SaskTel aiming to offer VOD by year-end as PPV dispute with Shaw continues

Frustrated by sour pay-per-view (PPV) negotiations with Shaw Communications Inc., SaskTel plans instead to offer its digital TV customers video-on-demand (VOD) by the end of the year. The Crown corporation owned by the Saskatchewan government has applied to the CRTC for a VOD licence, but the application has not yet been gazetted and no public hearing date has been set. Manitoba Telecom Services Inc. (MTS), another telco offering a TV distribution service, is also in the midst of preparing a VOD application. "Our VOD application is a work in progress," Roy Sherbo, VP of MTS TV Services, tells Canadian Communications Reports. Like SaskTel, MTS is having trouble coming to terms with Shaw to offer PPV. The VOD services could well make it onto the telcos' TV services ahead of PPV channels due to the ongoing dispute with Shaw. The two telcos have filed complaints with the CRTC stating that Shaw wants them to pay minimum guarantees for their PPV service, something it doesn't do with cable operators. SaskTel and MTS also say that Shaw wants a different revenue split on income derived from the service with them than with other distributors. Shaw is the licensed PPV operator for Western Canada, and SaskTel and MTS argue that their inability to come to reasonable terms for the service means that they are unable to fulfill part of their carriage requirements. As Class 1 broadcast distributors, they are required under section 18 (5) of the Broadcasting Distribution Regulations to distribute at least one English-language general interest television PPV service. Sherbo notes that not being able to offer PPV at this point in the development of MTS' digital TV service isn't critical. "PPV is important as a TV service. But at this point, the customers whom we've acquired aren't PPV customers," he notes. "It's not an issue at the moment because the PPV penetration level in Manitoba isn't that high. But we view VOD as a different offering from PPV. Certain content, such as movies, tend to come out on PPV before VOD. It's about being able to offer choice to your customers." Shelly Smith, general manager of Digital Interactive Video, the business unit within SaskTel that oversees the telco's digital TV service, says that SaskTel plans to put in its own server infrastructure and that there are no technical limitations to offering VOD over phone lines. "I think the exciting (development for the TV service) for us is VOD. We're very excited about what we can provide for the customers, and I think they are going to like what they see. We hope to be offering it by the end of this year," she tells CCR. "You wholesale pay-per-view, for example, through Shaw. But with VOD,…we'd negotiate directly with suppliers." In a complaint filed with the CRTC last November, SaskTel accuses Shaw and its PPV subsidiaries of granting undue preference to cable operators with regard to its PPV service. MTS, which began a soft launch of its digital TV service in January in Winnipeg, makes a similar argument in a separate complaint filed with the regulator in January 2003. Both SaskTel and MTS have asked the CRTC to order Shaw and its PPV subsidiaries to provide them with a PPV service on "an expedited basis, under reasonable terms and conditions." A decision is expected to be released by the commission in either May or June. "SaskTel wishes to note that the actions of Shaw and its subsidiaries have not only disadvantaged SaskTel, but also SaskTel's customers," states SaskTel's November 21 complaint. "Customers can now exercise their freedom of choice to obtain terrestrial cable television services from someone other than the former monopoly provider. Unfortunately, Shaw is penalizing those customers choosing SaskTel, by denying SaskTel access to the PPV Service." In follow-up correspondence to the CRTC on January 21, SaskTel notes it would have to acquire in the range of 60,000 to 75,000 customers, or 30% to 35% of the entire addressable market, in the first two years of operation to meet the proposed minimum guarantees demanded by Shaw. Both SaskTel and MTS note that the agreement that they were provided with by Shaw was completely different from anything discussed in ongoing talks. Not only were minimum guarantees demanded, but also the discussed revenue split was changed. In its January 20 complaint to the CRTC, MTS notes that Shaw's original proposal called for 45% of the $4.99 retail price for a PPV program be paid to the studios, with MTS receiving 50% of the remainder. But a draft agreement dated Nov. 21, 2002 prepared by Shaw lowered the amount that MTS would receive to 20% of the retail price. As well, both SaskTel and MTS say that Shaw never mentioned during extensive discussions that it needed to negotiate separate agreements with the Hollywood studios for product offered over telephony lines. "I'd love to see that evidence (that the studios want more)," Smith notes. "More recently, Shaw has stated that because MTS is a digital subscriber line (DSL) service provider, Shaw does not have the legal right to offer PPV Services to MTS. MTS considers that Shaw's demand for minimum payments and its contrary or opposing claim that it cannot provide PPV Service to DSL providers to be a thinly veiled attempt by Shaw to hinder MTS's ability to compete in the broadcast distribution market in competition with the cable television and satellite services offered by Shaw," MTS states in its complaint. "MTS notes that after ten months of negotiations, Shaw's letter of December 18, 2002 was the first time that Shaw raised the issue of its right to provide PPV Service to MTS as a DSL service provider. MTS further notes that the matter was not raised even while Shaw provided PPV Service during MTS's operations trial as a DSL service provider. MTS believes Shaw is now raising the issue…so as to deny PPV Service to MTS." MTS also complains about the number of PPV channels that Shaw is willing to make available to its service. The telco claims that Shaw is proposing to provide it with 15 PPV channels, while it gives affiliate satellite TV operator Star Choice Communications Inc. 36 channels, and Shaw Cablesystems in Winnipeg offers 50 PPV channels. Already, 4,000 subscribers have signed up for SaskTel's digital TV service, called Max Interactive Services, since the initial commercial launch in Regina last September (CCR, Sept. 26/02). Max Interactive Services is a fully integrated broadcast and Internet service that provides digital TV programming to the TV and unlimited high-speed Internet access to the TV and PC. It is now available in all but one community that SaskTel is licensed to serve - Regina, Saskatoon, Moose Jaw, Prince Albert, Yorkton, Estevan, Weyburn, Swift Current, The Battlefords, and White City. No date has been set for deployment in Pilot Butte.

SaskTel aiming to offer VOD by year-end as PPV dispute with Shaw continues

Broadcast | March 27, 2003

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