CRTC approves talks on TV signal fees

The CRTC has ruled that Canada's TV broadcasters can charge cable and satellite companies for their over-the-air signals but has asked the Federal Court of Appeal to decide whether the regulator has the jurisdiction to impose the ruling on the two sides.

Cable and satellite companies say CRTC has no say in fight with networks

'I'm not in the game to make popular decisions,' CRTC chair Konrad von Finckenstein said of the CRTC's ruling Monday, which calls for value for signal negotiations. ((Andrew Vaughan/Canadian Press))
Canada's private TV broadcasters celebrated somewhat of a victory Monday after the CRTC ruled that they can negotiate fair market value for their over-the-air signals from cable and satellite companies.

However, the broadcast regulator is first deferring judgment to the Federal Court of Appeal, saying it must consult the court to ensure it has the jurisdiction to impose a negotiation framework on the two sides.

The decision is the latest development in the bitter, ongoing battle over whether cable and satellite companies should pay for the conventional television signals they now pick up for free to include in the packages they sell.

"Broadcasters and distributors have a symbiotic relationship," said Konrad von Finckenstein, chair of the Canadian Radio-television and Telecommunications Commission, on Monday in a statement. "The time has come for them to put their differences aside and work together to ensure the continuation of conventional television, which Canadians clearly value."

A court decision could be about six months away, von Finckenstein estimated.

New system

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The fee-for-signal battle has for years pitted conventional broadcasters, including CTV, Global and CBC, against the cable and satellite companies — mainly, Rogers, Bell and Shaw — that widely distribute their free, over-the-air signals.

If the federal court approves the CRTC ruling, the broadcasters and the BDUs could move forward with a new system of negotiating compensation for traditional TV signals (a compensation system already exists for signals for specialty channels). 

The new scheme gives the networks the option to withhold their signals from cable companies if negotiations sour — as networks do in the U.S.

However, if broadcasters move forward with a fee-for-signal system, they may have to give up the benefits and protections of the current system, such as priority placement on the TV dial.

The CRTC has said it is willing to be brought in to mediate any negotiations between the private broadcasters and the BDUs.

It admitted, however, that that some broadcasters might choose to remain within the current system. Also, one or both sides could simply choose not to negotiate, which would continue the impasse. 

Paul Sparkes, CTVglobemedia's executive vice-president of corporate affairs, said he sees the ruling as a recognition "that there is a value associated with the content that we produce."

"We're very happy with that," Sparks said.

"[The ruling] just gives us that bargaining power that enables us to have a fair market negotiation for the re-transmission of our content, which [BDUs] think is valuable because they're charging consumers for it already."

Canadian broadcasters have long argued that amid today's plethora of TV channels and the drop in ad revenue, local TV programming is increasingly endangered without a solid new source of revenue.

According to CRTC reports released last week, private TV broadcasters reported losses (before interest and taxes) of $116.4 million in 2009 — which followed the massive 93 per cent drop in profits to $8 million during 2008.

Cable companies had profits (before interest and taxes) of $2.3 billion, an increase from $2.1 billion a year earlier. They also saw an overall rise in revenues of 11. 9 per cent in 2009.

Ruling draws criticism

Monday's decision riled the cable and satellite firms, (known as broadcast distribution undertakings, or BDUs), which have argued that — under the Broadcast Act — the CRTC doesn't have the authority to force them to pay for conventional TV signals.

The new system excludes CBC/Radio-Canada, angering executives at Canada's public broadcaster, who have argued that it faces the same drastic decline in ad revenues and fractured media landscape as the private broadcasters.

According to CBC president and CEO Hubert Lacroix, the decision diminishes what the public broadcaster "brings to the system" and "puts us in a position where we are not on a level playing field."

CRTC chair Konrad von Finckenstein countered that while the CBC is "an integral part of the Canadian broadcasting system" and would be examined separately, the new scheme cannot apply to it because the Broadcast Act mandates that the public broadcater must be available to all Canadians.

"We cannot have decisions where access to the CBC is in doubt."

"It's an inappropriate decision, and it's bad for consumers," said Mirko Bibic, Bell's head of regulatory affairs, on Monday afternoon from Gatineau.

"We will argue that the CRTC doesn't have the jurisdiction — I firmly believe they don't — and hopefully, we'll win in court." 

Rogers Communications vice-chair Phil Lind reiterated that if the CRTC imposes any new fees, they will be passed on to consumers, just as they did with the commission's 2009 increase to the Local Programming Improvement Fund.

If von Finckenstein thinks the BDUs will negotiate, "he's dreaming in Technicolour," Lind retorted.

As well, consumer groups, media unions and those representing the creative community criticized the decision.

Ian Morrison, spokesperson for the Friends of Canadian Broadcasting, blasted it as "a business-as-usual decision" that dumped the tough work onto the federal court.

"It's pretty difficult to negotiate on the basis of withdrawing your product from the market. It's certainly not in the interest of the viewers, and the CRTC has a responsibility to stick up for the viewers," he said.

Monday's CRTC ruling also included:

  • Changes to Canadian content rules, requiring broadcasters to spend 30 per cent of gross revenues on homegrown content, but allowing them greater flexibility to air that material, including shifting it to specialty and pay channels as well as airing it on main networks.
  • Requiring broadcasters to spend at least five per cent of gross revenues on "programs of national interest," including dramas, documentaries and award shows.
  • Plans to examine a complete broadcasting group (a main network lumped together with specialty and pay channels) when considering the next bout of licence renewals, due in August 2011.

Government awaits report

Canadian Heritage Minister James Moore issued a statement Monday afternoon, reiterating that the government's primary focus is "the interests of Canadian consumers."

Last fall, Moore ordered the CRTC to submit a report after issuing its ruling. That report will be released Tuesday.  

"We appreciate today's decision of the CRTC on the future of an important industry for all Canadians," Moore said. "We look forward to the public release of the second report by the CRTC."

The Conservative government has the power to overturn the CRTC's ruling, as it did in December when it allowed wireless provider Globalive access to the Canadian market after the commission had rejected its application.

Reaction to Monday's ruling

"We've seen the CRTC come down with 22 or 23 decisions in the last few years. They consistently decline to stand up for the public interest ... We're being held hostage by two large corporate interests, and local television is paying the price." —Charlie Angus, NDP culture critic

"The CRTC today has essentially placed a tax on all cable and satellite customers … While the over-the-air broadcast sector has had financial challenges during a tough recession, the commission has decided to penalize our customers and impose fees for services that are available free over the air for anyone with an antenna or on the internet." — Phil Lind, vice-chairman, Rogers Communications Inc.

"Referring jurisdictional issues to a federal court while cable companies rake in billions of profits from Canadian consumers is simply buying time — but for what? Completion of Shaw's purchase of Canwest? The introduction of higher foreign ownership levels in broadcasting?" —Peter Murdoch, vice-president of media, the Communications, Energy and Paperworkers Union of Canada.

"We’ve been fighting for 10 years to get Canadian scripted programming back into prime time, we’re completely gobsmacked that there’s nothing in this policy to ensure that ... It’s the same old story — broadcasters get a free ride while Canadian culture gets put on a back burner." —Ferne Downey, ACTRA national president.

"[The cable industry's] profits are larger than the revenues of the entire conventional television industry. They can well afford to compensate the broadcasters for their local signals without gouging their customers." —Ian Morrison, Friends of Canadian Broadcasting.

"I'm hopeful that if the courts do decide in the CRTC's favour and gives them the jurisdiction, that there will be a bright future for local television across this country." —Paul Sparkes, executive vice-president of corporate affairs, CTVglobemedia.

"This is a very dark day for public broadcasting and there does not appear to be a future for public broadcasting ... with this decision." —Steven Guiton, vice-president and chief regulatory officer, CBC/Radio-Canada.

With files from the Canadian Press