CRTC expected to revisit value-for-signal in new environment, experts say

The CRTC is expected to rethink its proposed value-for-signal regime given different marketplace conditions, a change at the top of the commission and a new regulatory environment, industry observers and an insider said. The commission’s proposed value-for-signal regime, released in March 2010, sought to help find an additional revenue stream for over-the-air broadcasters that suffered from a drop in advertising revenues as a result of the 2008 financial crisis and subsequent recession. The commission’s jurisdiction to implement the policy is now under consideration by the Supreme Court. If it goes ahead, the regime would allow local, over-the-air TV stations to elect to negotiate carriage terms with broadcast distributors such as cable companies. Right now, over-the-air stations are advertising-supported and carried on basic TV packages without receiving carriage fees. Industry insiders and observers say that, given industry and regulatory dynamics, the CRTC may not go ahead with the policy if given the green light by the Supreme Court. “The economics are a lot better,” Phil Lind, vice-chair of Rogers Communications Inc., said in a phone interview, adding that “everything has changed” since the commission issued the decision in 2010. Through industry consolidation, Lind said, most over-the-air broadcasters are supported by the broadcast distribution revenues of their vertically integrated parent companies, including Rogers (which owns the Citytv network), BCE Inc. (CTV), Shaw Communications Inc. (Global Television) and Quebecor Media Inc. (TVA). “Vertical integration has changed the whole thing, whereby now broadcasters, you can’t argue that they’re standing alone. They’re owned by major distribution companies,” Lind said. Michel Arpin, former CRTC vice-chair of broadcasting who sat on the commission when the decision was released, said advertising revenues for broadcasters in Canada’s largest markets have rebound since 2010 but “in the smaller markets, it is not that obvious.” Arpin said smaller market TV broadcasters have lost the majority of their former advertising sponsors as media buyers shift their ad spending to specialty channels to better target viewers. “That money, which is significant for the broadcast industry, has almost totally disappeared,” he said. Arpin and Lind referred to the CRTC’s decision last month to phase out the Local Programming Improvement Fund (LPIF) as an indication of where the commission might go with value-for-signal. In that decision, the commission said it will phase out the program, which provided funding for local TV broadcasters, partly due to a “general rebound in the aggregate advertising revenues of conventional television stations.” Sheridan Scott, a partner at Bennett Jones LLP and former head of the Competition Bureau, said a rebound in the advertising market for large conventional broadcasters is a “big thing” that is likely to influence the commission’s thinking on value-for-signal. She cautioned that conventional broadcasters are not “out of the woods yet” financially as they operate in a capital intensive industry and face rising competition for eyeballs and advertisers from online sources. “Certainly, financially, it appears as though the over-the-air stations are on the rebound,” she said. “But they have a number of challenges moving forward.” Lind, whose company opposed value-for-signal from the start, as well as a previous commission proceeding on fee-for-carriage, said the CRTC’s proposed policy may not be compatible with its decision last year introducing new rules for vertically integrated companies that own broadcast assets and broadcast distribution platforms. The vertical integration framework’s “standstill” rule may not work with value-for signal because it prevents broadcasters from pulling their signals from distributors during carriage disputes, he said. “In Canada, there’s certain restrictions now because of the VI decision that have made this thing almost impossible to implement, even if they did want to,” Lind said. Arpin said he does not believe the two decisions are mutually exclusive. He said the commission could allow conventional broadcasters to pull their over-the-air signals during disputes but restrict their ability to pull their specialty channel signals at the same time. The presence of a new CRTC chair and changes in commissioners could also impact the commission’s decision to implement value for signal. Lind said the new chair, Jean-Pierre Blais, is “more consumer focused” than his predecessor, Konrad von Finckenstein, whose term expired in January. Von Finckenstein viewed the creation of a value-for-signal regime as a personal project and “bullied” other commissioners to go along with the 2010 decision, Lind said. “I think it’s a whole new ballgame and I think the chairman is very consumer-oriented.” Arpin said von Finckenstein was not the driving force behind the commission’s value-for-signal decision and that it was “an industry proposal from the start.” “It started through them, seeking a revenue stream based on a rate to be set by the commission for the benefit of the over-the-air broadcasters,” he said. To the best of his knowledge, Arpin said, Blais has never indicated a preference for or against value-for-signal. Scott said Blais, who previously served as assistant deputy minister for cultural affairs at the Heritage Department, has “a lot of background in copyright” issues and will want to add his “two cents” to the value-for-signal discussion. “He’s a fellow who likes to listen to the evidence and duly consider it,” she said. At the Supreme Court’s hearing in April to consider whether the CRTC has the jurisdiction to implement the regime, opponents argued the policy will introduce a new form of copyright on broadcast signals. A similar regime in the United States, called the retransmission consent regime, allows conventional broadcasters to pull their signals from broadcast distributors if they can’t reach a carriage deal. This controversial power to “black out” signals came under question at a U.S. Senate committee meeting last month, where critics said it can result in consumers losing access to channels they pay for on their monthly TV bills. Kevin Crull, president of BCE’s Bell Media, said at the Canadian Telecom Summit in June that the commission’s 2010 value-for-signal ruling helped influence Bell’s decision to acquire CTV. He said CTV, CBC, Global and Citytv account for more than half of what Canadians watch on TV but generate a little less than 30 per cent of industry revenues because they cannot draw subscriber fees for carriage by broadcast distributors. Bell and other vertically integrated companies Quebecor and Shaw declined to comment for this story. nkyonka@thewirereport.ca

CRTC expected to revisit value-for-signal in new environment, experts say

Broadcast | August 7, 2012

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