At the stroke of midnight on Wednesday night, the switch from analog to digital signals will be completed in most major markets across Canada – and the country’s private TV broadcasters will have spent more than $70-million to free up space on the airwaves at the government’s command.
Soon enough, they’ll be lining up in Ottawa to buy it back again.
The biggest issue for the industry coming out of the digital transition is not the change to your TV set – it is the auction of a big slice of that 700 MHz spectrum, along with a separate 2.5 GHz band, likely to happen at the end of next year. The fight for that spectrum promises to be fierce, as companies look to break into the wireless space or gain an advantage over existing competitors with better data capacity and more powerful signals.
Following major deals last year, which saw BCE Inc. buy the TV and radio assets of CTVglobemedia Inc. and Shaw Communications Inc. buy the former CanWest TV stations – Canada’s largest private networks, which are paying for this transition, are now all owned by bidding companies that are giants in the wireless space, or are looking to break into that market, as Shaw is.
When the same switch happened in the U.S. three years ago, the subsequent spectrum auction raised roughly $20-billion for the government. The proceeds in Canada could amount to $4- to $6-billion. “This will be hotly contested spectrum, for sure,” said Darren Henderson, a partner with PricewaterhouseCoopers’s consulting practice in Toronto. “If any of the [wireless] carriers miss out, it will be a hit to their level of service.”
The spectrum is valuable because the signals are stronger and they can travel longer distances, making it cheaper to build out a network, since fewer towers are needed to cover the same amount of space. It’s also desirable because Canadians are using more data as habits change, surfing the Web on their phones, using mobile applications or apps, and increasingly, watching mobile TV.
Many of the integrated companies, which now own both TV stations and Internet and wireless businesses, are offering more of their content on new platforms. In 2010, nine per cent of English-speaking Canadians responded that they’d watched video on a cellphone, according to the Media Technology Monitor report compiled by BBM Analytics. That number was up from just five per cent in 2009. And roughly half of all Canadians watched video content online, whether on a computer, a tablet, or through other devices.
“Video is going to be a big driver of spectrum use,” said David Purdy, vice-president of video products for Rogers Communications Inc. “I think tablets will be game changing, and will lead to a whole new generation of media that we haven’t seen yet today.”
As the landscape shifts, this spectrum is a tract of luxury beachfront real estate in a very tight market. And it’s going to ignite a bidding war. Tensions are rising in the industry over whether some of the auction will be hived off for only new entrants to bid on. In recent weeks, telecom executives have met individually with the new Industry Minister, Christian Paradis, to set out their proposals for the auction.
“An open auction doesn’t exclude the small entrants,” said Mike Woollatt, vice-president of government relations with Bell Media. “The spectrum should be open to ensuring that all Canadians benefit equally, whether they’re rural or urban, from the switch.”
While BCE is a big company with more money to throw at the bidding process, like other large incumbent telecom players, its executives argue that new entrants do not cover rural areas, and so setting aside spectrum for them would mean rural areas would not benefit from the advances that go along with the newly available space on the airwaves.
“We’re getting off the spectrum in the broadcast side at a great cost,” Mr. Woollatt said.
Rogers, which owns the City TV network, also wants an open auction.
“We want a right to bid during the auction, alongside new entrants. ... It’s absolutely imperative that we be able to bid on that spectrum,” Mr. Purdy said.
But not all of the broadcasters who have paid for the switch agree. Shaw, which owns Global TV and is also mulling a launch of its own wireless network, has argued that the auction will not be truly competitive without space set aside for new entrants.
Explaining the switch
All over-the-air broadcast TV networks in Canada are required to convert from analog to digital signals by Wednesday midnight. This is mandatory for stations in all major urban centres, as well as many other areas; 80 per cent of Canadians live in mandatory-conversion areas. In some rural areas, some analog signals may continue to air but many will be shut off there as well, either switching to digital or going dark altogether.
What does it mean for me?
Probably nothing. If you’re like roughly 90 per cent of Canadians and you subscribe to satellite, cable, or IPTV, you get all your channels through that service – including the free “over the air” channels affected by this switch – and nothing will change.
If you get your channels through rabbit ears or a mounted antenna, nothing will change as long as you have a newer television can receive digital signals. If you have an older TV, you’ll see a snowy screen instead of channels such as CTV and Global.
What do I do?
If you want to keep watching TV over-the-air for free, you’ll need either a digital converter box, so that your television can read the digital signals your antenna picks up; or you need a newer TV built to handle those signals. When the switch happened in the U.S. a few years ago, the government shouldered some of the cost of this equipment by handing out vouchers, but Canadians are on their own. You could also sign up for a TV subscription.
Shaw Communications Inc. is also offering a free package of channels via satellite for customers in rural areas who have lost their signals.
Am I covered if I have a converter box?
Not entirely. If you live in a rural area, some analog signals may continue to air, and a digital converter box will block those out. And in some larger markets, the CBC has won a reprieve allowing it to continue broadcasting in analog, so you could see all the private networks, such as CTV, City TV, and Global, but not be able to see the CBC.
I have analog cable. Do I need to worry?
No. The TV industry is undergoing a different type of digital switch, with most cable companies phasing out the old analog coaxial cables in favour of crisper digital cable that allows more signals to be condensed and transmitted over the same amount of space. Analog over-the-air is different. No cable signals will be affected.
The digital switch tally
A tally of what the digital switch looks like for Canada’s largest private broadcasters, and how much it has cost them:
SHAW COMMUNICATIONS INC.
(Owns the Global TV network through its Shaw Media division)
85: Number of transmitters that will be converted to digital signals. Nineteen of them are in the “mandatory markets” required by the CRTC to make the switch by today’s deadline. The rest, which are in communities outside the mandatory markets, will be converted gradually over the next five years.
$39-million: Total cost of converting transmitters by Aug. 31, 2016. The 19 mandatory transmitters converted for this deadline account for $16-million so far, with the rest to be spent over the next five years.
$1.6-million: Advertising revenue Shaw estimates it would have made over the past four months for the air time in which Global was required to air public service announcements about the switch.
(Owns CTV and the A Channel broadcast stations – soon to be called CTV Two – through its Bell Media division)
23: Number of transmitters converted, all in mandatory markets.
$30-million: Cost of converting transmitters.
Roughly $3- to $6.5-million: estimated ad revenue lost in order to air PSAs.
ROGERS COMMUNICATIONS INC.
(Owns the City TV and Omni channels through its Rogers Media division)
19: Number of transmitters converted, all in mandatory markets.
$18-million: Cost of converting transmitters.
(owns the TVA network – and until October, the Sun TV network – through its subsidiary, TVA Group Inc.).
8: Number of transmitters converted, all in mandatory markets.
$6.7-million to $10.4-million: Quebecor declined to specify the cost of the transition. However, if it is comparable on a per-transmitter basis to the costs its competitors have incurred, it has likely spent roughly in this range to make the switch.
$3.3-million: Estimated ad revenue lost in order to air PSAs, according to documents submitted to the CRTC.