Ad war over TV taxes moves on to decisive phase at CRTC

OTTAWA — Canadians have seen the ad war over TV taxes, now comes the real thing.

OTTAWA — Canadians have seen the ad war over TV taxes, now comes the real thing.

For the next two weeks starting Monday, representatives of Canada’s television industry will go before the CRTC throwing verbal bombs at each other over the issue of whether cable companies should pay for the right to carry conventional television.

It’s the third time in the last three years the issue has come before Canada’s broadcast regulator.

The fee-for-carriage issue is without question the most contentious facing Canadian broadcasting for one rather prosaic reason — it’s all about money, who gets to keep more and who winds up paying.

Depending on who is doing the counting, it could involve the transfer of up to $350 million from the pipeline of the industry — cable and satellite firms that carry the signals — to TV networks that buy or produce the shows.

More likely, it could involve television viewers paying anywhere from $2 to $10 a month extra on the cable bills.

The battle is so bitter that even before Monday’s start of hearings, one of the parties, Rogers Communications Inc., (TSX:RCI.B) argued that CRTC chairman Konrad von Finckenstein and at least one other commissioner should ”recuse themselves“ because they had earlier called for a negotiated fee between the parties.

The request does not make mention of the fact that presumably von Finckenstein and at least one other member of the Canadian Radio-television and Telecommunications Commission had also twice before ruled the other way.

But as Ian Morrison of Friends of Canadian Broadcasting noted, facts are in short supply when both sides are busy throwing mud at each other.

“They say the truth is the first casualty of war and this is one case,” he said. “Nobody who has seen those ads has any idea who to believe.”

Michael Janigan of the Public Interest Advocacy Centre agrees, calling the millions spent on trying to bring public pressure to bear on the CRTC by companies it regulates “unprecedented.”

“I find the roles assumed by the participants bewildering. I suspect the commission is not terribly happy,” he said.

The roles assumed by the pipeline companies in launching the “Stop the TV Tax” blitz of ads is that if they are forced to pay over-the-air broadcasters for carrying signals that viewers with TV antennas pick up for free, they will have no choice but charge consumers $10 a month extra.

Independent observers say the fee will likely be more like $2 or $3 a month.

In filing before the CRTC, the carriers have also blasted CTV and Global for making hapless business decisions, including overpaying for popular U.S. shows such as CSI series or Desperate Housewives.

On the other side, CTVglobemedia Inc., Canwest Global Communications Corp. (TSX:CGS), and the CBC have responded with the “Local TV Matters” campaign, arguing they are being squeezed by dwindling ad revenue and increasing costs.

The say the carriers have gotten fat on their backs because they pay nothing for the privilege of distributing those popular and expensive programs, including local news.

They also argue that while profitability has been rising among carriers — particularly the cable companies — it has been plummeting among broadcasters to the point they reported a mere $8 million in profits last year, before the recession hit.

Meanwhile, cable company profits, including Shaw Communications Inc. (TSX:SJR.B), can be measured in the billions.

“This is a case where both sides are desperate,” says Morrison, who mostly sides with the broadcasters. “One side because it is sinking; the other because it is bloated and wants to stay that way.”

Some media critics contend both sides are in a race for who can be the greediest.

Still, the CRTC will have to weigh a number of issues, including whether the advent of the 500-channel universe has unalterably tipped the scale away from the broadcasters to the carriers, and if corrective measures are needed.

That’s what a panel decided earlier this year, so if the CRTC reaffirms that judgment, it will have to set the parameters for how the parties would negotiate market value for the signals.

In its tabled arguments, Rogers quoted from a study it commissioned from respected economist Jack Mintz of the University of Calgary that carriers would be at a disadvantage in negotiating a value for the over-the-air signals because the CRTC requires that they carry them.

Such negotiations occur in the U.S., but carriers are not obliged to include any specific channel on its menu.

A complicating factor is that some of the cable firms own TV stations, some over-the-air for which they pay no fee, and some cable, such as Rogers’ Sportsnet, for which they do.

Still another is that Heritage Minister James Moore jumped into the fray this summer and ordered the CRTC to hold hearings on how fee-for-carriage would impact consumers. Those will be held in December.

Some observers, such as Morrison and Janigan, say there is no reason for the cable companies to charge consumers any more, given their profit margins. A separate case can be made for satellite, which as yet is not as profitable.

One possible solution is for the CRTC to dictate that the carriers offer a basic package of stations at a minimal monthly rate set by the regulator.

Janigan jokes the CRTC faces a Solomon’s choice, which it might be wise to resolve by “making nobody happy.”

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