Cablecos anticipate tough negotiations with broadcasters in wake of CRTC framework decision

Last Thursday's landmark CRTC ruling on television carriage is winning praise from both large and small broadcast distributors, but the battle isn't over yet. Cable and satellite TV providers now have to sit down with disgruntled broadcasters to decide on a fair price for carrying distant television signals.One of the most contentious issues being considered as part of the BDU structural framework review was a proposal by broadcast networks - led by CTV and Global Television - to charge 50 cents per subscriber each month for over-the-air signals. It would have allowed broadcasters - for the first time - to generate revenue from signals aired in markets other than their own. But the commission rejected the proposal, saying broadcasters had failed to make their case.Pam Dinsmore, VP, regulatory affairs, Rogers Cable, described fee-for-carriage as a "very customer-unfriendly" proposal, and praised the commission for blocking it. "We were concerned about the issue and had it gone through, it would have been very expensive for our customers," she says.However, other fees could be passed onto subscribers pending the outcome of negotiations over what BDUs should pay to carry broadcasters' distant signals. Subscribers currently pay up to $5 each month to receive a time-shifting package, and as a concession to broadcasters, the CRTC says it will now allow them to negotiate with BDUs for compensation.Rogers currently carries distant signals under an agreement with the Canadian Association of Broadcasters (CAB). The new rules could mean negotiating with individual broadcasters, with the commission acting as arbitrator, says Dinsmore, adding there could well be challenges in negotiating costs."That would be a concern for us if we can't reach an agreement. It could have implications for our time-shifting packages but again, we will wait and see," she says.The decisions on fee-for-carriage and distant signals were part of a number of new regulations issued in last week's 86-page ruling (PN 2008-100) on the much-awaited policy on BDUs and discretionary programming services. The CRTC issued a call for input on a new policy more than a year ago, culminating in an April 2008 hearing in which 67 stakeholders presented their views.Small operators praise decisionThe CRTC ruling is also being applauded by the Canadian Cable Systems Alliance (CCSA) which had described fee-for-carriage as a tax that would drive BDU customers away from the regulated system."We had feared that this proceeding had been overtaken by conventional television's renewed demands for new carriage fees," Chris Edwards, the CCSA's VP regulatory, said in a statement issued Friday. "But, in the end, the CRTC grounded its decisions very solidly on first principles and the overarching objectives of the Broadcasting Act. That approach has resulted in a balanced, flexible policy framework well-suited to completion of Canada's digital transition and to the introduction of the new digital services that Canadian consumers are now demanding."The CCSA also welcomed new initiatives designed to help smaller cablecos roll-out new digital services to small town, rural and remote areas, including a regulatory exemption for systems with less than 20,000 subscribers (it had been 6000), which means more than 190 systems will no longer require a BDU licence.As well, the CRTC will allow small cablecos to distribute distant TV signals without consent, and require program suppliers to pick up the cost of transporting standard and high definition TV signals to cable headends. The CRTC will call for comments on its revised exemption order on April 1, 2009.Removing genre exclusivity for news and sportsOn the issue of packaging, the CRTC ruled that customers will now have the flexibility of choosing the kind of programming they want on their cable or satellite bundles - so long as each bundle has 51% Canadian programming. Dinsmore says Rogers welcomes the ruling on packaging, adding that the commission picked up on a lot of the suggestions her company offered during the hearing.Regarding video-on-demand commercials, the CRTC ruled that broadcasters can now insert targeted advertising in their programming, arguing that such advertising would benefit the broadcasting system by improving competition with the Internet and establishing new revenue sources.The commission rejected a proposal by Quebecor Media to boost television funding through royalties, although it did act of other proposals by the company, including removing genre exclusivity for general interest sports and news. Its subsidiary, TVA Group, is expected to apply for new network licences in the coming months.Other genres may be open to competition in the future, the CRTC notes, based on various criteria, including the economic health of existing services, the popularity of existing service, and availability of programming.As well, "Quebecor Media questions the paradox of a greater regulatory burden by the CRTC with the imposition of additional financial charges to increase to 6% from 5% the payments by distribution companies to a local programming fund that will not meet the expectations of Canadian viewers," the company stated.The increase will generate about $60 million annually for a Local Programming Improvement Fund through a new monthly fee of 50 cent/subscriber, although the CRTC said given the health of the broadcasting distribution industry and the new revenue streams provided by its new policies, it "does not expect companies to pass this cost along to their subscribers". This change will take effect in 2009.Most changes, however will not come into effect until August 31, 2011, to coincide with the transition to over-the-air digital television. Quebecor says it would have preferred to have the changes implemented sooner.Last week's decision also creates a busy regulatory agenda for the year ahead. The CRTC issued calls for comments for three separate proceeding to examine proposed licence conditions for sports and national news specialty services (2008-103: Comments due Dec. 1), regulatory framework for VOD services (2008-101: Comments due Jan. 29) and a proposed framework for the sale of commercial advertising in the local avails of non-Canadian services (2008-102: Comments due Jan. 15).Within the next two years, the commission will also launch a comprehensive review of its policies related to community channels, including whether they should have access to the Local Programming Improvement Fund.

Cablecos anticipate tough negotiations with broadcasters in wake of CRTC framework decision

Broadcast | November 3, 2008

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