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CAB wants time-shift deal revisited; millions at stake

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Bell Expressvu Inc.
Rogers Cable Inc.
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CRTC - television
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OTTAWA - The Canadian Association of Broadcasters is using a skirmish with Rogers Cable as a springboard to get the CRTC to revisit a two-year-old decision on the conditions of carriage for out-of-market distant Canadian broadcast signals.

What's at stake is tens of millions of dollars for local broadcasters and regional programming.

The CAB filed a 35-page submission on October 29th calling for the Commission to revisit the entire issue of appropriate compensation for BDUs offering time-shifted channels to customers. The submission is an opposing reply to a Rogers application for lower rates the cable company wants to pay the broadcasters' group for carriage of out-of-market signals on digital cable.

Rogers and most other digital cable operators offer a number of western and eastern American and Canadian broadcast signals to their customers, marketing them as time-shifting channels. The cablecos began carrying the signals in response to direct-to-home satellite companies Star Choice and Bell ExpressVu, whose channels are all available nationwide.

Fearing the impact that the availability of out-of-market Canadian signals would have on broadcasters' audiences (if an Ontario viewer is watching The Simpsons at 11 p.m. on Sunday evening on Global Vancouver on digital cable or satellite for example, he or she is not watching their local news), especially smaller broadcasters, the CAB and ExpressVu came to an agreement in 2002 where small broadcasters that aren't carried by the largest DTH company would be compensated and ExpressVu would add even more small market signals (which they have added this year).

(There are simultaneous substitution issues at play here, too, but the CAB is not targeting the carriage of out-of-market U.S. channels, it's the time-shifted Canadian broadcast signals which are the concern.)

In the original CAB-ExpressVu deal, signed in November of 2002, ExpressVu agreed to put some limitations on distant signals and the DTH provider agreed to inject new funding directly into the creation of local programming. ExpressVu agreed to divert 2% of its gross revenues to an independently administered fund specifically for local and regional programming.

However, that 2% was to come from the contribution ExpressVu and all BDUs already pay towards the Canadian Television Fund. Producers objected to the deal.

The CRTC did not approve it as written and instead altered the agreement when it announced its new policy in July of 2003 (which applies to Star Choice as well).

At the time, the CAB said the Commission's ruling and dismantling of their agreement with ExpressVu threatened the existence of some small market broadcasters.

The Commission ruled that only 0.4% of DTH gross revenues were to be diverted to small market independent broadcasters to address the impact of satellite (and now digital cable) technology, which covered the loss of advertising revenues caused by time-shifting from one region of the country to another.

A study commissioned by the CAB supports a far higher number and says that the carriage of out of market signals works out to damage between $1.66 and $2.49 per customer per month for local broadcasters. It has now asked the Commission to institute a rate of $2 per customer per month. The 0.4% that DTH pays and that Rogers has asked for, amounts to less than 40 cents a month.

Factoring in all the Star Choice and ExpressVu customers, as well as all the digital cable customers in the country, the dispute is a matter of tens of millions of dollars. Assuming four million digital television subscribers in Canada today, $2 each a month would come to around $96 million in revenue to the broadcasters in 2004.

At 0.4% of gross revenues (ball-parking an overall average $55 a month paid by digital subscribers to all digital BDUs), the amount paid to broadcasters in 2004 would come to about $10.5 million.

While the CAB was negotiating with ExpressVu, it had a provisional agreement where Rogers Cable paid $1 per customer per month, waiting on the terms of the DTH deal, and then the CRTC ruling on it.

Rogers now wants to take advantage of the Commission's 2003 DTH ruling, citing parity between the two platforms.

CAB president and CEO Glenn O'Farrell told last week that he doesn't blame Rogers for trying this route. "I understand why Rogers would make that choice," he said, but their application, "is not the right reference point."

The Commission "cherry-picked an agreement, and it falls apart when that happened," he adds. "The entire agreement lost all logic."

"We've asked to pay them on the same basis that DTH is paying CAB," said Rogers Cable's vice-president, regulatory, Pamela Dinsmore. "We agreed that when the DTH deal was done we would review our rate. There was a retroactivity clause where either they would owe us money or we would owe them� they have rejected our proposal based on parity."

O'Farrell is quick to note, however, that despite the clause in the CAB application that ponders banning the carriage time-shifted out-of-market channels, he really has no urge to pursue that. "We're not asking to roll the clock back on that. Even though that would be the simplest thing to do, it wouldn't be very consumer friendly," he explains.

There's no time-frame yet as to when the Commission might make a decision on the matter.
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