Sweeping regulatory changes in cable television have set the stage for a potentially bitter fight between specialty channels and cable companies over how much the channels will be paid for their services.
The CRTC says it wants to stop regulating the fees that many analog specialty-TV channels charge to cable distributors that carry their programming.
At the same time, however, the Canadian Radio-television and Telecommunications Commission wants the cable operators to keep selling services in groups of channels, known as tiers, until 2013. That is intended to ease the concerns of the specialty channels that they will lose subscribers as the cable world embraces the so-called à la carte model.
The advent of digital TV allows customers to buy channels either in theme packs or individually, which the industry refers to as à la carte or pick-and-pay. It also paves the way for the introduction of new services that analog can't handle, such as high-definition TV.
The CRTC made the proposals in a lengthy policy paper this week that outlines how analog specialty channels will be treated as the world moves to digital. Many players called it very complex.
The regulator says it wants to get out of regulating rates for the specialty channels just as it now has no role in determining what cable companies charge their customers.
If the regulator is no longer setting the prices, the cable companies and channels will have to negotiate what they believe each channel is worth.
Channels with larger audiences, such as The Sports Network or The Score, would have more bargaining power and might try to command higher rates. In contrast, channels serving smaller audiences, such as Vision TV, which airs multicultural and faith-based programs, acknowledge they may be bargaining from a weaker position.
“There is that little bit of disadvantage in negotiations being a smaller player,” said Mark Prasuhn, chief operating officer of Vision TV. “The concern is not limited to Vision; it's any smaller or unaffiliated service. The leverage [some channels have] with distributors is going to be less significant.”
An official with the CRTC expects several bigger channels will seek higher rates now that there will be no CRTC-mandated starting point for the negotiations, but predicts they will run into opposition from the cable companies.
Shaw Communications Inc. president Peter Bissonnette believes it's too early to measure the impact. Still, he says, “it's always interesting when you get into negotiations and you have to carry somebody; the negotiations for rates become more difficult.”
The CRTC wants the tiered system on digital, which mirrors the analog channel groups, kept in place until 2013. But it proposes that that system can be dropped after 2010 if the cable operators transfer more than 85 per cent of their subscribers to digital.
Cable operators say the move to digital TV gives them the opportunity to sell more services, such as video-on-demand and high-definition TV channels.
But the digital age is also creating new rivals for the cable companies. Telecommunications companies, for example, are using Internet protocol (IP) technology to send TV signals over phone lines, while TV networks are starting to sign deals to offer their shows via Apple Computer Inc.'s iPod devices and through Google Inc.'s new on-line video store.
Ken Engelhart, vice-president of regulatory affairs at Rogers Communications Inc., said its customers need to be able to pick and choose the channels they want, or else they'll turn to the Internet.
“People can get TV over Internet, downloads over iPod; there's a whole range of new options,” Mr. Engelhart said. “The TV industry has got to be competitive with customers who are increasingly wanting to watch what they want, when they want. We have to move with the times. [The] decision went a long way helping us to do that.”
But Shaw believes the CRTC needs to speed things up.
“If you look at the way that things are moving and as rapidly as they're moving . . . 2010 or 2013, where there's the fully unfettered ability to move services from analog to digital, that's a long time,” Mr. Bissonnette said. “A lot can happen in seven years.”
© The Globe and Mail
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.