Rogers, Shaw say new carriage linkage rule will mean dropped channels

A CRTC proposal to require vertically integrated broadcast companies to carry more independent, English-language specialty services will result in fewer third-language channels on cable and satellite television, two of Canada’s largest cable carriers say. The proposed new 3:1 linkage rule, laid out in CRTC consultation 2011-806, would require all vertically integrated broadcast distributors to carry at least two unaffiliated English-language Category B services for each affiliated English-language Category B service they offer, plus one unaffiliated channel of any language. In addition, at least one of those unaffiliated English-language specialty channels must be from an independent broadcaster, the CRTC proposal said. A Category B licence is a standard specialty channel licence under which the channel owner must negotiate a carriage agreement with a broadcast distributor before the company can air it on television. A company's “affiliated” channels are those that it owns. Independent broadcasters say the three-to-one carriage rule is necessary to prevent vertically integrated companies from blocking small competitors from access to television distribution networks. In comments filed with the CRTC last month, Rogers Communications Inc. and Shaw Communications Inc. said the commission's proposal will limit their ability to carry new third-language specialty services and could force the removal of some of the ones they currently offer. The cable companies said they must be selective about the number of channels they offer due to capacity issues on their networks. “The unintended consequence of establishing this 1-to-1 English-language linkage rule will likely be a reduction in the number of Canadian third-language services offered to customers, as additional English-language Category B services are added by BDUs to meet the new 1-to-1 requirement,” Rogers told the commission in a Jan. 24 submission. “Reducing the number of third-language services would result in real harm to our customers,” Shaw wrote in its submission, filed Jan. 23. “However, because of capacity limitations, the modified 3:1 rule would leave Shaw with no other option … Going forward, Shaw may be prevented from adding third-language Category B services.” Rogers and Shaw did not say why third-language services would be dropped before other channels. Shaw did not comment by deadline Thursday. Rogers spokeswoman Leigh-Ann Popek said in an email to The Wire Report that "this is a new regulation that wasn’t part of the CRTC’s original proposal. We wrote to the CRTC because we were concerned that under the new 3:1 rule we’d be required to ensure that the independent station is an English language station. We know that a lot of our customers enjoy content in other languages." The CRTC proposed the 3:1 linkage rule as part of its vertical integration decision issued last September, which requires vertically integrated broadcast companies to offer three unaffiliated Category B services for each affiliated Category B service they carry. Rogers suggested the commission's proposed English-language requirements, the details of which were released on Dec. 22, came as a surprise and go beyond what the CRTC announced in September. Rogers said it is “highly irregular” for the CRTC to propose amendments without first discussing their merits with the affected companies. “Consistent with the rules of procedural fairness, the Commission has over the years consistently adopted into its Regulations only those regulatory amendments that it had fully canvassed in a public process,” Rogers wrote. “he Commission’s failure to do that in case means that the current proceeding, proposing as it does the inclusion of the provision in the BD Regulations, is seriously flawed.” The companies said the proposed English-language regulation would contradict the cultural diversity objectives of the Broadcasting Act, which says the Canadian broadcasting system should strengthen the country’s cultural fabric. The act also says the broadcasting system should reflect “the linguistic duality and multicultural and multiracial nature of Canadian society,” the companies noted separately. In a submission to the commission Jan. 23, the Independent Broadcast Group said it analysed the Category B services carried by vertically integrated distributors and concluded that, without the new English-language linkage requirements, most distributors could add affiliated specialty services to their lineups without offering additional independent services. “Due to the large number of third-language services that some BDUs distribute, it would be possible for a BDU to add a very large number of additional related Category B services before being required to distribute any additional independent Category B services,” the group said. In an interview with The Wire Report on Wednesday, Joel Fortune, the IBG's legal counsel, said independent broadcasters had argued for the language-specific linkage rules during the commission’s vertical integration hearings last year. He said the proposed amendment would create “a balanced approach” that allows vertically integrated distributors to add their own services while protecting independents from potential self-dealing by the big players. Fortune pointed out that the same 3:1 rule is in place for vertically integrated broadcast distributors that carry affiliated French-language channels. “If there were not this kind of linkage rule , the 3:1 rule would really have little utility for English-language Category B services, in particular,” he said. “It’s really just a question of math.” When asked why the broadcast distributors would target third-language services first under capacity constraints, he said: “I don’t know why they would say that.” The new linkage rule is among a series of commission amendments to the broadcast distribution regulations, the CRTC's new media exemption order for content distributors, and the exemption rules for broadcast distributors serving fewer than 20,000 subscribers. In its submission dated Jan. 24, BCE Inc. criticized the commission’s vertical integration decision, saying it marks the CRTC’s “most significant effort to date” to regulate Internet content and to constrain the rights of Canada’s broadcasters. Bell took issue with the commission’s proposed implementation of a decision to restrict the types of online content that vertically integrated players can make available exclusively to their Internet or mobile customers. The company said it is inappropriate to prevent companies from offering exclusive content to their subscribers if they obtained the exclusive online or mobile rights before the commission imposed its rule on exclusive offerings. “To require industry stakeholders to comply with the Commission’s newly articulated policy on exclusives on a retroactive basis would be inappropriate for a number of reasons,” Bell said. “irst, exclusives were consistent with the Commission’s policies at the time; second, retroactive application of new rules contravenes the Commission’s predictability principle and moreover, is a breach of the presumption against retrospective operation of laws,” the company said. Bell has disagreed with a CRTC ruling related to exclusive NFL content it offers its mobile customers under a deal signed with the league in advance of the commission’s March 7, 2011 moratorium on exclusive offerings of new media broadcast content. Bell also supported Shaw in its arguments against the part of the commission’s vertical integration decision that imposed a “reverse onus” requirement on big players accused of applying an undue preference to their own content. Under a reverse onus approach, the onus is on companies accused of an undue preference to prove they did not break the rules. Bell and Shaw argued it is unfair that a competitor could accuse them of exercising an undue preference without being required to prove that any such allegation negatively impacted the competitor's business. “It would be incorrect to apply a reverse onus in situations where the applicant is best positioned to prove that the respondent’s actions caused the applicant adverse harm,” Bell said. The deadline for final reply comments on the proposed amendments to all three sets of regulations is Feb. 16. nkyonka@thewirereport.ca

Rogers, Shaw say new carriage linkage rule will mean dropped channels

Broadcast | February 9, 2012

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