CRTC pulls Telus’ BDU applications from hearing as it seeks clarification of concerns

Telus Communications Inc.’s applications for two regional broadcast distribution licences were pulled from a public hearing held this week as the CRTC seeks more information about an issue raised by interveners in the process. Sources at the CRTC would not reveal precisely what aspect prompted delaying hearing the applications, indicating only that more time was needed for further examination. Speculation is that the CRTC wants to examine in more detail the effect of carriage of the out-of-market signals that Telus is proposing. Telus Communications, a subsidiary of Telus Corp., has applied for regional broadcast distribution undertaking (BDU) licences to provide digital TV service over telephone lines in British Columbia and Alberta. The telephone company states that offering a television service will allow it to bundle multiple services and help retain customers (CCR, Sept. 26/02). The applications were slated to be considered at a hearing on November 18, but the commission removed the item in a public notice issued November 8 – Broadcasting Notice of Public Hearing 2002-10-1 (CCR Update, Nov. 13/02). The file is expected to be reassigned to a new hearing, although no date has yet been set. Michael Jurijew, senior regulatory services advisor at Telus, tells Canadian Communications Reports that the telco has not been informed of what aspect of the applications the CRTC wants to delve into in more detail. While expecting more interrogatories from the CRTC soon, he doesn’t think the development will have an overall negative impact on Telus’ chances of receiving approval for the licences. "I think the commission is being diligent with respect to some of the concerns raised by the intervening parties, none of which we note are unique concerns or concerns that haven’t been raised in the past," Jurijew says. Broadcasters oppose out-of-market signal plan Concerns raised by interveners centre around cross-subsidization, the ability of Telus to fulfill all the obligations of a Class 1 distributor, technological limitations that would prevent third-party Internet service provider (ISP) access to its lines, and the distribution of out-of-market signals. The latter issue is particularly contentious for broadcasters. The Canadian Association of Broadcasters (CAB), Jim Pattison Industries and Craig Broadcast Alberta Inc. have expressed concerns over the proposed lineup of distant Canadian and U.S. 4+1 signals that Telus wants the commission to approve as part of its basic and discretionary tiers. The effect of out-of-market signal distribution on local markets is the subject of an ongoing CRTC process (CCR, Oct. 11/01). The issue was also raised by Canadian Heritage minister Sheila Copps when she appeared last year before the House of Commons standing committee studying the broadcasting system. As well, compensation for not having to perform signal deletion of out-of-market television signals is under discussion as a result of an agreement reached between satellite TV operator Bell ExpressVu LP and the CAB (CCR, Oct. 10/02). It is also the raison d’être of a recent request for a proposed licence amendment by Star Choice Television Network Inc. (see article on page 3). Jurijew says Telus has applied for permission to carry distant Canadian signals not available on the incumbent cable systems in the markets it wishes to serve so that it may distinguish its service from existing ones. "The commission has approved similar requests by other distributors in the past (with regard to out-of-market signals)," he notes. "It certainly is a contentious issue as you can tell by the response from the broadcast community. The fact that there is an ongoing process (on the matter) may be one of the reasons that the commission is sort of wanting more discussion of our application. We’re looking at the distant signals perhaps more than MTS or SaskTel were." He adds, "We haven’t come to any agreement with broadcasters. We’re not quite that far along (to negotiate), but we have asked for authorization. The authorization allows us to carry the signals, but subject to signal deletion or concluding an agreement with the CAB." Jim Pattison tells the CRTC in its October 18 submission that commitments by its TV stations to locally produced programming will "be put in jeopardy if the Telus application is approved in full." Jim Pattison operates CBC Television affiliates in Kamloops BC, Prince George BC and Medicine Hat AB. The broadcaster notes that it made a similar complaint against Look Communications Inc. when the wireless cableco proposed serving Kamloops with new out-of-market signals in an MDS licence application a couple of years ago. In rendering Decision 2000-220, Jim Pattison notes that the CRTC agreed that "these (new) signals pose a potential threat to the survival of the local conventional broadcaster through loss of revenue and audience." The broadcaster says it is intervening once again in applications "that will have the same effect: undermining the fragile economic balance that exists for small market ‘local’ television broadcasters." Telus’ proposed list of channels that would be offered in Kamloops and Prince George on a discretionary basis includes CTV Toronto, Global Toronto, Global Winnipeg, CTV Winnipeg, CHUM Victoria, CHUM Vancouver, Global Victoria, the independent Vancouver station KVOS, and KSTW Tacoma. Jim Pattison "strongly opposes" Telus’ request for the addition of these additional stations in the B.C. interior. "These stations are not currently available on the incumbent cable system and would have the effect of further eroding the regional and national advertising revenues of our stations as well as those of the other CBC affiliates in the B.C. interior by creating the opportunity for spill coverage into our market. Why would the regional/national advertiser purchase advertising on the ‘local’ station when they would receive by default ‘spill’ advertising into our market(s) provided by carriage on Telus’ system?" the broadcaster asks in its intervention. It adds, "It should be noted that the incumbent BDU operator, Shaw Cable, does not provide these signals as part of their service, for the various reasons we have stated." The broadcaster also opposes Telus’ request to source its 4+1 signals from Seattle, Washington, and instead wants them to come from Spokane, Washington so that it can "request simultaneous substitution in parallel to the current Monarch Cable lineup of stations." In its October 24 submission, Craig objects to Telus’ request to offer on a discretionary basis a second set of U.S. 4+1 signals and certain distant Canadian signals from eastern and central time zones in each of the communities it serves. "The distribution of these signals from other time zones could adversely affect the local program rights purchased by Craig as a local conventional broadcaster." As it did in a recent decision to grant a BDU licence to Manitoba Telecom Services Inc., both Craig and the CAB want the CRTC to approve the distribution of these signals only if the licensee adheres to program deletion or comes to an agreement with local broadcasters for compensation in lieu of signal deletion. In its November 5 response to Craig, Telus confirms that it is not seeking an exemption from the obligation to provide non-simultaneous substitution upon request, and notes that if granted authorization to carry distant Canadian signals, it would be offering the same sort of services as direct-to-home (DTH) satellite TV distributors. Telus calls Jim Pattison’s concerns over carriage of a second CBC station in Kelowna "over-stated, given the availability today of multiple CBC network feeds for customers in Kelowna who subscriber to DTH service." Cablecos raise several concerns The Canadian Cable Television Association (CCTA) and Shaw question Telus’ ability to meet all the obligations of a Class 1 distributor and the possibility of it cross-subsidizing the rollout of its broadcast service with money from its telephony operations. A similar safeguard was requested by the CCTA and Shaw in the process to consider MTS’ application for a BDU licence (CCR, Jan. 31/02). In that case, the CRTC ultimately granted the licence (CCR, Aug. 15/02). "The fact that Telus will be using one integrated network to deliver residential and business telecommunications, telephony, and broadcast services raises the potential for Telus’ tariffed telecommunications services to subsidize its new broadcast service," Shaw states in its October 24 submission to the CRTC. "It is important that the commission carefully examine the assignment of broadband expenses and related investments to the competitive segment particularly in light of this new network deployment...The safeguard should include the requirement that Telus file with the CRTC financial information describing the assignment of costs associated with its BDU service and the expenses allocated to its competitive and utility segments." In its November 5 response, Telus notes that "the safeguards in place with respect to its activities are far more stringent than those in place with respect to possible cross-subsidization between the incumbent distribution activity of Shaw and the CCTA’s members and their respective high-speed Internet access or programming undertaking activities." The CCTA and Shaw also question whether Telus will be able to fulfill all the requirements of a Class 1 distributor due to technical limitations. The CAB points out that Telus cites cost, technical and market uncertainties associated with the provision of off-air local radio stations. The CAB submits that Telus’ contention that it would be costly to develop interface software to convert the digital audio signal back to analog format for reception on a subscriber’s radio receiver is not sufficient justification for the requested exemption. The CCTA also sounds the alarm that technology constraints may prevent Telus from fulfilling obligations to carry HDTV as it contends that it requires a significant amount of bandwidth beyond the 8 Mbps available through ADSL technology. "To allow entry by a competing BDU employing a technology that, from the outset, is unable to fulfill its BDU obligations would only serve to exacerbate the regulatory asymmetry in the market," the CCTA notes. Telus responds that an exemption from carrying audio services has been granted to other competitive entrants in situations similar to itself, and confirms that it intends to meet all regulatory obligations with respect to the carriage and packaging of channels. The CCTA and Shaw also question Telus’ ability to provide third-party ISP access to its lines, due to the capacity that will be eaten up the broadcast service. The irony of that complaint, given that no third-party ISP is actually currently using Shaw’s cable lines to deliver Internet access to customers, is not lost on Telus. Telus states that its ability to fulfill obligations for third-party IPS access to its lines will not be compromised in any way with the addition of a TV service, and calls "unwarranted" the "overwhelming concern of the CCTA and Shaw for Telus’ customers in the Internet business (i.e. direct competition with CCTA and Shaw)." Alberta producers want benefits The only other concern expressed by an intervener was that of the Alberta Motion Picture Industries Association (AMPIA), which raises funding issues. The AMPIA complains that Telus is offering virtually no benefits to the Alberta production community in which it proposes to offer its TV service. Telus retorts that the concept of a "benefits test" as it applies to BDU licences is a dated concept that is no longer applied by the CRTC when assessing applications. Telus also points out that it’s unrealistic to use its entry into broadcast distribution to address the financial challenges currently affecting the production industry in Alberta. A series of questions raised by the CRTC over the summer and already answered by Telus centred around the authorized capital structure of the company and ownership, including further information on shareholder corporations Clearnet Inc. and 612459 B.C. Ltd. In those interrogatories, Telus also confirmed that it would carry specialty and pay television services in accordance with the distribution and linkage requirements set by the CRTC, and that KSTW-TV would be distributed on a discretionary basis only. At that time, Telus also indicated that it had made changes to its proposed channel lineup, including offering a basic service option that would exclude any U.S. 4+1 signals. Subscribers would have two basic service options; one with U.S. network signals, the other without.

CRTC pulls Telus’ BDU applications from hearing as it seeks clarification of concerns

Broadcast | November 22, 2002

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