from category 2 to Canadian selections, in light of the more
limited availability of Canadian music appropriate to the format. The
applicant further proposed to increase the number of channels offered from 50
to 100 in the fourth year of operation. |
20. |
CHUM/Astral also committed to contribute
approximately $8.3 million during the first licence term to CTD initiatives,
which represents approximately 2% of projected revenues for the proposed
service. The applicant stated that 75% of the contributions would be
allocated to initiatives supporting English-language talent, and 25% would be
allocated to initiatives supporting French-language talent. |
21. |
CHUM/Astral indicated that, during the first
phase of the roll-out of the service, transmission facilities for single
frequency networks would be built in five cities: Montréal (Quebec), Ottawa,
Toronto and Hamilton (Ontario) and Vancouver (British Columbia). As the
licence term progressed, additional transmission facilities would be
constructed to serve other areas, including St. John’s (Newfoundland and
Labrador), Charlottetown (Prince Edward Island), Halifax (Nova Scotia), Saint
John (New Brunswick), Gatineau, Québec, Sherbrooke and Trois-Rivières
(Quebec), Kingston, Kitchener and Guelph, London, Windsor, Oshawa, Barrie and
St. Catharines/Niagara (Ontario), Winnipeg (Manitoba), Saskatoon and Regina
(Saskatchewan), Calgary and Edmonton, later expanded to include Red Deer and
other cities between Calgary and Edmonton (Alberta), and Victoria, and the
Fraser Valley (British Columbia). |
22. |
The applicant proposed that by the end of the
first licence term, the programming provided by its undertaking would be
available to 60% of the population, if only one of the satellite-based
proposals was authorized on what it referred to as equitable terms and
conditions, or to 75% of the population if the Commission approved the
CHUM/Astral proposal but did not approve either of the applications to
provide satellite radio service. The additional 15% would be accomplished by
adding transmitters in some 50 smaller communities across Canada. In
addition, the applicant stated that it would try to accelerate the provision
of service in certain Quebec communities including Québec, Sherbrooke,
Trois-Rivières and Gatineau. CHUM/Astral indicated that it would not launch
its proposed service if the Commission were to also approve both applications
for satellite subscription radio undertakings. |
|
Interventions
|
23. |
The Commission received almost 800 interventions
from various organizations and individuals from across the country, with the
vast majority of submissions expressing support for the licensing of one or
all of the proposed undertakings. |
24. |
In addition to those individuals who were
interested in subscribing to the new services, interveners supporting the
applications included a number of Canadian musicians and comedians who
welcomed the opportunity to gain exposure throughout Canada and, in the case
of the satellite-based proposals, North America. These interveners also noted
the monetary support for Canadian artists that the applicants had proposed in
the form of CTD initiatives. |
25. |
Gregg Terrence of Indie Pool, an organization
representing independent Canadian musicians, stated that many of Canada’s
unsigned independent artists are already getting airplay in the US on the XM
and Sirius satellite services and, for this reason, "overwhelmingly
supported" the licensing of CSR and Sirius Canada. |
26. |
Mr. Terrence submitted that there are scores of
highly talented and emerging Canadian independent recording artists who are
underserved by conventional radio stations, and that XM already plays more
independent Canadian music than Canadian radio station do. Mr. Terrence
stated: |
|
Canadian Satellite Radio also supports niche formats, like adult
alternative, heavy metal, traditional jazz, reggae, bluegrass, world and
children’s radio. This support will help prop up non-commercial Canadian
content that is currently underserved. They will help fill the airplay gap
with a music philosophy that puts the focus on the artists, especially
independent acts, that aren’t being played on Canadian radio.
|
27. |
A number of industry associations also
intervened, including the Coalition of Canadian Audio-visual Unions (CCAU),
the Association québécoise de l’industrie du disque, du spectacle et de la
vidéo (ADISQ), the Canadian Recording Industry Association (CRIA), ACTRA
Performers Society, the Canadian Media Guild (CMG), the Canadian Music
Publishers Association (CMPA), the Canadian Independent Record Production
Association (CIRPA), Friends of Canadian Broadcasting (Friends), and the
Society of Composers, Authors and Music Publishers of Canada (SOCAN). |
28. |
These associations opposed the satellite-based
applications by CSR and Sirius Canada on the basis that these applicants
proposed insufficient levels of Canadian content. Many cited section 3(1)(f)
of the Act, which states that each broadcasting undertaking shall "…make
maximum use, and in no case less than predominant use, of Canadian creative
and other resources in the creation and presentation of programming, unless
the nature of the service provided by the undertaking, such as specialized
content or format or the use of languages other than French and English,
renders that use impracticable, in which case the undertaking shall make the
greatest practicable use of those resources." |
29. |
SOCAN, CIRPA and the CMPA submitted that new
subscription radio services should be required to broadcast the same minimum
levels of Canadian musical selections that are required of conventional radio
stations that feature similar musical formats i.e., 35% in the case of
popular music, 10% for special interest music, and 7% for third-language
services. |
30. |
CRIA asserted that the Commission must consider
carefully whether the proposed services meet the statutory obligations for
promoting Canadian culture set out in the Act, and also ensure that the
services licensed in these proceedings do not set a precedent for approving
insufficient Canadian content commitments on the basis of technological
determinism. |
31. |
In its intervention, ADISQ submitted that the
issues raised in this process should have been addressed at a separate policy
hearing before the applications for subscription radio services were
considered. ADISQ stated that appropriate Canadian content levels and the
promotion of Canadian artists are essential to ensure a balanced Canadian
broadcasting system, and that these applications risk upsetting the fragile
balance that currently exists. At the hearing, ADISQ stated that the level of
French-language vocal musical selections proposed by both satellite
applicants was unacceptable, and that contributions to CTD cannot replace the
broadcast of musical works. It reiterated that, under the Act,
undertakings have obligations in terms of both contribution and
presentation, not contribution or presentation. |
32. |
Friends expressed similar concerns with the
satellite-based proposals, stating that both applications pose a threat to
the integrity of Canadian broadcasting policy. Friends submitted that
licensing services that do not meet established carriage and expenditure
requirements is unjustified and could create a precedent-setting expectation
that existing licensees could be authorized to reduce their exhibition
requirements. Conversely, Friends was of the view that the CHUM/Astral
application conformed with Canadian broadcasting policy and "was worthy of
sympathetic consideration by the Commission." |
33. |
The National Campus and Community Radio
Association (NCRA) submitted that the satellite-based applications represent
a significant departure from several decades of Canadian broadcasting policy.
The NCRA added that its concern extends beyond the proposed satellite
services’ music channels, since the applicants have also proposed numerous
channels of news, talk and sports without any significant Canadian choices in
these areas. In this regard, the intervener noted that the proposed services
would have more Spanish-language channels than French-language channels, and
that the applicants would be presenting ESPN rather than TSN, Fox News rather
than CBC Newsworld, and Bloomberg rather than ROBTv. The NCRA further
suggested that a weather channel distributed by these services would probably
not present any Canadian weather information. |
34. |
The Commission also received interventions from
a number of licensed radio broadcasters, including Corus Entertainment Inc.
(Corus), Rogers Broadcasting Limited, the OK Radio Group Ltd., Larche
Communications Inc., the Jim Pattison Broadcast Group, CKUA Radio Network
(CKUA), and Global Communications Limited (Global). These interveners did not
oppose the licensing of subscription radio undertakings, but asserted that
any licensee’s programming should be truly national in scope, and that any
licensee should be prohibited from carrying any advertising so as to
complement, not compete with, the local service provided by existing radio
stations. |
35. |
CKUA submitted that approval of the satellite
applications would increase the potential market for the two US satellite
radio services by a factor of approximately 10% by annexing the Canadian
domestic market as an additional base from which to seek subscribers. CKUA
suggested that the allocation of 10% of the available bandwidth to the
carriage of Canadian channels could be seen as a reasonable quid pro quo for
the US services being permitted to access revenues from the Canadian domestic
market. |
36. |
Corus proposed a formula whereby one Canadian
channel would be added for every new foreign channel added beyond the first
service offer of 100 channels, until an overall ratio of one Canadian channel
to 10 foreign channels is reached. Corus also contended that satellite radio
could have a significant impact on conventional radio and pay audio services
since the new satellite services would result in a loss of listeners to these
services and would impact advertising revenues for conventional radio
stations even if the satellite radio services do not sell any advertising.
Corus argued that the current regulatory requirements for conventional radio
stations and pay audio services must be examined to ensure that these
services can compete and survive in the face of competition from satellite
radio. |
37. |
In addition to submitting its own application
for a subscription radio licence, CHUM/Astral submitted a joint intervention
opposing the satellite-based proposals, arguing that these applications
contradict important principles of the Act and the Commission’s regulations.
CHUM/Astral argued that, since the satellites that would deliver the
satellite services are owned and operated by their American partners, CSR and
Sirius Canada would not be fully in control of their own services, and
therefore could not assume the responsibilities of licensees. |
38. |
This, they contended, is contrary to section
3(1)(a) of the Act, which provides that the Canadian broadcasting system
"shall be effectively owned and controlled by Canadians." CHUM/Astral claimed
that real control of the satellite-based services would appear to rest with
the American operators because most facets of the operations of these
services would take place outside the Commission’s territorial jurisdiction. |
39. |
Global submitted that the satellite-based
applicants did not adequately address the policy shortcomings inherent in
their applications, and that, if the low levels of Canadian content proposed
are to be accepted, an accompanying high level of support for CTD and a high
degree of newness and diversity on the Canadian channels should be expected.
|
40. |
With respect to the issue of the satellite radio
grey market, Friends and CHUM/Astral were of the view that the
satellite-based applicants were overstating the extent and ultimate threat of
Canadians subscribing to the US satellite radio services. CHUM/Astral
contended that, in the absence of licensed terrestrial transmitters, many
urban dwellers would find reception of satellite signals difficult, reducing
the appeal and demand for grey market satellite radio services. Both
CHUM/Astral and Friends submitted that authorizing the importation of more
than 200 US channels into Canada would do more damage to the Canadian
broadcasting system and music industries than the negative impact of the
satellite radio grey market. |
41. |
Global also questioned the claims by the
satellite-based applicants that licensing their proposals was essential to
prevent the satellite radio grey market from undermining the Canadian
broadcasting system. Global submitted that, since the satellite-based
applicants proposed to duplicate 96% of the programming distributed by the US
satellite services, and that many of the proposed Canadian channels would
rebroadcast existing Canadian services, the positive impact of these new
undertakings would appear to be minimal. |
|
Applicants’ replies
|
42. |
In response to the interventions opposing their
applications, both CSR and Sirius Canada submitted that, under the terms of
section 3(1)(f) of the Act, the maximum or predominant use of Canadian
resources is not required in circumstances where the nature of the service is
such that it is not practicable to require the undertaking to make maximum or
predominant use of Canadian resources. According to these applicants, such
circumstances may include situations where the content or format of the
service is specialized or in a language other than English or French, but it
is not limited to those situations. |
43. |
CSR and Sirius Canada argued that the proposed
satellite radio services consist of a specialized format and that format
comes within the exception set out in section 3(1)(f). The applicants argued
that the service model set out in their applications is predicated on using
satellite technology that cannot be replicated in Canada due to the limited
size of the market, and is the only way to establish a Canadian-controlled
service that will reach all Canadians. |
44. |
Both satellite-based applicants submitted that
the Commission has made exceptions to the requirement for maximum or
predominant use of Canadian resources in a number of situations. They noted
that such flexibility has been applied in the case of conventional radio
stations, which are only required to ensure that at least 35% of their
popular musical selections, and at least 10% of special interest musical
selections are Canadian. According to these applicants, the Commission has
also established very low minimum levels for the broadcast of Canadian music
on ethnic radio services, which must ensure that 7% of musical selections
aired each broadcast week during ethnic programming periods are Canadian. |
45. |
These applicants also submitted that the
Commission granted flexibility when it licensed pay-per-view services, which
must maintain a ratio of no less than 1:12 with respect to Canadian and
non-Canadian first-run feature films. The satellite applicants cited these
situations as precedents where the Commission has decided in the public
interest not to require maximum or predominant use of Canadian resources as
per section 3(1)(f) of the Act. |
46. |
Sirius Canada stated that it was sympathetic to
the desire of interveners for more Canadian channels, but that satellite
technology involves a North American platform and there is a limit to the
amount of bandwidth that can be obtained. |
47. |
In their applications, CSR and Sirius Canada
also pointed to numerous examples of Canadian music being played on the US
channels, and contended that many emerging Canadian artists receive far more
exposure on these channels than they do on Canadian conventional radio
stations. CSR indicated that Canadian selections make up about 2.5% of the
music played on XM, and that this represents massive exposure to listeners
for Canadian artists, given the size of the US market. Although neither CSR
nor Sirius Canada could commit its US partner to broadcast a minimum level of
Canadian content on the US channels, both applicants proposed to employ a
"Canadian ambassador" who would actively seek out and champion Canadian
musical selections, and encourage the program directors of the US satellite
services to include Canadian selections on their playlists. |
48. |
With regard to the impact that these new
services could have on existing conventional radio stations and pay audio
services, CSR and Sirius Canada both submitted that, in the US, where
satellite radio has been available for a number of years, the US radio
industry is financially healthy, and the introduction of satellite radio has
had no discernible effect on its success. They concluded that this suggests
that their services would have no significant impact on the financial
strength of the conventional radio sector in Canada. |
49. |
CHUM/Astral stated that for subscription radio
to succeed in Canada it must be complementary to, rather than competitive
with, conventional radio stations. For this reason, this applicant stated, it
has proposed a service that would not rely on advertising and would not
provide subscribers with local weather or traffic information. |
50. |
With respect to local programming and local
advertising, all three applicants indicated that they would accept a
condition of licence that precludes the broadcast of either. However, Sirius
Canada requested an exception for the local programming contained in the
programming of Radio One and La Première Chaîne, and to allow for the
possibility of rebroadcasting some of the programming of Standard’s talk
radio stations. CSR indicated that it was willing to accept a condition of
licence prohibiting the airing of local programming, including local
advertising, but wanted the ability to broadcast six minutes per hour of
national advertising. |
51. |
On the issue of the impact these proposals would
have on pay audio services, Sirius Canada stated that its service would be
available as a stand-alone subscription service requiring specialized
receivers that may be installed in cars, homes, cottages and other locations.
In contrast, it noted that pay audio services are only available from cable
companies and direct-to-home (DTH) satellite operators, whose focus is the
distribution of television programming, and who typically include pay audio
services as part of their basic digital television tier. The applicant argued
that this means that the price points for satellite radio and pay audio would
be radically different: $12.95 per month for satellite radio versus no
separate charge for pay audio when bundled with basic digital television
service. Sirius Canada maintained that this would make the two services
complementary, not competitive, and that, given the well-established position
of pay audio services in the Canadian market, the introduction of
subscription radio would not have an adverse impact on pay audio licensees. |
52. |
With respect to the issue of effective control
of the undertaking and the programming it would distribute, CSR argued that
the following three elements would ensure that the physical operation of the
undertaking would be under Canadian control: |
|
- exercise by CSR of control over the conditional access system that
enables Canadian subscribers to receive the signals transmitted by the XM
satellites and its terrestrial repeaters;
|
|
- control by CSR over the retransmission of the signal of the XM
satellites using terrestrial repeaters located in Canada, since such
repeaters are owned by CSR; and
|
|
- determination of which programming elements cannot be provided to
Canadian subscribers and resulting actions taken by CSR to ensure that
addressable receivers owned by CSR subscribers only receive programming
services that are authorized for distribution in Canada.
|
53. |
Sirius Canada stated that it would be
appropriate for the Commission to adopt measures to ensure that licensees are
accountable for the programming on the non-Canadian channels as well as on
the Canadian channels. The applicant suggested that provisions similar to
those in section 8 of the BDU Regulations regarding carriage of content be
set out as conditions of licence. Under these conditions, according to Sirius
Canada, subscription radio licensees would be prohibited from broadcasting: |
|
- programming that contravenes any Canadian law;
|
|
- programming that is abusive or that tends to or is likely to subject
any group or class of individuals to hatred or contempt;
|
|
- programming that uses obscene or profane language; and
|
|
- false or misleading news.
|
54. |
To make this accountability effective, Sirius
Canada stated that its subscribers would only receive signals that have been
selected for distribution by the Board of Directors of Sirius Canada, which
will have the sole responsibility for authorizing and de-authorizing the
Canadian receivers. |
55. |
With respect to the question of how many
subscription radio services the Canadian market could support, CSR was of the
view that the Canadian market is capable of supporting all three services
being proposed in this proceeding. According to CSR, the presence of three
competitors in the market would stimulate consumer awareness and demand
enough to support all three service providers. |
56. |
Sirius Canada stated that its business plan is
predicated on two national satellite services being licensed simultaneously
in Canada. In its view, the current lack of distribution infrastructure for a
terrestrial subscription radio service provider means that it would be some
time before it could become a significant competitive force in the
marketplace. For this reason, Sirius Canada considered that the impact of the
CHUM/Astral proposal on its business plan would be negligible. |
57. |
CHUM/Astral submitted that the Canadian market
is probably capable of supporting its proposed service and one of the
satellite-based undertakings, under conditions where both have what it called
equitable regulatory obligations. |
58. |
In response to the interveners who questioned
the applicants’ claims regarding the extent and potential threat of the
satellite radio grey market, CSR stated that there was abundant evidence that
a grey market is growing extremely quickly in Canada. The applicant
attributed this to extensive advertising by XM and Sirius in US media that
are received in Canada. CSR also noted that more than two-thirds of
respondents (68%) to its marketing survey indicated that government
opposition to satellite radio in Canada would not stop them from subscribing.
The applicant also cited a national survey conducted by General Motors in
Canada in January 2004 that indicates 2% of respondents already subscribe to
satellite radio. |
59. |
CSR submitted that thousands of "XM ready"
radios have been sold in Canada, thousands more are on store shelves, and
major consumer electronics companies have included components in most of
their automobile radio products which allow the radios to be upgraded for
satellite reception. |
|
The Commission’s analysis and determinations |
60. |
In addition to the objective set out in section
3(1)(f) of the Act, regarding the use of Canadian creative and other
resources by each broadcasting undertaking, the broadcasting policy for
Canada set out in the Act also declares that the programming provided by the
system should be varied and comprehensive (section 3(1)(i)(i)); that the
system should be adaptable to scientific and technological change (section
3(1)(d)(iv)), and that a range of broadcasting services in English and in
French shall be extended to all Canadians as resources become available
(section 3(1)(k)). The Act also sets out a regulatory policy that calls for
the Canadian broadcasting system to be regulated and supervised in a flexible
manner that facilitates the provision of broadcasting to Canadians (section
5(2)(d)), and that is readily adaptable to scientific and technological
change (section 5(2)(c)). |
61. |
While these objectives are pertinent to the
consideration of all three of the subscription radio applications in this
proceeding, the proposed satellite-based services and the terrestrially-based
service raised a number of different regulatory issues. The two types of
services are accordingly dealt with separately below. |
|
Satellite subscription radio undertakings |
62. |
The Commission considers that the introduction
of satellite subscription radio into Canada would contribute substantially to
the fulfilment of the above-noted policy objectives in a number of ways,
including the following: |
|
- it would increase the diversity and comprehensiveness of programming
choices available to Canadians;
|
|
- it would cover the entire country, bringing new services to rural and
remote areas where radio options are often quite limited;
|
|
- it would increase exposure and monetary support for Canadian musicians,
particularly new and emerging artists; and
|
|
- it would offer Canadian radio listeners multi-channel services in their
cars and other vehicles, using a proven technology that is being deployed
south of the border.
|
63. |
The Commission notes, however, that for the
foreseeable future, satellite subscription radio services will not be
available in Canada via satellite facilities that are owned and operated by
Canadians. As indicated in Notice No. DGTP-007-04 - Proposed Clarification
to the Government Satellite-use Policy for the Delivery of Broadcasting
Services, 21 October 2004 (Proposed Clarification to the Satellite Use
Policy), the Departments of Industry and Canadian Heritage stated: |
|
(a) Canada has no satellite facility capable of distributing digital
satellite radio broadcasting and is unlikely to have such a facility in the
future.
|
|
(b) Canada has not secured with the International Telecommunications
Union the required spectrum resources at the S-band to develop its own
specialized satellites.
|
64. |
The process to secure the required spectrum and
to put Canadian-owned satellites that would deliver Canadian satellite
subscription radio services in the future would take many years. Furthermore,
even if such satellites were available, the Commission notes that the Telesat
study indicated that it is questionable whether the Canadian market is large
enough to make such satellite facilities economically viable. In the US, by
contrast, S-band spectrum was secured from the International
Telecommunications Union, and the Federal Communications Commission has
licensed satellite radio services that utilize all designated S-band
spectrum, and that cover Canada as well as the United States. |
65. |
Although there was little quantitative evidence
submitted as to the number of Canadians who are subscribing to the US
satellite radio services via the grey market, the availability of satellite
radio receivers from Canadian retailers, as well as the studies submitted by
the applicants, and the many interventions submitted in support of the
applications, indicate that Canadians are interested in receiving satellite
subscription radio services and would subscribe to them via the grey market,
if no Canadian alternative is made available. |
66. |
As regards the impact of satellite services on
existing licensed radio and pay audio services, the Commission notes that no
quantitative evidence was presented to indicate that this new form of radio
service would have a significant negative impact on either. In this regard,
the Commission notes that the licensed broadcasters who intervened did not
oppose the licensing of the proposed undertakings, but argued only that the
new services should contribute adequately to the Canadian broadcasting system
and should be prohibited from distributing local programming and commercial
messages. As regards pay audio, the Commission notes that the licensees of
both existing Canadian pay audio undertakings appeared at the hearing in
supporting roles. CBC, the licensee of the Galaxie pay audio service,
appeared as an applicant in connection with the Sirius Canada proposal.
Corus, the licensee of the Max Trax pay audio service, appeared with CSR in
support of its application. |
67. |
In light of the above, the Commission finds, on
balance, that the licensing of satellite subscription radio services would
contribute to the achievement of the policy objectives set out in the Act,
and that building on the services now provided using US satellite facilities
represents the optimal solution for providing Canadian satellite subscription
radio services to Canadians. In this regard, the Commission notes that, in
the Proposed Clarification to the Satellite Use Policy, the Departments of
Industry and Canadian Heritage stated that "spectrum could be made available
domestically to accommodate the provision of digital satellite radio
broadcasting in Canada using US satellite facilities." |
68. |
With respect to the use of Canadian creative and
other resources in the creation and presentation of programming, as noted
above, section 3(1)(f) of the Act provides as follows: |
|
each broadcasting undertaking shall make maximum use, and in no case
less than predominant use, of Canadian creative and other resources in the
creation and presentation of programming, unless the nature of the service
provided by the undertaking, such as specialized content or format or the
use of languages other than French or English, renders that use
impracticable, in which case the undertaking shall make the greatest
practicable use of those resources;
|
69. |
The Commission recognizes that in building
Canadian services on the services now provided using US satellite facilities
that already carry extensive multi-channel services for the US market, the
bandwidth available for the delivery of Canadian channels will be limited by
the relative sizes of the Canadian and US markets and by the commercial
considerations of the US satellite operators. The Commission considers that,
as a result of these factors, the nature of these Canadian satellite
subscription radio services renders the predominant use of Canadian creative
and other resources impracticable. The Commission has therefore turned its
attention to what the greatest use of Canadian creative resources might be,
under the circumstances. |
70. |
In this regard, after considering the
applications and the comments of interveners, the Commission is not convinced
that the applicants have proposed the greatest practicable use of Canadian
creative and other resources. The Commission is particularly concerned by how
few Canadian-produced channels were proposed for distribution by the proposed
satellite subscription radio undertakings, both in terms of absolute numbers
and as a proportion of the total number of channels to be offered, which, as
noted above, have increased since the original proposals were submitted.
Accordingly, the Commission considers it appropriate to only approve these
applications subject to a number of conditions of licence requiring the
applicants, inter alia, to provide higher numbers of Canadian-produced
channels than were originally proposed. |
71. |
The Commission finds that approval of the CSR
and Sirius Canada applications, subject to those conditions of licence, and
to the terms and conditions set out below will serve the public interest and
contribute to the fulfilment of the objectives for the Canadian broadcasting
system set out in the Act. It further finds that the mechanisms proposed by
CSR and Sirius Canada will ensure that the proposed undertakings are
effectively controlled by the licensees. |
72. |
The Commission has determined that approval of
these applications will be conditional on the applicants filing, within 150
days of the date of the decisions, written confirmation of their acceptance
of the terms and conditions set out in the licensing framework and in the
licensing decisions, including any necessary revisions to the agreements with
their US partners. Failure to provide such confirmation within the required
timeframe shall render these decisions null and void. |
|
Licensing framework for satellite subscription radio undertakings
|
|
The appropriate ratio of Canadian to
non-Canadian channels
|
73. |
As noted above, dependence on US satellites for
signal delivery limits the amount of bandwidth available to Canadian
licensees which, in turn, limits the amount of Canadian programming that can
be presented to Canadian audiences. However, the proposal by the
satellite-based applicants to offer 5 Canadian-produced channels and 120 or
more US channels means that less than 5% of all channels would be Canadian.
The Commission considers that this represents an unacceptably low level of
Canadian programming to be distributed by licensed Canadian undertakings. |
74. |
The Commission considers that the particular
circumstances of satellite subscription radio justify a requirement that a
minimum of 10% of all channels received by Canadian subscribers be
Canadian-produced channels. Therefore, the Commission has determined it
appropriate to require, by condition of licence, that each licensee
distribute to each of their Canadian subscribers, a maximum of nine
non-Canadian-produced channels for each original Canadian-produced channel
that it distributes. In no case may Canadian subscribers to a satellite
subscription radio service be offered a package of channels in which, at any
point in time, original Canadian-produced channels constitute less than 10%
of the total channels offered to those Canadian subscribers. |
|
Original Canadian-produced channels
|
75. |
Given the lack of satellite bandwidth available
for Canadian channels, the Commission considers that the retransmission of
existing radio stations would be a questionable use of this limited resource.
Furthermore, allowing linkage of non-Canadian channels with existing licensed
Canadian radio stations would allow for the distribution of US channels
without the creation of new Canadian programming. Therefore, a
Canadian-produced channel will be considered to be "original" when not less
than 50% of the program content is produced for and first broadcast on that
channel. |
|
Full-time Canadian-produced channels
|
76. |
Linkage with US channels must be with full-time
original Canadian-produced channels, available 24 hours per day, to ensure
the proper proportion of Canadian and US channels at all times. |
|
The appropriate number of
Canadian-produced channels
|
77. |
As noted above, both CSR and Sirius Canada
proposed to distribute five Canadian-produced channels when they launch their
respective undertakings, with the possibility of increasing this to eight
Canadian-produced channels at some point in the future. Sirius Canada
indicated that the agreement with its US partner contains the provision to
negotiate the addition of Canadian channels when the Canadian service has
300,000 subscribers. CSR proposed to distribute three more Canadian-produced
channels in the first licence term, and to increase its CTD contributions by
1% of total revenues in the fifth year of operation for each of these
additional channels that it was unable to launch. |
78. |
Regarding the launch of the new undertakings,
the Commission is of the view that, in addition to the 10% ratio set out
above, a minimum of eight original Canadian-produced channels must be
distributed by each licensee, as a condition of licence. This will provide a
critical mass of Canadian-produced channels to ensure that there is a
meaningful amount of Canadian content available on the service. |
|
Music channels
|
79. |
The Commission notes that both applicants
proposed to distribute three music and two spoken-word Canadian channels, and
cited the important role the Canadian-produced music channels would play in
providing exposure to Canadian musicians. Accordingly, the Commission expects
that a minimum of 60% of the Canadian-produced channels distributed by these
licensees will be music channels. |
|
Canadian content
|
80. |
The Commission notes that the average minimum
level of Canadian content of the Canadian-produced channels proposed by the
applicants was approximately 90% in the case of CSR, and approximately 80% in
the case of Sirius Canada. In view of the limited number of Canadian-produced
channels that the applicants proposed to distribute on their services as a
proportion of the total channel offering, the Commission considers it
essential that the Canadian-produced channels contain high levels of Canadian
content. |
81. |
The Commission has therefore imposed a condition
of licence requiring each licensee to ensure that a minimum of 85% of the
musical selections broadcast each week on the Canadian-produced channels,
considered together, are Canadian. This condition will therefore be applied
to the Canadian-produced channels as a whole. The Commission notes that
Canadian content obligations for conventional radio stations are a minimum of
35% for popular music and 10% for special interest music. Assuming a 50-50
mix of popular and special interest music, the 85% requirement will result in
five Canadian-produced music channels providing the number of Canadian
musical selections broadcast by approximately 27 conventional radio stations.
|
82. |
The Commission has also decided to require, by
condition of licence, that an average of not less than 85% of the spoken-word
programming on the Canadian channels be Canadian. Spoken word programming is
Canadian provided that it is produced in Canada and a Canadian is the primary
performer or speaker. |
|
French-language programming
|
83. |
Section 3(1)(d)(iii) of the Act indicates, among
other things, that the Canadian broadcasting system should reflect the
linguistic duality of Canada. The Commission has therefore determined it
appropriate to require, by condition of licence, that a minimum of three of
the initial eight Canadian-produced channels, and subsequently not less than
25% of the Canadian-produced channels distributed by these services, be in
the French-language. Furthermore, each French-language channel must devote to
musical selections in the French language, on a weekly basis, a minimum of
65% of the vocal music selections from category 2, as defined in the Radio
Regulations. |
|
Canadian talent development contributions
|
84. |
In addition to the required levels of Canadian
programming to be distributed by the satellite subscription radio
undertakings, the Commission considers it appropriate to include a condition
of licence requiring each satellite radio licensee to contribute, each year,
a minimum of 5% of its gross annual revenues to eligible third parties
associated with CTD and other artistic talent or other initiatives approved
by the Commission. Licensees must report the names of the third parties
associated with CTD, together with the amounts paid to each, in their annual
returns. Given that CSR proposed to contribute 4% of its gross annual
revenues to CTD, the Commission has also decided to require it to file for
approval by the Commission, before commencing operations, its proposal for
the expenditure of CTD contributions that it will undertake in order to
fulfil the 5% requirement. |
85. |
In accordance with their commitments, each
licensee is required, by condition of licence, to allocate 50% of its total
annual contribution to CTD initiatives for the development of Canadian
English-language talent, and 50% to initiatives for the development of
Canadian French-language talent. Each licensee will also be required, by
condition of licence, to file annual reports describing the CTD initiatives
it has undertaken, the amount spent on each initiative, and the total amounts
expended on English- and French-language talent. |
|
Support for new Canadian music and
emerging talent
|
86. |
The Commission notes that one of the key
benefits of the new undertakings cited by the applicants and several
interveners was the exposure that would be provided to new and emerging
artists who receive little or no airplay on conventional radio stations. In
its application, CSR made a commitment that 52% of all musical selections
distributed on the Canadian-produced channels will have been released in the
previous six months. |
87. |
The Commission also considers that it is
important that satellite subscription radio undertakings broadcast selections
by new and emerging artists. Therefore it is imposing on each licensee a
condition of licence requiring it to ensure that, between 6 a.m. and midnight
each week on each Canadian music channel, a minimum of 25% of the musical
selections broadcast will be new Canadian musical selections, and a minimum
of 25% will be Canadian selections by artists who have not had a musical
selection that has reached a position on one or more of the charts identified
in the list set out in Circular 445,
14 August 2001, as may be amended from time to time. For the purposes of
this condition, a “new Canadian musical selection” is a Canadian
selection that has been released in the 6 months prior to the date that
the musical selection is broadcast. The Eastern time zone will be used
when determining compliance with this condition of licence. The licensee
will also be responsible for specifying on the music lists it provides
to the Commission, the release date of all musical selections it
broadcasts. |
|
Restrictions on local programming and local advertising
|
88. |
The Commission has imposed conditions of licence
requiring that none of the Canadian-produced channels distributed by the
licensees contain any original local programming or local commercial
messages. For purposes of this condition, "original local programming" means
programming that is produced for broadcast on the satellite subscription
radio undertaking that targets a particular geographic community or locality
and includes, but is not limited to, commercial messages, news, weather and
traffic information. |
|
Restrictions on national advertising
|
89. |
In its application, CSR proposed to broadcast an
average of six minutes per hour of national advertising. The Commission is
satisfied that the revenue garnered from this amount of advertising will not
have a significant impact on existing radio stations. It has therefore
imposed conditions of licence that permit satellite radio licensees to
distribute a maximum of six minutes per hour of national commercial messages.
For purposes of these conditions of licence, a "national commercial message"
is a commercial message, as defined in section 1 of the Radio Regulations,
that is purchased at a national rate and receives national distribution on
the service. |
|
Adherence to the Regulations and Industry Codes
|
90. |
The Commission notes that both CSR and Sirius
Canada committed to be accountable for the content of the programming
contained on all Canadian and non-Canadian channels distributed by their
undertakings. In this regard, the applicants have undertaken not to broadcast
anything in contravention of the law, any abusive comment, or any obscene or
profane language. CSR and Sirius Canada have also committed to adhere to the
Canadian Association of Broadcasters’ (CAB) Sex-Role Portrayal Code for
Television and Radio Programming, and CSR has further committed to abide
by the CAB’s Broadcast Code for Advertising to Children. Accordingly,
the Commission has imposed conditions of licence requiring adherence to the
relevant sections of the Radio Regulations, and to the aforementioned codes.
The Commission notes that both applicants committed to take whatever action
is necessary to ensure adherence to the regulations and codes including, if
necessary, the removal of a channel from their program offerings. |
91. |
The Commission is also requiring, by condition
of licence, that the licensees maintain sequential lists of all musical
selections played on each channel it distributes. Licensees will be required
to maintain these lists for a period of four weeks from the date of
broadcast, and forward these lists to the Commission upon request, along with
a notarized attestation of their accuracy. |
|
Restriction on video
|
92. |
The approval granted in the accompanying
decisions is to carry on a satellite radio undertaking for the distribution
of audio channels. Any activity by satellite radio undertakings involving the
distribution of video will require separate prior approval by the Commission. |
|
Grey market subscribers
|
93. |
As noted above, both applicants expressed much
concern regarding the potential for growth of the satellite radio grey market
in Canada. In this regard, the Commission also notes that, in its agreement,
Sirius Canada and its US partner undertake to cooperate to prevent
individuals from subscribing to each other’s services. Furthermore, the
Commission notes the clause in CSR’s agreement with XM that prevents XM from
providing Canadian subscribers with access to programming that cannot be
provided in Canada due to regulatory restrictions. In its application, CSR
committed to report to the Commission each year on its success in
repatriating grey market subscribers. |
|
Proposed amendment to the satellite use policy
|
94. |
In response to the Commission’s request for
clarification of the policy regarding the use of foreign satellite facilities
for the transmission of Canadian satellite radio services, the Departments of
Industry and Canadian Heritage initiated a public process to review this
policy. The current satellite use policy as it applies to broadcasting
undertakings states that the undertakings |
|
… should make use of Canadian satellite facilities to carry (receive
and/or distribute to Canadians) all Canadian programming services but may
use either Canadian or non-Canadian satellite facilities to carry
foreign-originated services that are intended primarily for foreign
audiences, and are authorized, in whole or in part, for distribution by the
CRTC; and under no circumstances should an undertaking make use of
exclusively foreign satellites for the distribution of its services to
Canadians.
|
95. |
While no decision has yet been issued regarding
the Proposed Clarification to the Satellite Use Policy, the Departments of
Industry and Canadian Heritage stated that they are of the preliminary view
that potential digital satellite radio broadcasting services raise an
exceptional circumstance. The Departments further stated that, without
prejudice to the current licensing process being carried out by the
Commission, they acknowledged the need to clarify the satellite use policy
and proposed the addition of the following provision: |
|
in exceptional circumstances, where no Canadian satellite facilities are
available, or likely to be available in a reasonable time frame, to
accommodate specialized satellite delivery of a broadcasting service to the
public e.g. satellite radio services including vehicular reception, the use
of foreign satellite facilities is permitted to distribute Canadian
programming services;
|
|
Terrestrial subscription radio undertakings
|
96. |
In the Proposed Clarification to the Satellite
Use Policy, the Departments of Industry Canada and Canadian Heritage stated
that spectrum could be made available to accommodate the provision of such
terrestrial subscription radio broadcasting in the L-band. The Commission
notes that the inability of terrestrial undertakings to provide complete
coverage of Canada’s population and geography means that, both in the short
and longer term, there will be significant gaps in the service such an
undertaking provides. The Commission notes that the original goal of the
CHUM/Astral proposal was to reach 60% of the population by the end of the
licence term. Even under its revised proposal to reach 75% of the population
by the end of the first licence term, this would leave 25% of the population
and, on a geographic basis, large regions of the country, without service. |
97. |
In addition to the limitations in signal
coverage, the CHUM/Astral proposal involves the use of transmission and
receiver technology that, while in use in other forms in Europe and Asia,
will require significant modifications and development before it can be
implemented in the Canadian market. At the same time, given that the
satellite and terrestrial subscription radio undertakings are discretionary
in nature, and based on proprietary technology, the Commission has determined
that a competitive environment is appropriate to provide consumers with a
range of choices as to how they will receive this type of service.
Furthermore, the CHUM/Astral application proposes levels of Canadian content,
French-language programming, and support for the development of Canadian
talent that will make a significant contribution to fulfilling the policy
objectives of the Act. |
98. |
The Commission acknowledges the applicant’s
position that it is unlikely that the Canadian market can support more than
two subscription radio services, and that it would not launch its proposed
service if both satellite proposals were also implemented. Nevertheless, the
Commission has determined that this application is in keeping with existing
Commission policies and objectives, and has approved it in Terrestrial
subscription radio undertaking, Broadcasting Decision CRTC
2005-248, of today’s date,
subject to the terms and conditions contained therein. The Commission notes
that it has not imposed minimum coverage requirements for the roll-out of
this service. |
|
Secretary General |
|
This document 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 |