Source : Toronto Star

Allowing network giants to charge fees for local TV signals amounts to unfair tax on customers, says Phil Lind of Rogers Communications

In the past year, both CTV and CanWest Global Communications Corp. have voluntarily mired themselves in debt: CTV to buy CHUM television and radio for $2.3 billion, and Global to buy specialty TV powerhouse Alliance-Atlantis for about half that amount.

Over the past few years, in frantic efforts to claim "we're No. 1" bragging rights and win the ratings game, both have indulged in out-of-control bidding contests to buy the rights to popular U.S. prime-time programs.

Predictably, both now find themselves short of cash and struggling to meet the profitability levels their investors expect.

What are these network giants doing about their problems? They're crying poor, all the way to the Canadian Radio-television and Telecommunications Commission, Canada's broadcast regulator.

Next month, CTV and Global will appear before the CRTC seeking the power to charge more than 80 per cent of Canada's television viewers, those who subscribe to either satellite or cable TV services, a fee for receiving their local signals.

As long as there has been television in Canada, such local broadcasts have always been free. CTV and Global now want to charge as much as 70 cents per month for them. That's $1.40 per customer per month. Maybe not so bad, you're thinking.

Think again. The CRTC is unlikely to give CTV and Global the authority to tax consumers without also ruling that all local broadcasters should receive the same 70-cent monthly payment.

Since the number of such broadcasters varies across the country, Canadians, depending upon where they live, could find themselves facing bill increases of more than $8 per month.

Taxing customers, CTV and Global claim, is the only way to ensure they will have sufficient cash on hand to meet their commitments.

Heaven forbid they take on less debt, rein in their spending, or explore new revenue opportunities. These options require hard work and discipline. It's so much easier to ask someone else, in this case consumers, to do it for you.

Consumers, along with cable and satellite companies, already make significant and ongoing contributions to CTV, Global and other television broadcasters' bottom lines. By CRTC order, monthly bills already contain a hidden 5 per cent consumer tax, money that goes to the Canadian Television Fund and is used to subsidize the cost of making Canadian programs.

Last year, that amounted to more than $150 million.

As well, cable and satellite carriage greatly increases the amount CTV, Global and other local broadcasters can charge for a minute of advertising. It does this by increasing the quality and, therefore, the attractiveness of the signal containing the ad, and by significantly enlarging the number of viewers the ad reaches.

Finally, at their own expense, cable and satellite distributors are obliged to help make local broadcasters wealthy by substituting on request Canadian versions of popular U.S. shows (everything from the Super Bowl to Grey's Anatomy) for the original versions transmitted into Canada by U.S. networks like NBC and CBS. Canadian viewers don't get the originals; they see a CTV or Global version complete with Canadian ads. These ads generate the easiest money anyone in the television business has ever made.

Yet, in the case they're bringing to the CRTC in April, CTV and Global blithely insist they are saviours of Canadian broadcasting. Never mind that they're reneging on their promise to provide their signals free and to produce Canadian programming in exchange for the privilege of receiving an exclusive broadcasting license.

That was then, they seem to be saying; this is now.

And now, having spent and mismanaged themselves into lower profits (not losses, mind you, just lower profits) CTV and Global have conveniently discovered they cannot comfortably meet their commitments.

They want consumers to do it for them and they want cable and satellite companies to play the role of tax collectors.

The proposition is distasteful and unfair on both counts.

Phil Lind, vice-chair
Rogers Communications Inc.



CTV's Paul D. Sparkes says antiquated rules allow cable, satellite providers to charge for local broadcasts without compensating networks

Local television stations are the backbone of the Canadian broadcasting system, and this month, we at CTV are recognizing decades of this enormous pioneering achievement.

Many of these local stations signed on when the only choices available to Canadians were the CBC and U.S. over-the-air stations from places like Burlington, Vt., Buffalo, N.Y., and Spokane, Wash.

Our local stations, like CTV Montreal and CTV Toronto, earned the trust of Canadians as a source of information and entertainment, and offered news and analysis that reflected the communities they served. They also bred generations of young Canadian journalists, many of whom started at the local level and have gone on to become leaders on the national and international stage.

What has changed? A system that began as three or four channels is now a 500-channel universe. Logically, the economic model for local TV has changed drastically, making the future of local television, and specifically local news, a challenge.

The financial pressures on local television and local news are not unique to Canada. The U.K., Australia, and even the United States have seen changes in advertising trends that threaten the future of local TV. This has led to calls in these countries to look at the economic model of local television with a view to creating a sustainable future.

The situation is more acute here in Canada, as our local TV stations have more obligations and fewer protections.

Next month, the Canadian Radio-television and Telecommunications Commission, or CRTC, will begin the first holistic review of the rules that govern television, cable and satellite since 1993. Given the rapid pace of technological change and consumer behaviour, this review is timely and important.

Interestingly, while so much has changed over the past five decades, one constant is the connection people have to local television and, specifically, local news.

More than four million Canadians watch CTV's local newscasts every day. We are exceptionally proud of the work they do - the stories of courage they tell, the hardships they cover, and the bonds they have built with their communities.

Local newscasts do as much to forge the Canadian identity as any other form of story-telling, because after all, they chronicle our daily lives.

In a recent Nanos Research poll, 64 per cent of Canadians polled placed a high or very high value on local television news. Among those surveyed, 70 per cent believed they paid their cable companies to include local television as part of their "basic" package. And 80 per cent believed local stations should receive compensation for carriage.

Sadly, antiquated rules have allowed cable and satellite providers to subsidize part of their business by taking local signals, charging customers for them and not compensating local broadcasters.

It's hard to imagine any reasonable business model that would allow someone to confiscate your property with no compensation and resell it for a profit, but that has been the relationship between local broadcasters and cable companies for years.

While it is clear that cable companies, like Rogers, are not interested in putting an end to this subsidy, we believe it is time for fair compensation for carriage of local broadcast signals. That is why CTV and CanWest Global Communications Corp., in a joint submission to the CRTC, have asked for the end of this subsidy to cable and satellite providers, to allow us to create a sustainable future for local television stations that perform local news and local reflection.

While Rogers and other cable and satellite providers have regularly raised their rates - as recently as last month - they hope to cloud the debate with threats of a cable bill increase.

Cable companies are already charging you - the consumer - and we believe that you shouldn't have to pay any more than you already are. But knowing the cable companies, they will use this as an opportunity to increase your bill.

In our joint submission to the CRTC, we suggested a modest fee of 50 cents per subscriber in exchange for cable's right to carry local signals. If the cable and satellite companies pass through this fee to the consumer, the average Canadian household should pay less than $2.50 a month. It would be less in smaller cities and towns, many of which have only one or two local television stations.

The television broadcasting and distribution system needs to be rebalanced. It must be equitable and fair for everyone. It's how the system was originally designed.

The time has come to restore a precious national resource for those who watch Canadian television and for future generation of journalists who hope to carry on the proud tradition of servicing their communities.

Paul D. Sparkes, executive vice-president, corporate affairs
CTVglobemedia

© Toronto Star