Don’t expect big audiences in a digital world

This week, the CRTC’s landmark proceeding began to determine the winners and losers in a digital TV world. At least one BDU is concerned that some digital applicants are expecting too much from the CRTC. Below is an edited excerpt from Look Communications’ July 7 comments to the commission. The CRTC has clearly recognized that packaging flexibility and end-user choice are key benefits of digital distribution. Yet Look continues to see specialty channel applications that recommend inclusion in forced set packaging. Such packaging mandates would obviate one of the major advantages of digital technology. The Category 1 applications before the commission include book channels, documentary channels, fashion channels, suspense/mystery channels, channels aimed at slim demographics ... these channels are not designed for high penetrations and care must be taken to ensure that their business models do not assume such high penetrations. Applicants knew the realities of the digital environment when they prepared the applications. They were aware of the low penetration of digital boxes in the overall marketplace; they were aware that they were applying for discretionary specialty or pay channels; they were aware of digital packaging models in the marketplace; they were aware of several industry marketing studies that point to package customization as a key consumer demand; and they were aware that the commission has spoken of customized packaging in past communications. They were aware of the risks. Look notes that through the process leading up to the award of Category 1 licences the commission has already provided significant regulatory protection to such services. The commission’s one-per-genre exclusivity policy is a treasured gift to new programmers: it amounts to unchallenged ownership of a particular programming type and the demographics associated with that type. Additionally, the must-carry mandate for Category 1 services ensures that these channels, however niche, will be carried by all digital distributors in Canada – including MDS companies with limited spectrum capacity. Look offers further protection in the form of a minimum discretionary specialty channel package of 10 channels. Further packaging protection for the yet-to-be-launched services is unnecessary. It would obviate a key digital technology benefit and minimize customer choice. Mandating packaging does not make sense in a digital world. Look continues to be frustrated by the attitude of some specialty channels that they should be guaranteed success and profits regardless of consumer demand. The Category 1 channels have enough protection. In this new digital age, Look asks the commission to end the "business model" that guarantees profits within a mandated carriage framework: it does not benefit distributors with higher penetrations; it punishes distributors with lower penetrations – and in the case of companies employing the Look choice model (or a similar model), it punishes distributors who allow customers to decide which channels they would like to receive. In the digital age that allows for greater consumer choice, Look submits that the commission must shift its focus to discretionary rates where such discretionary rates are associated with mandated carriage. A Category 1 network receives mandated carriage protection; and the negotiations between a network and the distributor who must carry the network are premised on such mandatory carriage. As a result the negotiation process does not occur on a level playing field because the discretionary rate is sanctioned by the commission’s licensing decision and mandated carriage requirements. Consumer protection must extend to discretionary wholesale fees in a framework that encourages choice. If the wholesale rate is too high, the customer who requests these channels will be unwilling to pay for them or will be unable to afford them. Wholesale rates affect television viewing patterns whether the channel is on basic or whether it is offered on a discretionary basis. The commission should ensure that Look and other 100 per cent digital distributors are not disadvantaged by cable’s slow transition to digital and the small digital universe.

Don’t expect big audiences in a digital world

Broadcast | August 17, 2000

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