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ARCHIVED - Broadcasting Circular CRTC 2004-461

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Broadcasting Circular CRTC 2004-461

  Ottawa, 14 June 2004
 

To all cable broadcasting distribution undertakings (BDUs) that serve between 2,000 and 6,000 subscribers, and to all satellite relay distribution undertakings, pay television services and specialty television services that receive affiliation payments from exempted cable BDUs

 

Transition rules for broadcasting licence fees

1.

In 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 (the Exemption Order), also issued today, the Commission determined that a cable broadcasting distribution undertaking (BDU) that meets the criteria set out therein will become exempt from licensing following the receipt and the approval by the Commission of an application to revoke its broadcasting licence.

2.

The exemption of cable BDUs that serve between 2,000 and 6,000 subscribers will affect the collection of Part I and Part II broadcasting licence fees, as provided under the Broadcasting Licence Fee Regulations, 1997 (the Regulations).
 

Transition rules related to exempted cable BDUs

3.

Section 3 of the Regulations stipulates that every licensee shall pay Part I and Part II licence fees annually. An exempted cable BDU qualifying under the Exemption Order will cease to be a licensee as of the date that its licence is revoked (the exemption date) and, therefore, it will not incur any new Part I or Part II fees after that date. In addition, an exempted cable BDU will not be required to complete a new licence fee return form after the exemption date. However, it will remain responsible for the payment of any outstanding CRTC licence fees and accumulated interest that exist as of the date of the licence revocation.
 

Transition rules related to satellite relay distribution undertakings, pay television services and specialty television services that receive affiliation payments from exempted cable BDUs

4.

The definition of "fee revenue" set out in section 1 of the Regulations prevents the same revenue from being assessed twice (the secondary recipient rule). A licensee that is the first recipient pays licence fees on fee revenue, including the revenue that is paid out to another licensed undertaking (the second recipient). The second recipient does not pay licence fees on the revenue received from the first licensed recipient unless it is received from the Canadian Broadcasting Corporation for the sale of air time.

5.

This rule usually operates between cable BDUs on the one hand, and satellite relay distribution undertakings (SRDUs), pay television services, and specialty television services on the other. For example, some pay television services do not pay any licence fees since their entire revenue is received from licensed recipient cable BDUs. Some specialty programming services pay fees only on that portion of their revenue that is directly derived from advertising.

6.

Before the revocation of its licence, a cable BDU pays licence fees on the entire amount of subscription revenues it receives, although part of these revenues might have to be paid to SRDUs, pay television services and specialty television services. After the revocation of the cable BDU licence, however, the SRDUs, pay television services and specialty television services will become the first licensed recipients of fee revenue. As a result, they will have to report the affiliation payments received from the exempted cable BDUs and pay licence fees on them.

7.

Every September, the Commission sends all broadcasting licensees a licence fee return form on which they must report their fee revenues for the year ending 31 August. A list of all the cable BDUs exempted before 31 August, as well as their exemption date, accompanies the forms sent out to SRDUs, pay television services and specialty television services in any given year. Any SRDU, pay television service or specialty television service that has received affiliation payments from an exempted cable BDU will have to include the payments received since the exemption date in their fee revenues to calculate Part II licence fees (i.e., 1.365% of fee revenues above the exemption limit). The SRDU, pay television service or specialty television service must pay these fees on or before 30 November.

8.

Please consult the table on the transition rules and their potential impact based on different exemption dates of cable BDUs set out in the appendix to this circular. If you have further questions about this circular, please call Arthur Tam, Assistant Director, Financial Operations, at (819) 997-9414.
  Secretary General
  This document is available in alternative format upon request, and may also be examined at the following Internet site: http://www.crtc.gc.ca
 

Appendix to Broadcasting Circular CRTC 2004-461

 

Transition rules and impact based on different exemption dates for cable BDUs

 

Exemption received by cable BDU

Between 1 April 2004 and 31 August 2004 Between 1 September 2004 and 29 November 2004 Between 30 November 2004 and 31 March 2005 Between 1 April 2005 and 31 August 2005
Impact on cable BDU        
         
Part I fees due 1 April 2004 Has to pay Has to pay Has to pay Has to pay
Part II fees due 30 November 2004 Does not have to pay Does not have to pay Has to pay Has to pay
Part I fees due 1 April 2005 Does not have to pay Does not have to pay Does not have to pay Has to pay
Part II fees due 30 November 2005 Does not have to pay Does not have to pay Does not have to pay Does not have to pay
Part I fees due 1 April 2006 Does not have to pay Does not have to pay Does not have to pay Does not have to pay
Impact on SRDUs, pay television services and specialty television services that receive affiliation payments from exempted cable BDUs        
Part I fees due 1 April 2004 No increase No increase No increase No increase
Part II fees due 30 November 2004 based on fee revenues for the year ending 31 August 2004 Will increase (1) (7) No increase No increase No increase
Part I fees due 1 April 2005 based on fee revenues for the year ending 31 August 2004 Will increase (2) (7) No increase No increase No increase
Part II fees due 30 November 2005 based on fee revenues for the year ending 31 August 2005 Will increase (3) (7) Will increase (4) (7) Will increase (4) (7) Will increase (4) (7)
Part I fees due 1 April 2006  Will increase (5) (7) Will increase (6) (7) Will increase (6) (7) Will increase (6) (7)
  1) Will increase because the fee revenues used to calculate the Part II fees for the SRDUs, pay television services and specialty television services will include the affiliation payments received from exempted cable BDUs from the exemption date to 31 August 2004.
  2) Will increase because the fee revenues used to calculate the Part I fees for the SRDUs, pay television services and specialty television services will include the affiliation payments received from exempted cable BDUs from the exemption date to 31 August 2004.
  3) Will increase because the fee revenues used to calculate the Part II fees for the SRDUs, pay television services and specialty television services will include the affiliation payments received from exempted cable BDUs from 1 September 2004 to 31 August 2005.
  4) Will increase because the fee revenues used to calculate the Part II fees for the SRDUs, pay television services and specialty television services will include the affiliation payments received from exempted cable BDUs from the exemption date to 31 August 2005.
  5) Will increase because the fee revenues used to calculate the Part I fees for the SRDUs, pay television services and specialty television services will include the affiliation payments received from exempted cable BDUs from 1 September 2004 to 31 August 2005.
  6) Will increase because the fee revenues used to calculate the Part I fees for the SRDUs, pay television services and specialty television services will include the affiliation payments received from exempted cable BDUs from the exemption date to 31 August 2005.
  7) It is impossible to accurately estimate the percentage increase due to the fact that the CRTC does not have a breakdown of affiliation payments made by cable BDUs to individual SRDUs, pay television services and specialty television services. However, it is expected that the percentage increase would be relatively minor.

Date Modified: 2004-06-14

Date modified: