Canada's conventional television networks should be able to negotiate payment for their signals, which are currently available for free to cable and satellite distributors, the federal regulator ruled on Monday.
It's an issue that has gone before the Canadian Radio-television and Telecommunications Commission twice before. Monday's ruling drew a harsh reaction from distribution companies BCE Inc. and Rogers Communications. Inc.
During a set of hearings in November, the broadcasters - CTV Inc., CBC and CanWest Global Communications Corp., which owns the Global network - argued once again that in an environment of crumbling advertising revenues and fragmented audiences, they should have access to an additional revenue stream from the distributors that make money providing those signals to Canadian homes.
The result is not exactly what the broadcasters wanted: fee-for-carriage, as was proposed in the past, would have seen the federal regulator require distributors like Rogers and Bell Canada to pay the conventional networks the same way they pay for the signals of specialty and pay television services. Value for signal, on the other hand, simply puts the CRTC's endorsement behind a negotiation process.
The CRTC decision said that "the system needs revision so as to permit privately owned television broadcasters to negotiate ... to establish the fair value of [their signals]"
Under the new system, the broadcasters would have the choice every three years to negotiate value for their signals. If they choose to do so, they give up regulatory protections that require cable and satellite companies to carry all the conventional networks and to place them at a preferential point on the dial (on channel 8 instead of 508, for example). That three-year option was proposed by CTV at the hearings in November.
If the broadcasters choose to negotiate, and are unable to come to an agreement with a distributor, they could pull their signals from the cable or satellite feed in question and also block other channels on the same service from broadcasting programs to which they have purchased the Canadian rights.
So, if CTV and Rogers were unable to make a deal, there might be no cable distribution of CTV for Rogers' customers and also a blackout on any channel with American Idol in its prime-time lineup.
The only broadcaster left out of the new framework is the CBC. Because it is a public broadcaster, a negotiation process that could involve the network pulling its programming does not fit with the CBC's mandate, according to the CRTC.
Rogers and Bell parent BCE Inc. reacted harshly to the decision.
"The CRTC today has essentially placed a tax on all cable and satellite customers," Rogers vice-chairman Phil Lind said in a statement. "While the over-the-air broadcast sector has had financial challenges during a tough recession, the commission has decided to penalize our customers and impose fees for services that are available free over-the-air for anyone with an antenna or on the Internet."
Added Kevin Crull, president of Bell Residential Services: "The CRTC is prepared to have Canadians pay even more to subsidize profitable broadcasters and their ever-increasing spending on U.S. programming."
The decision comes after a CRTC report last Friday that showed broadcasters operated at a loss in 2009, for the first time since the commission began recording industry numbers in 1996.
The CRTC's decision on Wednesday noted that "the dramatic change in proportions indicates a significant shift in market positions."
Cable and satellite distributors once again boosted their profits in 2009, and also increased the fees they pay to specialty and pay television channels for the privilege of distributing their programming. The broadcasters now want a slice of those fees, which last year amounted to a total of $2.5-billion.
Private broadcasters lost $116-million before interest and taxes, wiping out an already meagre profit of only $8-million in 2008. However, they also spent more on foreign programming than ever before, a practice that was strongly criticized by the cable and satellite firms during the course of the debate.
The CRTC has introduced a minimum spending requirement for Canadian programming of 30 per cent for the three largest private broadcasters (CTV, Global and CITY-TV). For companies such as CanWest that own both a conventional network and specialty stations, the regulator will allow more flexibility on how they distribute some of that spending among their conventional and specialty services.