CRTC arrives at fee-for-carriage decision, but holding its tongue on forcing negotiations

OTTAWA—CRTC chairman Konrad von Finckenstein says the commission has arrived at a decision on the controversial value-for-signal debate, but he’s holding his tongue on whether it will include a negotiations regime to determine the “value” of local broadcasts. At the Canadian Film and Television Production Agency’s Prime Time Ottawa conference Friday, von Finckenstein took part in a question-and-answer session with Trina McQueen, journalist and professor at the Schulich School of Business, where he said that the commission “hammered out a decision” over the previous three days. “It’s done in my head. It now has to be written, it has to be translated, be formulated, and be developed in a communications plan. In March, you will see the result,” he said. Von Finckenstein suggested he is discouraged that the two sides in the fee-for-carriage debate could not reach an agreement. He referred to the system in the United States originally mandated by Congress, which encourages the disagreeing parties to negotiate a deal. “If you want to have a deal, you negotiate it, and the chips fall where they may,” von Finckenstein said, describing the system in the United States. “The FCC won’t intervene except to ensure that it’s a fair negotiation. That was one model that was put before us.” “So why can’t we do that?” McQueen asked him. “We shall find out next month if we do,” von Finckenstein replied. “But I didn’t come here to give you a sneak preview.” Canadian broadcasters and distributors (the cable and satellite companies) have been waging an intense battle over the issue of fee-for-carriage, or value-for signal. Broadcasters CTV and Canwest have been leading the value-for-signal campaign, arguing that the distributors should pay to carry their free, over-the-air channels, but distributors Shaw Communications and Rogers Communications are staunchly opposed to paying anything for the signals. The CRTC will be issuing a decision on the matter next month. Von Finckenstein emphasized that the broadcasters and distributors should come to an agreement—one that does not necessarily involve fees. He said a deal could be worked out "in kind," in which the distributors exchange something of value for the carriage of over-the-air signals. “It can be in terms of ‘in kind,’ in terms of offering special deals on specialty channels, or on show times, or whatever,” von Finckenstein said. “But it’s still a basic conflict, and both sides have backed themselves into positions that I don’t quite understand. I have not seen any sign from either side of relenting or trying to approach this thing as they should—as a business issue.” Michael Hennessy, senior vice-president of regulatory and government affairs at Telus Corp., who was in the audience for von Finckenstein’s discussion, said he interprets the comments to mean that some form of value-for-signal will be put to the distributors. “It seems the message is going to be, ‘Yes, there’s going to be value for signal, and it should be negotiated, but it could involve things like the number of affiliated channels you carry,” he told The Wire Report. Hennessy said the negotiations could be arbitrated in a manner similar to baseball arbitration. The CRTC, like the system in the United States, would ensure “good faith” negotiations. CTV and Rogers did not respond to requests for comment Friday. At a commission hearing last November, CTV’s Paul Sparkes, executive vice president of corporate affairs, proposed a Canadian “negotiation for value regime” modeled on the American system, known as the retransmission consent regime. Under the CTV proposal, stations that offer local programming could elect to negotiate the terms of signal carriage every three years. If the parties can't come to an agreement, television stations would have the right to withhold their signals, or the distributors could refuse to carry them. “Under our proposal, the commission would not set rates, but should offer support to ensure ‘good faith’ bargaining and orderly negotiations,” Sparkes told the commission last November. “Our proposal isn't radical or untested. It's based on a model that has worked well for local broadcasters and consumers in the United States for the last 18 years.” McQueen also asked von Finckenstein Friday about a recent BMO Capital Markets research note that suggested Shaw’s proposal to acquire a controlling stake in CanWest Global Communications Corp. could put an end to the fee-for-carriage debate. The BMO note said that if Shaw’s plan is approved, CTV would remain the only large broadcaster championing fee-for-carriage. Canwest would fall to Shaw’s side of the debate, backed by Rogers. Von Finckenstein said that Shaw’s purchase of Canwest—if approved—would not influence the commission’s decision. “Our decision is done,” he said. “Assuming that’s the case, they can say, ‘well, we’ve changed our mind and now we’re ready to sit down and negotiate.’ Nothing is stopping them—nothing is stopping anybody from doing that right now.” Von Finckenstein also expressed disappointment with the tone of last year’s hearings on fee-for-carriage. “We have far more competitive hearings, far more litigious hearings. We had challenges to the CRTC on due process. That has never happened before. I think we’re just going to be a much more competitive climate in the future,” the chairman said. “Will there be less tension? I doubt it.”

CRTC arrives at fee-for-carriage decision, but holding its tongue on forcing negotiations

Broadcast | February 19, 2010

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