Cancel $106M local TV fund, end CBC’s competitive advantage from it, large distributors say

Conventional television stations owned by public broadcaster CBC/Radio Canada should not be eligible for millions of dollars in CRTC funding intended for local stations, some of the country’s largest broadcast companies told the commission. In submissions filed with the CRTC Wednesday as a part of its consultation on the $106-million Local Programming Improvement Fund (LPIF), Bell Canada, Shaw Communications Inc. and Quebecor Media Inc. objected to the public broadcaster’s eligibility to draw on the fund. They argued the $1.1 billion in public funds the CBC receives each year from Parliament ensures its financial viability and that additional access to LPIF funds gives the Crown corporation an unfair advantage over its private-sector competitors. Last year, the CBC was the greatest benefactor of the $106-million annual fund, receiving $40 million to support many of its 28 English and French-language stations. “In consideration of the financial security provided to the CBC by the Federal Government and the CBC’s legislative mandate to provide broadcasting services that reflect regional and linguistic minorities, it is unlikely that the elimination of the CBC as an eligible LPIF recipient will result in local TV stations closures,” Bell Canada, a BCE Inc. subsidiary, said in its submission to the CRTC. The CRTC created the LPIF during the 2008 global economic recession to protect local TV stations from declining advertising revenues. Broadcast distributors are required by regulation to pay 1.5 per cent of their gross annual revenues into the fund, which is distributed to stations serving small communities across the country. BCE paid $25.1 million into the fund last year and received $23.6 million in support of many of its CTV stations. Shaw and Quebecor paid $31.8 and $13.6 million into the fund, respectively, and received $8.1 million and $6.4 million in support of their local stations. Late last year, the commission announced a consultation and public hearing in April to examine the program’s effectiveness. The deadline for written comments for the consultation passed Feb. 15. In separate submissions filed Wednesday, Shaw and Quebecor argued that the fund should be eliminated now that the height of the recession is over. “The precarious position of support offered by the by injecting funds to artificially inflate the budgets of regional television stations in difficulty is simply not sustainable in the long term,” Quebecor wrote. If the commission refuses to eliminate the fund, Quebecor and Shaw said, that the CBC should not be permitted to continue collecting from the fund. They said the CBC uses LPIF money to free up other publicly-funded appropriations and take risks that its private broadcaster competitors can’t afford to take, such as investing in new media and online content. “CBC/Radio-Canada uses LPIF contributions to essentially displace other costs, allowing it to dedicate even more of its Parliamentary appropriations and other support revenues to compete in unregulated new media spaces, a point of pride in any number of its communications vehicles,” Shaw wrote. Bell argued in favour of keeping the LPIF and agreed the CBC should not collect from the fund. Bell, which owns Canada’s largest private TV network, said the CBC’s public funding has increased at a faster rate than private station revenues and that the public broadcaster would be no worse off today without LPIF funding than it was six years ago, before the recession. “The CBC differs from private conventional broadcasters in a number of material respects, not the least of which is its financial model,” Bell wrote. “The CBC enjoys a level of financial stability that far exceeds that of private conventional broadcasters due to the large amount (in both absolute and relative terms) of funding that it receives from the Federal Government through a parliamentary appropriation.” In a phone interview Thursday, Bev Kirshenblatt, the CBC’s senior director of regulatory affairs, said the commission considered whether the Crown corporation should draw from the fund when it was first proposed in 2008. She said the CRTC decided the LPIF could contribute to the quality and quantity of local programming on CBC stations. “The fund itself is intended to maintain and enhance a diversity of voices, which includes both public and private broadcasters in the medium and small-sized markets,” she said. “The fact remains that local television business continues to be financially challenged. That’s the same for both public and private broadcasters,” Kirshenblatt said. In a submission to the CRTC, the CBC presented data it collected through focus groups, public opinion surveys, and ratings data research showing Canadians support local programming. The CBC said 94 per cent of respondents in a national survey “considered local news to be very or somewhat important to them,” and that 42 per cent said TV was their primary source of local news. Eighty-five per cent said it is very or somewhat important that they have more than one source of local TV news and 93 per cent wanted the CRTC to support local TV news productions in small communities. “Most participants considered funding the LPIF to be a small price to pay for ensuring that local television programming could continue in their community,” the CBC wrote. CBC proposed that the commission maintain the LPIF but modify its funding formula to reward stations that increase the quality or quantity of their local content. “This objective would make it clear to all concerned that the LPIF is not intended solely as a stabilisation mechanism but rather aims to improve both the quantity and quality of local programming,” CBC said. CBC added that LPIF money has allowed it to increase the amount of local programming carried on 12 recipient French-language stations by 15 per cent and by 30 per cent for eight English-language stations. Rogers Communications Inc. and Telus Communications Co. also filed submissions arguing the commission should cancel the LPIF program. “hile the economy as a whole, including the media sector, faces a variety of challenges, there can be no doubt ... that the financial crisis that prompted the creation of the LPIF has passed,” Rogers wrote. Rogers, which paid $24 million into the fund last year and received $1 million for its CHMI station in Portage La Prairie, said ownership consolidation and vertical integration have reshaped the industry and that many small stations can rely on parent companies to stay afloat. Rogers said the fund is “unfair” to urban Canadians who, since the program was implemented, have paid for the LPIF through increases to their cable and satellite TV bills. The company said the fund is unfair to ethnic minorities because third-language channels are not eligible to draw on it. “Over the past two years, Canadians have indirectly or directly supported the production of local programming by over $200 million,” Rogers wrote. “Rogers believes that most Canadians who are contributing to the LPIF, including Canadians who watch local television in third-languages, receive little or no benefit from it.” If the commission is reluctant to cancel the program immediately, Rogers said, it should phase out the program over three years. The commission could reduce the percentage of revenues the broadcast distributors contribute each year to 1 per cent this year, 0.75 per cent next year, and 0.5 per cent the year after, Rogers said. Telus said the commission should eliminate the program immediately. If not, the company said, stations owned by vertically integrated broadcasters should no longer qualify to draw on the fund. “CTV, Global, TVA and CityTV stations are now part of the largest media companies in Canada,” Telus said. “They do not need subsidies to support their programming.” Asked via email whether Telus favours continued LPIF funding for CBC stations, Ann Mainville-Neeson, the company’s director of broadcast regulations, said Telus takes issue with the vertically integrated, private broadcasters. “We do not consider CBC vertically integrated but we also consider that CBC is in a different situation than the independent private broadcasters because it already receives public funding,” Mainville-Neeson wrote. “We consider that the LPIF should be abolished but if it remains, it must absolutely not pay-out to vertically integrated broadcasters. The rest is shades of grey.” With files from Danika J. Grenier nkyonka@thewirereport.ca

Cancel $106M local TV fund, end CBC’s competitive advantage from it, large distributors say

News | 02/17/2012 2:29 pm EST

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