Re: CRTC Broadcast Notice of Consultation 2010-649: Application 2010-1188-2 [TVA Group Inc. on behalf of a general partnership to be constituted or a corporation to be incorporated]

Sep 30, 2010

Mr. Robert Morin
Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, ON
K1A 0N2

Dear Mr. Morin:

Friends of Canadian Broadcasting is a watchdog for listeners and viewers supported by 100,000 Canadians. Friends does not seek to appear at the public hearing beginning on November 19.

Friends opposes the applicant's request for mandatory access in the initial three years and offers several observations and suggestions for the Commission's consideration.

At the outset, we wish to underline the unfairness of the current process. The Commission has recently turned down the application of TVA Group Inc. for a Category 1 licence, and shortly thereafter determined that it would not consider any 9(1)(h) applications until June, 2012. To subsequently 'fast track' a Sun TV News Category 2 application is unfair to other applicants that have followed the Commission's rules. We also note that it would appear the November 19 hearing has been established for the singular purpose of hearing the Sun TV News application - an unusual procedure.

Sun TV News should be entitled to a Category 2 licence only if it follows the Commission's established procedures. Jumping a queue and demanding mandatory access for any part of its licence period is highly unfair to other applicants who have played by the rules. If the applicant wishes the privileges of a Category 1 licence, it should apply at a time that the Commission has a public call for Category 1 submissions so that all applicants can be considered on their own merits in a fair and equitable manner.

This irregular process calls into question the Commission's commitment to the principle of due process - a bedrock of its past behaviour.

TVA Group Inc. states in its application that its Toronto-based channel Sun TV has lost in excess of $50 million since being acquired from CHUM as part the latter's acquisition of Craig Media. It appears to Friends that the applicant is seeking to 'blackmail' the Commission into scheduling this special hearing under the implied threat that it will surrender Sun TV's licence unless the present application is granted promptly, whereupon it will then surrender the licence and convert Sun TV's Toronto station into a specialty channel known as Sun TV News.

Before acquiring Toronto One, TVA Group Inc. and its parent Québecor knew, or should have known, that Toronto One was a very weak participant in the Greater Toronto market. They took a business risk and subsequently lost a substantial amount of money. The disappearance of Sun TV from Toronto's "overcrowded"1 market will hardly be noticed, and should not influence the Commission's determination regarding the current application.2 Either outcome would equally reduce the quantity of local programming in Toronto.

The applicant's request for mandatory access for the first three years of its proposed licence is both presumptuous and unprecedented - and should not be approved by the Commission. As all applicants know, Category 2 licensees receive no regulatory guarantees and must negotiate both carriage and compensation with distributors.

We note that a Category 2 licence generally carries a much lower required level of Canadian content and Canadian programming expenditures than Category 1 licences. The applicant seeks lower Canadian content obligations combined with mandatory access - in other words, the benefits of mandatory access, without the obligations.

As outlined in the following chart, the applicant is proposing to spend only 31% of revenues on Canadian programming over the duration of its proposed licence - a level consistent with many other Category 2 services, while the other Canadian news services with 'mandatory access' are spending approximately twice that level on Canadian Programming:

For mandatory access even to be considered, the applicant should be required to spend a proportion of revenue on Canadian programming equivalent to the CBC News Network, CTV News Channel and CP 24.

Where will the applicant acquire non-Canadian programming? In its response to deficiency questions, the TVA Group Inc. states that it does "not wish to enter into a business arrangement with another party". Friends recommends that this 'intention' be applied as a condition of licence.

We also note that the applicant states that it "may subscribe to foreign wire services to obtain American and international news footage (such as CNN, AP, Fox News etc.)" and describes these as "news footage we would repackage for our own news broadcasts". The applicant states that this programming would not be "programming acquisitions" and that they "have not reached a commercial relationship with any foreign wire service at this time". Friends recommends that the Commission defer consideration of the application until such time as these business plan issues are finalized and presented for consideration.

We also recommend that the 'zero' programming costs for foreign content projected in the applicant's "7 Year Financial Projections" (dated April 26, 2010) be converted into a condition of licence.

We note implicit contradictions in statements and research submitted by the applicant. For example: "English Canadians are news watchers" vs. "there is room in Canada for a new television news source. " Or "the CNN style of reporting is not particularly appreciated in Canada", yet "CNN is the most watched news channel in Canada".

We also express scepticism regarding the applicant's assertion that the English-speaking market is under-served by two national and one regional all-news services, and note that the United States market, with eleven times the population of English-speaking Canada, offers only four national all-news services.3 As many of these US services are also available in Canada, Canadians have more choice in all-news channels than Americans.

We note that the applicant has confirmed that "Sun TV News will subscribe to the Canadian Broadcast Standards Council's Journalistic Independence Code" as a condition of licence. We recommend that the Commission also require the applicant to adhere to the Canadian Association of Broadcasters' Code of Ethics,4 also administered by the CBSC. In particular, the following clauses are relevant:

Clause 5 - News

It shall be the responsibility of broadcasters to ensure that news shall be represented with accuracy and without bias. Broadcasters shall satisfy themselves that the arrangements made for obtaining news ensure this result. They shall also ensure that news broadcasts are not editorial.

News shall not be selected for the purpose of furthering or hindering either side of any controversial public issue, nor shall it be formulated on the basis of the beliefs, opinions or desires of management, the editor or others engaged in its preparation or delivery. The fundamental purpose of news dissemination in a democracy is to enable people to know what is happening, and to understand events so that they may form their own conclusions.

Nothing in the foregoing shall be understood as preventing broadcasters from analyzing and elucidating news so long as such analysis or comment is clearly labeled as such and kept distinct from regular news presentations. Broadcasters are also entitled to provide editorial opinion, which shall be clearly labeled as such and kept entirely distinct from regular broadcasts of news or analysis.

Broadcasters shall refer to the Code of Ethics of the Radio and Television News Directors of Canada ("RTNDA") for more detailed provisions regarding broadcast journalism in general and to the CAB Violence Code for guidance with respect to the depiction of violence, graphic reporting of delicate subject matter or the use of explicit language in news and public affairs programming on television.

Clause 6 - Full, Fair and Proper Presentation

It is recognized that the full, fair and proper presentation of news, opinion, comment and editorial is the prime and fundamental responsibility of each broadcaster. This principle shall apply to all radio and television programming, whether it relates to news, public affairs, magazine, talk, call-in, interview or other broadcasting formats in which news, opinion, comment or editorial may be expressed by broadcaster employees, their invited guests or callers.

Clause 7 - Controversial Public Issues

Recognizing in a democracy the necessity of presenting all sides of a public issue, it shall be the responsibility of broadcasters to treat fairly all subjects of a controversial nature. Time shall be allotted with due regard to all the other elements of balanced program schedules, and the degree of public interest in the questions presented. Recognizing that healthy controversy is essential to the maintenance of democratic institutions, broadcasters will endeavour to encourage the presentation of news and opinion on any controversy which contains an element of the public interest.

The applicant's assumptions on the number of English-speaking digital households are far from accurate.5 They assert that there will be 8,891,139 digital households in English Canada in 2011. Your Commission's data for the 2009 broadcasting year indicate that there were 7.62 million digital households as at August 31, 2009, but the distribution between English and French-speaking DTH subscribing households was not available. The following chart extrapolates the Commission's DTH data by assuming that 18% of the total DTH universe is comprised of Francophone homes:6

The 82% of DTH allocated to English is an estimate which, if too high, would further exaggerate the gap between TVA Group Inc.'s digital subscriber data and reality. Assuming that the 22.1% rate of growth of digital penetration between 2007 and 2009 as shown in the Commission's data can be projected forward to the rate of growth between 2009 and 2011, then there would be approximately 9.3 million digital households in 2011, of which approximately 7.6 million would be English-speaking digital subscribers. This suggests that the applicant's base-line subscriber data are off by 1.25 million - more than 16%.

Another nuance of the 'quasi-Category 1' Sun TV News application is with respect to subscriber rate and the Commission's dispute resolution process. The applicant notes that it is not asking the Commission to approve its proposed wholesale fee of 25 cents per month. However, we wonder if the Commission were to approve mandatory access based on a 25 cent per subscriber business plan, whether the applicant would then be in a position to come back to the Commission to ask for the imposition of a rate dispute resolution if non-Québecor distributors did not agree to this rate.

We therefore consider the gap between 'mandatory carriage' and 'mandatory access' to be somewhat a moot point, leading to a situation some years hence where - in a 100% digital environment - the applicant's signal is bundled with other services whereby most subscribers will effectively pay the 25 cent fee whether they know it or not. This outcome would generate in excess of $17 million per annum for the applicant before it sold its first advertising avail.

Friends recommends that the request for the initial three-years' mandatory access be rejected by the Commission. We attach evidence that this intervention has been faxed to the applicant.

Yours sincerely,

Ian Morrison
Friends of Canadian Broadcasting

cc: TVA Group Inc. (fax #: 514-380-4664)

1 The applicant uses this term in paragraph 7.2.1 and further states in paragraph 7.2.3 that "the Toronto conventional TV station advertising market is incapable of supporting the current number of conventional stations. The transformation of Sun TV will liberate advertising dollars for the remaining conventional stations."

2 The applicant states: "We therefore request that the Commission process this application on an urgent basis in the public interest and for the benefit of the television professionals that are currently involved in the former Toronto One, now the Sun TV venture". (Paragraph 1.4)

3 CNN, CNN Headline News, Fox News and MSNBC.


5 Sun TV News 7 years Financial Projections, April 26th, 2010, page 5.

6 2010 Communications Monitoring Report, pages Table 4.4.3 page 91.