Douglas Barrett is a partner and the head of the KNOWlaw Group of the Toronto law firm McMillan Binch.

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Monday, Sept. 30, 1997 marked the beginning of another round of specialty service applications to the crtc. The commission received 71 applications in all, 48 for English services, 21 for French services and two for services in other languages. The applications cover 21 separate genres in English and 15 in French.

Since quite a number of services licensed during the last round in 1996 have yet to be carried on any cable system, it seems at first to be inconceivable that so many applicants would incur the expense and effort, once again, to obtain new licences for services that may never see the light of day.

Yet, many of the major broadcasters have multiple applications. Global has applied for eight licences, wic for four, Baton for three, NetStar for six, Alliance for four and Atlantis for five.

The reasons why

There are several reasons why the broadcasters are doing this. First, the cable industry obviously believes new services can be marketed in packages, having recently agreed to launch as many as 18 new analog services including some that were only licenced for digital carriage.

Second, the capacity of the cable industry despite its protestations seems to be expanding to handle new offerings.

Third, there is likely to be some form of digital rollout in the next few years which will create even more capacity and limited market penetration for new services.

Fourth, the telephone companies will shortly be able to offer cable television and will be looking for new services to create programming packages which are competitive with those of cable operators.

In addition, many of the services applied for can be operated quite inexpensively, even with high Canadian content commitments.

A fitness channel, for example, uses relatively few hours of programming with an extraordinarily high repeat factor and appeals to a small but dedicated audience. If the operator of a fitness service also owns a number of other specialty services, the additional costs of operating the fitness service are very low and the combination of subscriber income from cable and advertiser support can produce a profitable bottom line.

Based on the crtc decisions made in 1996, many of the applicants believe, correctly in my view, that the commission will license every qualifying applicant and the licensee will therefore ‘reserve’ the genre until market conditions are appropriate for the service to be launched. The only losers will be the weaker applications in direct competition with each other. For example, only one of the five travel applications is likely to succeed.

Issues for the CRTC

So what are the issues to watch for at the hearing, likely to occur in mid-winter 1998?

One controversial question for the crtc will be to determine whether cable operators can control the new programming services. To date, every such situation has been treated as an exception to the general rule that cable should not own more than 30% of any such service. This time around Shaw Cable has controlling interest in two applications and Rogers in four applications.

Given the fact that many services in which cable operators originally had, or recently acquired, an equity interest are among those being carried in the current launch, the cable companies may face stiff opposition in their attempts to convince the commission that they should be permitted to control additional programming services.

Who applied for what

In the head-to-head competition department, there are some interesting battles shaping up. For instance, Atlantis and Alliance are competing for a biography or people channel; chum and Salter Street, former partners in a comedy application, are competing to offer an independent film channel; and five heavies (Astral, Baton, chum, NetStar and wic) are all applying for a travel channel.

Salter Street is completely unopposed in two categories (game shows and consumer reports) to which it could bring its own special brand of twisted humor. cbc is unopposed in its application for a farm channel and Atlantis is unopposed in its food channel application.

In addition, there are no fewer than nine regional news applications, four controlled by wic and five controlled by Global. Regional news stations have recently made strong gains south of the border and some or all of these will likely surface as an attractive addition to new cable packages.

Finally, there is a strong continuation of a previous trend for applicants to seek licences for French-language services which have already proven successful with the crtc in their English versions. For example, Alliance, Tele-Metropole and Radio-Canada have applied for History, Radio Mutuel for Home and Garden, and Cancom for business.

The key issue

While there will be many interesting contests, the key question facing the crtc is whether to add to the already large number of licences that do not have carriage or to adopt some method of restricting the number to those which have a reasonable prospect of obtaining carriage in the current cable environment.

The betting is that the commission will signal its commitment to supporting market forces by licensing many services and signaling to Canadians that a good proportion of those licensed may never launch or, if launched, may fail.

(This article is contains general comments only. It is not intended to be exhaustive and should not be considered as advice on any particular situation.)