Cablecos, producers fight CAB push to keep specialty channel figures private

The cable industry and television producers are fighting a drive by private broadcasters to keep specialty TV channel financial results off the public record. The Canadian Association of Broadcasters (CAB) is pressing the CRTC to release the numbers only on an aggregate basis, rather than on a channel-by-channel basis as has been done in the past. "What’s changed is the nature of competition. The CRTC relies increasingly on negotiation rather than regulation when it comes to the relationship of specialty and pay services to BDUs (broadcast distribution undertakings)," writes CAB senior VP of policy and regulatory affairs David Keeble in an email to Canadian Communications Reports. "That means we need a level playing field on detailed financial information. You can’t have fair negotiation when one side has all the details and the other side doesn’t…It’s that within each channel’s reports, the CRTC breaks down their subscriber revenue, and their advertising revenue. Those are obviously commercially sensitive numbers, and don’t just complicate negotiations with BDUs, but with program suppliers and advertisers as well." But the Canadian Cable Telecommunications Association (CCTA) argues that the numbers should continue to be released as they have been previously because the TV channels operate in a protected environment. "…Pay and specialty services are insulated from direct competitive pressures by a number of regulatory supports and safeguards. In particular, analog specialty services and Category 1 digital services benefit from genre exclusivity, which protects them from having to compete for programming rights or for subscribers/viewers inserted in that genre," writes the CCTA in its May 30 submission to the CRTC. Moreover, the access rules set out in the Broadcasting Distribution Regulations guarantee pay and specialty services carriage by all Class 1 and DTH (direct-to-home) BDUs. This means that pay and specialty undertakings do not have to compete for carriage. In addition, any service can apply to the commission to resolve a dispute with a BDU over the terms of carriage." The CCTA tells the CRTC that the rationale for treating cable operator’s financial data as confidential does not apply to pay and specialty services given the very different competitive environments in which the two types of undertakings operate. "Cable, DTH, wireless, and telecom BDUs are engaged in vigorous competition for subscribers, with at least three, and in some markets as many as five competitors operating in the same service area." Conventional TV broadcaster, radio station, and foreign TV channel financial results are not made public either. The CCTA also says that disclosure is necessary to assess wholesale rate applications. The cable industry says that distributors and consumers must have the ability to examine and comment on an application by a specialty TV channel requesting a rate increase. The CCTA says when it comments on rate increase applications, it uses the detailed financial information to study a service’s ability to generate revenue from advertising sales, to determine historic trends in revenue growth, and to compare revenue figures with expenses and, in particular, programming expenses. The CCTA also says that disclosure is necessary to assess contributions to the Canadian broadcasting system, particularly with regard to the production and exhibition of Canadian programming. "The CCTA submits that there is a real and substantial public interest in evaluating each programming service’s contributions to the system in light of its revenue (wholesale and advertising), its expenses (programming and other) and the number of subscribers that receive the service," the CCTA states. The Canadian Film and Television Production Association (CFTPA) also argues in its submission that clarity and transparency are essential to the public interest and that as publicly traded companies that have been granted the privilege of a licence to operate a programming service, broadcasters should be as open as possible. "The CFTPA…(says) that financial information on an aggregate basis is less ‘useful’ to its members than on a service-by-service basis. The CAB’s members would find it ‘useful’ to see detailed financial returns of the producers they negotiate with too, but we recognize that’s not a compelling public-interest argument," says Keeble. "Most of the CFTPA’s members benefit from Canadian content regulations, public subsidies, tax credits etc. – does that mean they should have to open up their books? I don’t think they’d agree to that." The CCTA also notes that disclosure on a station-by-station basis is necessary to verify copyright liability. The cable industry acknowledges that the administration of copyright royalties falls outside the jurisdiction of the commission, but states the CRTC should take it into account in coming to a determination about anything that could have a direct and prejudicial impact on the operation of copyright regimes. "The tariff certified by the Copyright Board uses the total revenue of the pay and specialty services as the basis for calculating the royalties to be paid to SOCAN. Although the tariff has provisions that require programming services to report this information to SOCAN and to the BDUs, there is no process by which the figures reported could be verified by the BDUs," the CCTA notes.

Cablecos, producers fight CAB push to keep specialty channel figures private

Broadcast | June 8, 2005

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