Telcos entering broadcast distribution market call for more flexibility in basic packages

Telephone companies getting into the television distribution business are asking for greater flexibility in the composition of their basic packages. Telcos could be one of the first to benefit if the CRTC establishes different rules for basic packages for all-digital cable systems since they are currently rolling out fully digital distribution services. Born in the analog environment, cableco rivals tend to offer digital options in conjunction with analog tiers. In comments filed February 14 in the CRTC process to establish rules on the distribution of specialty services in the basic packages of fully digital cable undertakings (Broadcasting Public Notice 2002-48), both Telus Corp. and SaskTel ask for the same flexibility accorded their satellite TV competitors. SaskTel, which rolled out its digital TV service in several communities in Saskatchewan last fall (CCR, Sept. 26/02), is asking for "regulatory parity" with fully digital distributors, and "increasing reliance on market forces" when deciding what channels must be included in the basic package. Even though its system is 100% digital, SaskTel is subject to more extensive carriage requirements than the all-digital, direct-to-home (DTH) satellite TV distributors because it is licensed as a Class 1 broadcast distribution undertaking. Telus Communications Inc.’s proposed TV service will also be all-digital (CCR, Sept. 26/02). "In the case of the digital basic service, SaskTel is requesting the same flexibility already accorded DTH distributors, as well as a model that limits mandated obligations for all digital undertakings, to the greatest extent possible," Candice Molnar, SaskTel’s general manager of regulatory affairs, writes in the telco’s submission. "SaskTel believes that regulatory flexibility will allow distributors to offer attractive basic service packages to consumers ‘customized according to their interests and preferences’ at reasonable rates. Failure to do so will result in quick retaliation from the marketplace." Willie Grieve, VP of public policy and regulatory affairs at Telus, contends that digital technologies allow distributors to offer packaging and viewing options not possible in an analog environment. "In this new (digital) environment, distribution undertakings need to be able to develop basic service packages that they feel will differentiate their services relative to that of their competitors and that will be most attractive to their target markets," he writes in Telus’ submission. Furthermore, he argues that greater flexibility in creating digital basic packages will create a greater incentive for cable operators to migrate to an all-digital system. Telus argues that "the establishment of a different set of basic service rules for digital distribution would be positive for distribution undertakings, as it would not only encourage competition, but would encourage service and delivery innovation as distribution undertakings explore different delivery and feature options made possible by digital technologies (e.g. à la carte programming, smaller thematic packages of discretionary services, interactive services, choice of basic packages, etc.)." The CRTC granted DTH satellite TV distributors more flexible carriage requirements than cable to allow them to be more competitive against the incumbents. The commission requires DTH operators to distribute all pay and specialty services, but it does not require that they distribute any specialty channel as part of the basic service. The Canadian Cable Television Association (CCTA), however, argues that cable companies are also in immediate need of must-carry flexibility. CCTA president and CEO Janet Yale argues that Bell ExpressVu LP and Star Choice Communications Inc. can no longer be considered new entrants, and cablecos need adaptability in creating basic packages to remain competitive (CCR, Aug. 29/02). Not surprisingly, broadcasters seeking continued protection for specialty channels on basic in digital are resisting the cable industry’s push for a more market-driven environment. The Canadian Association of Broadcasters (CAB) contends that the CRTC must ensure that any new rules for digital carriage continue to support the current objective of balancing the interests of programmers, distributors and consumers with respect to the availability, packaging and pricing of specialty services. The CAB warns that a fully market-driven approach could result in the disappearance of some specialty channels and the absence of new services. "For the consumer, either scenario represents reduced choices at a higher cost," the CAB writes in its submission. "Removing essential safeguards, particularly the dual status and modified dual status designations, and implementing a full ‘pick and pay’ universe would seriously undermine Canadian specialty services. Specifically, it would erode their ability to continue to make an extensive and positive contribution to all aspects of the Canadian broadcasting system." The CAB tells the CRTC that "at this point in the transition to a fully digital cable environment, there is no urgency to develop new rules for the distribution of specialty services by fully digital cable undertakings." The maintenance of existing rules is essential to ensure a successful transition to a fully digital environment, the CAB argues. Second-round comments in this process are due March 15.

Telcos entering broadcast distribution market call for more flexibility in basic packages

Broadcast | February 28, 2003

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