Expanded licensing exemption increases regulatory burden for Part IIIs: CCTA

Part III cablecos are the big losers in a CRTC public notice proposing to expand licence exemptions to cable systems of up to 6,000 subscribers. Harris Boyd, senior VP of industry affairs and office of small systems at the Canadian Cable Television Association (CCTA), tells Canadian Communications Reports that the association will use the comment period after the commission issues a proposed exemption order encompassing the changes to advocate for better conditions for Part III systems. They are defined as those systems serving high-cost remote and underserved areas, regardless of their size, where there are fewer than two licensed TV stations receivable over-the-air. Boyd says no Part III system would opt to become exempt under the conditions laid out in Broadcasting Public Notice 2003-23 (CCR Update, April 30/03). He states that the CCTA will likely push for Part IIIs to be considered exempt under the same conditions as exempt Class 3 systems, which serve up to 2,000 subscribers. “There is a downside in this notice for the Part IIIs. What is being proposed here is that they would be subject to the same conditions as the exempted Class 2s. They have been regulated as a Class 3 up until (now), so they don’t have any distribution rules, they don’t have mandatory services, they don’t have simultaneous substitution rules, and they don’t have to have a community channel or contribute to the (Canadian) production fund,” he notes. “To get the exemption, they would have to apply and agree to follow the same conditions as the Class 2s. So while the exemption order is good news for a Class 2 because it lightens certain requirements, it’s actually bad news for the Part IIIs because these are requirements they have never had before. While they could save about 1.35% of gross revenues paid in licence fees, they’d then have to pay out 5% of revenues in support of Canadian programming.” The CRTC’s move to expand licence exemption from Class 3 systems to encompass Class 2 systems not interconnected with large systems and with up to 6,000 subscribers should help mid-sized players better compete with direct-to-home (DTH) satellite TV distributors. They will save financially by not having to pay licence fees, which Boyd estimates to be about $40,000 to $50,000 a year for systems with about 6,000 subscribers. As well, the carriage and linkage requirements of Class 2 cablecos will become more aligned with their satellite TV competitors. While exempt Class 2 cablecos will still have to carry such mandatory channels as the Aboriginal Peoples Television Network (APTN), the French-language TVA network, the Cable Public Affairs Channel (CPAC), and the VoicePrint programming service as the secondary audio program of CBC Newsworld, they will not have to worry about dual status and modified dual status linkage requirements. The exempt systems will still be obligated to follow rules for channels in the official language of the minority (CCR, Feb. 28/01). “…The commission considers that there would be benefits associated with providing Class 2 cable BDUs (broadcast distribution undertakings) with greater flexibility in the packaging of services,” states the CRTC’s public notice. “Accordingly, the commission finds that the distribution and linkage rules applicable to Class 2 BDUs, i.e. those that will be ineligible for exemption under the proposed new exemption order, should be amended so as to be aligned with the requirements applicable to DTH BDUs.” The change is the result of an application by the CCTA asking the CRTC to expand its exemption from licensing of small cablecos with up to 2,000 subscribers to include Class 2 systems unaffiliated with the four largest cable companies and all former Part III cable systems (CCR, July 18/02). To accommodate subscriber growth, the exempt Class 2 systems will be allowed to exceed the 6,000 subscriber threshold by up to 10% or 600 additional subscribers. Intervening in the CRTC process that flowed from the CCTA application, the Canadian Cable Systems Alliance (CCSA) pushed the commission to expand the exemption even further to include independent cable operators, not including the big four, to systems of up to 20,000 subscribers. For the time being, the CRTC has rejected that request, opting instead to go with the CCTA’s suggestion of up to 6,000 subscribers. The expanded exemption would apply to 43 former Part III systems with 156,559 subscribers, and 42 unaffiliated Class 2 systems with 143,829 subscribers, according to the CCTA. But Boyd doesn’t rule out the CCTA applying for another expansion in the exemption. “For sure, we think small Class 1s should have more flexibility. But the commission has taken a small-step approach. It will take many steps before we reach 20,000,” he notes. “Certainly there are some small Class 1s with up to 10,000 subscribers, where they really are no different than the Class 2s in the market they operate in. And there will be some Class 2s who won’t qualify for exemption because they’re interconnected. We will probably propose another round – not immediately, because our priority is to fix this one for the Part IIIs.” The Class 2 systems included in this latest exemption will also benefit due to reduced administrative burdens, and also no longer be obliged to provide service, Boyd notes. “In other words, they will no longer have to build facilities out to the rest of the system if they haven’t already done so. In their licence serving area in the past, if you had already built it out, you had to constantly go back and get a condition of licence (to not have to provide service),” he notes. Under the proposed exemption, Class 2s must perform simultaneous substitution at the request of a local television station, and must contribute 5% of their annual gross broadcasting-related revenues to Canadian programming funds, such as the Canadian Television Fund, or to a community channel. Boyd says the example of the last year and a half with the exempt Class 3s has demonstrated that there are no longer any concerns about copyright fees (CCR, June 7/01).

Expanded licensing exemption increases regulatory burden for Part IIIs: CCTA

News | 05/08/2003 4:00 am EDT

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