OTTAWA – Canada’s satellite relay distribution undertakings (SRDUs) should be exempt from licensing requirements, say Canada’s only two SRDU operators – Shaw and Bell – in their submissions to the CRTC’s consultation on that market.
SRDUs transport broadcasting signals to broadcasting distribution undertakings (BDUs) that do not have access to fibre interconnections to receive their television signals, and, are often located in rural and remote parts of the country.
Both Shaw and Bell stress in their submissions dated July 11th that other technologies create enough competition in the signal transportation field to negate the need for licensing requirements.
“With the emergence of DTH (direct-to-home) and changes to the SRDU licensing framework to allow for competition in the late 1990s, the development of extensive terrestrial fibre networks for the relay of signals, and the lifting of restrictions on what cable operators are required to source from licensed BDUs, the need for licensing of SRDUs no longer exists,” reads Bell’s intervention. Bell offers SRDU services under the Bell ExpressVu brand.
In addition, the two companies asked the Commission to provide regulatory symmetry between SRDU services and terrestrial relay distribution undertakings (TRDUs), which currently operate under a licensing exemption order. As well, they want the CRTC to scrap a requirement for SRDUs to contribute 5% per cent of their gross revenues to Canadian programming funds.
“(T)here is no reason, for example, why TRDUs should be exempted from a contribution of 5% of gross revenues to Canadian programming while SRDUs remain subject to such a contribution,” Shaw’s submission reads.
Shaw pointed out that revenue from its SRDU business, known as Shaw Satellite Services, has been in a “significant” decline since 2004 due to competition from terrestrial relay networks. The company said that the drop in revenues constitutes evidence that its SRDU services are part of a competitive marketplace.
But Canada’s independent BDUs insist that the SRDU marketplace is not competitive, and that licensing requirements should remain in place to protect their investments.
“Part of our position is that the Commission’s key enforcement powers, its powers of inquiry, its power to make mandatory orders and the summary offence positions, depend at least to an extent, on the existence of conditions of licence,” said Christopher Edwards, vice-president of corporate and regulatory affairs for the Canadian Cable System Alliance (CCSA) in an interview with Cartt.ca. “A breach of such a condition is a way into those enforcement provisions.”
Edwards said that Shaw enjoys a virtual monopoly as Canada’s primary SDRU service provider because its technology is compatible with the Motorola head-ends that have become the industry standard for the majority of Canadian television service providers. “I would say 90% plus of our members are solely reliant on the Shaw SRDU,” he added.
The CCSA has taken the position that TRDUs do not qualify as effective competition to the satellite relays because fibre infrastructure is largely absent in rural and remote areas where SRDUs are the primary means of distributing television signals.
Concerns over vertical integration spurred FreeHD Canada, a company that expects to enter the SRDU space in 2012, to argue in favour of maintaining current licensing requirements for the sector.
“Past anti-competitive practices by SRDUs, coupled with increased levels of vertical integration in Canada’s two operating SRDUs, and the resulting increased motive and opportunity for anti-competitive behaviour, and the need for CSG-type groups to protect sensitive competitive information requires the Commission to continue to licence SRDUs,” states FreeHD Canada’s intervention.
Edwards noted that the primary competitors to the CCSA’s member companies are the DTH satellite services owned by Bell and Shaw. He added that the two vertically integrated companies have the potential to partake in anti-competitive behaviour thanks, in part, to their substantial broadcasting assets.
“Let’s suppose Shaw Broadcast hikes the Canwest signal rate and hikes the transport rate to a certain degree; we lose customers and those customers are going to Shaw Direct,” Edwards said. “That’s an ugly scenario for us.”
The Independent Broadcast Group (IBG) used its submission to flag concerns about a practice known as ‘tied selling’ in which a supplier of SRDU services, in this case, requires a customer to acquire a second service they may not want on the condition of paying for their primary service. The group has asked the CRTC to prohibit the practice with SRDU services.
“(T)his issue is most pronounced with Bell Media since, as a practical matter, it is usually Bell Media’s satellite delivery service that is not needed by a Canadian programming service,” the IBG’s submission maintains. The organization claims independent broadcasters are often asked to pay for Bell’s SRDU service, which they don’t use, in exchange for carriage on Bell’s more popular DTH service.
