Canadian Broadcasters, Pay TV Battle Anew Over Carriage Fees
OTTAWA -- Canada’s big private TV broadcasters are feuding again with cable and satellite providers over mandated carriage fees and financial support for local stations. The fight flared again late last week when leading cable and satellite operators accused CTVglobemedia, one of Canada’s largest broadcasters, of violating terms of its broadcast license by appealing during newscasts for viewers to support its position in favor of carriage fees (CD May 26 p13).
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The pay-TV coalition -- which includes Bell Canada, Rogers Communications, Cogeco Communications, and Telus -- asked the Canadian Radio-television and Telecommunications Commission to ban the viewer appeals. CTV quickly said it would contest the request. The company had also opened a petition drive on its Web site, held open houses at its stations and staged a rally on Parliament Hill here as part of its campaign.
The new action came a week after the sides finished trading fresh charges over carriage fees and TV stations in Parliamentary and CRTC hearings. Broadcasters argued that cable and satellite providers are thriving at the expense of Canadian TV stations, several of which are struggling to survive. Cable and satellite companies said the broadcasters are mainly hurting because of the recession, increased audience fragmentation and the debt they incurred from expanding too rapidly and paying too much for the Canadian rights to Hollywood programming.
At issue is a broadcast-industry proposal that cable and satellite distributors pay mandatory monthly fees of about 50 Canadian cents a subscriber to carry each national network. Broadcasters say the carriage fees would give them a second, more stable revenue source and restore their profit. That would let them keep their money-losing local stations afloat. Without the money, CTV has threatened to close three local stations, and another major national broadcaster, CanWest Global Communications, has threatened to close as many as five stations.
“Current regulations in Canada allow cable and satellite companies to take CTV and ‘A’ programming without compensation,” CTV said on its Web site. “These companies then charge you, the consumer, for the programming they take for free … Television service providers, including cable and satellite companies, are reaping huge profits at the direct expense of local Canadian TV stations that are going out of business.”
If the proposed carriage fees are imposed, the regulatory commission estimates, it would produce more than C$352 million ($315.4 million) in annual revenue for the country’s dozen or so conventional broadcasters. CanWest Global would gain C$72 million, CTV C$56 million and opponent Rogers, which owns the Citytv network, C$57 million. The publicly owned Canadian Broadcasting Corp. would gain C$92 million if it’s included.
The cable and satellite industries fended off mandatory carriage fees the past few years by threatening to pass on any added costs to consumers. Pay-TV executives have argued that, though stations are struggling, the big national broadcasters make big profits on their other TV operations. They say broadcasters already enjoy mandatory carriage, favorable channel positions and the right to insert Canadian commercials in the U.S. shows that they carry.
“My God, it’s ridiculous,” Rogers Vice-Chairman Phil Lind told the commission late last month. If CTV, Global and other broadcasters want to charge cable and satellite providers for their signals, they must be willing to give up their guaranteed placement on the dial in return, he said. “It’s fee-for-carriage or mandatory carriage, but not both.”
Seeking a compromise, commission Chairman Konrad von Finckenstein has proposed to set up a local programming fund that would subsidize TV stations in markets with fewer than 1 million people. Cable and satellite providers would have to contribute 1 percent of annual revenue. Stations could use the money to expand news and community programming. It’s estimated that the fund would raise about C$70 million a year.
But broadcasters argue that the proposed 1 percent rate wouldn’t produce enough money to keep the stations alive. At the commission hearings last month, CanWest executives also rejected a 2 percent levy as too little. CTV officials have been pushing for a 3 percent fee. Rogers executives rejected the idea as an unnecessary “bailout.”
Von Finckenstein has now proposed that the broadcasters negotiate carriage fees or other compensation with cable and satellite operators, much like the situation in the U.S. In closed-door meetings with the major networks earlier this month, the commission chairman reportedly offered to consider changing federal regulations to allow the networks to enter arbitration with the distributors if a “fair market value” deal can’t be reached. Von Finckenstein, who has rejected mandatory carriage fees twice in two years, also told the networks that they were “hammering a dead horse” by continuing to pursue the idea of imposed charges.
“I think we need a different approach to this whole issue,” von Finckenstein told CanWest executives, according to the partial transcripts of the meetings that have been released. “I think you should contemplate a scenario where there is a negotiation where at the end of the day, if you don’t get to an agreement, you put it to us for arbitration and we will deal with it.” The commission plans to take up the matter in fall hearings.