Fee for carriage doesn’t have to mean money, but failing to negotiate could means loss of US networks

BDUs across Canada will have to pony up $102 million over the next year towards local programming, but whether or not they pay a monetary “fee” for carriage of broadcast signals will be decided by the parties involved, not the regulator, says CRTC chair Konrad von Finckenstein. However, the commission is waving a stick at BDUs to negotiate in good faith, warning they could lose access to the major US networks if they fail to reach an agreement. The CRTC announced on Monday that BDUs will be required to divert 1.5% of their gross broadcast revenues for the 2009-10 broadcast year to the new Local Programming Improvement Fund, increased from a previous proposal of 1%. The commission is also squeezing in a September hearing to develop a new regulatory framework for conventional TV broadcasters that will decide the subsequent rate for the LPIF, as well as the mechanism for implementing a fee for carriage of local signals, group-based licensing and group-based Canadian programming expenditure requirements. And while BDUs are unhappy with the 1.5% local programming fee, von Finckenstein says it could have been worse: “The House of Commons (Heritage Committee) wanted us to go 2.5%. The conventional broadcasters would have loved it but we refused to do that,” he told Tech Media Reports. Both the LPIF fee and the fee for carriage concession have raised the ire of cable and satellite distributors. Bell Canada issued a statement saying it is “extremely disappointed” with decisions that “will see millions of dollars flow from consumers to broadcasting corporations.” The company said it will begin collecting the LPIF fees on its Bell TV bills beginning in September. Rogers Communications Inc. said consumers “should be very worried about major new consumer TV taxes that could cost Canadians an additional $50-$100 per year”, or about $0.90 cents per month, depending on their cable package. Similarly, MTS Allstream said these decisions “will reduce investment in infrastructure, hinder innovation and reduce consumer choice.” However, it’s still unclear how much BDUs will actually pay for the right to carry local broadcast signals. Broadcasters have suggested it could generate up to $300 million. Von Finckenstein says the CRTC has decided that local signals do have value, but did not go so far as to determine what that value is. “(The CRTC doesn’t) buy into the idea of fee for carriage. We just buy into the idea that there’s a value to the signal and let the market decide what it is... It’s up for them to decide what the remuneration is, whether it’s money or other incentives. They’re perfectly free to strike the deal and make what ever arrangements they want. I think they have to learn to stop coming to us for relief and to solve their problems.” BDUs will undoubtedly argue that they’re not as free to negotiate as the CRTC suggests. At issue is one question in the consultation notice for the September hearing, which states:“Should the carriage of the U.S. 4+1 signals (CBS, NBC, ABC, FOX and the non-commercial PBS network) be contingent on the successful negotiation of fair market value of Canadian signals?” Von Finckenstein says it comes down to protecting Canada’s broadcast rights regime. Canadian broadcasters pay for the Canadian rights to US shows, which are then made available in Canada by US networks via BDUs. Simultaneous substitution – which requires BDUs to insert Canadian commercials in US shows – helps but domestic broadcasters are beholden to following a US schedule. “If we said to negotiate there’s a possibility that BDUs will say, ‘well fine we won’t negotiate at all... we’ll just carry (the US shows) on NBC or ABC so Canadians will have access to them, thereby taking away any market leverage. So as one of the issues we posed for this hearing in September, is what should be the precondition that you have an agreement before you can transmit or redistribute American signals. It’s one of the issues I’m sure will be hotly debated in September.” Canwest Global Communications Corp, CTVGlobemedia, CBC and other broadcasters have been quick to praise the CRTC, partly for the LPIF contribution, but more importantly for the right to negotiate fee for carriage of their local signals. It’s been a long battle that dates back to the commission’s 1995 convergence hearings, when broadcasters fought to have cable operators pay a monthly wholesale fees, as they do for specialty services.

Fee for carriage doesn’t have to mean money, but failing to negotiate could means loss of US networks

Broadcast | July 8, 2009

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