The cable TV debate: A cable operator's view


TheStar.com
April 3, 2008

"Allowing network giants to charge fees for local TV signals amounts to unfair tax on customers",
says Phil Lind Vice-chair of Rogers Communications.
                                                                                    
THE REST OF THIS ARTICLE IS WRITTEN BY THE ROGERS EXECUTIVE AS WELL.

In the past year, both CTV and CanWest Global Communications Corp. have voluntarily mired themselves in debt: CTV to buy CHUM television and radio for $2.3 billion, and Global to buy specialty TV powerhouse Alliance-Atlantis for about half that amount.

Over the past few years, in frantic efforts to claim "we're No. 1" bragging rights and win the ratings game, both have indulged in out-of-control bidding contests to buy the rights to popular U.S. prime-time programs.

Predictably, both now find themselves short of cash and struggling to meet the profitability levels their investors expect.

What are these network giants doing about their problems? They're crying poor, all the way to the Canadian Radio-television and Telecommunications Commission, Canada's broadcast regulator.

Next month, CTV and Global will appear before the CRTC seeking the power to charge more than 80 per cent of Canada's television viewers, those who subscribe to either satellite or cable TV services, a fee for receiving their local signals.

As long as there has been television in Canada, such local broadcasts have always been free. CTV and Global now want to charge as much as 70 cents per month for them. That's $1.40 per customer per month. Maybe not so bad, you're thinking.

Think again. The CRTC is unlikely to give CTV and Global the authority to tax consumers without also ruling that all local broadcasters should receive the same 70-cent monthly payment.

Since the number of such broadcasters varies across the country, Canadians, depending upon where they live, could find themselves facing bill increases of more than $8 per month.

Taxing customers, CTV and Global claim, is the only way to ensure they will have sufficient cash on hand to meet their commitments.

Heaven forbid they take on less debt, rein in their spending, or explore new revenue opportunities. These options require hard work and discipline. It's so much easier to ask someone else, in this case consumers, to do it for you.

Consumers, along with cable and satellite companies, already make significant and ongoing contributions to CTV, Global and other television broadcasters' bottom lines. By CRTC order, monthly bills already contain a hidden 5 per cent consumer tax, money that goes to the Canadian Television Fund and is used to subsidize the cost of making Canadian programs.

Last year, that amounted to more than $150 million.

As well, cable and satellite carriage greatly increases the amount CTV, Global and other local broadcasters can charge for a minute of advertising. It does this by increasing the quality and, therefore, the attractiveness of the signal containing the ad, and by significantly enlarging the number of viewers the ad reaches.

Finally, at their own expense, cable and satellite distributors are obliged to help make local broadcasters wealthy by substituting on request Canadian versions of popular U.S. shows (everything from the Super Bowl to Grey's Anatomy) for the original versions transmitted into Canada by U.S. networks like NBC and CBS. Canadian viewers don't get the originals; they see a CTV or Global version complete with Canadian ads. These ads generate the easiest money anyone in the television business has ever made.

Yet, in the case they're bringing to the CRTC in April, CTV and Global blithely insist they are saviours of Canadian broadcasting. Never mind that they're reneging on their promise to provide their signals free and to produce Canadian programming in exchange for the privilege of receiving an exclusive broadcasting license.

That was then, they seem to be saying; this is now.

And now, having spent and mismanaged themselves into lower profits (not losses, mind you, just lower profits) CTV and Global have conveniently discovered they cannot comfortably meet their commitments.

They want consumers to do it for them and they want cable and satellite companies to play the role of tax collectors.

The proposition is distasteful and unfair on both counts.

http://www.thestar.com/Business/article/408883

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So who is calling the kettle black?

Allowing cable operators to raise their rates to subscribers every 9-10 months without reasonable justification, and with little or notice in a deregulated market, amounts to unfair gouging on customers.

Is it possible that Phil Lind of Rogers (the author of negative billing back in the 80's when Rogers operated cable in the Lower Mainland), is afraid the increases, if approved, will force cable subscribers to look elsewhere for their entertainment fix when monthly rates for TV shoot up to $45-$50 just for basic service?

Take a moment and look at what cable companies are charging now.

Here in BC, Shaw, a multi-billion dollar company, provides broadband cable television services, Internet, Digital Phone and telecommunications services (�Cable�); DTH satellite services (Star Choice) and satellite distribution services (�Satellite Services�).

Since Shaw succeeded Rogers as the prime cable TV company, providing a monopoly service to the Lower Mainland in March 2001, subscribers of Shaw's basic service have experienced nine cable increases in the past seven years with rates escalating from $19.95 on March 31, 2001 to $32.95 on April 1, 2008, a jump of  ($13.00) 65.2%, excluding federal tax. This represents an average increase of 9.3% every year.

With tax included this amounts to an overall increase to subscribers of $14.00 or 68%.
Keep in mind that the Federal tax has twice been reduced, from 7% down to 5%.

It would seem most Shaw subscribers receive their monthly cable bill and merely pay whatever is requested, taking little notice of the increases that have been heaped on us every 9-10 months. During the past two years Shaw has not even had the decency give subscribers a normal 60-day notice--my last bill arrived in the mail March 25, one week before the increase took effect.

Here is Shaw's record of cable increases on basic service only.

MONTH      YEAR    CABLE     SERVICE     RATE $   Increase   FED.TAX        TOTAL
Feb. 28      1999    ROGERS   BASIC         $18.12     - -              1.27           $19.39
Jan, 31      2000        "          "          $19.17    $1.05          1.34           $20.51
Jan. 31      2001        "          "          $19.25    $0.08          1.35           $20.60
Mar. 31      2001     Shaw  "           $19.25                    1.35           $20.60
Apr. 30      2002      "          "          $19.26    $0.01          1.35           $20.61
Jan. 31      2003      "          "          $21.00    $1.74          1.47           $22.47
Jul. 31       2003       "          "           $22.00    $1.00          1.54          $23.54
Feb. 1       2004      "          "          $23.00     $1.00          1.61          $24.61
Dec. 5       2004     "           "          $24.00     $1.00          1.68          $25.68
Oct. 9       2005     "          "          $25.00     $1.00          1.75          $26.75
Jul. 4        2006      "            "           $25.00                    1.50*         $26.50
Sept.30     2006            "            "         $27.00     $2.00          1.62          $28.62
Jul. 1         2007      "          "           $29.95       $2.95          1.80          $31.75
Jan. 31       2008            "           "                                              1.50**        $31.45
Apr. 1        2008          "           "          $32.95     $3.00          1.65          $34.60

*GST reduced from 7% to 6%.
**GST reduced to 5%

For a closer examination of just how profitable the cable business is take a look at Shaw's financial reports.
http://www.shaw.ca/en-ca/InvestorRelations/FinancialReports/

Cable operators (not the CRTC) will undoubtedly take the heat, and rightly so, from consumers, if and when these new fees are added to our existing cable bills, and Ted Rogers, Phil Lind and Jim Shaw are probably not looking forward to having to deal with their customers on that day.    

Not totally related but since we're talking of cable: Can anyone tell me why Shaw carries 2 PBS stations in the lower mainland; one from Seattle and one from Detroit (of all places). When I lived in T.O. the Detroit station wasn't even available despite it's relative proximity. Only the Buffalo, N.Y. PBS station was in the line-up. (Any ex Torontonians remember squeeky voiced Goldie during pledge drives on WNED? She almost became a cult symbol in some circles...LOL)

In short, becuase they can. Both are green-lit for distribution here, and time-shifting aside they offer some different content.