When the CRTC convenes its hearing on Canadian broadcasting in new media starting Feb. 17 in Gatineau, QC, expect to hear private broadcasters looking for flexibility, niche players looking for mobile access, and producers looking for funding.

Perhaps surprisingly, the matter of whether the regulator should slap minimum Cancon requirements on private broadcasters’ Internet ventures is likely to sooner be brought up by the broadcasters in a preemptive strike than by the production community itself. The Canadian Association of Broadcasters wants no part of the whole idea.

In its preliminary submission, the CAB recommends the CRTC ‘refrain entirely from attempting to exercise its broadcasting regulatory mandate on online content generally, as well as from imposing any new reporting or other regulatory obligations on traditional broadcasters with respect to their own online activities.’

The CAB argues that homegrown online content will ultimately do better if the casters are left alone to figure out the best ways to exploit the medium. In other words, they don’t want to be forced to spend on production. The role the CAB sees the commission playing in all this is rather to monitor the extent to which nontraditional new media players are impacting broadcasters’ businesses, and then to adjust regulation in the traditional space to help keep the broadcasters healthy, lest they will no longer be able to satisfy their current Cancon obligations.

Statistics show the broadcasters have reason to worry. While TV and the Internet currently coexist somewhat peacefully, the writing is on the wall. The CRTC’s inaugural Communications Monitoring Report released last summer revealed that revenues in 2007 for private conventional TV were basically flat (up only 1.3% over 2006), while revenues for specialty, pay, pay-per-view and video-on-demand were up 9%. But this pales in comparison to the 33% bump enjoyed by online advertising, which totaled $1.2 billion in 2007.

Although broadcasters continue to increase their online video offerings, much of that Internet advertising comes in the form of banner ads and classifieds – meaning only a small fraction of it is going to the broadcasters’ websites.

One suggestion on the Cancon issue has broadcasters receiving incentive rewards for funding digital content, but even on this point the casters are hesitant. Broadcast execs privately explain that whatever financial incentives are offered up, it’s just not worth it, because it gets the CRTC into the digital media game, and then, down the road, who knows how much more involved the regulator will be.

Privates CTVglobemedia, Canwest Global and Astral Media underline their support for the CAB’s stance in their respective filings.

As the industry gears up for the hearing, CTVgm is crowing about its online dominancy. September data from global Internet research firm comScore shows that CTVgm websites ranked fourth in terms of videos streamed by Canadians, behind sites owned by foreign aggregator giants Google, Microsoft and Yahoo! Among domestic rivals, CTVgm recorded five times more streams than the second-place Canoe Network.

In addition to a generous selection of on-demand episodes from series on its main network and specialties, original online content on the CTV Broadband Network includes on-set, music video and mini-episode extras for Degrassi: The Next Generation and webisodes related to The Jon Dore Television Show. CTVgm says it experienced double-digit online revenue growth last year.

And while Corus Entertainment makes no specific reference to the CAB submission, the company does make the case for not only sparing broadcasters from regulatory commitments in the new media space, but also reducing their commitments for traditional TV.

‘Private media enterprise success is what will lead to a stronger cultural system, not the current system of progressive fees, conditions and tariffs,’ reads Corus’ intervention.

But if it sounds like the casters are jumping ahead to their upcoming licence-renewal hearings, they may not get much engagement this time round from the production community, which is instead targeting Internet service providers to kick in for funding. Just as cable and satellite companies contribute 5% of gross annual revenues to domestic TV production (to be raised to 6%) via the Canadian Television Fund, production groups argue that new media distributors should support digital content with a similar tax on revenues derived from online broadcast activities.

‘We want to make sure that, through a levy on ISPs, we get some money flowing into the system so that we get more Canadian production activity for more Canadians,’ says Brian Anthony, national executive director and CEO of the Directors Guild of Canada.

The ISPs, of course, vociferously oppose the idea.

Bell Canada, Bell Aliant, Rogers, SaskTel and Telus have presented the CRTC with a joint study that argues against the logic of transferring a model from TV to the very different medium of the Internet – especially a model created when the web was in its nascent stages. The report goes to great lengths to differentiate the role of the ISPs from that of broadcasters, essentially passing the burden of programming funding back onto them.

The ISPs further try to dispel the belief that having a tax slapped on them would ‘level the playing field’ between themselves and the BDUs. In another example of companies using the new media hearing to try to gain advantage in the broadcast world, the report suggests rethinking BDUs’ obligations to the CTF.

‘A superior policy would be to reform the treatment of BDUs to be more consistent with the challenges and opportunities confronted in today’s media markets, which have changed, in part, because of the emergence of the Internet,’ it states. All of the companies that commissioned the report, except for Telus, contribute to the CTF.

There is also the question of whether or not the CRTC even has the jurisdiction to impose such a tax on the ISPs. To that end, the DGC, along with the CFTPA, ACTRA and the WGC, commissioned a study by Toronto law firm McCarthy Tétrault that concluded in the affirmative.

That the four groups would be focusing on the ISPs is hardly surprising given the current state of the industry. When it comes to funding, producers are traditionally cash-strapped, and broadcasters’ earlier warnings that they were in trouble have been confirmed in major layoffs at advertising-reliant Canwest and CTVgm.

The ISPs, meanwhile, have a more recession-proof business. A recent U.S. poll by Harris Interactive presented a list of items to consumers, asking which of the items they could not live without, with the top response being the Internet, at 65%, distantly followed by cable TV subscriptions at 39%.

According to Statistics Canada, the profit margin for domestic ISPs in 2006 was 20% (or $400 million), up from 19% in 2005.

‘When you look at their profit margins, there’s a fairly substantial potential amount of money there to flow into production,’ says the DGC’s Anthony.

StatsCan attributes an 11% growth in the ISPs’ operating revenues primarily to increased adoption of broadband services. Canadian producers can argue that they contribute some of the content that would drive customers to upgrade to broadband. (The survey doesn’t take into account Internet access through cable and wireless services, which would show even more widespread broadband take-up.)

ISPs will also find themselves under attack from broadcasters that feel they aren’t given fair access in the mobile space.

One of those is Oakville, ON’s Pelmorex Media, owner of specialties The Weather Network and Quebec’s MétéoMédia, and a pioneer in web and mobile content. According to comScore, the two channels’ websites are tops among news and information destinations in their respective markets, together receiving more than seven million unique visitors per month. The broadcaster has recently bolstered its online presence with short-video content.

Pelmorex also text-messages weather reports to mobile users, who can also access the websites through the browser pages of major carriers. Additionally, the broadcaster makes video clips available via cell phone. But Pelmorex is frustrated by the fact that mobile carriers can refuse to provide consumer access to their services, or put their services in less appealing price packages than rival weather offerings. A carrier could favor a weather service produced by a division of its own company.

‘Now, all of a sudden, you’re acting like a packager; you’re acting like a conventional cable company,’ says Paul Temple, Pelmorex SVP regulatory and strategic affairs. ‘So if they are going to act like a cabler or satellite distributor, then they should maybe be regulated like one, and if they are going to act like the pure Internet – where the consumer is completely in charge – then maybe they don’t get regulated. That’s an issue that we have got to flesh out as part of this hearing.’

The hearing begins on Feb. 17, breaks on the 19th and 20th for the CFTPA’s Prime Time in Ottawa conference, then resumes during the week of Feb. 23.