If ‘going digital’ means a race to 15% penetration of the cabled population, Shaw wins, Rogers trails.

Mid-month, Shaw Communications’ Peter Bissonnette, senior vp of operations, quietly announced that Shaw is now able to offer most of its 1.5 million subscribers digital cable. At $100 million in technology, spent. Canada, long digital nowhere, is digital somewhere.

At first look, the capacity issue is going up in a hail of ones and zeros. If digital service is available to ‘most’ of Shaw’s 1.5 million subscribers in Ontario, Vancouver and Alberta then the problem at the axis of the Canadian cable channel industry is solved. The distributors have room at the inn; the channels have access to a penetration base large enough to facilitate a reasonable business. Onward ho for the ‘orphaned four,’ some or all of the 40 English-language applications in limbo with the crtc and the French-language specialties that will be licensed this year.

It’s not that simple.

At press time, word is the commission will announce a framework hearing for new specialty channels in February. The process will likely take place late this fall, with a couple of months between it and the Sept. 1 deadline that both cablecasters and licensees have been eyeing since 23 new services were licensed in 1996.

To recap: among the pack blessed by the crtc that year were a dozen-odd ‘digital’ channels which had the option of negotiating with the cable companies for analog carriage in the short term. But as of Sept. 1, the onus of responsibility shifts to the cable companies.

The commission, which has granted cable fee increases in the name of digital for more than a decade, dictates that if the major msos don’t have 15% of their subscriber base digitized by September and all of the new channels launched, then those unlaunched licensees will be carried on analog. Read: the potential bumping of American services and/or home shopping and alphanumeric channels.

A year ago, debate moved around how binding an arbitrary date from the crtc would be. Today, it’s a different world, complete with a different commission. Of the appointees who sat the 1996 hearings, only two – David Colville and Andree Wylie – are still on staff.

With eight months to deadline, Shaw and Rogers chip at digital. The orphaned four – those with a licence still not launched – have some decisions to make, and debate is moving around whether the commission sticks to its guns or backs down come September.

Spectrum

status quo

Report On Business Television, Talk tv, Star tv and Canadian Learning Television make up the remaining digital licensees, those likely first and foremost thrilled by Shaw’s announcement. For its part, Shaw is onside. ‘We already have an agreement,’ says Bissonnette.

‘When they launch, we carry.’

But there remains a huge cap between the capacity to offer digital services to 1.5 million subscribers and actually signing on 15% of the whole.

In spite of the technical landscape, very little about the math has changed over the course of the year. Shaw’s original purchase order for 400,000 boxes from General Instruments still stands. According to Bissonnette, 70,000 customers already subscribe to Shaw’s premium service package and have analog boxes in the home. They can be immediately replaced by their digital counterparts.

In addition, he says that somewhere between 80,000 and 130,000 new subscribers could log on by the end of September now that smaller communities have access to the digital signal. Best-case scenario would bring total digital penetration to between 150,000 and 200,000, which would put Shaw in the clear with the crtc. But Bissonnette cautions against optimism.

‘Obviously with this move, we’re closer. But realistically, with this much programming available, it’s difficult and we may not get [to 15%] by September. It may take 18 months or two years. We need and want more programming to sell. We’re doing everything we can and you can’t just dictate a penetration level and say `That’s what it is.’ ‘

Which leaves the status quo for the remaining channels pretty much unchanged.

The going ‘magic number’ of subscribers with which a channel can make a profit is generally about one million. Shaw’s high-end 200,000 figure isn’t close. And although Rogers’ initiative could be expected to up the ante, there’s no word yet on a discernible digital distribution plan for its 2.2 million subscribers. Rogers is currently in the process of their own digital box trials with the Explorer 2000 from Scientific Atlanta. (Rogers’ Roger Keay was unavailable to elaborate at press time.) Shaw has selected gi’s DCT 2000 as its box of choice, which will be delivered in February.

What next?

Since the 15% goal is a long shot, the remaining licensees have choices over the next eight months: they can roll the dice that the commission will order the cable companies to clear analog space for them Sept. 1, continue trying to negotiate carriage on analog or decide to launch on digital and ink losses for the foreseeable future.

As for rolling the dice, the likelihood of the commission calling for the delisting of American services is slim to none. With trade sanctions pegged to cultural protection already in discussion, none believe the crtc will take steps to create a cmt-type situation again. A more likely option is demanding the cable companies remove infomercial and alphanumeric services, some of which they own and therefore wouldn’t want to displace.

Option b, negotiating for analog carriage, can take a couple of forms. Their brethren have been launched on analog via a variety of tactics including a ‘negotiation’ process, the results of which still technically still have to see the light of day.

Although no one is willing to go on the record with confirmation, a multitude of sources has long confirmed that chum’s Cable Pulse 24 found its coveted channel position only after Rogers was allowed a 20% ownership stake in the service. CanWest Global’s Prime tv and chum’s MuchMoreMusic are among others thought to have carved a similar deal. Most say the evidence won’t surface for years.

Although adjustments in broadcast ownership must come before the commission, the idea is to wait until capacity is no longer an issue (and cable, perhaps, back in the crtc’s good books) before bringing plans before the regulator.

Another option, one patterned by M3, is gathering carriage on the smaller cablesystems and then leveraging those numbers to launch on Rogers or Shaw.

Finally, there’s being prepared to absorb losses for the foreseeable future and launch on 70,000-plus subs. None among the final four are willing to let their licence expire in September and none are backed by ownership strata that can’t withstand a drain on the bottom line.

chum, which owns Star tv and Canadian Learning Television, already dominates the specialty spectrum. Talk tv is owned by ctv but is thought to have an excellent chance of launching on analog on Rogers before September. ‘Don’t think Rogers didn’t do a deal with CTV Sportsnet without talking about Talk tv,’ says one source.

rob tv, one of the most expensive channels in the offing, may be the only one requesting an extension of its licence term, particularly considering its ownership is in flux. As part of the WIC Western International Communications division of assets between CanWest and Shaw, rob tv is slated to become Shaw property.