Canadian TV Regulator Backs Broadcasters in Carriage Fee Fight

TORONTO -- In a much-anticipated decision, the Canadian Radio-TV and Telecommunications Commission (CRTC) said the nation’s conventional TV networks can seek from cable operators and satellite-TV providers fees or other compensation for their signals. But the CRTC stopped short of imposing any fees or mandating “value for signal” negotiations between the parties, pending a judgment by the courts on the agency’s power to do so.

The decision late Monday handed Canada’s two biggest private, English-language TV broadcasters -- CTVglobemedia and Canwest Television -- a long-sought victory in their four-year battle with cable and satellite distributors over proposed carriage fees. CTV, Canwest Global and their allies have been lobbying heavily for monthly carriage fees of C50 cents per subscriber for their networks, saying they need dual revenue streams to make up for slumping advertising receipts. The cable and satellite firms have fiercely resisted, saying they shouldn’t bear the burden for broadcasters’ heavy spending on U.S. TV programming rights.

The CRTC’s ruling did not give the major private broadcasters everything they wanted. It declined to set any fee for signal value, saying all compensation must be based on fair negotiations between the networks and distributors. The CRTC also declined to order the industries to start negotiations because of conflicting legal opinions that it received about its authority to do so. Instead, it asked the Federal Court of Appeal for an “expedited” ruling that would clarify its jurisdiction under the Canadian Broadcasting Act.

In an unexpected twist, the CRTC also left Canada’s national public broadcaster, the CBC, out in the cold. The regulator decided its proposed value-for-signal regime should not apply to the CBC because carriage negotiations would permit broadcasters to pull their signals in a contract dispute. This ability, the agency said, would clash with the Broadcasting Act’s mandate that the CBC be made available to the largest number of Canadians possible.

The CRTC said it came up with “a market-based solution” that would “allow private local television stations to negotiate with cable and satellite companies.” Under the planned regime, local TV stations could choose to negotiate value for their signals every three years. To do so, they would have to give up the current regulatory protections that require cable and satellite providers to carry all the conventional networks, place them in favorable positions on the dial and substitute their signals for U.S. networks carrying the same programming.

"The current dispute between conventional broadcasters and distributors threatens the overall integrity of the broadcasting system,” CRTC Chairman Konrad von Finckenstein said in a written statement. “Broadcasters and distributors have a symbiotic relationship. The time has come for them to put their differences aside and work together to ensure the continuation of conventional television."

Reaction to the CRTC decision was swift and predictable, with Canwest Global executives hailing the ruling and Rogers Communications, Bell Canada and CBC officials all blasting it. CBC officials said they will have to cut programs and jobs while Rogers and Bell Canada executives said they will have to pass on any extra fees to subscribers.

"The CRTC today has essentially placed a tax on all cable and satellite customers,” Rogers Vice Chairman Phil Lind said in a written 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.” Lind termed the ruling “a total win for the broadcasters and a total loss for consumers.”

Rogers executives threatened to take the issue to court and at least delay the implementation of any compensation plan. Rogers officials also suggested that they may appeal the decision to the Conservative government, which has signaled that it might block any move by the CRTC to impose additional fees on cable and satellite providers because of the impact on consumers. In December, the government overruled a previous CRTC decision to prevent Wind Mobile, an internationally backed wireless provider, from operating in Canada.

The CRTC’s decision came three days after the agency released a report showing that broadcasters ran up a loss in 2009 for the first time since the agency started keeping track in 1996. Private broadcasters lost C$116 million before interest and taxes last year, as revenue fell 7.9 percent to C$1.97 billion, largely because of a 10 percent drop in ad revenue. In contrast, cable companies boosted profit before interest and taxes nearly 10 percent to C$2.3 billion last year, as their revenue rose 12 percent to C$9.2 billion.