OTTAWA – In a 5-4 decision, the Supreme Court of Canada said Thursday that the CRTC does not have the jurisdiction to allow conventional over-the-air broadcasters pursue a wholesale fee from BDUs for the carriage of their signals. The court’s decision should just about bring to a close the so-called fee-for-carriage (FFC) or value-for-signal (VFS) debate.
The court heard the case back in April which was essentially between the big BDUs, which had always stood against VFS, and Bell Canada. Canwest Television was listed as a respondent, but that was a leftover artefact of the earlier case as Canwest’s new owners, Shaw Communications, is stanchly anti-FFC.
“I’m feeling absolutely phenomenal, but what’s really good is it’s a big win for the customer,” Rogers Communications vice-chair Phil Lind told Cartt.ca this morning after the decision was released. Lind has been at the forefront of this particular battle for years, backed up by Cogeco Cable, Shaw Communications and most of the Canadian BDU community.
Bell Canada expressed disappointment in a statement. “With value for signal, TV viewers across the country would have benefited from long-term stability for their local television stations, which currently rely on an advertising market that has seen permanent structural change, and is no longer able to fund such a model on its own,” reads its release.
“With its reliance on an uncertain advertising market, the financial model for local television is broken,” said Mirko Bibic, chief legal and regulatory officer and executive vice-president, Bell Media. “Bell Media believes the Canadian television industry as a whole must work together toward a new model for local TV, one that provides viewers with stable local TV stations well into the future.”
Lind, however, says any such regulatory regime would only have increased costs for consumers, who would have revolted. “It could have been awful. It could have been three, four, five or six dollars more a month for nothing extra,” he said. “We always thought we had a good argument and of course we have the consumer on our side… And although they didn’t step into it, the government was clearly not on side with dinging every cable and satellite subscriber three or five bucks a month.”
This has been a long, drawn out battle fought many times since 2000 in the court of public opinion (remember "Local TV Matters" vs. "Stop the TV Tax"?) and in front of the Commission (It even caused some of us to make rash statements…). The fight has its origins in the earliest days of cable when broadcasters called cable operators “pirates” in the 1950s and ’60s for distributing their TV signals to paying customers over wires. However, when those same broadcasters saw that the cablecos were distributing clear, stable signals far and wide, allowing them to make more money on advertising, the claim of “pirate” mostly went away through the 1970s, ’80s and ’90s.
But as specialty channels – distributed only via cable then later satellite – grew in popularity over time and when network operators invested in high speed Internet which exploded, BDU (especially cable) profit margins fattened considerably – which drove broadcasters to feel that their conventional stations deserve a bigger share of the consumer’s wallet via some sort of subscription fee. After all, they argued, the first thing a customer must buy from any cable operator is the basic cable TV package, whose prime features are those conventional TV stations.
However, the court sided with BDUs who have long insisted that the CRTC does not have the jurisdiction to create what amounts to a new copyright regime, something the court agreed is not allowed. “Reading the Broadcasting Act in its entire context reveals that the creation of such rights is too far removed from the core purposes intended by Parliament and from the powers granted to the CRTC under that Act,” reads the decision.
“Even if jurisdiction for the proposed value for signal regime could be found within the text of the Broadcasting Act, the proposed regime would conflict with specific provisions enacted by Parliament in the Copyright Act. First, the value for signal regime conflicts with s. 21(1) because it would grant broadcasters a retransmission authorization right against BDUs that was withheld by the scheme of the Copyright Act. A broadcaster’s s. 21(1)(c) exclusive right to authorize, or not authorize, another broadcaster to simultaneously retransmit its signals does not include a right to authorize or prohibit a BDU from retransmitting those communication signals. It would be incoherent for Parliament to set up a carefully tailored signals retransmission right in s. 21(1), specifically excluding BDUs from the scope of the broadcasters’ exclusive rights over the simultaneous retransmission of their signals, only to enable a subordinate legislative body to enact a functionally equivalent right through a related regime. The value for signal regime would upset the aim of the Copyright Act to effect an appropriate balance between authors’ and users’ rights as expressed by Parliament in s. 21(1).”
As we outlined in a story on Tuesday previewing the decision that came today, back in September of 2009 (before Bell Canada owned CTV and before Shaw Communications purchased Canwest Global), the CRTC held its group based licensing hearing and the March 2010 decision granted broadcasters the right to pursue such a fee, calling it a value for signal regime. However, the Commission did not outline how it would work as it declined to go any further, saying it wanted confirmation from the Federal Court that it had the right to do this. The Regulator’s legal eagles believed they have the right but they also knew BDUs would appeal fee-for-carriage/value-for-signal to the courts anyway, so in its group-based licensing policy decision, the CRTC said it wanted to ask the court first if it was okay.
Before that 2009 decision, however, broadcasters had already asked for and twice been denied the right for a wholesale fee for the off-air stations by the CRTC.
Known as the retransmission consent regime in the United States, this is a growing multi-billion dollar business there and so far, a windfall for American broadcasters, much to the chagrin of the carriers. However, the U.S. system is far different as there are dozens of independently owned broadcast groups operating as affiliates to the likes of CBS, NBC, ABC and Fox. In Canada, most conventional broadcast stations have long since been corporate-owned and now nearly all of those OTAs are owned buy large BDUs.
Also – as the BDUs often warned the Commission, if there was to be a FFC regime here, U.S. broadcasters would want a cut, too. As shown last month when some border broadcasters put out a release seeking to access distant signal funds (wholesale fees paid by Canadian BDUs to out of market conventional broadcast stations), the American TV stations are definitely champing at the bit, searching anywhere for more revenue.
With this Supreme Court decision in hand now, however, watch for the Canadian BDUs to ask the Commission to dismantle the distant signal compensation regime set up in the 2008 BDU and specialty policy (CRTC 2008-100), as well. “We’re studying that too because there are references to it in this decision,” Lind added.
As for Bell, its executives declined interviews and its statement gave no clues to next steps, if there even are any.
“In the most recent broadcast year, despite the boost in advertising sales from London 2012, Bell Media’s conventional stations saw a decline in their total revenues, and operating income is down significantly,” adds its release. “Small-market stations remain particularly challenged financially, and will become more so as the CRTC’s Local Programming Improvement Fund support is phased out.”
What do you think? Is this the last chapter for FFC/VFS? Let us know in the box below or at editorial@cartt.ca.
