GATINEAU – The biggest stir on the third day of the CRTC’s Let’s Talk TV policy hearing centered on the possible inclusion of revenue earned from broadcasters’ online activities when calculating Canadian programming expenditures (CPE) Bell Canada arguing that it’s illogical, odd and added insult to injury.
“Working document item 10 concerns us greatly,” said Mirko Bibic, Bell’s executive VP and chief legal and regulatory officer, adding that the proposal on the table “would treat Canadian licensees in that space differently than the Netflixes of the world.”
That bit of the CRTC’s discussion document says: “The definition of broadcasting revenues for licensees would be revised to include revenues from programming offered online or on other exempt platforms. Broadcasters would be allowed to count towards Canadian programming expenditures (CPE) their expenditures on original online only programming.”
As we have reported previously, Bell is building an over the top (OTT) SVOD service that, while similar to the shomi service recently announced by Rogers Communications and Shaw Communications, would be tied to a BDU subscription. One of the key elements in Bell’s counter-proposals is that there is a level playing field for all players. And if CPE were to be attached to a broadcaster’s online activities, then it would be disadvantaged against Netflix and other foreign OTT services.
“They could be online revenues which are tied to a linear subscription, they could be unauthenticated over the top revenues. In either case, under this proposal those revenues would be come with a CPE obligation. Netflix’s revenues would not. And that‘s not a level playing field,” said Bibic.
Wade Oosterman, president of Bell Mobility and residential services and chief brand officer, provided an analogy to explain the conundrum around CPE and online activities. Using the remote control for the PlayStation 4 to watch Netflix doesn’t attract CPE, but the one on the right connected to the set top box will.
“That just seems odd,” he said.
The line of questioning was undertaken by commissioner Candace Molnar, who acknowledged that Bell’s OTT service would be tied to a BDU subscription, noting that brings advantages, too.
I think it’s adding insult to injury a bit for us to say and if you do a Netflix [type of service], it’s going to be subject to the old rules.” – Kevin Crull, Bell Media
Kevin Crull, president of Bell Media, noted that there has to be a balance between the obligations and the benefits from this type of service. “What we said was putting the genie back in the bottle and probably putting obligations Netflix and other OTT providers to the linear world isn’t feasible. I think it’s adding insult to injury a bit for us to say and if you do a Netflix [type of service], it’s going to be subject to the old rules,” he said.
It’s unclear, according to Bell, what types of online activities would have CPE obligations attached to them.
“Are all our TV Everywhere applications captured? Would a new service tied to a linear subscription be captured? Would shomi be captured?“ Bibic asked. “The only difference between showmi and what Kevin is talking about is one is tied to a linear subscription and shomi is not. But that would be our strategy to actually compete directly and head on with Netflix. That’s why we’re struggling with it. It is our competitive response to Netflix.”
The Canadian Media Production Association (CMPA) also addressed the role of OTT providers in the Canadian system on Wednesday. It suggested that since requiring them to pay into the system is now out of bounds (thanks to Heritage Minister Shelley Glover), the Commission might want to bring back the tangible benefits policy on BDU acquisitions as a way to deal with the flow of money to players outside of the regulated system.
“If the Commission re-applied its benefits policy to BDUs, the end result could be hundreds of millions of incremental dollars to the CMF and independent funds to help achieve one of the CRTC’s over-arching objectives for this proceeding,” said Michael Hennessy, president of the CMPA.
“Regulations that ensure a channel is merely available to consumers without ensuring it is marketed, priced and packaged effectively will do nothing to ensure fair dealing or access for Canadian viewers." – Raja Khanna, Blue Ant
The Commission panel also delved into Bell’s proposal on wholesale affiliation agreements and turning local OTA stations into local specialty channels. The company is suggesting an approach that would give independent programmers and small broadcast distributors (those with fewer than 500,000 subscribers, or Eastlink and smaller) assurances that they wouldn’t suffer discrimination at the hands of larger players. In addition to the linkage rule, it suggests the dispute resolution process and maintaining the standstill provision should help the smaller companies. Its proposals, however, call for the elimination of the standstill when it comes to negotiations between larger companies (meaning big companies can withhold or remove TV channels from companies with which they do not have an affiliation agreement).
“The standstill is important so that a large BDU doesn’t exert leverage during a negotiation with a smaller programmer. The inverse for the smaller BDU,” explained Bibic (pictured with BNN's Paul Bagnell after B
ell's 5-hour-long appearance). If the Commission were to adopt Bell’s conversion of local conventional stations to local specialties, those would remain subject to the standstill.
Independent broadcaster Blue Ant Media argued in its appearance there are a number of Commission proposals creating a perfect storm that could “further disadvantage independent programmers.” The lack of clear rules overseeing affiliation agreements is one factor that was highlighted by Raja Khanna, Blue Ant’s CEO of television and digital, in his opening remarks.
“Regulations that ensure a channel is merely available to consumers without ensuring it is marketed, priced and packaged effectively will do nothing to ensure fair dealing or access for Canadian viewers,” he said. Expanding the vertical integration code and giving it force of regulation, as has been proposed by the CRTC, is supported by Blue Ant.
The Let’s Talk TV policy hearing continues on Thursday with big names such as Rogers Communications, Shaw Communications, Cogeco and the CCSA, getting their turn under the lights.
Follow the hearing live on cpac.ca, crtc.gc.ca or on Twitter via @gregobr and @CarttCa
