March 22, 2010 / 8:40 PM / in 8 years

CRTC says cable firms should pay for TV

OTTAWA (Reuters) - Canada’s broadcast regulator threw its weight on Monday behind the idea of cable and satellite operators paying private television networks for their signals, as in the United States, but stopped short of imposing such a system immediately.

The Canadian Radio-television and Telecommunications Commission (CRTC) proposed a framework under which cable and satellite companies and the financially strapped TV networks would negotiate fair value for the networks’ signals. It said it is now going to seek a court ruling to make sure it has the authority to implement such a regime.

For now, the cable and satellite companies will be able to continue to get the over-the-air signals for free. But the decision should mean that the networks, which have been hurt by slumping ad revenues, will eventually get a financial lifeline as long as the Federal Court of Appeal goes along.

It is the latest chapter in a bitter debate between broadcasters and distributors, which have both spent millions of dollars on advertising and lobbying campaigns.

Networks urged consumers to help them “Save Local TV”, while cable and satellite operators said they had to “Stop the TV Tax”, telling customers their bills could jump by C$10 (about $10) a month.

TO THE COURTS

If approved by the court, the winners would be network operators Canwest Global Communications and CTVglobemedia Inc, which is 15 percent owned by telecom and satellite-TV operator BCE Inc. The publicly owned Canadian Broadcasting Corp is excluded from the decision.

It would be bad news for telecom and cable companies Rogers Communications, Shaw Communications and BCE’s satellite television operations.

BCE’s Bell Canada unit said in a release late Monday afternoon it was disappointed by the ruling and would oppose the implementation of such a fee.

“It is unfortunate that TV networks that are already receiving millions in consumer subsidies for the very local programing they continue to cut are allowed once again to dip their hands in the pockets of Canadian consumers,” said Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs.

The CRTC decided against imposing a direct fee immediately.

Instead, the new framework would allow the networks to threaten to pull their signals, including popular U.S. television shows, if the cable and satellite companies do not settle on an acceptable level of payment to them.

“Broadcasters and distributors have a symbiotic relationship,” CRTC Chairman Konrad von Finckenstein said 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.”

Alan Sawyer of Toronto-based Two Solitudes Consulting Inc said that at this point no one seemed happy with the decision. The threat to withdraw signals is a potent weapon but the networks had hoped for a decision with more immediate effect.

“As soon as something is referred to a court, it’s far from a done deal,” he said.

Canada’s largest media union, the Communications, Energy and Paperworkers Union of Canada, said that going to court “while cable companies rake in billions of profits from Canadian consumers is simply buying time.” It warned of cable companies or foreign interests scooping up broadcasting assets.

The CRTC hopes to have a court decision in the next four to eight months but the ruling could be appealed to the Supreme Court.

OLD MODELS DEAD?

Broadcasters have long said the traditional model of advertising-supported TV broadcasting no longer works. Recent figures support that argument.

Last week the CRTC reported that broadcasters’ revenue fell 7.9 percent in 2009 to C$1.97 billion. Despite a 2.4 percent drop in operating costs, they lost C$116.4 million before interest and taxes, reversing a 2008 profit of C$8 million.

Cable companies have fought hard against paying for signals that have been free over the airwaves. They dub payment a cash grab to subsidize a broadcast industry that has hurt itself by spending too much on U.S. programing.

Last year, cable companies’ revenue grew 11.9 percent to C$9.2 billion, versus 16 percent growth in both 2008 and 2007. Profit before interest and taxes rose to C$2.3 billion in 2009 from C$2.1 billion in 2008, the CRTC figures showed.

Cable and satellite operators are not forced to pass along any costs to consumers, but Rogers, Bell and Shaw have already said they will.

($1=$1.02 Canadian)

Additional reporting by Susan Taylor; editing by Peter Galloway

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