Carriage fees FAQ
Should Canadians pay for local TV?
Last Updated May 17, 2007
Canada's conventional broadcasters say they're facing growing cost pressures — increasing audience fragmentation, slowing advertising growth, more competition from specialty channels and the internet, more use of personal video recorders that make it easy to skip commercials, and the need to spend millions converting their transmission and programming facilities from analog to digital/HD.
The broadcast industry has suggested a number of solutions, including being allowed to run more commercial minutes per hour or loosening rules dealing with infomercials and product placement ads. But it's one proposal in particular that has dominated the current round of CRTC TV policy hearings — carriage fees.
What are carriage fees?
Fee-for-carriage goes by a number of names, depending on who's doing the talking. The TV networks also like calling them subscription fees. The cable industry has less flattering names for them. Things like a "tax on free TV," a "cash grab" by the networks, or "trash."
Currently, Canadians do not pay directly for their local TV stations. They either pull them in over-the-air with rabbit ears or antennae or — more likely — watch them via cable TV or satellite providers. The problem, according to the conventional broadcasting networks, is they don't get any of that monthly cheque you send to your cable or satellite delivery company for any of their local over-the-air channels.
The networks wanted that to change. They wanted the CRTC to allow them to charge cable and satellite companies for their signals. No more free ride, they say.
"It is clear that [cable companies and satellite providers] have built their past and current existence on the backs of conventional … television stations," CanWest says in its submission to the CRTC. "And yet we have never received any direct payment or subscription fee in all that time."
CanWest suggested a fee of 50 cents a month for each cable or satellite subscriber for every private, general-interest conventional TV station. CanWest didn't think there would be a big consumer backlash, citing a survey it sponsored that showed two-thirds of respondents incorrectly assume that over-the-air broadcasters are already directly compensated by cable or satellite providers for their signals.
The CBC supported the idea of subscription fees, though some private broadcasters said the CBC shouldn't be eligible. The CBC said it would use the money to fund Canadian programming. The lobby group, Friends of Canadian Broadcasting, supported the idea of having the CBC use any of its fees to reduce "its draw on ad revenues, thereby benefiting the private sector [over-the-air] broadcasters."
If the fee-for-carriage idea was approved, the total monthly bill per subscriber for all conventional channels could range from $1.89 (CanWest's estimate) up to $7 (Rogers Communications' estimate).
What's been the reaction from the cable and satellite industries?
Ted Rogers, the veteran cable pioneer, called the fee-for-carriage idea "trash" when he addressed the CRTC hearings. "Nobody is going to be happy at getting five bucks added to their bill and not get anything for it," he said.
Shaw Communications, which owns cable and satellite operations that reach three million Canadians, puts it bluntly: "Consumers should not have to pay for what is free over-the-air," it says. "Canadians will resent and resist being forced to pay for these signals and many will find alternative sources of programming, including the black and grey market and web-based services." Shaw also took out newspaper ads that accused private broadcasters of "crying poverty."
Bell Canada, which operates the Bell ExpressVu satellite system, said broadcasters have not established either "a need for new funds, nor a rationale as to why such funds, if in fact they were found to be needed, should come from [cable and satellite distributors] or their customers." Bell also suggests that some consumers would switch to U.S. grey and black-market satellite services.
A survey sponsored by the cable and satellite industries found that 20 per cent of respondents said they would cancel their subscriptions, while 37 per cent said they would downgrade their current cable or satellite subscription to a cheaper level of service.
Another 36 per cent said they would pay an extra $5 a month for the conventional TV channels.
Is there precedence for carriage fees?
Many Canadian TV channels are not available "over-the-air." They can only be seen by those who subscribe to cable or satellite delivery services. CBC Newsworld, MuchMusic, TSN, HGTV, Discovery Channel, Bravo, ROBTv, and the Food Channel are just a few of the several dozen specialty channels Canadians can get only by subscribing to a delivery service like cable TV or satellite. Some of the channels are carried on "basic cable" while others are part of optional add-on tiers.
The owners of all of these specialty channels — and many are owned by the big broadcast networks — are paid carriage fees by the cable companies and satellite providers that distribute them.
Those fees range from a few cents per month per subscriber to as much as $1.07 a month for TSN (The Sports Network).
As for conventional TV networks in the U.S., there are no carriage fees there for over-the-air channels carried by cable or satellite companies.
What did the CRTC decide?
The policy hearings into the conventional TV industry in late 2006 were the first since 1999. In addition to the question of expanded carriage fees, the CRTC was also looking at whether broadcasters should be allowed to run more commercials, whether closed captioning should be expanded, and whether it should establish a formal shut-off date when analog broadcasting will end and the all-digital era will begin.
In May 2007, the broadcast regulator issued rulings in all of those areas.
On carriage fees: The big conventional TV networks lost their bid to charge cable and satellite companies carriage fees. Their "necessity has not been demonstrated," the CRTC said. So consumers will not see their monthly cable or satellite bills rise, at least because of new carriage fees for conventional television.
On more TV ads: While they lost on the carriage fee issue, the networks will be able to generate more revenue by running more commercials. The amount of advertising allowed will be gradually increased for the next two years. Then, in 2009, the CRTC will remove all restrictions on how many minutes of ads can run in any hour.
On closed captioning: Broadcasters will now be required to caption 100 per cent of their programs over the 18-hour broadcast day.
On a digital deadline: Broadcasters will send out their TV signals in digital format only as of August 31, 2011. All analog broadcasting will stop.
Number of cable subscribers: 6.6 million
Number of satellite subscribers: 2.5 million
Average monthly cable bill: $40.36
Average monthly satellite bill: $48.14
Source: CRTC (2005 data)
Number of TVs per household
4 or more: 18%
Source: Solutions Research Group (2006)
Cable/Satellite vs. Off-air
Canadian households that get their TV from cable or satellite: 90.3%
Households that get their TV off-air: 9.3%
Source: BBM (Spring 2006)