OTTAWA-GATINEAU – The idea that Canada’s signal distributors should pay conventional broadcasters fees to carry their signals is “trash” according to Rogers Communications CEO Ted Rogers.
Speaking to reporters Wednesday following his company’s appearance before the CRTC on day three of its over-the-air TV review hearings, Rogers countered the many broadcaster arguments in favour of such charges, known as fee-for-carriage (FFC), made over the hearing’s first two days. He said broadcasters should look to new technologies – not new regulations – for new revenues. “These guys should get back to high def and keep up with the new stuff.”
Rogers and his team concentrated heavily on video on demand, for example, and Canadian broadcasters’ reluctance to offer more content for the VOD platform. Rogers Cable VP and GM David Purdy said he would like to see the advertising rules around VOD liberalized to enable dynamic ad insertion (where old VOD content can have new commercials inserted), but that would require the co-operation of the broadcasters, which has not yet happened.
"There’s an opportunity there for cable company and broadcaster to work together to provide a richer experience for advertisers – one they would be willing to pay a premium for," said Purdy. But, he said, broadcasters seem not to want to experiment – and even that Global Television walked away from negotiations between it, CBS Paramount and Rogers over Survivor On Demand, which Rogers ended up completing a deal with CBS on its own.
On Tuesday, Quebecor president Pierre Karl Péladeau told the Commission consumers would balk if more fees were added. Instead, he suggested existing fees could be shared among all the telecasters. Rogers called that idea “bullshit” because cable, satellite and other carriers have already negotiated fees intended for specialties.
But Quebecor’s position reflects the fact that it owns distributor Videotron along with broadcasters TVA and Toronto’s SUN TV, among other properties. Corus Entertainment, which owns many specialties and three small market OTAs, rejected FFC on Tuesday. President John Cassaday also predicted a consumer backlash. But the major conventional broadcasters argued that FFC for OTA signals should be separate from specialty channel fees. Some suggested BDUs might absorb all or part of the fee, while others hoped if BDUs passed on a new charge to consumers, it would not be marked up.
But in his presentation, Rogers was unequivocal: “We will pass through any fee to our customers. And we will identify the fee as a separate line item on their monthly bill.”
He said private broadcasters should not claim they need new FFC revenue to remain financially “viable” because their profit margins averaged “a respectable 11% in 2005, in line with the six years average.” Profitability varies from year to year but, he argued, that has more to do with picking “the right U.S. shows” than with not receiving subscription revenues. Finally, with CTV owner Bell Globemedia recently committing $1.7 billion to buy CHUM, he argues this sector must be healthy.
While broadcasters also say a new money stream could allow them to invest more in Canadian programming, Rogers said “fee-for-carriage could significantly reduce the amount of money in the system, and thereby reduce expenditures on Canadian content….In fact, CanWest has proposed fewer local programming requirements, no Canadian expenditure requirements and no requirement to build digital over-the-air transmitters.
“But even if the Commission requires some or all of the new tax to be spent on Canadian programming, research shows that any incremental benefit would be more than offset by the fact that some viewers will drop discretionary services” or stop subscribing to regulated distributors altogether. He said even CanWest’s own Pollara research shows 8% of its respondents said they’d cancel cable or satellite service if they had to pay for OTA stations.
Studies cited by some broadcasters earlier this week argued that when consumers were informed they don’t currently pay for OTA programs, they were more willing to pay a fee. But Rogers said research from The Strategic Counsel, involving 1,000 BDU subscribers polled Nov. 16-19, indicates 81% opposed paying about $5 for channels they currently receive for free. It adds that two-thirds remain opposed even if some of the fee were to help cover costs of providing channels in HD. Rogers’ research also showed that a new fee would push 20% of subscribers to cancel their cable or satellite service, and another 37% to downgrade.
Numerous other BDUs agreed FFC might cost them subscribers. Eight independent specialties, including Fairchild Television, APTN, Vision TV, ichannel and TV5 all worried that subscribers would cancel subscriptions and move to alternate suppliers, such as the grey and black markets, which they say represent “significant competition.”
The Canadian Cable Systems Alliance, which is primarily a buying group that negotiates affiliation agreements with channels, named a common theme in its presentation: “It is fundamentally inequitable to charge BDU subscribers for conventional television services so long as those services are made available to other Canadians free over-the-air.” Chris Edwards, the alliance’s VP, corporate and regulatory, says job one for the very small systems CCSA represents is to “compete with attractive U.S. services” and to improve quality, not cost, by adding Canadian HD programming.
Telco TV, led by Telus, argued that the CRTC does not even have the right under law to impose such fees on anyone. "Those arguments are based in large part on the Commission’s previous clear legal determination on the matter (in 1993)," said Michael Hennessy vice-president, wireless, broadband and content policy for Telus. "We find nothing in the legal opinion the broadcasters have tabled in this proceeding which would alter our views in this regard; in fact, we can counter each and every one of the legal arguments they have offered in support of their case.
The idea that broadcasters can’t afford to build digital OTA transmitters frustrated Rogers, but also formed the focus of High Fidelity HDTV’s presentation. As partner Ken Murphy told the commission, the no-can-build attitude represents a “collective failure of imagination and leadership…(and) the predictable outcome of an unhealthy consolidation of ownership, combined with a powerful sense of entitlement.” He says there’s been plenty of time to plan to convert to digital and costs continue to fall.
Rogers, meantime, reckons FFC would reduce revenue in the system by a half billion dollars a year. Asked by reporters if FFC would be appropriate for any broadcaster, Rogers says it might be helpful for CBC, “if the government doesn’t give them more money.”
The issue of compensation for distant signals has been a popular topic all week. BDUs do pay for them at a rate negotiated by the Canadian Association of Broadcasters, but broadcasters say they should earn more. Ivan Fecan, CEO of CTV, told the regulator distant signals “should be treated as a free market, business issue. We are asking for the right to withdraw our distant signals, if we are unable to negotiate fair compensation with the BDUs.”
“We’re talking about working with the broadcasters,” countered Rogers on Wednesday. “They’re talking about withdrawal before we’ve even sat down. (Losing time shifting of signals) would hurt them more than us….If they really don’t want distant signals, we’ll stop doing it. People will just go to PVRs. They’ll delete ads and (broadcasters will) lose lots more money.”
Thursday, the Commission will hear from Shaw, Bell, Cogeco and an assortment of other industry groups.
Susan Tolusso is a freelance writer based in Ottawa.
