For background, last March I wrote a post that explained what mandatory carriage means and talked about the applications that I was most interested in. The hearing took place the week of April 23, 2013 and the decision was released today. 13 of the 22 applications for mandatory carriage were denied as the CRTC reiterated that mandatory carriage was reserved for services that ‘make exceptional contributions to meeting the objectives of the (Broadcasting) Act’. See Fagstein’s blog for a good chart form summary.
Most of the mainstream media and social media focus has been on the Sun TV application for mandatory carriage (which was denied) – see Simon Houpt and Steve Ladurantaye of the Globe and Mail for excellent coverage of the topic) but I have always been much more interested in the other applications which had the potential to impact the Canadian content part of the broadcasting sector – APTN, VisionTV, Starlight. There were also several licence renewal applications of interest, particularly Superchannel and Blue Ant, but those have not been released. There was however, one aspect of the Sun TV decision that I think is worth noting (in addition to the upcoming policy hearing on Canadian news services which will address the bigger picture of whether all Canadian news services need regulatory assistance). The Commission noted that not only did Sun TV not demonstrate how its service would make an ‘exceptional’ contribution to the objectives of the Act – it never referenced the Act in its application. #duh (sorry – couldn’t resist). Further, the service didn’t make ‘exceptional’ expenditure and exhibition commitments to Canadian programming beyond what other Canadian news services, which do not have mandatory carriage, make.
But enough about Sun TV. APTN received a renewal of their mandatory distribution order on the basis that its service was consistent with the objectives of the Act, it was important that the service be widely available across the country and that APTN is ‘exceptional in its contribution to Canadian expression and reflects attitudes, opinions, ideas, values and artistic creativity that would not otherwise be seen on television’. As well, should the BDUs only carry the service where concentrations of aboriginal populations warranted it, then many who were spread out around the country would not have access. This is a good description of the bar required for a service to be entitled to mandatory distribution – exceptional contribution to the objectives of the Act, and anticipation that the market would not provide the service consistently across the country.
However, APTN also asked for an increase in their subscriber rate from $0.25 per sub to $0.40. It requested the increase to keep up with inflation, improve programming and make more programming available on multiple platforms. The Commission accepted that an increase was warranted but given that an increase in the subscriber rate will mean an increase in the cost of the basic package, decided that a $0.06 increase would be a good balance between APTN’s need and the consumer’s reluctance to pay more for basic cable.
The Commission used the same balance language when it agreed to an increase for CPAC. The $0.01 increase ‘represents a good balance between the impact on the price of the basic service for Canadian consumers and the ability of CPAC to improve its programming’. This is the consumer filter that we have been told will be applied to all decisions clearly at work.
There were two proposed youth-focused services that applied for mandatory distribution – Fusion and Dolobox. It was interesting that both had significant user-generated content and online components and both were denied at least in part on the basis that there were enough existing alternatives in the online world that the Commission did not see a need to issue mandatory distribution and broadcasting licences. I heard both presentations and I could not understand why they were at the CRTC as it seemed like a backwards looking business model for forward-looking services.
Speaking of which, then there’s Starlight. While I strongly support the idea of finding a way to make it easier for Canadians to find and watch Canadian feature films, I was part of the camp who thought that Starlight for all of its good intentions, was not the solution because of its reliance on mandatory carriage in its business model (See also Denis McGrath’s Facebook post on the subject –- sometimes a former blogger has a relapse). As you can see from those services that received or maintained mandatory carriage, the Commission looked very closely at whether a service was exceptional enough to warrant increasing the cost of basic.
The Commission did not feel that the proposed service was exceptional enough because Canadian VOD and pay services are required to licence all Canadian services that are available so Canadian films are not unavailable. [Now, as Mario Mota pointed out in a tweet, pay is about $20/month on top of basic, which is not very accessible to Canadians so there is a flaw in that argument.] Starlight would to some extent duplicate the offering on pay and VOD so would not provide additional diversity to the system. I would agree except to the extent that Starlight was planning to reach into the back catalogue to films not currently or rarely available (some rightly so of course).
Part of Starlight’s strategy was to show general support for the service and it conducted a survey to demonstrate a high level of interest. Unfortunately that strategy seems to have backfired as the Commission felt that the high level of interest demonstrated that Starlight could be successful as a discretionary service. However, Starlight applied for mandatory distribution because it not only wanted to be sure that it was available in every home but also it needed the revenue to fund its original feature film financing plan. This plan could not be financed without a mandatory distribution order. The Commission felt that Starlight had not demonstrated that the existing funding for feature films was insufficient. I think that another way of putting that is ‘don’t force consumers to solve the problem of insufficient feature film financing’.
Over the years Vision has applied for mandatory carriage several times on the basis that its multifaith programming and its focus on its 55+ audience offers needed diversity in the broadcasting system. Vision expressed concern that as an independent service it runs the risk of vertically integrated companies moving it from a basic package to a discretionary package in order to make room for their own services. A move like that would draw fewer subscribers and therefore reduce Vision’s revenue. The Commission accepted the arguments of BDUs that the BDUs would not want to risk the wrath of Vision’s audience if they moved Vision out of basic (and warned the BDUs that the Commission would need to see good reasons if they ever did so). Vision also has recourse to the Commission should the BDUs treat Vision unfairly. The Commission also pointed out that Vision is no longer the only other faith programming service so there is no extraordinary need for Vision’s particular service. Or in other words – it’s all good so there’s no need to regulate.
One of the few new mandatory orders granted is worth mentioning. It went to The Legislative Assemblies of Nunavut and the Northwest Territories for a geographically limited broadcast of recorded and live coverage of proceedings in their Assemblies in aboriginal languages, English and French. The service clearly supports the objectives of the Act, there was a demonstrated demand and a demonstrated market failure. Bell ExpressVu stated no plans to carry the service and Shaw agreed to but without any time commitment. And possibly most importantly, the service did not ask for a subscriber fee.
The general feeling about this hearing was that the Commission would not grant many or possibly any new mandatory orders but would maintain the existing ones in order to keep a lid on the cost of basic cable and this is pretty much what they have done. The decisions were clear so if any service seeks to apply for a mandatory order in the future they will definitely know what issues to address in their application. There will be an increase to the basic cable rate but it should not be significant (Fagstein came up with wholesale increases of $0.31 per subscriber per month in English and $0.63 in French, which Mario suggests may be used by the BDUs to justify $1 increases in your bill).
In many ways those of us who watched the hearing felt that it was a throw back to an earlier era when broadcast television was the only way that you could reach an audience. That is so not the case any more. Now the question is whether the rejected applicants, and those contemplating new services in the future, turn to digital platforms to reach audiences and whether the CRTC needs to be there to ensure that the objectives of the Broadcasting Act aren’t being undercut by these new platforms. Yeah, I went there.