CRTC would give big cablecos a “free ride” by exempting their small system subsidiaries: Telus

Not all small cablecos deserve to be treated equally. That’s the conclusion of both Telus Corp. and the Canadian Film and Television Production Association (CFTPA) which are urging the CRTC to not create a loophole that would allow Canada’s largest cable operators to bypass production fund contributions if they own small cable systems. “TELUS considers that this consideration of an expanded exemption order for small distribution undertakings presents the perfect opportunity to modify the exemption in order to ensure that the large cable companies which operate exempt undertakings don’t escape paying their fair share of contribution. It is time that the Commission put an end to this free ride for the highly profitable big cable companies and restored competitive equity between broadcasting distribution undertakings,” Telus’ director for broadcast regulation, wireless broadband and content policy, Ann Mainville-Neeson, writes in response to a CRTC proposal to exempt small BDUs serving less than 20,000 subscribers. The current rules exempt BDUs serving 2,000 to 6,000 subscribers from the same licence fee requirements and Cancon contributions that their large counterparts pay. But Mainville-Neeson points out that 70% of exempt BDUs, mostly serving in rural areas, are owned by Canada’s five large cablecos. Under Telus’ proposal, if 50% of an exempt BDU is held by a large cableco, then the gross revenues of the exempt BDU should be included together with those of its parent company. With estimated annual revenues of $400 million, Mainville-Neeson argues that exempt BDUs are highly profitable and suggests that their large owners are using them to bypass their full contribution to the broadcasting system. “It is inappropriate that these large and highly profitable cable companies do not pay a contribution on the full complement of their subscriber base,” states Mainville-Neeson. An expanded exemption order will cost the industry $1.2 million in Part I licence fees, according to the CRTC. But Telus suggests this cost should be footed by the large cablecos, whose contributions should be “on the same footing as their competitors.” The new rules would come into effect in the 2010-2011 fiscal year. Telus insists the current system is unfair because it allows large BDUs to immediately increase their subscriber base with no added regulatory obligations simply by purchasing an exempt BDU. The same can’t be said for large competitors such as Telus TV, which face high costs in attracting new customers in small markets yet still have to contribute to Canadian programming. Telus adds that large cablecos that grow through acquiring smaller BDUs can also leverage this higher number of subscribers in negotiating affiliation agreements with content partners. “It is not appropriate to allow large cable companies to financially benefit from a lesser regulatory burden. There are simply no grounds for continuing to allow the largest, most profitable undertakings to escape from the requirement to contribute to the system on the same footing as their competitors,” Telus writes. Telus’ concerns are echoed by the CFTPA, which agrees that the largest cablecos be required to include revenues from their small systems when calculating their total contribution payments to Canadian production funds. “The CFTPA accordingly regards TELUS’s proposal as furthering the goal of streamlining the licensing regime for small BDUs, while at the same time repatriating contribution payments that can and should be directed to supporting the CTF (Canadian Television Fund) and other independent production funds,” writes Norm Bolen, president and CEO. As expected, Telus’ comments differ from those of the large BDUs which all support the CRTC’s call for a new exemption order. In their responses, Rogers Cable Communications Inc., MTSallstream, and Shaw Communications Inc. focused primarily on technical issues, such as the criteria for determining eligibility for exemption, annual return reporting mechanisms, and community programming. MTSallstream, while agreeing with the CRTC for an exemption order, stresses that exempt BDUs should not be compelled to provide community programming.

CRTC would give big cablecos a “free ride” by exempting their small system subsidiaries: Telus

Broadcast | May 20, 2009

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