News

Federal regulators took a dim view of a proposal by Canada's largest television networks to introduce subscriber fees to offset falling advertising revenue.

The networks proposed the new subscriber fees as they aired their financial laundry before a landmark hearing Monday before the Canadian Radio-television and Telecommunications Commission. But the proposed fees, which cable companies have attacked as a cash grab, met a cool response from the federal regulatory body.

Advertising dollars — once the lifeblood of the television business — are no longer its biggest source of revenue, executives with CanWest Global Communications Corp. told the CRTC.

Instead, the biggest moneymaker is now the subscriber fees that specialty channels such as Showcase, TSN and MuchMusic charge on cable and satellite bills each month.

At the first major regulatory hearings in the industry since the late 1990s, the networks presented a united pitch for the new fees. The idea has sparked controversy among cable and satellite companies such as Rogers Communications Inc. and received a cool response from CRTC officials.

“If I understand you, there's a little wool left on the sheep that hasn't all been sheared off in the last few years,” CRTC commissioner Ron Williams told CanWest.

The network made a pitch to charge cable and satellite companies 50 cents a month for its feed, which would be passed on to consumers.

“I don't consider the Canadian consumer to be sheep, but I think that, reasonably presented and reasonably structured, I believe this is doable,” said consultant Ken Goldstein, who was representing CanWest at the hearing.

The proposal for a subscriber fee of some sort was supported at the hearing Monday by representatives of the CBC, CTV and French-language TQS networks.

In response to testimony by the CBC, CRTC commissioner Richard French said the regulator's job is not to approve new fees simply to bolster the broadcaster's funding.

Though a seemingly small amount per channel — TSN for example collects $1.07 per subscriber each month — specialty channel subscriber fees are now worth $6.2-billion. Ad revenue, on a steady decline since the 1990s, totalled just over $3-billion last year.

Such fees have so far been taboo for the conventional broadcasting industry. But with increased programming costs and sliding ad revenue, the networks say they are now at a disadvantage.

“We believe the conventional television sector is heading into trouble financially, and needs help, if it is to meet the challenges of the future,” Ivan Fecan, chief executive officer of CTV parent Bell Globemedia, told the hearing. Bell Globemedia also owns The Globe and Mail.

Similar comments were made by rival CanWest, which has seen its fortunes slide in recent years. The specialty channels were granted permission to charge subscriber fees to compensate for their lower placement on the dial and the fact that cable and satellite carriers don't have to carry all of them. The major networks say that privilege should be extended to them.

“We're at a very ugly intersection in terms of the television industry,” said Peter Viner, chief executive officer of CanWest MediaWorks, noting the shift in ad dollars to other sources such as the Internet. “I'm afraid it's under so much stress that it's going to crash.”

In all, the networks spent more than six hours arguing their case, including the CBC, which supported the bid even though it acknowledged that as a public broadcaster it gets nearly half its funding from the government.

But CBC president Robert Rabinovitch said the networks need to cover new costs such as infrastructure and programming associated with the transition to high-definition television. Advertisers are not willing to pay more for commercials on HD channels or during HD programs, he said, leaving the networks to foot the bill.

That has left Canadian broadcasters struggling to figure out how the industry will pay for the massive shift toward high-definition, which requires new infrastructure and programming costs that are roughly 25 per cent higher.

Cable and satellite carriers will have the chance to argue against the fees later this week, though several have already criticized the move as a cash grab by the networks.