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Call for comments on a proposed framework for the licensing and distribution
of high definition pay and specialty services
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The Commission herein proposes a
regulatory framework that covers both the licensing and the distribution
of high definition pay and specialty services and invites comments on
that framework. Instructions for filing comments are set out at the end
of the notice. |
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Background and summary
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1. |
In A licensing policy to oversee the
transition from analog to digital, over-the-air television broadcasting,
Broadcasting Public Notice CRTC 2002-31,
12 June 2002 (Public Notice 2002-31),
the Commission set out the regulatory framework for the transition
to over-the-air digital television broadcasting. Subsequently, the
Commission issued The regulatory framework for the distribution
of digital television signals, Broadcasting Public Notice CRTC
2003-61, 11
November 2003 (Public Notice 2003-61),
which dealt primarily with the distribution regime applicable to over-the-air
digital broadcasting services. |
2. |
In Public Notice 2003-61,
the Commission addressed certain matters affecting the transition
of pay and specialty services to high definition. In particular, the
Commission announced that it would launch a separate proceeding to
establish the licensing and distribution frameworks for Canadian pay
and specialty services as they move toward the broadcast of programming
in high definition1. The Commission
also set out the regime that would apply until the completion of that
separate proceeding. |
3. |
The present public notice begins the separate
proceeding announced in Public Notice 2003-61
by setting out the Commission’s initial view of the regulatory framework
that should govern the licensing and distribution of high definition
pay2 and specialty services,
and by calling for comment with respect to that initial view. |
4. |
In general, the proposed licensing and
distribution policy is intended to encourage the transition of the
Canadian broadcasting system to high definition technology. It does so
by providing a mechanism for the licensing of transitional high
definition pay and specialty services that will permit easy entry to the
new technology. However, it will also reward those who make a strong
commitment to high definition by tying carriage rights for these
services to the provision of minimum amounts of high definition
programming. |
5. |
The proposed policy also encourages
broadcasting distribution undertakings (BDUs) to carry high definition
services by permitting flexibility in the packaging of such services,
and provides regulatory certainty by setting out the details of the
distribution policy for the new high definition services, including the
distribution and linkage rules, the carriage of non-Canadian high
definition signals, and provisions governing technical quality and
simultaneous substitution. |
6. |
The Commission invites comment on the
proposed policy framework that follows, including any issues or
questions relating to its implementation, taking into account any
differences that exist among distribution technologies. In particular,
parties should comment on the issues related to the licensing and
distribution of high definition pay and specialty services, setting out
what they believe the high definition framework should be. |
7. |
The Commission notes that the proposed
policy framework is intended to accommodate the industry’s transition
from today’s analog and low definition digital programming services and
distribution technologies to high definition. Therefore, what must also
be considered is how and when the current industry structure can be
adapted to the high definition framework. Accordingly, parties are
requested to set out the steps by which broadcasters and distributors
would make the transition to the high definition framework. |
8. |
In Public Notice 2003-61,
the Commission stated that once 85% of a BDU’s subscribers can receive
digital signals, the BDU would be able to apply to remove analog services
from its distribution system. The Commission added that it will determine
the terms and conditions for the removal of the analog services at
the time that it considers such applications. As a consequence, the
Commission does not invite comment at this time regarding what these
terms and conditions might be. |
9. |
In addition, the Commission intends soon to
issue a second public notice announcing its determinations with respect
to the establishment of rules to govern the distribution of specialty
services on the basic service of fully digital cable undertakings. The
Commission encourages those filing comments in response to the matters
discussed in this present public notice, in particular those addressing
the steps by which broadcasters and distributors would make the
transition to the high definition framework, also to consider the issues
set out in that second public notice. In the second notice, the
Commission will call for comments on additional questions related to the
migration of pay and specialty services to a digital distribution
environment. |
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Introduction
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10. |
The Canadian broadcasting system is
currently in a transition period that will eventually end in the
complete conversion of television transmission and distribution systems
from analog to high definition digital technology. This transition will
likely continue for some years. The transition will be complete when all
viewers in Canada can receive high definition programming, whether they
use the services of a BDU or rely on over-the-air reception.3 |
11. |
As the transition continues, pay and
specialty services will need to respond through the provision of
increasing amounts of high definition programming. A few have already
begun to do so. Some others are reliant on old series or archived
material and may therefore not begin to provide programming in high
definition for some years. However, as high definition receivers and
displays become more common, services will find it increasingly
difficult to compete for viewers if they do not upgrade their program
formats. |
12. |
As the system moves through the transition,
it will be necessary to adjust the regulatory regime. While the
Commission envisages a transition that is largely voluntary and
market-driven, it will nonetheless be necessary to provide regulatory
certainty, and where required, encouragement for the transition, through
a policy for the licensing and carriage of the high definition services
to be offered by current and future pay and specialty licensees. |
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Goals of the process
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13. |
In Call for comments on a proposed policy
to oversee the transition from analog to digital over-the-air television
broadcasting, Public Notice CRTC 2001-62,
5 June 2001 (Public Notice 2001-62),
the Commission stated that it would be guided by five objectives,
which continue to form the basis for its policy approach to the transition
to digital and ultimately to high definition: |
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- The transition policy should provide guidance to broadcasters,
distributors and producers concerning their adoption of the new
digital television technology.
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- The continued strength and growth of the Canadian broadcasting
industry should be fostered and its cultural objectives maintained.
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- The production, broadcast and distribution of high quality A/53
Canadian programs across the country should be encouraged.
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- Canadian viewers should benefit from these technological advances
to the fullest possible extent.
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- The orderly and timely transition to advanced digital television
services should not be impeded by unnecessary regulation.
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14. |
In addition, Public Notice 2002-31
set out three other principles governing the transition of over-the-air
television services to digital, resulting from previous processes: |
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- In general, digital technology should be treated as a replacement
for analog technology.
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- A voluntary transition, developing at a pace set by the
marketplace rather than by mandated deadlines, is the appropriate
approach for the Canadian broadcasting system.
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- The issuance of new, transitional licences is preferable to the
amendment of existing licences.
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15. |
The Commission is of the view that these
same objectives and principles, as they are discussed below, should
apply to the transition of both pay and specialty services from analog
and low definition digital to high definition digital broadcasting. |
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Licensing policy
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Replacement technology
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16. |
Consistent with the above, in the
Commission’s view, it is appropriate to treat high definition technology
as a replacement for the analog and low definition digital
technology used by today’s pay and specialty services. |
17. |
In Public Notice 2003-61,
the Commission stated that, as is the case for over-the-air digital
television services, digital versions of pay or specialty services
that contain any amount of programming in high definition would be
referred to as "upgraded versions."4
These upgraded versions would provide essentially the same
programming as their analog or low-definition digital counterparts.
However, it was also anticipated that some of the programming on an
upgraded service could be new, and not simply high definition versions
of programs broadcast on the counterpart service. |
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Unduplicated programming allowance
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18. |
In Public Notice 2002-31,
the Commission determined that a new transitional digital television
licence would be issued for each over-the-air digital television undertaking.
The Commission established a maximum allowance of 14 hours per week
for programming on the transitional digital over-the-air service that
is not duplicated on its counterpart analog over-the-air service.5
The purpose of the allowance was to balance the need to
grant enough flexibility for programmers to innovate and experiment
with the need to establish sufficient limits to prevent the creation
of what would be, in effect, distinct new services. |
19. |
These same considerations apply in the case
of pay and specialty services. The Commission considers that it would
therefore be appropriate to set the same 14-hour allowance for pay and
specialty services, Canadian as well as non-Canadian. Similarly, the
Commission would require that all of the programming in the 14-hour
allowance be in high definition formats, and that it conform to the
counterpart service’s nature of service definition as well as to other
conditions of licence and expectations. However, while up to 14 hours of
unduplicated programming would be permitted, the upgraded service would
be free to provide lesser amounts of unduplicated programming, and might
choose to offer none. |
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New licences preferable
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20. |
The Commission also considers that issuing
new licences offers more benefits than issuing licence amendments,
including an allowance for the appropriate and orderly examination of a
number of related matters, such as any outstanding distribution and
linkage issues, as well as the possible regulation of carriage rates.
These issues are discussed in the "Distribution policy" section of this
notice. |
21. |
In keeping with the principles outlined
above, the Commission proposes to proceed through the issuance of new
high definition-transitional (HD-transitional) licences, a class of
licence for which existing pay and specialty licensees, subject to
certain terms and conditions, would generally qualify when offering
upgraded versions of their services with any amount of high definition
programming. |
22. |
The Commission does not consider that
HD-transitional licences should be subject to any minimum requirements
to produce or broadcast high definition programming. As mentioned above,
certain specialty licensees, by virtue of the nature of the services
they offer, make considerable use of older programming, and thus may
offer only small amounts of high definition programming at first. At the
same time, however, the Commission generally considers that the services
provided under HD-transitional licences should not receive mandatory
carriage by BDUs unless they do provide certain minimum levels of high
definition programming. Otherwise, if access rights were granted without
a minimum requirement for high definition programming, a significant
carriage burden could be placed on the distribution industry with little
in the way of apparent benefit to the broadcasting system and the
viewing public. |
23. |
The Commission therefore proposes that
the access rights of pay and specialty HD-transitional licensees to
carriage by BDUs be linked to the provision of minimum amounts of
high definition programming. HD-transitional licensees who meet the
minimums would have access and carriage rights as described in the
section of this notice titled Distribution policy. Services that do
not meet these minimums would still be licensed, but carriage arrangements
would be established through negotiations. The Commission acknowledges
that this approach would differ from that established for over-the-air
digital television services in Public Notice 2003-61,
wherein the Commission determined that, "except as otherwise
provided under a condition of licence, a distribution undertaking
must carry the primary signal of Canadian over-the-air digital television
signals identified in sections 17, 32 and 37 of the Regulations."
Unlike over-the-air broadcasters, however, pay and specialty licensees
do not have to bear the substantial costs of constructing transmitters
to provide their upgraded services. As the Commission stated in Public
Notice 2003-61,
over-the-air broadcasters must be afforded the opportunity to maximize
their advertising revenues by having their over-the-air digital television
services reach as many viewers as possible. |
24. |
The Commission encourages the licensees of
upgraded pay and specialty services to produce and acquire as much
wide-screen format6
programming as possible for broadcast at times when high definition
programming is not being aired. |
25. |
The Commission would also invite such
service providers to apply for an HD-transitional licence for the
upgraded versions of their existing services. The proposed terms and
conditions of such licences are set out below. |
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HD-transitional licence (pay or specialty)
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26. |
An HD-transitional pay or specialty licence
would, in general, be granted on the application of an existing pay or
specialty licensee, subject to the following conditions: |
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a) the proposed upgraded service must provide the same audio and
video programming as its existing licensed analog or low definition
digital counterpart (LD-counterpart) service, with the exception of
up to 14 hours per week of programming that need not be duplicated
on its counterpart service;
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b) unduplicated programming provided within the 14 hours
permitted for such programming
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i) must consist entirely of high definition programs, and
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ii) must be at least 50% Canadian in origin;
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c) the upgraded service must conform to the "nature of service"
description of the LD-counterpart service;
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d) programming on the upgraded service must respect the
LD-counterpart service’s current obligations and conditions of
licence;7 and
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e) all programs that are produced in a high definition or low
definition wide-screen format, and that are available to the
licensee in that format, must be broadcast in that format. However,
programming originally produced in the 4:3 aspect ratio need not be
re-formatted as wide-screen, and low definition programming need not
be line-doubled.
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High Definition programming conditions
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27. |
In addition, as discussed in the later
section of this notice entitled Carriage obligations under the digital
transition, an HD-transitional service would receive distribution by a
BDU provided the licensee of the HD-transitional service adheres to
conditions of licence requiring minimum levels of high definition
programming. With respect to English- and French-language services,
these minimum levels are as follows: |
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a) If the proposed service is an English-language service, at
least 50% of the programming on the proposed service must be in high
definition format.
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b) If the proposed service is a French-language service, at least
30% of the programming must be in high definition format, of which
at least 50% must have been originally produced in French.
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28. |
Section 18(5)(c) of the Regulations states
that, except as otherwise provided under a condition of its licence, a
licensee shall distribute, to the extent of available channels, |
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the ethnic programming service of a programming undertaking
authorized to provide the service to all or any part of the licensed
area of the undertaking if
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(i) the licensee was distributing the service on May 16, 1994,
or
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(ii) 10% or more of the total population of all cities, towns
and municipalities encompassed in whole or in part within the
licensed area of the licensee is of one or a combination of the
ethnic origins to which the service is intended to appeal,
according to the most recent population figures published by
Statistics Canada.
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29. |
The Commission invites comment on the
amount of high definition programming that an ethnic programming service
should be required to broadcast to receive distribution by a BDU. |
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Exceptional cases
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30. |
In a limited set of exceptional cases, it
may be in the public interest to grant carriage rights for
HD-transitional services that offer less than the amount of high
definition programming that might otherwise be specified for services
offered in a particular official language or for ethnic programming
services. For example, there might be situations where, |
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a) carriage of the HD-transitional service is essential to the
continued viability of a particular service;
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b) the service is adjudged to make an important contribution to
the Canadian broadcasting system; and
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c) the service would have difficulty procuring and producing high
definition programming in the early years of the transition.
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31. |
The Commission invites comment on what
criteria it might use to determine whether an exception should be
granted in respect of any service, how the criteria would be measured,
and what, if any, lesser requirements for the provision of high
definition program requirements should be imposed. |
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Timing of licence applications and new entrants
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32. |
In Public Notice 2003-61,
as an interim measure, the Commission allowed for the provision of
upgraded versions of existing pay and specialty services by licence
amendment. Specifically, the Commission stated: |
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In the interim, the Commission will permit the licensee of a
Canadian pay or specialty service to make available for distribution
an upgraded version of the service, provided that not less than 95% of
the video and audio components of the upgraded and analog versions of
the service are the same, exclusive of the commercial messages and of
any part of the service carried on a subsidiary signal. The Commission
will authorize such an upgraded version by means of an amendment to
the licence of the corresponding analog service. The authorization
will be granted for a term of three years.
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33. |
The Commission’s intention is that the
services offered under HD-transitional licences would replace those
offered under the amended licences. As discussed above, a new
HD-transitional licence would offer a service the opportunity to provide
up to 14 hours per week of unduplicated programming. Moreover, once the
high definition content conditions are met, the carriage rights
described later in this notice would be conferred upon the licensee. The
Commission expects those licensees that operate high definition services
by licence amendment to submit applications for HD-transitional licences
once the final policy framework is adopted. |
34. |
Most pay and specialty licensees do not
currently operate high definition services. In general, the Commission
is of the view that these licensees should be given a reasonable period
of time to prepare business plans and to apply for HD-transitional
licences. During this period, they will continue to enjoy the genre
protection that they currently have. However, genre protection in the
high definition world cannot be guaranteed if an existing licensee fails
to apply for an HD-transitional licence within a reasonable period of
time. The audience for high definition programs should not be deprived
of the opportunity to enjoy high definition program services in a
particular genre or genres indefinitely. |
35. |
In light of the above, the Commission
proposes that, should an existing licensee fail to apply for a
HD-transitional licence within a reasonable period, or otherwise fail to
demonstrate that it is prepared to submit an application on a timely
basis, the Commission would consider an application by a prospective new
entrant for a licence to carry on an HD-transitional service in the
programming genre provided by the existing licensee’s service. |
36. |
In addition, during the transition period,
the Commission would continue to consider applications for licences to
provide new high definition services. Such applications would, as now,
be assessed in accordance with the Commission’s current practices and
policies, including those regarding market entry, ownership, licensing
and programming, as well as any policies ultimately adopted with regard
to minimum amounts of high definition programming. |
37. |
The Commission notes that the practice of
issuing licence amendments to authorize upgraded versions would cease
once the final policy framework is adopted. |
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Stages of the transition to digital and to high definition service
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38. |
The Commission foresees the transition as
taking place over three stages. Cable BDUs are currently in the first
stage of this transition, characterized by their distribution of analog
as well as digital services. The second stage would be characterized by
the absence of analog services. Instead, BDUs would offer a mix
consisting predominantly of low definition digital services with some
high definition services. In the third stage, high definition digital
services will predominate. These latter two stages will occur at
different times for different BDUs, and each stage will have its own
regulatory obligations. |
39. |
In Public Notice 2003-61,
the Commission provided for a possible end to the first stage, when
it concluded as follows: |
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A BDU may submit an application requesting the Commission’s
approval to cease the carriage of analog signals once 85% of the
BDU’s subscribers have the ability to receive digital services by
means of digital television receivers or set-top boxes. The
Commission will determine, at that time, the terms and conditions
under which the analog services may be removed from the system.
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40. |
Once a cable BDU is permitted to remove
analog services, it would enter the second stage in which its
subscribers would receive both low definition and high definition
digital services, just as subscribers to direct-to-home satellite
distribution undertakings (DTH BDUs) do now. The Commission expects
that, when a BDU’s analog services are removed, it would have
substantial bandwidth capacity to reassign to the distribution of
additional digital services and to other purposes. |
41. |
In the third and final stage, low
definition services would be phased out and all services would be
produced and distributed in high definition. However, as indicated
earlier, even when the transition is complete, some programs on high
definition services may remain in low definition formats, and some
television displays may not show the full resolution of high definition
signals. |
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Distribution capacity issues
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42. |
The Commission considers that the
underlying objectives and principles of its transition policy, as listed
in the section of this notice entitled Goals of the process, would be
served by facilitating the industry’s co-ordinated progress through the
second and third stages of the transition. Accordingly, the Commission
proposes to encourage the licensing of upgraded versions of existing
services and to ensure their carriage when the high definition content
conditions are met. |
43. |
At the same time, the Commission notes that
carriage of high definition services, particularly during the first
stage of the transition, will have a significant impact on the carriage
capacity of BDUs. Since the bandwidth demands of high definition are as
much as five times greater than low definition, the rapid addition of
upgraded versions of all existing analog and low definition digital
services would place a demand on overall system capacity that may be
difficult to accommodate. By implementing system upgrades over time,
however, and possibly by adopting efficiencies in modulation and
compression technologies as they become available, the broadcast
distribution industry would be better equipped to meet this demand. |
44. |
One of the difficulties facing distributors
is uncertainty over the timing of the high definition transition.
Whether or not there will be demand for capacity that cannot be met will
depend on the following four factors: |
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- how quickly over-the-air as well as pay and specialty services
convert to high definition;
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- how quickly BDUs add capacity through system upgrades or the
launch of additional satellites;
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- how quickly consumers adopt digital reception technology,
permitting capacity to be freed by removing analog services from cable
BDUs; and
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- the possible adoption of more efficient compression and modulation
technologies that would enable distributors to accommodate the
bandwidth demands of high definition programming.
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45. |
The Commission encourages the industry to
provide its views on the capacity issue, particularly as it relates to
the factors listed above. The Commission is especially interested in
receiving suggestions concerning how its proposed regulatory framework
can best address today’s capacity and technology constraints.
Comprehensive projections of both supply and demand for high definition
services should be included in comments where possible. |
46. |
In order to assist in the management of
capacity issues, the Commission considers that, once pay and specialty
licensees have developed their immediate and long-term plans for the
launch of high definition services, these plans should be conveyed to
distributors so that they, in turn, can plan for the carriage of such
services. This information could be provided on a confidential basis. |
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Distribution policy
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Authority to carry high definition services
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47. |
As noted above in the section entitled Timing
of licence applications and new entrants, the Commission provided,
in Public Notice 2003-61,
for the issuance of temporary authorities by way of licence amendment
for pay and specialty services to provide upgraded versions of their
existing services for a maximum of three years. It further provided
a general authority for BDUs to distribute such upgraded services
as follows: |
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Subject to the access requirements, the authority to distribute a
discretionary or optional service, whether it be over-the-air, pay
or specialty, and Canadian or non-Canadian, will also include the
upgraded version of that service.
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Carriage obligations during the digital transition
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48. |
As noted earlier, the Commission proposes
that access and carriage rights for HD-transitional licensees be tied to
their provision of the minimum amounts of high definition programming
described in the licensing policy set out above. |
49. |
As described below, the Commission also
proposes that carriage and access rights on the system of a particular
BDU be linked to the stage of the transition reached by that BDU, as
well as to the class of the BDU licence. |
50. |
This approach is intended to ensure a
smooth transition to high definition, to provide a degree of regulatory
certainty and, in the longer term, to provide an opportunity to simplify
the carriage and access regime. Linking carriage obligations to the
stage of the transition reached by the BDU would allow its available
channel capacity to be taken into account. It would also ensure that
existing service offerings are not disrupted. |
51. |
HD-transitional services that do not meet
the high definition content conditions would, like low and high
definition Category 2 services, have the same carriage status in all
stages of the transition: that is, their carriage would be subject to
negotiation. |
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BDUs in the first stage of the
transition
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52. |
Class 1, Class 2 and interconnected Class 3
cable BDUs would, while in the first stage of the transition (i.e. when
services are distributed in both analog and digital forms), be required
to carry the upgraded versions of all pay and specialty services that
they are currently obligated to carry in analog or standard definition
digital form, provided that the upgraded versions meet the high
definition content conditions set out earlier. Carriage of these
upgraded versions would be subject to available channel capacity,8
as set out in the Broadcasting Distribution Regulations
(the Regulations), as amended from time to time.9 |
53. |
Exempt cable BDUs that serve between 2,000
and 6,000 subscribers would, while in the first stage of the transition,
be required to carry the upgraded versions of all pay and specialty
services that they are currently obligated to carry in analog or standard
definition digital form, provided that the upgraded versions meet
the high definition content conditions set out earlier. Carriage of
upgraded versions meeting the high definition content criteria would
be subject to available channel capacity, as set out in Appendix A
of Exemption order respecting cable broadcasting distribution
undertakings that serve between 2,000 and 6,000 subscribers; and Amendment
to the Broadcasting Distribution Regulations, Broadcasting Public
Notice CRTC 2004-39,
14 June 2004. |
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BDUs in the second stage of the
transition
|
54. |
Once their analog services are removed,
Class 1, Class 2, interconnected Class 3 cable BDUs, as well as exempt
cable BDUs that serve between 2,000 and 6,000 subscribers, would enter
the second stage of the transition. With the release of substantial
bandwidth resources, distribution capacity should no longer be a
constraint that would limit access by Canadian services that meet the
high definition content criteria. Accordingly, once the analog services
have been removed from such BDUs, carriage rights would no longer be
subject to "available capacity" considerations in respect of
HD-transitional licensees that adhere to the high definition content
conditions set out earlier. The obligation to carry these pay and
specialty services would thus be similar to the priority carriage
requirements of section 17 of the Regulations. |
55. |
DTH BDUs do not distribute services in analog
and are therefore currently in the second stage of the transition.
In Public Notice 2003-61,
the Commission announced that it would launch a separate proceeding
to examine the regulatory framework governing the obligations of DTH
undertakings with respect to the carriage of high definition services.
As an interim measure pending completion of that proceeding, DTH undertakings
would be required to provide access for all HD-transitional licensees
that are subject to the high definition content conditions, excluding
Category 2 services. |
56. |
The distribution capacity of multipoint
distribution system (MDS) undertakings is constrained by the limited
bandwidth assigned to them. MDS undertakings are subject to access and
carriage requirements that are applied through the imposition of
specific conditions of licence that take these bandwidth limitations
into account. In view of the spectrum demands of the high definition
services, the Commission proposes to continue this approach. |
57. |
Provided they have a nominal bandwidth
capacity of 550 MHz or more and deliver programming services on a
digital basis, all Class 3 cable BDUs that are not interconnected, and
all exempt cable BDUs that serve fewer than 2,000 subscribers, could
fulfil their obligations to certain specialty services10
by distributing either the low definition11
versions of such services or their upgraded versions
that meet the high definition content conditions set out earlier. This
approach would apply in all stages of the transition. |
58. |
The Commission emphasizes that, for the
purpose of calculating the ratio of majority-language to
minority-language services that a BDU distributes, as prescribed in
section 18 (11.2) of the Regulations or in the applicable exemption
order, the current requirements will remain unchanged. Thus, where a BDU
distributes either an analog or a low definition version of a particular
service, as well as the upgraded version of that service, the two
versions would be counted as one service. |
59. |
The access and carriage regime described
above would not necessarily apply to all new high definition pay and
specialty services12
that the Commission might license in the future, given that the number
of new services licensed could be high. Carriage rights would be among
the issues to be decided at the time of the licensing of such new
services and could range from required carriage to a situation where
carriage would be negotiated between the licensee of the pay and
specialty service and the distributor. |
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Pay-per-view television services
|
60. |
Pay-per-view television programming
services generally provide multiplexed programming to distributors,
meaning that the programming service is distributed to subscribers
across a number of different channels. Section 18(6) of the Regulations
states:
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If a licensee is distributing a pay-per-view service in a
licensed area on more than 10 analog channels, the Commission may
declare one or more channels in the licensed area to be available
channels for the purpose of [section 18(5)].
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61. |
For its part, section 18(5) identifies
those services, namely the specialty, pay television, pay-per-view and,
in certain circumstances, ethnic programming services that, depending on
the official language of the market, must be distributed "to the extent
of available channels." |
62. |
In view of the amount of bandwidth required
to distribute high definition services, the Commission proposes that the
number of digital channels that may be used by a multiplexed high
definition pay-per-view television service, without raising the
possibility that one or more might be declared as "available channels,"
would be restricted to no more than three high definition channels in
all stages of the transition, as compared to the current limit of ten
analog channels specified in section 18(6). The Commission notes that
this would not preclude the existence of multiplexed pay-per-view
services that make use of more than three digital channels. |
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Exceptions to the carriage requirements
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63. |
The current provision in the Regulations
that allows for exceptions to carriage requirements, by way of condition
of licence, would continue. |
64. |
Some Class 2 and smaller cable BDUs do not
yet offer digital services, and cannot be said to have begun the digital
transition. Such BDUs cannot distribute high definition services and
would continue with their current carriage regimes until such time as
they develop digital capacity. |
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The predominance rule
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65. |
Section 6(2) of the Regulations provides
that a licensee shall ensure "that a majority of the video and
audio channels received by a subscriber are devoted to the distribution
of Canadian programming services…." This provision would continue
and, for this purpose, each HD-transitional licensed service would
count as a separate service. This would also be true for upgraded
non-Canadian services. In Public Notice 2003-61,
the Commission stated that it would amend section 6(2) "…to make
it clear, in respect of digital technology, that the upgraded versions
of Canadian and non-Canadian services are counted as distinct services
when determining if the majority of video services received by a subscriber
are Canadian." |
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Channel position
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66. |
Except as proposed below in the section
entitled Distribution and linkage, the positions of HD-transitional pay
and specialty services in distributors’ channel line-ups would not be
subject to regulation. |
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Access rights of existing services
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67. |
The preceding proposals encompass only the
proposed carriage rights of high definition pay and specialty services.
Services that elect not to make the transition to high definition would
retain their current access rights. Furthermore, once a BDU has passed
the benchmark threshold of 85% and the Commission has approved an
application to remove the duplicate analog services, the digital
versions of these services would still retain their access rights, each
to the equivalent of one low definition digital channel. |
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Distribution and linkage
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68. |
Historically, the packaging of analog pay
and specialty services by cable BDUs has generally been determined by
the limits of analog trap technology, the order in which services were
licensed, and various regulatory provisions. |
69. |
For Class 1 and Class 2 licensees, the
distribution and linkage requirements are set out in section 20 of
the Regulations and in Distribution and linkage requirements for
Class 1 and Class 2 licensees, Broadcasting Public Notice CRTC
2004-56, 29
July 2004 (Public Notice 2004-56).
For DTH BDUs, the requirements have been set out in section 40 of
the Regulations and in Linkage requirements for direct-to-home
(DTH) satellite distribution undertakings, Public Notice
2001-89, 3 August
2001 (Public Notice 2001-89).
The requirements for MDS undertakings have been addressed by the
Regulations, by conditions of licence and by Public Notice 2004-56.
It should be noted that the regulatory requirements imposed on distributors
operating in majority English-language markets differ somewhat from
those imposed on distributors operating in majority French-language
markets. |
70. |
Licensing frameworks and decisions have,
over the years, created a number of different carriage options for pay
and specialty services. Two of the more important are the "dual status"
and "modified dual status" provisions, which apply to the distribution
of specialty services by Class 1 cable BDUs. "Dual status" means that,
where carried, a service must be carried as part of the basic service,
unless the programming service agrees in writing to be carried on a
discretionary tier. "Modified dual status" means that, where carried, a
service must be carried as part of a discretionary tier, unless both the
BDU and the programming service agree to carriage as part of the basic
service. |
71. |
While the Commission considers that this
distribution and linkage regime has been a significant factor in the
successful establishment of a healthy pay and specialty sector, a number
of factors, including consumer demands for more purchasing options,
favour a more flexible model. To satisfy these demands, distributors
will wish to exercise all of the flexibility that digital carriage
affords. |
72. |
Further, in the past, the regulation of
wholesale and retail prices by the Commission has been an important
means of framing how services were packaged and marketed by
distributors. However, the Commission’s regulatory regime has changed
and, today, well over 90% of Class 1 BDU subscribers are served by BDUs
whose retail rates are not regulated. |
73. |
Accordingly, the Commission proposes to
adopt a less restrictive set of distribution and linkage rules for
HD-transitional pay and specialty services. Specifically, for these
transitional services, the Commission considers that rules similar to
those currently applicable to DTH BDUs would be appropriate for all
large BDUs. The key change proposed by the Commission involves the dual
status and modified dual status provisions, which currently apply to
Class 1 cable BDUs, but not to DTH BDUs. Under the proposed regulatory
framework, the dual status provisions would not generally be carried
forward for high definition services distributed by cable BDUs. |
74. |
In light of the above, the Commission
proposes that the following distribution and linkage requirements would
apply to DTH BDUs as well as to all Class 1 and Class 2 BDUs in the
first and second stages of the transition, when offering high definition
services: |
|
a) A Canadian HD-transitional pay television service may be
linked in a given discretionary package with no more than five
non-Canadian services, or their upgraded versions, specified in
Appendix A13 of
the List of Eligible Satellite Services.14
In no case may a licensee distribute more than five
non-Canadian programming services linked with Canadian pay
television services, regardless of the number of Canadian pay
television services distributed by the licensee.
|
|
b) Each Canadian HD-transitional specialty service, distributed
within a discretionary package that may include one or more Canadian
specialty and/or pay television services, may be linked with no more
than one of the non-Canadian services or its upgraded version,
specified in Appendix A of the list of eligible satellite services,
excepting Section B of that Appendix.
|
|
c) A licensee may designate one of the U.S. superstations, or its
upgraded version, specified in Section B of Appendix A of the list
of eligible satellite services and distribute the signal of that
superstation within a given discretionary package that may include
one or more Canadian HD-transitional specialty and/or pay television
services.
|
75. |
A BDU licensee is not permitted to offer a
package of services containing only non-Canadian high definition
services, save for the following two exceptions: |
|
a) Any Canadian single or limited point of view religious
programming service, and any non-Canadian religious satellite
service set out in the List of Eligible Satellite Services, may be
offered on a stand-alone digital discretionary basis. Such services
may also be offered in a package with other Canadian single or
limited point of view religious services or with non-Canadian single
or limited point of view religious satellite services. Distributors
are not permitted to offer such services in packages with any
balanced religious service or with any other type of Canadian or
non-Canadian programming service.
|
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b) BDU licensees are not permitted to package an adult
programming service in such a way that subscribers are obligated to
purchase the service in order to purchase any other programming
service, unless it is also an adult programming service. Licensees
are required to take measures to fully block the reception of both
the audio and video portions of any Adult programming service to
subscribers who request that it not be receivable in their home (in
either unscrambled or scrambled mode).
|
76. |
The Commission proposes that these linkage
rules apply equally to DTH BDUs as well as to all Class 1 and 2 cable,
wireline and MDS BDUs. None of the other rules that are currently
set out in Public Notices 2004-56
and 2001-89,
applicable to cable and DTH BDUs, respectively, would be carried forward
for high definition services. For cable BDUs, this would include sections
3 through 5, 7 (b)(iii) and 16 (b)(iii) of Public Notice 2004-56.
For DTH BDUs, this would include sections 3 and 7 (b)(iii) of Public
Notice 2001-89. |
77. |
The reduced distribution and linkage regime
currently in force for smaller cable BDUs and exempt systems would also
apply to high definition services carried on such systems. |
78. |
The Commission invites comment on the
proposals above, and in particular on the question of whether it should
be permissible to link non-Canadian high definition services only with
Canadian high definition services or whether low definition services
could also be included. Further, if the linkage of non-Canadian high
definition services is to be restricted, parties are asked to comment on
how non-Canadian high definition services should be defined or
designated for the purposes of the rules. |
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Exceptions to the distribution and linkage requirements
|
79. |
In the case of a service that is adjudged
to make an important contribution to the Canadian broadcasting system,
an argument could be made that the dual status or other linkage
provisions applicable to its analog version should be transferred to the
high definition version should this be determined essential to the
continued viability of the service. |
80. |
Parties who consider that the Commission
should carry the dual status or other specific linkage provisions
forward for a particular HD-transitional service are asked to set out
what regulatory criteria should be used and how such criteria should be
measured and applied in making such a determination. |
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Carriage of non-Canadian services
|
81. |
In Public Notice 2003-61,
the Commission determined that authority to distribute an analog non-Canadian
service would also include authority to distribute the high definition
upgraded version of the service, provided that not less than 95% of
the video and audio components of the two versions of the service
were the same, exclusive of the commercial messages and of any part
of the service carried on a subsidiary signal. The Commission also
indicated that it would review this determination in the present proceeding.
|
82. |
In addition, the Commission must determine
the regulatory framework under which it will evaluate applications to
add new non-Canadian high definition pay and specialty services that
have no analog or low definition digital counterpart services to the
lists of eligible satellite services. |
83. |
The Commission considers that, in a
market-driven transition without an imposed deadline, the entry of
non-Canadian high definition services, whether they are new services or
upgraded versions of existing services, could provide an important
incentive for Canadian pay and specialty services to upgrade their low
definition analog and digital services to high definition, and spur
innovation and creativity in the development of new Canadian high
definition services. New non-Canadian high definition services could
also make attractive packaging partners for Canadian services. |
84. |
The Commission considers that the market
impact of a new non-Canadian high definition service would likely depend
on a number of factors, including the programming genre of the
non-Canadian service and whether or not there were Canadian services
with which it would be partially or wholly competitive. The market
impact would also depend on the penetration of high definition
receivers. Although the penetration of such receivers is currently
limited, it will no doubt grow over time. In addition, there may be a
concern that non-Canadian services might consume limited distribution
capacity that Canadian services may need. |
85. |
Taking the above into account, the
Commission is of the view that, in the interest of speeding the digital
transition, BDUs should have the means and the regulatory flexibility to
create attractive packages of high definition services. |
86. |
Accordingly, the Commission proposes to
follow its current practices when considering requests to add new
non-Canadian high definition services to the lists of eligible satellite
services. The competitive aspects of any new non-Canadian high
definition services, including those related to the high definition
format, would be addressed at the time that the request is made to add
the non-Canadian services to the lists. |
87. |
With respect to upgraded versions of
non-Canadian services, the Commission proposes to give the same degree
of latitude as it gives Canadian services in terms of their
non-duplicated programming. Therefore, a non-Canadian high definition
service containing a maximum of 14 hours per week of programming that is
unduplicated on its analog or low definition digital counterpart service
would be authorized for carriage under the same terms as the counterpart
service. |
88. |
In addition, as noted in Public Notice 2003-61,
the Regulations will be amended to clarify that, where a non-Canadian
analog service was added to a distributor’s channel line-up before
6 May 1996, either the upgraded version or the analog version of that
service, at the distributor’s option, will receive grandfathered carriage.
The other version will be considered a post-1996 service. |
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Wholesale rates
|
89. |
A number of licensed analog specialty
services have basic wholesale rates that have been approved by the
Commission. Historically, the wholesale rate established for a service
was intended to recover for the program provider the costs incurred to
acquire and promote its programming, deliver this programming to
distributors, and ensure a fair return on its investment. The retail
rates charged in turn by a BDU to its subscribers serve to recover its
distribution costs, promotional and other expenses, and also to provide
it with a fair return on investment. As noted above, however, Class 1
BDUs representing well over 90% of all subscribers in Canada that are
served by such undertakings have retail rates that are not regulated by
the Commission. These undertakings are free to raise their basic and
discretionary rates within the limits set by a competitive marketplace. |
90. |
From a regulatory perspective, establishing
the initial benchmarks for what would be an appropriate wholesale rate
for the high definition version of a specialty service would be a
complicated exercise and would involve an extensive public process.
Given that few households are currently capable of receiving high
definition services, the initial audiences having access to any high
definition service would be relatively small. Bandwidth expenses would
depend on spectrum availability and opportunity costs. High definition
program rights may be another issue that would have to be addressed when
setting rates. At the end of the day, however, because relatively few of
the larger cable BDUs remain rate regulated, any wholesale rate that
might be set for an HD-transitional service would have an indirect
impact, at best, on the retail prices paid for the service by consumers. |
91. |
Given these considerations, the Commission
is of the view that it would be preferable if the wholesale rate for
each high definition service was set by negotiations between the
parties, in which any wholesale rate approved by the Commission in
respect of a current analog or low definition digital service would be
but one, albeit important, consideration. |
|
Digital migration
|
92. |
In Call for comments on the establishment
of rules to govern the distribution of specialty services on the basic
service of fully digital cable undertakings, Broadcasting Public
Notice CRTC 2002-48,
16 August 2002 (Public Notice 2002-48),
the Commission sought comments on the rules that should govern the
distribution of specialty services on the basic service of those cable
BDUs that distribute programming to subscribers exclusively via digital
technology. |
93. |
The record of that proceeding clearly
demonstrated that issues related to the migration of analog programming
services to digital distribution need to be explored in a broader
context. In particular, a full consideration of these issues would
provide important regulatory certainty to broadcasters and distributors
who must be able to develop business plans for the longer term.
Accordingly, as indicated at the outset of the present notice, the
Commission intends soon to issue a further public notice announcing its
determinations with respect to the establishment of rules to govern the
distribution of specialty services on the basic service of fully digital
cable undertakings, and calling for further public comment on the issues
mentioned above. |
94. |
Until such time as the Commission rules
otherwise, the existing distribution and linkage rules will continue to
apply to the carriage of the low definition analog and digital pay and
specialty services. |
|
Technical quality
|
95. |
In Public Notice 2003-61,
the Commission noted that, while technology is evolving, the term
"high definition" would encompass both the 720p and 1080i
picture formats, as defined by the Advanced Television Systems Committee
in its A/53 digital television standard. For the purposes of this
public notice, and as clarified below, the 720p and 1080i line formats
in that standard will continue to define "high definition"
for the purposes of transmission and distribution. |
96. |
The Commission considers that the quality
of the audio and video is of major importance in the transition of pay
and specialty services to high definition. For this reason, the
Commission clarifies the definition of the term "high definition" to
exclude certain methods of reformatting video images. Specifically, low
definition images can be converted to images that may meet the
definitions in A/53 through line-doubling techniques or through the use
of algorithms that stretch a 4:3 picture to fill a 16:9 screen. Images
converted in this manner will not, however, be deemed to be high
definition because they would not contain the detailed video information
that gives high definition its unique quality. |
97. |
Furthermore, high definition picture
formats do not by themselves guarantee the highest picture quality. For
example, the digital compression of a signal may not change the format
(i.e., the number of lines), but if taken too far, may introduce picture
degradation that could result in disappointment to viewers who have
purchased expensive high definition receivers and displays. |
98. |
The Commission believes that program
providers and program distributors bear equal responsibility for the
technical quality of the programming that is delivered to viewers
through the distribution chain, beginning with the production of
programming in high definition and ending with its display on high
definition sets. |
99. |
In Public Notice 2003-61,
the Commission required that program signals should be of the same
quality and in the same format as those received by the BDU, without
any degradation. The Commission considers that this provision should
apply to the signals of high definition pay and specialty services,
as it does to over-the-air signals. |
100. |
The Commission further considers that pay
and specialty service providers, like over-the-air broadcasters, should
ensure that the transmission of ancillary data accompanying their
programming does not decrease the quality or quantity of high definition
programming.15 |
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Simultaneous substitution
|
101. |
BDUs may carry out simultaneous substitution
requests from licensees of specialty services, in accordance with
section 30 of the Regulations. In Public Notice 2003-61,
the Commission extended the regime of substitution rights for over-the-air
broadcasters to high definition services, but with the additional
principle that the quality of the signal of the service making the
substitution request must be the same as or higher than the quality
of the signal to be replaced. The Commission proposes to also apply
this provision to the signals of high definition pay and specialty
services, in cases where BDUs carry out simultaneous substitution. |
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Call for comments
|
102. |
The Commission invites comments that
address the proposed policy framework set out above, as well as any
issues or questions relating to its implementation, taking into account
any differences that exist between distribution technologies. Parties
may also wish to advance other proposals that they believe would better
meet the objectives set out in the Broadcasting Act. The
Commission will accept comments that it receives on or before 5
November 2004. |
103. |
The Commission will not formally
acknowledge comments. It will, however, fully consider all comments and
they will form part of the public record of the proceeding, provided
that the procedures for filing set out below have been followed. |
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Procedures for filing comments |
104. |
Interested parties can file their comments
to the Secretary General of the Commission by using ONE of the following
formats: |
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-
Intervention/Comments form
available from the Commission’s web site by indicating and
selecting the public notice number under the Decisions, Notices
and Orders section
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OR
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OR
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- by mail to
CRTC, Ottawa, Ontario K1A 0N2
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OR
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105. |
Submissions longer than five pages should
include a summary. |
106. |
Please number each paragraph of your
submission. In addition, please enter the line ***End of document***
following the last paragraph. This will help the Commission verify that
the document has not been damaged during transmission. |
107. |
The Commission will make comments filed in
electronic form available on its web site at
www.crtc.gc.ca but only in the
official language and format in which they are submitted. Such comments
may be accessed in the Public Proceedings section of the CRTC web
site. Copies of all comments, whether filed on paper or in electronic
form, will also be placed on the public examination file. |
108. |
The Commission encourages interested
parties to monitor the public examination file and the Commission’s web
site for additional information that they may find useful when preparing
their comments. |
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Examination of public comments and related documents at the following
Commission offices during normal business hours
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Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage, Room G-5
Gatineau, Quebec K1A 0N2
Tel: (819) 997-2429 - TDD: 994-0423
Fax: (819) 994-0218 |
|
Metropolitan Place
99 Wyse Road
Suite 1410
Dartmouth, Nova Scotia B3A 4S5
Tel: (902) 426-7997 - TDD: 426-6997
Fax: (902) 426-2721 |
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405 de Maisonneuve Blvd. East
2nd Floor, Suite B2300
Montréal, Quebec H2L 4J5
Tel: (514) 283-6607
Fax: (514) 283-3689 |
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55 St. Clair Avenue East
Suite 624
Toronto, Ontario M4T 1M2
Tel: (416) 952-9096
Fax: (416) 954-6343 |
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Kensington Building
275 Portage Avenue
Suite 1810
Winnipeg, Manitoba R3B 2B3
Tel: (204) 983-6306 - TDD: 983-8274
Fax: (204) 983-6317 |
|
Cornwall Professional Building
2125 - 11th Avenue
Room 103
Regina, Saskatchewan S4P 3X3
Tel: (306) 780-3422
Fax: (306) 780-3319 |
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10405 Jasper Avenue
Suite 520
Edmonton, Alberta T5J 3N4
Tel: (780) 495-3224
Fax: (780) 495-3214 |
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530-580 Hornby Street
Vancouver, British Columbia V6C 3B6
Tel: (604) 666-2111 - TDD: 666-0778
Fax: (604) 666-8322 |
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Secretary General |
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This document is available in alternate
format upon request and may also be examined at the following Internet
site: http://www.crtc.gc.ca |
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Footnotes:
As with over-the-air digital television services, the balance of the
programming would be composed of material in low definition formats.
|