“Reverse grey market” growing in U.S. and Mexico for Canadian DTH services

The grey market battle has taken on an ironic new twist with revelations that at least two American companies are openly selling Canadian DTH systems to people in the U.S., Mexico and parts further south. Dish dealers in Wisconsin and Texas are among those importing the dishes and receiving terminals from Canada, and selling them as far as satellite footprints reach, which for Star Choice Communications Inc includes Guatemala, parts of the Caribbean and even Hawaii. One source estimates there are several thousand, if not tens of thousands, of people outside of this country subscribing to Canadian DTH services. "I wouldn’t be surprised if at some point there will be more Americans buying these Canadian services than Canadians," one dish dealer predicts. "I think you’ll also see Star Choice eclipse ExpressVu as the main company selling outside of Canada because of its increased coverage." What’s fueling the U.S. grey market? There appear to be two main events that have contributed to a recent rise in grey market sales in the U.S. – Star Choice’s migration to the Anik F1 satellite, which has geographical footprint that reaches as far south as Guatemala, and CBC’s decision to terminate its C-band signal on Jan. 19. The only way to get CBC’s signal now is either via antenna, cable or satellite TV.The other player in the equation is a "programming broker" who sets up a Canadian address for foreign residents that want to receive service from either Star Choice or Bell ExpressVu. The service – dubbed "The Canadian Solution" – is targeted at Canadian "snowbirds", expatriates and foreigners with a hankering for Coronation Street, Hockey Night in Canada, Francophone soaps and other shows not available south of the border. While ExpressVu and Star Choice inevitably gain financially when Americans buy their services – even indirectly – both companies deny any direct knowledge of a grey market for their services in the U.S. In fact, ExpressVu is in the midst of its own legal battles to shut down what remains of the U.S. grey market in this country (CCR, Jan. 17/01, Apr. 13/00). The issue is primarily one of programming rights: Companies like Los Angeles-based DirecTV don’t have clearance to sell their programming into Canada. Likewise, Canadian satellite TV providers haven’t cleared the rights to sell their shows in the U.S. market. Canadian companies not directly involved So when asked about the grey marketing of their services into the U.S., Canadian DTH companies are quick to distance themselves. "We are not aware of any such activities occurring," Star Choice president Peter Classon told CCR on Tuesday. "We will follow up on this information and try to locate these web sites … It is illegal for us to sell our systems into the U.S. due to current regulations so we would not support this activity at all. As of today, this is the first I’ve been made aware of it." A similar statement was relayed by ExpressVu by its director of communications. "We have heard through word of mouth that there are these types of installations," says Rosemary MacGilchrist. "But our position on them is exactly the same as what happens on (this) side of the border. We don’t have a licence to broadcast into the U.S. so we don’t support this type of activity. It really is inconsistent with our licensing arrangements." Officials at DirecTV’s office in Los Angeles weren’t willing to speak publicly about the issue at this time. One "programming broker" that’s providing the false Canadian addresses to foreign viewers says Star Choice and ExpressVu can say little else about the situation. "As long as (DTH companies on both sides of the border) can maintain deniability, I don’t think they have any compunction about doing it," says Jim Woods, owner of Freewaysupport.com. He also wonders if this denial is rooted in reality. "We see their threads into our web page every day so we know that they’re following us very closely. And we know that if they wanted to take issue with this, they’re in a position to do so to some degree. I don’t know if they could prevent us from doing anything. It’s a case of my lawyer’s bigger than your lawyer." For a one-time fee of $89, Freewaysupport.com of Winnipeg will set up foreign residents with a Canadian address, and forward bill payments onto Star Choice and ExpressVu. Freeway also arranges for Canadians to receive U.S. satellite TV services. Trying to legitimize the grey market Woods adds that he’s not trying to hide his grey market activity. Rather, he thinks the companies and governments involved should recognize that there are economic and cultural benefits to having people outside our borders wanting Canadian programming. "What we want to do is lend credibility to this particular grey market need," he told CCR. "We have found some niche markets that from a Canadian perspective are a good thing. There are Americans living in the U.S. that like to watch Canadian shows, and they’re willing to pay for it." Freeway acts as a broker for U.S. dish dealers that provide the equipment to residents outside of Canada. One such company is Global Communications of Plain Wisconsin, which is considered a pioneer in bringing Canadian programming to the U.S. Global is owned by Mike and Laurel Kohl, who themselves have become regular viewers of Canadian TV. Laurel says a lot of Americans used to watch Canadian channels on C-band, but the last of that disappeared in January when the CBC ended its C-band transmission. She says customers are now willing to pay for the service because "you get more programming for less money compared to (U.S.) services" and because of the favourable exchange rate. The main draw, however, appears to be the shows themselves. "There are a lot of Americans that like British programming and this is the only way they can get it," she told CCR. "The BBC World News and Coronation Street are incredibly popular." Global’s web site provides a glowing description of several Canadian services, as well as a section on whether or not grey market services are legal. It jokingly sums of the legality of the practice as "somewhere between tearing a tag off a mattress and smoking a Cuban cigar in the privacy of your own home. There may be a rule printed somewhere, but nobody is going to jail. It’s just TELEVISION!," the website states. Canadian and U.S. regulators not worried The company is probably right. When contacted this week, the CRTC wasn’t aware of any regulation that prevents Canadian services from being sold outside the country. Industry Canada ADM Michael Binder says he’s not aware of what rules this type of grey market activity would be violating in the U.S. "We haven’t heard any complaints from the Americans. Nobody has approached us about this, so it may not be an issue there," he says, adding, "If it doesn’t bother the American administration, it doesn’t bother me." And in Washington, it doesn’t appear to be a raging issue. When contacted by CCR, a senior official with the Federal Communications Commission says they have received no complaints about Canadian grey marketing, and have no immediate plans to crack down on the practice. "We have very limited staff to follow up with individual dealers," the senior FCC official says. "We have a foreign enforcement bureau that might be interested in pursuing something like this … but since it is the satellite dealers, I’m not sure how much we would be able to get involved." If ExpressVu and Star Choice wanted to sell their services directly into the U.S. market, the official says they would need a receive-only earth station licence from the FCC. But the source says even if such an application was made, the bureau likely wouldn’t approve it. Unlike Mexico and Argentina, Canada has no cross-border DBS agreement with the U.S. Before such an agreement could be negotiated, Canada would have to be willing to allow U.S. satellite TV companies to sell their services in this country. (See FCC policy) "I think certainly we would like to see our DBS guys to be able to provide service in Canada," the FCC official says. "We would like to see the Canadian market opened up." Binder says his department is always open to discussing cross-border issues with its U.S. counterparts. "The door has always been open."

“Reverse grey market” growing in U.S. and Mexico for Canadian DTH services

News | 03/14/2001 5:00 am EST

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