Star Choice accuses broadcasters of using CRTC process to bolster bargaining position

Star Choice Television Network Inc. is accusing broadcasters of trying to use the threat of changes to the carriage rules for direct-to-home (DTH) satellite TV providers to wrestle higher compensation fees in exchange for not having to perform signal deletion. "…It appears they are seeking to alter the DTH carriage rules for broadcast signals as a means of putting commercial pressure on Star Choice to agree to significantly higher compensation in lieu of the performance of deletion. Alternatively they are seeking greater carriage of their signals. This is a win-win proposition for the broadcasters," Star Choice notes in its submission to the CRTC’s call for comments on the carriage of local television stations by DTH providers in smaller markets – Public Notice 2001-103 (CCR, Oct. 11/01). Broadcasters have complained that DTH distributors do not distribute all the local stations in a market, which has had a negative effect on the advertising revenues of those that do not get picked up. On the other hand, they also argue that the audiences and revenues of local stations are lower when they have to compete with out-of-market channels beamed in by DTH distributors. The DTH providers and the Canadian Association of Broadcasters (CAB) agreed that local markets could be financially compensated for the distribution of out-of-market signals in their territory, rather than having them deleted. But separate agreements between the CAB and the DTH distributors expired Aug. 31, 2000. In its submission, Star Choice notes that the previous agreement called for it to pay 20 cents per month for each DTH subscriber within the local market to any broadcaster that did not have its signal distributed. The DTH company further states that the CAB is now asking for $1.50 per affected broadcaster in any market where Star Choice has fewer than 25,000 subscribers and $5.00 per affected broadcaster in other markets. "It is inappropriate to seek changes to the DTH signal carriage rules at the same time that commercial arrangements are being negotiated," Star Choice contends. Canada’s other DTH provider, Bell ExpressVu LP, concurs with Star Choice that "it is imperative that the current regulatory framework continue." "Any changes that would lessen our competitive position at a time when our industry is still years distant from breaking even will materially impact our ability to compete, which in turn will have a negative impact on Canadian programmers," ExpressVu states in its submission. In an introductory letter to ExpressVu’s submission, Chris Frank, VP of programming and government affairs, urges the CRTC to encourage the affected parties to come to a reasonable settlement for the carriage of distant signals. ExpressVu states that it compensates rights holders for "out of market" distribution through the retransmission copyright tariff. As well, it financially compensates the local "affected" broadcasters and makes payments to the CAB for each DTH subscriber that receives a second set of U.S. networks. According to the DTH operator, almost 75 per cent of its payments are sent to the CAB, with 25 per cent going directly to the affected small broadcasters. "Since the independent small market broadcasters do not benefit from DTH carriage, perhaps they should receive a greater share of the former component," ExpressVu suggests. "In any case, ExpressVu is prepared to address the quantum of these payments in its negotiations with the CAB, on the basis of the impact on small independent broadcasters of reception of distant signals from DTH in their markets." The CAB counters that the broadcasting environment has changed dramatically since the DTH regulatory framework was established in 1995. The far greater than expected success of satellite TV has resulted in a much more severe impact on local television broadcasters. "…(It) now threatens their ability to continue serving their local markets and to meet their local programming commitments," the CAB notes in its submission. "All broadcasters have suffered losses in local advertising revenues due to audience fragmentation attributable to distant signals." Global Television Network executives harped on similar perils of distant signal distribution at the CAB’s annual convention last October. In Global’s submission to the commission, it noted that "while broadcasters and DTH operators attempted to negotiate fair compensation for local broadcasters due to the importation of distant signals, it is clear that the average $1.5 million in annual payments to ‘affected’ broadcasters is grossly inadequate." Global further argues that the existing formula fails to take into account "the overall impact on other broadcasters due to audience fragmentation caused by the importation of distant signals, and the resultant loss in advertising revenues." However, the DTH operators note that it has been the growth of specialty channels, not the distant signals, that has caused the most audience fragmentation. The CRTC received some 207 submissions by the Nov. 30, 2001 deadline for comments. However, citing the importance of the issue, several interveners requested the right to be able to respond to the comments of others. The commission is accepting responses to the initial interventions by Jan. 31 – Public Notice 2001-103-1.

Star Choice accuses broadcasters of using CRTC process to bolster bargaining position

Broadcast | January 18, 2002

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