Canada's cable industry is bracing for a backlash from the national television networks after regulators blocked a move by the big broadcasters last week to begin charging for their signals.
CTV and Global Television sought to collect tens of millions of dollars in annual fees from cable and satellite companies, arguing those distributors make a healthy profit by offering the networks in their subscriber packages, while paying back nothing.
However, the Canadian Radio-television and Telecommunications Commission rejected that proposal - known as fee-for-carriage - saying the networks didn't make a compelling argument for why the money was needed, since the charges would likely have been passed on to consumers. Only specialty channels are allowed to collect such fees, since they are considered discretionary purchases outside of basic cable. On the heels of that decision, though, cable executives are now preparing for the TV networks to mount an even more contentious battle in the coming months.
"They didn't get fee-for-carriage, so they're going to stick it to us somehow," said Phil Lind, vice-chairman of Rogers Communications, Canada's biggest cable operator.
"That's going to be a problem."
Where the industry now expects to see sparks fly is on the topic of distant signals, the term for duplicate feeds of CTV, Global and other national broadcasters that allow cable subscribers to watch prime-time programming from different time zones.
Cable companies have for years offered this to customers as a "time-shifting" package, generally for about $4 or $5 a month.
In refusing the fee-for-carriage proposal, the CRTC made a key concession to the TV networks, allowing them to start entering into negotiations with the cable companies on compensation for this feature.
The TV networks argue that distant signals hurt their commercial revenue, since advertisers in one region lose audiences to another time zone. Advertisers have complained it becomes too hard to target a consumer in the East, for example, if they are watching the Vancouver feed in Toronto. The impact of distant signals has been estimated at $70-million to $90-million a year. CRTC chairman Konrad von Finckenstein said the regulator saw that issue as unfair to the broadcasters, since the cable companies were profiting at no cost.
"We are talking a question of fairness," Mr. von Finckenstein said. "This is an advantage to the cable companies to be able to show [programs] from different time zones. They take advantage of it, they are not paying for it. Right now it is a freebie and we said no, that is not fair."
The broadcasters are now allowed to enter into talks that will be arbitrated by the regulator. While the networks lack a key hammer in the negotiations - the ability to force cable companies to stop offering the packages by pulling their signals outright - the CRTC is allowing the broadcasters to put forward a dollar figure they want to be paid.
The onus will be on the cable companies to prove that number is wrong, and the CRTC as the arbitrator can force a decision - which is what has Rogers and other cable operators concerned. At a time when the networks are still stinging from losing their fee-for-carriage bid, Mr. Lind figures they may seek financial retribution.
Leonard Asper, CanWest Global Communications Corp. chief executive officer, said the ability to negotiate on time-shifting was a positive, but it does not make up for being refused on the fees.
Had the networks won their fee-for-carriage bid, which sought to collect 50 cents a month per subscriber from the cable and satellite companies, it would have been worth about $75-million a year to CTV and Global.
"If you use the baseline of zero, we clearly improved our position. Of course I'm deeply disappointed in the fee issue," Mr. Asper said.
In a sign of how fractious relations between the two sides of the industry are right now, Mr. Asper added of the CRTC decision: "I find it borderline offensive to hear [the CRTC] say that we didn't make a business case when monopoly cable companies have margins of 35 per cent."
Though CTV has been quiet since the decision, Mr. Asper's comments sum up the mood of the big TV networks heading into the annual gathering of the Canadian Association of Broadcasters, which begins today in Ottawa.
Mr. von Finckenstein will address the TV industry as the keynote speaker this morning, and he plans to use his speech to explain the rationale behind last week's decision. But he knows the reception could be icy. "If they throw eggs at me, you'll know," Mr. von Finckenstein said. "I didn't pick this job to be popular."
