Distributors now assessing their options, looking ahead to Federal Court, lobbying

Satellite and cable distributors are quietly regrouping and planning their next course of action following the CRTC’s decision this week on a negotiation regime for value for signal. Although the private broadcasters declared victory following the CRTC decision—which if approved by the Federal Court of Appeal would give them the power to force open negotiations with the distributors on value for signal—the distributors now have time to plot strategy. The Wire Report surveyed several industry and regulatory insiders who say that the distributors are comfortable in the belief that the Conservative government strongly opposes any move toward a value-for-signal regime that would result in price hikes for consumers of cable and satellite television. On Monday the CRTC issued its highly-anticipated decision on value for signal, proposing a negations regime that would allow private broadcasters to force open talks with the distributors with the power to pull their programming. But the commission said that it recognized a “valid dispute” over its legal authority to impose a negotiations regime, and referred the question of its jurisdiction to the Federal Court of Appeal. The CRTC said it is requesting an expedited court proceeding. The commission's proposed negotiating system would allow negotiations in which the broadcasters could demand fees or other items of “value” for the carriage of their signals, such as a higher-profile placement on the dial, or paying a reduced rate for the carriage of a broadcasters’ specialty channel. Neither the broadcasters nor the distributors are commenting for now. Of the broadcasting and distributor companies contacted for this story, only Rogers’ Jan Innes, vice-president of corporate communications, commented, saying the company is now evaluating its options. The court’s review of the issue, even at an expedited pace, is not expected to result in a decision in sooner than six months. Insiders say they expect the process to be closer to a year, and even then, if the federal court approves the CRTC proposal—which remains an “if”—nothing is final. Rather, they’re calling the court decision only a “second step.” The first was the CRTC decision, and the third will be the Conservative government’s evaluation of the court decision. If the Federal Court of Appeal approves the CRTC’s proposal, the government will have to decide whether to let it stand or to propose legislative changes to address it. “I think the decision was actually pretty good for the distributors,” Professor Jeffrey Dvorkin, the Rogers distinguished visiting chair in journalism at Ryerson University, said in an interview. The decision buys the distributors time, he said, during which they can plan for new distribution technologies and platforms. “They are a very smart industry, and they can anticipate that satellite is only one platform,” he said. “I think what they’re looking for is flexibility. They’re going to be able to pivot on the emergence of new platforms and new delivery systems.” Dvorkin said how the Tories react to the court decision will depend on whether a federal election happens in the interim, and whether it significantly changes the makeup of Canada’s Parliament. A majority Conservative government would react more decisively than a minority government. Insiders point to Prime Minister Stephen Harper’s comments during Parliament’s question period this week as evidence that the government will wait for a court decision before issuing its own opinion on the matter. “Obviously, we asked the CRTC to look at that question,” Harper said Tuesday. “The government itself has indicated in the past that we would obviously have concerns with taxes or fees imposed upon consumers. The CRTC has delivered some recommendations, and is taking this matter to the courts for further opinion. We will watch for the outcome of those deliberations.” “There’s no question this government hates value for signal,” one regulatory source noted in a background interview. “Every message it’s sent is, ‘We don’t want it to happen, we think it’s bad for consumers.’” Although the government has not stated that it outright opposes a value-for-signal policy, it continues to stress consumer interests, as it did this week in response to the CRTC. Some point to the Conservative members’ dissenting opinion in the House heritage committee’s report on Canadian television last year, which opposed value for signal and said the advertising troubles facing local broadcasters were “structural and cyclical.” The Tory members of the committee opined their “most fervent and rigorous opposition to any potential fee for carriage system, either negotiated or imposed, that would have a detrimental effect on the consumer.” The distributors will focus on the Federal Court of Appeal proceeding, arguing that the CRTC does not have the jurisdiction to impose a negotiation regime, but insiders say they will also lobby the heritage minister, the industry minister, and the Prime Minister’s Office. Phil Lind, vice-chairman of Rogers, noted as much earlier this week, when he told The Wire Report that he will take the issue to the government. If necessary, the company will appeal any court judgment to the Supreme Court, he added. The distributors also aren’t expected to continue their “Stop the TV Tax” campaign. Now that the issue has been punted to the Federal Court of Appeal, public opinion is taking a back seat in the process. Still, some observers say the distributors’ stop-the-tax campaign was powerful, and that it resonated in the media coverage of the decision even this week. “The distribution team has done a really good job of dominating the message,” noted Duncan Stewart, director of technology, media and telecommunications research at Deloitte Canada. “We know from a lot of PR campaigns that the word ‘tax’ is a real hot button.” The CRTC’s report to Cabinet, issued Tuesday, observed the “well funded” public relations campaigns from the broadcasters and distributors. For five months last year, the broadcasters ran a “Local TV Matters” campaign through a coalition involving the CBC, Global, A channel, CHEK News, V, and NTV. The distributors countered the broadcasters’ campaign in October 2009 with "Stop the TV Tax,” organized by Bell, Bell Aliant, Cogeco, Eastlink, Telus and Rogers. The CRTC received 114,890 comments through the longer-running “Local TV Matters” campaign, it said, and 49,693 comments through “Stop the TV Tax.” While the broadcasters’ campaign noted the possibility of closing local television stations, the distributors’ campaign put the threat of a “tax” squarely on the public agenda. The CRTC report said the distributors’ message that fee for carriage would result in a $10 per-month hike on cable bills led to consumer reaction “characterized as one of outrage”—particularly when they would not receive any new services. “any expressed concern about the future of local television,” the CRTC said of the campaign’s impact. “Second, consumers by and large stated that they do not want to pay more for the programming they currently receive.” sdoyle@thewirereport.ca

Distributors now assessing their options, looking ahead to Federal Court, lobbying

Broadcast | March 26, 2010

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