GATINEAU – The non-vertically integrated cablecos, Cogeco and members of the Canadian Cable Systems Alliance (CCSA) entered the Let’s Talk TV policy hearing discussion fray on Thursday with both arguing the Commission must ensure they can acquire programming rights at reasonable costs without onerous terms.
Keith Stevens, chair of the board at CCSA member Execulink Telecom, noted during the CCSA’s opening remarks that the recent affiliation agreement with Bell Media is a prime example of the harm small cable TV providers face when dealing with VI providers. Under this deal, Execulink was required to maintain packaging requirements as they were before the contract was made, with little chance at making things more flexible for customers.
The only way to change packaging of the services is to agree to “highly punitive rates,” he said. If Execulink wants to alter channel packaging under the deal “we can face rates up to 23 times higher than what we pay now. At the penetrations I can realistically achieve, the rates are unaffordable to me and my customers,” he said.
Louise St-Pierre, president and CEO of Cogeco Cable, speaking in French, echoed the sentiment.
“Unless you see to it that these terms are no longer allowed by television programming service suppliers, whether Canadian or non-Canadian, the much heralded new era of greater choice and flexibility will simply not happen for the most popular television services available on cable or satellite,” she said.
Switching topics to volume-based rates, which has long been another sore point for smaller carriers, those are nothing new acknowledged Jennifer Salmon, VP of contracts at the CCSA. But under questioning, she used the term “outrageous” to describe the differences demanded from her members and those from the larger carriers.
“So, a lot of our customers are being stolen by Bell, or won over by Shaw, and if our rates are 92% higher for the exact same service, it's going to be hard to compete with them on a retail price for our consumer." – Jennifer Salmon, CCSA
“When our margins are getting squeezed and we are being faced with competition from over the top, we need to be on a level playing field with those who are competing,” she said in response to a question from commissioner Candice Molnar. “So, a lot of our customers are being stolen by Bell, or won over by Shaw, and if our rates are 92% higher for the exact same service, it's going to be hard to compete with them on a retail price for our consumer.”
The CCSA also agreed that “more than make whole” rate cards (those which require compensation to the broadcaster for potential lost ad revenue, if penetration slips) shouldn’t be allowed and even questioned the merit of the “make whole” in the first place.
Salmon added the VI code should be enforceable. “We currently have the VI code with three players that are obligated to live by the rules… and we’ve received an agreement from Rogers that has tied selling, that has minimum penetrations, and that has more than ‘make whole’ programming costs,” she said, adding the rate demanded is $2 more than make whole.
This looked to surprise Molnar who responded, “Oh. Perhaps Mr. [Ken] Engelhart didn't know that when he was speaking.” The more than make whole element of some penetration based rate cards was denounced by the Rogers EVP during the company's appearance before the commission earlier on Thursday.
“Oh. Perhaps Mr. Engelhart didn't know that when he was speaking.” – Commissioner Candice Molnar
CCSA members (who came to the hearing with its full board of directors, showing how important this hearing is to them) are in full support of the Commission’s objective of increasing choice and flexibility for consumers, but Dave Baxter, president and CEO of Westman Communications, says this isn’t possible unless the CRTC addresses the commercial arrangements issue.
“We offer at Westman about 60 stand-alone signals now. Those are the only ones we're allowed to carry (in that fashion),” he said. “There's a lot more, especially some very desirable ones that we'd like to, but due to penetration based rate cards and minimum penetration requirements and all those things … it’s impossible.”
Jean-Pierre Caveen, VP of affiliate, partner and carrier relations at Cogeco, added during his company’s earlier appearance that with the exception of Shaw Media, which is willing to allow its programming services to be sold either a la carte or in build your packages, the others – Bell, Rogers and even independent programmers – are not.
“They don’t want our customer to be able to build their own package,” he said in French, “and they certainly don’t want their service to be available a la carte.”
Asked if the wholesale affiliation agreements are having a negative impact on competition, Louis Audet, president and CEO of Cogeco Cable, responded that it’s less about competition and more about being able to provide more flexibility to customers.
Based on experience, if customers don’t get what they want, they will go look for it elsewhere, he said.
Yves Dupras, the Quebec commissioner, wondered if sharing revenue between the distributor and the programmer would the help the situation for the non-VI companies.
Audet said he didn’t have answer to that, but underscored the problem facing the industry by saying that the Canadian broadcasting industry is so concentrated in the hands a few large players that in Cogeco’s case 40% of its affiliation fees go to its largest competitor.
The hearing continues Monday with two very interesting U.S. interveners appearing, The Walt Disney Company and Rentrak, along with Canadian companies like MTS, Pelmorex, the Independent Broadcast Group and others.
Follow the hearing live on cpac.ca, crtc.gc.ca or on Twitter via @gregobr and @CarttCa
