Source : Globe & Mail

GATINEAU, Que. — Canada's television system needs to be restructured to emulate the Internet, with more on-demand programming, looser restrictions on advertising and fewer hurdles for new specialty channels to compete with each other, Canada's largest cable company told federal regulators Tuesday.

At Canadian Radio-television and Telecommunications Commission hearings probing possible changes to the industry, Rogers Communications Inc. said those steps would make the sector better able to compete in the future with Internet television, which has already started eroding TV audiences.

The company also fired the first salvo at the three-week hearings in a contentious fight with national networks CTV and Global, which want regulators to let them charge cable and satellite distributors for their signals.

Rogers accused the networks of seeking a cash handout though the proposed fees, and has said it will pass them on to consumers on monthly bills.

The networks, which will appear at the hearings next week, argue they need the fees to continue funding local news and community programming due to slumping ad revenues of network TV. The networks have proposed charging 50 to 70 cents per cable and satellite subscriber, which Rogers has said would result in a large number of consumers cancelling their cable service. Only specialty channels are allowed to charge such fees.

CTV and Global say they are tired of giving their signals free to cable and satellite carriers that make billions of dollars. The distributors counter that they give the networks access to millions of homes, which boosts ad dollars for the broadcasters.

Rogers chief executive officer Ted Rogers argued the networks aren't struggling financially and that they have boosted spending on Hollywood programs. He added that his company wouldn't have spent hundreds of millions of dollars to buy the CityTV network last year if it thought TV broadcasters were in trouble.

"Listen, they're swimming," Mr. Rogers said of CTV. "They're doing well. The same can be said for Global."

CRTC chairman Konrad von Finckenstein questioned the assertion that consumers would "revolt," since cable companies often raise rates without fear of their customers leaving.

"You raise your fees annually, and you haven't had a decrease in subscribers," Mr. von Finckenstein said. "I'm just giving you a hard time. Don't worry, I'll give CTV and Global a hard time, too."

He added the CRTC would be unlikely to entertain the idea without "strings attached" for the networks, such as forcing them to spend the money on Canadian programming.

"It strikes me that without fee-for-carriage, local programming is going to be in serious danger," Mr. von Finckenstein said.

Outside the hearing room, an executive with CTV questioned the cable industry's opposition to the networks, given the profits it makes from TV in an industry where distributors have dominant positions in their markets.

"Their business is built on the backs of our industry and on the consumer," said Paul Sparkes, executive vice-president of corporate affairs for CTVglobemedia Inc. "We believe that the system needs to be rebalanced, and that's what we're asking for."

CTVglobemedia is the parent company of the CTV network and also owns The Globe and Mail. It is making the proposal in a joint submission to the CRTC with its rival Global Television.

The networks are expected to detail declining industry fortunes next week when they testify, particularly for local programming and news, which can be more costly to produce..

In other arguments, Rogers also testified that it wants to see the elimination of rules that prevent new Canadian specialty channels from competing with existing services in the same program format. These rules, which prevent two rival Food networks from launching, for example, would make the TV dial more competitive, argued Ken Englehart, head of regulatory affairs for Rogers.

"If someone's not doing a good job in their format, someone else will sneak into their genre and do a better job," Mr. Englehart said. "That kind of competition would be beneficial to the system.

However, Rogers says it's against U.S. cable channels such as the USA Network being allowed into Canada to compete with domestic specialty services. That notion has been put up for debate by the CRTC and has been favoured by other cable operators such as Shaw Communications Inc.

The CRTC often faces requests from consumers for unfettered access to foreign cable networks that aren't offered in Canada. But Mr. Rogers said opening the border could threaten the viability of Canadian channels.

"So far as foreign services are concerned, we are not in favour ... That would be very harmful to the system," Mr. Rogers said.

Some existing specialty channels don't want such genre protection rules opened up, even if it is only for the Canadian market, fearing it could cause a rush to duplicate successful formats such as the Weather Network and others.

Smaller specialty channels are also concerned about the power cable and satellite distributors have over deciding which channels can get carried. Popular cable channels such as TSN and Sportsnet have little trouble getting carriage, but niche formats can be refused. Rogers wants to let the market decide which channels are carried and what rates they can charge consumers for those channels on monthly bills, getting rid of what CRTC carriage rules are in place for some channels.

"The popular services will get higher rates, the less popular services will get lower rates," said Mr. Englehart.

"It will become like any other rational market for goods and services."

He said the cable companies would not shut out channels – which is what some broadcasters fear – if consumers complain.

"We're not talking about cutting people off ... Consumers are very loyal to their programming," Mr. Englehart said, noting that when Rogers moved the Golf Channel on the dial, it was flooded with complaints by consumers who thought it was cancelled. "The phones lit up."

Rogers also wants to sell ads on its video-on-demand service on digital cable. Existing rules prevent Rogers from putting new ads into on-demand shows, which are generally available after their live broadcast. However, existing ads are allowed to stay in the shows.

Selling new ads would allow the company to target commercials based on location and generate new ad dollars with broadcasters.

"Customers in some postal codes will get ads for trucks while other postal codes get ads for minivans," said Mike Lee, chief strategy officer for Rogers.

The company also wants to sell ads during the few extra minutes each hour on channels where the U.S. broadcasts carry more commercial time than Canadian broadcasters are allowed. These minutes – called avails in the industry – can't be sold and are therefore devoted to running ads for Canadian programs or cable or satellite services. A portion of the money made from this – roughly $60-million a year, Rogers estimates – would go into Canadian programming funds, the company proposed.

Following Rogers, CBC executives are scheduled to appear at the hearings later Tuesday.

© Globe & Mail