February 18, 2009
Via Email: dupuis.marc@ic.gc.ca
Mr. Marc Dupuis
Director-General,
Spectrum Engineering
Industry Canada
300 Slater St
Ottawa ON K1A 0C8
Dear Mr. Dupuis:
Re:
Canada Gazette Notices SMBR-006-08, “Publication
of the Digital Television (DTV) Post-Transition Allotment Plan” and SMBR-005-08, “Interim Agreement Between Canada and the United
States Concerning Digital Television (DTV)”
1.
The Canadian Association of Broadcasters (CAB) -
the national voice of Canada’s private broadcasters, representing the vast
majority of Canadian programming services, including private television and
radio stations, networks and specialty, pay and pay-per-view television
services - is pleased to submit the following comments in response to the
above-noted Canada Gazette Notices.
2.
As the comments
below demonstrate, in this time of structural erosion and financial
uncertainty, with ever-changing technologies and platforms emerging, private over
the air (OTA) broadcasters need support and flexibility from both the federal
government and the CRTC in order to continue with the digital television transition.
3.
In reviewing our comments, it is important to
recognize that the transition of Canada’s OTA industry to digital delivery is government-mandated. The principle to release radio spectrum for purposes other than
broadcasting and to auction spectrum will directly generate revenue for the
federal government. While some
benefits may accrue to new users of this spectrum, the transition is not expected to produce extra revenues
for affected OTA broadcasters. In
fact, it will oblige private broadcasters to incur considerable new capital costs at a time when the decline in
the national economy is critically affecting advertising revenues and therefore
broadcasters’ abilities to meet their current license commitments.
4.
In this regard we would note that on February 10, 2009
the Commission released the financial results for conventional television for
2008. These results demonstrate
that profitability (PBIT) decreased from 5.2% ($113M) in 2007 to 0.38% ($8M) in
2008; total OTA revenues decreased by 1.5% in 2008 and have been basically flat
since 2004 with a CAGR of only 0.9% over the past
five
years and advertising revenues decreased by 1.9% in 2008 and have been
basically flat since 2004 with a CAGR of only 0.8%. These dire economic results point to a period of significant
structural change affecting the OTA sector.
5.
It is also clear that government revenues
resulting from any auction of the radio spectrum to affect the digital
transition will not offset the costs to the Canadian public where it is
predicted some viewers will be required to make modifications to their current
viewing arrangements and/or receiving equipment, simply to preserve present
services.
6.
Considering
these factors, private OTA broadcasters are asking Industry Canada to adopt an
approach to DTV to ensure that:
(a)
domestic
digital television (DTV) technical licensing procedures and policies should accommodate
an extension to the analog TV termination deadline that may be found necessary
as a result of upcoming CRTC licence renewal hearings or other processes; and,
(b)
with
the possible exception of stations operating on channels above 746 MHz that may
be required for Public Safety services, the Department should allow
broadcasters to continue operating their existing analog TV transmitters at
current parameters, at least until any extended analog termination date; and,
(c)
DTV
channel associations identified for each station in the Allotment Plan should
be retained for at least 5 years following the transition and,
(d)
policies
affecting the broadcasters’ abilities to select over-the-air (OTA) DTV channels
other than those pre-selected for them by the Department in the DTV Allotment
Plan should be applied in a flexible manner and applications for such changes
will be handled expeditiously; and,
(e)
provisions
of the final Canada-US agreement should not preclude changes to domestic
regulations or DTV implementation policies that may be found necessary as the
transition proceeds, including the measures recommended in this submission;
and,
(f)
the
costs to broadcasters for the required transmitter transitions should be offset
from revenues that the federal government will earn as a result of the
expropriation of spectrum above 698 MHz .
7.
The CAB is
cognizant of the fact that the CRTC declared in Public Notice 2007-53 (17 May
2007) that it does not intend to renew the broadcasting licence terms for
existing analog OTA TV transmitters beyond 31 August 2011. However, for reasons detailed in the
following sections of this submission, the CAB believes that this date should
now be considered as a “target” only. Broadcasters that are able to do so, and can justify the costs on a
business or competitive basis, should be free to convert to DTV on
post-transition channels, as they see fit. However, the Department’s regulations, policies and
licensing actions with respect to spectrum
management
and DTV from this point onward should anticipate the probability that analog TV
operations in many parts of Canada may have to continue beyond 2011.
8.
While
a transition delay may temporarily postpone plans for the re-use of vacated TV
spectrum above Channel 51 (698 MHz) by commercial services, the CAB considers
such action is warranted by both the CRTC and Industry Canada for the following
reasons:
●
In
view of the depressed national economy, the large capital resources required by
potential new users to acquire and exploit any released TV spectrum are
unlikely to be available within the next several years in any event.
●
Notwithstanding many years of
planning and the expenditure of more than $1.34B in public funds to directly
subsidize disadvantaged viewers through set-top converter grants, the US
“national forced deadline” plan for DTV transition has failed to achieve its
original analog termination target of February 17, 2009 and is now set at June
12, 2009.
9.
The CAB notes
the new DTV Plan provides each regular, protected, analog TV transmitter
currently licensed in Canada with a channel allotment on which the licensee may
elect to operate a single high-definition (HDTV) OTA service in the
post-transition period. However,
there are a number of factors that we believe will prevent private broadcasters
from determining in the very near-term how many of these allotments will
actually be occupied by OTA HDTV replacement transmitters and exactly when
these might be implemented. Principal among these is the large capital expenditures required to
implement DTV installations. Building transmitters that will serve the few remaining OTA TV viewers
is difficult to justify in many markets, given the current economic
circumstances facing the private television broadcasting sector, and indeed
many Canadian industries.
10.
Nevertheless,
the CAB has been advised that many of its TV members do intend to apply for
post-transition DTV transmitters in the coming years, especially in the larger
TV markets. Since a majority of
such stations would use their current analog channels for digital services,
they would need to make “flash-cut” transitions that could take several months
to plan and execute. Consequently,
many of these conversions are likely to occur toward the latter part of the
transition period. Therefore, the
CAB suggests that the Department’s application processing personnel will need
to accommodate, in their work-load planning, the expected volume of requests
for such consideration.
11.
We
do not believe that this situation can be mitigated through the early
implementation of temporary DTV
facilities on transitional channels. At this late date, most stations implementing OTA DTV services will
likely opt to do so on their permanent channels, given that converting
transmitters from transitional to permanent channels would trigger even greater
expenditures.
12.
Considering the above, private
broadcasters are diligently seeking ways to ensure that all viewers no matter
where they may reside in Canada will have access by 2011 to high-quality
domestic digital TV services, delivered through a variety of distribution
methods. To this end, a number of
technical alternatives to the conversion of a majority of the existing local
analog OTA transmitters are being explored. Proposals in this regard may be brought forward shortly, in
the
context of upcoming CRTC licence renewal
hearings. However, implementation
of alternatives could take considerable time, since related regulatory and
policy changes may be required before they can be put in place.
13.
Consequently, the CAB recommends
that certain procedures referenced in SMBR-006-08 should be amended. Specifically, the Department should
refrain from removing DTV channel “associations” that relate to current analog
facilities until at least five years after the analog termination date. During this time, incumbent
broadcasters should have the right of first refusal to use their associated DTV
allotments. This is because one of
the technical alternatives for the early provision of cost-effective OTA DTV
could involve transmitter sharing. Under this scheme, several stations in a market would implement standard
definition (SDTV) services by occupying a pre-determined portion of a single
transmitter’s digital multiplex. If channel associations are removed from such stations prematurely, this
could prevent the subsequent migration of each programming service to its own
HDTV multiplex at a later date.
14.
However, once channel associations
are removed, the CAB believes that existing broadcasters that have implemented
OTA DTV transmitters, or who may intend to do so, should be given the first
opportunity to apply to use any allotments that may not have been taken up by
others.
15.
DTV conversion will position broadcasters for the
future enhancement of TV services perhaps including those targeted specifically
to mobile and portable receivers. In this regard, some research suggests that low power “distributed”
transmitter networks may ultimately provide better coverage solutions than the
single high-power transmitters envisaged in the present DTV Plan. Broadcasters looking to provide such
services may find it prudent to initiate DTV with lower power transmitters,
with the option to increase power or supplement coverage with multiple transmitters
once the mobile TV opportunities achieve commercialization and are better
understood. This approach may also have consequences for the manner in
which reliable DTV service areas are predicted, using time and location
probabilities. The CAB suggests
that the Department may need to re-visit the basic technical assumptions that
have gone into the development of the current Allotment Plan. So long as adequate protection is
provided to technically-related services, Industry Canada should permit broadcasters
a high degree of implementation flexibility as they deploy DTV services over
the coming years.
16.
Moreover, to ensure that the Canadian public can
be well-served within a future mobile TV broadcasting environment, broadcasters
implementing such services will require a wireless return path from
viewers. The CAB suggests that an
allocation of 1.5MHz will be required by each mobile TV licensee for such
purpose. Providing for this within
the Channel 52-69 block that will be released following the transition would
provide an opportunity to bring future two-way mobile broadcast applications to
the Canadian public.
17.
We note that only about 8% of the
DTV allotments identified for use by private protected stations are below
Channel 7. Nevertheless, it
appears that many of the existing low-band VHF analog channels currently in use
will remain in the Plan as vacant allotments. The CAB recommends that, where existing users of low-band
VHF channels have been allocated DTV allotments in core spectrum (Channels
7-51) and where these licensees are prepared to accept any DTV service area and
noise limitations that may result, they should be permitted to remain
on their current channels. The principal reason for granting
this flexibility would be to reduce the capital costs associated with DTV
conversion, particularly where antennas and perhaps towers would need to be
replaced to allow a channel change to occur. We would also urge that any
proposals for such changes be handled expeditiously by the Department.
18.
In this submission, the CAB is
advocating certain changes in channel utilization policies that may have an
impact on the final bilateral spectrum-sharing agreement that Canada intends to
enter into with the USA. Consequently, we recommend that the Department ensures that the
provisions of this agreement will not preclude changes to domestic regulations
or DTV implementation policies that may be found necessary as the transition
proceeds.
19.
The CAB has also reviewed the
Canada-US DTV Allotment Plan with respect to the specific channels set aside
for both Canadian and US stations in border areas. We note that Industry Canada has accepted a number of US
allotments near our largest TV markets that will enable these stations to
extend their OTA coverage in Canada when they convert to DTV. In at least ten cases, these service
extensions will exceed 10 km, which has the potential to further fragment the
viewing of domestic stations. We
suggest that this situation will need to be monitored to determine if adjustments
to regulatory policies might offset any increased encroachment of US signals
within our markets.
20.
The DTV
Allotment Plan does not contain any allotments above Channel 51. The stated purpose is to allow the
released Channel 52-69 spectrum (698-806 MHz) to be allocated for other
broadcasting and/or radiocommunication services. The capital costs
associated with converting all of the affected regular and LPTV stations to DTV
and re-locating them to other channels are substantial. Given the investment required, as well
as the poor economic climate at present, the CAB believes it is not
unreasonable that the costs that incumbents would incur, in making the changes
that are necessary to release the spectrum that Industry Canada wants to
re-allocate, should be offset in some manner.
21.
One source of compensatory funding could be the
revenues that the federal government will garner from commercial undertakings
that acquire future rights to use any vacated TV spectrum above 698 MHz. This principle could apply regardless
of whether new users buy the spectrum at auction or are licensed via
conventional licensing processes and then pay annual licence fees. Such a practice would also be in
keeping with the principle adopted in the US; specifically, that the federal
government should forego a portion of the “digital conversion dividend” in the
interests of achieving a smooth transition.
22.
In conclusion, the CAB wishes to
emphasize the recent changes that have negatively impacted the fundamental
precepts that led the broadcasters, the regulators and the government to
conclude that a relatively swift national transition to digital TV could be
achieved in Canada. Most
importantly, the world-wide recession has made it impossible for many
broadcasters to finance the capital costs associated with a full-scale OTA HDTV
transition and less expensive alternative digital delivery methodologies need
to be explored carefully. As well,
the difficulties encountered with the US DTV transition have vividly
demonstrated the perils associated with making an overnight nation-wide
technology transition that requires viewers themselves to take corrective
actions. Plans are just starting to be developed to deal with this in Canada,
and
broader action by both the federal government
and the industry will be essential if the pitfalls experienced in the US are to
be avoided.
23.
Although private broadcasters remain
committed to the eventual transition to digital television in Canada, the CAB
believes that a more flexible implementation plan, revisions to the planned
means of achieving this, as well as the timing of the conversion, must now be
considered.
24.
We would be pleased to meet with you
and your staff to discuss any aspects of these comments and recommendations.
Sincerely
yours,
Pierre-Louis
Smith
Vice-President,
Policy and Chief Regulatory Officer
cc: Ms.
Helen McDonald; Assistant Deputy Minister; Spectrum, Information
Technologies and Telecommunications; Industry Canada
Mr.
Ron Parker; Senior Assistant Deputy Minister; Strategic Policy Sector; Industry
Canada
Mr. Jean-Pierre Blais; Assistant Deputy Minister, Cultural Affairs;
Canadian Heritage
Mr.
Konrad von Finckenstein; Chair, CRTC
Mr.
Hubert Lacroix; President, CBC/Radio-Canada
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