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ARCHIVED -  Broadcasting Decision CRTC 2002-143

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Broadcasting Decision CRTC 2002-143

Ottawa, 21 May 2002

CTV Television Inc.
Across Canada

Application 2001-0646-0
Public Notice CRTC 2001-106
11 October 2001

Wholesale rate for Talk-TV

1.

The Commission approves, bymajority vote, the application by CTV Television Inc. (CTV) to amend the licence for the national specialty television service known as Talk-TV in order to authorize the licensee, by condition of licence, to charge each exhibitor of Talk-TV a maximum wholesale rate of $0.07 per subscriber per month, when the service is carried as part of the basic service.

Background

2.

Following a competitive process, the Commission, in Introductory statement - licensing of new specialty and pay television undertakings, Public Notice CRTC 1996-120, 4 September 1996, announced the licensing of one new pay television service and more than 20 new specialty services, including Talk-TV. The Commission licensed this service in Talk-TV - Approved, Decision CRTC 96-612, 4 September 1996. It is distributed on modified dual status, meaning that it must be provided on a discretionary basis, unless both the distributor and service provider agree that it be carried as part of the basic service.

3.

Talk-TV was licensed as part of the group of specialty services that the Commission determined would not have a right to carriage by broadcasting distribution undertakings (BDUs) until the earlier of the deployment of digital technology by a distributor, or 1 September 1999. Subsequently, the Commission authorized an extension of the deadline for implementation of the service to 1 September 2000. Talk-TV began operation on that day. Since then, a number of distribution undertakings have added it to their basic service.

4.

Most of the other specialty services licensed in 1996 had included a provision for a wholesale rate in their applications, which was used by the Commission to establish a condition of licence authorizing a wholesale rate for carriage as part of the basic service. The original licence application for Talk-TV projected that the service would be distributed exclusively on a digital discretionary basis and, therefore, did not forecast any basic service subscriber revenue and did not propose a monthly wholesale rate.

The present application

5.

At present, basic service subscribers receive Talk-TV free of charge. CTV filed this application because it wishes to recover subscription revenues for distribution of its service on the basic service of BDUs.

6.

In support of its application, CTV submitted revised subscriber and revenue projections over a seven-year period.

7.

According to CTV's revised projections, Talk-TV would have approximately 2.8 million more subscribers at the end of seven years than originally expected. CTV stated that this increase would be a result of the addition of customers who would not subscribe to Talk-TV as a discretionary service, but who would receive it as part of their basic service package.

8.

While CTV forecasted an increase in subscribers, its revised projections predicted lower revenues over seven years. It cited a substantial drop in the rates that digital services can command as a major factor in reducing the revenues that Talk-TV would be able to generate. CTV pointed out that the original licence application approved in 1996 projected a monthly rate of $0.70 for distribution of Talk-TV on digital cable, and $0.35 for distribution on direct-to-home (DTH) systems. In comparison, CTV noted that current rates are significantly lower: $0.20 for digital cable and $0.15 for DTH systems. The applicant claimed that a slower roll-out of digital services than had been anticipated in 1996 would also contribute to a loss of revenues.

9.

CTV stated that it expected to be able to sell more advertising because Talk-TV has a larger audience base as a result of being more widely distributed on the basic service. In addition, the applicant projected lower operating and depreciation expenses than expected in 1996.

10.

CTV claimed that, even after taking into account the additional advertising revenues, the lower expenses and the basic service wholesale rate requested in its application, the overall effect of the lower digital rates and slower roll-out in the digital sector would lead to a decline of $14 million in Talk-TV's revenues over the original projections.

Interventions

11.

The Commission received 370 interventions in support of this application. In its comment on the application, the Canadian Cable Television Association submitted that it is appropriate for Talk-TV to have an authorized basic wholesale rate and that the rate proposed by the applicant is reasonable.

12.

Mr. Gregg Taylor submitted an intervention that opposed the carriage of Talk-TV on the basic service. In response, CTV stated that Talk-TV is a valuable addition to the basic service and that its proposed rate is among the lowest charged for specialty services.

The Commission's analysis and conclusion

13.

The Commission notes that, while the original licence application did not propose carriage on the basic service or a basic service rate, Talk-TV is now, in fact, being distributed as part of the basic service of a number of BDUs. The Broadcasting Distribution Regulations (the Distribution Regulations) allow distributors to recover the cost of providing a specialty service from subscribers when the service is distributed on the basic service. This rate is considered a "pass-through portion" to be paid to the licensee of the specialty service in accordance with sections 45 and 53 of the Distribution Regulations. Accordingly, a majority of the Commission considers that authorizing a wholesale rate is appropriate in the circumstances.

14.

The Commission considers that the basic monthly fee should be as affordable as possible for consumers. The Commission has analysed the financial documentation provided by CTV. The rate proposed by the applicant is lower than the average wholesale fee authorized for other specialty services licensed in 1996 and other rates charged for basic service. A majority of the Commission considers that approval of the applicant's proposal will provide Talk-TV with adequate revenues to fulfil its obligations and remain viable while allowing distributors to recover from subscribers the cost of providing the service when it is carried on the basic tier. For all these reasons, the Commission, by majority vote, has determined that the proposed wholesale rate of $0.07 per subscriber per month is justified.

Secretary General

This decision is to be appended to the licence. It is available in alternative format upon request, and may also be examined at the following Internet site: www.crtc.gc.ca

Date Modified: 2002-05-21