‘No magic answer’ when it comes to value-for-signal, lawyer says

The CRTC’s apparent reticence to allow broadcasters to pull their signals during carriage negotiations under its proposed value-for-signal regime is a sure sign the debate over the controversial policy is far from over, experts say. “The commission has long been of the view that they don’t want consumers to lose access to a signal,” David Elder, who practices communications, competition and privacy law as counsel with Stikeman Elliott LLP, said in an interview. “The difficulty is that’s really the ultimate bargaining chip that both sides have.” In March 2010, the CRTC issued a decision that would allow broadcasters to ask distributors for compensation for carrying their over-the-air signals, but the ruling was never enforced as the commission referred the matter to the courts to ensure it had jurisdiction over the file. But while the courts deliberated, many turned their attention to the United States where a similar policy led to several high-profile cases of broadcasters pulling their signals during negotiations with distributors to the dismay of millions of viewers. In February, the Federal Court of Appeal issued a split decision giving the commission power to enforce its regime. But before any action was taken, distributors Rogers Communications Inc. and Telus Communications Co. took the case to the Supreme Court. The court is currently deliberating on whether the case will be heard but experts believe that if approved, the regime still won’t be in the clear when it comes to allowing broadcasters to pull their signals during negotiations. During the commission’s recent vertical integration hearing, distributors Rogers, FreeHD Canada and Cogeco Cable Inc. expressed concern that they were at a distinct disadvantage under the regime, and called on the commission to re-evaluate whether it was still relevant. The distributors argued that the regime was conceived at a time when broadcasters were financially ailing, but that the situation has changed considerably with recent vertical integration acquisitions. Seemingly in response, the commission issued a temporary policy direction on July 12 that said broadcasters must continue to make existing services available to distributors during negotiations. “I think what this signals is that coming out of the vertical integration hearing the commission is looking to include a provision in the regulations for television broadcasters and create an expectation that their services cannot be withheld as a form of bargaining chip,” Elder said. “The Commission is trying to tell the parties, ‘by all means negotiate, but in no case should subscribers be held hostage during negotiations.’” Elder said he expects the commission to revise the Television Broadcasting Regulations to drive this point across. But Elder noted that banning broadcasters from pulling their signals is sure to draw their ire. Without the right to withhold their signals, broadcasters must continue to offer their services to distributors during negotiations, which could ultimately lead to standstills. “If the commission takes that away, I think they may have a lot of parties coming to them with disputes they can’t resolve,” Elder said. “I’m not sure that there’s a magic answer for it ... I think it will result in more disputes.” But BCE Inc. spokeswoman Jacqueline Michelis said in an email that the current value-for-signal framework doesn’t need any amendments. Since its acquisition of CTV, Bell has come out in support of value for signal. “The CRTC already has the tools it needs to address any anti-competitive behaviour and uses them,” she said. “The value for signal model planned by the CRTC allows TV broadcasters and TV service providers to negotiate value for signal on a level playing field and Bell supports this straightforward approach to promoting access to local and national programming.” Cogeco’s vice-president of corporate affairs, Yves Mayrand, couldn’t disagree more. “The regime as crafted by the CRTC … specifically contemplates the possibility of foreclosure of signals,” he said in an interview. “There are a certain number of safeguards that the regulator must adopt.” The safeguards proposed by Cogeco include fair and reasonable terms for carrying signals from vertically-integrated groups; a standstill provision that would preclude denial of signal; and tightened and transparent timelines for dispute resolution, among other measures. During the vertical integration hearing, the CRTC asked Cogeco and other players to create an industry code of best practices that the commission intends to use as part of its framework for vertical integration. With the support of other independent distributors, Cogeco wrote that the code should say parties cannot withhold services after a formal complaint of discrimination or undue preference has been filed, or during the dispute resolution process. “We need a code of rules that’s clear for all parties… and those rules should be enforced by the regulator,” Mayrand said. “We are hopeful that the code… along with the recent announcement that there should be no foreclosure of services while programmers negotiate with distributors, will transpire in the final policy decision that the commission will issue, presumably some time in the fall.” Richard Paradis, president of consulting firm Groupe CIC and an instructor at the Université de Montréal’s communications department, said in an interview that he believes Cogeco’s proposed principles will be included in the commission’s code. “I think the commission will establish in its guidelines some mechanism to deal with value for signal,” he said. “I think the commission will not allow broadcasters to pull their signals for any length of time. They will probably say that one party can advise the commission when there’s no agreement on fee for carriage and the commission will arbitrate.” Paradis said that if the regime is approved by the court, the CRTC is likely to reinitiate a review of the policy, as many of the factors that had justified its creation have changed along with the state of vertical integration. “I think it will come back at some point although we’ve already looked at it three times,” he said. But Sheridan Scott, a partner with Bennett Jones LLP, said in an interview that she views vertical integration and value for signal as two separate issues. She said that if approved by the courts, the commission already has all the power it needs to oversee the regime. “Their arsenal is pretty wide,” she said. “In terms of being able to force parties to do things, you would have regulations that apply to distribution companies or programming undertakings and those would apply whether they are vertically integrated or not.” But Scott agreed that the commission appears not to be in favour of allowing broadcasters to pull their signals. “It’s very disruptive to consumers … there’s a predisposition at the CRTC to try to avoid that,” she said. “I think what they’ll probably do is set that out in a policy document … I think it’s going to be separate that has nothing to do with fee for carriage.” Rogers and Telus declined to comment as the court is currently evaluating their arguments against the regime. news@thewirereport.ca

‘No magic answer’ when it comes to value-for-signal, lawyer says

Broadcast | July 26, 2011

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