Broadcasters’ fortunes will improve; carriage “tax” unnecessary: Rogers

Rogers Communications Inc. took its battle against fee-for-carriage to Parliament Hill yesterday, hoping this time to convince legislators that carriage fees are effectively a consumer tax that will prove unnecessary once the current advertising crisis is over. Rogers executives were the first industry representatives to appear before House of Commons Heritage Committee as part of its review of the financial crisis affecting broadcasters, particularly local TV stations. The broadcast industry insists that the conventional over-the-air system is broken, and that introducing a monthly fee for carriage for their signals is the only solution. Rogers vice chair Phil Lind described their claim a “self-serving fiction”, stressing that far from being unprofitable, OTA broadcasters have pocketed significant profits over the years. “Last year alone, CTV’s combined over-the-air and specialty TV operating profit was about $200 million. Global wasn’t that far behind, at $164 million. So what’s the problem?,” he asked. Fee-for-carriage, he said, is a “cash grab” and not a solution to the crisis facing the broadcast industry. “It is one of the most insidious schemes to come around in a long time,” said Lind, describing fee-for-carriage as a tax on consumers. Signalling out CTV and Global, Lind claimed both broadcasters have no justification for threatening to shut down stations because their financial conditions are in ruin due to unwise economic decisions on their part. “Over-the-air broadcasters spent 25% more in Hollywood in the last three years alone, while their other costs grew at about 2% per year,” he said. Lind described the broadcast industry as a “cyclical industry” and suggested that with time, its fortunes will improve. Unswayed by Lind’s statement, some MPs pressed on with questions about the impact of a fee-for-carriage. Liberal MP Ruby Dhalla, following up on evidence given by Rogers that conventional broadcasters were wasting money on expensive bidding wars for U.S. programming, wanted to know what effect a fee-for-carriage stipulation would have on the industry, on ethnic communities, and rural areas. Lind replied that fee-for-carriage simply means consumers will have to pay more, which will trigger a consumer backlash, adding he doesn’t see the new fees bringing any particular benefit for rural areas and ethnic communities. Some MPs appeared sceptical about Rogers’ position on fee-for-carriage. Conservative MP Dean Del Maestro asked why Rogers was threatening to pass the cost onto consumers when broadcasters have indicated that it is vital to saving the industry. Ken Engelhart, VP, regulatory and privacy affairs, said their company’s money is needed to offset the cost—about $700 million—of upgrading networks. NDP MP and heritage critic, Charlie Angus, also appeared unconvinced about Rogers’ claim of a customer revolt if BDUs increased their rates. He pointed out that Rogers recently increased its rates in some localities and there was no customer revolt. Engelhart defended the increase by saying Rogers added new channels. One Liberal MP attempted to broaden the debate by looking to the US for a possible solution. Scott Simms asked whether the industry can borrow anything from the U.S model for fee-for-carriage which, in some instances, allows broadcasters to negotiate rates with BDUs. Lind agreed the model is a good one for the US, but doubted whether it would work in Canada unless broadcasters were willing to forgo mandatory carriage of their signals. The U.S fee-for-carriage model is garnering support among some broadcasters. Following Lind's comments on the issue, CTVglobemedia issued a statement saying its pleased with Rogers' comments, adding that the model could represent a "significant" step in solving the problems facing conventional television in Canada. Executives with Quebecor, which owns both broadcasting and cable properties, insisted that fee-for-carriage will save the industry which Pierre Karl Péladeau, president and CEO, described as dying and in need of a life-saver. Roger’s Engelhart said if broadcasters want a solution, there needs to be a “recalibration” of OTA in the near future, which could include measures to classify drama under specialty channels, which continue to be profitable. Carole Lavallée, Bloc Quebecois heritage critic, said one solution would be to establish a separate CRTC to deal with Quebec’s unique situation, which she said is exemplified by the fact that 90% of programming in the province is locally produced. But executives from Rogers and Quebecor rejected the idea, arguing that an additional regulatory body would be cumbersome to the industry. The committee meets again on tomorrow April 22 to hear evidence from CTVglobemedia, Canwest Media Inc., Shaw Communications Inc., Cogeco Cable, and CHCH-TV.

Broadcasters’ fortunes will improve; carriage “tax” unnecessary: Rogers

Broadcast | April 21, 2009

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