The cable lobby says it’s only fair that cablecasters are now allowed to own analog specialty channels, but what is not clear is whether this rule change will one day lead to a distributors’ monopoly on specialty ownership.

The CRTC announced earlier this month that it will now allow cablecos to gain controlling interests in analog specialty channels, so long as certain conditions are met. While the regulator promises to provide the reasons for its decisions later, it does not put an upper limit on the number of specialties a cablecaster can own, nor does it deal with the marketplace fallout if cable companies buy out all the independent specialtycasters such as Alliance Atlantis, Astral and Chum.

While relaxing ownership rules for cablers, the CRTC says several principles will apply: the need for equitable treatment of all specialty and pay services, ‘including terms related to pricing, packaging, promotion and marketing/promotional costs’; the need for equal treatment between services affiliated with a cableco and those which are not, on all issues mentioned in the previous condition; a requirement that programmers supplying to competing distributors (i.e. cable and satellite) not divulge ‘competitively sensitive’ information between them; a condition that programming services be entitled to verify subscriber numbers; and a requirement that programming services that help pay marketing and promotion costs for their channels be able to obtain ‘an independent verified accounting in respect of its contributions.’

Cable association president Janet Yale says the CRTC’s decision was the only fair choice, and won’t put any of the TV system’s players at a disadvantage. ‘Once the BCE/CTV deal went through, it became obvious that everybody should be on the same footing,’ she says.

When the federal Competition Bureau and the CRTC blessed the February 2000 purchase of CTV by BCE, it gave the giant telco, which already owned satellite distributor Bell ExpressVu, control of CTV’s specialty channels, including TSN, Discovery Channel, Talk TV, Outdoor Life Network and Sportsnet (which is currently seeking a new owner). And although cablers were not formally supposed to own controlling positions in analog specialties, commentators often cited the fact that Corus Entertainment, a media company spun off Shaw Communications in 1999, owned such specialties as CMT, YTV and Treehouse.

Equal treatment?

Meanwhile, some broadcasting companies have been concerned that large cablecos were not according equal treatment in terms of carriage and channel placement to services in which the distribution company did not hold an equity position. And during the current process of programmers negotiating cable and satellite carriage for Category 2 digital specialties, some said they feared that, access and fairness rules notwithstanding, cablers would pressure programmers to sell an equity interest in their channels in return for carriage.

Jay Switzer, president of Chum Television, says Chum, which holds multiple analog and digital licences, ‘did file an intervention with the CRTC expressing concern about granting this kind of freedom to distributors. We want to ensure that our channels get the same kind of treatment as the cable companies’ channels in terms of pricing, tiering, marketing and packaging. The 5:1 rule is a very important level of protection.’

The 5:1 rule requires cablecasters to carry five non-affiliated services for each affiliated one they carry. Yale says this rule ensures cablers treat channel suppliers equitably, adding her members will have no trouble living with the rule even though they can now take controlling interest in analog specialties. ‘Our members will have no problem upholding [the 5:1 rule]. But it ends up limiting what customers can get on their home service. If [the cableco] can’t launch one given affiliated service because they don’t have five unaffiliated services to match it,’ the customer will lose out.

But if cablers and satellite companies buy up all the specialties from independent specialtycasters, it may be that there will be no ‘unaffiliated’ channels left to match with affiliated ones. If that happens, Yale says, the protective 5:1 rule may have to be revisited by the CRTC.

She admits the supplier/cablecaster negotiations around the launch, pricing and packaging of the new digi-specialties will always be tough-minded, especially in a digital environment with a small, 2.1 million-subscriber universe and technology that makes packaging options infinite. It’s no longer the case, as with analog, that subscribers get all-or-nothing channel packages or tiers. Cablers want to keep package and other subscription prices as low as possible; since if the packages don’t draw subscribers, they will fail.

‘It’s a huge gamble, much more risk than for the earlier analog launches,’ Yale says, noting that 1.4 million subscribers have chosen satellite over cable – and if cablers package poorly or set prices too high, customers will look elsewhere. *

– With files from Ian Edwards