Telesat owed $2.6 million as client refuses to pay its portion of contribution levy

Having lost an attempt to get the federal government to exempt it from the CRTC’s new contribution regime, Telesat Canada is now faced with an undisclosed customer that won’t pay the levy that the satellite provider has passed onto its customers. In its second-quarter financials released last month, Telesat noted that one of its "major customers is disputing the application of the contribution levy, a service surcharge on telecommunications revenues used to subsidize local telephone service in Canada, on certain invoices and has not paid $2.6 million." Paul Bush, Telesat VP of corporate development, would not reveal if the customer was from the broadcast or telecommunications industry, but industry watchers believe it’s the former. Telesat has passed on the levy, but at least one customer is refusing to cooperate. "The company is pursuing various avenues in order to enforce payment. The CRTC Order 2001-435 which denied Telesat’s application for an exemption of Canadian satellite services from the levy did confirm that Telesat can recover the surcharge from its customers," states Telesat’s quarterly financial report. "We understand that this is a problem. We are in agreement that this contribution levy should not apply. But since attempts to appeal the contribution regime have failed, we have the right to pass the costs onto our customers," Bush tells Canadian Communications Reports. "We are working toward a resolution of this issue with this particular customer." He declined to provide further details, including whether the customer had paid some invoices connected to the levy or whether legal action was being considered. In its first-quarter financial report released April 30, Telesat stated that a major customer was refusing to pay the contribution levy it had passed on. The amount owing at the time was $2.3 million. Bush told CCR last fall that one of Telesat’s government customers was refusing to pay the levy. That customer was the Government Telecommunications and Informatics Services (GTIS) branch of Public Works and Government Services Canada, which buys bulk telecom services and resells them to government departments. Bush confirms, however, that the GTIS is not the "major customer" that is refusing to pay the levy. Telesat began lobbying extensively back in March 2001 for its broadcast customers to support its appeal of a November 2000 telecom ruling on local phone subsidies. That month at the Canadian Satellite Users’ Association (CSUA) conference, Telesat president Larry Boisvert warned that the costs of the new contribution regime to subsidize phone service in remote areas would be passed onto its customers, many of whom are broadcasters (CCR, March 29/01). Unsuccessful in its attempt to get an exemption from the CRTC, Telesat supported a petition to Cabinet filed by the Canadian Association of Broadcasters (CAB), the CSUA and direct-to-home (DTH) satellite TV licensee Star Choice Television Network Inc. (CCR, Sept. 27/01). But the government rejected the appeal, saying it was not in the public’s interest (CCR Update, May 28/02). The broadcasters had argued that they should not be hampered in their efforts to meet the cultural objectives of the Broadcasting Act by having to make financial contributions in support of the social goals of the Telecommunications Act. Telesat said it would pass its share of the contribution charge – about $8.3 million in 2001 – onto its customers, including broadcasters. Broadcasters contribute about half of Telesat’s revenues (CCR, March 29/01 and April 11/01). The CRTC set the 2002 contribution rate at 1.4 per cent of telecom revenues, a significant decrease from the 4.5 per cent interim rate applied in 2001. Telesat’s contribution charge for 2002 is expected to be about $3 million, according to Bush.

Telesat owed $2.6 million as client refuses to pay its portion of contribution levy

Broadcast | August 15, 2002

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