Whether the CRTC will soften, reform or maintain its policy on cable ownership is yet to be seen, but submissions on the subject have been flooding the commission’s gates since it put out a call in early December.

Several of the submissions are in favor of the status quo while many, including that of the CFTPA, suggest the CRTC should have a public hearing so the cable industry can demonstrate the public benefit of its suggested policy changes. However, the commission will decide how to proceed based on the amount of information acquired through the two-part submission process.

In early November, the Canadian Cable Television Association requested that the CRTC review its position on cable ownership of specialty and pay services.

The request came on the heels of the commission’s precedent-setting approval of the BCE/CTV deal, which allows for the co-existence of a BDU (Bell ExpressVu) and a broadcaster under the same corporate umbrella. The arrival of digital carriage was also a factor in motivating the CCTA’s lobby.

‘Access isn’t an issue now,’ says Janet Yale, president and CEO of the CCTA. ‘All services available on analog already exist, anything new will be launched in digital, which doesn’t have the limited capacity issue. At the time of the Convergence Report, new services were still being launched on analog.’

The CRTC’s cable ownership policy, which essentially prohibits BDUs from taking more than a 30% interest in discretionary programming service distributed in analog, was established in 1995 with the Convergence Report. ‘But it’s a more mature market now,’ Yale argues.

Adding cable companies to the mix of potential specialty service buyers will inevitably, or at least initially, increase competition in a consolidated marketplace. ‘Isn’t that good for diversity?’ Yale asks. Perhaps. But increased competition for specialty services can also drive the prices up, as seen in the $205-million WTN deal – a great incentive for sellers and a huge disincentive for existing buyers.

Chum Television, to name just one, is opposed to amending the CRTC’s policy on cable ownership.

Reflective of popular concern, Peter Miller, Chum’s VP business and regulatory affairs, concludes in the company’s second round submission that ‘dominant BDU market power translates into preferential treatment of affiliated services, which results in unduly disadvantaged treatment of unaffiliated services.’

However, the CCTA has proposed a set of safeguards that Yale says should effectively mitigate such concerns. The most significant of these is a commitment by the cable industry to maintain the packaging, pricing and placement of channels it buys. Any changes a cabler wants to make will have to be approved by the CRTC.

The cable industry is also prepared to accept a safeguard that would see an upper limit of no more than 40% of discretionary programming services distributed on analog and controlled or owned by a cabler, as per the FCC ruling in the U.S.

The cable industry is also willing to adopt a confidentiality agreement, similar to the one offered in the BCE/CTV deal, to safeguard against conflict of interest issues that can arise from a BDU having confidential information about an unaffiliated service that competes with an affiliated service.

Finally, the cable industry agrees to accept third-party payment verification.

The CCTA’s proposed safeguards were mostly culled from the first-round submissions.

Despite the CFTPA urging the commission to hold a public hearing in the same way it did when establishing the Convergence Report, Yale says there’s been more than enough information provided by all interested parties for the CRTC to decide without a public hearing which way to go on the issue.

And since public policy is encouraging the creation of major Canadian players who have deep enough pockets to finance quality content to be distributed across multiple platforms, as in the case of BCE, Yale is confident the CRTC will be onside.

‘How many players do we have to grow to such a scale to create those kinds of enterprises?’ she asks. ‘So far we have one: BCE. There can’t be public policy just for one.’

However, the monopolistic behavior of cablers coupled with the preferential treatment traditionally bestowed upon affiliated services may make the task more challenging than Yale expects.

In Miller’s submission he contrasts the penetration levels of some affiliated and unaffiliated services. For instance, While Treehouse TV, which is affiliated with Shaw Communications, enjoys a 51.2% penetration rate and Sportsnet, which is affiliated with Rogers Communications, has a penetration rate of 75.3%, unaffiliated services such as Star! and CLT have lower rates of 20% and 25.5%, respectively.

Basically, as outlined by Andre Bureau in Astral Broadcasting Group’s submission, ‘The necessary preconditions established by the commission in the Convergence Report have not been met.’

Such conditions include competition in the distribution industry. Despite satellite subscriber growth, neither Bell ExpressVu nor Star Choice has made a dent in the analog system, which is still the primary means of delivery for such services and will be for some time. Yale even says it will be a good 10 years before digital becomes a mainstay.

Most interested parties have urged the commission to keep the status quo. *

-www.crtc.gc.ca