GATINEAU – The clichés and attempted parallels were flying on the final day of the CRTC’s vertical integration hearing on Tuesday.
All of the independents, from V Interactions at the start of Tuesday through to GlassBox and Fight Network at the end of the day, are afraid the big, vertically integrated companies will only act ruthlessly in their own self interests to the severe detriment to their much smaller companies.
Among the elements of its proposal, the Weather Network/Météomédia owner Pelmorex Inc. argued that the Commission should “entrench in regulation” a requirement on broadcast distribution undertakings (BDUs) that they can’t alter the fees paid to an independent Category A channel. As well, BDUs shouldn’t be able to distribute or re-package the service in a manner that adversely affects its penetration rate.
“This is not an unreasonable request,” said Paul Temple, senior VP of strategic and regulatory affairs with Pelmorex. “Vertically owned services have security of distribution and packaging, and Bell, for example, has contractually agreed to similar conditions with foreign services. Surely the same protection can be extended to independent Canadian services.”
Under questioning from CRTC chair Konrad von Finckenstein, Pelmorex reiterated its call to give independent broadcasters the same tools that other players in the broadcasting system have.
“Every vertically integrated service doesn’t wake up in the morning wondering whether they are going to be repackaged or whether their rates are going to be changed. They have the comfort of knowing they’ve got two million plus subscribers safely in their pocket and the leverage of two million plus when dealing with other vertically integrated BDUs. So they have quite a hammer,” he said. U.S. services also have considerable might, he added, referring to statements made previously by Bell Media that American services can’t be repackaged without their permission and that they can essentially charge the rates they wish.
“So they have a hammer; all the vertically owned services have a hammer. The only people who don’t have a hammer, in fact who get hammered, are independent services. So we want the hammer,” Temple said to mild applause.
OTHER INDEPENDENT BROADCASTERS appearing on Tuesday were equally concerned about the concentration of power in the hands of a four large vertically integrated broadcasters and distributors. For V Interactions Inc., the Quebec-based indie OTA broadcaster wants assurances that it can get its fair share of funds from the Canada Media Fund (CMF).
Serge Bellerose, a special advisor to the company and former administrator at the Canadian Television Fund (predecessor to the CMF) said what is happening now as a result of vertical integration can be described as back to the future. At one time, the CTF’s board was stacked with beneficiaries of the fund. After changes put control of the CTF in the hands of the BDUs (contributors to the fund), vertical integration is now putting those who receive money from the CMF in control. V Interactions said this current situation will make it increasingly difficult for independent broadcasters to get their fair share of CMF funds.
Von Finckenstein told the company it was knocking at the wrong door asking for changes to the CMF, noting that it’s managed by the Department of Canadian Heritage.
Bellerose countered that the Commission does in fact have the authority to order BDUs to pay a portion of the CMF contributions for specific purposes. He said the CRTC can do this under the BDUs’ conditions of licence.
Appearing as a panel, the Independent Broadcast Group (IBG), ZoomerMedia Ltd. (ZML),Stornoway Communications, Ethnic Channels Group and OUTtv called for a re-balancing of the power in the Canadian broadcasting system in the wake of vertical integration. They also requested the Commission actually step away from implementing new, flexible broadcast rules as laid out in Broadcast Public Notice 2008-100, the new BDU policy slated to come into full effect as of September 1, 2011.
In his opening remarks, Bill Roberts, president and CEO of ZML’s Television Division, said Bell Media, Rogers Communications, Shaw Communications and Vidéotron “will have every opportunity to foreclose independent broadcasters” once the rules from 2008-100 go into effect on September 1.
These rules give the Big 4, as he described, the power to reduce rates, change packaging, poach popular programming and force indie broadcasters to divest equity in channels. The company also wants the Commission to ensure that the vertically integrated companies can’t shift channels around that could potentially put them in packages with lower penetration rates.
Asked whether it would be perhaps better to delay implementation and see how things play out, particularly since digital migration comes into effect at the same time, Monique Lafontaine, ZML’s VP of regulatory affairs, disagreed. “A postponement just delays the issue,” she said, noting that the company has a new owner and wants to move forward with planning and investment in programming. “We need to have clear rules now for essentially for a period of a licence term.”
Von Finckenstein responded that this was more than a re-balancing and a request for clear rules. “You want more than clear rules, you want a guarantee. You want a 33% penetration rate,” he said. This runs counter to the more flexible and economic-based direction the Commission has been taking with the current broadcast system because of the impact that over the top (OTT) services are having on the market.
The chair’s comments were not well accepted by the independent broadcasters.
“We understand the theory,” said Roberts, “but we don’t see that it can be equitably applied across the board. The vertically integrated operators will favour their own systems. They will not apply the same tough judgment to weak systems that they own as compared to the ones that they don’t own.”
Martha Fusca, president and CEO of Stornoway Communications (ichannel, bpm:tv and Pet Network) lashed out when the conversation turned to OTT services, saying the complaints about that from the big companies is ludicrous.
“Why do we have these big huge guys if they can’t compete with over the top? What is wrong with them?” she asked. “I thought that this hearing was our opportunity to finally get your attention to say, are you or are you not going to do something on our behalf?”
THE MATTER OF ACCESS to customer data, which was also discussed during Astral Media’s appearance last week, was raised by Pelmorex with the company calling for “net neutrality” rules for the set top box information. Given the significant amount of intelligence contained in the set top box stream and available to BDUs, this raises concerns for Pelmorex.
We are concerned it’s a Pandora’s box of potential undue preference. Viewer information for our service must not be hoarded by a vertically integrated BDU or shared with our competitors,” said Temple during his opening remarks.
“When we operate our web services, we have detailed information. We know how many pages everyone is looking at, when they’re looking at, how long they look it. We have all this rich information from our own file servers. That set top box and that infrastructure is now going to be captive to the BDU on the regulated system and they’ll have it and we won’t necessarily have any of it.”
Asked how to solve the issue, Temple said the Commission can borrow the programming rights access rules. “First of all, just as you have determined a policy for access rights on the programming side, I think at a minimum those same services, and probably all services, should have the same type of access rights to the information and to be able to develop applications for those boxes.”
Final written replies (no more than 10 pages, please) are due into the CRTC by July 8, with a decision to come in early fall.
