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Let’s Talk TV Day 4

Day 4 of the Canadian Radio-television and Telecommunications Commission’s (“CRTC”) Let’s Talk TV hearing was largely focused on issues with back-end business dealings in the ‘wholesale’ market, between broadcasting distributors (such as a local cable company) and programming distributors (i.e., content owners). It was suggested many times today that the unhealthy wholesale market has significance consequences for the lack of choice consumers face at the retail level.

These issues included the control of content rights and the method of reflecting that control in distribution agreements, specifically the problems with and appropriateness of: penetration-based rate cards; volume-based licensing; fair penetration-rate curves; make-whole clauses; most-favoured nation requirements and arbitration and dispute resolution processes.

The wholesale market in the broadcasting system is particularly complicated due to various levels of vertical integration. For example, vertically integrated companies like Rogers and Shaw, which spoke today, produce, purchase and distribute content. Both companies cited similar problems in negotiating agreements between each other, and especially rival vertically integrated media conglomerate BCE (Bell).

Additionally, there are ‘pure distributors’ such as independent broadcasting distribution undertaking (“BDU”) Cogeco and the various members of Canadian Cable Systems Alliance (representing 117 small independent BDUs across Canada), both of which also spoke today. They cited the same issues as their larger vertically integrated competitors, but with several added issues that result from their lack of leverage against these larger competitors.

The Canadian Network Operators Consortium also spoke today, representing a slew of independent Internet Service Providers, many of whom are interested in, or who are, offering television service through IPTV similar to TELUS’s Optik TV, but who cite additional challenges due to telecom-related regulations.

Further complicating the issue are the pure content creators, such as Insight Production Company Ltd, L’Association québécoise de la production médiatique, and the Writers Guild of Canada; all of whom spoke today as well. To them, the current system is working: Canadian content is being produced; any big changes to the system would upset the careful balance that has developed in the industry over the years. They generally echoed the comments of similarly-placed groups before them: simultaneous substitution is still an important revenue source; consumer choice should not come at the cost of Canadian jobs; and new Over-The-Top services such as Netflix should be required to contribute to the Canadian system. These parties emphasized their viewpoint at the creative end of the equation and concentrated less on the battles raging on at the backroom negotiating tables, where their content is being used as bargaining chips.

The Commission persisted in their questioning with each speaker to find the common ground that would address the concerns of all companies in the wholesale market, both big and small. The Commission sought confirmation that it has the ‘broad strokes’ correct in their Working Document, albeit that the details still must be fine-tuned.

A few speakers today also made clear that the Commission’s proposed implementation date of December 2015 would be too soon, suggesting that parties are realizing substantial change is very likely to occur as a result of this proceeding. The Commission has also been asking many of the larger companies to provide their view of a ‘implementation roadmap’ as recommended by Corus Entertainment Inc. yesterday, lending support to the idea that the Commission is seeking to fine-tune their approach stated in the Working Document rather than entertain new proposals raised at the hearing.

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