Overview

Friends makes several suggestions to the CRTC on how rate increases sought by Rogers Sportsnet Inc., The Score Television Network Ltd. and VoicePrint in their licence renewal applications  could be used for public benefit.

• Approve the modest rate increase requested by VoicePrint, a news service for vision-impaired Canadians.
• Direct any other increases in subscriber fees not to the applicants, but rather to the Canadian Television Fund.
• If the CRTC believes it is in the public interest to “level the playing field” amongst the three sports services, it should consider reducing TSN’s wholesale rate, rather than increasing those for Sportsnet and The Score.  
• Require all three sports services to give up their analog status and be distributed exclusively on a digital basis, as “tier drivers.”  This would give subscribers the freedom to choose whether to subscribe to such services, and might increase digital take-up rates at the same time.

Full Document

June 2, 2003

Statement to the CRTC
by Ian Morrison
Spokesperson
Friends of Canadian Broadcasting

[Applications 2002-0974-3, 2002-0891-9 & 2002-0702-8: Licence Renewal Applications for Rogers Sportsnet Inc., The Score Television Network Ltd. & VoicePrint]

Mr. Chair and members of the Commission: thanks for inviting Friends of Canadian Broadcasting to appear today. As you know, we wish to discuss the reasons for our opposition to the rate increases proposed in the renewal applications of Rogers Sportsnet and The Score. We also wish to support the rate increase proposed by VoicePrint.

In essence, the positions taken by Rogers and The Score are that they deserve an increase in their wholesale rate to level the playing field with their principal competitor, TSN, which currently has an approved wholesale rate of $1.07.

The most recent statistics available from the Commission reveal that as of August 31, 2002, SportsNet, The Score and TSN enjoy wide distribution, seven, five and eight million households respectively:

Table 1

Service	Subscribers	Subscriber Wholesale Revenues	2001/02 Average Wholesale Revenue per Subscriber p.a.
Sportsnet	7,135,431	$65,856,609	$9.23
The Score	5,203,136	$5,646,028	$1.09
TSN	8,012,076	$110,832,739	$13.80
Total		$182,335,376	$24.12

This wide distribution enjoyed by these three English-language analog sports services reflects the fact that they are typically distributed as part of the basic or extended basic tiers.

Effectively, English-language viewers have no choice but to subscribe to all three sports services. There is no opting out of basic, and in practice extended basic has become the de facto basic service.

It's instructive to compare what English-language subscribers must pay for sports services compared to what French-language subscribers must pay.

While there are three analog English-language sports specialty services, there is just one French-language service, Réseau des Sports ("RDS").

Table 1 in our submission demonstrates that the three analog English-language services receive wholesale revenues averaging $24.12 per year per subscriber. Taking the distributors' mark-ups into account, this means that an individual subscriber, on average, pays $48.24 per year for the three services.

By comparison, Réseau des Sports receives wholesale revenues averaging $16.23 per year per subscriber. The average subscriber therefore pays $32.46 for RDS.

Table 2

Service	Subscribers	Subscriber Wholesale Revenues	2001/02 Average Wholesale Revenue per Subscriber p.a.
Réseau des Sports (RDS)	2,482,568	$40,282,825	$16.23

We note that English-language subscribers are already forced to pay 50% more than French-speaking subscribers for specialty sports services, while French-speaking subscribers pay for a single service 67% of what English-speaking subscribers pay for three services. In both cases, sports services already represent a significant percentage of monthly cable spending by Canadian viewers.

The proposed monthly increased wholesale rates for SportsNet and The Score tell only half the story in terms of the impact on Canadian viewers.

As I have noted, broadcasting distribution undertakings typically double the approved wholesale rate to arrive at the retail rate charged to subscribers. As you can see from Table 3 of our submission, this means that, if the proposed rate increases were to be approved, Canadians would typically pay $5.08 per month or $60.96 per year to receive these three sports services, whether or not they want these sports services.

Table 3

Service	Proposed Monthly Wholesale Rate	Proposed Monthly Retail Rate	Proposed Annual Retail Rate
Sportsnet	$1.07	$2.14	$25.68
The Score	$0.40	$0.80	$9.60
TSN	$1.07	$2.14	$25.68
Total	$2.54	$5.08	$60.96

Friends seriously questions how it is in the interest of Canadians to be required to spend $61 annually to receive these three analog English-language sports services.

It is interesting to compare the amount Canadians spend to receive English-language analog news and information specialty services to the amount we pay for the three analog English-language sports services.

Table 4

Service	Subscribers	Subscriber Wholesale Revenues	2001/02 Average Wholesale Revenue per Subscriber p.a.
CTV NewsNet	6,959,267	$6,959,267	$1.04
CBC Newsworld	8,941,000	$56,042,000	$6.27
CP24	2,391,837	$608,586	0.25
ROBtv	4,242,984	$12,148,652	$2.86
Total		$75,758,505	$10.42

Table 4 reveals that analog news-oriented specialty services received an annual average of $10.42 in revenues per subscriber. Given that CP24 is a regional service restricted to Ontario, the average was actually $10.17.

Based on the typical 100% mark-up charged by distributors, English-speaking Canadians paid on average just less than $21 per year for English-language news and information services. This is considerably less than half the $48 they are already paying for the three analog specialty sports services.

As news services are more important public services than sports services, Friends questions this disparity and suggests it would not be in the public interest to allow it to grow further through approval of the proposed rate increases.

Friends questions why the approved wholesale rates should increase by even 1¢ for analog English-language sports specialty services. These services occupy coveted analog channels and enjoy high existing wholesale rates. The Commission has done more than its share to assure the success of these services. One would think that the rest should be up to their owners. We also noted with interest your questioning of these applicants wherein you appeared to share our concern that a substantial purpose of these rate increase proposals is to burnish the applicants' bottom lines.

While Friends believes that sports programming reflects a valuable component of Canadian culture, surely there can be no argument that drama programming makes a far greater contribution to Canadian culture than sports programming.

Yet, while sports services are already well funded through subscriber revenues and advertising, drama remains woefully under-funded in Canada. As you have recently stated, Mr. Chair, there is a paucity of drama programming aired on English-Canadian television. And lack of funding is obviously the key obstacle to the production and broadcast of Canadian drama programs.

So, should the Commission determine that it is acceptable in principle to increase the charges to subscribers by more than $80 million per annum - the combined Rogers and The Score request - Friends suggests that it would be preferable to mandate the distributors to collect those funds from subscribers and pass them along to the Canadian Television Fund, rather than to pass them on to Rogers and The Score.

If the Commission were to accept the notion that it is in the public interest to "level the playing field" amongst the three sports services, Friends submits you should consider reducing the wholesale rate enjoyed by TSN rather than increasing those for Rogers and The Score.

In the alternative, Friends suggests the Commission could require all three analog English-language sports service to surrender their analog status and be distributed exclusively on a digital basis. This would allow subscribers the freedom to choose whether to subscribe to such services.

Sports services are commonly referred to as "tier drivers". If the Commission were to require a move to digital by the three analog English-language sports services, that decision could have the beneficial effect of enticing more Canadians to subscribe to digital channels and might increase digital take-up rates which, in turn, would help bolster the fortunes of the struggling Category 1 and Category 2 digital specialty services.

Friends recognizes and acknowledges the valuable contribution to the Canadian broadcasting system made by VoicePrint. This not-for-profit charity provides a critical lifeline service for some 2.8 million blind, low-vision and print-restricted Canadians.

Friends supports the renewal initiatives proposed by VoicePrint, including its proposed monthly pass-through fee of 4¢ per subscriber. Friends urges the Commission to approve VoicePrint's renewal application as filed. We contend that approval of the VoicePrint renewal application, including its proposed rate increase, is truly in the public interest.

Finally, in reviewing the comments of the Canadian Cable Television Association on these three applications, we noted that CCTA "opposes" the rate increases proposed by The Score and VoicePrint, but "does not support" Rogers SportsNet's request for a rate increase. After attempting to plumb the essence of this distinction, we began to realize that "membership has its privileges".

To sum up, these three renewal applications afford the Commission an opportunity to make changes that could:

- help secure the future of the CTF;
- bolster the fortunes of the digital tier; and
- assure the long-term viability of a vital, under-funded service, namely VoicePrint.

Friends is making four suggestions for the Commission's consideration:

Suggestion #1: If the Commission accepts the proposition that Canadian consumers should pay higher subscriber fees, Friends submits it would be in the public interest to direct those increased fees not to English-language analog sports services, but rather to the CTF.

Suggestion #2: If the Commission were to accept the notion that it is in the public interest to "level the playing field" amongst the three sports services, Friends submits you should consider reducing the wholesale rate enjoyed by TSN, rather than increasing those for Rogers and The Score.

Suggestion #3: In the alternative, Friends suggests the Commission could require all three analog English-language sports services to give up their analog status and be distributed exclusively on a digital basis. This would allow subscribers the freedom to choose whether to subscribe to such services.

Suggestion #4: Friends urges the Commission to approve VoicePrint's renewal application as filed. We believe approval of the VoicePrint renewal application, including its proposed rate increase, is truly in the public interest.

We thank you for this opportunity to share our views on these important public policy issues.

Yours sincerely,

Ian Morrison
Spokesperson

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