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Konrad von Finckenstein, chairman of the CRTC (Sean Kilpatrick)
Konrad von Finckenstein, chairman of the CRTC (Sean Kilpatrick)

Feds eye move into battle over cable fees Add to ...

The federal government is positioning itself to wade into the all-out battle raging between Canada's big television networks and the country's cable and satellite carriers.

At regulatory hearings this week where CTV, Global and CBC are pushing for the right to charge the distributors for their signals, officials with Heritage Canada have cast a watchful eye over the proceedings. They are trying to gauge whether the government would move to overrule the CRTC if it decides to approve fees for the broadcasters.

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It would be the second key CRTC decision the government has reconsidered recently. Industry Canada decided last month to review the decision to block a new cellphone firm, Globalive Wireless Management Corp., from launching. The Canadian Radio-television and Telecommunications Commission said the firm violated foreign ownership rules because it was backed almost entirely by foreign investors.

In the TV debate, the government is opposed to letting the broadcasters charge cable and satellite companies for their signals, since the distributors vow to pass those fees directly onto consumer bills. Fearing a consumer and voter backlash, the government quietly fired a warning shot at the CRTC in September by suggesting it would intervene.

At the hearings this week, CRTC chairman Konrad von Finckenstein clashed with cable industry executives who have steadfastly refused to negotiate with the broadcasters. The networks have proposed a 50-cent monthly fee per consumer in the past, which is worth about $70-million a year in new revenue to the broadcasters, if it is approved.

However, an industry source speaking on condition of anonymity said the cable executives know they don't have to bend to the CRTC this week since the argument will likely be pushed to a higher power if they lose, in the form of Heritage Canada.

Though it is not uncommon for government to sit in on hearings held by the Canadian Radio-television and Telecommunications Commission, sources in Ottawa say staff with Heritage Minister James Moore's office are not merely passive observers.

The first sign that Ottawa was considering intervention came in September, after the CRTC opened the door in the spring to allowing the fees by permitting the broadcasters to go to arbitration if the cable companies could not agree on compensation.

An order-in-council sent by Heritage Canada to the CRTC in late September said the fees "may negatively affect affordable access by Canadians to Canadian programming, including local and regional television news, and information." That document, which is rare, has been interpreted by those inside the regulator as a warning to the CRTC not to go against the government's distaste for the fees.

More importantly though, the order, made under Section 15 of the Broadcast Act, is considered a prelude to a filing under Section 7, by which the government can issue a direct policy directive to the regulator. That would allow the government to dictate what the CRTC should do.

Under the Section 15 order already issued, the government has told the CRTC to consult consumers on the impact of such fees. Public hearings are to be held in December and the CRTC must produce a report to Mr. Moore.

CTV, Global and CBC have argued they are unable to support money-losing local TV stations across the country and may have to shut down some of their operations, since advertising no longer pays the bills. Outside the hearing room Tuesday, CBC president Hubert Lacroix brushed off suggestions that the CRTC hearings this week may be rendered irrelevant if the government weighs in later.

"Right now this is a CRTC hearing, this is where our focus is," Mr. Lacroix said, acknowledging the spectre of government intervention that hangs over the hearings.

"We think that it's very important that the consumer not be impacted by the result of these hearings and that a solution be found for the consumer ... So we welcome the December hearings and we'll see where that goes." The government may seek to delay the process well into next year, arguably past an election if one were to be held in 2010 to avoid any consumer backlash.

As in the Globalive situation, where CRTC officials knew their decision would likely be challenged by the government, officials are expecting pressure from the government if the fee decision doesn't fit with Ottawa's expectations.

The CRTC blocked Globalive from launching as Canada's newest cellphone carrier because Egyptian wireless company Orascom controls more than 80 per cent of its capital structure. That puts the foreign firm in control of the carrier, the regulator said.

The federal government has been anxious to see new competition enter the Canadian cellphone market and Industry Canada has put the CRTC ruling under review, issuing calls for comments from key industry players, which are due Wednesday.

The government is expected to comment on the Globalive ruling, likely in the coming week or two. While the process so far has been referred to as a pre-cabinet review, the government has also taken the steps to formalize a full-fledged cabinet review of the Globalive situation. Under the cabinet review process for telecom decisions, the government must consult with the provinces - a holdover from the days when the telecom sector was run provincially.

A source in Ottawa said Tuesday that the government has sent letters to the provinces, alerting them of the cabinet process, and thereby initiating a review if it needs.

However, there are concerns in Ottawa that overturning the CRTC ruling on Globalive would cause problems for the government's long-held restrictions on foreign ownership on telecom companies, essentially opening the door for non-Canadian investors to own large stakes in companies such as Telus Corp and BCE.



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