Hull, Que.: Canada’s production industry wants more rather than fewer licences for new specialty channels, but producers are also saying they want those services delivered as part of variable discretionary packages, and at the lowest possible price.

The big question at this month’s crtc specialty channel hearings is which of the new services will be given a major roll-out, or status, on basic. The other contentious issue to emerge is cable’s claim of limited channel capacity. This has provoked accusations that the cable industry is using technological ruses to usurp the commission’s authority.

In a letter to the crtc sent prior to the start of the Feb. 14 hearings in Hull, Que., Sandra Macdonald, president of the Canadian Film and Television Production Association, urged the crtc ‘not to allow any specialty service with a pass-through charge to be entitled to mandatory carriage on basic, outside Quebec.’

Macdonald says the vast majority of applicants have asked to be carried on basic, but no more than five or six new services requiring 80%-90% penetration can be accommodated, and as a consequence, ‘the penetration and revenue projections for almost all the applications are unrealistic.’

Producers also want the crtc to look closely at applicants’ Canadian programming commitments.

According to the cftpa, ‘the licensing of a larger number of lower-priced services would serve the overall system better than a small number of licences with high subscriber fees.’ The producers say they are taking this position ‘despite the fact that it is a riskier alternative for the services licensed – and by extension, for independent producers.’

In a letter to the crtc, dated Jan. 25, Paul J. Temple, vice-president, programming and regulatory at Rogers Cable tv, says the most important consideration in the licensing process is the ‘shock’ effect of cost increases to the subscriber. He adds that ‘the majority of cable operators (can) accommodate only three or four new services.’

Rogers also says ‘dropping (existing) lower priority services will only serve to needlessly taint the launch.’

Rogers has notified the crtc and applicants that it will ‘conduct negotiations regardless of applicant business plans…so as to obtain the lowest possible discretionary rates.’

A la carte

Independent of any carriage and packaging decision made by the crtc, Rogers goes on to say new specialty services may be ‘carried on a standalone or a la carte’ basis, and while packages will be made available, ‘the pick and pay concept also remains an important option.’

CanWest/Global Communications president and ceo Izzy Asper says the limited capacity claim by cable is ‘a disgrace.’

According to Asper, ‘cable is on trial at these hearings.’

‘They are effectively in the process of pre-empting the crtc,’ says Asper. ‘If there is only so much room for new services, then foreign (read u.s.) services like CNN Headline News should be dumped, as should non-broadcast services like Home Shopping. And if there is still no room, then the cable-owned services should also be dropped.

‘The Canadian cable system is not the servant of the u.s.,’ he says, ‘otherwise, they don’t deserve their monopoly.’

He adds the system is presently being used by cable to carry its own signals, including ytv and Home Shopping.

Referring to the crtc’s structural hearing decision, CHUM Ltd. vice-president Mark Rubinstein says digital video compression will be rolled out starting in 1995. (Recent reports suggest it will be delayed by as much as six months, with rumblings that it may be even longer.)

‘Once that happens and is completed in the next three or four years, I assume the question of channel capacity will be a historical anecdote,’ says Rubinstein.

He says there’s significant unused capacity in many major markets including Toronto, Vancouver, Edmonton and Ottawa. In Toronto, says Rubinstein, the three largest cable companies will have in excess of 15 available channels by Jan. 1, 1995, including the replacement of non-programming services, but not restricted channels.

‘Even where there may be a channel capacity problem,’ according to Rubinstein, ‘the commission should proceed with the licensing of new services and allow the licensee to hold off on the launch’ until the capacity is available.

‘So, in our view, it’s (cable’s claim of limited capacity) a non-issue,’ he says.

Diversity

Otherwise, Rubinstein says chum actually supports the cable companies on issues such as the need for diversity among new services, low cost, a solid track record and the need for marketing acumen and experience.

City-tv/MuchMusic president Moses Znaimer says the Canadian Cable Television Association has taken a position that if a service is licensed by the commission, the cable operator will carry it. ‘What the cable operator is not yet committed to is the quality of that carriage, and the price,’ says Znaimer. ‘The commission, in my opinion, may wish to regulate a price of new services that get on basic, but the likelihood of a number of new services getting on basic is very, very small when you consider the overall drift is to get away from that kind of system.’

As a new service is deemed discretionary, Znaimer says, ‘then a certain amount of pushing and shoving is to be expected.’

The main point, he continues, is that service suppliers can best deal with ‘monopoly or concentrated cable’ if they come to the table and negotiate with more than one service. An isolated or single standalone service or company is likely ‘to be roughed up,’ he says.

License all useful ones

‘We have been saying all along, they (the crtc) should license every Canadian service that they think is socially useful and is being offered by credible operators. If they don’t do that, then the same cable guys who say there is a shortage of channels for new Canadian services will import a bunch of American services the very next day, and magically, these channels will appear.

Znaimer says there is a high degree of difference among applicants: ‘Some are surgically tight (and) can make it work with a million subscribers, others haven’t got a hope of making their way unless they get five million subscribers.

‘The difference is while you can acquire a million on a discretionary basis as capacity develops, five million has to be handed to you, has to be forced, and it’s that privileged status that people are fighting over.’

A likely scenario would see those applicants seeking the widest initial delivery licensed in the form of a class one or priority licence, says Znaimer. ‘Anyone else who is willing to go on discretionary should be licensed and they can roll themselves out as they each achieve their minimum threshold for viability.’

CTV Television Network vice-president, entertainment programming Arthur Weinthal says ctv expects to sell its proposed 24-hour headline news service first to the cable companies, ‘and then go and sell it on the street, to the advertisers.’

At one point or another, says the veteran broadcaster, ‘cable will come out and declare what they want to sell, because if the cable companies are told they’re going to have five arts channels to sell tomorrow, they would probably throw up their hands and say `forget it.’ ‘

Both specialty applicants and cable companies are likely to agree ‘that newly licensed services should stand the test of desirability to the public,’ says Weinthal.

‘In this country we get embarrassed by failure, and I think it’s the hope that whatever we do does not upset the system, doesn’t drive broadcasters into bankruptcy and doesn’t make the cable companies say `My god, you’ve licensed things I can’t sell.’ Some kind of harmony should emerge.’ Weinthal leans to the belief that more than ‘four to six’ new services should be licensed.

John Cassaday, ctv president and ceo, gave the thumbs-up sign when asked if cable is showing ‘good faith.’

According to the cftpa, the Canadian broadcasting system and producers would be best served if the following services are licensed: an outlet for Canadian drama, three or four channels in the documentary, educational and lifestyle areas, a cartoon channel, a country music channel, an arts channel ‘with a feasible business plan,’ and a headline news channel.

Most importantly, say the producers, Canadian specialty channel programming obligations must be firmly expressed as a proportion of revenue, ‘so the first casualty of failure to meet revenue projections is not the Canadian part of the schedule.’

According to CanWest’s Asper, ‘a monopoly shouldn’t have the right to deny (system) access to others if lack of access is the result of cable selling its own products.’

Cable has its own agenda, ‘a ticket to ride for the stuff from the u.s,’ warns Asper.

‘It is unbecoming of them to wrap themselves in the flag,’ he says. ‘What’s at stake (at the specialty hearings) is cable’s monopoly in this country. If Canadian programming cannot reach Canadian homes, then the days for this monopoly are numbered. Canadian programmers will find another way to get into homes.’

According to Asper, ‘it would be a shame (if only four to six services are licensed). World markets indicate there’s a taste for a lot of specialty gaps. People want and will support niche broadcasting.

‘The more (new services) the merrier, providing they are Canadian,’ he says. ‘The airwaves and telephone and cable lines are public resources. These resources should be organized to give preference to Canadians.’

According to the ccta, the pay-tv and specialty channel share of the Canadian tv advertising market in 1994 is 5.9%. Projections indicate this will rise to 6.6% in 1995, 7.2% in ’96 and 8.5% in 1998.

Initial five-year earnings for various Canadian specialty services, according to the ccta, are as follows: tsn, $120 million; MuchMusic, $54.5 million; ytv, $23.6 million; MusiquePlus, $21.9 million; Newsworld, $21 million; Reseau des sports, $13.5 million; Vision TV, $1.7 million; and Meteomedia/The Weather Network, $1 million.

Annual spending

In her Jan. 25 letter to the crtc, the cftpa’s Macdonald says figures based on Statistics Canada’s biannual Family Expenditure Survey show spending on cable by Canadians rose $36 on average, from $260 in 1990 to $296 in 1992. Based on the same growth projection, it would mean an average household expenditure of $337 per year in 1994. Extending the projection, the producers’ association says ‘the amount Canadians might be prepared to spend (on new services) on cable is $3.20 (per month).’

Asked if he thought there was any truth to the assertion that the big cable companies are in the process of usurping crtc authority, commission vice-chair Fernand Belisle smiled diplomatically. All he would say was, ‘You’re going to have to wait and see what our decision is on June 15.’ LRB