Broadcasters and distributors still at odds over how to launch digital channels this fall

Disagreement over how to launch new digital channels this fall isn’t expected to delay their rollout, but it will affect how the retail revenue is divided between the services and broadcasters. Contract talks hit a roadblock this month when the various parties were unable to reach agreement on a joint code of conduct outlining equitable terms for carriage. The CRTC asked programmers and broadcasters to develop a common code that deals with pricing, packaging, promotion and marketing, and launch costs associated with the new digital services. Rather than receiving one code, this month the regulator received four separate ones. The problem, it seems, lies with the code’s scope. Cable and satellite TV operators say licensees want to include a detailed pricing formula in the code, something they say is better left to individual contract negotiations. The Canadian Cable Television Association (CCTA) writes in its proposed code that: "Wholesale rates must be negotiated on a bilateral basis between individual distributors and programming undertakings," with the rates reflecting "the specific circumstances of each distributor’s market, including competitive conditions, anticipated consumer demand for the service in question and the nature and size of the package(s) in which the service is offered." In contrast, broadcasters want a clearly spelled out code, one that also improves their bargaining position in contract negotiations. In its code, the Canadian Association of Broadcasters (CAB) says digital channels have a "serious concern" that distributors could and have imposed "unreasonably high markups on wholesale rates". Various groups aired their views on the matter last week at the Canadian Satellite Users Association (CSUA) conference. Martha Fusca, president of Stornoway Communications Inc – which won a Category 1 licence for the Issues Channel – said she understood from her negotiations that some cablecos plan to subsidize the cost of the digital boxes by charging more for the new channels. The CCTA says it’s unreasonable for digital channels to expect to receive the wholesale rate they proposed in their appli-cations to the CRTC and be marketed together in a comprehensive package. If everyone got their preferred wholesale rates, the CCTA says a tier of 16 Category 1 digital channels would cost $11.60 per month. When the cost of a set-top box rental is added in, the price climbs to $21, beyond what consumers are willing to pay, the CCTA warns. No consensus on interactivity Interactivity emerged as another area of contention. Jessica Casavant, director of digital technology at Bell ExpressVu, suggested during a CSUA session that her company may use a "walled garden" approach, which would prevent viewers from moving from their TV viewing onto the World Wide Web. "We want to control the set top box so that they can’t automatically go anywhere on the web, but that we can get as much revenue as possible (through ExpressVu initiatives, including e-commerce)." Vision TV’s Erika Kramer disagreed with the idea. She said a walled garden would prevent people watching its program on residential schools, for example, from linking to a help line during the broadcast. CCTA president and CEO Janet Yale said disagreement over interactivity isn’t a pressing concern because current set top boxes don’t support interactivity. The CRTC is expected to issue a public notice soon to review the issue of digital TV and interactivity, a move the CAB supports. "All sorts of requirements are going to have to be met to make (interactivity) work properly," says Sean Kiely, the CAB’s VP of specialty and pay services. "Things like the open platform approach to information, and set-top box portability." The CAB has also proposed that distributors’ affiliate agreements be subject to third-party audits to verify subscriber records and validate compensation, a proposal not supported by the CCTA. Bell ExpressVu and Look Communications Inc were the other two companies to file separate codes.

Broadcasters and distributors still at odds over how to launch digital channels this fall

Broadcast | March 29, 2001

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