Canada's big television networks and the cable industry have fought a bitter war against each other in recent months, but both sides are now facing an unexpected attack from the head of Canada's broadcast regulator.
Making no effort to hide his anger, Konrad von Finckenstein chastised executives with the country's largest cable and broadcasting companies during federal regulatory hearings Monday, accusing them of launching a "religious crusade" against each other that is tearing apart the industry.
"You and the [broadcasters]are destroying each other," Mr. von Finckenstein told executives with cable giant Rogers Communications Inc. during the first day of regulatory hearings aimed at sorting out a deep chasm in the industry.
The fight surrounds a proposal by the big TV networks - CTV, Global and CBC - to start charging cable and satellite carriers for their signals. The broadcasters argue the distributors make rich profits off their signals without fully compensating them. The cable industry has labelled it a cash grab by the networks.
In a tense scene unusual for a CRTC hearing room, Mr. von Finckenstein upbraided executives from Rogers, including chief executive officer Nadir Mohamed, for failing to work out a solution with the broadcasters. However, even though his vitriol was served up to the cable company, it was also directed at CTV, which had testified earlier in the day.
The fee proposal is worth about $70-million to each broadcaster if approved, and both sides have dug in their heels, launching attack ads this fall aimed at painting the other side as greedy. The cable companies have told consumers that the fees will cause their monthly bills to soar, while the broadcasters have suggested local TV stations could shut down for good.
Mr. von Finckenstein spent several minutes dressing down the executives, at one point raising his voice. "We are talking about money. You make this sound like a religious crusade," the chairman said. "I don't know why you two don't realize it's in your long-run interests to come to some solution - rather than scaring the daylights out of Canadians."
While the CRTC boss is known for his surly demeanour and abrasive approach to hearings, the show of frustration underscored how contentious the two-week-long hearings are expected to be.
The TV networks want to collect about 50 cents a month per subscriber from the cable and satellite companies.
CTV opened the hearings saying the networks deserve to be paid by cable and satellite distributors for their signals. For decades those signals have been free, since they are also broadcast over the air and can be picked up by antenna. But the broadcasters say cable and satellite companies now make significant profits selling those signals to subscribers, and want a slice of the revenue.
"We subsidized the construction of their nationwide delivery systems that have enabled digital services, telephony and Internet businesses," CTVglobemedia Inc. CEO Ivan Fecan said of the cable industry.
"They have grown rich off the 40-year investment we made in them. And now it's time to benefit from our investment."
In a bid to get the fee idea approved, CTV is proposing a major shakeup of the Canadian television sector that would see the country's large networks give up their preferential carriage in order to be allowed to collect from the cable and satellite distributors.
Current regulations require that the big networks get guaranteed carriage on cable in a place that is low on the dial. But every three years the networks could elect to give that up in exchange for the right to seek compensation for their signals, CTV has proposed.
Only specialty channels on cable are allowed to collect monthly fees, while the large networks are reliant upon advertising for most of their revenue. As a hammer in the negotiations, CTV also wants the right to yank their signal if they are unable to agree to financial terms with cable and satellite carriers. The networks would also have the right to force the cable companies to black out programs they own the rights to in Canada that are also shown on U.S. networks.
Rogers executives accused Canada's big television networks of being locked in an "irrational" bidding war for U.S. programming, which has hurt them financially and sent them looking for a regulatory fix.
"The destructive overspending by CTV and CanWest on U.S. programming is well known," Mr. Mohamed told the CRTC.
CRTC figures show growth in spending by Canadian networks on U.S. programming grew to more than $700-million in 2008 from roughly $400-million in 2000, Rogers said.
That 75-per-cent increase compares to revenue growth of 16 per cent during that time, Mr. Mohamed said.
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