March 23, 2010 / 9:06 PM / in 8 years

Bark may be worse than bite in Canadian TV fight

VANCOUVER (Reuters) - Rogers Communications Inc was quick to blast a ruling that could force Canadian cable and satellite companies to pay private broadcasters a fee for their signals, but any financial hit is likely to be small and not felt for some time, analysts said on Tuesday.

The country’s broadcast regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), gave cash-strapped TV networks the green light on Monday to start charging cable companies such as Rogers, Shaw Communications Inc and Quebecor Inc for their signals.

A system whereby broadcasters like CTVglobemedia Inc and Canwest Global Communications charge cable and satellite companies for carrying their content copies the arrangement in the United States.

But the fee plan is not expected to be in place anytime soon in Canada as the Federal Court of Appeal still has to confirm the CRTC has the authority to implement such a regime, and further legal challenges are expected.

Even if the fee-for-carriage plan does eventually see the light of day, cable companies have already said they will pass along any added costs they negotiate with broadcasters to consumers.

Negotiations may not be highly contentious because, in the highly convoluted and overlapping ownership structures in Canada’s communications sector, all the major cable companies own meaningful stakes in television networks, or are in the process of acquiring stakes, analysts said.

A drop-off in the high-decibel acrimony between the two sides ahead of CRTC hearings in December may come as a surprise but analysts point out that two major opponents — Shaw and Canwest Global — may soon end up as partners.

Cable, phone and Internet provider Shaw recently bid for a 20 percent equity stake in bankrupt Canwest’s TV arm. The deal, which will give Shaw an 80 percent voting interest, has court approval but faces a possible appeal court challenge.

“The shape of the industry has changed a lot since the acrimony. The Shaw-Canwest deal takes somebody out of the chorus and adds them to another,” said Iain Grant, an analyst at SeaBoard Group, a technology research and consulting company.

“We seem to be gnashing our teeth, wailing and covering ourselves in ashes to help CTV as everyone else is part of a larger consortium that is a (cable provider),” Grant said.

BCE Inc, Canada’s largest telecoms company and parent of Bell Canada’s satellite and Internet services, holds 15 percent stake in CTVglobemedia.

Rogers Communications, which owns Canada’s largest wireless company, owns stakes in Citytv and Omni television stations. Quebecor, which controls Videotron cable, the Sun Media chain of newspapers and is planning to launch a wireless network this summer, owns an interest in the TVA television group.

BMO Capital Markets analyst Tim Casey estimates that a fee-to-carriage system could result in a one-off, one-year revenue freeze for cable companies’ TV operations because they wouldn’t raise their cable prices for consumers at the same time as introducing a new fee.

During a hard-hitting media campaign last year, cable firms said consumers would be hit with a C$10 (about $10) increase on their monthly cable bills if fee-for-carriage was introduced.

Analysts expect it to be a lot less, possibly around C$1, an amount they don’t see chasing consumers away.

The CRTC said in a report to the government on Tuesday that although consumers were opposed to paying more for programing they currently receive, modest price increases would not necessarily drive them away.

The regulator said that in the period since 2002 total subscriptions for TV services had increased despite fee hikes.

“This suggests that many Canadians may be opposed to an increase in the price of basic television services but are still able to afford it,” the report said.

BMO’s Casey believes that any financial hit to cable companies will in any event be diluted as most have lucrative telecom and Internet operations that will act as a buffer.

“Given the importance of data and voice in cable financials, we view it as a minor negative but not a thesis-changer,” Casey said in a note to clients.

($1=$1.02 Canadian)

Additional reporting by Louise Egan in Ottawa; editing by Rob Wilson

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