Consultation on Proposed Changes to Small Systems Regulations

The departments of Industry and Canadian Heritage are currently reviewing the Definition of Small Retransmission Systems Regulations (SOR/89-255) and the Definition of “Small Cable Transmission System” Regulations (SOR/94-755) (collectively the “Small Systems Regulations”).

The Copyright Board is required to certify tariffs of royalties for the retransmission (e.g. by cable companies) of works in distant television and radio signals. These royalties are payable by cable operators, direct-to-home satellite service providers (DTH), and other types of broadcasting distribution undertakings. The Copyright Act provides that the Board must set preferential rates for “small retransmission systems” (s. 74(1)) when establishing these royalty rates.

The Copyright Board is also required to certify tariffs for the communication to the public of musical works, recorded performances and sound recordings in non-conventional (e.g. cable only) television and radio signals. Cable operators, DTH satellite service providers, and other types of broadcasting distribution undertakings, as well as the originator of the signal (such as specialty channels, e.g. CBC Newsworld, RDI) are jointly liable for the payment of these royalties. The Copyright Act provides that the Board must set preferential rates for “small cable transmission systems” (s. 68.1(4)) when establishing these royalty rates.

The Small Systems Regulations define a “small retransmission system” and a “small cable transmission system” for this purpose as systems that serve not more than 2,000 premises in the same licensed area. The reference to a licensed area reflects the fact that the Canadian Radio-television and Telecommunications Commission (CRTC) previously generally required small terrestrial distribution undertakings to hold a broadcasting licence. However, the CRTC recently made significant changes in the way it licenses small systems and now exempts most of them from licensing.

In 2001 and 2002, the CRTC issued orders exempting small cable and wireless systems, that meet prescribed criteria, from licensing (Public Notice CRTC 2002-74 http://www.crtc.gc.ca/archive/ENG/Notices/2002/PB2002-74.HTM, which amends Public Notice CRTC 2001-121 http://www.crtc.gc.ca/archive/ENG/Notices/2001/PB2001-121.HTM; and Public Notice CRTC 2002-45 http://www.crtc.gc.ca/archive/ENG/Notices/2002/PB2002-45.HTM). As a result, small systems could turn in their licence or simply not renew a licence in the future, as long as they met the prescribed criteria.

The CRTC also announced, on September 17, 2003, amendments to the Broadcasting Distribution Regulations (SOR/97-555, as amended) which will permit it to implement a regional approach to licensing cable distribution undertakings(Broadcasting Public Notice CRTC 2003-48 http://www.crtc.gc.ca/archive/ENG/Notices/2003/pb2003-48.htm). Prior to the changes beginning in 2001, each cable system was issued a licence under one of three classes, generally depending on the number of subscribers served: Class 1 licences for systems serving 6,000 or more subscribers; Class 2 licences for systems serving 2,000 or more, but fewer than 6,000 subscribers; and Class 3 licences for systems serving fewer than 2,000 subscribers. Under regional licensing, the CRTC will issue a single licence for all cable systems that are commonly owned, are of a common Class and operate in the same region. For example, all Class 3 systems that operate in the same region and are owned by one licensee (e.g. Rogers, Shaw) will operate under one Class 3 regional licence, with separate service areas for each system.

These changes have a two-fold impact on the systems that benefit from the Small System Regulations. First, as some small systems may opt to rely on their exemption from licensing, they will no longer operate in “licensed areas” and therefore might not be eligible to receive the benefit of the preferential rate. Second, the small systems that continue to be licensed, albeit now under regional licensing, might no longer benefit from the preferential small system rate as they may be part of a consolidated licensed area with more than 2,000 subscribers in total.

Therefore, in response to these changes, it is proposed that each of the Small Systems Regulations be amended by changing the term “licensed area” to “service area”. The “service area”, which would be defined as an area in which premises lawfully served by the relevant system are located, would encompass licensed systems as well as systems that will be exempt from licensing. Thus, such systems would continue to have the benefit of the preferential rates provided under the Copyright Act.

You can consult the suggested changes to the Small Systems Regulations (indicated for discussion purposes only), by clicking on SOR/89-255 and SOR/94-755. Final regulatory text will have to comply with the applicable Department of Justice standards for regulatory drafting.

We seek your written comments by close of business, Friday, July 9, 2004. If you have any questions concerning this consultation, please contact either Monika Surma, Industry Canada, (613) 941-1378 or Denis Gratton, Canadian Heritage, (613) 990-6066.

Written comments may be sent by email (WordPerfect, Microsoft Word, or HTML formats) to:

Comments may also be sent by mail or fax to:

Comments - Small Systems Regulations
c/o Intellectual Property Policy Directorate
Industry Canada
235 Queen Street, 10th Floor
Ottawa, Ontario
K1A 0H5
fax: (613) 941-8151