Letter from CRTC to Industry Canada and Canadian Heritage

Canadian Radio-television and Telecommunications Commission

October 17, 2003

FAX: 819-994-0979

Judith A. LaRocque
Deputy Minister
Canadian Heritage
25 Eddy Street
12th Floor – Mail Stop: 25-12-O
Gatineau, Quebec K1A 0M5

FAX: 613-954-3272

Jean-Claude Villiard
Deputy Minister
Industry Canada
235 Queen Street
CD Howe Building – Floor: 11E – Room: 1162A
Ottawa, Ontario
K1A 0H5

Dear Deputy Ministers: 

The Commission has received an application for a licence to establish a broadcasting undertaking to provide a Canada-wide subscription satellite digital radio service. The applicant is proposing to use the facilities of XM Radio Inc., which is licensed to provide a satellite digital audio radio service (SDARS) in the United States, and a series of terrestrial repeaters. It is proposed that subscribers to this proposed broadcasting service would be receiving Canadian and US originated programming services via existing US satellites and the proposed terrestrial repeaters in Canada.

The Commission is reviewing this application in accordance with the objectives set out in the Broadcasting Act. This proposal and any other similar proposal raises the need for clarification of the government policy regarding the use of Canadian satellite facilities for the transmission of Canadian programming services in Canada, and in particular digital radio by satellite.

A clarification was provided in the context of direct-to-home (DTH) satellite distribution and pay-per-view television programming undertakings. This was a letter to the CRTC dated June 14, 1995, from Harry Swain, Deputy Minister, Industry Canada, and Marc Rochon, Deputy Minister, Canadian Heritage.

In the Appendix to this letter you will find the facts as they relate to satellite digital radio service in Canada and arguments raised by the applicant in support of a clarification that would permit the use of non-Canadian satellite facilities for such a Canada-wide service. We note that because the above and the attached excerpt is proprietary to the applicant, the Commission treats it as confidential until it is published to invite public comments.

I am certain that you will understand that a clarification of the government policy is fundamental to the Commission's review of this application.

Thank you for your consideration of this matter.

Yours sincerely,

Diane Rhéaume
Secretary General

Appendix

(The following is a portion of the Canadian Satellite Radio Inc. application to the CRTC)

THE USE OF FOREIGN SATELLITES SHOULD BE PERMITTED

Prior to 2000, the use of a foreign satellite for distribution of programming services within Canada was limited to two types of situations: 

1. The distribution of foreign programming services by means of foreign fixed satellites to Canadian Broadcasting Distribution Undertakings.
2. Emergencies leading to a lack of domestic Canadian satellite facilities.

The policy was set out in a letter to the CRTC, dated June 15, 1995 from Harry Swain, Deputy Minister, Industry Canada and Marc Rochon, Deputy Minister, Canadian Heritage: 

• the undertaking should make use of Canadian satellite facilities to carry (ie. 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 CRTC; and
• under no circumstances should an undertaking use exclusively foreign satellites for the distribution of its services to Canadians. However, in the case of emergencies leading to a lack of availability of Canadian or foreign satellite facilities, back-up agreements between the two countries would be utilized.

[Emphasis added]

At the time that this policy was adopted there were a number of key structural differences in the provision of satellite services in Canada, most notably the following: 

• Telesat Canada ("Telesat") was the monopoly satellite carrier within Canada.
• No dedicated Direct Broadcast Satellite ("DBS") satellite facilities yet existed in Canada.
• Competitive Direct to Home ("DTH") services had not been licensed to provide service within Canada.
• The market for fixed satellite services had not yet developed through digital compression and there were a relatively small number of Canadian licensed service providers who utilized satellite facilities for distribution of programming services within Canada.

The satellite policy of 1995 is now more than eight years old and no longer corresponds to current Canadian or international market conditions for the following reasons: 

1. As part of its commitments under the General agreement on Trade in Services, Canada agreed that, effective March 1, 2000, competition would be permitted in the provision of both FSS and MSS satellite services. The Canadian government through Industry Canada, has authorized, in addition to Telesat, more than 50 foreign fixed service satellites to provide service in Canada. As a result, Telesat no longer has a monopoly in Canada.
2. In the provision of DBS services, the Federal Communication Commission's ("FCC") International Bureau on May 7, 2003, granted the application of Digital Broadband Applications Corp. ("DBAC") to provide direct broadcast satellite (DBS) and two-way broadband data services in the U.S. market using two Canadian DBS satellites and a U.S. fixed-satellite service (FSS) satellite. While the FCC has previously approved FSS satellite transmissions to the United States from Canadian satellites, DBAC's authorization is the first authorization for DBS service from Canadian satellites. In granting DBAC's application, the Commission declared that it hopes to stimulate competition in the U.S. DBS and FSS markets, as well as reduce prices and stimulate further technological innovation. DBAC's proposed network consists of one hub earth station, located in Arizona, and one million home terminals that will access the Canadian Nimiq and Nimiq 2 (Telesat - Nimiq) DBS satellites (to be located at 82° and 91° W, respectively) and the U.S.-licensed FSS satellite, Galaxy 11. The opening of the U.S. DBS market to services beamed from Canadian Direct Broadcast satellites marks a significant change in U.S. satellite policy. We believe that this event should be a catalyst for reciprocal action in respect of SDARS service to Canadians from a U.S. broadcast satellite.
3. Although Telesat Canada no longer enjoys a monopoly in the provision of Fixed Satellite Services in Canada, it is the sole provider of direct-to-home broadcast services using DBS services-band satellite facilities. Nonetheless Telesat supports this application for the use of U.S. SDARS space segment for a number of reasons that are specified in the application and summarized below:
   1. SDARS orbital slots have not been allocated to Canada;
   2. Construction of an SDARS or SADU satellite fleet dedicated to the Canadian domestic market would be prohibitively expensive at this time, and no existing or planned Canadian space facilities can be adapted for SDARS service;
   3. Even if regulatory and satellite coordination approvals were obtainable, construction and operational launch of an SDARS satellite fleet cannot be accomplished prior to 2010. Grey market services would proliferate in the Canadian marketplace prior to that date if no Canadian company were authorized to offer SDARS service;
   4. Telesat currently operates spacecraft tracking and control facilities for XM Satellite Radio Inc. Integration of a Canadian SADU provider's service on the XM Satellite platform would further benefit Telesat's long-term international and domestic business interests;
   5. Telesat's engineering expertise would be utilized in respect of ground-repeater stations in Canada, thus providing Telesat with additional revenue sources from a Canadian user, which is commensurate with the national satellite policy of using Canadian resources, wherever possible.