Satellite users’ appeal on contribution decision rejected by Cabinet

Canada’s broadcasters will have to continue to subsidize local telephone service in high-cost serving areas such as rural and remote regions of the country, according to a federal Cabinet ruling. Last week, it ruled that Telesat Canada’s broadcasting revenue is not exempt from the current contribution regime. The decision struck down an appeal to the Governor in Council by several broadcasting interests, which rely on Telesat’s facilities to distribute programming to Canadians. The Canadian Association of Broadcasters (CAB), the Canadian Satellite Users’ Association (CSUA), and Star Choice Television Network Inc. filed the petition last August in response to a May 2001 CRTC decision denying a Telesat review and vary application – Order 2001-435 (NL, Oct. 10/01). This is just one of several important decisions that could have an impact on the financial health of the telecom market. The fallout from last week’s price cap ruling will determine the future viability of several CLECs, as well as the general fiscal plans of the ILECs (see stories in this issue). Telus Corp. filed a review and vary application last fall regarding Decision 2000-745, the initial contribution regime ruling, and Decision 2001-238, a ruling on restructured bands (NL, Nov. 6/01). It worried that the CRTC was replacing actual costs with average national costs. At the time, Telus executive VP Jim Peters told Network Letter the firm would appeal to Cabinet if its R&V were rejected. Last week, he told the Vancouver Sun the telco could be forced to cut jobs, reduce capex spending in Alberta and B.C., or decelerate its rollout into the rest of Canada. "Whether the choice is to slow down our growth outside the province, whether it’s to pull back on rural investment or to reduce the staffing levels, that’s the mix that we’re faced with," the paper quotes Peters as saying. The CAB and the CSUA argued in their appeal that it was unfair to require broadcasters to help subsidize local telephone service in rural Canada, particularly since telecom companies don’t pay to support broadcasting objectives. They also argued that the appeal was not about exempting Telesat from the purview of the contribution order, as the wireless industry contended. "The petition acknowledges that when broadcasters engage in telecommunications activities they will be subject to the decision as much as wireless service providers and others," the groups pointed out in their March 8, 2002 reply comments to Cabinet. "What they seek is a recognition that revenue for services provided to them by Telesat exclusively in support of their regulated broadcasting activities constitute ‘Canadian non-telecommunications service revenue’ for purposes of Decision 2000-745," the groups wrote in March. The appeal by the broadcasters was strongly opposed by the Canadian Wireless Telecommunications Association, Telus Communications Inc., and SaskTel. The federal Cabinet ultimately decided that it wasn’t in the public’s interest to reverse the decision, vary it or refer Order 2001-435 back to the CRTC. "In reaching its decision, the government noted that the order is consistent with government policies to ensure the availability of affordable and reliable telecommunications services throughout Canada and to foster competition in the provision of telecommunications services," the government stated in a release. The CRTC has set the 2002 contribution rate at 1.4 per cent of telecom revenues, a significant decrease over the 4.5 per cent interim rate applied in 2001.For additional background on the satellite users’ appeal, see the Oct. 15/01 and June 11/01 editions of NL affiliate publication Report on Wireless.

Satellite users’ appeal on contribution decision rejected by Cabinet

News | June 3, 2002

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