Cogeco, Eastlink, warn ex post vertical integration rules would cause ‘irreparable harm’

GATINEAU, QUE.—An ex post system to redress regulatory wrongs after the fact can lead to cases of “irreparable harm,” Cogeco Cable Inc., Eastlink and the CBC told CRTC commissioners Thursday as they pushed for a new code or set of rules to govern the conduct of vertically integrated companies. “Our experience to date has been that when you try to fix something after it’s broken, you usually suffer irreparable harm,” Louis Audet, Cogeco’s president and CEO, said Thursday during day four of the commission’s hearings on vertical integration in the broadcasting sector. “Hence the need to have clear rules ahead of time so that everyone knows what they can and what they can’t do.” Cogeco recommended that “standstill” and “reverse onus” provisions for undue preference complaints be extended to all vertically integrated companies’ programming services. The company also said the timelines for dispute resolution should be tightened. A standstill provision would mean previously agreed to terms and conditions are maintained while any carriage disputes are ongoing. Under a reverse onus approach, a distributor or company accused of violating regulations must demonstrate that it has not broken CRTC rules. Hubert Lacroix, CBC’s president and CEO, said vertically integrated companies can afford to fight ex post battles as “a cost of doing business,” but the damage to unaffiliated companies can be irrevocable. “That damage can range from loss of market leadership in innovation, to loss of market share, to loss of financial viability,” he said. “The commission does not have the statutory powers to compensate for these types of losses, and vertically integrated companies know it.” Eastlink on Thursday recommended an enforceable code of behaviour that would address non-compliance in a timely manner. “Dispute resolution is not practical when our direct competitor owns a new, popular service and is already carrying it and using its media assets to advertise its availability,” Natalie MacDonald, Eastlink’s vice president for regulatory, told the commission. “Rules must be in place to limit the opportunity for vertically integrated entities to engage in this behaviour, with timely means to address non-compliance.” Commissioner Peter Menzies questioned Cogeco Thursday on whether ex ante provisions had the downside of inadvertently permitting what is not expressly forbidden. “There’s no end to the ability of the human imagination to work it’s way around whatever’s put in place with the implied thought that, if it isn’t expressly forbidden, therefore it’s permitted,” he said. “I don’t know that it’s possible—I’m pretty sure it’s not—to anticipate every little piece of monkey business that can be imagined to work their way around the regulations.” Menzies asked whether timely ex post rules could be more effective. On Tuesday, BCE Inc. argued that it would be impossible to establish comprehensive rules in advance, and that doing so would harm companies’ flexibility. But Yves Mayrand, Cogeco’s vice-president of corporate affairs, said Thursday that pushing such reasoning to its logical conclusion would mean abolishing the Broadcasting Act. Lacroix proposed an ex ante, or preventative, measure to require broadcasting distributors to carry their own affiliated channels, as well as others' unaffiliated services, on comparable terms. “We believe written affiliation agreements between vertically integrated BDUs and programming services, whether integrated or not, should be made obligatory and all agreements should be filed with the commission,” Lacroix said, adding that the agreements should comply with a code of good practices. But the Canadian Cable Systems Alliance Inc. (CCSA) said a standstill provision to prevent irreparable harm, along with a reverse onus rule and the prohibition of granting “head starts” on exclusive rights to content, would be sufficient. Alyson Townsend, the CCSA’s president, also said that a standstill provision is needed immediately—before the commission develops a broader policy based on the hearings—because cablecos are in carriage negotiations now. Cogeco and Eastlink also told commissioners that vertically integrated companies should be required to provide notice when launching a new service so that carriage negotiations can start. Maynard said vertically integrated companies, before launching new programming, should be required to show the commission that the programming is made available to non-affiliated parties, and on what terms. “This becomes very intrusive,” CRTC chair Konrad von Finckenstein noted. Cogeco said a moratorium on exclusives should be extended and applied to all platforms. “If you let the horse out of the barn on mobile platforms, you will have, I can assure you, huge pains in trying to bring it back in the barn if and when it becomes necessary in your mind,” Maynard said. The CBC disagreed. Lacroix said the broadcaster needs flexibility in content negotiations to grant exclusives if that is the best deal for producers. He said an exclusives rule should not apply to independents like the CBC, but offered no opinion on whether it should be enforced on integrated players. Eastlink and the CCSA called for a blanket prohibition on exclusive content deals for content originating on other platforms. mburgess@thewirereport.ca

Cogeco, Eastlink, warn ex post vertical integration rules would cause ‘irreparable harm’

Broadcast | June 23, 2011

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