Bundled Cable TV Channels: Why?

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Bundled Cable TV Channels: Why?

Postby jon » Sat Sep 08, 2012 12:40 pm

Who Bundles Cable TV Channels?

By Steve Faguy
The Montreal Gazette
September 8, 2012

Have you ever looked at the offering from your digital cable or satellite TV company and wondered why channels are packaged the way they are? Why in order to get the channels you want you’re often forced to subscribe to channels you don’t?

You might think that the way channel packages are chosen is completely up to the people selling them to you. But you would be wrong. Instead, there is a complex web of conditions in contracts between television service providers and broadcasters that restrict how flexible TV packages can be. And cable companies across Canada are worried that if BCE Inc.’s purchase of Astral Media Inc. is approved, the situation will only get worse.

Starting Monday, the CRTC holds a week of hearings at the Palais des congrès in Montreal about a proposed $3.38-billion purchase of Astral by BCE, the parent company of Bell Canada and CTV. This application to merge two media giants has prompted an unprecedented opposition from competitors large and small, who worry that Bell’s growth will result in higher prices and less choice for consumers.

The most high-profile opposition is from a campaign called Say No To Bell, formed by Quebecor Inc., Cogeco Inc. and Bragg Communications Inc. (EastLink), three cable television providers in eastern Canada. “To get popular channels, you could face pressure to pay for other Bell Canada channels that you are not interested in watching,” its open letter warns. “To watch popular programs, you may be pressured to buy other Bell Canada phone, wireless, internet and TV services.”

There’s also Stop the Takeover, formed of left-wing and consumer rights groups. “Owning more media content creates a profit incentive for Bell to push content that it owns or restrict access to other content it doesn’t control,” the group’s petition says.

Similar opinions have been expressed by other television providers, including Rogers Communications Inc., Manitoba-based MTS Inc., Telus Communications Company and the Canadian Cable Systems Alliance, which represents more than 100 small independent cable companies across the country. Every major provider except Shaw Communications Inc. (which is also the No. 2 English TV broadcaster behind Bell Media) said not only that the proposed purchase would give Bell too much control over English television services in Canada, but that Bell is already abusing its dominance to impose restrictive contracts or even deny its services to its competitors in order to give a competitive advantage to its own Bell TV service.

They’re charges that Bell vehemently denies.

Under CRTC rules, a few channels must be on all cable packages, at rates set by the commission. These include local channels, as well as services like CPAC and APTN. Older specialty channels like YTV, HGTV and Discovery must be available on all digital cable systems, but can be put in theme packs allowing consumers to choose whether to buy them. Newer specialty channels have fewer regulations, and their wholesale rates are up to negotiation between the provider and the broadcaster, with the provider under no obligation even to make the services available to their subscribers. A year ago, mainstream news and sports channels including TSN and RDS were added to this latter category, allowing Bell more freedom to negotiate their carriage conditions.

For television providers, not offering TSN or RDS is not an option. They are among Canada’s most popular channels and are must-haves for any sports fan. Not offering them would be competitive suicide. So no matter what Bell’s price, no matter what its conditions, they are forced to accept.

They still tried to resist. In July, MTS, Telus, Cogeco, EastLink and the CCSA ended an 18-month dispute with Bell Media over renewal of carriage contracts for Bell’s specialty channels, which also include Discovery Channel, Space, Bravo!, The Comedy Network and MuchMusic. The distributors asked the CRTC to step in, saying Bell’s demands were unreasonable.

Among the things Bell was accused of demanding were minimum penetration guarantees, which would require distributors to ensure a certain percentage of their customers were subscribed to a channel, whether they wanted it or not. Bell was also accused of demanding veto power over changes in channel packaging, and of denying access to “non-linear” content like video on demand and mobile video.

For Bell Media president Kevin Crull, nothing here is new.

“Since the beginning of time in the media business, it has always been standard practice for distributors of specialty channels to negotiate rates and part of the pricing has always had a volume component to it,” Crull told The Gazette. He pointed to the United States, where ESPN requires cable and satellite companies to ensure that 90 per cent of their subscribers carry the channel.

Programming costs are fixed, Crull explained, and so these services need to ensure wide penetration in order to remain profitable. “The cost doesn’t change if it’s in 10,000 homes or 10 million homes,” Crull said.

During the CRTC’s dispute resolution process, Bell offered a compromise, what it called a “penetration-based rate card.” This pricing system offered flexibility on packaging that providers wanted, but also made the rate higher if fewer customers subscribed to a specific channel. The CRTC accepted this plan as an appropriate business practice, provided that the pricing wasn’t such that it would effectively force providers to add Bell’s channels to everyone’s basic service plans.

According to Telus, that’s exactly what it does. The pricing scheme proposed by Bell for TSN meant that “all consumers would be forced to pay for this premium service” whether they wanted it or not, said Ann Mainville-Neeson, Director of Broadcast Policy for Telus.

“These penetration-based rate cards, which are offered under the pretext of providing a (television provider) with enhanced packaging flexibility, carry extremely stiff penalties if penetration levels decline,” Rogers said in its submission to the CRTC opposing the Astral takeover.

Television service providers have been under competitive pressure to offer their customers more choice through smaller packages, they say. In Quebec, Quebecor’s Videotron digital cable service lets customers choose their specialty channels in theme packages or à la carte. Bell and Cogeco have responded by offering similar deals, but only for their subscribers in Quebec.

“We’ve been recognizing for a long time that customers resent being sold large packages,” said Cogeco president Louis Audet. But “the outcome (of the negotiation has been) no sharing of risk on the part of Bell.”

Both Audet and Mainville-Neeson said that Bell has been the only broadcaster they have had this kind of trouble with. That in itself is an indication that Bell is not playing fair, they say.

Crull countered that Bell has come to deals with almost 200 distributors for its services, “very amicably, no complaints, no problems.”

He also pointed out that Cogeco signed a deal with Astral “on the exact same model” that Bell proposes for its own channels.

The rift between Bell and its competitors becomes bigger when you look at “non-linear” services like video on demand and mobile. There, Bell Media was accused of not even being open to negotiation. Though Rogers, Telus and Videotron expressed interest in offering live Olympics coverage on their mobile networks, they say Bell refused to offer them. What’s worse, Bell then advertised during the Olympics that such content was available “only from Bell.”

The CRTC has rules requiring vertically integrated companies like Bell to offer mobile and VOD rights to its competitors, but because the deal granting rights for Olympics content predates these rules, they were allowed to maintain their exclusivity.

Crull said Olympics rights were offered to Rogers, which is part of the consortium that won broadcast rights to the 2010 and 2012 Games, but that they couldn’t come to terms.

As for Telus: “Telus didn’t pay $153 million goddamn dollars for Olympic rights,” Crull said. “If they’d pay $153 million for Olympic rights, they could put it on their phones.”

Crull said non-linear content from Bell Media’s specialty channels is available to competitors. “I haven’t given a single non-linear right to Bell that I didn’t offer to other distributors,” he said.

Crull, who repeatedly expressed frustration at the “misinformation” campaign by Bell’s competitors, added this was especially frustrating because the CRTC doesn’t regulate how much Bell Media pays for things like National Hockey League rights or popular U.S. TV series, nor does it regulate how much TV providers charge their customers for their services. But those providers want the commission to step in and put more limits on how much Bell can charge those providers for its channels.

There are already regulations put forward by the CRTC to prevent vertically integrated companies from acting in uncompetitive ways. They are not allowed to give “undue preference” to related services, and their TV providers must carry competing channels when they add new channels they own.

Telus says the problem isn’t so much that new regulations are needed, but that existing regulations need to be better enforced, and in a more timely way. One thing both sides agree on is that the dispute resolution process should not take 18 months to resolve itself.

So who’s right? Are Bell’s contract conditions unreasonable? Are their prices too high? Only Bell, its competitors and the CRTC know. The contracts are confidential, and neither Bell nor the other providers are at liberty to disclose their contents. We know them only in general terms. In its submission opposing the Bell/Astral deal, the CCSA expresses serious concerns about how the increased bargaining power might affect its consumers, but the details of those concerns are blanked out.

This means that while the CRTC hears arguments for and against one of Canada’s largest mergers of media companies, and public debate continues through full-page newspaper advertisements, television consumers remain in the dark about how secret deals dictate how they pay for the channels they want to watch.

sfaguy@montrealgazette.com
© Copyright (c) The Montreal Gazette
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jon
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Re: Bundled Cable TV Channels: Why?

Postby tuned » Sun Sep 09, 2012 1:42 pm

I called Shaw to add two extra channels for my kids. The only way I could get them and not lose anything I already had was to spend another seventeen
dollars per month for another "package". Don't bother telling me to switch to Telus since it's the same clowns, different circus. Despite all the talk about "choice" and "personlizers" we are getting hosed.
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