BUSINESS

Competing channels

Regulators debate television’s future

DIANE BRADY March 22 1993
BUSINESS

Competing channels

Regulators debate television’s future

DIANE BRADY March 22 1993

Competing channels

Regulators debate television’s future

DIANE BRADY

From a television standpoint, the setting is drab but the script is packed with drama. Throughout March, an epic political battle is raging in a fluorescent-lit public hearing room in the bureaucratic bastion of Hull, Que. At stake is the future of Canadian television, with each of the combatants portraying themselves as defenders of the realm. Almost all of them have issued dire warnings— of satellite “deathstar” transmissions, “captive” cable subscribers and “Americanization.” Their proposed solutions are equally dramatic. Cable companies want billions of dollars in rate increases to compete against U.S.-based satellites that could soon beam up to 300 channels into Canadian homes. Consumer advocacy groups, in turn, are calling for an end to cable company monopolies. Telephone companies support them, and their executives claim that digital technology could make cheap video programs only a phone call away. Meanwhile, broadcasters are demanding at least $100 million a year from the cable companies to preserve Canadian programming. All of the warriors are vying for the favor of seven men and two women, who make up the Canadian Radio-television and Telecommunications Commission (CRTC), seated behind a table loaded with paper and empty coffee cups.

BUSINESS

By the end of March, the commissioners may have gathered enough evidence to bring the clouded hightech future of Canadian television into sharper focus.

The CRTC’s outspoken chairman, Keith Spicer, acknowledges that it is a daunting task, but one that he clearly relishes. In his opening remarks on March 1, Spicer predicted that the gathering could be “the mother of all hearings.” He added, “We are in for a lively, controversial and, we hope, productive debate.” But critics warn that the debate must soon lead to action if Canada’s broadcast industry is to survive against a digital wave of new programs—from 24-hour Madonna or military channels to a variety of educational courses on demand.

Midway through the hearings last week, which were telecast live, battle lines were

already firmly drawn. Representatives of consumers, telephone companies and writers and producers called for greater competition to widen the market for programs. Cable company executives, in turn, said that Canada needs stricter regulations to protect its culture—and their markets. But in addition to reviewing the role of every participant in the industry, the commission will have to assess its own ability to enforce any rules in an era of accelerating technological change.

At the heart of those challenges is digital technology, which has already revolutionized

the music industry with digital recording and compact discs. In a digital system, sound or light impulses are encoded as numbers that can be converted back to crystal-clear signals by special receivers. For anyone who now makes their living in television in Canada, that technology opens the door to new opportunities— as well as new threats. Cable operators say that that technology will soon allow them to compress up to 10 broadcast channels on lines that now only carry one. But digital technology will also make it easier for telephone companies to transmit video images by telephone. And it has also expanded the potential for satellites to

beam broadcast signals directly to households.

Indeed, the cable operators say that the largest immediate threat to their industry is DirecTv, a Los Angeles-based direct-broadcast satellite service that plans to aim dozens— and eventually hundreds—of channels into Canada starting in the fall. Viewers will be able to receive them through 18-inch satellite dishes that cost about $900. Technically, pirating signals with the large satellite dishes currently available on the market is illegal. But regulators have almost completely abandoned enforcement of those restrictions. For that reason, cable company executives have nicknamed the satellites deathstars that will kill both their $1.5 billion-a-year industry and most television production in Canada as well. Their proposed alternative is to install digital compression boxes in the homes of all of their subscribers by 2001 at a total cost of $7.2 billion. The boxes would allow viewers to manipulate hundreds of channels through upgraded cable networks. About three-quarters of Canadian homes receive cable TV.

But the cable operators also argue that they have to pass along the full cost of installing that equipment to consumers. Said Ronald Osborne, president of Maclean Hunter Ltd., owner of Maclean Hunter Cable TV, one of the country’s largest cable operators, and of Maclean’s magazine: “There is only one person who foots the bill for any product at the end of the day. It’s the consumer.” Telesat Canada, the privately owned Montrealbased company that has a monopoly over Canada’s overseas telephone comz munications, is proposing g another method for coun-

1 tering the challenge from

2 U.S. satellite services. Telesat wants to operate a Canadian satellite system with the cable companies that could operate under CRTC protection. “It would be a co-operative venture,” said Telesat spokesman Murray

Long, adding that the satellite could reach rural areas and supplement cable service with up to 300 channels. Like the cable owners, Telesat claims that U.S. competitors are driven solely by greed, have little or no concern for developing programming and would destroy the delicate fabric of Canadian culture. Long added that the commission should also make it illegal for Canadian stores to sell the dish antennas needed to receive satellite signals, even if it is unable to stop those signals from being beamed into Canada.

Last week, James Ramo, a DirecTv vicepresident, appeared before the commission to

defend his company against what he called “hysterical commentary.” Ramo said that his satellite service will supplement, not replace, cable with pay-per-view movies, sports and services including golf or guitar lessons. Ramo predicted that DirecTv will be able to sign up almost 50,000 Canadian subscribers next year and up to one million viewers within the next decade. He said that the cable industry’s warnings are unfounded because “the market is driving us to have a strong chunk of our programming Canadian.”

For his part, Stanley S. Hubbard, a St. Paul, Minn.-based entrepreneur who plans to start up another satellite service next spring, said that satellites are not a one-way proposition. “We want to bring Canadian programs into the United States,” said Hubbard, whose service will concentrate on specialty channels. “This might be a deathstar for cable, but it’s an opportunity star for broadcasters.” Spicer, for one, appeared to be sympathetic to those arguments. “None of you look like Darth Vader so far,” he said.

The cable companies’ proposals to thwart U.S. satellite services have also provoked protest from Canadian consumer advocacy groups. They argue that monopoly cable operators have over-charged Canadians and should be forced to compete with satellite transmission or telephone companies. “The emphasis shouldn’t be on protecting industries but on serving consumers,” said Rosalie Daly Todd, acting executive director of the Consumers’ Association of Canada.

Todd said that she wants the CRTC to treat the satellites as an opportunity for more choice and better programs—not as an excuse to further restrict the market. Added Todd: “The only thing that is being threatened in this exercise is cable’s monopoly.” And Ian Morri-

son, spokesman for the powerful lobby group Friends of Canadian Broadcasting, condemned the proposed cable fee increase as a “ridiculous” request from companies that already charge inflated rates. Said Morrison: “They are trying to scare us about direct-satellite broadcasting to get a free head start in the technology race against telephone companies.”

Canada’s phone companies have traditionally benefited from government monopoly protection, and their representatives opposed competition in long-distance services at the

CTRC just last year. But because they are eager to win a slice of the profits from television transmission, they, too, have become advocates of the free market. Last week, Jocelyne Côté-O’Hara, president of Ottawa-based Stentor Telecom Policy Inc., which represented Canada’s major provincial telephone companies, argued that broadcasters should “have the luxury of choosing the lowest-cost distributors of their programming packages.” She added, “Regulation should not artificially constrain any player.” Other Stentor officials told the CRTC that telephone companies would initially provide teleconferencing and training seminars for business users, with an eventual expansion into video and pay TV.

Meanwhile, broadcasters tried to shift the commission’s focus from debating about delivery systems to promoting Canadian content. “You are not going to win the battle for the viewer on technology alone,” said Michael McCabe, president of the Canadian Association of Broadcasters. “If people just see crap on cable, they are going to switch to direct-broadcast satellites.” The association sought permission to start charging cable operators between $100 million and $200 million to carry their signals. At present, broadcasters rely on advertising revenue to purchase or produce programs that the cable companies transmit without paying royalties. Whatever delivery system the CRTC i chooses, many of the producers, direc-

1 tors and others who actually create U Canadian programming say that more

2 channels may not necessarily mean more choices or more opportunities

for them. They claim that many of the

channels will carry the same programs or movies as existing services, only they will be presented at staggered times. That system is known as multiplexing and it is an option already available to some Canadian subscribers. Other programs will be offered on a payper-view basis, with costs ranging from 25 cents for an old movie rerun to more than $25 for current concerts, sports matches and other special events.

In its submission to the commission, Toronto Women in Film and Television, which includes female producers, directors, distributors, crews and entertainment lawyers, called on the CRTC to channel cable revenues directly to independent producers. They argued that the network and cable owners earn healthy profits, while the actual creators continue to have difficulty raising funds.

To a large extent, the most vulnerable participant in the hearing may be the CRTC itself. Critics say that new technology will render any form of regulation obsolete. “Canada is not a police state,” said Hubbard. “If people want to receive satellite signals, they just have to buy a dish.” McCabe added that the commission could become impotent if “you just call a 1-800 number in Utah to get your services.” For Morrison and many of the other 140 participants in the hearing, the CRTC’s central task is to channel more funds into producing quality programs for consumers. “The desire for Canadian programs is there,” said Morrison. “The challenge is to enable viewers and listeners to send their dollars to the creators of those programs.” Still, technology may soon force all of those in the Canadian television industry to fend for themselves.

DIANE BRADY with LUKE FISHER in Hull