Rogers offers wiggle room on fee for carriage debate

Rogers Communications Inc. says it will fight a carriage fee for conventional over-the-air broadcast signals all the way to the Supreme Court of Canada if necessary, but during the premier intervention at the CRTC's BDU and specialty review the cableco also revealed one fee-for-carriage scenario it would accept. Ken Engelhart, Rogers' senior VP of regulatory, said Rogers would work in a system where conventional broadcasters can choose either mandatory carriage with no fee (as is currently the case) or negotiate terms of carriage and fees - but with no carriage guarantees if negotiations break down. It's likely not a scenario the commission will advocate because of the potential for standoffs between broadcasters and BDUs, but to some extent it is a concession. And as regulatory hearings tend to feature opposing sides arguing from opposite poles, Rogers appeared to take a few steps towards the equator. Rogers' vice-chair Phil Lind kicked off the three-week hearing process in front of the six commissioners and a standing-room only crowd. "Everyone in this room would probably agree that we need a strong, healthy, viable Canadian broadcasting system," said Lind. "To ensure we have one, it is important to understand the changes that are affecting the television industry, everywhere in the world. The most important trend is that the consumer is in charge....We need to improve the Canadian broadcasting system so that viewers prefer it to any of the available alternatives." Make no mistake, Rogers does not consider fee for carriage a responsive measure. "Here we have an industry where one of its divisions is not doing well and they want to go to another industry to prop it up," said Engelhart. "I can't think of another country in the world that would listen to this argument." Since the CRTC reintroduced the carriage fees issue less than a year after denying it, the commission is obviously listening closely. At times CRTC chair Konrad von Finckenstein seemed to hint at where the commission may be leaning on the issue. "I don't understand how you expect the broadcasters to continue to live up to their expectations in the Broadcasting Act while one of their main sources of revenue continues to fragment and walk away," he said, later adding, "Surely you don't expect us to approve fee for carriage with no strings attached; what's driving this is local programming." While the chair clarified that "just because I pose questions, don't assume I'm making any conclusions," it is apparent that should a carriage fee be mandated, it would have strong ties to the provision of local programming. Rogers, however, says there are other ways than carriage fees to deal with fragmenting audiences. "Introducing more money simply adds fuel to the fire and will increase spending on US shows," said Real Merson, president of Rogers Broadcasting. As owner of the CityTV network, Rogers is now uniquely positioned as a BDU and national OTA broadcaster, and from that standpoint Merson said he's surprised other approaches weren't considered before fee for carriage. Using National Hockey League parlance, Merson said if the rapid increase in spending on US programming is so problematic for the broadcasting industry, the CRTC could either limit the amount of spending on US shows (i.e. a salary cap), or tie spending on US programs directly to spending on local programming (i.e. a luxury tax). But, he added, Rogers believes the market will sort itself out. Rogers' response to a fragmenting audience is to give choice back to consumers through video-on-demand (VOD) options and flexible channel packaging, and increasing competition by eliminating genre protection for Canadian services. In Rogers' opinion, there should only be five broad genre categories: news, sports, general interest, music, and drama. There would be level Canadian content limits and program expenditures across each category and broadcasters would be able to change their genre on the fly to target new audiences. And, said Rogers, these changes aren't just to benefit BDUs. There are new revenue opportunities for broadcasters and distributors through advertising on VOD platforms, advertising during local availabilities, and through dynamic, targeted advertising that can send different ads to different regions to maximize effectiveness and increase premiums. CBC on same page as Rogers on some issues Exactly what type of middle ground, if any, exists between the broadcasters and BDUs was put to the test when the second intervener, CBC, appeared before the commission. Somewhat surprisingly, the public broadcaster took Rogers' ‘consumer choice' mantra one step further by advocating a channel packaging model that is even more flexible than what Rogers suggested. CBC recommended a basic tier of only 10 to 12 channels for under $15 before customers can pick and choose what other services they want. "Our view is the more channels in the basic service, the more you limit choice," said Richard Stursberg, CBC's executive VP of English services. "If you reduce basic, lower the price, then over and above that you can pick the services you want." The caveat to CBC's suggestion is that customers be limited to one foreign service for each two Canadian services they order. Rogers wants a preponderance rule where BDUs simply have to offer more Canadian than foreign services. But Stursberg added that even CBC's specialty channels would be subject to the same market forces. "If there were no takers for our services than we would find ourselves in that bind," he said. However, CBC did not agree with Rogers on fee for carriage. Stursberg said carriage fees could be issued two levels: the first to compensate broadcasters for their anticipated loss of ad revenue, and the second to increase spending on local programming. "The fee is to maintain the existing levels of Cancon," Stursberg told the commissioners. "If the fee is over and above what we are losing on ad revenue, than we'll add more Cancon. Whatever ask you for by the way of a fee, it has to be tied to Canadian programming commitments." Stursberg also rebutted Rogers' comment that it would pass any mandated carriage fee directly on to its customers by saying the BDU has increased its basic cable rate by almost 50% since 2002 and added no extra services.

Rogers offers wiggle room on fee for carriage debate

Broadcast | April 9, 2008

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