Cogeco, CCTA, CCSA file for leave to appeal CRTC decision granting change of carriage

Canada’s cable industry hopes to challenge a CRTC decision that changed the carriage status of three specialty channels on the grounds that the regulator overstepped its jurisdiction and didn’t follow proper procedure. On August 25, Cogeco Cable Inc. and the Canadian Cable Telecommunications Association (CCTA) sought leave from the Federal Court of Appeal to appeal a CRTC decision that altered the carriage status of The Sports Network Inc. (TSN), Le Réseau des sports (RDS) and Country Music Television Ltd. (CMT) to "modified dual status" from "dual status" (CCR Update, Aug. 5/04). The Canadian Cable Systems Alliance (CCSA) is also appealing the decision. The change in status means that the three specialty channels can demand to be distributed on a discretionary tier at a negotiated wholesale price, which normally tends to be higher than the wholesale rate on basic. Under dual status, the services are carried on basic at the CRTC-regulated wholesale rate, unless the distributor and programmer mutually agree to distribute them on an add-on tier. Cogeco and the CCTA are also seeking to appeal the overlapping Broadcasting Public Notice 2004-56, which changes the distribution and linkage requirements of Class 1 and Class 2 cablecos in keeping with the changed carriage status of the three specialty networks. Ultimately, Cogeco and the CCTA are seeking an order declaring that the decision and the public notice "are individually and collectively null." The cablecos tell the Federal Court of Appeal that they intend to argue that in making the decision and issuing the public notice that the CRTC erred in law and exceeded its jurisdiction by amending the distribution and linkage rules without first publishing the proposed changes in the Canada Gazette, contrary to subsection 10(3) of the Broadcasting Act. They also argue that the regulator erred in law and exceeded its jurisdiction because any attempt to regulate or supervise Class 1 cable licensees must be in accordance with broadcasting policy set out in subparagraphs 3(1)(t)(ii) and 3(1)(t)(iii) and paragraphs 5(2)(e) and 5(2)(g) of the Broadcasting Act. They also state that the commission erred in law and exceeded its jurisdiction by failing either to hold a public hearing to inquire into and hear the significant broadcasting policy issues raised by the decision and public notice or to demonstrate why a public hearing was not in the public interest as required under subsection 18(2) of the Broadcasting Act. The cablecos also point out that the CRTC changed the carriage status of the three channels, despite its unequivocal prior statement in 1998 that it planned to review the carriage status of specialty programming services as a group rather than on a piecemeal basis. In issuing Public Notice 1998-123, the CRTC at that time declined to change the carriage status of TSN. The cablecos also note that when Parliament granted the CRTC, as a federal delegate, the jurisdiction to make regulations, Parliament imposed a clear condition precedent before such regulations could be effective. Under subsection 10(3), all proposed regulations must be published in the Canada Gazette, and a reasonable opportunity must be given to licensees and other interested persons to make representations to the commission. "The CRTC as a federal delegate cannot avoid limits on its jurisdiction by merely adopting a regulation containing distribution and linkage requirements that can be amended merely by public notice and not by proper amendment to the Broadcasting Distribution Regulations," reads the submission seeking leave to appeal. Further, the cable industry argues that changing the carriage status will increase the cost of programming and removes services for Canadian cable consumer currently receiving one or more of the channels as part of their basic cable service. The result, they argue, is clearly inconsistent with the Broadcasting Act. "The result also ignores the administrative burden, which as a consequence of the CRTC’s decision and order is imposed on the Class 1 licensees, contrary to paragraph 5(2)(g) of the Broadcasting Act," reads the leave to appeal motion. "The likelihood of repeated requests for the CRTC’s assistance to settle fee disputes, the channel disruptions which will result from changing channel positions from basic to tier, changes to packaging and prices and changes to subscriber billing across potentially hundreds of thousands of consumers of many cable systems across Canada are further administrative burdens," the submission states. "…It is difficult to reconcile how mandatory carriage, coupled with a service’s ability to avoid prescribed wholesale rates and extract higher fees selectively from Class 1 cable licensees, contributes to the affordability of programming costs and subsequent subscriber rates or provides for fair commercial negotiation and reasonable terms of carriage." Broadcasters against appeal In response, TSN, RDS and CMT stated on September 24 that they don’t believe an appeal stands any chance of succeeding. The three channels argue that the decision and public notice "are entirely consistent with the commission’s statutory mandate, including the policy of fostering a competitive market for the distribution of specialty services while taking into consideration the affordability of rates. By virtue of the decision, TSN, RDS and CMT join 97% of specialty services which are already approved for carriage on either a modified dual or discretionary basis. Moreover, this court has consistently rejected attempts, like the present applications, to have the court substitute its own judgment for that of the commission, the agency empowered by Parliament to administer the Act, as to how the Act’s objectives are best implemented." On September 27, Cogeco and the CCTA responded, stating that the three channels "incorrectly submit that only a small residual percentage of services retain ‘dual status’ and that this status is an anachronism." The cablecos argued that since its inception in 1993, the "dual status" and "modified dual status" regime has applied only to a subset of the so-called analog services and has never applied to digital-only services, and that the analog services subject to "dual status" or "modified dual status" garner the majority of subscriptions, revenue and audience of the whole specialty universe. "The true measure of the change is that of the 49 analog services, 12 were ‘dual status’, 32 were ‘modified dual status’ and five were discretionary only pursuant to Broadcasting Notice 2003-42. These numbers changed respectively to nine, 35 and five pursuant to Public Notice 2004-56 with respondents’ status change," retort the cablecos.

Cogeco, CCTA, CCSA file for leave to appeal CRTC decision granting change of carriage

News | 10/22/2004 4:00 am EDT

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