Carriage fees are just the beginning

Kelly Toughill

The feud between cable and satellite companies and conventional broadcasters masks the fact that both industries are headed for trouble.

CTV launched an ad campaign last week that stopped just short of calling cable and satellite operators thieves and that accused them of killing local news shows.

Cable companies accused broadcasters of running their networks into the ground and then trying to download billions of dollars in bad business decisions onto defenseless consumers.

The battle is over $300 million in so-called “carriage fees,” but the war is about who will pay for the revolution in media: broadcasters, cable and Internet companies, taxpayers or consumers.

Conventional broadcasters are losing viewers and advertisers to specialty channels. The trend is aggravated by the recession, but the losses of 2008 for over-the-air broadcasting are not a blip. The money isn’t coming back.

Cable companies are losing customers to the Internet. They are still making money, but teenagers no longer huddle with the family to watch television; they watch their own shows on their own computers on their own time. Soon we all will.

Both industries have adapted. Conventional broadcasters bought up specialty channels and cable companies got into the Internet business. The question now is who is going to pay for all the old-fashioned stuff? Who will track bad school board decisions and cover Canadian troops in Afghanistan? Who will commission Canadian dramas like Little Mosque and Corner Gas? Who will go on air during a hurricane or flood to tell us what to do?

This is the fight playing out in the halls of the Canadian Radio-television and Telecommunications Commission (CRTC), which regulates both industries, and in the halls of Parliament, where politicians will eventually carry responsibility for how the new media universe unfolds.

There are five options: let conventional television networks wither and perhaps die; offer some form of government subsidy; force cable companies to share their profits with broadcasters; force consumers to pay more; or force the big networks to use profits from their new specialty channels to subsidize their own conventional television operations.

The broadcasters want cable companies to pay for carrying conventional programming. The carriage fees would generate at least $300 million a year. Until now, cable companies have been required to carry the programs, but did not pay the networks for them. In the United States, cable companies do pay.

Peter Bissonette is president of Shaw Communications in Calgary, one of Canada’s largest cable and satellite providers. He points out that cable companies in the U.S. aren’t forced to carry anything. They negotiate the fees and can reject a channel if the price isn’t right.

“If we had the option to only pay the fee if people paid for the service, that could work,” he said this week.

That doesn’t seem to be what the broadcasters want. They want the cable companies to be forced to carry their shows, forced to pay the networks for them and banned from passing the cost on to customers.

Bissonette pointed out that Canadian broadcasters also benefit from the simultaneous broadcast rule, which is only possible because of the technical help of cable companies, which substitute the Canadian broadcast of a program on every channel on which it is shown. This means when Toronto residents watch the American-made crime show Bones on the Fox network, they still see the Global broadcast, with the Global advertisements. The ad value of the simultaneous substitution rule is hard to estimate, but is probably worth hundreds of millions of dollars.

The government does not regulate retail cable charges in Canada, so if it approves the controversial carriage fees, the charges will almost certainly be passed on to consumers.

Bissonette compared the situation of big broadcasters to that of Shaw when it took over StarChoice, a satellite company that was losing $350 million a year. The satellite carrier delivered vital television programming to remote areas. Instead of asking for help, Bissonette said, Shaw cut costs and invested in new technology to make the service profitable.

“We think it is outlandish that the government would think of bailing them out of a self-induced situation,” Bissonette said of conventional broadcasters. “Imagine if we had gone to the CRTC and asked broadcasters to pay for the right to be carried on StarChoice,” he said.

CTV has launched an aggressive ad campaign to lobby for the carriage fees. The campaign includes television and newspaper advertising, a website (, an email petition and even open house events at stations across the country.

“Cable and satellite companies are reaping huge profits at the direct expense of local Canadian TV stations that are going out of business,” reads the CTV-sponsored website. “As a consumer, you are at risk of losing local programming options on the dial.”

Bonnie Brownlee, spokesperson for CTV, did not respond to requests for an interview for this article.

Bisonette wants CTV to use its specialty channels’ profits to help out its ailing conventional television operations. “It is disingenuous for CTV to suggest they are a suffering broadcaster . . . If (smaller) stations aren’t doing well, let them go the way of someone who has a different vision and approach.”

It was that kind of dare that led Shaw to buy three small CTV stations for just $1. Many have dismissed the sale as a publicity stunt that will be abandoned when the news cycle turns. Shaw has not put out a release, notified investors or asked the CRTC to approve the sale, but Bissonette swears that Shaw intends to go through with the purchase of stations in Windsor, Brandon and Wingham, and that it plans to dramatically beef up local programming in Windsor and Brandon.

He said Shaw will model the stations on its community service channel in Calgary, but will sell advertising.

In the meantime, parliamentary hearings on the issue continue. CRTC Chairman Konrad von Finckenstein is scheduled to appear May 25. Stay tuned.

Kelly Toughill is an associate professor in the School of Journalism at the University of King’s College, Halifax and a contributing editor for the J-Source Business of Journalism J-Topic. Her background includes 20 years at The Toronto Star, where she helped set up an investigative team, was a senior political reporter at Queen’s Park, was a member of the editorial board and founded the paper’s Atlantic Canada bureau. She was deputy executive editor of The Star when she resigned to join the King’s faculty in 2006.