Bitove makes CRTC pitch for over-the-air HDTV


Grant Robertson
GlobeandMail.com
February 12th, 2008

Canada has free health care and free speech. John Bitove wants it to have free high-definition television as well.

That was the pitch Tuesday as Mr. Bitove, the fast-food and satellite radio executive, made his bid to federal broadcast regulators for a new national TV network in high definition.

The proposal, which is facing opposition from Canada's other big broadcasters, would see Mr. Bitove's company, HDTV Networks, launch eight TV stations across the country. The network wants to broadcast a high-definition signal over the air, meaning it would be available to viewers by antenna rather than requiring a cable or satellite subscription.

“We would like to become a new independent and unaffiliated voice,” Mr. Bitove told the regulator. “We believe this is important now that an unprecedented amount of consolidation has already taken place.”

The application, if approved, would amount to the birth of a new national network in Canada, with stations from Vancouver to Halifax. But the Canadian Radio-television and Telecommunications Commission may now find itself facing a difficult decision.

On one hand, the regulator is concerned about the lack of ownership diversity in the TV sector, following roughly $2-billion worth of takeovers in the past two years.

On the other hand, Mr. Bitove's bid asks for concessions that the regulator fears other broadcasters would also demand if the licence were granted.

In addition to broadcasting its signal free over the air, HDTV Networks wants to be carried as a national network on cable and satellite TV services. It plans to operate in Vancouver, Edmonton, Calgary, Winnipeg, Toronto, Ottawa, Montreal and Halifax, but is proposing that it would not operate as a local broadcaster.

Under this structure, HDTV Networks would have a national newscast, but would not spend on local news or programming – something the CRTC usually requires such stations to carry. In exchange, the company is proposing not to solicit local advertising or compete with local TV stations run by CTV, Global, CBC and others.

If granted, the Canadian Association of Broadcasters warned Tuesday that this could lead to the other broadcasters flooding the regulator with requests to cut back their spending on local programming and news.

Those expenditures are considered among the more costly aspects of running a local TV station since they also produce the slimmest returns compared with the top-rated shows, which draw bigger ad dollars.

CRTC chairman Konrad von Finckenstein said he had some concerns about the proposal for that reason. Mr. Bitove “is asking for the best of both worlds” by seeking to be carried across the country without having to spend on local programming, he said.

Earlier in the day, the CRTC asked Mr. Bitove to consider revising the application to include a plan for local programming across the eight-city network. Mr. Bitove's team, which includes former executives from CTV, Global and Alliance Atlantis Communications Inc., planned to meet last night to discuss whether a revised proposal could be put forward today, on the second day of hearings.

The CRTC also heard a separate application from YES TV, which is seeking to operate a high-definition station aimed at youth in the Toronto market.

The hearings come after the regulator put out a call more than a year ago for more HDTV operations in Canada, which is seen to be lagging behind other countries in that regard.

Only a few cities in Canada now have over-the-air high-definition signals from a limited number of networks. CTV, for example, broadcasts its signal in Toronto and Vancouver. Mr. Bitove said the industry has created a system with “two classes of people: those who can pay the premium to get high-def and those who can't.”

The Canadian Association of Broadcasters is opposing the bid, and said the application threatens the industry at a time when local TV markets are already under threat from eroding revenue and fragmenting audiences. Adding another competitor, particularly one with fewer restrictions on local programming, would dilute the market even further, said Glenn O'Farrell, president of the industry group.

“The outlook has never been as glum as the one we've seen now,” Mr. O'Farrell said, adding that the application should be put off until other regulatory decisions are made on the industry, including whether main networks should be allowed to charge cable and satellite carriers for their signal. That issue will be debated in April.

The association said the profit margins of local TV have slipped below 10 per cent in most markets, where they were above 20 per cent as recently as five years ago.

However, Mr. Bitove said he doesn't share the same bleak outlook for broadcasting, adding that he is willing to put up the financing for the operation. He is also the founder of Canadian Satellite Radio Holdings Inc., operator of the XM Canada brand, and head of the Priszm Income Fund, which operates several hundred KFC, Taco Bell and Pizza Hut outlets.

“You've had mass consolidation already,” Mr. Bitove told the CRTC, referring to the recent buyouts of CITY-TV, A Channel and Alliance Atlantis Communications Inc. Those assets were bought by Rogers Communications Inc., CTVglobemedia Inc. (which also owns The Globe and Mail) and CanWest Global Communications Corp., in that order.

“You need more voices, news gathering alone has shrunk in this country,” Mr. Bitove said.

Though broadcasting the TV signals over the air would make the service free, cable and satellite companies expect to have at least 85 per cent of their customers paying for digital packages by 2013. If that's the case, the vast majority of the country wouldn't need an over-the-air signal.

Industry Canada has given the HDTV Networks group a technical approval to broadcast, including channel allotments in its proposed markets, but the CRTC decides whether it gets a licence. A decision is not expected for a few months. If approved by the fall, the group said it hopes to launch by late 2009.

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