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Decision

Ottawa, 8 April 1992
Decision CRTC 92-220
Global Communications Limited
Paris, Bancroft, Owen Sound, Ottawa, Midland, Stevenson, Peterborough, Oil Springs and Toronto, Ontario - 911278000
Fort Erie, Sudbury, Timmins, North Bay, Maxville and Sault Ste. Marie, Ontario - 911279800 - 911280600 - 911281400 - 911282200 - 911283000 - 911284800
Application for Licence Renewal
Following a Public Hearing held in the National Capital Region beginning on 5 November 1991, the Commission renews the broadcasting licence issued to Global Communications Limited (Global) for the television programming undertaking consisting of CIII-TV Paris, CIII-TV-2 Bancroft, CIII-TV-4 Owen Sound, CIII-TV-6 Ottawa, CIII-TV-7 Midland, CIII-TV-22 Stevenson, CIII-TV-27 Peterborough, CIII-TV-29 Oil Springs and CIII-TV-41 Toronto, from 1 September 1992 to 31 August 1996. The licence is subject to the conditions specified in the appendix to this decision and in the licence to be issued.
Global is indirectly controlled by Mr. I.H. Asper of Winnipeg through CanWest Global Communications Corp. (CanWest), formerly CanWest Communications Enterprises Inc. CanWest has the second highest revenues of any broadcaster in Canada. CIII-TV has the highest revenues of all independent television undertakings in Canada. The Commission has decided to grant a four-year licence term which reflects the Commission's concern that, while Global has generally met the requirements of its conditions of licence, it may not have contributed to the Canadian broadcasting system as fully as it should have, given the resources available to it. The Commission also has concerns with certain aspects of Global's practices regarding the acquisition and scheduling of Canadian drama series. These concerns are more fully addressed below.
Decision CRTC 86-1086 required Global to spend a minimum of $5 million per year, together with increases based on the percentage increase in the consumer price index (CPI), on new, first-run Canadian drama, music and dance, variety, children's and documentary programs, and to broadcast a minimum of 200 hours per year of this under-represented Canadian programming, increasing to 250 hours for the 1991/92 broadcast year. With the exception of the children's programming, these programs were to be scheduled between 8:00 p.m. and 11:00 p.m. on Sunday through Friday and between 7:30 p.m. and 11:00 p.m. on Saturday. Further, Global was required to spend a minimum of $12.736 million per year plus CPI increases on the direct and indirect cost of news programs, excluding overhead allocations.
In assessing Global's performance in meeting its requirements regarding broadcasting of programs in the under-represented categories, the Commission notes that fully 50% of the under-represented programming broadcast during the current licence term is children's programming, primarily animation, which is scheduled at appropriate times for that audience. Further, the Commission notes that Global's children's programming for the 1991/1992 broadcast season will consist primarily of re-runs.
Given the narrow margin between the Commission's minimum requirements and the licensee's actual performance, Global was specifically asked at the hearing whether it considered the requirements set by the Commission to be minimum or maximum levels that the licensee should achieve. In response, Mr. Asper cited Global's longstanding shareholders' deadlock as being primarily responsible for the licensee's performance. This matter was only resolved when the Commission approved CanWest's acquisition of control of Global in October 1990. Mr. Asper noted that Global is now free to adopt the CanWest philosophy of treating conditions of licence as minimums rather than maximums. The Commission notes however that Global's projections for the broadcast years 1990/1991 and 1991/1992, following the change of control, do not reflect any significant change in the licensee's approach with regard to its conditions of licence.
In its application and at the hearing, Global described its vision and strategy for a "new Global" for the new licence term. The Commission considers that Global did not provide sufficient evidence concerning its programming proposals to enable the Commission to assess how these plans would be realized during the new licence term. Accordingly, the Commission intends to review Global's progress in implementing its plans for a "new Global", within the four-year licence term.
Programming
In its renewal application, Global made a commitment to broadcast three hours per week of Canadian drama during the new licence term. Under its existing condition of licence, Global has broadcast an average of 1.5 hours per week of first-run Canadian drama between 8 p.m. and 11 p.m., which with re-runs amounted to an average of 3 hours per week of Canadian drama. In the Commission's view, Global's commitment for the new term represents a continuation of the existing level of Canadian drama. However, with Global's commitment to broadcast only 80% of this programming between 8 p.m. and 11 p.m., the licensee's proposal may actually result in a decrease in the amount of Canadian drama broadcast by Global during this peak-viewing time. For this reason, the Commission has decided to require Global to broadcast 3 clock hours per week of Canadian drama between 8 p.m. and 11 p.m. during the first two years of the new licence term. Moreover, the Commission requires Global to increase the amount of Canadian drama broadcast, between 8 p.m. and 11 p.m., to 3.5 clock hours per week during the last two years of the licence term. The condition of licence is set out in the appendix to this decision.
In addition, the Commission notes Global's current practice of scheduling most of its Canadian drama on weekends. The Commission encourages Global to ensure that its Canadian drama programming is more evenly distributed throughout the broadcast week.
Although Global did not make any specific commitments for the new licence term with regard to other categories of under-represented Canadian programming, the Commission notes the licensee's statement that it "wants to remain committed to children's programming and documentaries" and that it "did not foresee a downward trend" in these areas. The Commission notes Global's commitments in this regard and expects the licensee to maintain a balanced, reasonable approach to documentary, music/variety and children's programming.
News and public affairs programming has always been a key part of Global's mandate. Decision CRTC 86-1086 noted that "although the quality of the news programming produced by Global has remained consistently high, its efforts in the area of public affairs specials oriented to the needs and interests of Ontario residents has not been substantial". The Commission therefore expected Global to ensure that its news and public affairs programming respond to the needs and interests of Ontario residents. In Decision CRTC 90-1073, the Commission put Global on notice that it would be called upon at its next licence renewal to demonstrate that it had responded fully to all of the conditions, expectations and concerns set out in Decision CRTC 86-1086, including concerns regarding the quality of Global's regional service. The Commission notes Global's commitment to provide province-wide coverage in its news and public affairs programming during the new licence term.
As a benefit of the 1990 transfer of control to CanWest, Global committed to spend $9 million over 5 years to develop a "strengthened national and international news service" through the establishment and operation of six Canadian and two foreign news bureaux. At the hearing, Global advised that these bureaux are now in operation and that it has purchased two satellite news gathering vehicles. Global also stated that it was committing to maintain throughout the new licence term the incremental expenditures on news programming that were committed over five years as part of the benefits package. This would entail approximately $2 million per year to operate the Canadian and foreign news bureaux.
Decision CRTC 90-1073 also contained the expectation that Global "introduce closed-captioning for at least the headlines and appropriate scripted portions of its newscasts within the remainder of the current licence term". The Commission notes that Global has not only met, but now exceeds, these captioning levels. In response to a joint written intervention by the Canadian Captioning Development Agency and the Ontario Closed Caption Consumers, Global stated at the hearing that it has taken steps to rectify deficiencies and to improve the quality of the station's closed captioning service. Further, Global announced that, as of October 1991, all of its news was fully captioned, with the exception of live interviews and unscripted comments of its on-air personnel.
The Commission expects Global to maintain its current level of closed-captioned programming and to continue to improve the quality of this service.
The Global Canadian Program Investment Fund
A major component of Global's future programming strategy is its commitment to invest $50 million over a proposed seven-year licence term to establish the Global Canadian Program Investment Fund (the Fund) for the purpose of improving the quality and quantity of the station's Canadian programming. In its application, Global indicated that, if it received approval for all of its applications for new transmitters (a matter discussed later in this decision), it would expand the Fund by an additional $20 million, again on the basis of a seven-year period.
As described by Global at the hearing, the Fund will not take the form of an endowment, but will be an annual expense item. The licensee will hire an Executive Director to direct the Fund; final decisions on investments in individual projects will be made on a case-by-case basis by senior CanWest/Global executives. The nature of the Fund's investments will vary from project to project and will include loans, bridge financing and equity participation. Approximately 75% of each year's investments will be alloted to drama. Global will only invest in projects originating from Canadian independent producers and in projects that "reflect the Canadian experience and/or are distinctively about Canada and/or Canadians".
Given that Global's commitment of $50 million to the Fund was based upon approval of its request for a seven-year licence term rather than the four-year term granted herein, the Commission has pro-rated the $50 million commitment accordingly. Further, given that the additional $20 million was predicated on a projected revenue increase associated with all six proposed transmitters rather than the five authorized later in this decision, the Commission has deducted from the $20 million commitment the projected revenues associated with the proposed Maxville transmitter. The Commission therefore expects Global to allocate $9.7 million per year to the Fund.
At the hearing, Global stated that it expected to recoup, largely from foreign sales, approximately 50% of its investments. However, Global has committed to invest the amounts specified regardless of its success in recoupment.
The Commission notes that most of the independent producers who intervened supported Global's proposal for the Fund. The Canadian Film and Television Production Association, (CFTPA), the umbrella organization representing independent producers across Canada, however, raised certain concerns and claimed that, given the option, independent producers would prefer to receive realistic licence fees from broadcasters, rather than equity investment.
In accepting this proposal, however, the Commission has noted Global's commitment that the investments associated with the Fund will not replace or reduce the licence fees paid by the licensee for Canadian programs, including those programs that receive investment funding under this initiative. The Fund, combined with the licensee's other required Canadian programming expenditures, will enable Global to contribute to Canadian production through both investment and reasonable licence fees. The Commission commends Global on this significant commitment to increased investment in Canadian drama. Global has stated that all projects that receive funding will be broadcast by Global.
The Commission considers that investments through the Fund should be incremental to, and be kept separate from, the licensee's other requirements for expenditures on Canadian programming. Furthermore, the Commission advises Global that any losses associated with Fund investments cannot be used to offset any increases in other required Canadian programming expenditures.
The Commission requires Global to file a report with the Commission, on an annual basis, detailing the activities of the Fund. This report, the precise contents of which will be determined following discussions between staff of Global and of the Commission, should contain sufficiently-detailed information regarding projects supported by the Fund to assure the Commission that its programming expectations and Global's programming commitments are being met. The annual report should therefore include certification by Global's external auditors that monies allocated to the Fund are over and above any other Canadian program expenditures required of Global.
Financial Performance and Canadian Programming Expenditures
In Public Notice CRTC 1989-27, the Commission stated that the level of spending on Canadian programing is a vital element in ensuring the quality of Canadian programming. To ensure achievement of the Commission's objective of encouraging the production and broadcast of quality Canadian programming, it announced the establishment of a programming expenditure formula. The Commission also announced that it would impose on the licensees of television stations whose annual total advertising revenues exceeded $10 million a condition of licence that their expenditures on Canadian programs meet or exceed levels established by the programming expenditure formula.
In its renewal application, Global expressed reluctance to accept a condition of licence related to Canadian programming expenditures. However, Global did commit to spend $30 million per year on Canadian programming over and above expenditures associated with the Fund.
At the hearing, Global was given the opportunity to comment on the relevance of the Canadian programming expenditure formula and to propose possible modifications. Among other things, Global suggested that operating profit would be a more appropriate basis for the formula than revenues. Global also expressed a desire for flexibility in meeting annual expenditure requirements under the formula. In addition, Global proposed shortening the length of the programming expenditure formula's averaging mechanism from three years to two years, to enable the licensee to respond more quickly to declines in revenues.
The Commission is of the view that spending remains the most significant quantifiable indicator available to evaluate a licensee's efforts in Canadian programming. Accordingly, the Commission has decided to impose on Global a condition of licence with regard to expenditures on Canadian programming. The condition of licence is set out in the appendix to this decision.
As stated in Public Notice CRTC 1992-28 of today's date, the Commission has decided to introduce modifications to the programming expenditure formula. These modifications will permit all licensees additional flexibility in meeting the Commission's requirements with regard to Canadian programming expenditures.
With respect to Global's suggestion that operating profits rather than revenues be used as the basis for the programming expenditure formula, the Commission notes that operating profits are subject to larger fluctuations from year to year on a percentage basis than are revenues. The Commission also considers that advertising revenues provide a more objective and equitable basis for assessment. Accordingly, the Commission will maintain, as the basis for the programming expenditure formula, growth in revenues, as opposed to growth in operating profits. Futher, the Commission has considered Global's request to shorten the length of the formula's averaging mechanism, and will permit Global to average its revenue growth over two years, beginning in the third year of the new licence term.
For the purpose of Global's condition of licence, the expenditure requirements are based on an average of annual changes in time sale revenues as reported in the licensee's annual returns. Revenues will include all time sale revenues associated with Global's rebroadcasting transmitters and all revenues associated with programs acquired by Canvideo Television Sales (1983) Ltd. (CanVideo), a subsidiary company.
The Commission notes that, in the past, Global's Annual Returns have recorded, as a portion of the licensee's annual advertising revenues, income earned through the sale of air time to CanVideo. CanVideo uses the purchased air time for the broadcast of foreign acquired programming. In the circumstances, the Commission is concerned that the amount of advertising and syndication revenues reported by the licensee may thus have been understated, at least to the extent that the advertising revenues generated by such acquired programming have exceeded Global's revenues from the sale of air-time to CanVideo. Accordingly, the licensee will henceforth be required to report the costs of the programs acquired by CanVideo as well as the advertising and syndication revenues earned by such programming. The Commission will consider these costs and revenues as part of Global's own foreign program costs and advertising revenues.
In its financial projections, Global included as part of its Canadian program expenses an allocation under the category "other", representing 75% of its expenses for such items as salaries and other costs associated with program editing, the production of closed captioning and liaison with independent producers. Such an allocation would represent a change in the licensee's accounting practices. When questioned on this matter at the hearing, Global agreed that it would be more consistent to exclude these expenses from its calculation of Canadian programming expenditures. Accordingly, the Commission requires Global to exclude this category "other" when calculating its Canadian programming expenditures.
The Commission will count, as the base figure for the programming expenditure formula in the first year of the licence term, Global's projected expenditure of $32,033,000 on Canadian programming, less $2,025,000 in expenditures on programming initiatives that had been part of the benefits package in the 1990 ownership transaction. In addition to the expenditures required by the programming expenditure formula, Global will be expected to maintain expenditures on benefits accepted by the Commission in Decision CRTC 90-1073 at the levels specified in its transfer of control application for years one, two and three of the new licence term. As discussed at the hearing, expenditures on these benefits in year three will be added to the calculated expenditures on Canadian programming for year four under the condition of licence formula.
In calculating its Canadian program expenditures under the condition of licence, the Commission will expect Global to exclude any losses on investments made through the Fund.
The Commission notes that Global currently allocates all of the costs of Canadian rights purchases to Canadian programming expenditures regardless of its success in syndicating these purchases. Global, however, reduces the reported costs of foreign rights purchases by the amounts recovered through syndication. When questioned on this practice at the hearing, Global stated that it believed that this was standard industry practice because of the greater risk associated with acquiring Canadian programming.
Global's practice of not netting Canadian programming syndication revenues against Canadian programming expenses is not an industry-wide practice. Moreover, the Commission does not consider this method to be an acceptable accounting practice for regulatory purposes. Accordingly, the Commission expects Global to revise its accounting practices in this regard. Expenditures on Canadian programs, including news, must be net of syndication revenues and/or sales.
In its application, Global made a commitment to allocate an average of $400,000 per year for program development. The Commission notes that this funding is part of the licensee's Canadian programming expenditures and is separate and distinct from the Fund.
The Commission considers that expenditures on program development are important investments in the future of Canada's broadcasting system; it expects the licensee to fulfill its commitments in this regard and to adhere to the Commission's guidelines on development expenditures as set out in Public Notice CRTC 1989-27.
The Commission has also reviewed Global's relationship with independent producers. The Commission notes Global's progress in fulfilling the commitment made as part of the ownership transaction to spend $1 million in licence fees over five years on drama programming produced by "untried creative Canadians". The Commission also acknowledges the working relationship that Global has developed with independent producers, particularly in the production of 30- and 60-minute drama specials and documentaries.
The Commission received approximately 48 interventions from Canadian producers supporting Global's renewal application. While supporting Global's licence renewal, the CFTPA, expressed serious concerns regarding the low licence fees Global pays.
The panel questioned the licensee on its policy in this regard, particularly in light of the fact that programs broadcast on Global and the CanWest stations reach 65% of the English-speaking Canadian population. Although Global responded that it pays a licence fee that "equates to what a producer needs to get his project done", the Commission does not agree that levels of licence fees are bound to this criterion. Further, in the Commission's view, Global's claim that it works with "non-established" Canadian producers more often than any other Canadian television broadcaster, does not lessen the licensee's responsibility to pay reasonable licence fees to all producers.
The Commission notes that Global normally buys national rights for peak-time drama and syndicates these rights to stations located outside Global's service area. The Commission therefore encourages Global to ensure that the licence fees it pays to independent producers are set at reasonable levels. Applications for New Transmitters at Fort Erie, Sudbury, Timmins, North Bay, Maxville and Sault Ste. Marie, Ontario
In the past, the Commission has consistently emphasized Global's primary role and responsibility to provide a regional service to southern Ontario. The Commission notes, however, that Global's service is currently available, via cable, to many Ontario viewers outside southern Ontario and that, over the years, Global has broadened its coverage to include the province as a whole. In the circumstances, the Commission considers it appropriate that Global's mandate be broadened to encompass responsibility to meet the needs and to reflect the concerns of residents of Ontario.
In recognition of this expanded mandate to serve Ontario, the Commission approves the applications to amend the broadcasting licence for the programming undertaking CIII-TV Paris (the originating station), by authorizing the licensee to add transmitters at Fort Erie, Sudbury, Timmins, North Bay and Sault Ste. Marie.
The transmitters will operate with the following technical parameters:
Location/ Channel/ Effective Radiated Power/
Endroit Canal Puissance apparente rayonnée (watts)
Fort Erie 55 14,200
Sudbury 11 25,000
Timmins 13 11,600
North Bay 2 3,400
Sault Ste. Marie 12 1,800
In approving the applications for transmitters at Sudbury, Timmins, North Bay and Sault Ste. Marie, the Commission has taken into consideration Global's commitment to establish a news office and retain a part-time correspondent in northern Ontario, at an estimated cost of $50,000 per year.
Approval of these applications is subject to the requirement that construction of the transmitting facilities be completed and that they be in operation within twelve months of the date of this decision, or where the licensee applies to the Commission and satisfies the Commission that it cannot complete implementation before the expiry of this period and that an extension is in the public interest, within such further periods of time as may be approved in writing by the Commission.
Should the Commission refuse to approve an extension of time requested by the licensee, the authorities granted shall lapse and become null and void upon the termination of the last approved extension period.
The Commission reminds Global that, as stipulated in Decision CRTC 91-838, it is required by condition of licence to encrypt its satellite-delivered signal for the distribution of programming to its television transmitters in Ontario and to other Canadian television stations that hold rights to Global programming. Global is also prohibited, by condition of licence, from broadcasting any local advertising. These conditions of licence are set out in the appendix to this decision.
As for Global's application to add a transmitter at Maxville, the Commission notes the proximity of the official Grade B contour of the proposed Maxville transmitter to the local head ends of cable systems serving subscribers in the greater Montreal area. These same head ends also serve as distant or remote head ends for cable systems serving other parts of the province of Quebec. The Commission is concerned that the proposed transmitter would make it more feasible for cable systems in Montréal to pick up the Global signal for carriage on a discretionary basis, as permitted under subsection 10(1) of the Cable Television Regulations, 1986. Given that Global's mandate extends only to the province of Ontario, the Commission denies Global's request to add a transmitter at Maxville. The Commission acknowledges the more than 430 interventions submitted in support of Global's applications for licence renewal and for new transmitters, as well as the comments by the Alliance of Canadian Cinema, Television and Radio Artists, the National Association of Broadcast Employees and Technicians, and the Association of Canadian Advertisers Inc.
Allan J. Darling
Secretary General
APPENDIX TO DECISION CRTC 1992-220
The broadcasting licence of Global Communications Limited for the licence term 1 September 1992 to 31 August 1996 will be subject to the following conditions of licence and to others contained in the licence to be issued.
1. For purposes of conditions 2 to 5 inclusive, all terms are to be interpreted and all calculations are to be made in accordance with the explanations set out in Public Notice CRTC 1992-28, dated 8 April 1992.
2. Subject to conditions 3 and 4, the licensee shall spend on Canadian programming, at a minimum:
 (a) for the year ending 31 August 1993, the amount of $30,008,000;
 (b) for the year ending 31 August 1994, the amount set out in paragraph (a) above, increased (or decreased) by the year-over-year percentage change for the year ending 31 August 1993, in the total of the station's time sales revenues as reported in the relevant Annual Return;
 (c) for the year ending 31 August 1995, the minimum required expenditure calculated in accordance with paragraph (b) above, increased (or decreased) by the average of the year-over-year percentage changes for the years ending 31 August 1993 and 31 August 1994, in the total of the station's time sales revenues as reported in the relevant Annual Returns; and
 (d) for the year ending 31 August 1996, the minimum required expenditure calculated in accordance with paragraph (c) above, increased (or decreased) by the average of the year-over-year percentage changesii
   for the years ending 31 August 1994 and 31 August 1995, in the total of the station's time sales revenues as reported in the relevant Annual Returns, and then (further) increased by the amount of $ 2,125,000, representing the licensee's benefit expenditures on news programming set out in Decision CRTC 90-1073 for the year ending 31 August 1995, referred to at pages 5 and 11 of this decision.
3. In any year of the licence term, excluding the final year, the licensee may spend an amount on Canadian programming that is up to five percent (5%) less than the minimum required expenditure for that year set out in or calculated in accordance with condition 2; in such case, the licensee shall spend in the following year of the licence term, in addition to the minimum required expenditure for that year, the full amount of the previous year's underspending.
4. In any year of the licence term, including the final year, the licensee may spend an amount on Canadian programming that is greater than the minimum required expenditure for that year set out in or calculated in accordance with condition 2; in such case, the licensee may deduct
 (a) from the minimum required expenditure for the following year of the licence term, an amount not exceeding the amount of the previous year's overspending; and
 (b) from the minimum required expenditure for any subsequent year of the licence term, an amount not exceeding the difference between the overspending and any amount deducted under paragraph (a) above.iii
5. Notwithstanding conditions 3 and 4 above, during the licence term, the licensee shall spend on Canadian programming, at a minimum, the total of the minimum required expenditures set out in or calculated in accordance with condition 2.
6. It is a condition of licence that Global broadcast between 8 p.m. and 11 p.m. the following average number of hours per week of Canadian drama:
1992-933 clock hours
1993-943 clock hours
1994-953.5 clock hours
1995-963.5 clock hours
7. It is a condition of licence that Global not broadcast any local advertising.
8. It is a condition of licence that Global be permitted to use satellite technology to deliver its signal or its programming only to its television transmitters in Ontario and to other Canadian television stations that hold rights to Global programming, provided that the signal is delivered in an encrypted form.
9. It is a condition of licence that Global adhere to the guidelines on sex-role portrayal set out in the Canadian Association of Broadcasters' (CAB) Sex-Role Portrayal Code for Television and Radio Programming, as amended from time to time and approved by the Commission.
10. It is a condition of licence that Global adhere to the provisions of the CAB's Broadcast Code for Advertising to Children, as amended from time to time and approved by the Commission.