Appendix 3

Fall Launch of Specialty Services
CRTC Postmortem

Opening Statement

Canadian Association of Broadcasters
November 24, 1997

The CAB appreciates the opportunity provided by the CRTC at this Post-mortem to present the views of its specialty service members, including those owned by Baton/CTV, CanWest Global, CHUM, Télé-Métropole and WIC.

At the outset, we too wish to note with approval the considerable shared industry success of this fall's new specialty launch. Together we have launched 4 new French-language services and 10 new English-language services, with another one to come in January. This is by far the largest single launch of new Canadian services in the history of Canadian broadcasting. By all indications, it is a hit with Canadians. First week numbers put the new English-language services at close to a 7% share of viewing, and the French-language services at close to 5%.

We are here today, not to emphasize problems, but to build on that success. We are here today with one singular over-riding objective. And that is to start working with the Cable industry and the CRTC to have the 6 remaining Canadian dual status licenced services launched as soon as possible.

These 6 remaining English services were approved on the same basis as 6 of the services launched in October, 1997, and unlike the two third-language services, they are subject to the access rules. All 6 of these services are represented by the CAB. Together they will create over 250 new jobs and spend as much as $300 million on Canadian programming in the first 7 years after launch. There can be no more important business arising out of the fall launch, than the unfinished business of launching these Canadian services.

In order to know where we are going, we have to know where we've been. From our perspective, therefore, the starting point for this Post-mortem is the March 1995 Information Highway Proceeding, and the three major proceedings since then; the Access Hearing, Specialty Hearing, and the BDU Hearing. In the Information Highway Hearing, CAB TV members unanimously agreed that the most important priority going forward was access. We made access the first cornerstone of our Four Cornerstone Canadian Programming Initiative. What we said then could equally be said now, "this Hearing is about ensuring that Canadian choices find their place in a world dominated by U.S. programming. This Hearing is about building a highway for Canadians - a new TransCanada Highway not U.S. one."

Fast forward to the Access Hearing. We asked that access rules be enshrined in regulation. That they be law. The CRTC agreed. We asked that there be a rule on channel repositioning. The CRTC agreed to introduce a 60-day advance notice provision.

The May, 1996 Specialty Hearing. Given uncertainty about the rollout of digital boxes, the Commission built an incentive into its decisions. If cable "implemented digital" by September 1, 1999, then they could wait to launch all but 4 of the new dual carriage English-language services on digital then. If not, they would have to make room for everyone on analogue, subject to "available channel capacity".

At the Hearing the cable industry said they only had room for 3 or 4 new channels. The CAB and industry players said there were closer to 8 available channels. The CRTC agreed and licensed 24 new services. Cable-owned services were licenced on the expectation of no preferential treatment. Finally, at the BDU Proceeding in October 1996, CAB pressed for a rule against undue preference, in lieu of case-by-case expectations. The CRTC agreed.

The legal framework for all these decisions will be set down in Broadcast Distribution Undertaking regulations to be released in the next month or so. The importance of these laws cannot be overstated.

For the first time, we will have law in 4 critical areas:

1. Implementing Digital

The Commission will have clearly defined the minimum threshold for carriage of the remaining 6 specialty services. Cable systems that are unable to meet this threshold by September 1, 1999, will be required to carry the remaining 6 services on analogue.

2. Available Channel Capacity

The Commission will have legally enshrined its definition of available channel capacity as including exempt programming services other than legislative channels and non-Canadian programming services carried after May 6, 1996.

3. Undue Preference

This regulation will permit the Commission to deal with any complaints of any preferential treatment, and enforce its expectations in this regard.

4. 60-Day Notice of Channel Repositioning

This rule will now be enforceable.

CAB is confident that these regulations will minimize misunderstandings in the future, and provide the legal basis necessary for launching the remaining 6 licensed services. There is always room for improvement. But a law in place is better than two in the works.

This legal basis is supported by the clear priorities and intentions of the CRTC in licensing Canadian specialty services, and the business interests of cable and other distributors.

In licensing the new specialty services, the Commission was guided by 3 key policy objectives:

  1. increasing the Canadian programming menu;
  2. maintaining a strong and viable system; and
  3. consumer choice.

The carriage approach adopted by the Commission -- licensing some for immediate analogue carriage, others for carriage by September 1, 1999, and two on a purely discretionary basis - recognized the inability to predict the pace of technological change and the need to maintain flexibility.

Nevertheless, the direction was clear:

"In order to ensure a strong Canadian presence in an environment that is rapidly moving towards expanded channel capacity and choice, the Commission has decided to authorize as many Canadian niche programming services as possible..."

What no one expected was what has in fact happened:

These events have made the Commission's distinction between "core" and "other" English services unnecessary. Analogue capacity is not so limited after all. With analogue re-builds, cable companies are creating more and more analogue capacity while they await their move to digital. In fact, we understand that many cable systems will have up to 25 new analogue channels by next September. The real issue is what that capacity should be used for.

While the access rules give priority to Canadian services, cable systems have used unexpected flexibility to carry more foreign and exempt channels.

Surely, this is not the way to meet the Commission's objectives of more Canadian programming and more Canadian services. If room can be found for foreign and exempt services, room must be found for Canadian services - and much sooner than September 1, 1999.

We believe that good faith negotiations between the cable industry and the 6 remaining services will result in a plan that allows all of these services to launched long before September 1, 1999.

We would like the Commission's support in this endeavour. We propose 3 elements.

First, we would like your endorsement of our goal to launch the 6 remaining services as a priority.

Second, we would ask that the cable industry voluntarily put a moratorium on the launch of any other non-Canadian or exempt services until the remaining 6 licensed services have launched.

Third, if within a reasonable time frame of 3-4 months, we are unable to agree on the terms of the launch, we would ask the Commission to be ready to get involved - perhaps by holding another industry roundtable such as this one.

Finally, we would be remiss if we did not raise the issue of the upcoming Specialty Hearing. We are extremely concerned that the Commission is contemplating a delay in the hearing. The response to lack of clarity in the distribution market should be to proceed forthwith with the hearing on more specialty services - not to hold back. If we wait, as new channel capacity becomes available, it will again be taken up by more unlicensed foreign and exempt services. Seventy-one potential services took time and energy to put together applications, and we are prepared to accept the risks of an uncertain environment. We strongly urge the Commission to hear these applications, in February, as planned, or as soon as possible thereafter.

While working toward the launch of new services, there will, of course, be other matters to address, most notably:

  1. How do we maximize the carriage of French-language services outside Quebec, and English-language services within Quebec?
  2. How do we better understand the distribution environment the 71 new applicants will be licensed into. What are the current expectations for increasing analogue capacity and rollout of digital?
  3. How do we rethink the role of U.S. cable services in the Canadian system? How do we ensure a more direct contribution? How do we avoid back door entry on the eligible list when Canadian partnerships are possible.

We urge the Commission to consider a Proceeding and/or roundtables on these matters within the next 6 months.

Once more, we emphasize that by working together, the cable industry and broadcasters have successfully launched 15 new Canadian services. Our shared priority is to build on that success by ensuring the remaining 6 Canadian dual carriage services launch as soon as possible.

The CAB and its members look forward to having business discussions with Vision.com and the cable industry on how to get the 6 services launched.

Clear, strong law set by the Commission creates a necessary framework we need to work to that end. The cable industry's voluntary undertaking not to carry new foreign or exempt services, prior to the launch of the 6 services, will be a clear indication of their good faith. Absent industry agreement within 3-4 months, however, we will need the Commission's involvement to ensure the 6 services get up and running.

We see this Post-mortem as an important first step, and thank the Commission for this opportunity to present our views.