The federal broadcast regulator's decision this week on who can sell subscription radio in Canada is likely to prompt a lengthy period of turmoil in the nascent broadcasting sector.
Depending on the details of the ruling Thursday from the Canadian Radio-television and Telecommunications Commission, there could be appeals to the federal cabinet or the courts, and one or more of the potential subscription radio players might drop out of the game.
Instead of stabilizing the subscription radio scene and preparing it for a smooth launch in Canada, the CRTC decision could end up causing even more uncertainty.
Most industry players and other observers expect licences to be granted to all three of the applicants, but with detailed and possibly restrictive conditions attached.
“We believe that all these groups are going to get licences at the end of the day,” said Brahm Eiley, president of Convergence Consulting Group Ltd. in Toronto.
The commission's usual reasons for limiting the number of licences — such as scarcity of spectrum and providing protection for Canadian artists — don't apply to satellite radio, said Iain Grant, managing director of SeaBoard Group, a telecom consulting firm in Montreal. “Once you digitize something, you do not have a shortage,” he said in reference to the spectrum supply limits in conventional radio.
But Heritage Minister Liza Frulla said her primary concern about satellite radio is the effect on Canadian musicians, who will gain more opportunity to reach listeners but will also have to fend off more competitors. “For my artists, I'm not sure.”
The three applicants are:
--Canadian Satellite Radio Inc., a Toronto-based joint venture between entrepreneur John Bitove Jr. and Washington-based XM Satellite Radio Holdings Inc., which already has four million subscribers.
--Sirius Canada Inc., a partnership between Canadian Broadcasting Corp., Toronto-based Standard Broadcasting Corp. Ltd., and New York-based Sirius Satellite Radio Inc.
--A joint venture of Toronto-based CHUM Ltd. and Montreal-based Astral Media Inc. that proposes to use terrestrial transmitters instead of satellites. The CHUM-Astral proposal includes far higher levels of Canadian content than the XM or Sirius systems.
The key feature of the decision is just how much Canadian content will be expected of the two U.S.-based satellite systems, if they are licensed. Each has proposed to include several Canadian channels among the more than 100 channels they beam across North America.
Depending on the Canadian content requirements, the key question will be “does this allow the satellite guys to launch or not, and does it satisfy the cultural stakeholders,” said Peter Miller, CHUM's head of regulatory affairs.
CHUM's decision on whether it's economically feasible to go ahead with its subscription radio system will likely depend on the content conditions imposed on the satellite proposals, and how the other applicants respond, Mr. Miller said.
“Depending on the conditions and the timing, we'll have to make our decision as to whether we have a business case,” he said.
It would take CHUM a year to get its transmitter infrastructure in place, so “if the other guys can get into the market place this fall with 10 Canadian channels each, that probably makes it virtually impossible for us.”
Analysts say Canada, with so many remote communities out of the range of conventional radio signals, is a natural market for satellite radio. They also say there's no reason the CRTC shouldn't approve all three applications, because more players means more competition. Since taking the commission's helm more than three years ago, CRTC chairman Charles Dalfen has placed greater emphasis on creating competition.
But the CRTC's ruling may not be the final word on the matter, Mr. Miller said.
“My suspicion is that whatever the CRTC decision is, there will be an appeal to cabinet, if not to federal court.”
For example, a CRTC decision that says the new radio players must have 15-per-cent Canadian content would likely draw criticism from a number of players, he said.
“There'll be a bunch of cultural groups saying that's not high enough, and the [satellite] applicants will be saying that's too high.”
A crucial issue, Mr. Miller said, is the precedent that could be set if the CRTC lets the U.S. satellite radio companies operate with 10- or 15-per-cent Canadian content.
“How long [will it be] before the mobile telephone guys ask for the same thing, then mobile multimedia. Then eventually it works its way down to television and direct-to-home satellite television and cable,” he said. Now, television content has to be 50-per-cent Canadian, but “once you set that bar [at a lower level] there's no turning back.”
Kevin Shea, chief executive officer of Toronto-based Sirius Canada, said the key issue that the U.S-based satellite services will look for in the CRTC decision is the Canadian content requirement when the new services launch, and whether there will be a demand that this level increases over time.
Another key issue is how much money the licensees will have to contribute to Canadian programming. This will likely be expressed as a percentage of revenue.
The CRTC could also limit or prohibit advertising on subscription channels, and it could ban local or regional programming, to protect existing conventional radio stations.
Mr. Shea said if the Canadian content level is set too high, Sirius might have to give up on the Canadian market.
“There are going to be levels where the Americans just say ‘we can't give you 10 per cent, or we can't give you 15 channels.'”
Sirius has 120 channels, and if it has to have 10-per-cent Canadian content at launch, or 12 channels, “I don't think those numbers work,” Mr. Shea said.
On the other hand, if the Canadian content requirement is roughly 10 per cent of the 65 or so music channels on the system, that might be feasible, he said.
Mr. Shea, too, said an appeal of the CRTC decision to the cabinet or the courts is quite likely.
