CTV says profits from spectrum auctions should help finance digital transition

OTTAWA—A portion of the revenues from the upcoming 700 and 2500 MHz spectrum auctions should go to assisting broadcasters in the digital transition, CTVglobemedia says. In a submission to the federal government’s consultation on the digital economy, CTV said that the government's demands on broadcasters--through the transition from analogue to digital television broadcasting and the freeing up of spectrum for mobile broadband use in the 700 and 2500 MHz bands--is coming at a great cost to broadcasters. “Consequently, given that the Government is supporting the expansion of broadband throughout Canada, it would also be appropriate for the Government to support broadcasters’ conversion of their transmitters,” CTV wrote in its submission. “This could be achieved by setting aside a reasonable portion of the funds raised from the Government’s spectrum auction , made possible by our transition in the first place.” Mike Woollatt, CTVglobemedia vice-president of government relations, said in a phone interview that because the government is mandating the change, it should assist broadcasters and the public with the transition. “What we’re doing now is making a mandated change that the government is mandating in all the markets, and therefore because they are mandating the switch, we think it’s reasonable they provide assistance for it,” Woollatt said. “We believe it’s the government’s job to inform their constituents about the changes they are mandating. In other jurisdictions, like the U.S., the government played a key role in education and support, and we feel the Canadian government should be doing the same thing.” The CRTC has set a deadline of Aug. 31, 2011 for broadcasters to transition to digital over-the-air television. Based on the commission’s requirements, CTVglobemedia will be required to change 22 over-the-air analog transmitters serving its CTV and A-Channel stations in mandatory markets. According to the CRTC, mandatory markets are those with populations of more than 300,000 as well as smaller markets that have more than one local television station. In a statement issued July 16, Heritage Minister James Moore said the deadline provides broadcasters with enough time to develop their plans for the transition and inform consumers about the change. “As I stated in December 2008, our Government expects industry-led solutions that will ensure a smooth transition for consumers,” Moore said. In its submission, CTV estimated the transition will cost it about $30 million. Should CTV decide to convert all of its transmitters, including those outside mandatory markets, the additional cost would be an estimated $106 million, plus equipment costs, the broadcaster said. Woollatt said CTV can move ahead with its plan for the transition if the CRTC’s proposed value-for-signal regime is implemented and if the commission approves a request for regulatory relief for the broadcaster’s A-Channels. But Woollatt said broadcasters are undertaking the transition at their own expense with little or no means of recouping the investment. “We have no way of recouping any of this money that is going straight out of the capital budget. There is no extra revenue coming out of this,” he said. “Mandatory or non-mandatory, the issue is that this is completely un-recoupable money. It’s money that we’ve been spending to continue to do the same business that we have been doing.” Ian Morrison, a spokesman for independent watchdog group the Friends of Canadian Broadcasting, said in an interview that the government has been “playing dead” on the transition and should assist broadcasters and the public in the move to digital over-the-air television. “We’re not hostile to the government helping broadcasters to overcome that hurdle, particularly when the over-the-air broadcasters, in the most recent broadcasting year, had a negative profit,” he said. “The government is in a poor position to deny assistance. It effectively has a conflict of interest because it wants to hasten the transition so it can auction the spectrum and … get billions of dollars into the treasury.” Morrison pointed out that the spectrum auctions are expected to generate $4 billion, and the government could create a $200-million fund to assist in the digital transition. “A program that would help the broadcasters with $100 million, and helped the viewers with $100 million, that would be per cent of their projected revenues,” he said. CBC spokesman Angus McKinnon told The Wire Report that the public broadcaster will not be able to meet its digital transition targets by deadline without government assistance. “Our financial situation is such that we won’t be able to have our full plan up and running by the 2011 deadline. We’re going to be late in certain markets,” McKinnon said. “If Canadians and policy makers think it’s important to have the whole transition moving along, it’s pretty clear that the industry is going to need some help.” In a letter to the CRTC released Thursday regarding its purchase of Canwest Global Communications Corp.’s television assets, Shaw Communications Inc. said it will be converting 20 transmitters in mandatory markets by the transition deadline and proposes to convert its remaining 35 transmitters in non-mandatory markets after the deadline, as resources permit. Robert Hersche, SaskTel director of regulatory affairs, said in an interview that a portion of the government’s spectrum revenues could be allocated to help broadcasters with the transition in non-mandatory, rural markets. “There should be some assistance for the transition to digital, but money that should be allocated there should be more for the transition in rural areas.” Telus Corp., Bell Canada and SaskTel, in their submissions to the digital economy consultation, said the proceeds from spectrum auctions should be directed toward promoting the digital economy. But Bell associate director of media relations Marie-Eve Francoeur told The Wire Report in an email the proceeds from the auctions should be used for broadband expansion and other digital economy initiatives. “We do not agree that the government or companies like Bell should be required to subsidize broadcasters as they make this transition. Broadcasters have had a decade to prepare for the transition and are well positioned to pay the related costs themselves,” she wrote. Michael Hennessy, Telus’ executive vice-president of regulatory affairs, told The Wire Report by email that Telus has long supported using spectrum auction proceeds for public policy goals, including the digital transition. “We favor that rather than more taxes and fees. The only caveat is that auctions need to be fair and open to ensure the proceeds are not inflated by government limiting supply or creating asymmetric rules of the game,” he wrote. kfournier@thewirereport.ca

CTV says profits from spectrum auctions should help finance digital transition

Broadcast | July 23, 2010

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