Broadcasters, industry associations have chosen sides on consolidation. What about the regulator?

Does the CRTC need tougher regulations to safeguard smaller players and new entrants or would a more laissez-faire approach help consolidating broadcasters better deal with an increasingly global media world with the likes of giants Time Warner? Not surprisingly, industry players are advocating for both sides of the spectrum.And while the CRTC has been pushing on many fronts for market forces to play a bigger role in broadcasting, it has also shown it isn't afraid to enforce rules. The broadcast regulator recently didn't allow CTVglobemedia Inc. to acquire the six Citytv stations formerly owned by Chum Ltd., because of the "twin sticks" policy prohibiting a broadcaster from owning more than one over-the-air TV station in a market. The decision could result in media giant Rogers Communications Inc. eventually morphing into a third national private network to compete with CTV and CanWest Global. The commission is also expected to give CanWest an equally tough ride when it considers this November the Winnipeg-based broadcaster's $2.3-billion purchase of Alliance Atlantic Communications due to Canadian ownership concerns; U.S. investment bank Goldman Sachs Group Inc. is footing most of the bill for CanWest. In contrast, the Standard Radio Inc.-Astral Media and Rogers-Citytv mergers appear to be heading toward the CRTC greenlight - with perhaps a few tweaks to the benefits package - mainly because they don't violate any current regulatory policies.The CRTC clearly has a role to play in broadcast acquisitions, but just what rules it should enforce are being heavily debated prior to the "Diversity of Voices" public hearing that begins today and is expected to last at least a week. All the players - from broadcasters, big and small, to distributors to the guilds/unions to independent producers - will be appearing before the commission, but their regulatory wish lists are as diverse as their size.The larger broadcasters, such as CTVglobemedia, Quebecor Inc. and Rogers, along with their industry organization, the Canadian Association of Broadcasters (CAB), are advocating for less regulation. CTVglobemedia calls on the CRTC to "embrace the move to a world of lighter, more flexible regulation." The way to meet current challenges, such as audience fragmentation, is through consolidation so that Canadian broadcasters are large enough to battle international conglomerates in the traditional and non-traditional media universes, argues CTVglobemedia.A rapidly changing communications environment "requires strong Canadian companies with the critical mass to compete in the new global order; rebalanced regulation; and, above all, a focus on programming with broad appeal that tells distinctly Canadian stories," writes CTV senior VP of corporate affairs Paul Sparkes to the CRTC.Despite the consolidation, the explosion of new platforms and the growth of specialty TV, satellite radio, the Internet and radio stations has resulted in an "unprecedented quantity and diversity of voices" available in Canada, adds CTVglobemedia.The media giant also points to the radio industry, where the CRTC's multiple licence ownership policy allows a company to own as many as four radio stations per language in a given market. This change has allowed for more diversity in, for example, the Ottawa-Gatineau market, where Rogers, CHUM/CTVglobemedia and Astral are all multiple owners of a diverse number of radio formats, states CTVglobemedia. Diversity has increased, argues the broadcaster, because savvy owners recognize that niche markets are increasingly important.In CTVglobemedia's view, the CRTC's role is best served by ensuring Canadian stories are available to viewers - something that can be done by regulating the entry of foreign broadcasters into Canada, retaining priority carriage rules for local services, requiring distributors to carry a preponderance of Canadian signals, and providing broadcaster incentives for the creation of high-quality Canadian programming.Rogers tells the commission the recent consolidations are nothing new - just the most recent wave and probably not the last. It says larger media companies are needed because they can use their critical operational synergies and economies to amortize program production and acquisition costs over a larger audience base and develop marketing initiatives across a wide variety of media platforms.Like CTVglobemedia, Rogers says despite the media mergers, "the diversity of voices in Canadian society has never been greater than it is today." Look, it notes, at new specialty TV entrants like Stornoway Communications, Maple Leaf Sports and Entertainment, Ethnic Channels Group and Channel Zero, the measurable increase in the number of news channels and the availability now of a plethora of third-language TV channels. Rogers too wants less regulation, particularly the elimination of the benefits test and the five-to-one carriage rule. Quebecor concurs that Canadian media companies need to be large to survive as media borders fall and international players employ cross-platform strategies.That's what the big guys are saying, but the voices of the many smaller players are singing a different tune. Pelmorex Communications Inc., which owns The Weather Network and its French-language cousin MétéoMédia, not only wants media ownership limits for over-the-air stations retained, but also extended to specialty TV. It wants an ownership cap for specialty TV for each official language market and limits on the number of specialty TV channels an over-the-air broadcaster can own. Otherwise, Pelmorex contends, a single broadcaster can exert so much control over the advertising market that it would harm other broadcasters.Charts filed with Pelmorex's CRTC submission reveal that 86.6% of specialty TV revenues go to channels affiliated with over-the-air broadcasters, while only 4.1% is to non-affiliated English-language broadcasters and 9.1% to non-affiliated French-language broadcasters."The current regulatory measures have not been sufficient to ensure that a balance exists in the broadcasting system that prevents the largest broadcasting entities from dominating the smaller ones and thereby reducing the voices available to Canadians," argues Pelmorex. "Today, it is virtually impossible for a new player to successfully enter the regulated broadcasting environment."The Association of Canadian Advertisers (ACA) also asks the commission to extend ownership limits to the specialty TV sector."In general, competition among broadcast alternatives always helps to moderate advertising prices, which in turn serves to restrain consumer prices," says ACA vice-president of policy and research Bob Reaume.Pelmorex is also concerned that only a few companies control access to distribution channels, and thus wants "firm regulatory measures" to safeguard the distribution gateway and assurances of priority access for Canadian channels.The Canadian Cable Systems Alliance (CCSA), which represents smaller cablecos, also finds itself at odds with Rogers. It complains that increased consolidation increases the likelihood, for example, of "tied selling" practices, or a distributor being forced to include a broadcaster's less attractive specialty TV channels in exchange for the right to carry a more popular one. The commission, warns CCSA vice-president of corporate and regulatory affairs Christopher Edwards, must be "prepared to restrain such practices" and have the necessary tools in place to prevent them.The Directors' Guild of Canada (DGC) and other unions once again argue that regulatory intervention is required to ensure that 10-point Canadian drama gets produced and broadcast. The existence of Canadian TV drama cannot be reliant solely on the benefits packages that accompany mergers, according to the DGC. It still though wants benefits package requirements reinstated for purchases of distribution companies."Just as an individual should not build a retirement plan by expecting to inherit money from rich relatives, the Canadian production industry needs to be able to plan rather than rely ‘on the generosity' of broadcasters," DGC president Alan Goluboff writes to the CRTC. Stephen Waddell, national executive director of ACTRA, tells Canadian Communications Reports he's also concerned that further consolidation could result in a duopoly or monopoly. "There should be no single voice in these big media centers," he said, praising the CRTC's decision to veto CTV's attempt to gain control of the Citytv stations in violation of the "twin sticks" policy.Waddell also argues the CRTC has a role to play in ensuring benefits packages "flow not just to shareholders of business companies, but also to the production community."The Canadian Film and Television Production Association (CFTPA) notes recent consolidations have resulted in fewer broadcast groups to which independent producers can sell programming or "one less door for producers to knock on."CFTPA president and CEO Guy Mayson says, "The CRTC definitely has a role to play in ensuring benefits package meet the objectives of the Broadcasting Act," and also in helping ensure a vibrant independent production section in the country.The CFTPA is "not opposed to consolidation in the broadcasting sector, within limits, and provided sufficient safeguards are put in place to mitigate concerns about gate-keeping, undue preference, or other anti-competitive practices potentially associated with increases in vertical and horizontal integration."However, the producers' organization notes the commission needs to pay more attention to the impact common ownership has on independent production. The organization wants the CRTC to force large broadcast groups to enter into terms of trade agreements with it, on behalf of independent producers. All broadcast stakeholders see some sort of role for the CRTC to play in ensuring Canadian voices remain on the small screen. However, they don't agree on what is the best way to go about it.

Broadcasters, industry associations have chosen sides on consolidation. What about the regulator?

Broadcast | September 17, 2007

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