Source : Globe & Mail

by Robert Brehl

In a blow to Shaw Communications Inc.'s multimedia aspirations, the broadcast regulator has ruled against the cable company owning almost half of the Headline Sports specialty-TV channel.

Yesterday's Canadian Radio-television and Telecommunications Commission decision – although seemingly minor on the surface - is expected to have wide-ranging ramifications, particularly when it comes to Calgary-based Shaw's takeover of WIC Western International Communications Ltd. of Vancouver.

That's because WIC has extensive specialty-and premium-TV holdings, which Shaw had made clear it was interested in keeping throughout the four-month battle with CanWest Global Communications Corp. of Winnipeg.

Shaw has 52 per cent and CanWest has 44 per cent of WIC, which also owns 12 radio stations and nine television stations. The two sides are currently negotiating to carve up the assets before presenting a package to the CRTC.

But by denying Shaw Headline Sports, an around-the-clock sports highlights and game scores channel, the CRTC seems to increase the likelihood it will keep WIC's specialty and premium channels out of Shaw's reach, too.

Late last year, Shaw purchased 682,576 shares or 47.85-per-cent of Hamilton-based Sportscope Television Network Ltd., the parent of Headline Sports, which was launched nationally last year, for an undisclosed price from Clairvest Group Inc.

Calling the decision "surprising" and "very disappointing," John Cassaday, president of Shaw Media, said WIC and Headline Sports are quite different deals and an inference on WIC assets should not be drawn from this ruling.

For instance, Shaw has a background in children's programming that fits into WIC's assets, while Shaw has no track record in sports programming such as Headline Sports.

"We have demonstrated our commitment to children's programming and no one is triggering more Canadian (children's programming production) than us," Mr. Cassaday said.

Asked if it would have been worth the effort for WIC should Shaw end up only with WIC's 12 radio stations and its satellite subsidiary, Mr. Cassaday responded: "We don't anticipate that's the way it's going to break down."

Shaw is examining whether to appeal this decision, he said. The company has 45 days if it wants to go to the federal cabinet. The CRTC said it turned down the application because it has had enough of the cable industry's broken promises on rolling out digital services, which could increase capacity on cable networks. The commission said that with tight analog capacity, cable operators could confer "undue preference" to specialty channels that they own.

"Given Shaw's extensive vertical and horizontal holdings in the Canadian broadcasting industry, its dominant market position could lead to gatekeeping and other anti-competitive practices," the CRTC wrote in its decision.

Shaw, which already controls three specialty-TV channels and has minority stakes in three others not including WIC's holdings, is Canada's second-biggest cable operator with 1.5 million customers. Toronto-based Rogers Cablesystems Ltd. is the biggest with 2.23 million subscribers.

Shaw has been the most aggressive in rolling out digital services with about 70,000 set-top boxes in customers' homes and 400,000 more boxes on order, Mr. Cassaday said. Rogers has delayed digital rollout indefinitely until a standardized box is developed.

"The CRTC finally has drawn the line on vertical integration of cable and programming," said Matthew Fraser, a professor of broadcasting policy at Ryerson Polytechnic University in Toronto. "It must have taken some courage, because of the 14 interventions on the question, 12 were in favour of the Shaw takeover. The big industry players support vertical integration because they want to jump on the same bandwagon. But the CRTC didn't buy it."

Jane Logan, president of the Specialty and Premium Television Association, said the CRTC has sent a clear signal to cable to stop dragging its heels on increasing channel capacity.

"The commission has recognized that disputes over fair access and cable self-dealing are tied to the shortage of cable capacity," Ms. Logan said. Ian Morrison, spokesman for the Friends of Canadian Broadcasting, said the implications of this decision extend beyond WIC. He said the regulator has made it clear it intends to use its authority until strong competition against cable arrives to let the market decide.

"This is the new CRTC questioning things that the old guard never did," Mr. Morrison said.

Yesterday's decision does not augur well for Rogers, either. It has an application before the CRTC to double its 20-per-cent stake in CTV Sports Net, a specialty service slated to launch this fall.

One difference between the Rogers and Shaw applications is that Rogers was part of the winning specialty licence, while Shaw tried to go from zero percent ownership to almost half in one swoop after Headline Sports was already on air. Rogers also has a smaller stable than Shaw of specialty-TV holdings, with minority stakes in two channels and 24-per-cent voting hold of Viewers' Choice pay-per-view service.

Rogers officials were tight-lipped on yesterday's ruling. "It just wouldn't be prudent for me to comment," Rogers vice-president Jan Innes said.

Cable delivery is essential to the survival of specialty channels because they are not available using antennas as are conventional TV channels.

CRTC's Sportscope (Headline Sports) decision sends a signal to Shaw and its WIC takeover.

CABLE MARKET SHARE

Rogers ... .... 29.0%
Shaw ... ... ... 18.5%
Videotron ... 18.5%
Others ... .... 18.5%
Cogeco ... .... 9.0%
Moffat ... ... ... 4.1%
Fundy ... ... ... 2.4%

SHAW COMMUNICATIONS

YTV, children's programing, 100%
Treehouse TV, children's programming, 100%
Country Music Television, 80% (90% votes)
Teletoon, 16.7%
The Comedy Channel, 14.95%
Telelatino, 20%

***

WIC WESTERN INT'L COMMUNICATIONS

The Family Channel, 50%
Teletoon, indirect 40% through Family Channel's 40% holding of Teletoon
Superchannel, current release movies and concerts to homes west of Ontario,100%
MovieMax, more than 5-year old movies to homes west of Ontario, 100%
Viewers' Choice Pay Per View, to homes west of Ontario, 100%
Report on Business Television, 50% is through its subsidiary Canadian Satellite Communications.

***

WESTERN CO-AXIAL

Sportscope, 47.85%

***

ROGERS CABLE

Outdoor Life, 30%
Sports Net, 20% (waiting for CRTC approval for increase to 40%)
Viewers' Choice, 24% voting interest

***

MOFFAT COMMUNICATIONS

The Women's Network, 68.4%

***

VIDEOTRON

Canal Indigo, 20%

***

Source: CRTC, CCTA, Nielson People Meter data plus Initiative Media estimates

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