I’VE HEARD NO END of parallels spun in attempts to explain the complex structure we call the Canadian television industry.
From cars and roads and traffic lights to water bottles and Lake Ontario. A house of cards to yarn and a sweater – and even an airplane ride and airline peanuts. Various parts of the industry are the gears in the car, the pre-and post-processed water, the air pressure inside and outside the plane. The yarn-and-sweater analogy is always “if you pull at one thread, the whole things comes apart.” I can’t repeat without a potential libel suit what the tiny bag of airplane peanuts referred to.
Suffice to say that most of the broadcasters using the analogies are trying to get across in simple terms that if one thing changes in the policies governing cable, satellite, telco TV and specialty services, many other things will be irrevocably altered, too. Some ideas, like putting premium gas in a car – will make it run a little better and emissions will be lower – but will cost more. The car still runs well, though. Others, like performing a service overhaul on a plane’s jet engines and leaving the turbines loose and flexible, would be disastrous, of course.
The one constant in all of this is that the car, water, airplane, sweater and cards, even the peanuts, are all Canadian – or as Canadian as possible. That’s really what’s at the heart of this week’s CRTC hearing on the policies governing broadcast distribution undertakings and specialty services, which begins tomorrow. The Broadcasting Act demands a Canadian system. Yes there has to be consumer choice and yes, market forces are important and yes, time are changing. But the system, at its core, still must be Canadian. It’s law, actually.
And we’re talking about the overall Canuck-ness of the system, not just the Canadian content you see on the screen, which has its own set of rules which will be partly addressed through this hearing, too. The issue also speaks to the channel lineups and what’s Canadian in them and of them, what’s offered and taken by consumers, what new foreign channels can come here and under what conditions.
Shaw Communications is the boldest when it comes to the market forces debate. Beyond what the company’s leadership has said about the Canadian Television Fund and some Canadian TV in general, it has staked out a position on the distribution end of the argument which it says is absolutely pro-consumer, in that it wants a simple preponderance rule where 50% plus one of the channels Shaw Cable or Star Choice offers to customers must be Canadian.
It also wants to open up the border to American cable channels.
“When you go to the magazine rack and you buy Time, you’re not required to buy Maclean’s,” Shaw’s head of regulatory, Ken Stein said in a recent interview, drawing his own parallel. “You don’t have to do that with any other product. So, we feel that with a simple preponderance rule… that they’re there for customers to pick… (T)he problem has become that all these rules that have come in place over the last five to 10 years that have simply served to protect the services more and more. So, you get just a myriad of services, none of them ever fail as they just keep adding on top. So, at some point customers are going to say, you know, enough is enough.”
The distribution and linkage rules “are the largest irritant of our customers,” added Stein.
“There shouldn’t be any rules beyond basic carriage regulations,” explained Shaw president Peter Bissonnette. “We think that offering a preponderance of Canadian services is still important (but) we don’t think there should be any restriction on the addition of non-Canadian services. You know as long as we’re offering a preponderance of Canadian, they’re being well represented. Our customers are very savvy. They all have the Internet and they know what’s going on in the real world and they know what services their relatives and friends down in the U.S. are receiving… so, we think that there shouldn’t be any restrictions on our ability to carry any of those services.”
The message is very effective among consumers. Shaw (and other BDUs, too) positions itself in the market as the western guy standing up to the nabobs in Ottawa who are keeping ESPN and HBO (the two most-cited channels) out of Canada. That’s true, sort of, but nowhere near the whole truth. ESPN is a 30% owner of TSN. Do they want to infringe on that investment? Do they want to compete to buy up Canadian rights to major sports properties? It seems unlikely, but no one knows. Over the years, I’ve periodically asked that question of the Bristol, Conn.-based folks. It’s not one they’ve been prepared to answer. As for HBO, they make millions selling their programming to multiple outlets in Canada – a reliable revenue stream that would not be replaced by becoming another pay TV station here (especially since it wouldn’t have the Canadian rights to most movies).
All the way on the other side of this particular Canadian distribution coin are Canada’s independent specialty service owners such as Pelmorex, (The Weather Network, MétéoMédia), Channel Zero (Movieola, Silver Screen Classics), S-Vox (Vision, One: Body, Mind & Spirit, The Christian Channel), and Stornoway (ichannel, bpm:tv and the Pet Network), among others.
They speak of a “Canada First” strategy which they will pitch to the CRTC during the three-week-long hearing. Part of the argument centres around forcing distributors to ensure 66.7% of channels customers receive are Canadian. Another part says that if the regulations are going to shift more towards being fully market-oriented, then it has to be fully market-oriented. That is, no more protections for anyone.
“All that we really need out of this hearing, in a nutshell, is a fairly straightforward decision from the Commission: Do we, or do we not want a Canadian first system? If we don’t, then let’s open up the borders, let’s remove all the regulation, let’s allow DirecTV and Dish Network in. Let us compete fairly because we’ve got American competitive programming services, but we don’t have American competitive distributors.”
Millar remains miffed that many distributors have quite recently chosen to offer both Turner Classic Movies and American Movie Classics on basic analog cable to their customers, while keeping his company’s category two digi-net Silver Screen Classics on digital – or ignoring it altogether.
U.S. channels were allowed in to be packaging partners for nascent Canadian channels, giving them a bit of a sales boost and expanding the distribution of Canadian channels and their content. But, says Millar, those regs “have outlived their usefulness. That doesn’t mean you take away the ones that are here… but Turner Classic Movies and AMC being placed on the basic analog service… are not helping Silver Screen Classics deliver Canadian content.
“They’re competing unfairly. In other trade circles that would be known as dumping, because they’re bringing it in and there’s no cost to bringing it in,” he explains.
Adds John Panikkar, co-founder and COO of High Fidelity HDTV: “We think there should be an absolutely moratorium, starting now, today, on any more foreign services in this country until the CRTC has a fuller grasp on the circumstances under which they’re coming in, how much money they’re making, what if any benefit there is to the Canadian system. You know, when this is originally set up, they were supposed to be packaging partners for “weaker” Canadian services.
“That’s not happening anymore.”
Like many cable operators, Panikkar, Millar and the other independents are entrepreneurs who believe their channels can compete anywhere, but also that the current Canadian regulatory raft is tilted against independent broadcasters, some of whom who are struggling to stay on the raft in increasingly rough waters – and what some of the BDUs are proposing in their applications would flip the raft altogether, scuttling much of the system diversity here in Canada.
“Let’s identify the fact that we do have an artificially constructed broadcasting system that requires regulation and has other purposes than just market forces in consumer choice at the heart of it,” says Millar. “Once you decide which of those two you have, you’re only into what flavor, but you can’t say I want one for you guys and I want one for us. That would be as ludicrous as it would be for me to say I think all the BDUs should be open to foreign competition, but there should be no American (channels) in.
Besides their wish that 66.7% of what consumers buy and are delivered be Canadian (the big broadcasters say 51% delivered, not just offered, is good enough), the independent broadcasters have also asked for a moratorium on adding any new foreign channels to the eligible satellite list – and for a rule change that ensures any new additions can’t just park there on the list forever. Both TCM and AMC, launched in the past 24 months by a number of MSOs, were on the list for many years before they were actually carried here. In fact, Comedy Central and Oxygen, two very popular U.S. cable channels, are on that list right now and have been for a long time.
Meanwhile, any new Canadian category two license holder has a scant two years to get going, or they lose the license.
But one of the most intriguing aspects to the independents’ submissions is their call to re-class Canadian specialties into Category A and Category B channels.
“Category A services would be required to contribute significantly to the creation and presentation of Canadian programming. In particular, they would be subject to a minimum Canadian content requirement of 50% and subject to an annual Canadian programming expenditure ("CPE") requirement of at least 50% of the previous year’s gross revenues. In return, the Category A services would be entitled to mandatory digital carriage by Class 1 and Class 2 and DTH BDUs,” reads the Channel Zero submission.
“All analog specialty services and all Category 1 digital specialty services that are currently in operation would be automatically converted into Category A licensees. Category 2 services that are in operation by April 7, 2008 would have a two year period in which to apply for conversion into a Category A service provided that the Canadian content and CPE requirements would be met.”
Category B services would be anyone else not meeting the requirements and would have no mandatory carriage on BDUs.
So, the current category twos could boost their Cancon into Category A territory and then adds the submission, any broadcaster wanting in as a new Category A, would be subject to an open call for competitive license bids, just as the Commission does with OTA television and radio.
“The Commission does it with radio. They do it with over-the-air. So why not specialty?” asks Millar.
And those U.S. services that do want in, would have to show that they tried to come to a partnership agreement with a Canadian broadcaster as a Category B before they could be added to the list. “I would suggest that the poster child for category B would be Cosmo TV. They chose to partner with a Canadian, they have a limited amount of Canadian content, no production requirement, and they choose not to want mandatory carriage. They’ll negotiate their way on,” said Millar.
“The category 2 experiment hasn’t gone as expected,” continued Millar. “The objective was to bring new players into the industry, but there aren’t a lot like us… And I don’t think that the category 2 experiment was intended to create new networks that were then going to be hung out to dry at contract renewal time… So our creation of category A and B is an attempt to go back to what we’ve been part of – just the Canadian first principles of the Broadcast Act.”
To the distributors, though, this all sounds too complicated and difficult, especially as they push for less regulation altogether. “You hate to ever be in a situation where you’re saying to someone, I’m sorry you can’t order that, you need to have a couple more Canadian services. But as a practical matter, I’m not sure it matters that much. What we really need is a preponderance rule and whether offered or delivered… we just have to get away from all this crazy tearing and linkage and 5-for-1s and all that,” said Ken Engelhart, SVP regulatory at Rogers Communications (which, to its credit, has added tons of the new Canadian specialties).
“We’re trying to get away from the regulations telling people what to watch and letting people decide what they want to watch.”
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