CRTC denies Pelmorex iTV proposal; launches fact-finding proceeding instead

The CRTC’s fact-finding proceeding on interactive television is expected to turn into yet another battle between broadcasters and distributors as the two sides wrangle over what role the broadcast regulator should play in the emerging iTV market. On Nov. 2, the commission denied a proposal by Pelmorex Communications Inc. to recognize interactivity as an integral part of its weather specialty channels (CCR, July 4/01), opting instead to launch a fact-finding inquiry on issues involving iTV. The regulator continues to believe that it’s too early to develop rules or principles governing iTV, but says the time is right to gather facts on current and planned interactivity of broadcasters, producers, and distributors – Public Notice 2001-113. It points out that distributors and programmers are beginning to offer interactive features, noting that Bell ExpressVu LP is now marketing a set-top box with personal video recorder functionality and Rogers Cable Inc. has launched Enhanced TV (CCR Aug. 15/01 & CCR Update, Oct. 3/01). Interested parties are asked to file submissions by Jan. 15, 2002 to "assist in the development of industry collaboration and help the industry and the commission to address related issues as they arise." The commission is seeking information on a number of iTV issues, including deployment strategies, technical matters, and possible partnerships. It also asks interested parties two key regulatory questions: which interactive activities they consider to be broadcasting, and which they consider to fall under the new media exemption order. The Canadian Cable Television Association (CCTA), which opposed Pelmorex’s iTV proposal, applauds the CRTC’s move to gather more information on iTV before considering regulatory rules. "I think it’s great that they decided to find the facts before they moved into a policy-making mode because if you are not in the business world grappling with these issues but you’re sitting in Ottawa as a policy maker, how are you supposed to have all the facts in front of you that you need?" asks CCTA president and CEO Janet Yale. "We certainly encourage the commission when it’s dealing with these speculative new technologies not to (make) rules too soon." The cable industry has consistently argued that it’s too soon to consider regulations for iTV, particularly when technology issues remain unresolved and no clear business model for interactivity has emerged. "What we’re saying (is) let’s not make rules that force a particular business outcome if that’s not the business outcome that makes sense in the marketplace," Yale tells CCR. "And it doesn’t mean that the commission shouldn’t intervene if there’s a problem. It just means let’s not second-guess the market, if we don’t need to. "I think this process is about figuring out what is at issue, and whether or not the primary issues are standing in the way – which we believe are business issues versus regulatory rules… Then the commission will hopefully reach the conclusion that if it’s a business issue, then the businesspeople have to sort that out in the marketplace as opposed to trying to come up with rules in advance…" Pelmorex iTV proposal deemed premature As part of its licence renewal applications for The Weather Network and Météomédia, Pelmorex surprised many in the industry by seeking an amendment to the channels’ nature of service definition that would have entrenched interactivity as an integral part of the specialty services. This would have required distributors to distribute interactive elements to their subscribers. Pelmorex had argued that the commission needed to establish rules of the game for iTV so that precedents wouldn’t be set. Also, it argued that interactivity was essential for its weather channels to provide localized content in the digital environment. The commission denied the Pelmorex proposal because of its concern that it is "premature given the embryonic state of the technology and the numerous uncertainties pertaining to digital distribution and the implementation of interactivity" – Decision 2001-668. Given the importance of interactivity to Pelmorex’s plans for offering localized content in digital, the CRTC encourages Pelmorex and distributors to negotiate in good faith terms and conditions to distribute iTV services, while it studies the issues addressed in the fact-finding proceeding. "Our feeling was that things would go a lot smoother and faster if everybody knows the rules of the game before they start playing," says Paul Temple, Pelmorex’s senior VP of corporate development. "We tried to make it quite clear that we weren’t asking the commission to resolve all the technical issues but rather to address the rules. That’s pretty critical." Despite the CRTC’s decision, Pelmorex, which is currently doing iTV trials with Vidéotron ltée, will move forward on interactivity. Temple says it will continue discussions with distributors to negotiate acceptable carriage arrangements. "I think we’ll have to. Interactivity is important to our service. We can’t do nothing," he tells CCR. "I think it would be a lot easier if those rules were in place beforehand. Just simple questions like, ‘Can a distributor charge for access to interactivity and who should pay?’ That’s a pretty simple but fundamental issue, because in the meantime, our concern is that precedents will be set so if the commission waits too long, the rules of the game will be set and they might not necessarily be in the best interests of the Broadcasting Act. "If the commission said – just as a hypothetical – that interactivity was consistent with the programming being broadcast and is an integral part of the service, then it should be distributed, and if there were costs associated with that, then the consumer should bear the cost," Temple adds. "That would kind of set out the rules pretty straightforward for people. What content can a programming service include in interactivity? Could we put any old stuff on? Could The Weather Network start doing sports scores? Could MuchMusic start doing weather reports? There’s a whole bunch of things here that need to be addressed. And I haven’t studied (PN 2001-113) to the extent that those kinds of issues will be addressed." Yale says the fact-finding proceeding should uncover the barriers to moving ahead with iTV and what it will take for business models to come together. "I don’t think the ground rules are going to reduce the risks" she adds. "It’s a very risky business proposition, and the issue isn’t a lack of ground rules but a lack of a business model. I don’t think that has anything to do with regulatory rules." Temple acknowledges that everyone is struggling to figure out the business model for interactivity, but notes that initial interactive offerings are available today. "When you say it’s a long ways off, there’s a service available now to Rogers subscribers," he says, referring to Rogers Cable Inc.’s launch last month of Enhanced TV. "So that doesn’t seem a very long way away. It’s kind of a basic-level service, but it’s there and it’s there now." Temple speculates that Pelmorex’s iTV licence amendment proposal likely forced the commission to move on an iTV proceeding sooner rather than later. "We would have loved for them to have agreed with our proposal in our licence renewal, but failing that, I think this is a good step in the right direction," he says. "I guess in some small way we helped act as a catalyst." Pelmorex must file progress reports on iTV negotiations In an unusual move, the commission is requiring Pelmorex to file a report within six months of the date of its decision and once a year thereafter on progress made in negotiating iTV carriage with distributors, saying its experiences could assist in the development of its future policies. The CRTC also reminds programmers that they have recourse if they believe they are being treated unfairly by distributors. "The commission notes that refusal to make The Weather Network/Météomédia’s interactive elements available to subscribers where the distributor is offering interactivity for other programming services, including programming programming services with which that distributor is affiliated, could be viewed pursuant to the provisions pertaining to undue preference in the Broadcasting Distribution Regulations."

CRTC denies Pelmorex iTV proposal; launches fact-finding proceeding instead

News | 11/09/2001 5:00 am EST

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