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(Fernando Morales/Fernando Morales/The Globe and M)
(Fernando Morales/Fernando Morales/The Globe and M)

Broadcasting

Consumers’ gain is TV stations’ loss as CRTC cuts local programming fund Add to ...

A decision to scrap a fund that helps pay for local television programming will save cable and satellite TV subscribers about the cost of a coffee a month, but threatens to put struggling local stations out of business.

The Canadian Radio-television and Telecommunications Commission announced on Wednesday it is winding down the Local Programming Improvement Fund, introduced in 2008 to help local stations that were struggling to make the transition to digital television while also grappling with the onset of of the recession. The CRTC says that transition is “more or less” complete and ad revenues have returned to pre-recession levels.

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But owners of local conventional TV stations, which have seen their business deteriorate in the face of competition from specialty and pay TV, as well as the Internet, say that without the fund, some of their stations may be forced to close.

Scrapping the fund also represents another blow to the Canadian Broadcasting Corporation, which is still reeling from a decision in the last federal budget to cut $115-million from its $1.1-billion annual funding. The broadcaster was one of the biggest recipients of money from the CRTC fund, receiving more than $40-million a year.

The CBC said it was “astonished” by Wednesday’s decision, arguing the fee was critical to local programming in smaller markets.

“For us, it will mean adjustments in terms of level of service, how we deliver service and the territory that our journalists can cover,” said Hubert T. Lacroix, president of CBC/Radio-Canada.

And for businesses like CHEK Media Group Ltd., owner of a single TV station in Victoria that was bought out by management and investors three years ago, the loss of the fund means re-evaluating his company’s business model.

“In our case [the fund] was a Godsend” and part of the original business plan, said John Pollard, the company’s president. “We’re marginally profitable, and certainly part of that is because of the fund.”

Since September 2009, most cable and satellite companies that were supposed to contribute to the fund have simply passed on an extra fee of 1.5 per cent to their customers through monthly bills. That fee will be phased out starting in September, when the contribution requirement will be cut to 1 per cent, dropping another half a percentage point in 2013 and 2014.

The conventional TV business has been stagnant or in decline for much of the past 10 years. Around the time the CRTC set up the fund, Canwest and Global TV were in receivership, and CTV was losing millions of dollars. The CRTC was concerned stations could go dark if it did not act.

Mirko Bibic, chief legal and regulatory officer with CTV owner Bell Media, argues there is still reason for concern.

“There’s no doubt that local stations in small and medium-sized markets will receive significantly less revenue,” said Mr. Bibic, chief legal and regulatory officer with CTV owner Bell Media. “At a time when conventional television continues to be under tremendous financial pressure … this is obviously a major concern.”

The fund was supposed to help private stations improve the quality and quantity of their local content, but the LPIF also allowed the CBC to renew its interest in local television. But it was never supposed to be a fund for the national broadcaster, said Peter Miller, a Toronto-based broadcast lawyer and consultant.

“I think the CRTC concluded it’s not their job to subsidize the CBC via subscription revenue,” Mr. Miller said. “That’s the government’s job.”

The CRTC is asking cable and satellite companies to prepare a report by Sept. 17, 2012 to show they are reducing customers’ bills as the fee is phased out.

The CRTC said the fact that consumers were ultimately footing the bill for the LPIF was a factor in its decision to phase out the fund.

“The commission is returning to its role as a consumer advocate, something it hasn’t always recognized as its greatest priority.”

But if local stations start closing their doors, there is no doubt local residents will be unhappy, he added.

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