CHUM Limited and Astral Media

Sent by Electronic Mail

December 13, 2004

Mr. Larry Shaw Director General Telecommunications Policy Branch Industry Canada 300 Slater Street Ottawa, Ontario K1A 0C8

Dear Mr. Shaw:

Re: Notice No. DGTP-007-04 – Proposed Clarification to the Government Satellite-use Policy for the Delivery of Broadcasting Services (October 30, 2004) – Submission by CHUM Limited and Astral Media

CHUM Limited (“CHUM”) and Astral Media (“Astral”) are pleased to provide the following comments in response to the above-referenced Gazette Notice (the “Notice”), which proposes to amend the government satellite-use policy (the “satellite-use policy”). As discussed in detail below, CHUM and Astral believe that this proposed amendment is unnecessary, overly broad and, at best, premature.

The Notice

The stated purpose of the Notice is to respond to a request made by the Canadian Radio-television and Telecommunications Commission (the “Commission”) in the fall of 2003 to clarify the satellite-use policy for the transmission of Canadian programming services in Canada, in particular digital radio by satellite. This request was prompted by the receipt by the Commission of an application to establish a subscription satellite radio service in Canada using one of the two U.S. satellite networks designated for this purpose. The

Commission subsequently received a second application for this type of service proposing to use the facilities of the other U.S. satellite radio network.

As discussed in greater detail below, CHUM and Astral have also filed an application with the Commission for a broadcasting licence to carry on a multi- channel subscription radio broadcasting undertaking. However, our application proposes to use a terrestrial-based digital transmission network as opposed to satellites.

The Commission considered these three applications at a public hearing that took place in Gatineau, Quebec from November 1-4, 2004.

The Satellite-Use Policy

As discussed in the Notice, the satellite-use policy was established in 1995 during the Commission’s proceeding relating to the distribution of Direct-to-Home (“DTH”) services.

The satellite-use policy requires that:

• Broadcasting undertakings should make use of Canadian satellite facilities to carry (i.e., receive and/or distribute to Canadians) all Canadian programming services, but may use either Canadian or non-Canadian satellite facilities to carry foreign originated services that are intended primarily for foreign audiences and are authorized, in whole or in part, for distribution by the CRTC; and

• Under no circumstances, should a broadcasting undertaking use exclusively foreign satellites for the distribution of its services to Canadians. However, in the case of emergencies leading to lack of availability of Canadian or foreign satellites facilities, back-up agreements between the two countries (Canada-U.S.) would be utilized.

The Notice states that this policy was intended to reflect, among other things, the objective in the Broadcasting Act (the “Act”) that “each broadcasting undertaking shall make maximum use, and in no case less than predominant use, of Canadian creative and other resources . . .”

Industry Canada and Canadian Heritage (the “Departments”) have indicated that the existing policy did not contemplate a situation where Canadian specialized satellite facilities would not be available to deliver a particular broadcasting service. As a result, the Departments are proposing to amend the satellite-use policy to provide that:

“in exceptional circumstances, where no Canadian satellite facilities are available, or likely to be available in a reasonable time frame, to

accommodate specialized satellite delivery of a broadcasting service to the public e.g. satellite radio services including vehicular reception, the use of foreign satellite facilities is permitted to distribute Canadian programming services . . .”

[Emphasis added.]

CHUM and Astral’s Concerns

As noted above, the proposed amendment is to cover “exceptional circumstances, where no Canadian satellite facilities are available, or likely to be available, to accommodate specialized satellite delivery of a broadcasting service to the public.” The Notice highlights satellite radio services as one such exception.

CHUM and Astral have four specific concerns with this approach, which are discussed in detail below:

1. Is satellite radio an exceptional circumstance?

2. Does the proposed change only relate to the use of foreign facilities?

3. What other circumstances might be considered exceptional? and

4. Is it necessary to amend the satellite-use policy at this time given that there is considerable doubt as to whether or not the applications for satellite radio services will be approved by the Commission?

Before addressing these issues, CHUM and Astral would like to note that while we have filed an application for a subscription radio service, what is being proposed has broader ramifications than just the development of subscription radio in Canada. The Act states that the Canadian broadcasting system shall be effectively owned and controlled by Canadians. By endorsing the use of foreign satellite facilities to deliver broadcasting services directly to Canadians, the Departments are setting a dangerous precedent that could result in this principle being undermined.

Is Satellite Radio an Exceptional Circumstance?

The Notice concludes that satellite radio services that rely on foreign satellite facilities fall into the definition of what constitutes an “exceptional circumstance”. However, CHUM and Astral believe that before discussing whether or not what is being proposed constitutes such a circumstance, it is necessary to examine whether or not the question has been framed properly.

As noted above, the proposed amendment assumes that for something to qualify as an exceptional circumstance, no Canadian satellite facilities can be available, or are likely to become available, to accommodate specialized satellite delivery of a broadcasting service to the public.

This line of reasoning presumes that satellite technology is required to deliver this type of service to Canadians. This is a departure from past practice. Canadian broadcasting policy has historically focused on the types of services that can and should be made available to Canadians, not the technology that enables those services to be provided.

As with DTH in the mid-1990’s, the key issue that needs to be determined in this situation is whether or not the proposed service meets the objectives of the Act relating to Canadian ownership and control and making maximum use of Canadian resources.

Three applications have been filed with the Commission for broadcasting licences to operate multi-channel subscription radio services based on one of two different technological platforms. Two of the applicants are proposing services that rely on foreign satellite facilities and, therefore, require an amendment to the satellite-use policy. However, CHUM and Astral’s application does not rely on foreign satellites to reach Canadians. Instead we have proposed a “Made in Canada” solution that makes maximum use of Canadian creative and other resources.

In effect, what is most “exceptional” about the proposals being advanced by the satellite radio applicants is that they will rely mainly on the programming and other resources of their U.S. partners and provide very few Canadian produced channels.

Given the existence of a proposal that does not require an amendment to the satellite-use policy and otherwise complies with the Act, CHUM and Astral submit that it is incorrect to conclude that satellite radio services are an example of the type of undertaking that warrants an exception if exceptions should be granted at all.

Does the Proposed Change Only Relate to the use of Foreign Facilities?

From the face of the Notice it would appear that the proposed change to the satellite-use policy simply relates to the use of foreign satellite facilities as opposed to those that are Canadian owned and controlled. However, a broader examination of the proposals by the satellite-based subscription radio applicants show that what is envisioned is not a service where the satellite provider is simply a common carrier. What they are actually proposing is an integrated service whereby the satellite operator provides not just carriage, but the vast majority of the programming that is being offered to Canadians as well. As a

consequence, what these applicants are truly looking for is an amendment to the policy that will facilitate the entry into Canada of broadcasting services that are effectively controlled by foreign entities. By adopting the proposed amendment, the Departments will be turning a blind eye to this reality.

In addition, the Departments have been quick to conclude that it is unlikely that a Canadian satellite facility capable of providing this type of service will be developed in the future. This is the argument that the proponents of satellite technology have made. However, based on discussions at the November hearing, it appears that orbital slots will become available in approximately five years.

Should the proposed amendment be adopted, it leads to the following question – when a Canadian satellite does became available to deliver subscription radio services, will licensees be required to use it to deliver their services? If the answer is “no”, then the result of this amendment to the satellite-use policy will be to remove any incentive to launch a Canadian-owned and controlled satellite.

What Other Circumstances Might be Considered Exceptional?

While satellite radio has been highlighted as one type of exceptional circumstance, the proposed amendment to the satellite-use policy does not place any limit on the number of exceptions that might be granted.

The existing satellite use policy has resulted in the development of a competitive broadcasting distribution sector that uses Canadian satellite resources and has not impeded the development of innovative, truly Canadian broadcasting services.

Given that it is unclear at this time whether or not any such exceptional services exist, CHUM and Astral submit that it would not be prudent to amend the satellite-use policy in such an open-ended manner to provide for a service that may or may not be developed in the future. In effect, what is being proposed could pave the way for one to argue that any broadcasting service should be allowed to be supplied to Canadians using foreign facilities.

Is it Necessary to Amend the Satellite-Use Policy at This Time?

The Commission first approached the Departments over a year ago for clarification regarding the satellite-use policy. At that time, the Commission had received an application for a broadcasting licence to carry on a satellite radio undertaking and it was widely believed that satellite was the only means by which such a service could be delivered.

At the hearing in early November, the Commission raised a number of concerns about the proposals put forward by the satellite radio applicants, including:

• Whether or not these services would be effectively owned and controlled by Canadians; • Whether they would be providing a sufficient number of Canadian- produced channels; and • Whether they would be offering a sufficient level of Canadian content.

Given the concerns raised by the Commission, there is no guarantee that the applications for satellite radio services will be approved. As a result, CHUM and Astral submit that the Departments should wait until the Commission makes its determination on the applications for multi-channel subscription radio services before opining on whether or not the satellite-use policy should be amended. In the event that the Commission concludes that licensing the satellite radio applications would be consistent with the objectives of the Act, it could issue decisions that are contingent on the Departments making the necessary amendments to the satellite-use policy.

Should you require any additional information, we would be pleased to provide it on request.

Sincerely,

Peter Miller Sophie Edmond VP, Planning & Regulatory Affairs VP, Regulatory & Governmental Affairs Radio & Television Astral Media Inc. CHUM Limited