EVEN THE VERTICALLY integrated companies know they need a code of conduct to help guide how – as the 800-pound Canadian gorillas – they do business in a country where they own most of the content and distribution channels.
CRTC chairman Konrad von Finckenstein said repeatedly during last month’s vertical integration hearing that he wants to see some sort of code of business practices for vertically integrated media companies set out in writing in order to try and avoid new regulatory and legal battles when the new BDU regulations come into force this September. So final replies, which were due last Friday, include a number of different sets of proposed rules for Canada’s vertically integrated media and carriage companies to abide by.
With the creation of such a code, “I am trying to take the uncertainty out of it, and unnecessary litigation – and complaints will arise after September 1 as sure as day follows night,” von Finckenstein told Shaw on day 3 of the vertical integration hearing (CRTC 2010-783).
After reading through a number of the final submissions, it’s clear there is no disagreement among many of the parties on certain issues, so some of this will be easy writing for Commission staffers. Other parts of the codifying will be tricky, however.
For example, Rogers has demanded that no companies grant themselves head starts on launching new specialty services. If Bell were to create a TSN3, for example, it “must give all BDUs either 60 days notice prior to launch or a 60 day free preview period. Notice must include date of launch and the proposed rate card,” reads the Rogers submission.
Bell, on the other hand, has a bit of different viewpoint, pointing out that launching a new channel without notice to competitors isn’t really a problem and does not automatically mean there’s been an undue disadvantage or undue preference.
Two groups of independents each co-operated on their code writing and we think the fact that Canada’s independent broadcasters (who have no distribution arms) as well as our independent carriers (who have no TV content divisions) each got together among their groups to come up with concise, mostly workable, codes of business practices, will carry much weight with the Commission as it crafts the new policy stemming from the proceeding. A decision is expected in early fall.
The genius of the independent carriers’ code (submitted by Telus, Cogeco Cable, EastLink, SaskTel, MTS Allstream, and the Canadian Cable Systems Alliance membership) is how succinct it is.
It’s creativity is in its simplicity. It’s just two pages and the first page is just a preamble and some definitions.
“Fundamentally, this Code seeks to ensure that any television program made available on any wireline or wireless distribution platform in Canada is made available to competitors for distribution on those distribution platforms, on a non-exclusive and non-preferential basis, and on terms that are commercially reasonable,” says the independent carriers’ code
Helpfully, that bit is in line with what Rogers wants, too: That anything on the regulated TV system can’t be exclusive on other platforms. Bell, too has proposed something similar, albeit with many more caveats.
“Any content that is broadcast in Canada on a linear television channel (including a channel devoted to conventional, specialty, pay or PPV services) or on a video-on-demand (VOD) service, and that is also distributed on one or both ancillary (broadband or mobile) platforms, must be made available, on a non-exclusive and non-preferential basis and on terms that are commercially reasonable, to competitors for distribution on those same platforms,” reads a portion of Rogers’ proposed code.
The code of conduct document submitted by Bell is not as straightforward as it sets out 10 additional guidelines when it comes to the conditions on the sale and distribution of exclusive content. While it says that content available on linear TV should be made available on reasonable terms to everyone, its code, notably, doesn’t mention whether VOD content can be exclusive or not.
Content can be exclusive if, reads the Bell submission:
• The content on the new media distribution platform is ancillary to content broadcast on a linear distribution platform;
• The content was designed specifically for new media distribution;
• The distributor exercising the exclusive distribution right contributed to funding the creation of the content and the content would likely not have been produced absent the exclusive agreement;
• There is evidence that one or more competing new media distributors were provided with a fair, bona fide, market-based opportunity by the underlying rights holder to acquire the exclusive distribution rights;
• There is evidence that a third party holding the distribution rights to the content insisted that the rights at issue be sold on an exclusive basis;
• There is evidence that other commercial avenues are open to competing distributors to acquire the distribution rights on the relevant new media distribution platform to this or similar content;
• There is evidence that barriers to the creation of such programming are low and that competing new media distributors could have created their own similar content;
• The content pertains to or is from a genre that is open to competition under the Commission’s open entry for specialty services policy and is not subject to genre protection; or
• The content creator and/or licensor has bona fide business and or technological reasons for choosing to sell exclusive distribution rights, due for example, to technological compatibility or capability reasons, quality control reasons, branding or other relevant business reasons.
Shaw Communications’ submitted code of conduct does not really seem to be a code at all and reads more like a primer on competition law. The company appears to be reminding the CRTC that rules on anti-competitive behaviour exist elsewhere already. In fact, Shaw notes it has based its code on the Competition Bureau’s Information Bulletin on the Abuse of Dominance Provisions as Applied to the Telecommunications Industry, June 6, 2008.
But back to the independent carriers submitted code which says no company can grant an undue preference to itself and then identifies four ways that can happen:
• Packaging requirements which force three or more content services to be in a same package or which negate a package’s theme or price point;
• Tied-selling of programming services, i.e. requiring that x services be carried in order to conclude an agreement for the carriage of y services from the same Program Supplier;
• Minimum penetration rates which force distribution on the basic tier or in a package that is inconsistent with the package’s theme or price point
• A fee charged for Television Content or Supporting Services that is not commercially reasonable.
The independent carriers also call for confidentiality of competitor information, which is something all tend to agree on and also something the independent broadcasters’ proposed code also demands.
That code was agreed upon not just by the Independent Broadcasters Group (ZoomerMedia, Stornoway Communications, Channel Zero, OutTV, Ethnic Channels Group, Fairchild Media and APTN), but also Pelmorex, GlassBox and Fight Network and Allarco (Super Channel).
The meat of the independent broadcasters’ code supported strong packaging and distribution rules when it comes to how vertically integrated companies deal with their independent channels, calling for “reasonable” wholesale fees and “reasonable” packaging placements.
But, what’s reasonable?
The independent ‘casters say that for pricing, “reasonable” shall include:
• CRTC approved or reviewed wholesale fees for Category A services;
• Fees paid by the vertically integrated broadcasting undertaking or by other vertically integrated broadcasting undertakings for related programming services of similar value to consumers;
• Similarity of regulatory obligations between related and independent programming services;
• Fees paid for services with similar cost inputs based on historical data; and
• Other requirements imposed on independent programming services in the negotiated agreement (e.g. uplink and transport costs, marketing costs, etc.).
The independents’ proposed packaging rules is where it gets a little more lengthy: They don’t want to be offered on an a-la-carte basis if the vertically integrated companies’ channels are not offered that way; independent channels shall be placed in the channel line-ups adjacent to VI companies’ “similarly themed” channels; independent channels shall be placed in all “appropriate” theme packages with VI companies’ own channels; if the big companies are carrying all of their channels in HD, then they must also carry the independents’ HD feeds.
Score Media’s almost singular push is also for a protective packaging rule. It wants a new policy saying that no carrier can re-package an independent category A service (like The Score) so that its average penetration among the BDU’s customers falls lower than what it was on October 22, 2010, the day the Commission called this hearing. If The Score has 72% penetration on Rogers like it did on October 22, 2010, any repackaging by Rogers which would see that drop would be prohibited.
The vertically integrated companies have been somewhat sympathetic towards some hard and fast carriage regs for independents, which was often termed during the hearing as a “modified three-to-one” rule. “In satisfying section 19(3) of the Broadcasting Distribution Regulations (which comes into effect on September 1, 2011), which requires a BDU to distribute a minimum of three unrelated Category B services or exempt third-language services for every related Category B service or exempt third-language service distributed by the BDU, a BDU shall ensure that at least one of the three unrelated services is owned and controlled by an independent broadcaster,” reads the Rogers proposed safeguards.
Shaw noted during the hearing their channel line-up already complied with such this three-to-one idea.
And finally, the independent broadcasters inserted something the carriers are sure to object to, strenuously: “Vertically integrated broadcasting undertakings shall provide independent programming services with access to the set-top box to develop or deliver their own applications, and to information obtained through the set-top box regarding the independent programming service, that is comparable to the access or information that the vertically integrated broadcasting undertaking provides to itself, to related programming services or to other vertically integrated broadcasting undertakings.”
Access granted to third parties so they can make their own apps for set top boxes? Er, let’s just say we can’t see cablers or any other carriers agreeing to that. Ever.
What parts of the proposed codes will make it to policy? Let us know below or drop us a line at editorial@cartt.ca. We’ll keep it confidential if you wish.
