Following the receipt of applications by Bell Media Inc. and Rogers Broadcasting Limited, the CRTC calls for comments on its policy regarding Canadian programming expenditure (CPE) over-expenditures for conventional television and specialty services from large broadcast groups, as well as on the impact that approval of those applications would have on the Commission’s CPE policy.
The Commission had set out a new conceptual model with respect to Canadian programming expenditures for large private English-language ownership groups that hold conventional and specialty (Category A and Category B) television licences. In that model, large ownership groups are allowed to flexibly allocate the aggregate of their required CPE across individual programming undertakings, while ensuring that the full aggregate amount is spent. In addition to encouraging effective business judgments, this ensures that there is no reduction in overall spending on Canadian programming. The conceptual model was implemented by the Commission.
The Commission outlined the criteria for qualifying services under the new group-based policy. As such, qualifying services for the group-based approach were limited to conventional television stations, Category A services, and Category B services with more than one million subscribers. Moreover, as these qualifying services would now have the flexibility to allocate the aggregate of their required CPE across individual programming undertakings, the Commission established specific requirements with respect to over- and under-expenditures on CPE.
Prior to that specialty and pay television services were permitted to carry forward all CPE over-expenditures of the amounts that are spent on Canadian programming in one broadcast year against CPE requirements in any of the remaining broadcast years of the same licence term.
In its decision the Commission stated that an authorization to carry forward over-expenditures (and to make up under-expenditures) would continue to be a useful tool for large private English-language ownership groups (i.e., designated groups) to manage CPE requirements, particularly in the case of multi-year projects. It also considered, however, that an under- or over-expenditure level of 5% would be sufficient for groups to manage CPE requirements, especially given that the designated groups would also be granted the flexibility to count CPE on one qualifying service towards the CPE requirements on another service. In that same decision, the Commission also clarified, amongst other things, that over-expenditures in any broadcast year could be used as a credit against CPE requirements in subsequent broadcast years. Moreover, the Commission indicated that requirements relating to CPE as well as to spending on programs of national interest (PNI) were to be considered minimum spending requirements.
The Commission had imposed a condition of licence relating to the above on the various qualifying conventional television and specialty services affiliated with the Bell Media Inc. and Rogers Media Inc. broadcasting ownership groups. As per the above-noted determinations, Bell Media’s and Rogers’ qualifying conventional television and specialty services currently receive a credit for expenditures that exceeds the minimum CPE requirements, which is limited to 5% of minimum expenditures and which must be used in the year after which the expenditure is made.
The Commission has received applications by Bell Media and Rogers seeking to amend the broadcasting licences for their various qualifying conventional television and specialty services so that the abovenoted 5% “cap” on CPE over-expenditures as well as the obligation to use that over-expenditure in the subsequent broadcast year be deleted.
Noting that the group-based policy was intended to give greater flexibility to licensees in their support of Canadian programming, Bell Media submitted that the Commission’s determination on CPE overspending was not consistent with that policy and with its historical practices. It further submitted that the current 5% cap on CPE over-expenditures and the obligation to use that over-expenditure in the subsequent broadcast year limited its ability to commission the best projects as they become available, which it argued is necessary for the program commissioning cycle. As an example, Bell Media indicated that, due to the high cost of the rights to the Olympic Games and the fact that CPE requirements are based on the previous year’s revenues, overall CPE will significantly exceed the required CPE amount, even when including the 5% over-expenditure. It further noted that the issue of a cap on CPE over-expenditures was not discussed at the public hearing for group-based licensing and that licensees therefore did not have the opportunity to comment on or respond to this issue.
Rogers submitted that the 5% cap will limit its ability to operate its Citytv conventional television stations since, in its view, the cap does not offer sufficient flexibility, and given that some of its expenditures were already committed to large budget productions during the first broadcast year of the licence term. Moreover, Rogers stated that the Commission’s rationale for the 5% cap does not apply to it, given that it was not one of the designated groups identified during the group-based licence renewal process, and given that, unlike the designated groups, it is not able to allocate CPE and PNI expenditures between services.
The Commission considers that the applications submitted by Bell Media and Rogers are essentially requests to amend part of the Commission’s group-based policy relating to the implementation of CPE over-expenditures, and that the interpretation of the conditions of licence in question could have an impact on a number of parties, including the other groups that operate under similar conditions and the production industry, which benefit from these CPE and PNI requirements. As such, the Commission considers it appropriate to launch a public process in order to consider the impact that approval of the applications by Bell Media and Rogers would have on its policy regarding CPE over-expenditures.
The Commission seeks comments on the following questions:
Are the proposals regarding the elimination of the 5% cap on CPE overexpenditures and of the obligation to expend that over-expenditure in the subsequent broadcast year, as set out in the applications by Bell Media and Rogers, necessary in order to allow services to benefit from the CPE flexibility granted in the group-based licensing policy?
What are the impact/benefits of the current policy regarding CPE on the Canadian broadcasting industry?
Does the over-expenditure cap limit the ability of broadcasters to expend capital on large-scale programs and events?
What is most appropriate way to monitor compliance as it relates to CPE overexpenditures?
What impact would the above-noted proposal by Bell Media and Rogers, as set out in their applications, have on the program commissioning cycle, and on the production sector in general?
In the event the Commission does not approve Bell Media’s and/or Rogers’ applications, how should the Commission address the implementation of its policy regarding a cap on CPE over-expenditures?
The Commission invites comments on the questions set out above. The Commission will accept interventions that it receives on or before 7 August 2012. Parties may file replies to the matters raised in the initial interventions. The deadline for the filing of replies is 17 August 2012.
The new Canadian Radio-television and Telecommunications Commission Rules of Practice and Procedure, set out, among other things, the rules for content, format, filing and service of interventions, and the procedure for filing confidential information and requesting its disclosure. Accordingly, the procedure set out below must be read in conjunction with the Rules of Procedure and its accompanying documents, which can be found on the Commission’s website under “CRTC Rules of Practice and Procedure.”
In accordance with the Rules of Procedure, a document must be filed with, not merely sent to, the Commission by 5 p.m. Vancouver time (8 p.m. Ottawa time) on the date it is due. The Commission takes no responsibility for postal delays and will not notify a party whose submission is received after the deadline date. Late submissions will not be considered by the Commission and will not be made part of the public file.