No business model for HDTV, CBC tells CRTC

GRANT ROBERTSON
Globe and Mail Update

GATINEAU, QUE. — As television shifts towards high-definition channels and programs, broadcasters are finding no business model for HDTV and are instead being forced to foot the massive bill, the head of CBC warned Monday.

Speaking on the opening day of a two-week regulatory probe into the state of Canada's television sector, CBC president Robert Rabinovich said advertisers are not willing to pay more for commercials on high-definition channels or during HD programs.

That has left Canadian broadcasters struggling to figure out how the industry will pay for the massive shift towards high-definition, which requires new infrastructure and programming costs that are roughly 25 per cent higher.

“There's no evidence either in Canada or the United States that we have found for advertisers willing to pay a premium for a program that's in HD,” Mr. Rabinovich said. “So basically they're saying if you want to shoot in HD, that's your business, we're not going to pay you more.”

The regulatory hearings being held by the Canadian Radio-television and Telecommunications Commission are the first major review of the rules governing TV broadcasters since the late 90s.

CBC was the first of Canada's broadcasters to appear at the hearing, painting a dire financial picture for the industry during two hours of testimony. The CBC, which gets slightly more than half its revenue from commercials and the rest from government funding, said ad dollars are eroding from the industry as audiences migrate to other forms of entertainment such as the Internet, and advertisers follow the migration.

Faced with the transition of TV to high-definition, the broadcasters are proposing various plans that ask the regulator to drop some or all of their over-the-air signals. Those are the free broadcasts that are available without cable or satellite. The industry argues that between 80 and 90 per cent of Canadians are cable or satellite subscribers, so the conventional broadcasting method can soon be eliminated. That could save costs for the networks, who would otherwise have to spend millions updating the infrastructure.

While some networks want to drop those altogether, the CBC is proposing a hybrid model, where it would build more than 40 digital over-the-air transmitters, capable of carrying the HD signal, in urban markets. CBC executives say most of Canada's remaining over-the-air customers live in cities. The public broadcaster has already built eight of these in various cities.

The transition to HD has been likened to the shift from black and white to colour, or the move to stereo in the 80s. Mr. Rabinovich said the networks won't see any increase in their business despite the higher cost, so the CBC is arguing the regulator should allow the conventional broadcasters to start charging cable and satellite companies to carry their signal.

The feeds from conventional broadcasters, such as CBC, CTV, Global, City TV and others, are currently provided free. Specialty cable channels such as Showcase, HGTV and TSN are allowed to collect a fee as compensation for their lower placement on the dial and, arguably, the smaller ad revenue they attract because of their channel location.

All broadcasters are pushing for these fees to be introduced, which could increase a monthly cable bill by between $3 and $7 by some industry estimates, depending on what the rate is set at.

It is likely that the regulator would require the networks to pour more funding into Canadian content and productions if it did agree to the fee.

The CBC said Monday it supports that concept.

However, the industry has not come to a consensus on what the fee should be set at. CanWest has proposed a monthly rate of 50 cents per subscriber per network. Mr. Rabinovich said he did not know what the ideal rate should be, if the regulator decides the idea has merit.

“The conventional broadcasters agree on a fee, they don't agree on the reasons for the fee and they don't agree on the size,” he said. “We think that should be done on each [broadcaster's] individual theory.”

CRTC commissioners questioned CBC executives over whether the networks were using the fee concept as a way to get the regulator to “skate them back onside” in terms of profitability. Mr. Rabinovich said no, because costs are going up regardless due to HD content, while ad revenue is falling.

The first two days of hearings will see the broadcasters present, including Global and CTV Monday afternoon. Cable and satellite providers, who are opposed to the fee idea, are scheduled to speak Wednesday and Thursday in Gatineau.