GATINEAU – The word of the day on Wednesday at the CRTC hearing? Rebalancing.
While both presenters yesterday (Quebecor and CanWest Global) said they wanted to “rebalance” the regulatory system, they meant it in different ways. And Quebecor’s way – where a value for signal regime wouldn’t cause another carrier rate increase – was likely music to consumers’ ears.
Quebecor (which, of course, owns the largest Quebec cable company in Videotron and the most successful French-language broadcaster, TVA) went first and the tone between its executives and the commissioners was far less testy than prior presenters.
This is what we heard on day 3:
• Quebecor CEO Pierre Karl Péladeau and Videotron CEO Robert Dépatie were sharply critical of the competing English Canada ad campaigns – the ongoing Local TV Matters vs. Stop The TV Tax tit-for-tat attacks. “We did not support it,” Dépatie told Cartt.ca “It was just ridiculous in my opinion… It is confusing customers. Everybody is saying taxes and 10 dollars, six dollars, and saying ‘what are you talking about?’ It hasn’t done the job at all.”
• Quebecor wants conventional broadcasters to share in subscription revenue, but not at the expense of its cable customers. It would rather see the cash come out of the leading audience fragmenters who have two sources of revenue: Canadian specialty channels. Under its model, the Commission would oversee a three-year process where specialty rates would be examined and dropped, with the difference going to OTA channels. This would rebalance the system, said Péladeau.
New wholesale rates would be discovered through each channel’s Canadian content and audience share, and “based on those criteria, you’re going to have to tell us by how much we can decrease the royalties to the specialty channels and then we’ll use that money to give it to the conventionals,” Dépatie said in our interview.
“Wholesale fees would go down across all specialties… and reinvested in conventional channels.” Then, after three years of arbitration and rule-setting, “we’ll let the market do its job alone where you might have channels ask for more or less and it’s based on market forces,” he said.
• And when CanWest CEO Leonard Asper was asked what he thought of that when his company presented, he said there is already a drag on specialty profits. “There is a serious check on it – it’s called the CPE,” he said. Specialty Canadian programming expenditure costs rise as profits for the channels rise, which is unfair, noted Asper.
Not long ago TVTropolis saw its CPE jump “because somebody thought we were doing too well,” he said. “Specialty has enough taken out of it.”
• Of course, Canwest, like its broadcasting brethren, want a new fee from the cable and satellite companies for the carriage of their broadcast signals. Canwest said Wednesday it would tie that new money to a new CPE, but it wants the flexibility to decide how and where to deploy any new Canadian content.
Asper came as close as anyone to a number during his presentation. While CRTC chairman Konrad von Finckenstein cautioned Asper, since this proceeding is to decide about whether or not there can be a negotiation and not to set a fee, the Canwest CEO guessed Canwest would pursue one in the range of certain specialties, many of which range from the 30 cents to 70 cents per subscriber per month area. He also cited a company survey that said 82 cents is what Canadians would be willing to pay.
“Are we likely to ask for a dollar?” said Asper. “No.”
In an interview with Cartt.ca after his session, Asper said new funds are needed for survival and could be pumped into any kind of programming. “Our whole point is we want the flexibility. For some markets, more local news is better. Other times you get no return on your investment on local news,” he said. “It could go into any one of those pots. It depends on the programming needs of the stations or specialties.”
• Asper also insisted that the broadcasters didn’t just wake up and smell the recession and ask for more money. This is a long-term, ongoing battle (some have said it’s a half-century old battle, but…). “We’ve been saying since 1993 – that the system is unfair… it favours cable… and broadcasters are going to need subscriber revenue.
“We are not suddenly waking up and saying there’s a recession and we need money. This is a principle we have been pursuing for a very long time… This is Groundhog Day.
• Canwest’s submission also called for certain protections should a new negotiation regime be put into place to protect its other businesses. Specifically, if carriers have to pay a new charge for Global TV, will it then come out of the revenue for HGTV or Showcase? It’s a real issue, insisted Canwest SVP regulatory and government affairs Charlotte Bell. “We’re very concerned about that obviously… They have told us they would take it out of our other services.”
Negotiations for a fee for OTAs would have to be “fenced in negotiations that don’t capture the value (from specialties) or the negotiation is pointless,” added Canwest VP regulatory Jon Medline, who explained that retaliation might not just be monetary. “Any repackaging of specialty services,” where a channel is suddenly shifted to a less lucrative packaging slot with a carrier, “should be reviewable with prior approval from the Commission required to make sure that doesn’t happen,” added Medline.
• It’s been interesting noting that Rogers, and today Videotron, say they make no money on their video products. Rogers cited data showing it lost money on video in the last fiscal year and Videotron today said its margin on just its traditional cable video product stands at 1%.
So to be a little cheeky, we asked Dépatie why not just get out of the RF, MPEG2 business and go all-IP? “The problem is then the costs,” he said. “The customer wants quality and you’re not going to get HD over IP for a while… and then we’ll be going 1080p and that will be a problem with the transfer to IP.
“The cost per bit would be even more expensive than it is on (cable) video… too expensive for the customer and the distributor,” he added.
“But keep in mind, we will offer it. That is where we’re going.”
• When it comes to negotiating a wholesale cost among the two biggest players in Quebec, CRTC vice-chair, broadcasting, Michel Arpin earned some laughs when he noted “the negotiations between TVA and Videotron might be very short.”
• One of the topics that CRTC chairman Konrad von Finckenstein and others keep asking is what if a new value for signal regime only let broadcasters charge a fee for an HD signal, rather than standard definition. One supposes the consumer might be more willing to pay more for a higher quality picture – and then a carrot would be built in to force broadcasters to switch to digital transmission as they pursue that wholesale fee potential.
Despite others’ reservations on days one and two that it’s more about the content being valuable than the pixels, Canwest and Quebecor executives were intrigued by the idea. “We think it’s a pretty interesting idea,” said Péladeau. “HD is certainly a way to bring added value to the consumer.”
Said CanWest head of regulatory Charlotte Bell to the same query: “We appreciate the link you’re making and it merits taking some time to look at it.”
The hearing continues this morning with Corus Entertainment first up.
