TV wholesale code finalized, takes effect in January

The CRTC on Thursday released a final version of its anticipated wholesale code governing the business relationships between TV-service providers and channel operators, which, among other things, bans provisions that would prevent a particular channel from being offered on a stand-alone basis or as part of a package that customers can create themselves. The rules, which take effect on Jan. 22, will also ban so-called penetration-based rate cards (PBRCs) that require service providers to compensate channel operators when certain thresholds for advertising revenue are not met. The CRTC signalled the coming of a new wholesale code in March, at the same time it announced rules that will require TV-service providers to offer customers pick-and-pay options next year for channels beyond a skinny-basic package that costs no more than $25 a month. The commission initially indicated it intended to have the new rules in effect by September. The CRTC said in an online posting that the code will be binding for licensed Canadian TV distributors and channels, while serving as a "set of guidelines" for "exempt BDUs, exempt programming undertakings and exempt digital media undertakings." It added that the wholesale code would also serve as "guidelines" for non-Canadian channels, which are authorized for distribution through Canadian sponsors rather than directly licensed. However, the CRTC said it "expects non-Canadian parties distributed in Canada to conduct their negotiations and enter into agreements with their Canadian partners in a manner that is consistent with the intent and spirit of the Wholesale Code if they wish to continue to have their programming services available in Canada." The commission added that it "is prepared to act to ensure that parties are conducting their negotiations fairly, even if it leads to a disruption in the market place." Besides banning agreement terms contrary to the principles of pick-and-pay TV, the new rules will ban: unilateral grandfathering of previous terms between parties; veto rights for broadcasters on changes to packages offered by service providers; requirements that analog tiers of service be matched in digital-TV offerings; provisions that guarantee terms at least as good as agreed to with other parties (known as "most favoured nation provisions"); and any terms that guarantee minimum penetration, revenue or subscriber levels with exceptions for independent program services. The new code has a section that deals with preventing "commercially unreasonable" practices, with much of this centred on PBRCs. These typically result in higher carriage rates for channels on a per-customer basis when the proportion of a service-providers' subscriber base receiving the channel is lower. The CRTC said such arrangements would be considered unreasonable if they can't be justified commercially, are anticompetitive, if they force distribution of a channel on the basic tier or package that isn't appropriate, or if they insulate a channel "from the effects of consumer choice." It said rate cards that make channels whole on their advertising "are an example of a PBRC that is considered unreasonable, as this type of rate card has the effect of insulating a programming service from the effects of consumer choice." Cards that make channels whole based on subscription levels might be deemed reasonable "under limited circumstances," and will be considered "on a case-by-case basis," the commission said. "This may be the case in particular for independent programming services, which have fewer opportunities to leverage other revenues through cross-subsidization of other activities, and which may also have lower advertising revenue levels and thus be more vulnerable to a decrease in subscription revenues," the CRTC said. Independent broadcast consultant Kelly Lynne Ashton said the restrictions this code brings in on rate cards are not good for smaller content providers. "During Talk TV, what struck me the most in the discussion of this during the hearing was the conversation about the penetration-based rate cards, because that's what affects the smaller independent services," she said in a phone interview. "And they were looking for greater protections from the pick-and-pay system, which they're not getting with this code." Independent broadcast lawyer Peter Miller said regulatory decisions made over the last year, including directives to bring in pick-and-pay TV with a new wholesale code, are generally negative for smaller broadcast entities. However, he said the final version of this code is not has bad as some had feared. For example, he said there were concerns the code would effectively ban all forms of penetration-based rate cards. "Now they've pulled back on that ... said they would look at them on a case-by-case basis, but in particular said that for independent program services may be an appropriate way for them to do a rate card," he said in a phone interview. The code will require that service providers offering theme packages include all available independent channels that fit into their given themes. It also will make vertically integrated providers of multi-platform programming "offer reasonable terms based on fair market value to other BDUs for their non-linear multiplatform rights at the same time as their linear rights and provide such content on a timely basis." The CRTC noted that such multi-platform provisions do not apply to programming that's shown exclusively on hybrid video-on-demand services, a new category for services offered online to all Canadians as well as through TV-service providers. Companies such as BCE Inc. and Shaw Communications Inc., which have both broadcast distribution and programming operations, indicated they would review the code in more detail before commenting. Rogers Communications Inc. spokesman Kevin Spafford said in an email that his company is also reviewing the decision, but is "pleased the wholesale code will enable more TV choice for Canadians." — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Shruti Shekar at sshekar@thewirereport.ca

TV wholesale code finalized, takes effect in January

News | 09/24/2015 9:00 pm EDT

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