The fight for carriage: TV channels' quest for prized cable spots

The Globe and Mail

Sun News Network.

Robert Lantos was seething. Standing on the dais of a hotel conference room in downtown Ottawa last month, he locked eyes on an executive of Rogers Communications Inc. a few feet to his left and let loose. “You work in an industry, and for a company, which built its empire with a forked tongue, and continues to speak with that forked tongue,” he snapped. About 100 TV and film producers who thought they had come to see a genial chat at an industry confab began murmuring in astonishment.

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Mr. Lantos, one of the country’s highest-profile film producers (with movies such as Barney’s Version and Eastern Promises), was in Ottawa to promote Starlight, a startup TV channel that, if licensed, will broadcast only Canadian films. Starlight is scheduled to appear at a hearing convened by the Canadian Radio-television and Telecommunications Commission that begins April 23, alongside 15 other wannabe channels and six established ones, in hopes of scoring what is known as “mandatory carriage” on the country’s TV systems.

The rare status gives channels a prized spot on the digital basic tier of every cable, satellite and IPTV lineup – and, more importantly, guaranteed payments from subscribers, whether they want the channel or not. The designation was introduced about 20 years ago in part to ensure that small services that helped bring diversity and Canadian culture into the country’s living rooms were able to survive amid the flood of foreign programming, without worrying about the need to attract advertisers or jockey for position on a growing dial.

But some in the industry are warning darkly that now the policy, in trying to help more than a dozen new channels come to life, might accidentally hasten the demise of the regulated Canadian television broadcasting system as we know it.

Currently, the industry siphons hundreds of millions of dollars every year to help pay for the production of Canadian TV shows, films and digital content. The ultimate source of that money is the viewer – the 12 million Canadian households paying about $62 a month, on average, to subscribe to cable and satellite feeds. But with more consumers exploring the idea of cutting off or at least limiting their TV subscriptions, and moving to so-called over-the-top services such as Apple TV, Netflix, legitimate online video sites or illegal downloading, TV distributors are lining up next to each other to oppose the channels asking for mandatory carriage, even as they continue to fill their lowest tiers with more of their own channels.

For as long as cable television has existed, there has been tension between broadcasters and distributors over how to divide the spoils. But the stakes have rarely been quite this high. The April hearing will determine whether some channels survive at all; it will help signal the leanings of the CRTC under its new chairman, Jean-Pierre Blais; and it could influence the economics of the $11-billion cable and satellite business.

A report from Convergence Consulting Group Ltd. this week suggested that the number of consumers who are “cord-cutting,” or abandoning their cable and satellite subscriptions, is on the rise, although the total number is still small. It estimated that the number of so-called “connected homes” in Canada subscribing to a regulated cable, satellite, or IPTV service grew by only 52,000 in 2012 rather than about 250,000, which is what industry trends would have forecast. The possibility of mandating more channels, which could cause a spike in TV bills of about $6 a month if they were all approved, might be enough to push many out of the system.

Pam Dinsmore, the vice-president of regulatory affairs at Rogers, gently pressed this point with Mr. Lantos during that Ottawa panel. “[Mandatory carriage] is completely at odds with the way the world is going,” she said. “Canadians can now get what they want, when they want, how they want, on any platform – that’s not trite, it’s true, it’s what’s going on out there. The fact is, customers are no longer a captive audience that can be taken for granted – which is pretty much how they were treated in the old days. I’ll admit to that.”

In a sign of how polarizing the subject is, the CRTC has logged more than 13,000 interventions in the runup to the hearings: One-line e-mails from consumers swearing at the commission for possibly forcing them to pay for more unwanted channels, impassioned essays from advocates of Canadian culture, and letters from elderly supporters of Sun News sent in through traditional mail because they don’t have Internet access.

Many argue that granting mandatory carriage is a prime example of what the country’s broadcasting policy is designed to do: Support the growth of a wide range of Canadian voices that might not otherwise have much chance to reach a large audience.

And while the approach was already important when it was introduced in the early 1990s, vertical integration – in which large telecommunications and cable providers also own much of the content they distribute over their networks – has largely taken hold in Canada since the CRTC passed a new policy in 2011, as two of the largest TV distributors, BCE Inc. and Shaw Communications Inc., absorbed two major private broadcasters. Several of the smaller channels now vying for mandatory carriage insist that, in this new environment, their businesses would flounder without the government’s direct intervention, and the public good would not be served.

But these days, asking for mandatory carriage may prove to be a Hail Mary, especially against the backdrop of a CRTC that has, since Mr. Blais assumed control last June, tried to reposition itself as a friend of consumers. At the same Prime Time conference in Ottawa, Mr. Blais delivered a speech declaring that, “the CRTC is a serious supporter of Canadian creators. ... But, under my watch, you will not see a protectionist. I’m a promotionist.”

Even before he arrived, the commission had set a high bar for determining whether a service deserves mandatory carriage, which is authorized under the Broadcasting Act’s Section 9(1)(h). According to a policy introduced in 2010, a channel must make “an exceptional contribution to Canadian expression and [reflect] Canadian attitudes, opinions, ideas, values and artistic creativity.” It must also specifically contribute “to one or more objectives of the [Broadcasting] Act, such as Canadian identity and cultural sovereignty, ethno-cultural diversity, including the special place of aboriginal peoples in Canadian society” and other diversity goals. Lastly, it must make “exceptional commitments to original, first-run Canadian programming in terms of exhibition and expenditures.”

It might also have added “must be desperate.” Aboriginal Peoples Television Network, which currently gets mandatory carriage, says that, to properly fulfill the mandate of covering First Nations in Canada, as outlined in its licence, it needs not just to retain the protected status but also to jack up its fee by 60 per cent, from 25 cents a month per subscriber to 40 cents, to cover the ever-increasing cost of programming as well as fund its news-gathering operations.

“We can’t meet our licence conditions with current revenues – we just can’t,” says chief executive officer Jean Larose, adding that the channel has tried to bulk up its advertising revenue but doesn’t have the viewership numbers needed to command top rates for its airtime. “We have 11 bureaus across the country, three of them in Northern Canada where price of operating is expectedly high. In Toronto, you jump in a car to go to a story [and] for 80 bucks of gas you’re done. Up there, it’s an $8,000 expedition per person.”

Sun News Network, which has managed to get itself on to the channel lineups of 40 per cent of Canadian homes, says it is losing $17-million a year, and can only get on track financially under the government protection of a temporary five-year mandatory carriage term to ensure the channel gets in front of the audience it needs to cultivate if it hopes to last much longer in a crowded marketplace.

Other independent channels argue that large companies such as Rogers and BCE are more interested in pumping out Canadian versions of popular reality shows and sporting events than promoting culture, religion, or diversity – which are all things the country’s broadcasting law says must exist in the Canadian system.

“The purpose of mandatory carriage is to reflect values that the country holds dear,” says Moses Znaimer, the president of ZoomerMedia Ltd., which owns the spiritual broadcaster VisionTV. “Is there not room for one channel for all those people who may not go to a mosque or a church any more but still have an interest or belief in something?”

Independent channel operators regularly complain that they cannot even bring the distribution companies to the negotiating table. Mandatory carriage, they say, helps fix a distorted market.

“The same operators who extend privileges to their own services don’t want to give it to someone else. It’s all so obvious that I don’t even know why we have to talk about it,” Mr. Znaimer says. “There is no such thing as ‘basic’ any more, they stuff everything they own in there and then complain about us.”

Which is why Mr. Lantos was speaking of forked tongues.

Rogers and its competitors, he noted, had thrived for decades under government protection; but now, with the prospect of mandatory carriage extending a different form of government protection to others, they had conveniently morphed into anti-protectionist consumer-oriented champions.

The CRTC may yet throw everyone a curve ball. Because, while the channels are all saying they must receive exactly what they’ve asked for if they are to survive, the commission could, for example, grant some of them a lower wholesale fee. It could grant mandatory carriage to just one or two, at a higher wholesale fee. It could dismiss them out of hand. Or, most intriguingly, it could also hand down what is known as a “must-offer” order, which would force the distribution services to offer the channels to viewers but leave the pricing up to the two parties to negotiate.

Back in Ottawa, Rogers’ Ms. Dinsmore was urging people to not do anything that might upset the status quo. “We all benefit from customers remaining on the traditional system,” she said, noting that contributions to industry production funds made by cable, satellite and IPTV operators are based on their number of TV subscribers. Addressing the producers in the audience, she said: “[The system] funds the films that you guys make, that broadcasters air. So, to the extent that customers choose to leave us, that’s to the detriment of everybody in this room.”

Mr. Lantos waved away Ms. Dinsmore’s argument and went back to scorching the earth. The producer, himself a wealthy man, tore into the seven-figure salary of Rogers’ CEO Nadir Mohamed and the company’s $2.8-billion operating profit last year. “I don’t quite feel sorry for you yet,” he said sarcastically.

Then he added, to laughter from the crowd: “The rest of this, we’ll get into at the CRTC hearing. And boy, I can’t wait.”

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Channels that have mandatory carriage as of today

 

  • CBC News Network (in French-language markets): $0.15
    National news network

 

  • Réseau de l’information (RDI) (in English-language markets): $0.10
    French news network

 

  • Avis de recherche (in French-language markets): $0.06
    Public safety channel

 

  • Weather Network/Météomedia: $0.23
    Weather news and information bulletins

 

  • TVA: offered without a wholesale rate
    French-language television network

 

  • Aboriginal Peoples Television Network (APTN): $0.25
    Devoted to providing a “positive window on Aboriginal life for all Canadians.”

 

  • Cable Public Affairs Channel (CPAC): $0.10
    Public affairs programming

 

  • AMI audio, formerly known as VoicePrint: $0.04
    Broadcasts readings of books and news articles

 

  • Accessible Media: $0.20
    Described video programming for the visually impaired

 

  • Canal M, formerly known as La Magnétothèque: $0.02
    French-language audio programming.

 

New channels that want mandatory carriage

 

  • Described Video Guide $0.02
    Tells viewers were described video programs can be found on their subscriptions.

 

  • Canadian Punjabi Network Inc., $0
    Wants mandatory carriage wherever more than 5,000 Punjabi speakers live to show Canadian made programs about “realities of Canadian Punjabi community.”

 

  • ACCENTS, $0.25
    General interest programming that reflects well on Francophone communities.

 

  • FUSION, $0.32 English, $0.16 French
    Current affairs focused on “youth and local reflection.”

 

 

  • Accessible Media Inc., $0.30
    Open-format described video programming to provide French-language access to a wide breadth of news, information, drama, entertainment and other television programming to Canadians who are blind or partially sighted.

 

 

Existing services seeking mandatory carriage

  • Takten Gyurmey Foundation. $0.25
    Programs dealing with disability issues and to the support of people with disabilities in Canada.

 

  • Sun News General Partnership, $0.18
    Mainstream national news and information programming.

 

  • All Points Bulletin Incorporated, $0.06
    Assist law enforcement agencies across the country to obtain clues, tips and leads.

 

  • TV5 Québec Canada, $0.30
    Programming about the Francophone community.

 

  • ZoomerMedia Limited, $0.12
    Interfaith religious programming.

 

  • The Natural Resources Television Channel, $0
    Focused on natural resources, the workers in the industry, the promotion of Canadian expertise and technologies, and relations with Aboriginal peoples.

 

  • Education Through Media, up to $0.08
    User-generated content ranging in length from 30 to 60 minutes.

 

Existing channels looking to renew mandatory carriage

  • Aboriginal Peoples Television Network Incorporated, from $0.25 to $.40
    Devoted to providing a “positive window on Aboriginal life for all Canadians.”

 

  • Avis de recherche incorporée, from $0.06 to $0.08
    Assist law enforcement agencies across the country to obtain clues, tips and leads.

 

  • Accessible Media Inc., no increase requested
    Described video programming

 

  • Cable Public Affairs Channel Inc., from $0.10 to $0.12
    Public affairs programming.

 

  • Vues & Voix, from $0.02 to $0.04
    French-language audio programming.

 

Compiled by Steve Ladurantaye; Source CRTC

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