CRTC decision proposes broadcasters get power to force ‘value-for-signal’ negotiations with distributors

GATINEAU, Que.—CTV celebrated a key CRTC decision Monday that will allow private broadcasters to force open negotiations with the cable and satellite distributors by having the power to pull their programming—including popular American shows—from the distributors. The CRTC’s highly anticipated decision on group-based licensing for private television services did not propose “fee-for-carriage,” in which conventional broadcasters charge the distributors a set fee to carry their over-the-air signals. Instead, the commission will ask the Federal Court of Appeal to approve its proposed system that will allow broadcasters to force the distributors into negotiations, where they can determine the “value” of carrying the broadcasters’ over-the-air channels, as well as the channels’ fair distribution. Distributors could provide “value” for the carriage of broadcasters’ local signals through various deals—such as offering local channels a higher-profile spot on the dial, or carrying a broadcasters’ specialty channel for free or at a reduced rate. Paul Sparkes, CTVGlobemedia’s executive vice president of corporate affairs, told the media Monday that the decision was exactly what the broadcaster had asked for: the chance to enter negotiations with the cable and satellite carriers, which have adamantly oppose the idea. However the Copyright Act of Canada does not require cable and satellite distributors to compensate broadcasters for their over-the-air programming, so the CRTC will ask the Federal Court of Appeal to approve the CRTC’s proposed negotiation regime. One CRTC official said he hopes the court process will be expedited and dealt with within six months. A key part of the negotiating system will be the broadcasters’ power to pull their programming—including popular American shows they’ve licensed for broadcast—from the distributors. “Part of the system we are setting out is that you give notice if you want to negotiate,” CRTC chair Konrad von Finckenstein told CTV’s Power Play Monday. “If you don’t negotiate, you are entitled to hold back your signal.” If broadcasters chose to pull the plug on signals, they would also affect American channels that carry the same programs in Canada. “ not only your own signal, but copies of it that are being transmitted by American broadcasters,” Finckenstein said. Distributors would also have the power to refuse to carry the local signals in the event that an agreement cannot be reached. Broadcasters CTV and CanWest Global have led the value-for-signal campaign, arguing that the distributors should pay to carry their free, over-the-air channels. Distributors Shaw Communications and Rogers Communications are staunchly opposed to paying anything for the signals. Canwest was not available for comment Monday. The company is currently restructuring under creditor protection, and Shaw is finalizing a bid to take a controlling stake in CanWest’s broadcasting assets. The CRTC will present a report on the value-for-signal decision to the federal cabinet Tuesday, which has the power to overturn the decision. “Our Government's primary focus has always been the interests of Canadian consumers,” Heritage Minister James Moore said in a statement Monday. “We appreciate today's decision of the CRTC on the future of an important industry for all Canadians. We look forward to the public release of the second report by the CRTC tomorrow.” The distributors reacted Monday by saying the regime will result in a “tax” on consumers’ cable and satellite bills. Phil Lind, vice chairman of Rogers, said the company is not interested in entering negotiations with the broadcasters, and that it will take the issue to the government and, if necessary, appeal to the Supreme Court. “It raises the prospect of black-outs. I think that is very wrong,” Lind told The Wire Report. “The situation is fine exactly the way it is today. We’re not interested, and our customers aren’t interested, in paying more for what they’re getting today.” Mirko Bibic, Bell Canada’s senior vice president of regulatory affairs, also told The Wire Report Monday that he is against the value-for-signal decision. “I would like to see the federal government overturn this decision and declare a policy that taxes like this shouldn’t be imposed on consumers,” he said. “The consumers are going to see increased bills on a monthly basis for access to local programming, and that’s the part that I find rather sad.” Value-for-signal negotiations have existed in the United States for more than 18 years. In that period broadcasters’ bargaining tactics have led to three signal blackouts. “What has happened in the US is that they negotiate for compensation ‘in kind.’ The cable company may agree to pay to carry an extra specialty channel or may give the channels better placement on the dial,” Finckenstein told CTV Monday. “The experience has been that most of the compensation is not monetary, but in kind between the cable companies and the broadcaster.” At a commission hearing last November, Sparkes proposed a Canadian “negotiation-for-value regime” modeled on the American system, known as the “retransmission consent regime.” “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. If the Federal Court of Appeal approves the negotiation regime, the parties would renegotiate their terms every three years. The broadcasters could elect to stick with the current agreement, or opt to negotiate a greater value for their programs and signals with the cable and satellite providers. Steven Guiton, vice president regulatory affairs with the CBC, argued that there was nothing in Monday’s decision for the public broadcaster. The CBC said the proposed negotiations regime unfairly includes only private broadcasters. “We are very disappointed,” Guidon told reporters. “In our view the CRTC has failed to fulfil its responsibilities under the Broadcasting Act.” He added: “Effectively this is a very dark day for public broadcasting and there does not appear to be a future for public broadcasting further to this decision.” Also in today’s decision, the CRTC said it is proposing a minimum 30 per cent cap on Canadian programming spending by the three largest private English-language broadcasters: CTVGlobemedia, CanWest, and Rogers. Under the proposal, broadcasters could move a portion of their 30 per cent Canadian programming spending to specialty channels. The spending cap also includes a five per cent portion that must be dedicated to dramatic and documentary programs. In 2009, conventional over-the-air broadcasters spent $846.3 million on foreign programming, representing a 9.2 per cent increase over the previous year and the highest proportion of total programming expenses ever, at 59 per cent. jmigneault@thewirereport.ca

CRTC decision proposes broadcasters get power to force ‘value-for-signal’ negotiations with distributors

Broadcast | March 22, 2010

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