OTTAWA (Reuters) - Television blackouts could happen in Canada as they occasionally do in the United States if television broadcasters are allowed to charge cable companies fees for their signals, Canadian cable-TV firms warned on Tuesday.
In arguments before the Supreme Court of Canada, the cable companies said a value-for-signal plan advocated by broadcasters violates Parliament's intent for stable, affordable access to television as a cornerstone of cultural and communications policy.
"Canada for 50 years has avoided blackouts. Look at the U.S. regime, where blackouts become a nightmare for ordinary consumers," cable lawyer Kent Thomson told the court, pointing to what he said were U.S. "games of brinkmanship... where consumers become pawns in negotiations."
In 2010, the country's industry regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), accepted broadcasters' arguments that local stations needed new money to stay viable.
But before imposing fees on cable companies, the CRTC asked the courts to decide whether it had the jurisdiction to do so. The Federal Court of Appeal said yes, and the cable companies appealed this ruling to the Supreme Court.
The case originally pitted broadcasters against cable and satellite-TV companies, but the lines have become muddled after Canada's two biggest private-sector TV networks were bought by a cable company and a telecoms company.
Ultimately, it is consumers who may lose as the cable companies threaten to pass on any extra costs, estimated by the cable companies at C$10 ($10) on customers' monthly bills.
Television blackouts in the United States are rare but have a high profile when they happen. They are usually the result of last-minute pressure tactics exerted on cable companies by broadcasters.
In 2010, for example, 3 million New York subscribers of Cablevision Systems Corp faced a blank screen for the first 12 minutes of the Oscars in a dispute between Cablevision and the local WABC-TV station.
Millions of New York Cablevision viewers suffered a similar blackout on the first two games of Major League Baseball's 2010 World Series.
Chief Justice Beverley McLachlin, in remarks echoed by other justices, said in Tuesday's hearing that she had "some discomfort" with the idea that the CRTC plan to let broadcasters charge fees is in keeping with Parliament's policy aims.
"We've avoided this kind of market-place struggle that we've seen going on south of the border, this laissez-faire let's-negotiate-it approach...with these blackout wars," she said.
Benjamin Zarnett, arguing for the broadcasters, said the U.S. system should not be feared.
"The CRTC heard arguments about blackouts when they made their report on this. They actually characterized the American system as one that is working well," he said.
He is the lawyer for a unit of telecoms company BCE Inc, which purchased CTV, Canada's largest private broadcaster. Though BCE has Internet-protocol television and satellite-TV operations, in fact it switched sides to favor charging for feeds after it bought CTV.
Arguing against fees, cable's Thomson harked back to the gold-medal men's hockey game at the 2010 Vancouver Winter Olympics, carried in Canada by CTV, when 16 million Canadians watched Canada defeat the United States 3-2.
"Try to imagine what might have occurred if a blackout had occurred on the eve of the gold-medal hockey game," he said.
The biggest corporate losers in a value-for-signal program would be Telus Corp and Cogeco Cable Inc because they lack broadcasting assets that would help offset any fees.
Elsewhere on the cable side, Rogers Communications Inc owns a handful of TV and cable stations, and Shaw Communications Inc bought No. 2 private-sector TV network Canwest in 2010. Both still oppose the CRTC plan, however.
Because of vertical integration and because broadcasters are doing better than they were in the recessionary runup to the 2010 CRTC decision, the need for action now may be less urgent than before.
The court reserved judgment but even if it backs the new plan, the CRTC is unlikely to implement fees immediately as it mulls whether broadcasters still need help after integration.
"It's highly likely they'd have to hold hearings," Sheridan Scott, a lawyer who once worked for the CRTC and then headed the Competition Bureau, told Reuters ahead of Tuesday's hearing.
"They don't have any legal obligation to proceed with this."
Yet she pointed out that while the economy is substantially better now, broadcasters face huge costs and more competition from online sources such as Netflix.
In any case the new plan would not apply to the Canadian Broadcasting Corp, which is owned and subsidized by the government.
Tuesday's case is Cogeco Cable Inc., et al. v. Bell Media Inc. (formerly CTV Globemedia Inc.), V Interactions Inc., Newfoundland Broadcasting Co. Ltd, et al. (34231).
Editing by Peter Galloway