CRTC releases digital conditions; licensees worry rates will lead to disputes in carriage

Despite giving the CRTC high marks for conditions of licence that are "flexible and balanced" for the new digital services, many programmers say the commission could have done more to ensure reasonable carriage. Rather than taking a hard line on distribution rules, the CRTC wants programmers and distributors to develop a code of conduct dealing with equitable terms of carriage, including launch arrangements, and undue preference or disadvantage for the new digital services. The Canadian Cable Television Association and Bell ExpressVu have already developed codes, while the Canadian Association of Broadcasters is working on its own code to address what it sees as deficiencies in existing attempts. A code agreed to by both distributors and programmers must be filed with the CRTC by Feb. 15. But many digital licensees worry such codes won’t go far enough to ensure the success of the new channels. "The code of conduct is a good first step, but we’re in favor of something stronger," says Rob Malcolmson, senior VP of Headline Media Group Inc, which will operate the Category 1 PrideVision channel. "For example, the commission could have required affiliation agreements for carriage well in advance of the launch. Because it didn’t pick up on that, negotiations will be protracted." Another concern is that Category 1 licensees won’t be able to negotiate fair wholesale rates. Martha Fusca, president of Stornoway Communications Inc, which in partnership with Cogeco Radio-Television Inc, got greenlighted for the Category 1 public interest channel Issues, says she’s disappointed carriage terms don’t have to recognize specific business plans. "With the Issues Channel, we based our (monthly wholesale rate of ) 35 cents (per subscriber) on what we felt it would cost to deliver the channel we applied for," she says. "We are going to need that 35 cents, but there hasn’t been much in the way of comfort either from the CRTC or the industry to indicate that is understood," she states. "I think that if you are stuck with 10 or 15 cents," she adds, "what you’re going to get is a lot of repeats. Why would that intrigue the consumer? The consumer is only going to be intrigued by never before seen programming." Sheldon Teicher, VP of business development and general counsel for Corus Television, which was licenced in partnership with others for the Category 1 Canadian Documentary Channel, and Land & Sea, says programmers and distributors are going to have to work cooperatively to find the right balance. "Because if we don’t price things right, it’s going to be hard to entice people to move toward the digital environment," he says. How services will be packaged has yet to be decided, but Teicher says he’s pleased the CRTC decided to prohibit Class 1 and 2 cablecos and DTH companies from marketing Category 1 services on a stand-alone basis only. "The conditions are much as we would have anticipated and I think they try to strike a fair and appropriate balance for the channels that are launching into this environment," he adds. For example, the digital services can underspend by 10 per cent each year on their Canadian content obligations, provided the total commitment is met by the end of their licence term. Current analog specialty channels have a five per cent window. "I think that the 10 per cent clause is wonderful," says Teicher. "I think that the commission has recognized that the digital environment presents real opportunities, but also significant challenges and they’re trying to give people a little bit more flexibility to ensure that they can meet their commitments." The CRTC has also endorsed a common launch date of September 2001, but mandated that all Category 1s begin no later than Nov. 24, unless an extension has been granted. The 262 approved Category 2s must be on air no later than Nov. 24, 2003. Category 2 and foreign services have also been prohibited from launching in advance of the Category 1s. "I’m not sure we have the whole picture yet about how they are going to launch," says an industry source, noting that the CRTC issued with the conditions a call for proposals to amend the lists of eligible satellite services to include more foreign channels on a digital only basis. The possibility of more foreign services entering the market, and fuzziness surrounding packaging and carriage agreements far outweigh concern over any of the licensing conditions, the source concludes.

CRTC releases digital conditions; licensees worry rates will lead to disputes in carriage

Broadcast | December 21, 2000

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