Independents call for framework to prevent ‘retaliation’ from vertically integrated players

Independent broadcasting companies are calling on the CRTC to establish safeguards to prevent large, vertically integrated players from discriminating against smaller broadcasters by way of retaliatory measures like dropping or moving channels. “We can no longer afford to come to the Commission to discuss difficulties we are experiencing with BDUs due in large measure to poor or non-existent regulatory oversight only to be told that if we complain we risk the loss of carriage of our other services,” Stornoway Communications, an independent broadcaster that operates three specialty services, told the commission in comments for its proceeding on vertical integration. “We can no longer sustain package changes that result in the loss of 92% of our revenue while at the same time consumers have to pay more for less.” Following the approval of Shaw Communications Inc.’s acquisition of the broadcasting assets of the former Canwest Global Communications Corp. last year, the CRTC launched a proceeding to review its existing safeguards to prevent anti-competitive behaviour in the broadcasting sector, with a focus on programming and carriage rights. Parties filed their comments with the CRTC by the deadline on Wednesday. Stornoway wrote that the CRTC’s existing policies and regulations have been detrimental to independent broadcasters, adding that they are often prevented from entering dispute resolution because they fear direct retaliation from broadcasting distributors by way of moves like dropping a Category B service or being shuffled to a lower-profile television package. “Any number of independents that have made that effort have discovered that you complain about one thing and then they’ll take it out on you in some other fashion,” Martha Fusca, Stornoway’s president and CEO, said in an interview. “Nobody likes to talk about this.” Fusca was quick to point out that fault lies with the commission’s framework, not the broadcasting distributors, which are playing by the rules. Stornoway wrote in its submission that the existing dispute resolution procedures and ex-post approach to solving cases aren’t strong enough to overcome the imbalance in the broadcasting system. The commission should instead adopt a clear ex ante framework, where cases are prevented as opposed dealing with them as they occur, the company suggested. It proposed a series of regulations to require distributors to meet certain carriage requirements for each type of service. For example, each distributor should be required to carry one independent Category B service for each Category B service it operates. Distributors should also be prevented from changing the terms of carriage for an independent Category A service without consent. Category B licences support standard specialty services in which carriage is not guaranteed and must be negotiated. Category A services have licences known as “must carry" or "must offer." GlassBOX Television Inc. and the Independent Broadcasters Group (IBG), made up of Aboriginal Peoples' Television Network, Channel Zero Inc., Ethnic Channels Group Ltd., Fairchild Television Ltd., TV5 Québec Canada, ZoomerMedia Ltd. and Stornoway, said they support Stornoway’s proposed rules in their comments. The IBG also cited fears of potential retaliation from large players as a reason to review the CRTC’s existing regulatory framework. The independent broadcasters added that safeguards are necessary for the treatment of commercially sensitive information to prevent broadcasting distributors from gaining an edge on independent broadcasters in carriage negotiations. Pelmorex Communications Inc., which operates The Weather Network, wrote in its comments for the proceeding that independent programming services are now suffering from self-dealing by vertically integrated distributors. “In English-language markets, the two dominant BDUs with programming interests, Shaw and Rogers , have demonstrated a clear propensity to favour their own services,” the company wrote. Pelmorex said Rogers’ and Shaw’s channels have a significantly higher uptake on their own television distribution services than independent channels. Shaw and Rogers declined to comment for this story. Paul Temple, senior vice-president of regulatory and strategic affairs at Pelmorex, said in an interview that there’s a big difference between being carried and being promoted. “Good packaging is very important … It’s one thing to be carried in a 500-channel universe. It’s another thing to be promoted, and that’s the whole idea,” he said. “If you’re in some package that’s never mentioned and promoted or priced attractively, then no one will take your service, or fewer will.” Pelmorex called on the CRTC to move away from ex-post solutions, such as dispute resolution and mediation, to ex-ante regulatory safeguards to protect independent services. “Ex-post doesn’t work very well, because first of all, if you’re a smaller service … it’s your biggest distributor, so what are you going to do? Take them to court every time they do something? You don’t want to bite the hand that feeds you,” Temple said. He added that the dispute resolution process is long and expensive. “It takes a year to solve a problem, and by that time what can you do about it? You’ve been moved or have been displaced for a year. What’s the point?” The proposed ex-ante rules would encourage subscriptions to independent services; regulate data-collection from set-top boxes; require the filing of reports on penetration; service affiliation agreements and audit requests; and support independent services through ad availabilities on foreign specialty channels. But many of the big players say new measures are not necessary. Bell Canada wrote in its comments that the commission’s existing regulatory framework and undue preference rules are sufficient and that there is no need to implement reverse onus provisions. Under a reverse onus approach, an accused distributor must demonstrate that it has not broken the CRTC’s rules. Bell added that independent broadcasters do not need new safeguards because the existing undue preference rules already apply. “Bell is unaware of any instances where small independent broadcasting services have been unduly disadvantaged at the hands of a vertically-integrated company that were not or could not have been addressed utilizing the Commission's existing regulatory tools,” the company wrote. Shaw wrote in its submission that ex ante rules would penalize integrated players, and that the current ex-post rules are sufficient to address any potential anti-competitive issues. “The benefits of vertical integration to the system, the economy and Canadian viewers should not be undermined by unnecessary and harmful new ex ante rules and safeguards that, in effect, penalize companies that have chosen to integrate,” the company said. Rogers wrote that the commission has already adopted mechanisms to ensure independent broadcasters can operate as profitable undertakings and should not adopt new protections. But Rogers expressed concern that BCE and Shaw now control more than half of the television market, and that without certain regulatory safeguards, the companies could inhibit competitors. “We have every reason to believe that through exclusive program acquisitions and/or unreasonably priced content, Bell and/or Shaw may use their dominant position in the rights market to prevent third-party distributors, such as Rogers, from offering content on all of their platforms, on terms that are fair and equitable,” Rogers said. Rogers proposed the establishment of a “rights holder code of good practices” to enhance transparency and predictability. The company also supports the implementation of a reverse onus approach to resolving undue preference cases. Another key issue in the proceeding is exclusive content arrangements. While Telus Corp., Rogers and Shaw support a ban on exclusive content, Bell and Quebecor Media Inc. support exclusive content deals. Quebecor said that exclusive content rights allow broadcasters to raise enough revenues to create and support Canadian programming. Telus, Rogers and Shaw said that exclusivity hurts consumer choice. A public hearing is scheduled to start June 20 in Gatineau. news@thewirereport.ca

Independents call for framework to prevent ‘retaliation’ from vertically integrated players

Broadcast | April 29, 2011

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