CRTC blasts bull-headed broadcasters and cable firms over television tax issue

GATINEAU, Que. — The federal regulator upbraided the two big players in Canadian broadcasting for bull-headedness Monday over the fee-for-carriage issue that has divided the industry into warring factions.

CRTC Chairman Konrad von Finckenstein listens to the opening address from President and CEO of CTVglobemedia Ivan Fecan at the CRTC hearings in Gatineau

GATINEAU, Que. — The federal regulator upbraided the two big players in Canadian broadcasting for bull-headedness Monday over the fee-for-carriage issue that has divided the industry into warring factions.

CRTC chairman Konrad von Finckenstein bluntly told conventional broadcasters and the cable companies they were “destroying” their brand and “scaring Canadians” with threats of a $10 TV tax on their cable bills.

Reminding executives of Rogers Communications (TSX:RCI.B) he had asked them three times to work with broadcasters on a solution, von Finckenstein’s frustration boiled over.

“Basically, I’ve been told, ’We’ve got market power, we won’t do anything,’ ” he said.

At another time, he accused Rogers of taking an argument about money and elevating it into a “religious crusade.”

He appeared almost as frustrated earlier in the day in questioning executives of CTVglobemedia, the country’s biggest broadcaster.

Several times he pleaded with CTV officials to propose an industry-made solution, adding: “I am very frustrated by this very confrontational view.”

Such was the first day of two weeks of hearings into whether Canada’s conventional television broadcasters will be given the green light to negotiate with cable and satellite companies on a fee for the signals they now carry for free.

Von Finckenstein’s pleas fell on deaf ears with Rogers vice-president Phil Lind, who said the CRTC was trying to get the cable companies to do its dirty work — levy a tax for conventional TV.

“We are not going to be the culprits, they (CRTC) are going to be the culprits. They are in a bit of a corner because they (broadcasters) can’t get more money unless they raise it from consumers,” he said during a pause in the hearings.

If more money doesn’t flow to broadcasters, argued CTV president Ivan Fecan, Canadian television may never look the same.

Noting that two local TV stations had recently closed, Fecan said the business model for the industry is basically broken.

The lion’s share of revenues is now flowing to the carriers — cable companies — and most of the costs in terms of domestic programming and local news, is flowing to the broadcasters.

If cable firms don’t pay up, Fecan said, he would be prepared to pull his network off any cable company that refuses to negotiate a fair fee, or even pull out of conventional broadcasting altogether.

“We are not going to be here operating conventional TV unless we can make a business of it,” he told the Canadian Radio-television and Telecommunications Commission.

But Rogers chief executive Nadir Mohamed insisted conventional television “is not in a state of crisis” — and even if it is, it is one of its own making.

“The destructive overspending by CTV and Canwest (Global TV) on U.S. programming is well known,” he said.

He estimated English-language networks pay 75 per cent more today — about $700 million — than the $400 million they allotted nine years ago, a period in which revenues only increased by 16 per cent.

For months, Rogers Communications, Canada’s largest cable TV operator, and Bell (TSX:BCE), which owns the country’s largest satellite TV operation, have waged a TV and newspaper ad war containing their own threat — if they are forced to pay broadcasters for the signals, they will charge their customers up to $10 a month.

To which, CTV says the CRTC should again get into the business of regulating extremely profitable cable firms like Rogers and Shaw Communications (TSX:SJR.B) to force them to offer a basic package of programs for a low cost set by the regulator.

Fecan’s threat to pull CTV’s signal off cable, or satellite, if no compensation is given would come with a big condition. It would be dependent on the network enforcing a blackout on broadcasting in Canada any U.S. show it has bought rights to.

The reasoning is that no carrier could withstand the customer backlash from the black-out of such popular fare as CSI, Desperate Housewives or House.

But Rogers said it would continue to carry the U.S. networks, which also broadcast the shows.

“If they want to pull the signals, let the chips fall where they may,” responded Ken Engelhart, Rogers’ head of regulatory affairs.

One fear, said CRTC commissioners, is that with the parties at logger-heads, negotiations will not work, resulting in Canadians having to get the rabbit ears and antennas out to watch CTV or Global stations.

But Fecan and his executive vice-president, Paul Sparkes, said they did not believe negotiations for so-called fee-for-carriage would break down.

They said re-transmission negotations have worked in the U.S. and cooler heads would prevail in Canada as well.

At a news conference held outside the hearing room, a group of about a dozen Canadian actors called on the CRTC to allow broadcasters to seek a fee for their signals, but added that any new money that would flow to the networks should come with strings.

Actors guild president Ferne Downey said the CRTC should insist broadcasters invest at least six per cent of gross revenues on Canadian dramas and comedies.

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