August 2016

Regulatory 101(b)(ii)

An Introduction to Regulation

for CCSA Members

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Contents

Preface ........................................................................................................................................... iv

Firing Up the Grill ........................................................................................................................ 1

Some Barbeque Tools .................................................................................................................. 2

Regulatory Bulletins / Quick Takes ...................................................................................... 2

The CRTC Website ................................................................................................................... 2

CRTC RSS Alerts ‘Today’s Releases’ ..................................................................................... 3

CARTT.ca Subscription .......................................................................................................... 3

Regulatory Handbooks ............................................................................................................ 3

Contact CCSA ........................................................................................................................... 3

The Bun .......................................................................................................................................... 4

The Legislation .......................................................................................................................... 4

Some Statutes to Know About ............................................................................................ 4

The Constitution ................................................................................................................... 5

The Broadcasting Act ........................................................................................................... 6

The Telecommunications Act ............................................................................................. 7

CRTC Proceedings ................................................................................................................. 10

CRTC Rules of Practice and Procedure ........................................................................... 10

CRTC Proceedings in General .......................................................................................... 10

The CRTC, CCSA and You ................................................................................................ 12

Broadcasting Regulations ...................................................................................................... 13

The Broadcasting Distribution Regulations .................................................................... 13

Other Broadcasting Regulations ....................................................................................... 17

Small Systems Exemption Order ...................................................................................... 18

Rules for Exempted BDUs Under 2,000 Subscribers ..................................................... 19

Rules for Exempted BDUs Over 2,000 Subscribers ........................................................ 20

Types of Programming Services .......................................................................................... 21

Types of Regulated Canadian Services ........................................................................... 21

Foreign Services Authorized for Distribution in Canada ............................................. 23

A Bit of History ................................................................................................................... 23

Over-The-Top and Video-On-Demand Services ............................................................ 25

The “Talk TV” Decisions ....................................................................................................... 26

New Licence Classes for Programmers ........................................................................... 27

Elimination of Genre Protection and Nature of Service Rules .................................... 28

Elimination of Access Rights ............................................................................................ 28

Implementation of “Skinny Basic” ................................................................................... 29

Packaging Flexibility – Small Package and Stand-Alone Distribution ....................... 30

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The Wholesale Code ........................................................................................................... 31

The Television Service Provider Code ............................................................................. 32

The Community Channel ...................................................................................................... 34

Telecommunications Rules ................................................................................................... 37

Some More History ............................................................................................................ 37

Types of Telecom Providers .............................................................................................. 39

The Importance of Facilities .............................................................................................. 40

A Definition – Telecommunications Service................................................................... 41

General Rules and Mechanisms for Telephone Service Providers .............................. 41

Obligation to Serve ........................................................................................................ 41

Forbearance ..................................................................................................................... 42

Telecommunications Basic Service .............................................................................. 43

The Wholesale Regime – It’s All About Broadband ................................................. 44

Internet Traffic Management – Usage-Based Billing and “Throttling” ................. 47

Price Cap Regulation ..................................................................................................... 50

Costing Studies ............................................................................................................... 50

Tariffs ............................................................................................................................... 51

Contribution Regime ..................................................................................................... 51

CRTC Data Collection System (DCS) .......................................................................... 52

ILEC and SILEC Rules ....................................................................................................... 53

CLEC Rules .......................................................................................................................... 53

Registration ..................................................................................................................... 54

CLEC Obligations .......................................................................................................... 55

Model Agreements and Tariffs .................................................................................... 57

Notification ..................................................................................................................... 57

The Copyright Act .................................................................................................................. 59

Payment of Royalties .......................................................................................................... 59

Notice-and-Notice for ISPs ................................................................................................ 60

Break Time ............................................................................................................................... 61

The Beef ....................................................................................................................................... 63

What Channels Do I Have To Carry? .................................................................................. 64

Exempted Analog-Only Systems (Assumed Under 2,000 Customers) ...................... 64

Exempted Systems Under 2,000 Customers that Distribute in Digital ....................... 65

Exempted Systems that Serve 2,000 – 20,000 Customers (Anglophone) .................... 66

Exempted Systems that Serve 2,000 – 20,000 Customers (Francophone) ..................... 68

Exempted Systems that Serve 2,000 – 20,000 Customers (Quebec Francophone) ....... 70

Licensed Systems (Anglophone) ...................................................................................... 72

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Licensed Systems (Francophone) ..................................................................................... 75

Licensed Systems (Quebec Francophone) ......................................................................... 78

CLEC Obligations - A More Detailed Table ....................................................................... 81

Copyright Primers for CCSA Members .............................................................................. 86

Copyright Liability for Cable Systems Serving More Than 2,000 Subscribers .......... 87

Small Cable System Copyright Payments ..................................................................... 100

Certified and Proposed Copyright Tariffs That Apply to Cable Operators Serving More Than 2,000 Subscribers .......................................................................................... 106

Tariffs Not Yet Certified (i.e. currently no payment obligations) ............................. 110

The Condiments ....................................................................................................................... 112

Ketchup – Some Messy Stuff that Won’t Stay in the Bottle ........................................... 112

Customer Transfer Rules ................................................................................................. 112

Support Structures ............................................................................................................ 113

Mustard – Some Telecom Issues with a Bite .................................................................... 114

CISC .................................................................................................................................... 114

Telecom Complaints Commissioner .............................................................................. 115

Relish – Some Things that Make You Green .................................................................... 116

Emergency Alerting ......................................................................................................... 116

Described Video ................................................................................................................ 117

Advertising Loudness ...................................................................................................... 118

The Cheese ................................................................................................................................ 119

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Preface

Hey there, CCSA Members! Most of you will know that, in 2014, we published a regulatory primer for you called “Regulatory 101”. This document is an update to that primer. It’s designed to take into account some of the fundamental changes to the communications regulatory regime that have happened since 2014. Much of what is in this document you have seen before. Our advice is: “Read it again. It won’t hurt your head too much and, maybe, you’ll pick up something new and helpful.” Since 2014, the CRTC has undertaken major reviews of its broadcasting and telecommunications regulatory policies. On the broadcasting side, the “Let’s Talk TV” was a comprehensive review in which “everything was on the table”. We think the CRTC did a pretty good job of this. In particular, the CRTC has taken measures to reduce the historical protections that were given to programmers to support development of a Canadian cultural industry. Gradually, the CRTC is promoting competition among programmers. That should result in less duplication and better quality programming. It should also give you much more flexibility to offer your customers what they want. We’ll see. We’ve added a section to this document to tell you how that all works. We’ve left in the description of the existing rules and the history of how those rules came to be. The change currently in process is a gradual one, based on programmer licence renewals through 2018. So some of those old rules remain will apply for a while yet – you still need to understand them. On the other hand, the new Wholesale Code is effective now. That’s a huge win for you and should be a great protection from being beaten up by the big guys. We’ve also added some stuff about the rules that apply to Over-The-Top video services (basically, none) and, importantly, new rules that apply to “hybrid” Video-On-Demand services like CraveTv and Shomi. This is a big change that will deeply affect the competitive environment in which you operate.

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The CRTC has been conducting a similar proceeding on the telecommunications side – you might call it “Let’s Talk Broadband” – essentially to define what the telecommunications “basic service” should be. The key issue here is whether broadband service should be part of the basic telecommunications service offered to Canadians and, if so, what speeds will be required. Unfortunately, we are still awaiting the CRTC’s policy decision on that one. We’ll just have to update you next time around. On the telecommunications side, we have added a number of sections that describe how the provision of telecommunications wholesale services is regulated. It’s all about broadband and we know wholesale access to bandwidth is a critical issue for you. This is the world you live in now. Hopefully, these sections will help you to understand it better and find ways to get the bandwidth you need at reasonable prices. You may notice that we have not covered the regulation of mobile wireless telecommunications. Although we know you want to be, the simple fact is that, to date, there are very few of you in that business. When that changes, we’ll add new sections to cover that area or regulation. This guide is meant to be fun. We wanted to re-work our barbeque metaphor but, frankly, there is just too much else to do right now. So, this time around, take the burger we grilled for you last night, chuck it in the microwave and dig in! We’ll just have to see what we can cook up for you next time! Enjoy! All the best, Chris

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Firing Up the Grill

We get a lot of questions about regulatory stuff from CCSA members like you. We often find, when answering such questions, that the people asking may not understand some of the basic regulatory environment. We tend to assume, when we use terms like “BDU” or “Category C Specialty” or “interrogatory”, that you understand us. But, we fear, what you may actually hear, when talking about these things with us, is something like this:

Indignor quicquam reprehendi, non quia crasse compositum illepedeve putetur, sed quia nuper, nec veniam antiquis, sed honorem et praemia posci.

Or, just nothing at all. This guide is not a detailed review of the rules that apply to you and what you have to do to meet them. To do that, we would have to make this document (a) way too long; and (b) completely incomprehensible. We might as well just hand you a few thousand pages of acts and regulations and wish you good luck. We will try to give you some simple guides to the applicable rules where we can. But the real purpose of this document is to give you some background that will help you understand the rules and procedures that apply to you. We like to use the analogy of a pegboard. You can’t hang your tools on it until you have the pegboard itself and some hooks arranged on it. An understanding of the general regulatory environment should give you some hooks for hanging the detailed rules in a way that makes sense to you. So this is a regulatory introduction for beginners. If you just got hired and told to “do regulatory” or if you’re in a small company and just don’t have the time to deal with detailed regulations, this is where you start. It’s summer and we’re in full barbeque mode here in New Brunswick. So we decided to grill this up for you in the form of a nice, juicy hamburger. Enjoy!

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Some Barbeque Tools

So the grill’s warming up but . . . it can get pretty tricky flipping those patties with your bare fingers. So some tools might be useful. Here’s a few. There are several ways you can stay informed regarding regulatory issues:

1. ‘CCSA Regulatory’ Bulletins 2. Monthly ‘CCSA Quick Take’ distributions 3. The CRTC website 4. CRTC alerts on new issues 5. A Cartt.ca Subscription

Regulatory Bulletins / Quick Takes

CCSA communicates most of our Regulatory items with you via two avenues:

• CCSA Regulatory Bulletins and

• CCSA Quick Takes

If there’s something that requires your attention – or if there’s specific information we need from you - we’ll be sure to inform you via a ‘CCSA Regulatory’ bulletin.

Our ‘CCSA Quick Takes’ distribution is another way we communicate regulatory items with the membership. This monthly email message provides a quick review of high-level activities taking place within each of the CCSA departments.

If you are not currently receiving the ‘CCSA Regulatory’ & ‘CCSA Quick Take’ notices, please contact Cheryl Mangusso at cmangusso@ccsa.cable.ca to be added to these distribution groups.

The CRTC Website

The CRTC Website also provides a wealth of information. Check it out at http://www.crtc.gc.ca/eng/home-accueil.htm.

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CRTC RSS Alerts ‘Today’s Releases’

Sign-up to receive email or RSS feeds on the CRTC Newsroom page by visiting: http://www.crtc.gc.ca/eng/media.htm

CARTT.ca Subscription

CCSA provides members and their employees a free subscription to Cartt.ca (www.cartt.ca), the industry's news leader. Cartt.ca is the place where those working in cable, radio, television and telecom are provided breaking news, features and opinion. This free subscription was launched to members in November 2005 and is a bulk agreement between CCSA and Greg O'Brien, Editor and Publisher of Cartt.ca (Cable Radio Television Telecom).

To add your name to the CCSA/Cartt.ca subscription, please contact Cheryl Mangusso at cmangusso@ccsa.cable.ca.

Regulatory Handbooks

If you’re going to be doing a fair bit of regulatory work or you’re just interested, the law firm McCarthy Tetrault publishes some really good books on broadcasting, telecommunications and other relevant laws and regulations. The Canadian Broadcasting Regulatory Handbook has all the broadcasting statures, regulations and CRTC policies along with good notes that help explain things. The Canadian Telecommunications Regulatory Handbook does the same thing on the telecommunications side; that is, for telephone and Internet services. The set also includes a summary of case law called Communications Law and the Courts in Canada and, as of 2016, two new volumes, the User’s Guide to Canadian Copyright Tariffs and the Canadian Spam, Telemarketing and Privacy Handbook. We couldn’t live without these books, especially the first two. They come out every two years and can be purchased, for a couple of hundred bucks, from McCarthyTetrault: call 416-362-1812.

Contact CCSA

When in doubt, you can always give us a call. Please contact Chris Edwards at cedwards@ccsa.cable.ca or 506-849-1334 Ext. 211.

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The Bun

The Legislation

Some Statutes to Know About

As a communications company, you operate in a highly regulated environment. That means your business can be – and often is – directly affected by decisions made by politicians and, especially, bureaucrats (like CRTC Commissioners). Lots of statutes apply to you but there are two main ones that affect you most directly. Those are:

• The Broadcasting Act for anything you do in the TV world;

• The Telecommunications Act for anything you do in the telephone and internet service provider world.

Both of those Acts are administered by the CRTC. We’ll come back to them shortly. In addition, you are affected by the Copyright Act. That Act, which is administered by the Copyright Board of Canada, is all about paying content creators (“rightsholders”) for your use of their creative products. Copyright primers that have been developed for you are included in the “Beef” section of this guide. In your dealings with your customers, you also need to pay attention to privacy and anti-spam legislation. The federal privacy law is called the Personal Information Protection and Electronic Documents Act or PIPEDA. In very basic terms, it requires you to have a policy that covers what customer information you collect and how that information can be used. Your customers must be able to see that policy and must be given the opportunity to consent to your use of their personal information as set out in your policy. So you need a mechanism to do those things. The so-called Canadian Anti-Spam Legislation or CASL, governs the use of “commercial electronic messages” that are directed to consumers. Here, we are talking primarily about emails you may send to your customers or prospective customers. As with the privacy law, consent is a key requirement. So, if you are sending out batch emails, you must give the addressees an opportunity to either “opt in” or decline to receive your messages and you must give people who subscribe to your messages an opportunity to

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“unsubscribe” from your mailing list. A related set of rules, the CRTC’s Unsolicited Telecommunications Rules, gives consumers similar protections in relation to unsolicited phone calls from you. If you operate any sort of outgoing call centre function, you need to comply with those rules. These privacy, anti-spam and unsolicited calling rules are all about protecting Canadians, as citizens and consumers, from harassment and improper use of their personal information by commercial businesses like yours. As such, the various enforcement bodies – primarily the CRTC and the Privacy Commissioner – enforce the rules quite vigorously. The penalties for non-compliance can be severe. If you are not complying with those rules, we strongly recommend that you engage your own lawyer to get you onside with them as soon as possible. Finally, you need to be aware of the Competition Act, which is administered by the Competition Bureau. That Act is all about protecting consumers from the negative effects of nasty things like misleading advertising, price-fixing and collusion. While this law is not likely to be a big part of your daily business, you should at least be aware of the rules that govern how you can advertise your products and services.

The Constitution

Before we wade into the individual statutes, let’s take a quick step back. Canada’s supreme law is its constitution. A major part of the constitution has to do with the division of federal and provincial powers. For example, it defines civil and property rights as falling within provincial powers: generally the Feds don’t get to tell the provinces what to do in that area. A number of more “national” subject matters are defined by the constitution as falling under the federal powers. They include things like banking, railways and, you guessed it, communications and broadcasting. The language of the constitution refers to federal and provincial “undertakings”. A bank is a federal “undertaking”. So is a broadcasting company. When you hear a term like “Broadcasting Distribution Undertaking” (or BDU, for short), that’s where the language is coming from.

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Your company may be incorporated under the laws of your province or territory. Nonetheless, when it provides a broadcasting or communications service, it is acting as an “undertaking” that is subject to the applicable federal laws, including the Acts we have mentioned above.

The Broadcasting Act

All CCSA members distribute broadcasting services; that is, TV channels like Global News, TSN and The Movie Network. In doing that, you act as a federal “undertaking” and your activities are governed by the Broadcasting Act. The Broadcasting Act is what we call “cultural legislation”. It requires the Canadian broadcasting system to be “effectively owned and controlled by Canadians” (i.e. not by Americans) and it says that the system shall be “a public service essential to the maintenance and enhancement of national identity and cultural sovereignty.” The system is required to serve and reflect all Canadians in a way that respects cultural, linguistic and other social components of Canadian society. Lots of big words there! Section 3 of the Act sets out a number of similar high-level objectives for the broadcasting system. There are a couple of key points to be made here. First, Parliament has given the CRTC the responsibility and the authority to supervise the broadcasting system so that the objectives of the Act are met. The CRTC has no choice in this: it must, by law, meet those objectives. Second, it is those high level cultural objectives that drive all of those detailed carriage rules that complicate your lives. The broadcasting system must reflect Canada’s aboriginal heritage so some of you must carry APTN. The broadcasting system must reflect Canada’s official languages so some of you must carry one minority-language service for every 10 services in the majority language of your market. And so on. Regarding the “public service” aspect of the broadcasting system, a former version of the Act referred to broadcasting undertakings that “make use of radio frequencies that are public property”.

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That concept is a key to understanding how the CRTC thinks about broadcasting. That is, as a broadcasting distributor, you operate within a system built on spectrum that is public property. In the CRTC’s mind, you therefore enjoy a privilege in operating as a broadcasting distributor. In exchange for that privilege, you owe certain obligations to ensure that the system works well for the Canadians who own it (the public, not Bell). That is why you continually see the CRTC making you do things like contribute to media production funds, pass through Described Video and implement emergency alerting capabilities. From the CRTC’s viewpoint, you owe those things to the public. Another key feature of the Broadcasting Act, as compared to the Telecommunications Act, is actually what it does not contain. That is, it does not have detailed, well-constructed procedural rules. As a result, CRTC proceedings under the Broadcasting Act tend to be quite loosely governed – sometimes it feels like the CRTC and the parties to a proceeding are making up the rules as they go. We’ll get into that more deeply later but, as a quick example, while a telecom proceeding allows parties to ask each other formal questions called “interrogatories” and to actually cross-examine other parties at a hearing, the Broadcasting Act does not have corresponding rules. Similarly, the Broadcasting Act does not have some of the powerful tools – such as fining powers and the authority to award legal costs and other “interim” remedies – that the Telecommunications Act includes. As a result, the CRTC often finds itself without the real “teeth” it needs when parties misbehave in the broadcasting sector. While the CRTC has the power to award, suspend and revoke broadcasting licences – and it is a criminal offence to broadcast without a licence – revocation of a licence is a very “blunt” instrument and the CRTC hardly ever uses that power.

The Telecommunications Act

Most CCSA members are Telecommunications Service Providers (TSPs) and/or Internet Service Providers (ISPs). Both of those activities are governed by the Telecommunications Act. If the Broadcasting Act feels like it was dreamed up by a bunch of liberal arts majors (it was) then the Telecommunications Act feels more like it came out of the Math

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Department. That is because the underlying histories and purposes of the two Acts are completely different. The Telecommunications Act is economic regulation. It actually grew out of the old Railway Act because, in the early days of communication by telegraph, it was CN and CP that carried that traffic on wires that ran along their railway line properties. While the Broadcasting Act is concerned primarily with cultural content, the Telecommunications Act is concerned primarily with carriage of communications traffic between points. The content of that traffic is largely irrelevant. The underlying concept is that the ability to communicate – by telegraph, telephone or, more recently, over the Internet – is an essential service to all Canadians. If you can’t watch “Duck Dynasty” anymore, that won’t kill you. If you can’t get that 9-1-1 call through, well, that’s a different matter. Most telecommunications providers, then, are called “carriers”. It’s important to understand that we’re not just talking about telephone companies here. Cable companies can be carriers too: it’s about the services you offer using your own networks, not the type of technology or network you use. A telecommunications provider that actually processes traffic across its own networks or “facilities” is regulated by the CRTC as a “common carrier”. A “common carrier” is a legal classification for a person or company which (a) transports goods; and (b) is legally prohibited from discriminating or refusing service based on the customer or nature of the goods. The Telecommunications Act grew up in a monopoly environment. That is, telephone service was treated like any other utility such as water or electricity. Historically, such utilities have been provided by monopolies such as Ontario Hydro, or, in our case, Ma Bell. Such monopolies were subject to oversight by Public Utilities Boards (PUBs). Many still are. The basic bargain was that, in exchange for undertaking an obligation to provide an essential service to the public, the monopoly provider was entitled to a fair rate of return on its investment. The core function of the PUBs has been to review the annual costs and cost justifications of the regulated monopoly and, based on costs that it recognizes as legitimate, approve rates for services offered by the monopoly that will allow it to earn a fair rate of return (profit) on that legitimate cost base.

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In our case, the CRTC is, effectively, the PUB that governs federal undertakings that provide telecommunications networks and services. As such, it spends a lot of time looking at detailed cost studies and determining the rates that telecom carriers will be allowed to charge both wholesale and retail customers for provision of various telecommunications services and facilities. As you can imagine, the CRTC’s telecom people think and speak in a way that is completely different from its broadcasting people. Of course, broadcasting and telecommunications are becoming the same thing. Given that it operates under two completely different and separate Acts, that’s a problem for the CRTC. With respect to telecommunications, the CRTC is more than just a PUB. It also sets – and enforces – regulatory policy. Like the Broadcasting Act, the Telecommunications Act sets out high-level objectives for the telecommunications system – this time at section 7 – and, again, the CRTC must supervise the system in a manner that meets those objectives. Government has made competition in the telecom sector a priority. As a result, a central policy of the CRTC, over the past few decades, has been to move the industry away from monopoly provision of telecommunications services toward a competitive environment. In theory, Canadians should benefit from increased competition on price and quality of service. A key tool the CRTC uses to promote competition is “forbearance”. Section 34 of the Telecommunications Act permits the CRTC to forbear from applying certain parts of the Act (for example, sections that require it to set rates and require filing of public rate tariffs) where such application is not needed to meet the high-level objectives of the Act. So, for instance, when competing carriers gain the ability to provide sustained service to a significant portion of a market for local telephone service, the CRTC may forbear from making the “incumbent” provider (the old monopoly provider) file tariffs and may de-regulate rates in that market. The Telecommunications Act has much more robust procedural provisions than the Broadcasting Act and, in telecom matters, the CRTC’s rules are much more like that of a traditional court. That is, the rules of procedure and evidence tend to be more clear and, in addition, the CRTC can apply remedies like mandatory and restraining orders, cost awards and interim relief (such as a restraining order) while a proceeding is still in progress.

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CRTC Proceedings

CRTC Rules of Practice and Procedure

One of the CRTC’s key powers, on both the broadcasting and telecom sides, is to make its own regulations in certain areas. One of the regulations it has made is called the CRTC Rules of Practice and Procedure. There used to be separate sets of rules for broadcasting and telecom but, recently, they have been brought together in a single document. You can find the CRTC Rules of Practice and Procedure here:

http://laws-lois.justice.gc.ca/eng/regulations/SOR-2010-277/index.html The CRTC also maintains Guidelines on how to interpret and use the Rules. You can find that here: http://www.crtc.gc.ca/eng/archive/2010/2010-959.htm If you go to the CRTC website, you can also find some fairly quick and easy guidance on how to participate in CRTC proceedings. Check out this page: http://www.crtc.gc.ca/eng/info_sht/g4.htm We’re not going to get into a detailed review of the Rules here but you might want to have a look at these documents. We’re always happy to answer your questions.

CRTC Proceedings in General

The CRTC’s rules cover two basic types of proceedings:

• Part 1 Proceedings - A Part 1 Proceeding is initiated by an application that is not the subject of a notice of consultation. For broadcasting, this would include applications for licence amendments, additions to the list of eligible satellite services and undue preference applications. For telecom, this would include

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applications related to disputes between providers (e.g. network interconnection, unjust discrimination) and requests for forbearance; and

• Notice of Consultation – This is a proceeding in which the CRTC seeks input

from the public. A notice of consultation may be issued for matters such as:

o notices of applications received where Part 1 procedures are not sufficient; o notices of public hearings; o calls for applications (for example, for new types of licences); and o calls for comments on policy matters and proposed amendments to

regulations. In a Part 1 proceeding, applications are posted on the Commission's website on the “All Public Proceedings Open for Comment” page and the public has 30 days to submit “interventions” relating to the applications. Applicants then get 10 days to reply to the interventions. The Commission then examines all of the written submissions and issues a decision. A Notice of Consultation will also appear on the “All Public Proceedings Open for Comment” page on the CRTC website. It will typically have a reference number like “2014-190”. The time frames for commenting on a Notice of Consultation will be set out in the notice itself. Because Part 1 proceedings start with an application by somebody who wants something, comments filed by the public and other industry players are called “interventions”. Typically, an intervention must state whether the intervener supports, opposes or is simply commenting on the application. For a Notice of Consultation, on the other hand, someone who files a response to the notice is typically “commenting” on the proposals made by the notice. Many Notices of Consultations are started by the CRTC itself when it needs input on a policy matter: no application is required. While Part 1 proceedings are “written” processes, Notices of Consultation may result in public hearings. Whether a hearing is necessary will be determined by the legislation and the CRTC Rules of Practice and Procedure. When a hearing is to be part of the proceeding, the intervener or commenter must indicate whether she wishes to appear at the hearing. It’s worth noting that the CRTC works hard to make its proceedings accessible. For example, the CRTC is quite open to receiving video calls as a means of participation in a hearing.

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It’s also worth making a general note on telecom proceedings here. While broadcasting proceedings tend to be pretty straightforward and predictable, a telecom proceeding can be a wild tiger to ride. Telecom proceedings are frequented by the big, “incumbents” like Bell, Telus and Rogers. Those guys know the processes well and have the resources to maximize the opportunities to ask questions. Once you’ve weighed in and made yourself a party to such a proceeding, you could find yourself caught up in the detailed questioning process. As a party, you are expected to respond, even if it is to say you don’t have the information they want or it is confidential. This can be a lot more work than you bargained for. That raises the issue of confidentiality. The rules allow you to file information with a request that it be treated confidentially. If you file confidential information, you must specifically request that it be kept confidential. You have to get that part right. Even so, the CRTC must apply a “public interest” test to determine whether it will keep your information confidential. It’s possible that your request will be denied and your information will go on “the public record”. The moral? If you’re not experienced with telecom proceedings, be careful where you tread. More than once, we at CCSA have regretted getting ourselves into one of these.

The CRTC, CCSA and You

Generally, CCSA keeps close tabs on CRTC proceedings and we make comments and interventions on your behalf. Those submissions are reviewed by a Regulatory Committee composed of CCSA members. There may be times, however, when you really want to speak out for yourself or when CCSA is encouraging members to weigh in on an issue. In such cases, often, the simplest thing to do is to find the “Public Proceedings” tab on the CRTC website, pick either “Broadcasting Proceedings Open for Comment” or “Telecommunications Proceedings Open for Comment”, scroll down the list to find the proceeding you are interested in and, click on the “Submit” button. That will take you into forms that will give you a way either to write your comments directly or attach a document (such as a letter on your letterhead).

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If you do file comments with the CRTC, we would very much appreciate receiving a copy. We need to be able to ensure CCSA and its members do not contradict each other.

Broadcasting Regulations

The CRTC has made a number of regulations that apply to broadcasting. Some of the

key ones are the:

• Broadcasting Distribution Regulations – rules for licensed broadcasting distributors • Broadcasting Licence Fee Regulations – formula for fees payable annually by

licensees • Pay Television Regulations – rules for pay television services like The Movie

Network • Specialty Service Regulations – rules for specialty television channels like TSN; and

• Television Broadcasting Regulations – rules for “over-the-air” television networks like Global.

In the TV broadcasting world, systems operated by companies like yours are “Broadcasting Distribution Undertakings” or BDUs. BDUs include cable companies, telephone companies and some other forms of distributors such as Multi-Point Distribution Systems (MDS). Collectively, those are often referred to as “terrestrial” BDUs because their facilities are, well, on the ground. Makes sense. The other major BDUs are the Direct-To-Home (DTH) operators, Bell Satellite TV and ShawDirect. These BDUs distribute broadcasting to their customers via satellite to receiving dishes that are on the customer’s homes. All of these companies are BDUs to the extent that they distribute broadcasting to subscribers. For all these companies, the Broadcasting Distribution Regulations are the most important set of rules. That’s where all of the carriage and packaging rules appear.

The Broadcasting Distribution Regulations

Before we discuss those rules, we should emphasize that the Broadcasting Distribution Regulations apply only to licensed BDUs. Most CCSA members have been exempted

from licensing and are not bound by these regulations. Rather, the rules for exempted

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BDUs are set out in what we call the “Small Systems Exemption Order”. We’ll say more about that shortly. The other thing we should do is clarify just what a BDU is. For your purposes, the BDU is what we often refer to as a “system” or a “headend”. In the language of the Broadcasting Act, it is a facility where broadcasting is received for onward transmission to customers. That is, it is the physical facility for reception of TV signals that really defines what a BDU is. So a single company may operate several BDUs. For example, Access Communications operates over 200 individual cable systems. Many are very small and operate under the rules for exempted BDUs. Access’ Regina system, on the other hand, is quite large, has not been exempted (yet) and remains bound by the Broadcasting Distribution Regulations. So what are these rules? We’ll give a general description here and then break down the rules you really care about in a later section. Part 1 of the Broadcasting Distribution Regulations has general rules that apply to all licensed BDUs. They include:

• A prohibition against distributing programming except in accordance with the rules;

• Some rules about what is required when control of a licensed BDU is transferred;

• A requirement that all customers must be provided with a basic service before

they are sold other “discretionary” programming (there are some exceptions such as Pay-Per-View and Video-On Demand);

• A rule that requires that the majority of programming received by a subscriber

must be Canadian;

• A general prohibition against distributing certain types of programming (e.g. abusive, obscene or otherwise illegal content);

• A prohibition against giving one’s self an undue preference or subjecting

someone else to an undue disadvantage;

• Rules that require you to give competitors access to your “inside wire” in a customer’s premises;

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• Certain annual reporting requirements; and, last but not least

• General rules for CRTC dispute resolution.

A couple of these rules are especially important to you. First is the requirement to distribute a “basic” service. As you will see, certain services are required to go to all BDU customers. Those are typically: a) what are called “priority” services (e.g. local over-the-air stations, CBC stations

and provincial educational channels); and b) channels which the CRTC, by a mandatory order made under section 9(1)(h) of

the Act, has required to be distributed on the basic tier (e.g. CPAC and APTN). Other channels are referred to as being “discretionary”. Most pay and specialty services fall in that group. To get your offerings of discretionary channels, the customer must first “buy up” through your basic service tier. So this rule is a mechanism for the CRTC to ensure that channels which it considers to be especially important get very broad distribution and, so, are seen and financially supported by a broad base of Canada’s 12 million BDU subscribers. The rule that requires all customers to get a majority of Canadian services, sometimes called the “preponderance” rule, is also something to which you need to pay attention. Also important to independent distributors, as represented by CCSA, are the CRTC’s dispute resolution rules. These rules are one of the main tools we have to control the behaviour of the “big guys” when they try to force bad contracts on us. We use CRTC dispute resolution a fair bit and we talk to the CRTC a lot about how the process needs to work. Part 2 of the Broadcasting Distribution Regulations has rules that apply to all licensed terrestrial BDUs. They include:

• A description of the programming services (the so-called “priority” services) that must be carried on your basic service; (s. 17)

• Access rules (s. 18) for other television channels, including:

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o A requirement to carry all Category A services (more on that later);

o A requirement to carry at least one Pay-Per-View service; and

o A rule that requires you to carry one minority official language channel for every 10 channels in the majority official language in your market;

• A description of other programming services, including non-Canadian services

authorized for distribution in Canada, that may be carried (ss. 20 – 22);

• Certain packaging requirements, primarily for specialty services, commonly referred to as “Distribution and Linkage” rules (ss. 23 – 27);

• Rules for distribution of audio-only services like commercial radio stations and

pay-audio services like Stingray (ss. 28 – 29);

• Rules about your community channel (ss. 30 – 33);

• Rules that require you to contribute a portion of your broadcasting revenues to Canadian content production (s. 34); and

• Rules that require you to substitute Canadian network programming over a US

program signal at the request of a Canadian broadcaster (s. 38). Part 3 of the Broadcasting Distribution Regulations sets out some special rules for distribution of TV channels in analog. These include the requirement to provide a basic service, a description of other channels the BDU may carry and some restrictions on shutting down analog transmission.

You can see the Broadcasting Distribution Regulations at

http://laws.justice.gc.ca/eng/regulations/SOR-97-555/page-1.html.

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Other Broadcasting Regulations

The other regulations mentioned previously relate primarily to regulation of different

types of programmers. Those regulations are fairly similar to one another. For our

purposes, there are a few key provisions that are common among them:

• Programmers are subject to CRTC dispute resolution, including:

o A “no head start” provision that requires a programmer to make new services available to all BDUs;

o A “standstill” provision that prevents a programmer from cutting off

service or changing contractual terms during a commercial dispute

• Programmers are prohibited from “tied selling”, whereby a BDU is forced to take some of the programmer’s services as a condition of getting the services it really wants; and

• Programmers cannot give themselves an undue preference or subject other

persons to undue disadvantage – this provision comes into play especially when one company is a BDU and also owns programming assets. Such a company cannot, for example give one of its own channels preferred distribution on its BDU and conversely, the programmer cannot give its affiliated BDU preferred wholesale rates and packaging terms.

You can see these regulations at the locations below:

• Pay Television Regulations – http://laws.justice.gc.ca/eng/regulations/SOR-90-105/page-1.html

• Specialty Services Regulations – http://laws.justice.gc.ca/eng/regulations/SOR-

90-106/page-1.html

• Television Broadcasting Regulations - http://laws.justice.gc.ca/eng/regulations/SOR-87-49/page-1.html

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Small Systems Exemption Order

The Broadcasting Distribution Regulations set out the rules that apply to licensed BDUs.

However, the CRTC has the power to exempt certain classes of undertakings from the

application of Part 2 of the Broadcasting Act and the regulations. In fact, it has to. Section

9(4) of the Act says “the Commission shall, by order” exempt persons who carry on

broadcasting undertakings of any class “where the Commission is satisfied that

compliance with those requirements will not contribute in a material manner to the

implementation of the broadcasting policy”.

Over the years, CCSA has succeeded in getting most BDUs operated by its members

exempted. We’re still trying for the rest. Today, BDUs that serve 20,000 or fewer

customers are exempted. That’s on a system or headend level. Again using Access

Communications as an example, all of its systems are exempted except for Regina

which has more than 20,000 customers.

For almost all systems in CCSA, it is the exemption order – not the Broadcasting

Distribution Regulations – that sets out your rules. Moreover, that exemption order

essentially contains all of your rules.

However, it is also important that you understand that the exemption order – issued as

it is under the Broadcasting Act – has nothing to do with your activities as a TSP or ISP.

So you may be exempt as a BDU but still have to follow rules under the

Telecommunications Act, regardless of how small you are.

“So,” you ask, “if I’m exempted, what are my rules?”

The answer depends partly on your system’s size and partly on whether you distribute

programming using digital technology. It also depends on when you look: the

exemption order is amended from time to time. The most current version was issued as

Broadcasting Order CRTC 2015-544, a copy of which you can find here:

http://www.crtc.gc.ca/eng/archive/2015/2015-543.htm

First, the exemption order distinguishes between BDUs that serve fewer than 2,000

customers and those that serve more than 2,000 but fewer than 20,000 customers.

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Rules for Exempted BDUs Under 2,000 Subscribers

If your system serves fewer than 2,000 customers, you have to:

• Offer a basic service tier that includes:

o Local over-the-air television stations (very roughly, any station that has a transmitter within 15 km of any part of your service area);

o CBC in both French and English (CBC must pay to get the signals to you)

• Deliver a majority of Canadian channels to each subscriber; • If you distribute in digital, carry 1 official minority language pay or specialty

channel for each 10 majority language channels you carry;

• Offer adult programming in a way that subscribers don’t have to buy the adult service in order to get any other service and offer “limited point of view” religious channels only on a stand-alone basis;

• Pass through the channels unaltered except for certain very specific

circumstances; and

• Not distribute any content that is abusive, obscene or otherwise illegal.

In addition, you can only carry programming services that are authorized for

distribution in Canada (i.e. no ESPN or HBO-US) and you are limited to offering two

sets of US 4+1 (ABC, CBS, FOX, NBC + PBS) networks.

All exempted BDUs are subject to CRTC dispute resolution. We’ll talk about that briefly

later.

That’s about it. There are some minimal annual reporting requirements but we take care

of that for you.

Finally, on the positive side, community channels operated by exempt BDUs under

2,000 subscribers can place up to 12 minutes per hour of local commercial advertising.

That can be an important revenue source for you.

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Rules for Exempted BDUs Over 2,000 Subscribers

If your exempted system serves more than 2,000 customers, you have all the same rules

but with certain other things added:

• For your basic service add:

o Regional over-the-air television stations (the station’s Grade B contour touches any part of your service area – we’re afraid you’ll have to look that one up through Industry Canada);

o The provincial educational channel; o Channels that the CRTC has said are mandatory for carriage on basic,

which we call “9(1)(h)” channels. These must be distributed as indicated in the CRTC’s individual orders for their distribution: some need only be distributed on digital basic, some in Francophone markets, some only in Quebec and so on. You have to look at the individual orders but you can refer, first, to our carriage lists in the “Beef” section of this guide. These channels include:

� APTN; � A TVA Group signal (e.g. CFTM – Montreal); � CPAC plus the minority-language audio feed of CPAC on a

secondary audio program (SAP); � AMI-audio, either on a secondary audio program if you offer CBC

Newsworld or as a separate audio channel if you do not;

o If you distribute programming in digital, more “9(1)(h)” channels, including

� AMI-tv � In Francophone markets only, CBC News Network, Canal M and

Meteomedia; � In Anglophone markets only, RDI and The Weather Network; and, � In Quebec only, Avis de Recherche;

o Perform simultaneous substitution if requested to do so by a local

television station (we’re not even going to get into that stuff – suffice to

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say that virtually all members get signals from terrestrial or satellite partners that have already done the substitution – no worries);

o Contribute 5% of your gross broadcasting revenues to Canadian content

production. However, that full 5% can be directed toward your own community channel, if you have one; and

o For your community channel, 60% of your programing must be “local” to

your community and 30% must be “community access programming” that is produced by members of the community, not you.

Exempted BDUs with over 2,000 subscribers must file a “simplified annual return” with

the CRTC. This is done through the CRTC’s Data Collection System (DCS). The CRTC

sends you the forms that you must complete and return each year.

While smaller exempt systems can place commercial advertising on their community

channels, you can’t, at least for now. You can exhibit up to two minutes per hour of

“promotional messages”, 75% of which must be used for “promotion of the community

channel, non-related Canadian programming undertakings and for unpaid Canadian

public service announcements”.

Types of Programming Services

We’ve talked a bit about some different types of TV channels or, as we call them,

programming services. We should explain those a bit.

Types of Regulated Canadian Services

Today, there are a number of different types of regulated programming services:

• “Conventional” or Over-The-Air (OTA) services, also referred to as “television stations” – these are broadcast channels that viewers can receive off-air using an

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antenna. So far, they are completely advertiser-supported and can’t charge subscription fees. They fall into two classes, depending on how you use them:

o Local signals – the broadcaster has a transmitter close to your area and

you are showing their television station in their own local market; and

o Distant signals – this is when you import an off-air television station for time-shifting purposes. So, for example, you are in Ontario and you bring in a Vancouver station so that your viewers have an alternative time slot to see programs that they would otherwise see on the local station;

• Pay Television services are services like The Movie Network that get their

revenue only from subscription fees. They are not allowed to sell advertising;

• Specialty Television services like TSN that are allowed to sell advertising and charge subscription fees. There are three categories of these:

o Category A – these are former analog services and some services, licensed

for digital distribution, that the CRTC considers important enough to give certain carriage rights, chiefly the right to be offered in a package before they are offered as “stand-alone” and “genre protection” which keeps other services from competing in their space. An example is Discovery Channel;

o Category B – these are services licensed for digital distribution that the

CRTC does not consider to be important enough to require protection. They are left to compete for carriage and subscribers. An example is Blue Ant’s HiFi channel; and

o Category C – these are “mainstream” news and sports services like CTV

Newsnet and TSN. The CRTC found the mainstream news and sports genres to be sufficiently competitive to leave such services to open competition;

• Pay-Per-View – these are movie and “live event” (think premium fight events)

services that are allowed to charge fees but can’t sell advertising. Fees are charged to customers on a per-transaction basis, usually with a retail revenue split between the BDU and the programmer; and

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• Video-On-Demand – these are essentially the updated version of Pay-Per-View services. In this case, the services are generally operated by BDUs rather than programmers. Generally, a separate licence is required to operate a VOD undertaking but exempted BDUs can operate their VOD undertakings under an existing VOD Exemption Order.

Foreign Services Authorized for Distribution in Canada

We’ve referred a couple of times to your ability to carry foreign services that the CRTC

has authorized for distribution in Canada. Such services are defined in a document

called the “Eligible Satellite Lists”. The document is updated quite regularly as new

foreign services pop up and apply for the right to be distributed in Canada.

The updated version of the document can be found here:

http://www.crtc.gc.ca/eng/publications/satlist.htm

Pay attention to the notes at the end of the list. That is where rules for carriage of the US

over-the-air networks (ABC, CBS, Fox, NBC and PBS, also called the “US 4+1”

networks) are set out. Basically, you can carry only two sets of US 4+1 signals, each set

from a different time zone.

A Bit of History

How did these different types of services come into being? Some historical background will help you understand that and why certain services have the rights they do. In The Beginning, there was OTA television. If you’re old enough, you’ll remember a world where there was something like Channel 3 (CBC), Channel 8 (CTV) and, maybe, a couple of US stations (in New Brunswick, we got Channel 2 (WLBZ, Presquisle) from Maine. Then cable came along. That worried the Canadian OTA networks, mostly because cable could directly import the same US programming that the networks were already paying to show. However, the Canadian guys managed to have the CRTC force the

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BDUs to carry their own networks and, eventually, to substitute their own networks over the imported US channels that were showing the same content at the same time. That protected the Canadian networks’ programming rights and advertising revenues. So the OTA networks had to be carried on the BDU basic service tier and “simultaneous substitution” was born. Ever since, Canadians have been aggravated by their exclusion from seeing US Superbowl ads. In the 1980s, it was decided that Canada needed its own “cable” or “specialty” channels, partly to help grow Canada’s cultural industry by spurring investment in content creation. But Canada is big and doesn’t have all that many people. Supporting such channels would be a challenge. So a few lucky entrants were licensed and given some serious privileges to help them grow. The first licensees were “optional to basic”. A BDU didn’t have to carry them but, if it did, the service would have to be on basic. Later in the 1980s, another round of new entrants was licensed. This time, the CRTC was more concerned about how much Canadians would have to pay for the basic BDU service. So these new services were given access rights to distribution by BDUs but they had to be offered on “discretionary” tiers. So these services got broad distribution but the customer got to choose whether to buy the BDU’s service tier that contained them. Together, those are the “legacy analog” services. The two types of carriage rules that applied to them came to be known, respectively, as “Dual Status” (optional to basic) and “Modified Dual Status” (BDU must carry but on a discretionary tier). Another aspect of the privileges given to these services was “Distribution and Linkage Rules”. Those rules required limited numbers of US services to be included in tiers of Canadian services. That gave the fledgling Canadian specialties “lift” from subscriber interest in the popular US channels. Those rules have now largely disappeared. Then digital came along. In 2001, the CRTC invited applications and licensed a large number of new services for digital distribution. The CRTC created two Categories of such services:

• Category 1 – These were 16 English and 5 French services that the CRTC deemed to be culturally important and gave certain carriage rights. Licensed BDUs had to carry them and offer them in packages; and

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• Category 2 – These were less important services that were left to compete for carriage and subscribers. There are hundreds of them.

Collectively, these are the so-called “specialty” channels. By 2001, the rules had evolved such that all licensed BDUs had to carry all of the legacy analog and Category 1 specialty services, some on basic, some in discretionary tiers or packages. They did not have to carry the Category 2 services. Exempted BDUs did not have to comply with those carriage rules (but what happens in commercial affiliation agreements is a different story). In 2008, the CRTC undertook a major review of the rules for BDUs and programming services. As a result, new categories of specialty services were introduced; the Category A, B and C classifications described above. That’s where we are today. However, see the discussion under “Talk TV” below. It’s all in the process of changing again.

Over-The-Top and Video-On-Demand Services

Some years ago now, the CRTC first wrestled with the question of whether to regulate over-the-top services such as Netflix. The CRTC found that such services were, in fact, “broadcasting” within the meaning of the Broadcasting Act. However, the CRTC, for good reason, was not prepared to regulate “the internet”. As a result, the CRTC exempted such services from regulation under what is called the Digital Media Exemption Order (DMEO). That order applies to video services that are:

• delivered and accessed over the Internet; or • delivered using point-to-point technology and received by way of mobile

devices. A further condition of this exemption order is that the service cannot, “offer television programming on an exclusive or otherwise preferential basis in a manner that is dependent on the subscription to a specific mobile or retail Internet access service”. That is, the CRTC would not permit the ability to view such services to be tied to the consumer’s subscription to a particular distributor such as Bell or Rogers. You can see that at play now with Netflix available on the offerings of many BDUs across Canada.

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This exemption effectively created an advantage for over-the-top services as compared to regulated Video-On-Demand Services. To respond to that problem the CRTC, as part of the “Talk TV” decisions we are about to discuss in detail, created a new form of exemption for what it called “Hybrid VOD” services. These are the CraveTvs and Shomis of the world. The exemption order for Hybrid VOD services sets out key terms that mirror those in the DMEO. In short, for a VOD service to take advantage of the exemption:

• all programs for which the rights are held on an exclusive basis are also delivered and accessed over the Internet; and

• shall not be offered in a way that is dependent on a subscription to any specific broadcasting distribution undertaking, mobile service or retail Internet access service.

When a VOD service meets those conditions, it gains a number of advantages in terms of funding contribution, catalog requirements and so forth. That is, it can compete on an equal regulatory footing with services like NetFlix. It’s worth noting, here, that VOD services operated by exempt BDUs have similar advantages. So long as you don’t operate any licensed BDU systems, you can offer your VOD service over the internet to subscribers throughout the country. That may be an opportunity for some of you.

The “Talk TV” Decisions

Over the past couple of years, you’ve heard plenty from us about the CRTC’s major consultation called, “Let’s Talk TV”. In fact, we’re guessing you’re pretty sick of hearing about it. Nonetheless, we’ve now arrived at a time when the CRTC has issued its major policy decisions and is making regulatory amendments to implement those changes. The essence of the “Talk TV” decisions is that, in a new disrupted environment in which services like NetFlix are at play outside the regulated system, Canadians should be able, to the greatest extent possible, be able to purchase only the programming they want within the regulated broadcasting system. Otherwise, the regulated system will die.

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For the CRTC, that means dismantling the elaborate system of programmer protections described above and relying, whenever possible, on robust competition to deliver choice to Canadians. The CRTC also recognized that, in a world where very large, integrated media companies like Bell and Rogers compete with smaller independents, it is necessary to put some controls around what the big guys can and cannot do. The sections below describe some of the key elements of the new regulatory environment for broadcasting:

New Licence Classes for Programmers

All of those different programmer licence classes we discussed above will be replaced by three types of licence:

• Basic Services – must be on the basic service; includes conventional OTA, community channel, provincial educational channels and mandatory “9(1)(h)” services;

• Discretionary Services – includes all Pay and Specialty except those with

mandatory carriage status on basic under s. 9(1)(h) of the Act; and

• On-Demand Services – includes Pay-Per-View and Video-On Demand. The CRTC can’t change the terms of a licence it has issued until the licence has run for five years. As a result, the new licence classes will take effect only as the programmers come up for licence renewals. That is:

• August 2017 – Major Private Groups (Bell, Rogers, Shaw, Videotron)

• August 2018 - Independent Pay and Specialty services and CBC.

At the time of writing, the major English and French groups are in the process of re-

licensing and the CRTC has developed preliminary standard conditions of licence for

each of the three new classes of programming licensees. The CRTC’s new Wholesale Code

will become part of those conditions of licence. More on that in a minute.

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Elimination of Genre Protection and Nature of Service Rules

In the past, a policy called “genre protection” operated to give Category A services protection from competition: if a Category A service occupied a given programming genre, the CRTC would not licence another service to operate in that genre. In addition, each programming service is licensed on the basis of its “nature of service”, whereby the channel’s content is restricted to certain pre-defined categories (e.g. “cheap, crappy reality TV shows” or “really old, dusted-off library sitcoms”. Effective now, genre protection is gone and the CRTC is no longer enforcing the existing “nature of service” rules. In theory, this means there should be more open competition based on the quality and price of the programming products. The logical conclusion is that some programming services will not survive.

Elimination of Access Rights

Currently, Category A programming services have the right to be distributed by all

licensed BDUs. As these services’ licences are renewed, per the timetable just

mentioned, they will lose that right. The only services that will continue to have access

rights are the so-called “9(1)(h)” mandatory carriage services.

That’s a bit of a mixed blessing. While such services can no longer demand carriage on

BDU systems, a new presumption is raised that if you don’t like a service’s price or

content, you can just drop it. However, as you know, there are many services that, as a

practical matter, you cannot deny to or take away from your customers.

In addition, the CRTC has generally taken the position that programming services that

enjoy access rights have an obligation to pay the costs of getting their signals to your

headends. With the access rights going away, the programmers have a stronger case

that there is no reason they need to pay satellite uplink costs. In fact, we are seeing more

and more programmers walking away from any sort of signal transport funding.

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Implementation of “Skinny Basic”

The “Talk TV” decisions are all about the consumer. The CRTC wants to ensure that there is an entry-level basic service that pretty much everyone can afford. Beyond that, it wants customers to be able to choose only the services they really want to buy. So, for licensed BDUs, the CRTC has done two basic things:

1) restrict the services that can be included in an entry-level “skinny” basic service; and

2) cap the retail price of that entry-level service at $25.

The programming services that a licensed BDU must offer in its basic service are: • Local and regional off-air television stations; • Mandatory carriage “9(1)(h)” channels; • Provincial educational service; • Community channel if one is offered; and • Provincial legislature programming. In addition, a licensed BDU may include the following in its “skinny” basic: • Where there is a limited number of available local and regional off-air television

stations, additional local and regional off-air television stations from other markets, to a maximum of 10 in total;

• One set of US 4+1 networks (ABC, CBS, Fox, NBC + PBS); and • Local AM and FM radio stations. That’s all the licensed BDUs can include in their entry-level service and they can’t charge more than $25 for that service. As it turns out, the big guys are all charging the full $25 permitted and are doing very little to let customers know the new, cheaper level of service exists. The CRTC is not happy about that and will be asking the big guys to justify their approaches in September 2016. For exempt systems, your rules for provision of a basic service don’t change. Those rules are set out in the Small Systems Exemption Order and, as we have discussed, differ slightly depending on whether the system is over or under 2,000 customers. One of the things you’ll notice here is that licensed BDUs cannot put discretionary services such as TSN, Peachtree and VRAK on this new “skinny” basic service. But an

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exempt BDU can do that. So there is an opportunity to market a small basic service at a competitive price point that contains a couple of the most popular discretionary services. Also, exempt systems are not bound by the $25 retail price cap. However, most CCSA members have leaned toward offering a “skinny”, entry-level service at as low a price point as possible. So there are opportunities for smaller systems to position their entry-level services very positively as compared to what the big guys are able to do.

Packaging Flexibility – Small Package and Stand-Alone Distribution

The CRTC is phasing in a new world of packaging choice. The first thing we should do

here is define some terms. The “Talk TV” decisions speak about two types of packaging:

1) “Pick and Pay” which, to us, means the same thing as “Stand-Alone” – the

customer gets to choose an individual channel and pay only for that

channel; and

2) “Small, reasonably priced packages” which, as the CRTC puts it, “can take

the form of either a build-your-own package option (including an option

to buy a package of up to a maximum of 10 services) or small pre-

assembled packages, such as theme packs”.

When the CRTC says “small pre-assembled packages” it is thinking of packages with

five or fewer channels.

With those definitions in mind, the CRTC set out a two-stage time frame for

implementation of such packaging by licensed BDUs:

• By March 2016, those BDUs had to offer all discretionary services either on a Pick

and Pay basis or in small reasonably priced packages; and

• By December 2016, those BDUs must offer all discretionary services both on a

Pick and Pay basis and in small reasonably priced packages.

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Note that these rules apply to distributors like you; not the programmers. It remains up

the distributors to make sure their affiliation agreements with the programmers support

these rules.

We’re seeing those provisions now in our contract renewals but, as you can imagine, the

issue is wholesale pricing. Programmers are trying to insulate themselves from any risk

by passing increased costs for such new carriage options on to the BDUs. Again, the

new Wholesale Code comes into play. Be patient: we’re almost there!

You should know, as well, that the CRTC said expressly that “these requirements will

not apply to analog and exempt BDUs”. Good news! Thanks, CRTC!

So, for all you exempt systems out there, if you wish, you can leave your basic service

and discretionary packages just as they are today and you’ll be just fine. How you

adjust your packaging will be driven by competitive needs and consumer demand – not

regulation.

The Wholesale Code

You probably know that the CRTC has established what it calls the “Code of Conduct

for Commercial Arrangements and Interactions” or, more briefly, the Wholesale Code.

This Code was first introduced in 2011 as a result of a proceeding in which the CRTC

considered the effects of a number of vertical integrations, e.g. Bell buying CTV and

Astral, Shaw buying Global Media properties and Rogers buying City-TV.

The concern that the Code addressed was the incentive and power of those big,

integrated companies to act anti-competitively – for instance, by squeezing your

margins – and to drive smaller competitors like you out of the market.

However, there were problems. First, the original Code said the vertically-integrated

companies “should” and “should not” do certain things in their affiliation agreements.

It was not legally binding on them. Second, parts of the Code were imposed on those

companies as Conditions of Licence in some of the later acquisition approvals. As a

result, different companies had different legal rules about how they could behave. It

was a bit of a mess.

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As a result of the “Talk TV” decisions and subsequent regulatory amendments, the new

Wholesale Code is now legally binding on all vertically-integrated companies. Lest there

be any doubt, the Code is also being incorporated into their Conditions of Licence.

This new Code is an extremely important protection for independent distributors like

you. In a nutshell, it’s the best tool we have for resisting unreasonable wholesale rates

and packaging terms. A recent decision on a rate dispute between Videotron and RDS

gives us hope that the CRTC is prepared to stand behind the Code.

The Code is structured under the following headings:

• Prohibitions – contractual terms that simply are not allowed (e.g. programmer

veto rights over packaging changes);

• Commercially Unreasonable Practices – contractual terms that are presumed to

be unreasonable (e.g. requiring tied selling of channels);

• Commercially Reasonable Practices, including:

o Factors that will be considered in determining a service’s “Fair Market

Value” (e.g. historical rates and rates paid for similar services; and

o A number of general provisions regarding packaging and, also, the

availability of multi-platform distribution rights; and

• Affiliation Agreements – rules around the timing of negotiating renewals and

filing of contracts with the CRTC.

You can see the complete Code at the following link. It’s not very long and is well worth a look: http://www.crtc.gc.ca/eng/archive/2015/2015-438.htm There is also a guide to interpretation of the Code which you can see here: http://www.crtc.gc.ca/eng/archive/2015/2015-440.htm.

The Television Service Provider Code

The “Talk TV” decisions are really all about Canadians, as citizens and consumers. The changes we have been discussing are aimed at providing Canadians improved programming choices at affordable prices. The CRTC also felt that measures were

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required to protect Canadian consumers at the retail level. As a result, the CRTC introduced a new TVSP Code similar to the Wireless Code it introduced some years ago. The new TVSP Code is all about clarity and reasonableness of retail contracts: Canadians should know what they are buying, should not be subject to hidden fees or penalties and should be able to terminate services without penalty. This new Code applies to “all licensed TVSPs and related exempt undertakings”. As we

understand it, that would catch a company like Rogers for both its licensed and

exempted systems. However, it would not apply to exempt BDUs that do not have

related licensed systems.

So, for example, Access, which has a licensed system in Regina, would have to comply

with the Code for both its licensed and exempt systems. However, a company, such as

Mascon, which has only exempted systems, would not be forced to comply.

The TVSP Code covers a number of key areas:

• clarity of retail offerings/promotions and understandable “plain language” in

your retail contracts;

• clear and complete pricing information for both channels/packages and

customer equipment;

• clear information about when time-limited discounts expire, early cancellation

fees and the like;

• early notification of price changes;

• service call standards;

• policies for services outages and rebates for such outages; and

• disconnection policies.

The Code requires the TVSP to provide each customer a “Critical Information

Summary” that covers these points, in clear, simple language, along with the actual

retail contract.

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It’s worth noting that most of the provisions in the TVSP Code concern fixed-term, written contracts with BDU customers. Those provisions generally do not apply to month-to-month or indeterminate customer agreements such as most of you have. However, let’s step back for a minute. This new Code is administered by the

Commissioner for Complaints for Telecommunications Services (CCTS). The

Commissioner’s complaint-driven processes are administratively complex and costly.

Currently, if the CCTS gets unresolved telecom complaints about smaller Telephone

Service Providers, such TSPs can be forced to join the CCTS: there’s a joining fee and the

TSP would become bound by the CCTS’ rules. Ouch!

We now have the same structure on the broadcasting side of the business. So, in our

view, the wiser course for all CCSA members will be to become familiar with the TVSP

Code and, to the extent possible, to behave as if it applies to them.

In particular, you should ensure that customer complaints about your video services get resolved before they can be referred to the CRTC or the CCTS. That is the way to avoid being forced into CCTS membership or having the CRTC simply change the rules to make the TVSP Code apply to you, regardless of your company’s size. You can see the full TVSP Code at the following link. Again, it’s not very long and is well worth a look: http://www.crtc.gc.ca/eng/archive/2016/2016-1.htm.

The Community Channel

Many CCSA members operate community channels. They range from simple “billboard” information services to full-up TV channels with sophisticated in-house studios and production facilities. We’ve covered some of it already but it’s worth going over the community channel rules. First, generally, all exempted BDUs can operate what are called “zone-based” community channels. That is, a single company can operate a community channel that serves the various communities in which it operates systems. As well, separate

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companies that serve communities within a region can pool their resources to create a single community channel that serves the region. The basic criterion for this is that the community channel must serve a “community of interest”. The CRTC defines a “community of interest” as one in which the members of the community:

• have common social and economic interests;

• have a common heritage, culture or history; • are within the same geographically or politically recognized boundary; and • have access to the same local and regional media.

So in theory, Quebec members, for example, could join together to create a “Rural Quebec Community Channel” that would serve rural communities across the province or in a given region, say, the Eastern Townships. The requirements for licensed BDUs are set out in sections 30 – 33 of the Broadcasting Distribution Regulations. The content on a licensed BDU’s community channel is restricted to actual community programming, two minutes per hour of promotions of Canadian programming, PSAs, government announcements, the question period of the provincial legislature and announcements about programming on the community channel. The programming can also include tightly defined messages from someone who sponsors programming on the channel (think PBS sponsorship messages). Sponsorship messages can be run for donors who provide direct financial assistance to the channel. Of the two minutes per hour of promotional time, 75% must be used for the promotion of Canadian programming. The other 25% can be used to promote the BDU’s other services, for instance cable TV packages, telephone service, bundles and the like. The community channel must occupy 60% of its programming with “local community television programming”. In addition, 50% of the channel’s content must be “community access programming”; that is, programming made by members of the community other than the BDU/community channel itself (but this can be done with your assistance). The channel must also include up to a further 50% of its time, on a weekly basis, to community access groups if it is requested to do so.

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As you will see from the numbers, “community access programming” is a subset of “local community television programming”. That means, even though it looks like there’s no place for anything but community access programming, there is, in fact, still room for programming that is not strictly local but is more regional in character. The community channel rules dovetail with the rule that requires BDUs to contribute to Canadian programming creation. While a licensed BDU must devote 5% of its broadcasting revenues to Canadian content production, it can direct the greater of what it spent in 2010 or 1.5% of its broadcasting revenues to its own community channel. The balance must be tossed into the bottomless pit we call the Canadian Media Fund. By way of contrast, an exempted BDU with over 2,000 subscribers can direct the full 5% contribution to its own community channel. Those BDUs also, like the licensed BDUs, have minimum requirements for “local community television programs” and “community access programming” but those thresholds are 60% and 30% respectively. Such BDUs are also limited to two minutes per hour of promotional messages. BDUs with fewer than 2,000 subscribers:

• do not have minimum thresholds for “local community television programs” and “community access programming”;

• do not have to contribute to production of Canadian programming; and

• can sell and exhibit up to 12 minutes per hour of local commercial advertising.

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Telecommunications Rules

That’s about it for broadcasting stuff. Now we move on to (deep breath) telecom. We have to admit that, coming, as we do from a cable background, the telecom world looks more complicated than TV, and there are a lot of rules that probably aren’t that relevant to what we do. Telecom regulation is polluted with a dizzying array of acronyms like ILEC, SILEC, CLEC, LIR, LSR, BLIF, PIC/CARE, ADSL, AWS, APLDS, NAS, BITS, CMS, CCS7, CDMA, CDNA, CISC, CSG, DCS, DNCL, EAS, GAS, HCSA, IPD, ISP, IXP, TSP, ITMP, ISDN, LNP, LTE, MAA, MBS, MVNO, NANP, NCF, PES, PSTN, POTS, SIP, TAPAC, TTY,TPL, TPIA, VDSL, VoIP, WNP and about a bazillion others. Yikes! Now that we’ve spit a bunch of them out, we’ll try to use them as little as possible. So how do we describe telecom regulation simply and without all that stuff?

Some More History

Let’s start here. Alexander Graham Bell is credited with inventing the telephone in the late 1870s. Like his cronies who were off building the Canadian railroads, Bell was a Scottish Canadian. Like them, he was not just an inventor but a shrewd businessman as well. Bell had a big idea and, in those days, businessmen with big ideas went after the main prize – monopoly! With his powerful patent in hand, Bell got that monopoly over telephone in Canada. Well . . . almost. In fact, what happened was that, shortly after the turn of the century, as Bell was rolling out his still fairly rudimentary telephone network, he would run a single line into many of the small towns he passed. So such a town would have a single phone, maybe down at McGillicuddy & Sons Hardware & General Store. Not surprisingly, local entrepreneurs just like you figured out pretty quickly that they could tap into that line, start running wiring out to homes and businesses in their communities and make some money doing it. Bell didn’t like that. It was not unheard of for Bell’s “boys” to show up in town, cut lots of wires and impose a little “discipline” on those entrepreneurial heroes. Nonetheless,

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the local guys persisted and, eventually, succeeded in setting up their own phone companies with local geographic monopolies. While there were many smaller operators providing service alongside Bell, Bell emerged as the major operator in central Canada, after consolidating some smaller operators in larger communities and selling off its operations in the Maritimes and in the West. In the West, MTS, SaskTel and Telus began their lives, long ago, as provincially-owned telephone companies that had been expressly excluded from the federal legislation. While most telephone companies didn’t start out as monopolies, as more people signed up for telephone service, it made sense to have everyone using a single network in an area so they were all connected to each other – monopolies (and regulation) made this easier. More recently, a number of things happened. In 1968, the old Board of Broadcast Governors became the CRTC and assumed responsibility for telecommunications regulation. In the 1970s, the Department of Communications was folded and its duties were assumed by Heritage and Industry Canada. More generally, there was a global movement away from monopoly provision of utilities and the Canadian government began to promote competition in the telecom space. Those factors resulted in a new Telecommunications Act in 1993. A top-level objective of that Act was to “foster increased reliance on market forces for the provision of telecommunications services”. Again, in 2006, the government issued a policy direction to the CRTC that required the CRTC, when making regulations, to “rely on market forces to the maximum extent feasible” and “interfere with the operation of competitive market forces to the minimum extent necessary”. There are a few points to be made about that history. First, telecom regulation today is – and for decades has been – largely about continuing and completing a transition from highly regulated monopoly to open and effective competition in the provision of telecommunications services. You can see that playing out especially vividly, today, in the current government’s insistence on creating a fourth major Canadian wireless provider and reservation of wireless spectrum specifically for “new entrants”. Second, the former monopoly telephone companies have a lot of experience with regulation and deep roots in their communities. This can make them formidable

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opponents in the regulatory arena. Anyone who is just getting into telecom regulation in Canada should be prepared for that. Third, that history helps to explain the different types of telephone companies we see in the business today. So . . . it’s time for some acronyms.

Types of Telecom Providers

ILEC means Incumbent Local Exchange Carrier. These are the old large-scale

monopoly companies. They include Bell Canada, Bell Aliant, Northwestel, Telebec, MTS, SaskTel and Telus.

SILEC means Small Incumbent Local Exchange Carrier. There are too many to

list here. Mostly these are small telephone companies in Quebec and Ontario. Most are now also IPTV providers and many are CCSA members.

CLEC means Competitive Local Exchange Carrier. Again, there are too many to

list. Typically, these are cable companies who have gotten into the phone business. Again, many CCSA members are now CLECs as well as broadcasting distributors.

A Local Exchange is the region within which you can make a call to someone else without incurring long distance charges. That is, the local phone provider does not have to pass traffic off to an “inter-exchange carrier” to complete the connection. A telecom provider’s status is based on the geographic territory that it is licensed to serve. So it is possible, for example, for one company to be both a SILEC in the exchanges it has been licensed to serve as such and a CLEC in the territory of another licensed ILEC such as Bell. Generally, the incumbents, both ILECs and SILECs, have been going through a process that requires them to “open up” their facilities to the competing CLECs. The incumbents have to allow the CLECs to establish interconnections between their facilities and those of the ILECs. This can be done directly between the two carriers or indirectly using another carrier’s facilities. And there are detailed procedures that must be followed to make this happen. The incumbents also have to sell their competitors certain “essential” wholesale services at tariffed rates. An example would be access to telephone poles to string cabling or

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leasing the last mile telephone wire, known as an “unbundled loops”, that allow the competitor to connect with individual homes in the local exchange.

The Importance of Facilities

Near the beginning of this guide we defined a “carrier” as being someone who processes telecommunications traffic. We said that where a carrier actually processes traffic across its own networks or “facilities”, it has special obligations as a “common carrier”. Those obligations may include an obligation to provide service basically to anyone who asks and, also, to refrain from discriminating or refusing service based on the customer or nature of the service. The Telecommunications Act also requires that a “common carrier” be qualified as a “Canadian carrier” (although exceptions to Canadian ownership have been allowed since 2012) and we will be using that term here. The telecommunications system rides on a physical network. Pieces of that network are owned and operated by a number of parties; big telephone companies like Bell and Telus, big cable companies like Rogers and Shaw and smaller telephone and cable companies, many of whom are CCSA members. Collectively, the total network is called the “Public Switched Telephone Network” (PSTN). Access to the public telephone network is an important social “good”. Canadians need that access to live and communicate. It is one thing to process telephone and internet traffic as a “reseller” that has no actual network but essentially sells space on the physical network operated by others. However, when you actually own a piece of that vital physical network, certain obligations follow. So, if you: a) process telecommunications traffic (telephone and/or internet) to the public for compensation; and b) own some part of the physical network over which that is done; then, no matter how small you are, you can expect to have some special obligations.

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We’ll get into that more shortly when we talk about CLEC rules. First, we’ll review some of the main principles and mechanisms that shape the Canadian telecom industry today.

A Definition – Telecommunications Service

A number of the principles and rules discussed below apply to companies that provide telecommunications services. So what does that mean? The Act defines “telecommunications” as meaning, “the emission, transmission or reception of intelligence by any wire, cable, radio, optical or other electromagnetic system, or by any similar technical system”. It defines “telecommunications service” as meaning, “a service provided by means of telecommunications facilities and includes the provision in whole or in part of telecommunications facilities and any related equipment, whether by sale, lease or otherwise”. Those are pretty broad definitions. However, the Act, at section 4, says that it does not apply “in respect of broadcasting by a broadcasting undertaking”. So while broadcasting, including your activities as a BDU, is excluded, most other communications that you offer – including telephone and internet service – is considered the provision of a “telecommunications service”. You should understand the discussion that follows in that light.

General Rules and Mechanisms for Telephone Service Providers

Obligation to Serve

Going back, for a minute, to monopoly regulation, the quid pro quo for having a monopoly, including a guaranteed return on investment as set by the regulator, was an obligation to serve. That is the “common carrier” obligation to provide service to all who want it without discrimination and at “just and reasonable” prices. Today that is called the “Basic Service Objective”. In a nutshell, it applies only to the incumbent telephone companies that, previously, were monopolies; that is, the ILECs and SILECs. On the other hand, CLECs are, by definition, competitors trying to build

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market share in an exchange and, with the incumbents always there in the background, there is no need to place an obligation to serve on those competitors. So CLECs have no such obligation. When sustainable competition takes hold in an exchange, the CRTC will likely forbear from regulating the incumbent’s retail activities in that exchange. Among other things, once forborne, the incumbent in that exchange will no longer have a basic service obligation.

Forbearance

Umm. Forbear? Explain please? OK. Well, section 34 of the Telecommunications Act permits the CRTC to refrain, or “forbear” from applying certain provisions of the Act when it finds, as a matter of fact, that to do so would be consistent with the objectives of the Act. That section also requires the CRTC to forbear from applying those provisions where it finds, again as a matter of fact, that a given market is sufficiently competitive to protect the interests of users of the system. So, over the past couple of decades, as competitors like you have established themselves in the ILECs’ and SILECs’ markets, the CRTC has “forborne” the incumbent telephone companies from regulation. Forbearance is done at the level of the local telephone exchange. It is done because, once sustainable competition takes hold in an exchange, consumers in that exchange have a choice of telecommunications service providers. If they are unhappy with Bell’s prices or services, they can vote with their feet and their wallets. Forbearance relates to specific sections of the Telecommunications Act. Specifically, those are:

• Section 24 – this section requires any telecommunications service to be provided in accordance with any conditions the CRTC may place on such service;

• Section 25 – this section requires incumbent telephone companies to secure

CRTC approval of rates for their services in the form of authorized public tariffs;

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• Section 27 – this section requires that every rate charged for a telecommunications service be “just and reasonable” and also prohibits an incumbent carrier from unjustly discriminating against any other person in provision of its services;

• Section 29 – this section requires CRTC approval of any agreements between carriers that concern interchange of traffic, common use of facilities and apportionment of rates between carriers; and

• Section 31 – this section restricts any limitation of liability a carrier might try to implement in relation to its provision of telecommunications services.

So you can see why an ILEC would want to be forborne. Forbearance creates all sorts of competitive freedom. You should note that this applies to both retail services and to wholesale services the incumbent carriers provide to you. More on that shortly.

Telecommunications Basic Service

So what is that “Basic Service Objective”, anyway? The CRTC defined that, most

recently, in 2011. Currently, the basic service objective consists of the following:

• individual line local touch-tone service;

• capability to connect to the Internet via low-speed data transmission at local rates;

• access to the long distance network, operator/directory assistance services,

enhanced calling features and privacy protection features, emergency services, as well as voice message relay service; and

• a printed copy of the current local telephone directory upon request.

So those are the service elements that each incumbent carrier must provide to all

customers within an exchange.

However, the basic service objective applies to the ILECs only in local exchanges where

the CRTC continues to regulate the rates, terms, and conditions of wireline local

telephone services. In exchanges where the Commission has forborne from regulation,

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the ILECs continue to have an obligation to provide stand-alone wireline local

telephone services, which consist of unlimited local calling at a flat monthly rate, subject

to a price ceiling, and access to a choice of long distance service provider.

Note that the incumbent carriers can meet this minimum standard with their mobile

telephone offerings.

At the time of writing, the CRTC is in the middle of a major proceeding, comparable to

“Let’s Talk TV”, on the telecommunications side. One of the central questions in that

proceeding is whether high-speed broadband service will replace the “low speed data”

(i.e. dial-up speed) requirement in the 2011 objective and, if so, what will be the

minimum speed and signal quality requirements.

Unfortunately, there is no decision from that proceeding yet: we’ll have to update you

in a future version of this guide. If you want a useful guide to the background on this

issue, you can look at Telecommunications Notice of Consultation 2015-134 here:

http://www.crtc.gc.ca/eng/archive/2015/2015-134.htm

The Wholesale Regime – It’s All About Broadband

In fact, today, it’s all about high-speed broadband. The simple fact is that all communications services – video, telephone, data and Internet – can now be regarded as “apps” that are transported as packages of digital bits and bytes over broadband pipes. As the CRTC put it in a 2015 policy for wholesale provision of wireline and related services:

Throughout the 1990s and early 2000s, the Commission focused its wholesale service regulation on improving competition in the long distance and local voice telephony markets. Over the past decade or so, the Commission has gradually shifted its focus away from legacy voice services and towards improving competition for broadband services. The Commission’s general approach towards wholesale service regulation has been to promote facilities-based competition wherever possible.

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Facilities-based competition, in which competitors primarily use their own telecommunications facilities and networks to compete instead of leasing from other carriers, is typically regarded as the ideal and most sustainable form of competition.

Generally, the wholesale services framework sets the rules for how competitors can get access to facilities and services operated by the incumbent telephone and cable companies. For the telephone companies, this is known as High-Speed Access (HSA). For cable incumbents, it’s called Third-Party Internet Access (TPIA). Such facilities and services include things like High-Speed Access Service over fibre, Unbundled Local Loops (ULL), Ethernet and CDN networks that are used to connect a competitor from the point of interconnection to the ILEC’s facility to the retail customer. Such facilities and services also include things like co-location in the ILEC’s facility, billing, back-office and other interconnection services such as support for IPTV. Oops, here come those acronyms! To determine the rules for access, the CRTC does what it calls an “essentiality test”. The point of the test is to determine whether the incumbent should be forced to provide a given service to competitors at mandated, publicly tariffed rates. The CRTC considers whether the service is a necessary input to the competitor’s business, whether the incumbent has market power such that denial of the service will harm retail customers and whether the facilities in question can be duplicated economically. The CRTC also considers policy questions such as whether the facility or service is required for the public good, whether mandating provision of the service will promote efficient use of networks and what effect mandating the service might have on further network investment. Based on all that, if a facility or service is deemed to be “essential”, the ILEC will have to offer the service at tariffed rates that are “just and reasonable”. The CRTC is all about encouraging both incumbents and competitors to invest in networks whenever possible. It is important to understand, in that context, that the CRTC distinguishes “access” (the path, over the incumbent’s network, from the point of interconnection by the competitor to the end customer) from “transport” (the path from the competitor’s facility to the point of interconnection with the incumbent).

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Certain “access” services have been deemed to be essential. Transport services, on the other hand, are not “essential” and, as such, have been forborne. The incumbents don’t have to provide transport services to you and, if they do, they can pretty much charge you what they wish. That’s an issue we have been making noise about to anyone in Government who will listen. Given the crazy rates some of you pay for broadband transport services, you can be sure we’ll keep pounding that drum. You should also know that the CRTC distinguishes between “aggregated” and “disaggregated” provision of access services. In a previous decision, the CRTC required incumbent telephone and cable companies to provide “aggregated” access to High-Speed Access facilities; that is, competitors would basically be allowed to come into one interconnection point per province. The CRTC, in its 2015 decision, flipped that by deciding that the incumbent must support interconnection at many points. You can imagine the frustration of the incumbents’ network architects! However, that’s good for competitors like you: it means you need to build or lease transport facilities only to the nearest available point of interconnection, the local Central Office or headend of the incumbent. That “disaggregation” should make it easier and less expensive for at least some of you to source bandwidth and signals by fibre interconnection. On that point, we would say, if you can do it then you should do it. The days of satellite distribution are numbered: you need to get connected if you want to survive in the digital world! Another key point from the 2015 decision is that the incumbents must provide competitors with access to their new fibre builds. Bell fought like a lion to reverse that decision but, to date, that’s the rule. Consistent with the above quote from the CRTC, mandated provision of Unbundled Local Loops, which primarily support voice traffic over copper, is being phased out over the next few years. So, wholesale provision of that service will gradually be deregulated. The move from “aggregated’ to disaggregated” provision of high-speed access services will also be phased in gradually to give the incumbents time to adjust their networks. Right now, it is mandated only for Ontario and Quebec.

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So, as a competitor, what do you do about all this? Well, if you need access to your customer or prospective customer over the incumbent’s network then you need to determine whether the services you need are regulated as being “essential” or have been forborne. For “essential” services, you then need to find the tariff pages that tell you the rates and other terms upon which you can get those services. The 2015 regulatory policy modifies an earlier wholesale services policy that was published in 2008. That 2008 policy defines several categories of wholesale services in buckets such as “essential”, “conditional essential”, public good”, etc. Whereas the 2015 policy is only about High-Speed Access, the 2008 decision still reflects the CRTC’s determinations as to how a large number of legacy wholesale services (e.g. listing interchange files, directory file services and low-speed data services) may be sold. If we haven’t completely lost you by now – and you just happen to be interested – you really ought to become familiar with these policies. You can see them here: http://www.crtc.gc.ca/eng/archive/2008/dt2008-17.htm http://www.crtc.gc.ca/eng/archive/2015/2015-326.htm

Internet Traffic Management – Usage-Based Billing and “Throttling”

A major issue that developed, in recent years, regarding wholesale access services was that the incumbents had every incentive to limit the broadband speeds available to their competitors: as long as the incumbent’s network was faster, it had little to fear from new competitors. As a result, in 2010, the CRTC imposed a requirement that the incumbent telephone and cable companies must provide you, as a competitor, with the same broadband Internet speeds they offer to their retail customers. That was another hard-fought battle but the rule remains in place. So, if the incumbent offers three speed-level packages to its customers, it must offer you the same speeds. This is known as the “speed-matching requirement”. During the same period, the incumbent telephone and cable companies were introducing usage-based billing. This is the format in which the retail customer chooses an Internet package with a cap on monthly data usage. Typically, a communications

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company will offer two or three such service levels at different prices. When a retail customer exceeds her monthly data allowance, she may be invited to “buy up” to the next service level or may simply have to pay for usage beyond the cap on a “per megabit” or “per gigabit” basis. Introduction of that billing structure raised a new concern that the incumbents’ wholesale customers – competing Internet Service Providers – would be forced to impose the incumbents’ usage-based billing scheme on their own customers, thereby removing a key competitive advantage the competitors might otherwise have had. The CRTC addressed that concern by approving two different wholesale billing models. The first is a capacity-based model in which the competitor commits to purchase a set amount of capacity. There is a monthly access fee for each of the competitor’s retail customers plus a capacity charge based on increments of 100 megabits per second. That approach allows the competitor to design its own retail model for selling that capacity. However, if the competitor exceeds the purchased capacity in, say, a given month, then it will have to manage its capacity until it can buy more in the next period. The second model is a flat-rate structure. Here, the competitor pays the incumbent a flat rate per month, by speed tier, for capacity regardless of how much of that capacity is actually used. So this model has a higher monthly access charge based on the tiers of service to which the competitor’s customers subscribe but does not include any capacity-usage element. A related issue arises from the fact that network operators build their networks to handle peak traffic demands. Put another way, peak traffic is a key cost driver for networks. For reasons of both cost and the need to deliver a high-quality customer experience, network operators have a vital interest in managing traffic on their networks. The issue, then, is how may that traffic be managed? Can the incumbent “throttle” usage of the bandwidth it sells to its competitor? Can an ISP select which applications get priority and which do not? Can the ISP inspect data packets to identify them and assign such priorities? Can an ISP limit the capacity used by customers who torrent video 24 hours a day? Generally, these are the issues of “net neutrality” about which we hear so much. For the CRTC, as usual, it is about protecting the retail customers and the watchword is “transparency”. The CRTC recognizes that some network management tools will

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inevitably be required. However, customers must know exactly what practices are employed and those practices must be proportional to the network management challenge. There are two types of Internet Traffic Management Practices (ITMPs); economic and technical. The CRTC prefers economic ITMPs as being the most transparent. These practices are the data cap models discussed above. The CRTC has articulated a number of principles about acceptable ITMPs:

• Where any ITMPs are employed, ISPs must be transparent about their use. Consumers need this information to make informed decisions.

• Economic practices are the most transparent ITMPs. They match consumer usage

with willingness to pay, thus putting users in control and allowing market forces to work.

• Where ITMPs are employed, they must be designed to address a defined need,

and nothing more.

• ISPs must ensure that any ITMPs they employ are not unjustly discriminatory nor unduly preferential.

• For retail services, ISPs may continue to employ ITMPs without prior

Commission approval.

• For wholesale services there will be additional scrutiny.

o When an ISP employs more restrictive ITMPs for its wholesale services than for its retail services, it will require Commission approval to implement those practices.

o Technical ITMPs applied to wholesale services must comply with the

ITMP framework and must not have a significant and disproportionate impact on secondary ISP traffic.

All ISPs must publish a notice on their websites, 30 days in advance of a new ITMP’s implementation, which sets out the nature of the traffic management practices that will be introduced.

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“Primary” ISPs (i.e. the incumbent network operators) have some additional requirements related to their provision of wholesale service to other ISPs:

• for new economic ITMPs, they must file and obtain approval of tariffs that describes the practices; and

• for new technical ITMPs that are more restrictive than the practices the ISP

applies to its own retail customers, the ISP must secure CRTC approval before implementing the measure.

That last one is important: it keeps the big guys from whom you buy capacity from unfairly throttling your service. The incumbent ISPs must also provide you with advance written notice of their intention to introduce new traffic management measures.

Price Cap Regulation

Incumbent telephone carriers are subject to what is called “price cap” regulation. In essence, the services they provide are divided into a number of “baskets” and each “basket” of services is subject to a price maximum or “cap.” Those companies can change the prices of individual services within the baskets but they cannot increase the price of the overall basket of services without getting CRTC approval of a new tariff. That approach protects consumers by limiting price increases. It also promotes competition. Without the “baskets”, the incumbents could underprice (subsidize) the services that they must compete to sell by increasing the prices of services for which they have a true monopoly and no competition. The underpricing of services that are also offered by competitors would allow the incumbents simply to drive the competition away. The grouping of services into “baskets” is designed partly to prevent such anti-competitive behaviour.

Costing Studies

Here comes the Math Department! In the late 1970s and early 1980s, in support of moving to “price cap” regulation, the CRTC conducted a major “Cost Inquiry” to establish the cost baseline upon which price caps would be calculated. This resulted in “Phase I”, “Phase II” and “Phase III” cost studies.

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The most important of these, for our purposes, is the “Phase II” costing method because it is the main tool still used by the CRTC to determine the rate for an individual service. It is a way of calculating the incremental costs of providing a particular service, in addition to all of the services already provided. It is done by comparing a “reference” study of costs without the service to a second study that includes the service and, then, determining the difference. Typically, for example in the provision of a wholesale service, the incumbent is allowed to charge competitors the resulting cost difference plus a reasonable mark-up, typically 15% or more.

Tariffs

All of the incumbents, both ILECs and SILECs, are required to file tariffs that describe, in detail, all of the facilities and services they offer and the rates they charge for those facilities and services, as provided to both retail and wholesale customers. As you can imagine, these can be really big books; really, really big (if there still were books – actually, online access is now required for all approved tariffs). Incidentally, cable companies may also have to file tariffs to the extent they provide wholesale (not retail) telecommunications services. In particular, they have to file rates for provision of wholesale services to their competitors under a regime called Third Party Internet Access. Being small doesn’t necessarily get you out of that: if an Internet Service Provider asks you to file tariffs for access to your network, you may have to do it. Generally, smaller companies can adopt the tariffed rates of the larger incumbents. Tariffs filed by telephone and cable companies under these rules will often have to be supported with Phase II costing studies and are subject to CRTC approval. CLECs are also required to file tariffs for connections to other carriers, but there are templates that set most of the terms and rates and no costing studies are required.

Contribution Regime

As an independent communications company, you know very well that some areas cost more to serve than others. In broadcasting, your companies do what they can in dealing with “Fibre To The Barn”. On the telecom side, there is a “National Contribution Fund”

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which is a mechanism to subsidize delivery of residential local telephone services to High Cost Serving Areas (HCSAs) with revenues earned by telecommunications operators in the more dense and profitable urban markets. We won’t go into all the rules and calculations in this area. We will say that ILECs, SILECS, CLECs and, basically, anyone else that provides telecommunications services may find themselves required to contribute to the pot. The rate in 2013 was 0.5% of revenue, so not as large as the levy on the broadcasting side for independent programming, but companies are exempt if they have annual telecom revenues of less than $10 million. On the other side, telecommunications companies get to draw subsidies from the Fund to enable delivery of services to customers in those HCSAs. However, only those companies that continue to have an Obligation To Serve are allowed to draw down from the Fund. That means ILECs and SILECs to the extent they serve non-forborne exchanges.

CRTC Data Collection System (DCS)

The CRTC operates an extensive Data Collection System that applies to all Telecommunications Service Providers (TSPs), regardless of size or category. The system is complex and form-driven. As a TSP, you almost certainly will be required to file information annually under this system. The CRTC organizes companies registered under the DCS in two groups. Essentially those are Group 1 – Big and Group 2 – Not So Big. The Group 1 companies typically have to file tariffs, have licences to handle international call traffic and have annual telecom revenues over $10,000,000. The smaller companies in Group 2 do not face all the on-line forms that the larger guys do. Rather, once registered in the system, they are mailed a simplified “annual return” for completion and filing. All facilities-based providers, regardless of size, must file their completed forms electronically through the on-line DCS. If you are providing telecommunications services, then assume you need to register. If you’re uncertain as to which Group you fit in, it’s probably Group 2. Every TSP that reports through the DCS must do two things:

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• Appoint a “Response Manager” who is your company’s single point of contact with the CRTC for DCS purposes; and

• Create a CRTC account for filing of documents.

There is a guide to this process at http://www.crtc.gc.ca/dcs/eng/current/dcs2.htm.

ILEC and SILEC Rules

OK. This is a guide for CCSA members. None of you are ILECs. Some of you are SILECs. ILECs and SILECs have been in this game for over 100 years. They know what they’re doing with this stuff. So we’re not going to spend hundreds of pages going through the startling scope and complexity of the rules that apply. For the rest of you, let’s just say that, if you’re going to enter the regulatory arena against one of the big incumbents, you’d better know what you’re doing. Read early and read fast on the specific subject area of your dispute. That’s all we’ve got to say about that.

CLEC Rules

You do, however, need to know about the rules that apply to CLECs. Before we get going on working through those, there are a couple of key references you should know about. They are:

• Telecom Decision CRTC 97-8, “Local Competition” , at http://www.crtc.gc.ca/eng/archive/1997/DT97-8.HTM

• Telecom Decision CRTC 2006-58, “CCTA Part VII application regarding the

application of some competitive local exchange carrier (CLEC) obligations to certain CLECs”, at: http://www.crtc.gc.ca/eng/archive/2006/dt2006-58.htm.

Decision 97-8 is the one in which the CRTC determined that the ILECs must open up to competition from new entrants called CLECs and set out the rules for such competition. Decision 2006-58, in response to a CCTA application, loosened some of the rules for smaller CLECs who relied upon third-party Local Exchange Carriers for facilities, interconnection and back-office functions.

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Registration

Anybody who provides telecommunications services in Canada must register with the CRTC. As discussed above, registration will require you to nominate a Response Officer as a single point of contact with the CRTC and create an on-line account with the CRTC. The CRTC maintains “Registration Lists” of the various classes of telecom service providers. There are three basic classes of provider; facilities-based providers, non-facilities-based providers and basic international telecommunications service providers (someone who handles international phone traffic). One provider may appear on more than one list. The lists can be found here: http://www.crtc.gc.ca/eng/8180/8180a.htm The first step in registration is to write the CRTC to tell them what type of provider you are, provide some other information, including service area maps, and commit to meeting the obligations that apply to the type of provider you are. Your letter must:

• state whether your company is a Facilities-Based or Non-Facilities-Based Provider;

• state the registration list(s) on which your company should appear;

• state your company’s legal name and address;

• include an acknowledgement that you understand and will conform to the

regulations associated with the list(s) for which you are registering; and

• attest that your company is Canadian owned and controlled Assuming you are offering local telephone service, once you have written that letter to the CRTC, your company gets added to a list of “Proposed CLECs”. This is important. If you are offering telecommunications services and have not formally told the CRTC so, you risk facing a complaint from another telecom company that you are offering phone service without the necessary authorization.

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If the CRTC gets such a complaint, it may have no choice but to shut you down to the extent you are offering the unauthorized services. That’s no joke: it happened to a CCSA member a few years ago. Getting your company on the list of “Proposed CLECs” shows that you have started the registration process. But it is just a starting point - until your company has satisfied all of the CRTC’s rules for becoming a CLEC, you are not protected from such a complaint. Why have all these rules? Well, it’s because local telephone service is “essential” – people depend on it to call 911, not just watch their favourite TV show or do an internet search. Making sure that the telephone line works all the time relies on a complex network with all kinds of different companies handing off traffic between their customers and assuming various contractual and legal liabilities in the process. So it’s important that all the players know who they must deal with and how, where their service areas are and so on. Other than avoiding the risk of getting shut down, why would you register as a CLEC? The short answer is that, once you are registered, the incumbents must deal with you by giving access to their facilities and services at tariffed wholesale rates, including cost-shared access to interconnection trunks, and to their operational support systems. You also get direct access to telephone numbers from the Canadian Numbering Administrator and some other things.

CLEC Obligations

Your initial letter must acknowledge that you know the rules and obligations that apply to you and that you commit to meeting those obligations. So what are they? CLEC obligations vary depending on:

• whether you are facilities-based; that is, you are processing communications using any part of your own physical network, whether entirely on your own or in combination with another service provider; and

• your size in terms of the number of telephone customers you serve.

There are four types of CLECS:

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• Type I – these are “full CLECs” that provide local exchange services using entirely their own facilities;

• Type II – these are wireless Canadian carriers that are licensed under the

Radiocommunication Act;

• Type III – these are “non-dominant Canadian carriers” that rely on the facilities of a third party LEC, either directly or through a resale arrangement to provide Voice Over IP local services and, typically, do not qualify as Type IV because they have more than 10,000 local telephone customers; and

• Type IV – these are “non-dominant Canadian carriers”, referred to as “small

CLECs” that rely on the facilities of a third party LEC, through a resale arrangement, to provide Voice Over IP local services and have fewer than 10,000 local telephone customers.

Most CCSA CLEC members are either Type III or Type IV. Generally, CLECs must:

• File an “Access Services” tariff with the CRTC;

• Enter into a Master Agreement for Local Interconnection (MALI) with all other LECs in the CLEC’s operating territory;

• File tariffs and enter into agreements that provide for equal access by inter-exchange (long-distance) providers. Type II and IV CLECS do not have to do this;

• Supply directory listings to other LECs that serve the same exchanges as the

CLEC;

• Provide 911 and Message Relay services;

• Obtain a Central Office (NXX) code for each Local Interconnection Region (a grouping of local exchanges) and a Central Office code for each exchange in which the CLEC intends to assign numbers to customers. The CLEC can rely on a third party for this;

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• Implement Local Number Portability, a function that allow customers to keep their phone numbers when changing providers. Type IV CLECs are only required to support outbound portability; that is, when customers leave for another provider they can take their telephone number with them;

• Comply with customer privacy and confidentiality requirements; • Provide both the CRTC and customers with service area, billing, payment and

other information;

• Exchange certain information specified by the CRTC with other LECs in the exchanges served; and

• File annual contribution reports with the CRTC.

That’s a lot of obligations. However, many of them can be discharged by a third party LEC with whom the CLEC has a commercial arrangement. That’s exactly what many CCSA members do. A more complete table of CLEC obligations can be found under the section of this document titled ”The Beef”.

Model Agreements and Tariffs

One of the daunting aspects of all this is the prospect of negotiating inter-connection agreements with other LECs in an exchange and, also, the prospect of filing certain tariffs. Negotiation of the interconnection agreements, in particular, can be an issue when the negotiation is with someone big who has no interest in dealing with you. However, as a general proposition, there are authorized models for such documents. Again, for many members, the better path is to rely on a third party to meet the underlying obligations set out in the agreements. However, each CLEC must sign its own agreements and file its own tariffs.

Notification

Once a new CLEC has met all of the requirements required for registration, it must still send formal notice of its intention to offer service in local exchanges to both the CRTC

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and all other LECs operating in those exchanges. That has to be done before service is “turned up”; that is, actually offered to consumers and not just “friendlies” on a trial basis. So, each time the CLEC is ready to introduce service to a new exchange, it must:

• file a letter of intention with the CRTC that references the exchanges to be served;

• complete an approved Schedule C of the MALI with all other LECs in the exchange; and

• file a letter of notification with the CRTC prior to actually “turning up” service.

In other words, there is no shortage of paperwork for anyone who proposes to get into the telephone business as a CLEC. However, if you are already a CLEC in one exchange, the requirements are just a bit less onerous to add a new exchange. You can see the requirements for adding an exchange here: http://www.crtc.gc.ca/eng/archive/2012/2012-396.htm) The good news is that there are consultants out there who have helped many CCSA members get through these processes and know all the steps for getting it done most easily. That’s enough of that. We can see your head nodding. There are a million other things to talk about in the telecom world but we won’t inflict that on you here. If you have questions, call us!

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The Copyright Act

Payment of Royalties

That’s enough of the CRTC for now. Let’s look, very briefly, at the world of copyright. There are two things you really need to know at this time:

• your company has a legal requirement to pay royalties for its use of music and video that other people have created; and

• the Copyright Modernization Act enacted in 2012 imposes important obligations on

you as an Internet Service Provider. Under the section of this document called “The Beef”, we are including copyright primers that have been created especially for CCSA members. We have updated these from the version included in the original “Regulatory 101” guide. You may have seen these before. If not, you really need to take the time to understand them. We are here to help you with that. In very broad terms, anyone who creates a creative product – called a “work” in copyright lingo – has a right to be compensated for that creative effort. In our business, we’re talking primarily about music and video. The Copyright Act authorizes the Canadian Copyright Board to administer the process of flowing compensation to creators for use of such works in this country. The Board does that by creating tariffs (yes, that word again) for various uses of copyrighted works. The tariffs authorize copyright “collectives” to collect royalties for onward distribution to the creators, or “rightsholders” that they represent. For example, SOCAN is the collective that represents musicians in Canada. SOCAN can collect royalties, under Tariff 17, for the “communication” of music on Pay and Specialty TV channels. There are many such collectives and many such tariffs. The Act makes such communication a single act that is jointly performed by the programmer (e.g. Bravo!) and the distributor (e.g. you). As such, the programmer and distributor are jointly liable for the payment of royalties, as set out in the applicable tariff. That is a legal liability to pay. It doesn’t go away if you ignore it. Rather, unpaid royalties attract interest that you would have to pay if the collective comes calling.

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The good news is that most CCSA members qualify as what the tariffs call “small retransmitters”. A small retransmitter is a company that serves fewer than 2,000 customer premises across all of its systems. Generally, rather than paying a monthly royalty calculated on a per-subscriber basis, those small members are liable to pay only an annual flat fee that is pretty small; depending on the tariff, the fee ranges from $10 - $100. Members have asked CCSA, many times, to take over the complex process of calculating and paying these royalties. The problem is, the collectives don’t want to do that, even if it means they are not getting some royalties. However, we recently succeeded in getting the collectives to accept payment and reporting from CCSA in relation to those “small retransmitters” that pay only an annual flat fee. In 2014, we made those payments on behalf of members for the first time. So, if your entire company serves fewer than 2,000 homes, you don’t really need to think much more about this. If you’re larger, you absolutely do. That’s about all we want to say on that topic. If you need help dealing with your copyright obligations, first have a look at the primers we have provided and, second, call us. We have excellent outside counsel who know how to guide you through this.

Notice-and-Notice for ISPs

The other issue you need to know about comes out of the 2012 Copyright Modernization Act. In that Act, Parliament has created a “Notice and Notice” regime. That has to do with how copyright violations by internet users are handled. Here’s how it works. Suppose one of your internet customers has been torrenting first-run movies and selling them, at a discount, through his own on-line pay site. In other words, he’s a pirate. The owner of the rights in the movies finds out. Somehow the owner identifies the IP address of the pirate’s computer and discovers that he is your customer (you may have read about the recent court case in which TekSavvy had to disclose customer information). The rightsholder (let’s call him Disney®) is going to get in touch with you . . . in a forceful way. In the US, they now have “Notice and Take-Down”, a regime that would require you to actively ensure that the offending content is removed from the internet.

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In Canada, the Notice-and-Notice regime is somewhat more forgiving. It requires you, when you receive the notice from Disney®, to pass that notice along to the pirate. Once you’ve done that, your job is done. What this does mean is that you need a process for passing the notice to the right customer, for recording that you have done so and for notifying the rightsholder that you have done so. The actual implementation of Notice-and- Notice was done by regulation and that regulation came into force in January, 2015. So this is the law . . . you have to do it. Again, CCSA and its copyright counsel can assist.

Break Time

In the comic strip, Calvin and Hobbes, Calvin’s dad is a copyright/patent lawyer. So he probably deserves this one: And, just because it’s Summer (at least as we write), you deserve this one:

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And, because we love Summer so much, here are a couple more . . .

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The Beef

OK . . . back to work!

Up until now, we’ve been giving you context or, as we put it at the beginning, a

pegboard and some hooks to hang the rules on. “But,” you say, “I really don’t care. Just

tell me what I have to do!” That’s what this section will attempt to do.

We’ll do our best to give you a handy-dandy set of checklists, geared to your different

sizes and technologies, that you can use as references. As you can imagine from the

CLEC discussion we finished a while ago, that will be easier for some things than for

others.

Because we’re presenting, where we can, single-page “checklists”, it may look from

time to time like we’re finished. Don’t assume your work is done. Flip the page anyway.

Right now!

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What Channels Do I Have To Carry?

Exempted Analog-Only Systems (Assumed Under 2,000 Customers)

Must offer on Basic Service:

Must offer all local Over-The-Air TV Stations (transmitter within 15km)

Must offer CBC English (if CBC pays transport)

Must offer CBC French (if CBC pays transport)

Preponderance Rule:

Must offer more Canadian than foreign services in entire line-up.

US Networks (ABC, CBS, FOX, NBC + PBS):

May offer 2 sets, each from a different time zone (no carriage requirement). May

offer both sets on basic.

Other Non-Canadian Channels:

May offer any service on Eligible Satellite Lists

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Exempted Systems Under 2,000 Customers that Distribute in Digital

Must offer on Basic Service:

Must offer all local Over-The-Air TV Stations (transmitter within 15km)

Must offer CBC English (if CBC pays transport)

Must offer CBC French (if CBC pays transport)

Preponderance Rule:

Must offer more Canadian than foreign services in entire line-up.

Minority Language Rule:

Must offer 1 minority-language Pay or Specialty service for every 10 majority-

language services

US Networks (ABC, CBS, FOX, NBC + PBS):

May offer 2 sets, each from a different time zone (no carriage requirement). May

offer both sets on basic.

Other Non-Canadian Channels:

May offer any service on Eligible Satellite Lists

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Exempted Systems that Serve 2,000 – 20,000 Customers (Anglophone)

(Assumes digital service offered)

Must offer on Basic Service:

Must offer all local Over-The-Air TV Stations (transmitter within 15km of your

service area)

Must offer all regional Over-The-Air TV Stations (Grade B contour touches your

service area)

Must offer CBC English (if CBC pays transport)

Must offer CBC French (if CBC pays transport)

Must offer provincial education service if available

Must offer all mandatory “9(1)(h)” services applicable to your market:

(* = Must offer only if programmer pays transport)

Basic:

*APTN

*A Groupe TVA service (e.g. CFTM, Montreal)

*CPAC (main audio in majority language and SAP in minority language)

*CPAC (with main and secondary audio flipped from the above)

If offering CBC Newsnet on analog, AMI-audio as SAP for Newsnet

If not offering CBC Newsnet, AMI-audio on a separate audio channel

Digital Basic:

*AMI-tv

*AMI-tv Francais

AMI Audio

Canal M

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*TV5/UNIS

*RDI

*The Weather Network

Discretionary:

*ARTV

Preponderance Rule:

Must offer more Canadian than foreign services in entire line-up.

Minority Language Rule:

Must offer 1 minority-language Pay or Specialty service for every 10 majority-

language services

US Networks (ABC, CBS, FOX, NBC + PBS):

May offer 2 sets, each from a different time zone (no carriage requirement). May

offer both sets on basic.

Other Non-Canadian Channels:

May offer any service on Eligible Satellite Lists

Other Canadian Channels:

May offer any licensed or exempt Canadian service

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Exempted Systems that Serve 2,000 – 20,000 Customers (Francophone)

(Assumes digital service offered)

Must offer on Basic Service:

Must offer all local Over-The-Air TV Stations (transmitter within 15km of your

service area)

Must offer all regional Over-The-Air TV Stations (Grade B contour touches your

service area)

Must offer CBC English (if CBC pays transport)

Must offer CBC French (if CBC pays transport)

Must offer provincial education service if available

Must offer all mandatory “9(1)(h)” services applicable to your market:

(* = Must offer only if programmer pays transport)

Basic:

*APTN

*A Groupe TVA service (e.g. CFTM, Montreal)

*CPAC (main audio in majority language and SAP in minority language)

*CPAC (with main and secondary audio flipped from the above

Digital Basic:

*AMI-tv

*AMI-tv Francais

AMI Audio

*CBC Newsnet

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*TV5/UNIS

Canal M

*Meteomedia

Preponderance Rule:

Must offer more Canadian than foreign services in entire line-up.

Minority Language Rule:

Must offer 1 minority-language Pay or Specialty service for every 10 majority-

language services

US Networks (ABC, CBS, FOX, NBC + PBS):

May offer 2 sets, each from a different time zone (no carriage requirement). May

offer both sets on basic.

Other Non-Canadian Channels:

May offer any service on Eligible Satellite Lists

Other Canadian Channels:

May offer any licensed or exempt Canadian service

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Exempted Systems that Serve 2,000 – 20,000 Customers (Quebec

Francophone)

(Assumes digital service offered)

Must offer on Basic Service:

Must offer all local Over-The-Air TV Stations (transmitter within 15km of your

service area)

Must offer all regional Over-The-Air TV Stations (Grade B contour touches your

service area)

Must offer CBC English (if CBC pays transport)

Must offer CBC French (if CBC pays transport)

Must offer provincial education service if available

Must offer all mandatory “9(1)(h)” services applicable to your market:

(* = Must offer only if programmer pays transport)

Basic:

*APTN

*A Groupe TVA service (e.g. CFTM, Montreal)

*CPAC (main audio in majority language and SAP in minority language)

*CPAC (with main and secondary audio flipped from the above

Digital Basic:

*AMI-tv

*AMI-tv Francais

AMI Audio

*CBC Newsnet

Canal M

*TV5/UNIS

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*Meteomedia

*Avis de Recherche

Preponderance Rule:

Must offer more Canadian than foreign services in entire line-up.

Minority Language Rule:

Must offer 1 minority-language Pay or Specialty service for every 10 majority-

language services

US Networks (ABC, CBS, FOX, NBC + PBS):

May offer 2 sets, each from a different time zone (no carriage requirement). May

offer both sets on basic.

Other Non-Canadian Channels:

May offer any service on Eligible Satellite Lists

Other Canadian Channels:

May offer any licensed or exempt Canadian service

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Licensed Systems (Anglophone)

(Assumes digital service offered)

Must offer on Skinny Basic Service:

Must offer all local Over-The-Air TV Stations (transmitter within 15km of your

service area); includes digital version if provided to you by direct feed

Must offer all regional Over-The-Air TV Stations (Grade B contour touches your

service area); includes digital version if provided to you by direct feed

Must offer CBC English

Must offer CBC French

Must offer provincial education service if available

Must offer channel with provincial Legislature (unless programmer consents to

discretionary tier)

Must offer community channel if you have one

Must offer all mandatory “9(1)(h)” services applicable to your market:

(* = Must offer only if programmer pays transport)

*APTN

*A Groupe TVA service (e.g. CFTM, Montreal)

*CPAC (main audio in majority language and SAP in minority language)

*CPAC (with main and secondary audio flipped from the above)

If offering CBC Newsnet on analog, AMI-audio as SAP for Newsnet

If not offering CBC Newsnet, AMI-audio on a separate audio channel

*AMI-tv

*AMI-tv Francais

*RDI

*The Weather Network

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*TV5/UNIS

Canal M

May offer on Skinny Basic:

One set of US 4+1

Up to 10 Off-Airs in total

Must offer on Discretionary Tiers/Packages:

All English language Category A services

All Category C Mainstream News services, if not already carried on Basic:

CBC News Network

CTV News Channel

Le Canal Nouvelles (LCN)

ARTV (Mandatory 9(1)(h) “Must Offer”)

One English language general-interest Pay-Per-View service

Ethnic Category A service if 10% or more of market is language of the service

Community-based low-power television station, if available

Community-based digital programming service, if available

Preponderance Rule:

Must offer more Canadian than foreign services in entire line-up.

Minority Language Rule:

Must offer 1 minority-language Pay or Specialty service for every 10 majority-

language services

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US Networks (ABC, CBS, FOX, NBC + PBS):

May offer 1 set from your time zone or adjacent zone (no carriage requirement)

Other Non-Canadian Channels:

May offer any service on Eligible Satellite Lists

Other Canadian Channels:

May offer any licensed or exempt Canadian service

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Licensed Systems (Francophone)

(Assumes digital service offered)

Must offer on Skinny Basic Service:

Must offer all local Over-The-Air TV Stations (transmitter within 15km of your

service area); includes digital version if provided to you by direct feed

Must offer all regional Over-The-Air TV Stations (Grade B contour touches your

service area); includes digital version if provided to you by direct feed

Must offer CBC English

Must offer CBC French

Must offer provincial education service if available

Must offer channel with provincial Legislature (unless programmer consents to

discretionary tier)

Must offer community channel if you have one

Must offer all mandatory “9(1)(h)” services applicable to your market:

(* = Must offer only if programmer pays transport)

*APTN

*A Groupe TVA service (e.g. CFTM, Montreal)

*CPAC (main audio in majority language and SAP in minority language)

*CPAC (with main and secondary audio flipped from the above

*AMI-tv

*AMI-tv Francais

AMI Audio

*CBC Newsnet

Canal M

*Meteomedia

*TV5/UNIS

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May offer on Skinny Basic:

One set of US 4+1

Up to 10 Off-Airs in total

Must offer on Discretionary Tiers/Packages:

All French language Category A services in a single package

All Category C Mainstream News services, if not already carried on Basic:

CBC News Network

CTV News Channel

Le Canal Nouvelles (LCN)

RDI

One French language general-interest Pay-Per-View service

Ethnic Category A service if 10% or more of market is language of the service

Community-based low-power television station, if available

Community-based digital programming service, if available

Preponderance Rule:

Must offer more Canadian than foreign services in entire line-up.

Minority Language Rule:

Must offer 1 minority-language Pay or Specialty service for every 10 majority-

language services

US Networks (ABC, CBS, FOX, NBC + PBS):

May offer 1 set from your time zone or adjacent zone (no carriage requirement)

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Other Non-Canadian Channels:

May offer any service on Eligible Satellite Lists

Other Canadian Channels:

May offer any licensed or exempt Canadian service

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Licensed Systems (Quebec Francophone)

(Assumes digital service offered)

Must offer on Skinny Basic Service:

Must offer all local Over-The-Air TV Stations (transmitter within 15km of your

service area); includes digital version if provided to you by direct feed

Must offer all regional Over-The-Air TV Stations (Grade B contour touches your

service area); includes digital version if provided to you by direct feed

Must offer CBC English

Must offer CBC French

Must offer provincial education service if available

Must offer channel with provincial Legislature (unless programmer consents to

discretionary tier)

Must offer community channel if you have one

Must offer all mandatory “9(1)(h)” services applicable to your market:

(* = Must offer only if programmer pays transport)

*APTN

*A Groupe TVA service (e.g. CFTM, Montreal)

*CPAC (main audio in majority language and SAP in minority language)

*CPAC (with main and secondary audio flipped from the above)

*AMI-tv

AMI Audio

*AMI-tv Francais

*CBC Newsnet

Canal M

*Meteomedia

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*Avis de Recherche

*TV5/UNIS

May offer on Skinny Basic:

One set of US 4+1

Up to 10 Off-Airs in total

Must offer on Discretionary Tiers/Packages:

All French language Category A services in a single package

All Category C Mainstream News services, if not already carried on Basic:

CBC News Network

CTV News Channel

Le Canal Nouvelles (LCN)

RDI

One French language general-interest Pay-Per-View service

Ethnic Category A service if 10% or more of market is language of the service

Community-based low-power television station, if available

Community-based digital programming service, if available

Preponderance Rule:

Must offer more Canadian than foreign services in entire line-up.

Minority Language Rule:

Must offer 1 minority-language Pay or Specialty service for every 10 majority-

language services

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US Networks (ABC, CBS, FOX, NBC + PBS):

May offer 1 set from your time zone or adjacent zone (no carriage requirement)

Other Non-Canadian Channels:

May offer any service on Eligible Satellite Lists

Other Canadian Channels:

May offer any licensed or exempt Canadian service

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CLEC Obligations - A More Detailed Table

Pre-Entry Obligations for Proposed Competitive Local Exchange Carriers (CLECs)

Requirement to Fulfill Obligations and Associated References

Type I CLECs Type II CLECs

Type III CLECs Type IV CLECs

1 Attest to the Commission that the proposed CLEC understands and will conform to the obligations set out in Telecom Decision 97-8, as modified from time to time.

Required

Telecom Decision 97-8 par. 295(1)

2 Identify the exchange(s) and the associated province(s) in which local service is to be provided.

Required

Telecom Decision 2011-809

par. 16

3 Attest to the Commission that the proposed CLEC is Canadian owned and controlled within the meaning of the Canadian Telecommunications Common Carrier

Ownership and Control Regulationsissued under the authority of section 22 of theTelecommunications Act(the Act) available athttp://laws-lois.justice.gc.ca/eng/acts/T-3.4/.

Required

s. 16 and 22 of the Act

4 Register with the Commission using the electronic Data Collection System (DCS) and complete the associated forms (i.e. the registration and ownership forms). Ensure ongoing compliance with theCanadian Telecommunications

Common Carrier Ownership and Control Regulations, including the filing of ownership reports.

Required

Telecom Circular 2003-1, Telecom Circular 2005-4, and s. 16 of the Act

CLEC Tariff / Agreement Filing Obligations

5 File an Access Services Tariff for Commission approval. (Based on the most recent version of the CLEC Model Tariff. Any departure from the CLEC Model Tariff needs to be justified.) Follow process described under Telecom application checklists and Frequently Asked Questions page.

Required

Telecom Decision 97-8 par. 190, 192, and 279

Required

(Modified Tariff)

Telecom Decision 2006-58 par. 101

6 Enter into a master agreement for local interconnection (MALI) (the most recently approved version) with other

local exchange carriers (LECs) and file Schedule C with the Commission. Follow process described under Telecom application checklists and Frequently Asked Questions page. Note: Pursuant to Telecom Decision 2007-129, LECs must file a quarterly report listing new template-based MALIs entered into with other LECs. If an executed MALI departs from the template, LECs must file the complete MALI for Commission approval.

Required

Telecom Decision 97-8 par. 27, 28, 40, 41, 206, and

282

Required

Telecom Decision 2006-58 par. 101

7 File proposed tariffs for interexchange equal access. (Based on the most recent version of the CLEC Model Tariff. Any departure from the CLEC Model Tariff needs to be justified.) Follow process described under Telecom application checklists and Frequently Asked Questions page.

Required

Telecom Decision 97-8

par. 190

Telecom Regulatory Policy 2011-771 par. 64

Relieved

Telecom Regulatory

Policy 2012-24 par. 94

Required

(Model CLEC Tariff)

Telecom Decision 97-8

par. 190 and Telecom Decision 2006-58 par. 101

Relieved

Telecom Decision 2006-58 par. 107

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Note: This obligation is to be fulfilled by an applicant CLEC only in those exchanges where an ILEC supports equal access.

Telecom

Regulatory Policy 2011-771 par. 64

8 Enter into a LEC/IXC (interexchange carrier) Agreement (most recently approved version) Note: Pursuant to Telecom Decision 2007-129, LECs must file a quarterly report listing new template-based LEC/IXC agreements entered into with other IXCs. If an executed LEC/IXC agreement departs from the template, LECs must file the complete LEC/IXC agreement for Commission

approval. Follow process described under Telecom application checklists and Frequently Asked Questions page. Note: This obligation is to be fulfilled by an applicant CLEC only in those exchanges where an ILEC supports equal access

Required

Telecom Decision 97-8

par. 295(3)

Telecom Regulatory Policy

2011-771 par. 64

Relieved

Telecom Regulatory

Policy 2012-24 par. 94

By third party

Telecom Decision 2006-53

par. 114-115 and Telecom

Decision 2006-58 par. 109

Telecom

Regulatory Policy 2011-771 par. 64

Relieved

Telecom Decision 2006-58 par. 107

9 Supply subscriber directory listings to other LECs that serve the exchanges in which the proposed CLEC plans to offer service. File the unexecuted template Basic Listing Interchange File Agreement (BLIF) for Commission approval. Any departure from the BLIF agreement template needs to be justified.

Required

Telecom Decision 97-8

par. 227

Relieved

Telecom Regulatory

Policy 2012-24 par. 94

Required

Telecom Decision 2006-58 par. 89, 92, and 101

10 Provide 9-1-1 service where an ILEC offers the service and file a 9-1-1 agreement if required. Note: 9-1-1 service is currently provided by public safety answering points via the incumbent local exchange carriers (ILECs). A 9-1-1 agreement with the ILEC is obligatory when 9-1-1 service is provided through the ILEC. In the event that a proposed CLEC enters into a direct interconnection arrangement with a PSAP, the proposed CLEC would not be required to submit this arrangement for Commission approval but would instead be required to file an attestation that such an arrangement has been finalized.

Required

Telecom Decision 97-8

par. 286

Telecom Regulatory Policy 2011-771 par. 64

Required

Telecom Decision 2003-53

par. 83, 85-89, 91

Telecom

Regulatory Policy 2011-771 par. 64

By third party

Telecom Decision 2005-21 par. 19, 52, 68, 93, and 98 Telecom Decision 2006-58

par. 87

Telecom Regulatory Policy 2011-771 par. 64

11 Provide message relay service (MRS) and file an MRS agreement if required. Note: When MRS is provided through an agreement with the ILEC, the proposed CLEC is required to file this agreement for Commission approval.

Required

Telecom Decision 97-8 par. 286

By third party

Telecom Decision 2007-49 par. 19

By third party

Telecom Decision 2006-58 par. 87

12 File a Primary Interexchange Carrier/Customer Account Record Exchange (PIC/CARE) Access Customer Handbook in accordance with Part 1 of the CRTC Rules of Practice and Procedure. Note: Only required if an IXC requests direct interconnection. Complete all required documents as specified in the Broadcasting and Telecom Regulatory Policy CRTC 2010-958.

Required

Telecom Decision 97-8

par. 276 and 279

In Northwestel’s operating territory:

Required only in

those exchanges where

Relieved

Telecom Regulatory

Policy 2012-24 par. 94

By third party

Telecom Decision 2006-58 par. 107

In Northwestel’s

operating territory:

Required only in

those exchanges where

Relieved

Telecom Decision 2006-58 par. 107

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Northwestel offers equal

access

Telecom Regulatory Policy 2011-771 par. 64

Northwestel offers equal

access

Telecom Regulatory Policy 2011-771 par. 64

Proposed CLEC Entry Obligations

13 Advise the Commission that the proposed CLEC has obtained a central office (CO) code (NXX) per local interconnection region (LIR) for routing purposes, for each LIR in which it intends to provide service. To obtain a CO code, the proposed CLEC should contact the Canadian Numbering Administration Consortium, which is responsible for the Canadian Numbering Administrator (CNA). The CNA provides information on procedures, guidelines, application forms, and current or upcoming area code relief planning activities and related service provider obligations (e.g. numbering resource utilization forecast or NRUF input). See www.cnac.ca

Required

Telecom Decision 2007-23 par. 72

By third party (one CO code per LIR)

Telecom Decision 2007-49

par. 16

14 Advise the Commission that the proposed CLEC has obtained a CO code (NXX) for each exchange in which it intends to assign numbers to customers. To obtain a CO code, see 13 above and www.cnac.ca

Required

Telecom Decision 97-8

par. 23 and Telecom Decision

2007-23 par. 30

Required

Telecom Decision 2007-23 par. 30

By third party

Telecom Decision 2007-23 par. 30 and 45

and Telecom Decision 2007-49

par. 16

15 Attest to the Commission that the proposed CLEC has implemented local number portability (LNP). Proposed CLECs are required to join the Canadian Local Number Portability Consortium (CLNPC) and to participate

in CLNPC activities, as recommended to all industry members. See: www.clnpc.ca

Required

Telecom Decision 97-8 par. 282

Third Party

Telecom Decision 2006-58

par. 113

Outbound: By third party

Inbound:

Optional Telecom Decision 2006-58 par. 113

16 Attest to the Commission that the proposed CLEC will meet all existing and future regulatory requirements designed to protect customer privacy. These requirements include the following:

Delivery of the privacy indicator when invoked by an end-

customer;

Provision of automated universal per-call blocking of calling line identification;

Provision of per-line call display blocking to qualified end-

customers;

Disallowance of Call Return to a blocked number;

Enforcement of the Commission’s restrictions on automatic

dialing-announcing devices, automatic dialing devices, and unsolicited facsimiles applicable in the ILEC territory where the proposed CLEC operates; and

Required

Telecom Decision 97-8 par. 288 and 295(4)

Required

Telecom Decision 2006-58 par. 101

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Provision of the universal Call Trace feature.

17 Provide the following information to the Commission and make it available to existing and potential customers, upon request:

Local calling area boundaries;

Policy on access to enhanced service providers;

Available special needs services; and

Information on privacy protection, including how the company protects the confidentiality of customer records.

Required

Telecom Decision 97-8 par. 292 and 295(4)

Required

Telecom Decision 2006-58 par. 87

18 Provide the following information to the Commission and make it available to existing and potential customers, upon request:

Details of all service options, with applicable prices;

Details of all potentially applicable service charges.

Required

Telecom Decision 97-8

par. 292 and 295(4)

Make the information available

upon request only

Telecom

Regulatory Policy 2012-24 par. 94

Required

Telecom Decision 2006-58 par. 87

19 Make serving area maps available at company business offices upon request.

Required

Telecom Decision 97-8 par. 291

and Telecom Decision 2011-809 par.

17

Required

Telecom Decision 2006-58

par. 87 and

Telecom Decision 2011-809 par. 17

20 Provide the following information to the Commission and to existing and potential customers before the proposed CLEC accepts service contracts:

The policies on billing frequency, payment, disconnection,

security deposits, and directories;

The name and address of the company providing service to the customer;

A toll-free telephone number that the customer can use to

obtain further information or lodge a complaint;

Billing dates;

Due dates for payment;

Interest rates applicable to late payments;

9-1-1 service and MRS information, including customer charges, if any;

Information on company obligations regarding customer safety and privacy protection.

Required

Telecom Decision 97-8 par. 293 and 295(4)

Required

Telecom Decision 2006-58 par. 87

21 Attest to the Commission that the proposed CLEC will abide by Commission directives regarding the confidentiality of customer information established in Telecom Decision 86-7, as modified from time to time.

Required

Telecom Decision 97-8 par. 289

and Telecom Decision 2003-33

Required

Telecom Decision 2003-33 and

Telecom Decision 2006-58 par. 87

22 Attest to the Commission that the proposed CLEC will abide Required Required

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by Commission directives on the provision of billing information and billing inserts in alternative formats, as modified from time to time.

Telecom Order 98-626

Telecom Order 98-626

and Telecom Decision 2006-58

par. 87

23 Attest to the Commission that the proposed CLEC will abide by the Commission directives to ensure that end-users are able to have direct access, under reasonable terms and conditions, to services provided by any other LEC serving in the same area.

Required

Telecom Decision 2003-45 par. 141, 151 and 152

Filing Completion

24 Serve the documentation filed with the Commission on all

other LECs serving exchanges in which the proposed CLEC plans to offer service, and on all other entities that have proposed to provide service in compliance with the above-mentioned entry obligations.

Required

Telecom Decision 97-8

par. 295(1), (2) and (4)

25 Notify the Commission once the CLEC obligations set out in Telecom Decision 97-8, as modified from time to time, have been met. This notification should include a description of how each obligation has been met and a reference to the relevant Commission determination(s). Serve a copy of the notification on other LECs providing service in the exchanges in which the proposed CLEC is proposing to provide service.

Required

Telecom Decision 97-8 par. 295(1), (2) and (3)

Other Obligations

26 File annual contribution revenue information. Contact Robert Thompson, Senior Analyst Canadian Radio-television and Telecommunications Commission 1 Promenade du Portage Gatineau, Quebec K1A 0N2 Phone: 819-994-2484

Fax: 819-953-0795 Email:robert.thompson@crtc.gc.ca

Required

Telecom Decision 2000-745 and summarized in

Telecom Circular 2007-15

27 Contact the Canadian Telecommunications Contribution Consortium Inc. (CTCC) to become a shareholder. Note: CLECs are eligible to become CTCC shareholders but are not required to do so. You may contact the CTCC using the following information: By mail: Stephen P. Whitehead Fasken Martineau DuMoulin LLP, Barristers & Solicitors, Patent & Trade-mark Agents Suite 1300 55 Metcalfe Street Ottawa, Ontario K1P 6L5 By email:swhitehead@fasken.com Online: www.fasken.com

Optional

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Copyright Primers for CCSA Members

On the pages that follow, you will find copies of a couple of “Copyright Primers” that have been prepared for CCSA by outside counsel. They will help you understand in more detail how the royalty regime administered by the Copyright Board works.

It’s complicated stuff! For many members, the best thing to do call one of the lawyers below. They can give you good, quick, practical advice on what you need to do. If you let us know in advance, CCSA may be able to pay for some of their time with you.

Jay Kerr-Wilson Ariel Thomas Fasken Martineau DuMoulin LLP Fasken Martineau DuMoulin LLP Tel: (613) 696-6884 Tel: (613) 696-6879 jkerrwilson@fasken.com athomas@fasken.com We have included a “primer” for systems with 2,000 or fewer customer premises. You will see that it includes information about payment to collectives and where to send them. It was written before CCSA managed to convince the collectives to let us pay on behalf of the small members who pay only annual flat-fee royalties. So the information is there to help you smaller members understand your liabilities. But don’t worry about calculating and sending cheques: we’re still doing it for you. Larger CCSA members should read the guide for systems with more than 2,000 subscribers carefully. We do not calculate or remit these royalty payments for you and you need to take care of business there. Again, if you need help, call us and we’ll set you up with Jay or Ariel. Tariffs are set to cover certain time periods, typically with rates specified for each year in a term. From time to time, the collectives propose new tariffs with (always – go figure) increased rates. The certification process can be long. As a result, it is common for a proposed tariff be made retroactive when it is eventually certified. You need to be aware of proposed tariffs and to accrue for potential liability at the proposed rates. Also, because the tariffs change, some of the information in the attached primers may already be slightly out of date. You can check for current proposed and certified tariffs at: http://www.cb-cda.gc.ca/tariffs-tarifs/index-e.html

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Copyright Liability for Cable Systems Serving More Than 2,000 Subscribers

Introduction

The administration of copyright payments for cable operators has become an increasingly

complex process. This update on copyright administration includes information on how

copyright payments are calculated and remitted to the various collecting societies.

Copyright Regime

Copyright is the legal regime that gives creators of artistic, literary, dramatic and musical works

exclusive rights and rights to receive compensation for the use of their works.

Cable operators “use” copyright protected works when they provide video and audio

programming services to subscribers. The Copyright Act recognizes “communication to the

public by telecommunication” as one of the uses of works for which creators must be

compensated.

Specifically, cable operators must compensate the composers of the music that is contained in

the programming on the specialty television, pay television and pay audio services distributed to

subscribers. Cable operators must also compensate broadcasters, professional sports leagues and

program producers for the retransmission of programs carried on distant television signals such

as the U.S. 4+1 signals and out-of-market Canadian signals.

Music composers are also seeking compensation for the reproduction of their works as part of

video on demand (“VOD”) services. No payment is due for this yet.

The Tariff System

Instead of requiring each user (such as a cable operator) to negotiate with each individual

composer for the right to use each piece of music, the copyright compensation regime is based

on the tariff system.

Music composers assign their copyrights to SOCAN, CMRRA and SODRAC, which are

collectives that administer the collection of royalties from music users. In exchange for paying

the royalties administered by these collectives, users receive a blanket licence that allows

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unlimited use of the music in the collectives’ repertoires for the particular uses covered by the

licences.

Re:Sound plays a similar role to SOCAN in representing the public performance and

communication rights of record companies and performers.

Broadcasters, professional sports leagues and program producers, on the other hand, are

represented by 9 different collective societies which administer the collection of royalties for the

retransmission of distant television signals.

The collective societies propose the terms and conditions for various forms of copyright use in a

series of tariffs that are published by the Copyright Board in the Canada Gazette. If users object

to the terms of a proposed tariff, the Copyright Board holds a hearing to determine the

appropriate rates and conditions.

The following description of copyright administration and payment deals with the liability

for licensed and exempt cable systems that serve 2,001 premises or more. Special rates

apply for those systems that serve 2,000 or fewer premises.

SOCAN Tariff 17 (pay and specialty services)

Description

SOCAN Tariff 17 establishes the rates paid by cable operators and programming services for

musical works contained in Canadian and foreign pay and specialty television services. The

Tariff 17 base rate is currently set at 1.9% of specialty and pay services’ revenues. There is a

“low music use” rate of 0.8% applicable to services that use much less music (typically news,

information and sports services). These rates were certified for a period ending on December 31,

2008, but continue to apply on an interim basis, pending any Copyright Board proceeding.

The Copyright Act makes BDUs and programming services jointly and severally liable for the

royalty payments to SOCAN. The cable industry has negotiated agreements with specialty and

pay services to split the Tariff 17 royalties 50%/50%.

Each cable operator also pays an additional $0.0014 per subscriber per month to cover the music

used on all community channels, exempt programming services and non-programming services

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carried on each cable system. This includes services such as the Shopping Channel, real estate

listings, barker channels and legislative assembly channels.

Processing Payment for Canadian Specialty Services

In order to facilitate the orderly accounting and payment of royalties, cable and DTH operators

and programmers have retained a third party administrator known as Collectserve to act as a

“clearinghouse” to gather the required information needed to calculate the SOCAN Tariff 17

royalty payments. Collectserve calculates the amounts payable by each cable operator and each

programming service and prepares individual monthly reports that can be submitted to SOCAN

along with the payments.

Cable operators send monthly reports to Collectserve for processing the Tariff 17 royalty

calculations. Each monthly report should include:

• the list of all the Canadian specialty services carried for the month covered by the report,

• the number of subscribers that received each Canadian specialty service during the month covered by the report, and

• the amount of affiliation payments made to each Canadian specialty service during the month covered by the report.

Collectserve has prepared an electronic form which can be used by cable operators to facilitate

the reporting.

Low music use services

Some specialty services can avail themselves of a “low music use” rate. This rate applies to

specialty services that use music for less than 20 per cent of airtime. Many news and information

services (e.g. Newsworld, RDI, Newsnet, LCN, the Weather Network, Météo Media and CPAC)

routinely qualify for this discount. The low music use rate is set at 0.8% (which is less than half

of the standard rate).

This discount is then passed on to cable operators who also pay royalties based on this rate.

Specialty services are responsible for notifying cable operators, Collectserve and SOCAN that

they qualify for the low music use rate. Upon notice, Collectserve makes the necessary

adjustments in the calculation of the royalty. This should be reflected in the monthly report sent

by Collectserve to cable operators and requires no action on the part of cable operators.

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Modified Blanket Licence

Specialty and pay services are also able to clear the rights to the music in programs they produce

themselves, without having to go through SOCAN. This is known as the “Modified Blanket

Licence”. Again, specialty services will report any use made of the modified blanket licence to

Collectserve and SOCAN. This should be reflected in the monthly report sent by Collectserve to

cable operators and requires no action on the part of cable operators.

Processing Payment for Canadian Pay and Non-Canadian Specialty Services

The Collectserve process only covers the royalties payable to SOCAN for music contained on

Canadian specialty services. Cable operators have to calculate the royalties owed to SOCAN for

Canadian pay services (e.g. TMN and Movie Central) and non-Canadian specialty services (e.g.

US services such as A&E, CNN, TLC, etc. and other foreign services such as BBC World). The

payment for each of these services is equal to 1.9% of the monthly affiliation payments made by

the cable operator to the programming service. CCSA members have to make arrangements with

these services to share the cost of the royalties, either by reimbursement or set-off against

affiliation payments. The industry has prepared a model agreement that can be used by cable

operators and programming services, but most of the services prefer to enter into informal set-off

arrangements or include set-off provisions in affiliation agreements.

Video on Demand (VOD)

As cable operators begin to deploy video on demand services, they will be liable for the use of

music on these services in accordance with Tariff 17. Special considerations apply to the

calculation of royalty payments for VOD services. Tariff 17 royalties are based on the

programming services’ revenues. However, given that many cable operators operate the VOD

service directly, there is no programming service revenue upon which to calculate the

appropriate payment. In light of this, the industry practice is for cable operators to use the

licensing fees payable by cable operators to obtain the rights to the programming as the base

amount upon which to calculate payment.

SOCAN Tariff 17 is available on the Copyright Board’s website at:

http://www.cb-cda.gc.ca/tariffs-tarifs/certified-homologues/2008/20080322-m1-b.pdf

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Proposed Tariffs

SOCAN has proposed new rates for Tariff 17 for the years 2013 to the present. The new

proposed tariff contains slightly higher rates of 2.1% of specialty and pay services’ revenues and

0.9% for low music use services.

The additional fee paid by the cable operator of $0.0014 per subscriber per month under the

2005-2008 tariff to cover the music used on all community channels, exempt programming

services and non-programming services carried on each cable system remains intact in the new

proposed tariffs.

The proposed tariff for 2013 is available on the Copyright Board’s website at:

http://www.cb-cda.gc.ca/tariffs-tarifs/proposed-proposes/2015/TAR-2015-07-04-Supplement-

SOCAN-2016.pdf

CMRRA and SODRAC Commercial Television Tariffs

For the first time, musical composers (represented by CMRRA and SODRAC) are seeking

compensation for the reproduction of their works as part of commercial and cable television.

Royalties do not have to be paid until the final rates are determined by the Copyright

Board.

CMRRA’s Proposed Tariff for Audiovisual Services

CMRRA, which represents composers in English Canada, has proposed a tariff to be paid by all

services that deliver television programming and movies through cable, satellite, VOD or online

- e.g., a cable operator. The tariff covers the copying of music that is done in the course of

programming.

The proposed rate is 2.7% of the cable operator’s gross revenue, subject to a minimum of the

greater of 18 cents per subscriber, and a per-play amount determined according to the following

table:

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The proposed tariff for 2016 is available on the Copyright Board’s website at: http://www.cb-

cda.gc.ca/tariffs-tarifs/proposed-proposes/2015/TAR-2015-05-30-CMRRA.pdf (Beginning on

page 27.)

SODRAC’s Proposed Tariffs for VOD

SODRAC, which represents composers in French Canada, has proposed tariffs to be paid for the

copying of music that is done in the course of providing VOD.

There are separate proposed tariffs for “audiovisual works” (regular television programming and

movies) and “musical audiovisual works” (e.g., music videos, concerts and variety shows).

The proposed rate for regular programming and movies is the greater of 1.49% of gross revenue

associated with the proportion of plays on VOD that contain SODRAC music, and the amount

calculated according to a table that provides rates that depend on how many minutes of

SODRAC music is played.

For musical audiovisual works, the proposed rate is 3.07% of gross revenue associated with the

proportion of plays on VOD that contain SODRAC music.

The proposed tariffs for 2016 are available on the Copyright Board’s website at:

http://www.cb-cda.gc.ca/tariffs-tarifs/proposed-proposes/2015/TAR-2015-06-05-

SODRAC.pdf

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SOCAN/Re:Sound Pay Audio Tariff

Description

The Pay Audio Services Tariff establishes the rates paid by cable operators for pay audio

services (i.e., Stingray). Re:Sound represents performers and makers of sound recordings (record

companies) who hold “neighbouring rights”. As a consequence, Re:Sound royalties have

generally been about half the amount that is paid to SOCAN for the same use, but due to a

change in the Copyright Act, we expect the rates to equalize in the future.

Pursuant to the currently certified tariff, the rate paid to SOCAN is 12.35% of the monthly

affiliation payments made by the cable operator to the pay audio services. The Re:Sound rate is

5.85% of the monthly affiliation payments made by the cable operator to the pay audio services.

The pay audio services pay half of the royalties. Cable operators make the payments to both

SOCAN and Re:Sound on behalf of both themselves and the pay audio services and can then set

off the services’ share of the copyright payment from the affiliation payments paid to the pay

audio services by the cable operator. The industry has negotiated a reimbursement agreement

that each cable operator should have entered into with each pay audio service that it carries.

The SOCAN/Re:Sound Pay Audio Tariff is available on the Copyright Board’s website at:

http://www.cb-cda.gc.ca/tariffs-tarifs/certified-homologues/2010/20100116.pdf

Please note that in the certified tariff, Re:Sound is referred to by its former name, “NRCC”.

Proposed Tariffs

SOCAN has proposed rates for the year 2016 that are the same as the currently certified rates.

SOCAN’s proposed tariff for 2016 is available on the Copyright Board’s website (scroll down to

Tariff 26) at:

http://www.cb-cda.gc.ca/tariffs-tarifs/proposed-proposes/2015/TAR-2015-07-04-Supplement-

SOCAN-2016.pdf

Re:Sound has proposed a rate of 15% of monthly affiliation payments. Re:Sound’s proposed

tariff for 2016 is available on the Copyright Board’s website at: http://www.cb-

cda.gc.ca/tariffs-tarifs/proposed-proposes/2013/supplement15062013.pdf

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The Distant Television Signal Retransmission Tariff

Description

The Distant Television Signal Retransmission Tariff (“TV Retransmission Tariff”) covers the

payment of royalties for the distribution of the audiovisual programs carried on distant Canadian

and foreign conventional television signals. The BDUs and the collectives negotiated the

following rates for the year 2013, which were certified by the Copyright Board:

Number of

Premises

Royalties (Cents per

Premises Per Month)

6,001 and over 98

5,501 – 6,000 92

5,001 – 5,500 86

4,501 – 5,000 81

4,001 – 4,500 75

3,501 – 4,000 69

3,001 – 3,500 63

2,501 – 3,000 58

2,001 – 2,500 52

1,501 – 2,000 46

Up to 1,500 41

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These rates continue to apply on an interim basis until the Copyright Board certifies new rates

for the years 2014-2018. If the rates go up, cable operators will be required to pay the difference

retroactively for past years. The BDUs proposed that the Board maintain the current rates for

2014-2018. The collectives, on the other hand, proposed a sharp increase in rates. Their proposed

2016 rates are:

Number of

Premises

Royalties (Cents per

Premises Per Month)

6,001 and over 218

5,501 – 6,000 213

5,001 – 5,500 208

4,501 – 5,000 203

4,001 – 4,500 198

3,501 – 4,000 193

3,001 – 3,500 188

2,501 – 3,000 183

2,001 – 2,500 178

1,501 – 2,000 173

Up to 1,500 168

The royalties generated by this tariff are split among nine collective societies that represent

broadcasters, program producers, SOCAN and professional sports leagues.

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Francophone market discount and TVA discount

For a cable retransmission system located in a Francophone market, royalties benefit from a 50

per cent discount on applicable rates. The discount does not apply to any subscriber who takes

any English-only packages of services or any English services on a stand-alone basis. Those

cable operators who carry the TVA signal as the only distant signal pursuant to the CRTC’s

mandatory carriage order, the royalties are reduced by 95 per cent.

Partially Distant Signals

A signal that is distant in part of the area covered by a postal code is deemed to be distant for

half the premises served in that area.

Split Among Collective Societies

There are nine retransmission collective societies to which cable operators must make payment.

Under their previous settlement agreement, their respective shares of the royalties are as follows.

Border Broadcasters, Inc. (BBI) 0.96%

Canadian Broadcasters Rights Agency (CBRA) 13.5%

Canadian Retransmission Collective (CRC) 14.85%

Canadian Retransmission Right Association (CRRA) 9.76%

Copyright Collective of Canada (CCC) 53.38%

Direct Response Television Collective (DRTVC) 0.70%

FWS Joint Sports Claimants Inc. (FWS) 3.25%

Major League Baseball Collective of Canada, Inc. (MLB) 0.80%

SOCAN 2.80%

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The collectives are currently renegotiating the split of royalties for 2014-2018, so these shares

could change. If so, cable operators will not have to do anything as a result because the

collectives will reallocate royalties among themselves.

The previously certified Distant Television Signal Retransmission Tariff is available on the

Copyright Board’s website at:

http://www.cb-cda.gc.ca/tariffs-tarifs/certified-homologues/2013/30112013.pdf

The Distant Radio Signal Retransmission Tariff

This tariff covers the distribution by cable operators and other BDUs of out-of-market

conventional radio stations. Unlike all other applicable copyright tariffs, this rate applies on a

yearly basis and is payable on January 31st of the year for which payment is being made.

The interim rate is $12.50 per retransmission system per year for Small Retransmission Systems,

Unscrambled LPTVs and Unscrambled MDSs, and 12 cents per year for each premises served

for all other retransmission systems. The payment is split between the following three collective

societies in the shares indicated:

Canadian Broadcasters Rights Agency Inc. (CBRA) 38.635%

Canadian Retransmission Right Association (CRRA) 11.365%

Society of Composers, Authors and Music Publishers of Canada (SOCAN) 50%

The Distant Radio Signal Retransmission Tariff has not yet been certified by the Copyright

Board for the years 2014-2018, but the terms are not likely to change. The previously certified

tariff is available on the Copyright Board’s website at: http://www.cb-cda.gc.ca/tariffs-

tarifs/certified-homologues/2013/30112013.pdf (It starts on page 47.)

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SOCAN Tariff 16 (Background Music Suppliers)

This tariff covers the distribution by cable operators and other BDUs of background music to be

played in subscribers’ premises. This rate applies on a quarterly basis and is payable within 60

days of the end of each quarter. It needs to be paid for subscribers that use pure music services

(i.e., Stingray) or that play television programming on their premises. Therefore, it applies to

commercial accounts, not residential TV and music accounts.

This tariff does not apply if the SOCAN-Re:Sound Pay Audio Tariff already applies. As a rule,

the Pay Audio Services Tariff applies to residential premises (including guest rooms in hotels)

and SOCAN Tariff 16 applies to commercial subscribers that play music or show television

programming in public areas.

The tariff is split into two portions: communication and public performance. The rate that BDUs

need to pay for the communication of music to subscribers is 2.25% of revenues from those

subscribers, subject to a minimum fee of $1.50 per subscriber premises.

The portion of the tariff that covers the actual public performance of background music is 7.5%

of subscriber revenues, or a minimum of $5.00 per subscriber premises. BDUs only need to pay

this portion of the tariff if they authorize subscribers to use the service as background music, and

if the subscriber doesn’t pay royalties under SOCAN Tariff 15.

This tariff has not yet been certified for the years after 2009, but SOCAN is not proposing a

change to the rate. The most recently certified tariff was for the years 2007-2009, and is available

on the Copyright Board’s website at: http://www.cb-cda.gc.ca/tariffs-tarifs/certified-

homologues/2009/200900620-m-b.pdf

Re:Sound Tariff 3 (Use and Supply of Background Music)

This tariff covers the distribution by cable operators and other BDUs of background music to be

played in subscribers’ premises. This rate applies on a quarterly basis and is payable within 60

days of the end of each quarter. Unlike SOCAN’s background music tariff, this tariff does not

apply where television programming is played on a subscriber’s premises. It only applies where

pure music services (i.e., Stingray) are used. As with SOCAN’s background music tariff, it

applies to commercial accounts, not residential music accounts.

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This tariff does not apply if the SOCAN-Re:Sound Pay Audio tariff already applies. As a rule,

the Pay Audio Services Tariffs applies to residential premises (including guest rooms in hotels)

and Re:Sound Tariff 3 applies to commercial subscribers that play music in public areas.

Currently, background music suppliers have to pay Re:Sound 3.2% of subscriber revenues, net of

the amounts subscribers pay for equipment.

However, suppliers and Re:Sound have agreed that to match the SOCAN tariff, the Re:Sound

tariff for the years after 2009 include an additional payment of 0.97% of revenues to cover the

transmission of music to subscribers. This agreement has been submitted to the Board for

certification. BDUs would therefore be prudent to set aside an additional amount to cover the

communication royalty.

The most recently certified tariff was for the years 2003-2009, and is available on the Copyright

Board’s website at: http://www.cb-cda.gc.ca/tariffs-tarifs/certified-homologues/2006/20061021-

m-b.pdf

CONCLUSION

For each of the copyright tariffs, cable companies are required to submit a number of reports to

the applicable collectives. The content of the reports is explained in each of the tariffs. For the

retransmission tariffs, the applicable forms can be found within the tariff document itself. If you

have any questions regarding copyright administration and payment, please do not hesitate to

contact Fasken Martineau DuMoulin LLP.

Jay Kerr-Wilson Fasken Martineau DuMoulin LLP Tel: (613) 696-6884 jkerrwilson@fasken.com

Ariel Thomas Fasken Martineau DuMoulin LLP Tel: (613) 696-6879 athomas@fasken.com

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Small Cable System Copyright Payments

Introduction

Small cable operators incur copyright liability for the use of copyright-protected works over their

cable networks. Specifically, cable operators must compensate the composers of the music that

is contained in the programming on the specialty television, pay television and pay audio

services distributed to subscribers. Cable operators must also compensate broadcasters,

professional sports leagues and program producers for the retransmission of distant television

signals such as the U.S. 4+1 signals and out-of-market Canadian signals. Different collective

societies administer the collection of royalties for these various uses.

The Copyright Act has mandated that preferential rates be set for small cable systems. A small

cable system is defined as a system that has served or was deemed to serve on the last day of

each month during the preceding year no more than 2,000 subscribers.

Most copyright payments for small systems are payable on a yearly basis and payments are due

January 31 of the year for which payments are being made. As such, copyright payments for

the year 2016 are due January 31, 2016.

Tariff 17 – Pay and Specialty Programming Services

Tariff 17 establishes the rate paid by cable operators for the use of music on all Canadian and

foreign pay and specialty services. For small cable transmission systems, the total royalty

payable is $10 a year. This rate has been certified until December 31, 2008, but continues to

apply on an interim basis and no change has been proposed.

This royalty is payable to SOCAN at the following address:

SOCAN 41 Valleybrook Drive Toronto, Ontario M3B 2S6 (416) 445-8700 (Telephone) (416) 445-7108 (Facsimile)

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SOCAN/Re:Sound Pay Audio Tariff

The Pay Audio Services Tariff establishes the rates paid by cable operators for pay audio

services (e.g., Stingray). Re:Sound represents performers and makers of sound recordings

(record companies) who hold “neighbouring rights” to receive payment for the use of about 45%

of SOCAN’s repertoire.

The royalties payable to SOCAN and Re:Sound respectively are 6.175 per cent and 2.925 per

cent of the affiliation payments payable during a year by a distribution undertaking for the

transmission of a pay audio signal. Payments are due on January 31 of the year following the

relevant year. Therefore, payments for 2015 are due on January 31, 2016.

The pay audio services are responsible for paying half of the royalties. Cable operators make the

payments to both SOCAN and Re:Sound on behalf of both themselves and the pay audio

services and can then set off the services’ copyright payments from the affiliation payments paid

to the pay audio services by the cable operator. The industry negotiated a model reimbursement

agreement that each cable operator should have entered into with each pay audio service that it

carries.

The royalty payable to SOCAN can be sent at the address indicated above.

The royalty payable to Re:Sound can be sent to the following address:

Re:Sound 1235 Bay Street, Suite 900 Toronto, Ontario M5R 3K4 Fax number 416-962-7797

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The Distant Television Signal Retransmission Tariff

This Tariff covers the distribution of distant Canadian and foreign (i.e. US 4+1) conventional

television signals.

The royalty rate for retransmission of distant television signals is $100.00 per year. This

amount is split between the following nine collectives.

Border Broadcasters, Inc. (BBI) $0.96 c/o Ms. Marcie Smith P.O. Box 2469A, Station A Toronto, Ontario M5W 2K6 (248) 344-2997 (Telephone) (248) 596-1103 (Facsimile) Canadian Broadcasters Rights Agency (CBRA) $13.50 P.O. Box 459 Winchester, Ontario K0C 2K0 (613) 774-6288 (Telephone) (613) 774-6289 (Facsimile) Canadian Retransmission Collective (CRC) $14.85 74 The Esplanade Toronto, Ontario M5E 1A9 (416) 304-0290 (Telephone) (416) 304-0496 (Facsimile) Canadian Retransmission Right Association (CRRA) $9.76 c/o Canadian Broadcasting Corporation 181 Queen Street P.O. Box 3220, Station “C” Ottawa, Ontario K1Y 1E4 (613) 288-6276 (Telephone) (613) 288-6279 (Facsimile)

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Copyright Collective of Canada (CCC) $53.38 55 St. Clair Avenue East Suite 210 Toronto, Ontario M4V 2Y7 (416) 961-1888 (Telephone) (416) 968-1016 (Facsimile) FWS Joint Sports Claimants Inc. (FWS) $3.25 c/o Piasetzki & Nenniger Barristers and Solicitors 120 Adelaide Street West Suite 2308 Toronto, Ontario M5H 1T1 (416) 955-0050 (Telephone) (416) 955-0053 (Facsimile) Major League Baseball Collective of Canada, Inc. (MLB) $0.80 P.O. Box 3216 Commerce Court Postal Station Commerce Court West Toronto, Ontario M5L 1K1 (416) 979-2211 (Telephone) (416) 979-1234 (Facsimile) SOCAN $2.80 41 Valleybrook Drive Toronto, Ontario M3B 2S6 (416) 445-8700 (Telephone) (416) 445-7108 (Facsimile) Direct Response Television Collective Inc. (DRTVC) $0.70 c/o Lewis Birnberg Hanet, LLP 693 Queen Street East Toronto, Ontario M4M 1G6 (416) 865-9444 (telephone) (416) 865-1018 (fax)

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The Distant Radio Signal Retransmission Tariff

This tariff covers the distribution by cable operators and other BDUs of out-of-market radio

stations. The rate is $12.50 per year. The payment is split between the following three

collective societies:

$4.83 to the Canadian Broadcasters Rights Agency Inc. (CBRA)

$1.42 to the Canadian Retransmission Right Association (CRRA)

$6.25 to SOCAN

Re:Sound Background Music Tariff

This tariff covers the distribution by cable operators and other BDUs of background music to be

played on subscribers’ premises. This rate is payable quarterly, within 60 days of the end of each

quarter. Unlike SOCAN’s background music tariff, this tariff does not apply where television

programming is played on a subscriber’s premises. It only applies where pure music services

(e.g., Stingray) are used. It applies to commercial accounts, not residential music accounts.

Currently, background music suppliers have to pay Re:Sound 3.2% of subscriber revenues, net of

the amounts subscribers pay for equipment.

Re:Sound and some suppliers have submitted a tariff for approval by the Copyright Board. If the

new tariff is approved, the rate for small cable transmission systems will be reduced to 2.085%.

Payments to Re:Sound should be addressed to:

Re:Sound 1235 Bay Street, Suite 900 Toronto, Ontario M5R 3K4 Fax number 416-962-7797

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SOCAN Background Music Tariff

This tariff covers the distribution by cable operators and other BDUs of background music or

television to be played on subscribers’ premises. This rate is payable quarterly, within 60 days of

the end of each quarter. It applies to commercial accounts, not residential TV and music

accounts.

Currently, the tariff is split into two parts: to cover the transmission of music to subscribers,

small cable systems that are background music suppliers have to pay SOCAN 1.125% of

subscriber revenues, subject to a minimum fee of $0.75 per subscriber premises.

BDUs who authorize the public performance of the music as background music also need to pay

3.75% of subscriber revenues or a minimum of $2.50 per subscriber premises.

Payments to SOCAN should be addressed to:

SOCAN

41 Valleybrook Drive Toronto, Ontario M3B 2S6 (416) 445-8700 (Telephone) (416) 445-7108 (Facsimile)

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Certified and Proposed Copyright Tariffs That Apply to Cable Operators

Serving More Than 2,000 Subscribers

If you distribute pay and specialty television services, non-broadcast services, and/ or community channels (Residential only) − SOCAN TARIFF 17:

Covers Royalty Rates Currently Applicable Proposed Royalties Retroactive Payments

Musical works contained in Canadian and foreign pay, specialty, and other television services.

The rate payable under SOCAN Tariff 17 is divided equally between, and paid by, the Cable Operators and Pay/Specialty Services . Collectserve, a third party service, assists in calculating the royalty payments to SOCAN by each Cable Operator and Pay/ Specialty Service. The 2009-2013 Agreed Rates:

Payable by Cable Operators and Pay/ Specialty Services:

• 1.9% of the revenues of pay and specialty services (the “Standard Rate”);

OR

• In the case of pay and specialty services that use music for less than 20% of their airtime, 0.8% of the pay and specialty services’ revenues (“Low Music Use Rate”).

• The revenues used to calculate the amounts owned under the tariff are those of the Pay/ Specialty Services, not the revenues of the Cable Operators.

Payable by Cable Operators only:

• Each cable operator pays an additional $0.0014 per subscriber per month, which covers the music used on all community channels, shopping channels and non-programming services.

2013-2016 Tariff Proposals:

• Standard Rate: 2.1% of the revenues of pay and specialty services; or

• Low Music Use Rate: 0.9%. of the revenues of pay and specialty services that use music for less than 20% of their airtime

• The proposal maintains the additional fee paid by cable operators at $0.0014.

Could go back to: January 1,

2009

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If you distribute Pay Audio Services (such as Stingray) (Residential only) − SOCAN & Re:Sound Pay Audio Services Tariffs:

Tariff Covers Royalty Rates Currently

Applicable Proposed Royalties

Retroactive Payments

SOCAN -NRCC

Pay

Audio Services Tariff

Musical works contained in Pay Audio Services.

The 2009 Certified Rates:

• 12.35% of the amounts paid by the Cable Operator to the Pay Audio Service.

Standard industry practice is to split these payments 50%/50% between the Cable Operator and the Pay Audio Service.

2010-2016 Tariff Proposals:

• Same as the 2009 Certified Rates

Could go back to: January 1,

2010

Re:Sound Tariff No. 2

Pay

Audio Services Tariff

Published sound recordings of musical works contained in Pay Audio Services.

The 2009 Certified Rates:

• 5.85% of the amounts paid by the Cable Operator to the Pay Audio Service.

Standard industry practice is to split these payments 50%/50% between the Cable Operator and the Pay Audio Service.

2010-2016 Tariff Proposals:

• 15% of the amounts paid by the Cable Operator to the Pay Audio Service

Could go back to: January 1,

2010

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If you retransmit distant television signals or radio stations (Residential only) − Distant TV Retransmission & Distant Radio Retransmission Tariffs:

Tariff Covers Royalty Rates Currently

Applicable Proposed Royalties

Retroactive Payments

Distant TV

Retransmission

Audiovisual programs carried in Canadian and foreign conventional television signals.

The Interim Rates: The royalty rates are based on the number of premises to which the Cable Operator retransmits distant signals:

Number of Premises

Royalties (Cents per Premises

Per Month)

2,001 – 2,500

52

2,501 – 3,000

58

3,001 – 3,500

63

3,501 – 4,000

69

4,001 – 4,500

75

4,501 – 5,000

81

5,001 – 5,500

86

5,501 – 6,000

92

6,001 and over

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2014-2018 Tariff Proposal:

Number of

premises

Monthly Rate for each premises

receiving one or more distant

signal (cents)

2014 2015 2016 2017 2018

Up to

1500

150 159 168 178 188

1501-

2000

155 164 173 183 193

2001-

2500

160 169 178 188 198

2501-

3000

165 174 183 193 203

3001-

3500

170 179 188 198 208

3501-

4000

175 184 193 203 213

4001-

4500

180 189 198 208 218

4501-

5000

185 194 203 213 223

5001-

5500

190 199 208 218 228

5501-

6000

195 204 213 223 233

6000+ 200 209 218 228 238

Could go back to: January 1,

2014.

Distant Radio

Retransmission

Radio programs, musical works and broadcaster compilations carried in out-of-market Canadian and foreign conventional radio stations.

The Interim Rates: This tariff applies on yearly basis (unlike all other applicable copyright tariffs), and is payable on January 31st of the year for which the payment is being made.

• For Small Retransmission Systems, Unscrambled LPTVs, and Unscrambled MDSs:

$12.50 a year for all radio programs and musical works; and $6.25 a year for all broadcaster compilations

• For all other retransmission systems: $0.12 per each premises served by the Cable Operator per year

2014-2018 Tariff Proposal:

• No change to the royalties payable by Small Retransmission Systems, Unscrambled LPTVs, and Unscrambled MDSs

• No change to the royalties payable all other retransmission systems.

Could go back to: January 1,

2014.

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If you transmit background music services to commercial subscribers − SOCAN & Re:Sound Background Music Suppliers Tariff:

Tariff Covers Royalty Rates Currently Applicable Proposed Royalties

Retroactive Payments

SOCAN Tariff No.

16

Background Music

Suppliers

• Musical works or contained in the background music played by commercial establishments. This includes pure music services (e.g. Stingray) as well as the music contained in television programming.

• This tariff does not apply if the SOCAN-Re:Sound Pay Audio Tariff already applies.

• Additionally, the tariff also does not apply to the use of music as live entertainment, at a live event, or to accompany fitness or dance classes, dancing, skating, or other similar activity.

This tariff applies on a quarterly basis and is payable within 60 days of the end of each quarter The 2009 Certified Rates (a) For the communication of musical works to a commercial subscriber only:

• 2.25% of revenues from a subscriber (minimum fee of $1.50 per premises per quarter);

OR (b) For the communication of musical works to a commercial subscriber and the authorization of the public performance of the works as background music by the commercial subscriber (i.e. to play such works on the subscriber’s public premises):

• 2.25% of revenues from a subscriber for the communication of the work (minimum fee of $1.50 per premises per quarter); in addition to,

• 7.5% of revenue from a subscriber for authorizing the public performance of the work (minimum fee of $5 per premises per quarter).

2010 - 2014 Tariff Proposal:

• Same as the 2009 Certified Rates

Could go back to: January 1,

2010

Re:Sound Tariff No. 3

Use and

Supply of Background

Music

• Published sound recordings of musical works contained in the background music played by commercial establishments. This tariff only applies to pure music services (e.g. Stingray).

• This tariff does not apply if the SOCAN-Re:Sound Pay Audio Tariff already applies.

• Additionally, the tariff also does not apply to the use of music as live entertainment, at a live event, or to accompany fitness or dance classes, dancing, skating, or other similar activity.

This tariff applies on a quarterly basis and is payable within 60 days of the end of each quarter 2009 Certified Rates:

• 3.2% of subscriber revenues (net the amount subscribers pay for equipment);

Agreed Rates for 2010-2013 (a) For the communication to a commercial subscriber of published sound recordings of musical works only:

• 0.97% of subscriber revenues (minimum of $2.15 per subscriber per establishment per quarter);

OR (b) For the communication to a commercial subscriber of published sound recordings of musical works and the authorization of the public performance of the works as background music by the commercial subscriber (i.e. to play such works on the subscriber’s public premises):

• 0.97% of subscriber revenues for communication (minimum of $2.15 per subscriber per establishment per quarter); in addition to,

• 3.2% for public performance (minimum $0.64 per subscriber per establishment per quarter).

2014- 2016 Tariff Proposal:

• 16.36% of the suppliers’ gross revenues

• Minimum fee of $20.61 per establishment per quarter.

Could go back to: January 1,

2010

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Tariffs Not Yet Certified (i.e. currently no payment obligations)

If you distribute regular television programming, television programming devoted to music (e.g. music videos), and/ or movies, through cable, satellite, VOD, or online − CMRRA & SODRAC Commercial Television Tariffs:

Tariff Covers Proposed Tariffs Retroactive Payments

CMRRA Tariff No. 7

Audio Visual

Services

Musical works contained in regular television programming and movies, delivered through cable, satellite, VOD, or online.

The proposed tariff (calculated monthly) is the greater of:

(a) 2.7% of the gross revenue of the service; (b) 18¢ per subscriber; or, (c) Amount calculated according to the number of minutes of CMRRA music contained in the file, per play:

Minutes of CMRRA music

Per Play

<5 minutes 1.29 ¢

> 5, Between 5-10 mins.

3.43¢

>10, Between 10- 20 mins.

6.4¢

>20, Between 20-30 mins.

9.16¢

> 30, Between 30-45 mins.

11.57¢

>45, Between 45-60 mins.

13.9¢

>60, Between 60-90 mins.

17.39¢

>90, Between 90-120 mins.

21.31¢

>120 mins. 23.99¢

If the tariff is certified, the retroactive payments could go back to: January 1,

2016

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Tariff Covers Proposed Tariffs Retroactive Payments

SODRAC Tariff No. 6

Musical

Audiovisual Services

Musical works contained in “musical audiovisual works” (i.e. music videos, concerts, and variety shows) delivered through video-on-demand services.

The proposed tariff (calculated monthly) is the greater of:

(a) 3.07% of the gross revenue associated with the proportion of plays on VOD that contain SODRAC music; (b) 16.37¢ per subscriber; or, (c) 0.054¢ per play of a file containing SODRAC music.

If the tariff is certified, the retroactive payments could go back to: January 1,

2016

SODRAC Tariff No. 7

Audio Visual

Services

Musical works contained in regular television programming, delivered through video-on-demand services.

The proposed tariff (calculated monthly) is the greater of:

(a) 1.49% of the gross revenue associated with the proportion of plays on VOD that contain SODRAC music; or, (b) Amount calculated according to the number of minutes of SODRAC music contained in the file, per play:

Minutes of SODRAC music

Per Play

<5 minutes 1.34 ¢

> 5, Between 5-10 mins.

3.55¢

>10, Between 10- 20 mins.

6.62¢

>20, Between 20-30 mins.

9.48¢

> 30, Between 30-45 mins.

11.97¢

>45, Between 45-60 mins.

14.39¢

If the tariff is certified, the retroactive payments could go back to: January 1,

2016

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The Condiments

We’re betting you skipped or skimmed the copyright stuff. That’s OK. It’s really there as reference material for you to consult as the need arises. There are some issues you should know about that don’t fit well under our other headings but are worthy of a quick mention and explanation here. These are your condiments.

Ketchup – Some Messy Stuff that Won’t Stay in the Bottle

Customer Transfer Rules

There have been detailed customer transfer rules and procedures on the telecom side for many years. That is because:

• customers have been able to replace their telephone company with a CLEC and keep the same telephone number for more than a decade; and

• it’s a real problem when customers lose access to their “lifeline” telephone service due to sloppy transfers.

If this was still just a telecom issue, we would have dealt with it earlier; but it’s not so we’re doing it here. That is because, while TV and internet are less obviously “lifeline” services, the CRTC has extended the telecom customer transfer process to those services. Basically, the rules are:

• If you receive a customer transfer request directly from another service provider (as opposed to the customer), you must complete the requested transfer;

• With your new subscriber’s authorization, you can submit a request for service

cancellation directly to another service provider on behalf of that new subscriber.

• The “losing” service provider will have two business days to complete the service cancellation. The subscriber retains the right to cancel the services directly in all cases.

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• The “winning” and “losing” service providers must coordinate with each other so as to minimize any service disruption to the subscriber; and

• Certain information formatting and automation requirements may apply to you.

Companies that have implemented the current procedures for local telephone service transfers and initiate large volumes of customer transfer requests (more than 25 per month), are expected to use a standardized automated process to deal with customer transfers. All customer transfers initiated by a “winning” service provider require it to send specific information to the “losing” provider and the “losing” provider must confirm that the transfer has been completed (or could not be completed), by email or using the automated process. You can read the gory details in Regulatory Policy 2011-191, which you can find here: http://www.crtc.gc.ca/eng/archive/2011/2011-191.htm. More gory details are here: http://www.crtc.gc.ca/eng/archive/2013/2013-261.htm And also here: http://www.crtc.gc.ca/eng/archive/2014/2014-48.htm

Support Structures

One class of wholesale facility that the telephone companies must make available to competitors like you is support structures. Support structures are the things that your plant hangs off of or runs through; hydro poles, strand on poles, ducts, etc. Again, we put this issue in this section because, while the rules are on the telecom side, they affect your ability to offer any of your services as a BDU, a TSP or an ISP. Provision of support structures is done in accordance with CRTC-approved tariffs and agreements that set out the terms and conditions. Things were pretty quiet on the tariff front for several years until 2008 when the telephone companies asked to increase the rates. The CRTC approved higher rates and also opened up the pandora’s box on a new issue - requiring competitors to pay for using poles running from main roads into customers’ properties (service poles). The

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problem is not just the new cost but also that the records on how many service poles there are, who owns them, and who is using them, are all but non-existent in most regions. Ownership of such poles is mixed: the phone companies own some, the hydro companies own others and, finally, private residents may own poles that are on their property. This area is important because:

• It can cost you big money; and

• The incumbents can use permit requirements to stall your builds. The message is that you would do well to understand this area better and be prepared to challenge invoices unless they are well substantiated. The big guys won’t be shy in charging you for everything they can, regardless of whether they have a legitimate right to do so.

Mustard – Some Telecom Issues with a Bite

While they don’t really belong in a discussion about the “why and how” of telecom regulations, there are some other telecom matters you should be aware of. We put these matters under this heading because they can bite you – hard. Really, they are about two organizations, CISC and the CCTS.

CISC

CISC is the Communications Interconnection Steering Committee. It is a body authorized by the CRTC to deal with the many competitive and other issues that arise around the interconnection and exchange of traffic between many, often competing players. CISC has a number of working groups such as the Business Process Working Group or BPWG. Its main focus is on resolving the nit-picky details of implementing local competition at the operational and technical level for the ILECs and CLECs. It is made up of business and technical staff from the major ILECs and CLECs, with the CRTC staff

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observing. CISC does not have the power to make regulatory decisions, but the Working Groups prepare reports that are key inputs to CRTC decisions. Anyone can join a Working Group, but there is a very steep learning curve and newbies will be surrounded by many who have dwelled in the depths of CISC for years and years. Few small players participate in CISC so there is a risk that the “little guy” perspectives will not be represented in reports from the Working Groups. So decisions get made and turned into rules that may cause you real harm even if there was no intention to harm you. CCSA keeps an eye on CISC proceedings but there is a lot to watch. If you are someone who watches the CRTC website and proceedings, don’t ignore the ones where the CRTC is seeking input before it implements a CISC report. Sometimes, that’s where the real stuff happens.

Telecom Complaints Commissioner

A few years ago, the Government decided that all telecommunications providers should be subject to an independent consumer agency to resolve complaints. As a result of CRTC process, a new office called the Commissioner for Complaints for Telecommunications Services (CCTS) was created. All telecom service providers with telecom revenues over $10 million must belong to the CCTS and become subject to its complaint resolution procedures. It’s fairly costly to join the CCTS but the real expense is in its administrative procedures. If a complaint against your company goes to the CCTS, you pay those costs. Companies with telecom revenues under $10 million don’t have to join the CCTS. However, if the CCTS receives and validates a customer complaint about your provision of telecommunications services, you will be forced to join and be subject to the CCTS complaint resolution process. That can become very expensive. Once you’re in, you’re in – forever. As we discussed earlier in the document, the CCTS is now responsible for administering the new Television Services Provider Code. That means that you also need to pay attention to the CCTS with respect to your broadcasting operations.

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The moral is: for both television and telecommunications services you offer, do not ignore your customers’ complaints. Resolve them before the customer ever gets the notion to call the CCTS.

Relish – Some Things that Make You Green

Early on, we mentioned that the CRTC regards your participation in the

communications system as a privilege that comes with certain obligations and

expectations. Those obligations tend to revolve around social issues like accessibility

and public safety.

Unfortunately for you, while the things the CRTC makes you do are generally socially

beneficial and are “the right thing to do”, they almost always cost you money and

generate little or no return. That’s just life as a BDU/TSP/ISP.

It’s also worth pointing out that the CRTC generally faces its own political risk if these

“social goods” do not come to pass. Do not expect forgiveness if you are not doing the

things you have been told you must do.

We thought we’d tell you, very briefly, about some of those issues.

Emergency Alerting

This issue has a very long history. Canada needs a nation-wide system for issuing

localized emergency alerts for weather events, train derailments and other disasters.

The government has a Department of Public Safety but has never been willing to pony

up the dollars need to create the system.

So the CRTC got saddled with the problem and, as it does, the CRTC turned the

problem over to industry participants.

Pelmorex, which operates The Weather Network, undertook to build the system in

exchange getting mandatory carriage rights for The Weather Network. That system, the

National Alerting Aggregation and Dissemination (NAAD) system, has now been built.

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More recently, the provincial and territorial EMOs have all signed on as alert “issuers”.

That means that BDUs and other “last mile distributors”, like TV and radio stations are

the last stumbling block to getting this done. So the pressure is rising.

At this time, the CRTC has not made your participation in the NAAD system

mandatory. It may yet do so and that could happen in the fairly near future.

The headend equipment required to pass through these geographically targeted

messages is available. It’s also expensive and, depending on your architecture, may

have to go into each headend you operate.

So far as we know, all CCSA members that are required to do this are, in fact, doing it.

However, even if you are not required to do it today, your company should be thinking

about how it will comply if participation becomes mandatory for you in the future.

Described Video

Described video is the narrative soundtrack that describes what is happening on the TV

screen. Typically, it is carried on a channel’s secondary audio program (SAP). It is an

accessibility feature for the vision-impaired. As matters stand today, you must pass

through Described Video in whatever formats you distribute to your customers (e.g. SD

and HDTV).

Work continues in this area, In particular, there is a mandate to make the feature more

widely known, to include “DV” designations in the electronic guide information and to

make the using the feature with TV remotes easier for the visually impaired.

You may be called upon to participate in those initiatives, for example, by showing

PSAs, sending out bill stuffers and so on. Just be aware of it.

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Advertising Loudness

This issue is really about customer annoyance with ads that blare out between segments

of programming. What you need to know here is that it is already a rule for all BDUs,

licensed and exempt, that the programming you distribute must meet the technical

standard for noise-levelling. That standard is called ATSC Recommended Practice A/85:

Techniques for Establishing and Maintaining Audio Loudness for Digital Television.

Generally, you can rely on the programmers and relay undertakings (e.g. Shaw

Broadcast Services) to do the signal conditioning so that the signals you receive already

comply with the standard. CCSA actually has gone out and gotten certificates of

compliance from the non-Canadian programmers it deals with.

Again, however, if your customers complain that their ads are too loud, the CRTC will

look to you to fix it – and they won’t be patient with you.

Hmmmm. Maybe I’ll just take that burger without the fixin’s.

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The Cheese

There you have it. Thanks for staying with us. It’s been fun doing this.

Please feel free, always, to call us with your questions.