Videotron says no undue preference or disadvantage
By Ahmad Hathout
Rogers is alleging Videotron has refused to allow the cable giant to audit its subscriber information for the purposes of determining whether it’s paying a proper rate of access for Rogers’s OMNI Regional programming.
The comments come in an intervention supporting a complaint by not-for-profit media company Accessible Media Inc. (AMI), which alleges Videotron is forcing it to sign a pre-audit memorandum of understanding (MOU) before AMI is allowed to analyze Videotron’s subscriber records. The problem, according to AMI, is that the MOU includes language that turns bulk subscribers from institutions like hospitals and hotels into single subscribers, so AMI gets far less revenue because there are many rooms and units at those institutions that may broadcast its AMI-TV and AMI-tele programs.
But AMI isn’t the only one that has experienced this issue, alleges Rogers in its submission.
“Rogers notes that, despite the absence of a commercial agreement for the carriage of OMNI Regional, Videotron allowed our auditors…to conduct an initial audit of their records covering the period beginning August 1, 2017 and ending June 30, 2019,” Rogers said. “However, once objections were raised by Rogers relating to the unilateral application of discounting of OMNI Regional’s wholesale fees for certain accounts, namely bulk and transient accounts, Videotron has since refused to allow subsequent audits of its records or remedy its practices despite ongoing objections by Rogers.”
There are two alleged violations outlined by AMI and Rogers: the alleged refusal of Videotron to provide audit access in the absence of some sort of prior agreement, and Videotron’s alleged unilateral discounting of the rate for institutional subscribers it pays for programming that it must carry based on the broadcasting law’s 9.1(1)(h) rule.
Rogers cites a section of the Broadcasting Distribution Regulations that command a licensee to provide access to “its records to any Canadian programming undertaking that receives a wholesale rate for its programming services to enable the programming undertaking to verify subscriber information for its programming services.”
It also cites a 2014 broadcasting policy that notes audit provisions “shall apply to all audits of a BDU…whether the programming undertaking and BDU are bound by a formal affiliation agreement or not.”
And on the rate part, Rogers cites another section of those regulations, which determine that a licensee that “distributes a new programming service with respect to which it has no commercial agreement shall abide by the rates, terms and conditions established by the operator of the concerned programming undertaking until a commercial agreement is reached between the parties or the Commission renders a decision concerning any unresolved matter.”
“By failing to pay AMI in the manner prescribed under the Commission’s distribution order, Videotron has granted itself an undue preference, and subjected AMI (and other services it has treated in a similar manner including OMNI Regional) to an unfair disadvantage by unilaterally (i) determining the method by which subscribers are counted, and (ii) determining the level of discounting it will take without agreement from the programming service, and has thereby enriched itself at the services’ expense,” Rogers said.
Rogers is asking the CRTC to force Videotron to give access to its records so that audits can be conducted by AMI and Rogers for OMNI Regional, which, along with AMI’s aforementioned programs, must be carried by the Montreal-based company.
Rogers, like AMI, said these are dollars that are desperately needed to continue to provide public interest programming.
Bell’s own intervention is heavily redacted, but its point of agreement with AMI comes in its reference to AMI’s expert report that highlights that program distribution agreements differentiate between single subscriber and bulk accounts, where the latter includes many units.
The Independent Broadcast Group (IBG) further argues in favour of AMI’s application. It said AMI is, by the rules, entitled to an audit for must-carry programs without having to accept certain terms first. Forcing it to accept said terms, the IBG said, is a violation of the broadcasting regulations cited by Rogers.
“If this approach were permitted to stand, this will result in very significant disadvantages to independent services in their dealings with BDUs,” the IBG said in its submission. “BDUs are in sole possession of the records necessary to conduct an audit and verify payments made to programming services.
“Effectively, under Vidéotron’s approach, a programming service can be required to agree to carriage terms that it might otherwise reject solely for the purpose of enabling its right to conduct an audit. This would turn the reason for the mandated audit provisions on its head.”
The IBG said it is also “commercially untenable” that Videotron would try to “remit pennies a month” for an institutional subscriber “for which the BDU may itself receive thousands of dollars.”
Videotron says CRTC should not interfere in commercial negotiations
Videotron said in a partially redacted French-language response that the CRTC should reject AMI’s complaint in its entirety.
For one, it said the terms of a bulk institutional subscriber is a “matter of free negotiation between the parties and should not be subject to review” by the CRTC, adding this has been a policy recognized by the regulator since 2005.
Videotron cites the CRTC’s decision not to modify the definition of the term subscribers in the Broadcasting Distribution Regulations after a previous complaint by the Canadian Association of Broadcasters – of which AMI is a member – said BDUs were using the current definition to make “artificially low” affiliation payments in certain cases.
The CRTC “instead confirmed that the parties have the freedom to agree on the definitions of their choice within the framework” of their contractual agreements, in particular concerning the term “subscribers,” Videotron said, adding CRTC intervention in a case like this would do major harm to the principle of free commercial negotiations for all BDUs.
Videotron also said it’s AMI’s fault for not accepting “a more than reasonable prior agreement” (i.e. the MOU), which prevented the audit from happening. “Videotron expressed its concerns about the importance of such supervision in order to guarantee the smooth running of the process.”
Videotron, in fact, alleges that AMI has previously accepted an MOU prior to an audit of its subscriber information.
AMI said in its Part 1 application that there is an industry standard by which Videotron refuses to play, which says that institutional subscribers can get a maximum bulk discount of 50 per cent.
But Videotron disputes that there is such a standard, arguing that AMI has not proven that to be the case.
Videotron adds that treating institutional or transient subscribers the way it does will not jeopardize the sustainability of those services.
AMI said Videotron told it that it has 174 institutional customers that could be classified as transient subscribers. The consequence of Videotron’s current subscriber configuration, AMI says, is that the Montreal-based company would only pay the current monthly rate of 28 cents for each of these institutions – amounting to roughly $48 per month for all of them.
“At a time when Canadian businesses and the general public are facing higher costs due to inflation, the AMI Services are seeing significant revenue declines as BDU subscribers ‘cut the cord,’” AMI said in its application. “AMI’s annual revenues have declined by more than $2 million annually over what they were five years ago.
“The situation is exacerbated when a BDU like Vidéotron does not pay AMI its fair share of bulk transient accounts,” it added.
But Videotron said the cord-cutting phenomenon is also affecting BDUs like itself. “Videotron is not only not responsible for this phenomenon which affects the entire industry, but above all it is actively fighting it to limit unsubscriptions to its cable distribution service, and incidentally, to protect subscriptions to the programming services that it distributed,” inferring AMI’s programs.
“It is not appropriate for the Commission to intervene in the free commercial negotiations of the parties for the sole purpose of protecting services 9.1(1)(h) such as AMI, from the current realities of the broadcasting market, while ignoring the similar realities of BDUs,” Videotron said. “Videotron certainly recognizes the role played by these services within the broadcasting system and their importance under the Act. However, there is no commercial or regulatory justification to treat these services differently, beyond the distribution to which they are entitled.”
Videotron also replied to Rogers, categorizing several of its points as “misleading.” However, relevant parts responding to Rogers are redacted.
Otherwise, Videotron asks the CRTC to deem irrelevant the discussion raised by the interventions related to discounts and rebates with or without an affiliation agreement, as it says its MOU is simply an attempt to establish the parameters of the audit process.
