OTTAWA – True to its word, the CRTC was quick to release its determinations from last month’s expedited hearing into dispute resolution between the Canadian Independent Distributors Group (CIDG) and Bell Media.
As Cartt.ca has reported, independent distributors Cogeco Cable, Telus, EastLink, MTS and the Canadian Cable Systems Alliance, collectively the CIDG, object to packaging, penetration, and other terms offered to them by Bell Media for its 30-some specialty channels. Bell says that its wholesale costing model, a penetration based rate card that has already been signed by a number of other distributors, rewards stable packaging with stable long-term rates for distributors.
On Thursday, the Commission issued the following determinations for the non-monetary points of dispute between the parties, as identified by the CIDG.
Distribution and packaging
While recognizing that a balance must be struck between allowing a BDU to provide its subscribers with more choice and flexibility, at the same time as providing programmers with reasonable and predictable levels of revenue for each of their services, the Commission said that it would be unreasonable for a BDU to expect flexible packaging for a given programming service while insisting that it be provided with rates similar to those provided under a set packaging option.
“The Commission considers that, in return for the increased flexibility, the programming undertaking may reasonably request higher wholesale rates from a BDU in recognition of the fact that lower penetration, and thus lower volume, may result under a flexible packaging option”, reads the decision. “Consequently, it would be commercially unreasonable for a BDU to expect fixed unit pricing based on fixed penetration levels while enjoying the flexibility of delivering fluctuating penetration levels.”
Commercial reasonableness of pricing incentives
While agreeing that the use of pricing incentives and interest payments are common business practices, the Commission said that when an incentive or interest payment represents “a disproportionate percentage of the value of an agreement, such incentives could be viewed as punitive and considered commercially unreasonable.”
It also reminded both parties that the Vertical Integration Framework states that rates either determined by the Commission or agreed to by the parties prior to the Commission reaching a decision would be applied when the last agreement reached for the distribution of the service expires.
Non-linear programming rights
The Commission said that it considers non-linear rights as distinct from linear rights, noting that they offer a separate value proposition. It also recognized that the evolution of non-linear rights requires the development of new business models.
“The Commission expects that when non-linear rights are made available to distributors, they will be provided on commercially reasonable terms, and negotiated in compliance with the Vertical Integration Framework and the Code of Conduct”, the decision continues.
Process for final offer arbitration
The Commission said that it is preferable to allow parties to arrive at a commercially negotiated settlement, and that guided by the above determinations, “to engage in direct negotiations with each other with the purpose of reaching an agreement”.
“Should the parties fail to reach an agreement, given CIDG’s submission that a single agreement could be made binding on each of CIDG’s individual members, as well as Bell Media’s submission that its smaller-volume BDU rates would apply to every CIDG member, the Commission finds that CIDG members are entitled to negotiate and participate in FOA (final offer arbitration) as a group if they so choose.”
