CCTA calls CRTC decision on local avails frustrating, given its recent telco rulings

The head of the Canadian Cable Telecommunications Association (CCTA) says the CRTC’s decision (Broadcasting Public Notice 2005-88) earlier this month to maintain the status quo on local availabilities shows inconsistency between its rulings on the telecommunications and the broadcasting sides. CCTA president Michael Hennessy tells Canadian Communications Reports the association likely isn’t finished its fight to win approval for cablecos to advertise their bundles in local avails. "We don’t intend to be handicapped in the market in terms of the telcos. The way that competition exists between telephone companies and cable is through bundling, and you can’t have the telecom side of the CRTC rushing ahead and approving every Bell filing on an ex parte basis at lightening speed, and the broadcasting side totally ignoring the realities of the market when it comes to that. It doesn’t work," he says. "The core of our frustration is that decisions are coming out of the commission on the broadcasting and telecommunications side that seem to be totally disconnected and don’t reflect the kind of competition we are now facing in the marketplace." He adds that the CCTA will probably reapply to the regulator for the right to advertise cable Internet services in local avails, which is the air time during programming on certain U.S. channels that is normally used to promote such things as Canadian programming and cable offerings (excluding their telephony products), along with airing public service announcements. "I would never dismiss that option (going through the justice system) – we clearly think we have the right. But that is not the only option. We can go back to the CRTC (seeking the right to promote telephony products)," he notes. "I think the commission left it open for us to make a case in that particular area, and I think given what has been happening on the telecom side, and the freedom that telephone companies have been given to bundle, there’s a strong argument for reconsideration of that particular part of the decision." "In the very same week that we saw a sort of cursory dismissal of our submission (on cable being able to advertise its telephony products in local avails), the commission approved on an ex parte basis the Bell digital voice tariff after a couple of weeks, and that Bell tariff is all about bundling," Hennessy says. "It gave or is proposing to give the telephone company, Bell, more flexibility in terms of de-averaging with a turnaround of three days. We feel that what the commission seems to be missing is that they have now increased the ability of the phone companies to bundle and have restricted us in using what would probably be the best tool available to us to promote our bundles, even though it would have absolutely no effect on the broadcasting system, and in fact by promoting digital bundles would probably have a positive impact (on the digital rollout)." On the question of advertising cable telephony products on the avails, the CRTC was brief in its decision. "The commission considers that the CCTA has failed to make a compelling case under the (Broadcasting) Act to justify the use by cable (broadcasting distribution undertakings) of local availabilities…for the promotion of telephony or other non-programming services," reads the decision. "Furthermore, the commission considers that the CCTA has failed to demonstrate conclusively that a BDU’s use of local availabilities to advertise its own or affiliated non-programming services would be without competitive impact. It is the commission’s further determination that such impact would generally be difficult to redress." Commission policy requires that at least 75% of local avails, which amount to about two minutes per hour in U.S. programming, be used by Canadian broadcasters to promote their programming services or by distributors to air unpaid PSAs or advertise their community channels. A maximum of 25% of the local availabilities can be used by distributors to promote their discretionary services and packages, customer service information, channel realignments and cable FM services. In an August 2003 decision, the CRTC clarified that the condition of licence pertaining to local avails doesn’t permit distributors to mention in their local avails such services as the Internet or telephony products. It is this section of the local avails policy that the CCTA will continue to pursue because Hennessy says there is no opposition from broadcasters – only the telephone companies – on the matter. He is gearing up to provide the commission with a "compelling case." In its local avails application filed back in November 2002 (CCR Update, Nov. 28/02), the CRTC also asked to be allowed to sell advertising in local avails– a request that was strongly resisted by the Canadian Association of Broadcasters (CAB). It has been a battle the cable association has been fighting for years. The commission denied a similar request from the cablecos in the 1990s (CCR, Oct. 23/96). On September 9 of this year, the CRTC once again turned down the CCTA’s request. "While we are pleased with the decision, we are not overwhelmed by it because when you argue before the regulator to maintain the integrity of the rules and they are maintained, that’s a good thing," says CAB president and CEO Glenn O’Farrell. "But it’s not as if the broadcasting industry has won anything here. We simply forced the hand of the regulator, hopefully, to really enforce its own principles and regulatory rules as it should. It’s not as if there is a windfall for broadcasters here." The CRTC found little basis for the CCTA’s argument that it needs the additional revenue generated by the sale of ads in local avails in the face of increased legal and illegal black and grey market competition, rising wholesale rates from the U.S. channels, and additional costs associated with "expanding regulatory obligations." "From the commission’s perspective, the cable industry has benefited greatly from its ability to bundle its services, that is, to combine video, Internet and, in some cases, wireless services, into different packages. The industry also appears well positioned to ensure continued growth, and to expand its ability to bundle services, through its entry into the telephony business," reads the CRTC’s decision. "For these reasons, the commission finds little basis for the CCTA’s argument that the cable industry needs the additional revenues that would be realized were the CCTA’s proposed policy change implemented." The CRTC also ruled that there would be a negative impact – albeit very small – on the existing Canadian conventional and specialty TV stations if the proposal were approved as advertising dollars could flow from them to the cablecos. The CCTA estimated the potential revenue impact of its proposal would be between $35 million and $40 million per year, CTV between $76 million and $97 million, and the CAB between $45 million and $61 million. The commission adjusted these estimates to predict that the cost would be between $43.6 million and $52 million, which is not a lot considering that private Canadian conventional TV channels generated $1.9 billion in ad revenues, and Canadian specialty services $708 million in 2004. "We did a solid piece of analysis (on the costs) and the commission seems to have agreed with us at least notionally. They certainly didn’t challenge it on any level that was of concern," says O’Farrell. The commission acknowledges that the revenue impact would "be relatively small," but was concerned "by any negative impact that the CCTA’s proposal might have on the ability of existing programming services to meet their Canadian content obligations." The regulator also was worried that if the cable proposal were greenlighted, the expansion of advertising inventory might hamper the ability of newly launched Category 2 digital specialty TV channels to establish themselves and could even discourage some new channels from moving ahead. The regulator also pointed out that as the transition is made to a digital environment, more foreign content will become available and it will be increasingly important to maintain promotional opportunities for Canadian services and programming. As well, the CRTC stated that opening up the local avails to advertising might have a modest negative impact on the effectiveness of its recently introduced ad-based incentives for broadcasters to commission, air and promote Canadian TV drama (CCR, Dec. 6/04). Hennessy is unhappy with the CRTC on a number of other levels, including how long it took to come to its decision. "It took almost three years, and we’re seeing a lot of Bell tariffs this year being approved in a matter of weeks. That’s frustrating," he says. "It was also frustrating that the commission found that there was no evidence that the proposal would materially hurt the broadcasting system as it exists today, but expressed concern, without any evidence, that it could hurt the future." While the CRTC didn’t grant the CCTA any of what it wanted, it did tinker with the local avails policy in a way not requested. In a decision issued on the same day as the local avails ruling (Broadcasting Decision 2005-89), it regulated that 5% of the local availabilities set aside for the promotion of licensed Canadian programming services, community channels and PSAs must be made available for the promotion of the French-language private network TVA, the specialty channel Aboriginal Peoples Television Network (APTN), the Cable Public Affairs Channel (CPAC), and the audio programming service VoicePrint, operated by The National Broadcast Reading Service Inc. These services are collectively known as the 9(1)(h) services, and the CRTC requires them to be included in basic cable TV packages. Bell ExpressVu unsuccessfully tried to have TVA excluded from the policy, arguing that it would be unfair to other Quebec-based private broadcasters. "…Although the 9(1)(h) services already have access to the local availabilities, the significance of these services to the Canadian broadcasting system warrants that some specific portion of the local availabilities be dedicated exclusively to their promotion," states the CRTC decision. As well, 5% of promotional time on the cable community channel used to promote that channel or other Canadian programming services must be set aside for the 9(1)(h) services, ruled the CRTC. "Given that the commission approved a 10-cent across the board rate increase for APTN (CCR, Sept. 9/05), you would have thought that was sufficient...It’s bad enough to be turned down; it’s unfortunate when the decision has been bent to achieve some other objective the commission has in mind," says Hennessy. The CRTC also denied a request by Vidéotron ltée, which is not a member of the CCTA, to amend its conditions of licence to sell commercial advertising in 50% of the local availabilities on A&E, CNN and TLC (Broadcasting Decision 2005-460).

CCTA calls CRTC decision on local avails frustrating, given its recent telco rulings

News | 09/27/2005 4:00 am EDT

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