Small cablecos and broadcasters disagree on how best to move to digital

Small cable distributors and broadcasters continue to be at loggerheads over whether analog specialty channels can be distributed in digital without permission from the licensee. In a CRTC process examining the digital migration of small cable (PN 2001-58), the cable industry is demanding more flexibility in the rollout. Small cablecos argue they don’t have enough subscribers to generate revenue for costly upgrades and are facing increased competition from direct-to-home satellite. The Canadian Cable Television Association (CCTA), representing more than 350 small cable systems serving 800,000 subscribers, wants the CRTC to allow small cable to migrate existing channels to digital, launch previously uncarried analog channels directly in digital, and duplicate services already in analog in digital – all without the prior consent of broadcasters. While agreeing that small cablecos need some form of help, the Canadian Association of Broadcasters (CAB), representing pay and specialty channel owners, argues that "programmers must have the ability to control their signals both from a copyright perspective and to ensure that they are able to continue to fulfill their licensing obligations and service to viewers". The broadcasters also worry that if they grant small cablecos the right to air signals in digital without consent, then larger cablecos could use "most favoured nations" clauses found in affiliation agreements to trigger similar rules for them. The CAB wants a more controlled process for the conversion to digital, one that would result in foreign services being moved to digital before Canadian channels. Alyson Townsend, the general counsel and COO for the Canadian Cable Systems Alliance (CCSA), representing about 390 cable systems serving 960,000 subscribers, is perplexed with why the broadcasters fear they’ll lose control of their signal. "The broadcasters have control. We can’t lift the signals for digital distribution without their consent," she told CCR. "They have to flick a switch in the broadcast center before we can get them." She adds that small cablecos are often denied access to channels or are required to place them in certain packages before consent is given. In its reply comments, the CAB accuses the cable industry of underestimating the impact of its proposals. Small cablecos represent about 12 per cent of Canadian cable subscribers, or 1 million customers. "The severe financial impact that such a move (to digital) would have on an individual programming service should not be underestimated," if small cablecos could unilaterally migrate a channel from high-penetration analog to low-penetration digital, say the broadcasters. The CCSA is asking for much the same as the CCTA, and more. Because small cable systems are generally not interconnected and don’t have access to signals over fibre, they must rely on satellite relay distribution undertakings to receive the digital signals, the CCSA writes in its submission. This means that small cablecos have to pay 10 cents to 12 cents per signal per subscriber in monthly transport costs, a minimum of $100,000 for Motorola equipment and services to deploy Headend in the Sky (HITS), and 37 cents per digital subscriber each month for the use of a national authorization system that accompanies HITS. "In the absence of reliable low-cost alternatives to HITS, conversion to digital is simply unaffordable for virtually all independent CCSA Class 2 and 3 members," writes the CCSA. As a result, it suggests that small cable systems be allowed to distribute the new Category 1 and 2 digital channels in analog, since digital is along way off for them. The CCSA is also calling on the CRTC to encourage the development of a cost-effective means to get digital signals to headends, to ensure transponder lineups minimize the requirement for access to multiple transponders, and to require programmers to absorb the cost of transporting their programming in digital to the headends. The Fédération des coopératives de câblodistribution du Québec (FCCQ), representing 54 small cablesystems in Quebec, is requesting a six-month free preview period of channels because their members don’t have adequate budgets to effectively market new services over the short term. The CAB cautions, however, that six months is too long for broadcasters to go without payment. Rather, the association says the CRTC’s deregulation of Class 3s (PN 2001-59) should provide some of the flexibility being sought. The CCSA disagrees. "The total savings in licence fees of a Class 3 cableco with 1,550 subscribers amounts to less than $8,000 annually, while the upfront capital costs of converting to digital are over $100,000. That figure does not include ongoing wholesale rates, or transport and box authorization fees." Due to the wording of PN 2001-58, a dispute also re-emerged over the definition of what constitutes a small cable system. In its notice, the CRTC referred to small cable operators as those not affiliated with the four largest cable companies – Rogers Communications Inc, Shaw Communications Inc, Vidéotron ltée and Cogeco Cable Inc. Not surprisingly, the CCTA and CCSA agreed with this definition. The CAB, however, noted that the commission’s preliminary definition "was inconsistent with the general consensus reached by the working group on digital migration (CCR, March 14/01).

Small cablecos and broadcasters disagree on how best to move to digital

Broadcast | August 2, 2001

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