Canada: CRTC Removes Three-Year Limitation On Pay And Specialty Television Services’ Upgraded High-Definition Feed

In a series of recent licence-amendment decisions, the Canadian Radio-television and Telecommunications Commission (CRTC) has dropped the three-year limitation on upgraded high-definition (HD) feeds of already-licensed pay and specialty services. This change implements the HD regulatory framework first announced in Broadcasting Public Notice CRTC 2008-100. Pay and specialty television services can now apply to offer a HD feed, known as an "upgraded" HD feed, for the balance of their remaining term of licence.

Pay and Specialty Services

Canadian pay and specialty television services include:

• Analog services, licensed between 1984 and 1996, whose analog and digital signals most regulated broadcasting distribution undertakings (BDUs) must make available to subscribers. Analog services are protected against competition from other pay or specialty services within the same genre — such services will not licensed if they are wholly competitive with an analog service.
• Digital Category 1 services, licensed since 2000, whose digital signals most regulated BDUs must make available. Digital Category 1 services are licensed only if they are not wholly competitive with any analog service, but in turn enjoy protection against competition (genre protection) from Category 2 services.
• Digital Category 2 services, also licensed since 2000, who must negotiate with BDUs for carriage.

The HD digital television format is defined for regulatory purposes as one that encodes pictures using at least 720 progressive-scan (non-interlaced) or at least 1020 interlaced lines. The CRTC has stewarded the introduction of HD television into Canada as part of the CRTC's broader approach to digital television, including both over-the-air broadcasting and discretionary services distributed directly through BDUs.

Transitional Undertakings and Upgraded Versions

The CRTC's 2006 regulatory framework for the licensing and distribution of HD pay and specialty services created two ways that pay and specialty services could begin broadcasting in HD. First, they could apply to add an upgraded HD feed of their existing non-HD service by obtaining an amendment to the existing service's conditions of licence. Second, they could apply for a new "HD-transitional licence."

An upgraded HD feed is a relatively straightforward way for existing licensees to offer a HD version of their service in the near term upon making a simple application to the CRTC. Although no minimum level of HD programming is required of the licensee's upgraded HD feed, 95 per cent of the upgraded HD feed's programming must be identical to that of its standard definition (SD) counterpart, and a BDU is not obliged to carry an upgraded HD version. As originally set out, an upgraded HD feed would be authorized only for a three-year period.

An HD-transitional licence was a second option for pay and specialty services seeking to make an HD version available. In exchange for meeting a minimum 50 per cent quota on HD programming during the broadcast day, the licensee gained the right to include on its HD feed up to 14 hours of unique HD programming that did not appear on its SD feed. In addition, the pay or specialty service's HD-transitional version would enjoy the same genre protection and carriage rights as its SD version. This was intended to make the HD-transitional option attractive, particularly to analog and digital Category 1 services: the upgraded HD version could air only 8.6 hours (five per cent of the broadcast week) of unique HD programming, and once an analog or digital Category 1 service's upgraded HD version's three years had run out, that service would no longer enjoy genre protection in the HD format. Only an HD-transitional version, with its mandatory minimum level of HD programming, would allow a service to maintain its protected status indefinitely.

Upgraded Version Wins Out

Following the establishment of the "hybrid" upgraded/transitional HD regime, a number of pay and specialty services applied, and were granted permission, to begin supplying an upgraded HD version. However, none applied for an HD-transitional licence.

Noting this in Broadcasting Public Notice CRTC 2008-100, the framework decision that reclassified analog and digital Category 1 services as "Category A" (must-offer) services, the CRTC decided that BDUs would henceforth be permitted to decide whether they would carry the SD or HD version (or both versions) of a service in order to fulfill their requirement to offer a digital version of that service, rather than be required to offer both versions of a Category A service.

In providing BDUs this flexibility, the CRTC removed one of the key "carrots" that went with the HD-transitional licence. In further deciding not to implement the rules under which an HD-transitional licence could be obtained, the CRTC also appeared poised to eliminate the three-year ramp-up after which services would be required either to program a minimum proportion of HD content, or lose their genre protection.

In a series of decisions amending pay and specialty services' conditions of licence to allow them to offer an upgraded HD version (Broadcasting Decisions CRTC 2009-55,
-207, -286, -287, -288 and -289), licensing such stations (Broadcasting Decisions CRTC 2009-123, -219), or extending their three-year HD authority to a full licence term (Broadcasting Decisions CRTC 2009-342, -343 and -344), the CRTC now appears to have confirmed that, in the absence of an HD-transitional licence to ramp up to, the three-year ramp-up cap would be removed from upgraded HD versions.

Cost of Transport

Although programming services' requirements for phasing in HD content have been relaxed, some of their costs to do so have not. Broadcasting Public Notice CRTC 2008-100 noted that the cost of signal transport for Category A services had been left to the market, but also indicated the "[t]he costs associated with transporting pay and specialty services have become a greater concern due to the increased costs of transporting HD versions of these services."

The CRTC recently concluded a public proceeding on its oversight of the transportation of television services to BDUs, hoping to stimulate greater competition in the signal transport sector. A decision is forthcoming.

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