CRTC decision is good news - for lawyers

Decision on cable fees will keep case before the courts for years

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by L. IAN MacDONALD
The Gazette, Wednesday, March 24, 2010

It is a Solomon's judgment that the regulator has issued in the fight between the cable guys and the private TV networks, one of the nastiest spats ever to end up before the Canadian Radio-television and Telecommunications Commission.

CRTC chairman Konrad von Finckenstein told the networks they could negotiate fee for carriage for their programs on cable and satellite systems, provided the concept is approved by the Federal Court of Appeal.

The networks got most of what they wanted, a recognition of fee for carriage, which the specialty channels such as TSN and the Weather Network, already enjoy on a monthly pass-through basis. The cable guys get to fight on in court, with the next step up being the Supreme Court of Canada.

So it was a good day for lawyers and lobbyists - this case could go on for years.

And von Finckenstein, by nodding in favour of fee for carriage and punting the issue to the courts, gets to wash his hands of the whole business, in which both the cable guys and the networks have been models of bad behaviour.

You've seen their ads on television, usually back to back - "Stop the TV tax" from the cable guys, "Save local television" from the networks. The net effect has been a wash in public opinion, like political attack ads that cancel each other out.

And of course, it's all about money. The networks, admitting the old business model is broken, say they can no longer make ends meet with advertising revenues alone. In fact, they maintain they lost more than $100 million last year, while according to a CRTC report the cable and satellite industry saw their profits increase 16 per cent, in spite of the recession, to $2.3 billion in 2009.

For the networks and their local affiliates, gone are the days when a TV television franchise was a licence to print money. Psst, wanna buy a TV station, cheap? You can have many of the local channels on CTV or Global for a song. And some of them are simply being shut down.

What's happened to the business model? First, the arrival of the 500-channel universe. It's not just CBC, CTV, and Global anymore in English, or Radio-Canada and TVA in French. And there aren't just three U.S. networks any more, with the prime-time substitution of Canadian commercial versions of their programs, which is how the private networks made a killing in Canada for decades.

The arrival of the speciality channels, and the all-news networks on both sides of the border, has dispersed audiences for conventional broadcasters in a big way.

That's a big change in the TV industry. The cyclical change was the recession that struck in the third quarter of 2008 with ruinous effects to the industry's bottom line in 2009. As for the cable guys, they're doing very well because they don't have advertising to speak of, just subscription fees that come in every month from your cable or satellite bills.

The TV networks want the same deal as the specialty channels, fee for carriage, a level playing field. They're tired of giving their programs away, especially when they see how well the specialty channels are doing. For example, while CTV has been losing money with its main network, some of its sister channels owned by CTVGlobeMedia, such as sports channels TSN and RDS, are collecting fee for carriage.

For their part, the cable guys say any payouts to the networks won't come out of their bottom line but will have to be passed through customers by way of increased fees for their cable and satellite packages.

And this is where both the CRTC and the government come in, warning the cable and satellite operators not to even think about it.

"They'd better be careful that they don't impose it on the customer," von Finckenstein said on Monday. Coming from the regulator, that's a pretty unambiguous warning.

Then in the House yesterday, Stephen Harper got into it twice in a question period exchange with NDP leader Jack Layton.

"The government has indicated in the past," the prime minister said, that it sees "a problem with taxes or fees imposed on consumers."

In that sense, the cabinet could just overrule the CRTC decision. But that wouldn't settle anything, and only leave the broadcasters turning out their empty pockets.

Next stop, the Federal Court. Final stop, the Supreme Court. Yes, indeed, a good day for lawyers.

 
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