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Broadcasting Public Notice CRTC 2006-69
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Ottawa, 2 June 2006
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Promotion of non-programming services using local availabilities
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In this public notice, the Commission
considers applications received from Shaw Communications Inc., Rogers
Cable Communications Inc., and Bragg Communications Incorporated, on
their own behalf and/or on behalf of their wholly owned subsidiaries
operating cable broadcasting distribution undertakings (BDUs) at a
number of locations across Canada, requesting amendments to their
conditions of licence related to the use of local availabilities. At
present, it is the Commission’s policy to permit BDUs, by condition of
licence, to insert promotional messages from Canadian programming
services as well as promotions for the community channel and public
service announcements into at least 75% of these local availabilities,
and to use up to 25% to promote BDU services, such as discretionary
packages or equipment, as well as to provide customer service
information. The amendments sought by the applicants would permit them
to also use that latter 25% to promote non-programming services offered
by the BDU or by affiliated companies. |
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For the reasons discussed in this public
notice, the Commission finds it appropriate to update its policy with
respect to the use of local availabilities to provide for the promotion
of non-programming services. Accordingly, in three decisions also issued
today, the Commission has approved the applications described above and
amended the various licences held by the applicants to reflect this
approval. |
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Background
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1. |
Conditions of licence related to the use
of local availabilities were first introduced 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).
Since that first approval, virtually every licensed broadcasting distribution
undertaking (BDU), including cable, direct-to-home (DTH) satellite
and digital subscriber line (DSL) BDUs, has applied for and been granted
this condition of licence. Such conditions of licence permit BDUs
to insert certain promotional messages into the local availabilities
of non-Canadian satellite services. These local availabilities amount
to approximately two minutes of time per hour in the programming of
as many as 12 services.1 |
2. |
The condition of licence granted to BDUs
has remained generally unchanged since it was first introduced in
Decision 95-12, and
currently reads as follows:
The licensee may, by condition of licence, at its option,
insert certain promotional material as a substitute for the "local
availabilities" (i.e. non-Canadian advertising material) of
non-Canadian satellite services. At least 75% of these local
availabilities must be made available for use by licensed Canadian
programming services for the promotion of their respective services,
for the promotion of the community channel and for unpaid Canadian
public service announcements. A maximum of 25% of the local
availabilities may be made available for the promotion of
discretionary programming services and packages, customer service
information, channel realignments, cable FM service and additional
cable outlets.
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The applications
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3. |
Rogers Cable Communications Inc. (Rogers),
Shaw Communications Inc. on behalf of six wholly owned subsidiaries
(Shaw), and Bragg Communications Incorporated., on behalf of itself and
four wholly owned subsidiaries, all carrying on business as Eastlink
(Eastlink)2, submitted
applications requesting that the Commission amend their conditions of
licence related to the use of local availabilities. The amendment that
each applicant has sought would permit the BDUs concerned to use the 25%
portion of local availabilities currently available for the promotion of
BDU services to also promote non-programming services offered by the BDU
or by affiliated companies. In particular, these non-programming
services could include telephone service, high-speed Internet service
and wireless telephone service. |
4. |
The applicants noted that the BDU market,
and communications markets as a whole, have changed significantly since
conditions of licence related to local availabilities were introduced in
1995. At that time, the cable industry did not face competition from DTH
satellite BDUs or from DSL BDUs operated by the large incumbent
telecommunications companies. Cable BDUs also did not seek to compete
directly with these telecommunications companies in the telephone or
Internet markets. The applicants argued that, today, in order to compete
effectively in these new markets, they must utilize every asset at their
disposal, including local availabilities. |
5. |
The applicants emphasized that "cable"
companies are actually "integrated communications companies" focused on
the sale of packages of equally integrated communications services,
including video, telephony, Internet and, in some cases, mobile
telephony. The applicants, therefore, considered it necessary that their
marketing and promotional efforts consistently highlight these packages,
and that their use of local availabilities should not remain limited to
the promotion of discrete BDU services, as is currently the case under
their existing conditions of licence regarding their use of local
availabilities. |
6. |
The applicants contended that the proposed
amendments to their conditions of licence would have no negative
implications. Instead, approval would allow the applicants to leverage
synergies developed through convergence to inform and educate potential
customers as to how new services, such as voice over Internet protocol (VOIP),
work and the equipment necessary to receive them, as well as to counter
misinformation circulated by competitors. |
7. |
Rogers, in particular, argued that the
current limitations on the use of local availabilities are inconsistent
with the objectives of the Broadcasting Act, specifically
those identified in sections 5(2)(c) and (f). Rogers added that
preventing or limiting BDUs from promoting non-programming services on
local availabilities constitutes a form of indirect regulation of
telecommunications activities for which there is no statutory basis
under the Broadcasting Act. |
8. |
The Shaw and Rogers applications were gazetted
in Broadcasting Public Notice CRTC 2005-102,
16 November 2005 (Public Notice 2005-102),
while the Eastlink application was gazetted in Broadcasting Public
Notice CRTC 2006-17, 10 February 2006
(Public Notice 2006-17). |
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Interventions
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9. |
In response to Public Notices 2005-102
and 2006-17, submissions were received
from Aliant Telecom Inc. (Aliant); Alliance Atlantis Communications
Inc. (Alliance Atlantis); the Association of Canadian Advertisers
(ACA); Bell ExpressVu LP3 and
the Class 1 BDUs licensed to Bell Canada and Aliant Telecom Inc. (submitted
jointly and hereafter referred to as Bell); the Canadian Association
of Broadcasters (CAB); the Canadian Cable Telecommunications Association
(CCTA); CanWest MediaWorks Inc. (CanWest); Cogeco Cable Inc. (Cogeco);
MTS Allstream Inc. (MTS); and Quebecor Media Inc. (QMI). In general,
while a number of parties suggested changes to the amendments proposed
by the applicants or other related measures, only MTS and the ACA
were opposed to approval of the applications. |
10. |
MTS considered that the requests made in
the applications had been substantially addressed and denied 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,
9 September 2005 (Public Notice 2005-88),
in which the Commission considered a request by the CCTA to permit
BDUs to sell and broadcast commercial advertising during local availabilities.
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11. |
In MTS’ view, use of local availabilities
is a privilege extended to BDUs for the purpose of promoting programming
services, rather than non-programming services, and approval of the
applications would not contribute to the attainment of the objectives of
the Broadcasting Act. In its view, the applications are
essentially requests to "air significant amounts of advertising,
absolutely free of charge." It argued that approval would provide the
applicants with further tools to maintain their dominance in the BDU
market. According to MTS, even if all BDUs were given the ability to use
local availabilities to advertise their non-programming services, the
benefits of this ability would be greater for incumbent cable BDUs than
for any other BDUs, due to the incumbents’ market dominance.
Accordingly, MTS considered that, for incumbent BDUs, such an
authorization might constitute an undue preference. |
12. |
In its opposing intervention, the ACA noted
that the programming services that contain local availabilities draw
significant Canadian audiences and that these audiences represent a
substantial advertising opportunity and value. It further noted that
many of its member companies offer services that compete with those
offered by BDUs and that, in its view, exclusive access by BDUs to this
"substantial marketing and promotional resource" is anti-competitive and
fundamentally unfair to other advertisers. The ACA proposed that the
Commission make local availabilities available for use by all
advertisers. |
13. |
Aliant and Bell did not oppose the
applications, but argued that cable BDUs are already in a good position
to provide and promote bundled services and to ensure continued growth.
In their view, cable BDUs already enjoy advantages over the incumbent
telephone companies with respect to their ability to advertise and
market their services to potential customers. As evidence, Bell noted
that cable BDUs have a much greater share of the high-speed Internet
services market than telephone companies, that cable BDUs maintain a 90%
share in the distribution of broadcasting services in most markets and
as much as a 100% share in multiple-unit dwellings in some markets. Bell
also noted that cable BDUs often already control a programming service
(i.e., a community channel), which they use to promote their brand. Bell
submitted that, should the Commission approve the applications, it
should also remove restrictions on marketing and promotions applicable
to incumbent telephone companies in relation to their telecommunications
services. |
14. |
The CAB supported the applications, with
certain conditions. It proposed that the applicants be authorized to
promote only their own non-programming services. The CAB also proposed
that the applicants be required to continue to use at least half of the
25% of local availabilities for the promotion of programming-related
services and that promotions of programming and non-programming services
be scheduled equitably throughout the broadcast day. Finally, the CAB
requested that the Commission clarify its policy with respect to the
amounts paid by programming services to BDUs for the insertion of
promotional material in local availabilities. In this regard, the CAB
asked that the Commission specify that programming services should pay
only the direct incremental costs incurred by BDUs, i.e., no mark-up,
overhead or common costs should be paid by programming services, and
that programming services should not be required to "buy" or commit to
paying for insertion of promotional material for a period greater than
six weeks (referred to as a "minimum buy"). |
15. |
Alliance Atlantis and CanWest also
supported approval of the applications, subject to the conditions
proposed by the CAB. Alliance Atlantis considered that approval of the
applications could increase the penetration of digital programming
services to the benefit of those services. CanWest noted, however, that
the conditions proposed by the CAB are important in order to ensure that
promotions of digital and other programming packages are not excluded
from local availabilities. |
16. |
Cogeco, QMI and the CCTA supported approval
of the applications as well. According to Cogeco, the applications could
not be characterized as unreasonable or as having far-reaching policy
implications. The parties noted the need for the Commission to adapt its
local availabilities policy to the dramatic technological and market
changes that have occurred since 1995. The CCTA considered that approval
would allow the promotion of packages of services, which would, in turn,
increase the digital penetration of Canadian programming services. It
further argued that approval would carry no demonstrable risk of
potential harm to other BDUs. Moreover, since other BDUs would be free
to request similar amendments to their conditions of licence, approval
could not be considered to provide the applicants with an undue
preference. |
17. |
The CCTA also argued that the current
exclusion of non-programming services from the list of services that
BDUs may promote using local availabilities is a limitation on
commercial freedom of expression. On this basis, the CCTA suggested that
the onus lies with the Commission to justify any continuing exclusion.
According to the CCTA, it can find no compelling Broadcasting Act
objective that would justify such an exclusion, nor has the Commission
identified such an objective. |
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Applicants’ replies to interventions
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18. |
In replying to the interventions, the
applicants noted that there was general support for their applications
from a broad cross-section of the industry. Shaw and Rogers noted, in
particular, the support of broadcasters and reiterated their view that
the advertising of bundled services will benefit Canadian programming
services through the increased penetration of digital programming
services, as well as of high definition and video-on-demand programming
services. |
19. |
In response to Bell, the applicants
disagreed that marketing and promotional restrictions on incumbent
telephone companies should be removed and noted that such a request lies
outside the scope of the current proceeding. The applicants also
disagreed that approval of the applications would provide a competitive
advantage, submitting that the incumbent telephone companies generally
continue to hold 95% or more of the market for local telephony services.
Shaw noted that Bell did not oppose the applications and generally
supported the principles underlying them. |
20. |
In response to MTS and the ACA, the
applicants generally argued that the applications are not
anti-competitive, and that approval would not provide the applicants
with an undue competitive advantage since they are merely requesting an
extension of existing conditions of licence intended to bring them into
line with the way the applicants market their products and services.
Rogers noted that each major incumbent telephone company has a BDU
affiliate that could apply to use local availabilities in a similar
manner. Shaw noted that the largest incumbent telephone company with
which it competes, Telus Communications Inc., did not intervene in this
proceeding. |
21. |
Responding specifically to the ACA proposal
that all parties be given access to local availabilities, Rogers submitted
that this proposal was substantially similar to part of the CCTA application
that was denied in Public Notice 2005-88. |
22. |
In response to the conditions proposed by
the CAB, the applicants generally agreed to schedule promotions inserted
in local availabilities on an equitable basis, but did not consider it
necessary for the Commission to clarify its policy with respect to the
costs associated with local availabilities that are charged to
programming services or the manner in which these costs are assessed.
Rogers specifically noted that it charges programming services only the
direct costs of insertion of promotional material, and considered that
these charges and its "minimum buy" requirements are both consistent
with the Commission’s policy and general industry practices. |
23. |
The applicants were opposed to the CAB’s
proposal that BDUs be authorized to promote only their own
non-programming services. Rogers noted that this restriction would
prevent it from promoting Rogers Mobility wireless services since these
services are offered, not by Rogers, but by an affiliated company.
Eastlink also noted that it offers the Rogers Mobility services as part
of its packages, and expressed concern that such a provision would
exclude the promotion of these packages by its BDUs. |
24. |
The applicants differed somewhat in their
responses to the CAB proposal that they be required to use at least half
of the 25% of local availabilities to promote programming services.
While Rogers accepted this proposal, Shaw and Eastlink argued that they
should be permitted flexibility with respect to the use of the 25% and
that decisions as to how to allocate local availabilities time should be
theirs to make. Shaw and Eastlink noted that, in order to remain
competitive, each would continue to promote "programming-related
services" as part of this 25%, but argued that the Commission should not
set specific requirements in this regard. |
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Commission’s analysis and determinations
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25. |
The Commission notes that many of the
arguments made by both the applicants and interveners related to the
merits of the applications with respect to the provision of
telecommunications services (non-programming services) offered under the
Telecommunications Act. Although the Commission also
administers the Telecommunications Act, the use of local
availabilities falls exclusively under the Broadcasting Act. The
Commission is, therefore, of the view that the applications at issue in
this proceeding should be considered exclusively by reference to the
objectives of the Broadcasting Act. |
26. |
With respect to these objectives, the
Commission’s intent in granting permission to use local availabilities
has always been to provide an additional means of promoting Canadian
programming services. In this regard, the Commission notes that the
applicants have proposed no change with regard to the insertion of
promotional material from programming services into at least 75% of
local availabilities, and that they have all stated their intention to
continue to promote discretionary programming services and packages in
the remaining 25%, in conjunction with non-programming services. In the
Commission’s view, there are significant competitive incentives for the
applicants to continue to promote programming services and packages
using local availabilities, even in the absence of a regulatory
requirement to do so. The Commission is, therefore, satisfied that the
objective of providing an additional means to promote programming
services would still be met, should it amend its policy and approve the
applications at issue in this proceeding. |
27. |
The Commission also recognizes that the
ability to package programming and non-programming services and to
promote these packages is of substantial importance to the applicants,
as evidenced by their submissions in this proceeding. To the extent that
the use of local availabilities would increase penetration of these
packages, the Commission considers that such use may also increase the
penetration of programming services. In the Commission’s view, these
outcomes would be consistent with the objectives set out in sections
3(1)(d)(iv) and 5(2)(c) of the Broadcasting Act. Consequently,
the Commission considers that the marketing and promotion of packages of
programming and non-programming services could be of benefit in
advancing the objectives of the Broadcasting Act. |
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The CAB proposal
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28. |
With respect to the first condition
proposed by the CAB, the Commission generally agrees with the principle
that the applicants should only use local availabilities to promote
their own non-programming services, and not the non-programming services
of other parties. However, the Commission notes the applicants’ concerns
that limiting the promotion of non-programming services to those offered
by BDUs would prevent Rogers from promoting certain other services, such
as the Rogers Mobility wireless services. |
29. |
The Commission can find no reason in the
record of this proceeding as to why promotions for services such as
Rogers Mobility wireless services (whether offered by Rogers or Eastlink),
which are commonly bundled with these parties’ BDU services, should be
treated in a different manner than promotions for other telephony
services described by the applicants. Accordingly, consistent with the
rationale set out in paragraphs 25 and 26 above, the Commission
considers it appropriate to allow BDUs to use local availabilities to
promote non-programming services, whether offered by themselves, by an
affiliate or through joint-marketing arrangements with third parties,
that are offered in conjunction with programming services offered by the
BDU. |
30. |
With respect to the second condition
proposed by the CAB, the Commission generally agrees that BDUs should
continue to use part of the 25% of local availabilities to promote the
programming services they offer. The Commission notes the applicants’
commitments in this regard, and considers that it is in the best
interests of the applicants to use local availabilities to promote both
their programming services and their non-programming services.
Accordingly, the Commission is of the view that it is not necessary to
impose additional requirements on the applicants intended to ensure
continued promotion of programming services. |
31. |
With respect to the CAB’s request that the
Commission specify that programming services should not be required to
meet "minimum buy" requirements set by BDUs, the Commission notes
Rogers’ response that minimum buys are necessary administrative
mechanisms and are consistent with the Commission’s policy and industry
practices. In any event, the Commission also notes that this request
pertains to the 75% of local availabilities that are used to insert
promotions from programming services. Accordingly, this request is
outside the scope of the current proceeding. |
32. |
With respect to the CAB’s further request
that the Commission specify that programming services should pay only
the direct incremental costs incurred by BDUs, the Commission considers
that its policy on this matter is well-established. As set out in
Building on Success – A Policy Framework for Canadian Television,
Public Notice CRTC 1999-97,
11 June 1999, BDUs may only charge Canadian programming services their
share of the direct costs associated with the insertion of their promotional
material in local availabilities. |
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ACA proposal
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33. |
The Commission considers that the proposal
by the ACA, that use of local availabilities should be offered to
all advertisers, is similar in many respects to that denied in Public
Notice 2005-88. The Commission
is concerned that the ACA proposal would present many of the same
difficulties as the CCTA’s proposal that was denied at that time,
in that it would devalue the commercial advertising time on which
broadcasters rely. The Commission also considers that it could create
additional problems related to equitable access by numerous potential
users of limited local availabilities. |
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Aliant and Bell proposal
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34. |
In the Commission’s view, the proposal by
Aliant and Bell that the Commission remove restrictions on marketing
and promotions of local telephony services by incumbent telephone
companies if it approved the applications lies outside the scope of
the current proceeding. Further, the Commission notes that these issues
were recently addressed in the proceeding conducted under the
Telecommunications Act that culminated in the issuance of
Forbearance from the regulation of retail local exchange service,
Telecom Decision CRTC 2006-15,
6 April 2006. |
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Commission’s conclusion
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35. |
In light of the above, the Commission finds
it appropriate to update its policy with respect to the use of local
availabilities to permit BDUs to use these availabilities to promote
non-programming services, subject to the conditions noted below. BDUs
that seek and receive amendments to their conditions of licence that
allow them to use local availabilities for this purpose will be authorized
to use a maximum of 25% of local availabilities for the promotion of
discretionary programming services and packages, customer service
information, channel realignments, cable FM service, additional cable
outlets and non-programming services, including telephone and Internet
services. |
36. |
The Commission considers that the promotion
of non-programming services in local availabilities should generally be
limited to those non-programming services that are made available in
conjunction with programming services, and that are offered by the BDU,
by an affiliated company, or by a third party pursuant to a marketing
arrangement with the BDU, such as that between Eastlink and Rogers.
Should a complaint arise, BDUs should ensure that they are in a position
to provide, at the Commission’s request, a report with respect to their
use of local availabilities. |
37. |
In accordance with these conclusions, the
Commission has also issued today Broadcasting Decisions CRTC 2006-205,
2006-206 and 2006-207,
each entitled Licence amendment to replace condition of licence
relating to the use of local availabilities in non-Canadian satellite
services, in which it approves the Rogers, Shaw and Eastlink applications
described above and amends the various licences held by these applicants
to reflect this approval and the Commission’s determinations in this
public notice. |
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Secretary General |
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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
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Footnotes:
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Date Modified: 2006-06-02 |