Rogers Communications Inc. says it fears new television proposals would send revenue plummeting and drive U.S. networks out of Canada.
The cable giant told a hearing on Thursday it is concerned a set of ideas floated by the Canadian Radio-television and Communications Commission (CRTC) to strip down basic TV packages and let viewers buy channels one by one would hurt its business. But it argued it could accept the regulator's proposals – with a few major caveats.
Over four days, the CRTC repeatedly heard dire warnings about the folly of such a plan from television's most powerful players. Quebecor Inc. called for massive deregulation, while BCE Inc. demanded a new subscriber fee to support local TV.
Rogers, however, said it thinks it could make "pick-and-pay" work if the CRTC agrees to keep popular U.S. networks such as ABC, CBS and PBS in basic cable, force distributors to offer just half their channels "à la carte," and provide some help in bargaining network contracts.
"We're here in a somewhat middle position," Ken Engelhart, Rogers's senior vice-president of regulatory, told the CRTC, striking a more conciliatory tone than his major competitors. By offering consumers more choice in a way that doesn't threaten broadcasters' revenues, "We might keep people from cord-cutting," he said.
Keeping subscribers in the traditional TV system is a huge challenge as online streaming services provide new competition. Rogers and its rivals are undergoing what Rogers Media president Keith Pelley called an "unbelievable transformation" in viewing preferences among younger audiences.
The CRTC has proposed a pick-and-pay system to boost viewers' choice and satisfaction with the price of TV. In response, broadcasting companies, including Rogers and Shaw Communications Inc., say the plan is misguided and would actually drive cable bills up for most viewers, because the huge fixed costs of television would be spread less widely after unbundling.
Yet Rogers also voiced a second fear: Some in-demand U.S. channels like A+E and AMC almost certainly wouldn't allow their programming to be sold à la carte.
David Purdy, senior vice-president of content at Rogers, said U.S. networks think pick-and-pay "is like touching the third rail" – a non-starter that would kill profitability. And Mr. Engelhart warned if Canada forces the issue, some may decide to "take [their] ball and go home," pulling signals from Canada.
Instead, Rogers proposes building a much smaller basic package, costing $25 to $30 instead of the $38 charged for its base bundle now, as the CRTC has suggested. It would put at least half its channels up for sale à la carte, and offer all stations as part of "build-your-own" bundles of perhaps 10 or 20 channels, as opposed to one by one.
The CRTC's chairman, Jean-Pierre Blais, challenged Rogers about why 50 per cent pick-and-pay is the right threshold, and whether it would simply expose Canadian channels to the risks of unbundling while sheltering their more powerful American counterparts. "Don't you find it's an odd result?" Mr. Blais asked.
Mr. Engelhart replied he wasn't trying to draw a line between Canadians and Americans, but rather looking to keep channels from disappearing from the dial.
Rogers and Shaw also praised a CRTC proposal to ban "unreasonable" negotiations between TV distributors and networks. The rates a cable or satellite company pays for a channel are set through calculations based on how many subscribers sign up for it, but Rogers says it gets demands that "amount to guaranteeing [a channel's] business case forever and a day," Mr. Engelhart said.
Companies like Rogers will likely lose money even if the CRTC accepts its caveats. But the Toronto-based company says it would play along if the regulator agrees to ease into a pick-and-pay world, rather than leaping into the deep end.
With full pick-and-pay, "you [risk getting] into this sort of vicious cycle," Mr. Engelhart said, where subscriber numbers go down, pushing costs up. "And yes, those [costs] are passed on consumers."