Bell, Rogers and Shaw tell CRTC what’s needed to save local broadcasters

Three of Canada’s largest broadcast distributors are attempting to stave off any further moves by the CRTC to hike cable and satellite TV bills as a way to subsidize money-losing local television stations. Instead, the companies are using the OTA licence renewal proceeding (2009-113) to pitch other ways in which local broadcasters can boost revenues and cut costs. The CRTC received a staggering 9360 interventions to its review, which is considering short-term licence renewals for several over-the-air broadcasters, including Canwest Television Ltd. Partnership, CTV Ltd., Group TVA Inc. and Rogers Broadcasting Ltd. A public hearing is scheduled to begin April 27 in Gatineau QC. The main issue will be what the CRTC can do from a regulatory perspective to ease the financial crunch for broadcasters, at least on a short-term basis. This may include amending or eliminating some conditions of licence, short-term licence renewals, a 1% or higher levy on BDUs to pay for a new Local Programming Improvement Fund (LPIF) and moving up the date for implementing a new distant signal regime. BDUs say they’re worried that some of these concessions will mean less money and more obligations for them. “All corporations, not only over-the-air broadcasters, are facing economic challenges at this time,” writes Jean Brazeau, senior VP, regulatory affairs at Shaw Communications Inc. in the company’s March 30 intervention. “It should not be taken for granted by the regulator that companies or sectors which appear financially strong can thus be made responsible to cross subsidize weaker ones.” If the CRTC wants to take that approach, Brazeau says it should make broadcasters divert funds from their highly profitable specialty channels to offset losses on the OTA side. “BDUs and their customers should not be forced to prop up OTAs for their past business indiscretions, including over-spending on foreign programming and a mismanaged acquisition strategy that included non-broadcasting and non-Canadian properties.” Rogers Communications Inc. is equally blunt in its criticism, saying Canwest Media’s $4-billion in debt stems from its “rash acquisition strategy”, adding that both Canwest and CTVglobemedia Inc. have participated in “reckless bidding wars” for popular US programs, at the expense of funding local programming. Rogers also reminds the commission that CTVglobemedia and Canwest Media operate many of the most profitable discretionary services. Financials released by the CRTC March 26 showed that total revenues for pay and specialty channels grew by 7.6% to $2.9 billion in 2008, thanks largely to $1.9 billion in subscriber fees from BDUs. More than 65% of the discretionary services sector's total annual revenue came from monthly carriage fees, and a large proportion of these revenues are earned by the same companies that own the OTA broadcasters. “These same ownership groups are asking the Commission to require significant financial support from the BDU sector to sustain their OTA revenues, yet are resisting the Commission’s decision to review their consolidated broadcasting holdings in the 2010 public hearing... by examining the resources of the OTA sector at the same time as it examines the pay and specialty services, the Commission may conclude that no additional direct financial assistant to the large OTA broadcasters is required,” writes Bell Video Group, which represents Bell Canada and Bell Aliant Regional Communications, Limited Partnership. BCE also owns CTV as well as CTVglobemedia, which owns 32 specialty and pay TV channels, including The Sports Network, The Comedy Channel and Discovery Channel Canada. Bell Video says it generally supports the broadcasters’ request for regulatory relief, at least until advertising revenues rebound. But it continues to oppose any moves that take money away from BDUs. It notes that Bell TV is still in the red financially, even after 10 years in operation and with over 1.8 million subscribers. Instead, it recommends other ways broadcasters can make money or reduce their costs, including: using new BDU online platforms to attract viewers and advertising dollars, and to reduce cost of developing their own platforms expanding the reach of local TV signals via satellite, using part-time channels. “Few have taken Bell up on this offer,” it writes. Temporarily reducing broadcasters’ reliance on independent productions from 75% to 50% Partnering with Bell TV to offer signals unencrypted on its DTH system, as an alternative to digital OTA broadcasting (the “Freesat” model) Eliminating Part II licence fees For its part, Shaw says the commission should eliminate advertising restrictions, reduce programming and carriage obligations and work with the federal government to eliminate Part II licence fees. It has also proposed what it describes as an affordable “virtual broadcast” solution, whereby viewers could access a new programming tier comprised only of local TV stations that have ceased to transmit over-the-air. “Outdated rules are part of the problem” Lower advertising revenues aren’t the only issue driving down broadcaster revenues. Shaw says the CRTC must take some of the blame for being “unwilling to examine the extent to which its outdated rules are part of the problem.” Imposing more regulations and taxation just exacerbates the problems, Shaw’s Brazeau contends. For example, Shaw and many other BDUs are strongly opposed to the introduction of the LPIF and suggestions by the regulator that may increase this new levy above 1%. “Now is not the time for a new tax imposed on ten million Canadian households to bail out a few broadcasters ... the LPIF is one more flawed subsidy system,” writes Shaw. Rogers appears to agree, describing the LPIF as tantamount to a fee-for-carriage regime. “It will be a simple cross subsidy from BDUs to local broadcasters, supposedly to allow them to maintain the status quo, but with so little accountability on how these monies will be spent, that in fact it will be a virtually condition-free money transfer,” writes Ken Engelhart, Rogers’ senior VP, regulatory. However, if the LPIF does go ahead, Rogers says it must be used to support an increase in local programming. Engelhart says the company is willing to accept a formula that allows the funds to go to maintaining existing levels of programming, but only for one-to-two years. Rogers also wants the allocation formula changed so that mid-sized market stations in Hamilton, Barrie and Victoria are disqualified from accessing the fund, since these stations compete with ones serving Toronto and Vancouver which cannot access the fund. Likewise, MTS Allstream opposes any attempts by broadcasters to transform the LPIF into a primary source of funding for local programming in small markets, saying the CRTC should maintain the requirement that funds be used for incremental improvements to local programming. Several BDUs also opposed the governance of the LPIF. The Canadian Association of Broadcasters has recommended a five-member board, with three of those members selected by the CAB. In its intervention, the Canadian Cable Systems Alliance says that since broadcasters will be the main beneficiaries of this fund, it would be more appropriate for the board to be made up of companies that contribute to the fund, as opposed to its recipients. MTS Allstream contends that at a minimum, BDUs should have equal representation on the board.

Bell, Rogers and Shaw tell CRTC what’s needed to save local broadcasters

Broadcast | April 6, 2009

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