Star Choice battles Telesat for return of four “disputed” transponders on F1

The CRTC is expected to rule this week on an urgent appeal by Star Choice Communications Inc to stop Telesat Canada from handing over four Anik F1 transponders to three other Canadian broadcast customers. According to Star Choice, the dispute threatens to significantly reduce the number of channels it will have available for newly licensed digital TV services, unless the commission enacts a little known provision of the Telecommunications Act that would prevent Telesat from taking back the transponders. Assuming a compression ratio of 8:1, Star Choice could end up with 189 video channels when F1 goes into commercial service in February – instead of the 220 it had anticipated. The issue is as unusual as it is complicated. It’s also one that Star Choice contends will seriously undermine its ability to compete against Bell ExpressVu, which through its Nimiq DBS satellite could end up with far more satellite capacity. Star Choice accuses Telesat of giving "unlawful preferential treatment" to itself, and its affiliates. BCE Inc owns both Telesat and Bell ExpressVu. The telecom giant also now owns NetStar Communications Inc, which stands to gain two transponders that had been reserved for Star Choice. In the high stakes satellite TV game, how many transponders you have is your biggest advantage. As Star Choice notes in its Nov. 29 Part VII application to the CRTC: "The key determinant of the competitiveness of a DTH service in the minds of distributors, retailers and consumers is the number of channels offered." If the CRTC sides with Telesat, the BCE group would control 35 Ku-band transponders on Nimiq and Anik F1, while Star Choice would be "frozen" at 25 F1 transponders, the complaint states. "This stark difference in overall satellite capacity available to Bell ExpressVu and Star Choice would exist for Anik F1’s entire projected life of fifteen years," the Shaw Communications-owned company writes. Anik F1 launched Nov. 21. Star Choice says it had contracted for 29 Ku-band transponders on F1. On Oct. 20, Telesat sent letters to NetStar, Chum Ltd and Alliance Atlantis Communications Inc inviting them to lease the four transponders. The companies are expected to resell some of the capacity to third parties, and use the remaining channels to launch new Category 1 and 2 digital TV services, which they won licences for on Nov. 24. Star Choice says having programmers control the capacity precludes its company from carrying other digital services. "Star Choice would lose the ability to select and package the services to be offered to its subscribers on those transponders," it writes. "Instead, the choice and number of services would be made by CHUM, NetStar/CTV/BCE and Alliance Atlantis … Star Choice would effectively be forced to deliver a full slate of Category 2 and other services selected by these broadcasters, whether or not consumers are interested in receiving them." CTV, which owns NetStar, takes issue with what it describes as Star Choice’s self-portrayal as "the protectors of programming services, small- and medium-sized cable operators, subscribers and the public interest". In a Dec. 14 letter to the CRTC in response to Star Choice’s application, CTV executive VP Robin Fillingham says Star Choice only has its own private commercial interests at heart. The company warns that if the CRTC sides with Star Choice, "those third parties whom the applicants have said they are seeking to protect will not be guaranteed a better end result when it comes to negotiating with the applicants regarding critical matters such as equitable access, reasonable terms of carriage and competitive satellite service rates." The CRTC has little choice but to rule quickly on this dispute. Star Choice says it was forced to suspend its Christmas marketing campaign since it no longer knew how many new channels it would be offering in February. The issue isn’t an easy one for the commission. Telesat Canada is forborne from regulation, although the CRTC does have the power under Section 28 of the Telecommunications Act to intervene if it determines that satellite capacity is being assigned in a way that compromises broadcast policy objectives. Star Choice insists Telesat is doing just that. Telesat’s view of the facts In its Dec. 8 reply to the commission, Telesat says the CRTC shouldn’t intervene in what it describes as a "private commercial dispute between two contracting parties". It argues that there was no breach of contract because a "claw back" provision allowing a limited number of Ku-band transponders to go to other users was always provided for in its original contract with Star Choice (CCR, Nov. 18/98). "Under the terms of this agreement, the claw back provision can be exercised at any time up until Telesat accepts delivery of the satellite from the manufacturer … (currently estimated to occur on or around February 1, 2001)," writes Robert Power, Telesat’s VP regulatory matters. He points out that the CRTC also approved this transponder agreement in Telecom Decision 99-6 (CCR, June 2/99). "Star Choice negotiated and signed the Transponder Agreement with full knowledge that it was guaranteed the rights to Ku-band transponders on Anik F1, with the final allocation of further Ku-band transponders totally dependent on how many were taken through the claw back provisions…," Telesat writes in its intervention. Telesat takes issue with several of Star Choice’s arguments. The DTH company’s assertion that it would be "frozen" at 25 transponders "is a gross distortion of the actual situation," Telesat maintains. It points out that Star Choice can negotiate with Chum, NetStar and Alliance Atlantis for additional capacity since all four companies are using compatible digital video compression technology. Telesat notes that similar deals were done with the Anik E2 satellite between distributors and programmers without CRTC intervention. Power adds that Star Choice failed to mention its interest in acquiring nine to 19 Ku-band transponders in 2003 on Anik F2. "Star Choice will have close to the same amount of capacity in total as Bell Express-Vu within the next few months and will leap frog ExpressVu in terms of available capacity once Anik F2 is launched in 2003." He also argues that the CRTC shouldn’t intervene in these types of capacity issues. "It is to be expected that the amount of capacity that one DTH service provider will have at any one time relative to another will be constantly changing…" Star Choice doesn’t dispute the existence of the "claw back" provision, but seems to suggest that Telesat has waited too long to exercise it.

Star Choice battles Telesat for return of four “disputed” transponders on F1

Broadcast | December 21, 2000

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