Free tier of local TV stations a good idea, but not at expense of paying for signals, broadcasters warn

Opposition is mounting to a proposal by FreeHD Canada Inc. to be exempted from contributing to a local programming fund and paying broadcasters a fee for their signals – in return for Canadians receiving a free basic tier of local channels. Bev Kirshenblatt, CBC senior director, regulatory affairs, said if FreeHD is relieved of Local Programming Improvement Fund (LPIF) contributions, which currently amount to 1.5% of each BDU’s gross revenues, it would negate the CRTC’s policy of supporting local programming and open the floodgates to similar requests from other BDUs seeking competitive equality. “This would not be in the best interests of the Canadian broadcasting system,” wrote Kirshenblatt in a submission to the CRTC. FreeHD applied for a licence to operate a new national satellite television service in August. A key aspect of the application is a promise to offer a “free local program package” to customers who buy FreeHD’s reception equipment and pay a one-time set up and connection fee. The free HD service has also been touted as a solution to ensuring broad consumer access to the 100 or so over-the-air signals that will convert to digital by Aug. 31, 2011. The cost of distributing OTA signals in HD format is estimated at $40 million per year, or about $40,000 for each signal. To offset this cost, FreeHD says it needs to be relieved—for at least five years—of contributions to the LPIF. As well, if the CRTC approves a signal compensation regime, FreeHD wants to be exempted from paying broadcasters for their signals. But in submissions to the CRTC, lawyers for the big name broadcasters and BDUs called FreeHD’s request unjustified. Regarding exemption from compensating broadcasters for their signals, Kirshenblatt said new BDUs should not be treated any differently from incumbents. “If FreeHD or any other BDU is marketing and selling its service to Canadians by offering them the value of conventional broadcasters’ programming, then as they are required to compensate specialty service providers, so should they be required to compensate conventional broadcasters,” she said. Jon Medline, vice-president, regulatory affairs, Canwest Television Limited Partnership, said while the rationale for relief is understandable, Canwest objects to any call for exemption from LPIF contributions and signal compensation. “It is easy, but dangerous, to allow exceptions for new companies, but potential fall-out from such exceptions is always unknown,” Medline warned, adding that since the LPIF regime is only three months old and the CRTC is still assessing its viability, any exemption would be ill-advised. “In the absence of any other support mechanisms, on principle we could simply not support exceptions from a rule that applies, and should apply, to all licensed BDUs regardless of their stage of development,” he said. Similarly, Medline said even though four Canwest stations will be carried on the proposed “free” package offered by FreeHD, this does not negate the need to negotiate for a fair value for signals. Echoing the CBC and Canwest, CTVglobemedia Inc. also opposed the request for a reprieve from LPIF contributions and negotiations for signal compensation. On signal compensation, Kevin Goldstein, VP, regulatory affairs, said a regime would enhance broadcasters’ programming rights and create distribution of high quality and diverse programming choices for consumers. “In CTVgm’s view, if a BDU wants to carry our local signals, it’s because those signals have value,” he said. In addition to opposing the concessions sought by FreeHD, lawyers for Rogers Cable Communications Inc., Bell, Telus, and Shaw, also raised individual concerns about some aspects of the application. Others called for similar concessions should the CRTC approve FreeHD’s request. “In this respect, we oppose FreeHD’s proposal for relief from such payments, unless the same relief is granted to all BDUs,” wrote Pamela Dinsmore, VP, regulatory affairs, Rogers, who also objected to FreeHD’s basic package plans, which she said were incompatible with CRTC distribution rules. In addition, Dinsmore said the list of OTA stations to be carried on HD is incomplete. Paul Armstrong, director, regulatory affairs, Bell, said FreeHD’s call for subsidies is unwarranted, pointing out that Bell never asked for help when it launched its DTH service in 1997. The company has incurred $2 billion in losses, but Armstrong says it has managed to stay afloat by relying on adjustments within the limits of its licence conditions. He said the same approach should apply to FreeHD. In its application, FreeHD requested permission for the temporary use of a foreign satellite. The CRTC has referred the request to Industry Canada. But Armstrong said the request is contrary to section 7 of the Telecommunications Act. “Bell TV submits however, that there is no crisis or emergency in Canadian broadcasting that would require bypassing the existing Canadian policy,” noted Armstrong.

Free tier of local TV stations a good idea, but not at expense of paying for signals, broadcasters warn

Broadcast | December 17, 2009

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