The Canadian Association of Broadcasters (CAB) is strongly urging the CRTC to reject a proposal by the cable industry to sell commercial advertising in Canada on U.S. specialty TV services, such as CNN and A&E. The CAB tells the CRTC that approving the proposal would grant cablecos a new revenue stream from the sale of commercial advertising on U.S. channels, which is a serious departure from its original commitment to only use these local avails to promote Canadian TV broadcasting services. The Canadian Cable Telecommunications Association (CCTA) is proposing being allowed to air two minutes an hour in advertising, while Vidéotron is requesting to be able to use 50% of the local avails. The CCTA has attempted to sweeten its proposal before the CRTC by pledging to contribute 25% of the revenues it makes from the advertising to the Canadian Television Fund (CTF) (CCR, May 23/03). Below is an excerpt from the CAB’s October 7 submission to the CRTC. An economic impact analysis prepared by Communications Management Inc. and included with this submission estimates that the CCTA proposal, if approved, would take $60 to $70 million out of the Canadian advertising marketplace. While this impact would be felt across all sectors of the broadcasting industry, including radio, the primary impact would be on conventional television stations and Canadian specialty services. Approval of the CCTA proposal would result in the transfer of advertising dollars away from local television stations, thereby reducing their ability to do local programming. Television stations serving smaller markets would be particularly vulnerable due to their more fragile economics. Any reduction in local programming would not be offset in any way by the CCTA’s promise to contribute 25% of the local avails advertising revenues to the Canadian Television Fund, since this would do nothing to address the creation of local content. The proposal would also impact on Canadian specialty services. In 2003, for example, if a $60 million impact had been taken from comparable Canadian analog specialty services, their total spending on Canadian content would have been reduced by $25.5 million, since on average they spent 42.5% of their revenues on Canadian programming in 2003. At the same time, only 25%, or $15 million of the total $60 million impact would have gone to the CTF under the CCTA’s proposal. In other words, to the extent that local avails revenues are taken from Canadian specialty services, for every dollar added to the CTF there could be a loss of $1.70 of spending on Canadian content. These potential consequences, as significant as they are, represent only the "thin edge of the wedge" with respect to the ultimate impact of these local avails proposals on the Canadian broadcasting system. Approval would give the cable industry an immediate advantage – the ability to allow national advertisers to target selected metropolitan markets, an option that is not available to Canadian specialty services. Given cable’s goal of increasing the number of U.S. channels carried on cable, and as consumer uptake of digital cable becomes more prevalent, the corresponding negative impact will also increase. Cable would get a head start in building an alternative competitive advertising platform, including the sale of commercials in local avails, the multiplexing of commercials, and the combining of ad sales with the message-extension capabilities of PVRs (personal video recorders). …The CCTA has provided no justification for the new revenue stream that it proposes to create for the cable industry. Contrary to the CCTA’s arguments that competition in distribution is eroding profit margins, every key measure of cable financial performance as published by the CRTC shows increasing profitability for the cable industry since 2001. …At a minimum, if the commission is not prepared to deny both proposals on the basis of the written submissions, the CAB submits that the commission should convene an oral public hearing so that all interested parties have an opportunity to further consider the profound negative impact that approval of these proposals would have on the Canadian broadcasting system.