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ARCHIVED -  Decision CRTC 84-2

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Decision

Ottawa, 5 January 1984
Decision CRTC 84-2
Aim Satellite Broadcasting Corporation
Vancouver, British Co1umbia - 832631600
Following a Public Hearing in Vancouver on 29 November 1983, a majority of the members of the Commission approves the app1ication for authority to transfer effective control of Aim Satellite Broadcasting Corporation ("Aim"), the regional, general interest, English-language pay television licensee serving British Columbia and the Yukon Territory, to Allarcom limited ("Allarcom").
The transfer of effective control of Aim is to be accomplished through the transfer of 80% of the issued and outstanding shares of Aim from two groups of existing shareho1ders, the Spracklin group of eleven shareholders, of which George C. Spracklin holds the greatest number of shares in Aim, and the Castile group, being indirectly comprised of Harold Hine and his family, to Allarcom, the regional, general interest, English-language pay television licensee already serving Alberta.
The Spracklin and Castile groups currently hold 96.4% of the issued and outstanding shares of Aim. The remaining 3.6% of the issued and outstanding shares are held by shareholders who are not party to the purchase agreement. As a result of this agreement, Allarcom would temporarily hold 80% of the shares of Aim, the Castile group would hold 10% and the remaining 10% would be held by the Spracklin group (6.4%) and the other five present shareholders of Aim: Wolfgang Rauball, Judd Cyllorn, Allan Robertson, Elaine Cash and United Health Care Services Ltd. (3.6%).
Allarcom indicated that up to 30% of the issued and outstanding shares of Aim will subsequently be transferred to residents of British Columbia and the Yukon not related to either the Spracklin group or the Castile group. The Commission requires, as a condition of approval of this application, that this commitment be implemented at the earliest feasible date within the term of Aim's licence so that Allarcom's shareholdings in Aim do not exceed 50%.
The Spracklin and Castile groups have entered into a share purchase agreement with Allarcom dated 22 August 1983 which has been endorsed by all of the existing shareholders of Aim. The agreement provides for an immediate adjournment of the legal action which the Spracklin and Castile groups have undertaken against each other since the issuance of the licence to Aim, and for the dismissal of such action by consent should the Commission approve this application.
Upon approval, the Board of Directors of Aim is to be comprised of a clear majority of residents of British Columbia and the Yukon, including George C. Spracklin. All programming investment decisions will be made in the region by the Board of Directors. In addition, Aim has undertaken to estab1ish a seven-member regional Advisory Committee, to be comprised entirely of residents of British Co1umbia and the Yukon, which will make recommendations to the Board of Directors on the use of a production fund to be established by Aim for the production of regional programs.
On 21 February 1983, the Commission issued Decision CRTC 83-115 which initially granted a licence to Aim over three competing applicants to provide a regional, general interest, English-language pay television service to British Columbia and the Yukon Territory. In the decision the Commission stated that, while none of the applications fully satisfied its expectations in the context of its objectives for pay television, it considered that Aim was the best applicant, having regard to the resources, management capacity and experience of each applicant. It also emphasized that in "assessing these applications, the Commission has given careful consideration to the importance, at this time, of licensing a regional, general interest pay television service in British Columbia and the Yukon to ensure that viewers in that region have access to pay television services originating in their region, and to strengthen and expand the regional pay television grid across Canada".
A concern raised at the public hearing by interveners opposing the transfer of control of Aim to Allarcom was the possibility that, given that the transfer arises during the first term of Aim's licence and that the pay television service is not yet in operation, approval of the proposed transfer would compromise the integrity of the licensing process.
In considering this issue, the Commission has laid particular stress on the need to ensure that residents of British Columbia and the Yukon have access to an alternate general interest pay television service without further delay. The Commission notes that this is the third public hearing which has been held since 1981 to consider applications related to the introduction of an alternate general interest pay television service to this region. Strong representations for early service were received each time from interested parties in British Columbia, including the independent production industry. The majority of the independent producers in British Columbia also felt that new applicants for a pay te1evision licence in British Columbia would not be forthcoming if a new call were to be issued at this time.
Aim submitted that the compensation to be paid by Allarcom to the vendors represented the actual costs, including legal expenses, incurred by them as a result of their participation in Aim. In this regard, the Commission notes that, at the public hearing, Dr. Allard speaking on behalf of Allarcom, as the purchaser in the proposed transaction, stated:
 I went to great lengths to make sure that there was no profit to either of the parties in this transaction and that we were, in fact, agreeing to pay no more than the money they had already expended.
In this regard, Aim outlined its efforts to implement its authority noting that meetings with members of the production community were held, consultants and officers hired, office space rented and significant financial expenditures made towards implementation of the service. The applicant argued that the delay in implementation was largely due to unforeseen litigation among the shareholders which exacerbated the financial difficulties of the licensee and was the principal impediment in the establishment of the service. The Commission notes that, pursuant to the terms of the share purchase agreement, this transfer of control will resolve the financial and legal difficulties faced by Aim.
Although Aim has not yet implemented its service, only ten months have elapsed since the licence was granted. In this regard, the Commission notes that it generally took the pay television licensees, with the exception of TVEC, about one year to commence operations.
Furthermore, the financial support and managerial and professional expertise provided to Aim by Allarcom will ensure that the licensee contributes significantly to the development of British Columbia's growing program production industry. Association with Allarcom will also facilitate the realization of the licensee's programming commitments and the immediate effective use of regional creative expertise and resources necessary to achieve high quality Canadian programming.
The Commission has carefully considered all factors associated with the transaction, including the length of time since the licence was granted, the financial arrangements under which the shares are being transferred, the extent to which the licensee has attempted to implement its authority, the reasons for its inability to do so, and the fact that the proposed transfer will occur in the context of a new, not yet established industry characterized by special risks and uncertainties.
In light of all of the above factors, a majority of the members of the Commission is satisfied that approval of this app1ication will not compromise the integrity of the licensing process and is in the public interest.
As noted in Decision CRTC 84-3 authorizing the extension of Allarcom's Alberta signal to British Columbia and the Yukon for an interim period, Allarcom discussed at the public hearing the possibility of raising the requirement related to the total revenues from its overall pay television operations to be expended on Canadian programming from 35% to 45% if it were authorized to use the same transponder, origination centre and uplink facility located in Edmonton to serve British Columbia and the Yukon on a permanent basis. The applicant noted that it would not be financially feasible to achieve this level of expenditures on Canadian programming if separate facilities were to be established in British Columbia.
The Commission recognizes the fact that the use of a distinct transponder and uplink facility to serve the British Columbia/Yukon market might not be financially viable, at least at the present time. Accordingly, it wou1d be prepared to review further the possibility of Allarcom extending its Alberta signal to the British Columbia/Yukon region on a permanent basis, provided Allarcom also increases its overall Canadian programming expenditure requirements from 35% to 45% in addition to maintaining all of the commitments made at the hearing by Aim and Allarcom and outlined on pages 7, 8 and 9 of this decision.
Notwithstanding the above, it is a condition of approval of this application that Aim spend 45% of its total revenues from its pay television operations in British Columbia and the Yukon on Canadian programming in each year over the term of the licence.
In the application for approval of the transfer of control, a revised Promise of Performance was submitted based on a proposal to provide viewers in British Columbia and the Yukon with 168 hours of programming per week, as opposed to approximately 60 hours per week promised in Aim's original application approved by Decision 83-115. Approximately 68% of the programming will consist of feature films, as compared to the 75% proposed in Aim's earlier application, including an increase in films designed specifically for children. The remainder of Aim's programs will include theatrical performances, musical variety specials, children's programs, sports and short films. The Commission accepts the above-noted amendments which are hereby approved.
Further, the Commission requires, as a condition of approval of the proposed share transfer, that Aim implement the following commitments made at the hearing;
- a minimum of $12 million to be expended on the investment in, or acquisition of, Canadian programs during the term of Aim's licence. The Commission expects the licensee to ensure that a large portion of this amount be expended in the British Columbia and Yukon region;
- $1 million to be expended on the investment in Canadian programming during the first year of operation. The Commission expects the licensee to ensure that a large portion of this amount be expended in the British Columbia and Yukon region;
- the establishment of a script and concept development fund to which will be allocated 2.7% of gross revenues from its pay television operation in British Columbia and the Yukon; and the immediate investment of $500,000 in "seed" money for script and concept development;
- the establishment of a program production fund generated from the profits from its pay television operation in British Columbia and the Yukon, through the flow-through concept. 75% of this fund to be invested in regionally-based projects or on projects done in cooperation with other regional general interest pay television licensees;
- the investment of 100% of the Company's profits over the first five years from its pay television operation in British Columbia and the Yukon, in Canadian productions;
- the establishment of a creative development department in British Columbia within 90 days of the issuance of this decision. In this regard, Aim stated: "This department will meet with producers and writers, here in Vancouver, in the region". It "will assess and critique proposals, invest in promising projects, offer a vital link with other regional pay services and other Canadian sources of co-production financing, and beyond that, offer inroads to international markets".;
- the allocation of 6% of the total revenues from its pay television operation in British Columbia and the Yukon for the production or acquisition of regional productions;
- the distribution of a minimum of 8 hours per week of programming produced or acquired in the British Columbia/Yukon region.
- the establishment of a seven-member regional advisory committee to be comprised entirely of residents of British Collumbia and the Yukon, who will make recommendations on the use of the program production fund. Aim stated that the decisions on the use of the fund "will be made in the region by the [AIM] Board of Directors..., a majority of whom are long-time B.C. residents". The advisory committee will engage "in an exchange of ideas with key people in the industry "and will include a representative from the Yukon.";
- to initiate or cause the initiation of six Canadian feature films in the British Columbia/Yukon region during the first year of operation;
- 18% of all the feature films to be distributed to be Canadian;
- children's programming to represent at least 121/2% of the 168 hour-a-week schedule; and
- the restriction of the distribution of adult movies to a maximum of 12 hours per week, representing 7.1% of the total viewing time.
Aim indicated that adult movies will not be scheduled in British Columbia/Yukon region before 12:00 midnight, and confirmed at the hearing that it would not show anything of a pornographic nature, or "anything that is violent for violence's sake." The Commission expects the licensee to adhere closely to this commitment and to establish appropriate standards and practices respecting pay television programming in that regard.
The Commission is satisfied, based on the above-noted commitments and on the ownership conditions of licence, that the regional dimensions outlined in the Introductory Statement to this decision, have been met.
Attached to Aim's licence was the condition that, "except as may be otherwise authorized by the Commission, the licensee shall commence service on or before 1 September 1983". On 26 August 1983, the Commission authorized the extension of the implementation deadline date by six months to 1 March 1984 to allow time for the Commission to consider the application for approval of the transfer of control of Aim. In the application for transfer of control, the parties indicated that approximately eight months would be required to implement the service.
In Decision CRTC 84-3 issued today, the Commission has authorized Allarcom to provide interim service to British Columbia and the Yukon until 30 September 1984. In line with that decision and with the applicants' request, the Commission hereby amends the licensee's condition of licence by extending its deadline for the implementation of service to 30 September 1984 or such further period as the Commission may, upon receipt of a request for extension received before 30 September 1984, deem appropriate under the circumstances.
The Commission acknowledges the numerous interventions received in regard to this application, the large majority of which supported this application.
J.G. Patenaude
Secretary General