As is often the case when propositions are put before the CRTC, there’s as much action off the screen as on. Not that the venerable and much-maligned bastion of Canadiana is to blame.

Recent proposals from the Canadian Cable Television Association (CCTA) to bring in U.S. specialties and allow cable operators to sell their two minutes of avails – along with a proposal from Toronto’s 49th Media to sub in Canadian ads on U.S. satellite feeds – are causing so much industry drama and plot twisting that even Shakespeare might be heard to utter a ‘fuggedaboutit.’

Buyers and the Association of Canadian Advertisers (ACA) are tending to endorse 49th Media’s plan, but they are split on the CCTA proposal. On the one hand, advertisers and buyers would like to get their hands on the two minutes per hour of ad space that would be made available on the new U.S. channels, on the other, some don’t welcome more fragmentation and allowing the cablecos to become de facto broadcasters.

You can usually count on a response when you poke a hornet’s nest, and CCTA president/CEO Janet Yale says she expected a reaction when she proposed the CRTC allow U.S. specialties into Canada. ‘The application is as much about triggering debate about the need for a paradigm shift as it is about the particular services,’ she notes. But like they say, be careful what you wish for.

The resulting dispute centres on two of the arguments put forward by the CCTA – that U.S. nets will both give consumers more choice and will curb the growing black market.

‘Everyone who’s thought about it for a minute and a half has realized it can’t accomplish either,’ counters the CEO of Toronto’s Alliance Atlantis Broadcast Group, Phyllis Yaffe. Theft, she notes, is not about poor service. ‘I don’t think this will counteract any of the motivations for people who steal signals,’ the main one being, of course, to get something for free.

But Yale says theft and choice are related. ‘This notion that it is about either/or is a false dilemma. We have to enforce and provide choice. The truth of the matter is we are as aggressive as ever about enforcement because we believe it is key to shut down the theft of satellite services. But that doesn’t mean we want angry consumers. The notion that [services like] HBO and ESPN are not in Canada is a myth. There are 750,000 households that have this programming. We want people to be delighted about coming back to a legal Canadian alternative, not angry.’

Yaffe and others at the Canadian channels contend that the choice argument is a red herring, as the most popular U.S. programming is already seen on Canadian networks, by a wider audience than would have access to it under the CCTA’s proposal.

The CCTA counters that broadcasters want it both ways: If Canadians don’t see value in the services, they won’t sign up. If they do, then the CCTA says it will be a boon domestically, as its proposal sees U.S. and Canadian services bundled together.

But in a new digital Canada, any talk of adding services inevitably leads to concern about fragmentation, which in turn calls attention to the vulnerability of many of the Canadian outlets.

‘There is not enough business in Canada right now to support all of the Canadian analogue and digital we have, let alone absorbing the U.S. specialties,’ observes Theresa Treutler, SVP broadcast investment director at Toronto’s Starcom Worldwide. ‘This is awfully risky. There are a lot of organizations and people’s jobs at stake here. And no one has demonstrated that giving the viewer more choice does anything. Total viewing in Canada is pretty stable. The influx of all these digitals has not grown television viewing hugely in any kind of a meaningful way. All it’s done is change the mix.’

Fragmentation does have some benefits for buyers, such as the ability to hammer specific demographics and psychographics. But it also creates administrative problems. Every buy costs the same to process, and the lowest-rung specialties only pull a fraction of a single share as it is. And there is also the concern that big-brand U.S. specialties will try to charge a premium. ‘There’s no way I would recommend to a client that we would pay anything higher than what the Canadian specialties are transacting at,’ warns Treutler.

That doesn’t mean she won’t add U.S. outlets to the mix if the price is right. ‘Our mandate is to buy the networks that address our clients’ targeting objectives and that are priced properly and contribute meaningfully to the buy,’ she says. ‘And if it’s a U.S. network, then it’s a U.S. network. It’s no different than buying the U.S. lineup on CTV or Global…. Unfortunately, patriotism is not at play in that decision process.’

Sarah Ivey, VP of strategic planning at Toronto’s Initiative Media, believes the shift in dollars might even be felt by the networks, not just the specialties, although CTV’s strength makes it less vulnerable than Global.

‘In a season where certain conventional providers have a lot of turnover in their schedules,’ she observes, ‘it causes a lot of uncertainty and question marks. If you’re a gambling person, you might just [buy an HBO]. Would I present it to my clients? Yes, absolutely.’

But Ivey is concerned about the effect on kid providers like YTV, because Nickelodeon could take a run at fickle kid viewers. Peter Moss, EVP of programming and development at YTV’s owner, Corus Entertainment, acknowledges the threat.

‘I wouldn’t welcome Nickelodeon as a competitor along with Teletoon, Family, BBC Kids, CBC, and TVO,’ he says. ‘There’s already enough competition in this tiny little universe. [But] the real question to me is why would the CCTA want to take money out of the system and put it in the hands of Americans to take out of the country?’

Through both a 5% direct contribution to the CTF and Canadian programming investments averaging 35%, Canadian specialties say they currently kick back 40% of their revenues to the system, while other nets (foreign and domestic) are only required to contribute 5%.

Yale bristles at such a simple reading of the numbers.

‘The specialties aren’t at 40%. Five percent of the gross revenues of the cable industries, including the revenues of the specialties, go to support the fund. That’s the only direct contribution anyone in the system makes. Period. In addition to that, Canadian licence services have Canadian content spending obligations in return for the fact that they have a licence – and for having prime beach front, if you will, on the analogue dial.’

All of these arguments aside, however, the real challenge facing the proposal is the rights conflict that would exist between Canadian and U.S. outlets over the programming they currently share. Notes Kevin Shea of 49th Media, author of the proposal to free up U.S. specialties to be sold to Canadian buyers on satellite, ‘from a rights perspective, this thing will never work. Those channels technically cannot come in since the rights are spoken for. It can’t happen.’

Yale believes it’s premature to talk about rights. ‘[The CCTA] understands that [concern], and that’s why we applied for this differently than we have for other foreign services we’ve tried to bring into the country.’

She underlines that the CCTA has no agreements with U.S. services because any such arrangement would be technically illegal. ‘You can’t ask someone to let you sponsor them if there is a policy prohibition saying they’re not eligible because they compete with a licensed Canadian service. So we’ve asked for a policy change that would allow us to act as sponsors. But, we thought, if we just say we’re applying to change the policy on movies, kids, news and sports, no one would know what we’re talking about except at a theoretical level. So we said, let’s list the services we believe we would be authorized to apply to have as sponsors if the policy was changed.’

While the CRTC hasn’t decided when the application will be considered, Shea believes it’s a moot point. ‘My read is that they’ll withdraw it because there’s no legitimacy for the application from a legal perspective. My own view is that it is a bit of a straw dog for their other application.’ Shea is a supporter of that proposal, which would allow cable operators to sell the two minutes per hour they currently are supposed to dedicate to promoting local programming, if only because it might free up space for regional buys.

For its part, the ACA also champions the proposal. Hinting that cable operators have largely blurred the line between ‘local programming’ and selling their own services anyway, the ACA says such a change would create a fair playing field.

Says ACA president Ron Lund, that time should be ‘accessible to all advertisers on an equal basis. That’s really our only caveat.’ The association also welcomes the possibility of additional regional buys, although the CCTA proposal does not specifically address that issue.

From the buyers’ perspective, most would welcome access to those minutes, but Starcom’s Treutler wonders if the cable operators have considered the cost of setting themselves up as full-service vendors, including the expense of buying both Nielsen and BBM numbers. Some also argue that the move alters the notion of cable operators as ‘utilities’ as they were traditionally conceived.

The 49th Media proposal to sell Canadian clients ad space on the top five U.S. specialties delivered via satellite is also generally being hailed as a positive move.

‘I’ve been fielding questions from advertisers in terms of accessing that content since 1996,’ says Initiative Media’s Ivey. ‘There’s a lot of interest out there. A&E is a beautiful brand. So is CNN. They’re very salable…. If I was able to access inventory on A&E, I could stick it on practically every plan that we’re working on right now, because the numbers are already there.’

Lund agrees it’s time for this change. ‘We’ve always had a great concern about the lost Canadian audiences that were going to U.S. specialties…. We’ve been hoping that someone was going to find a way to repatriate those audiences so that we could access them as Canadian advertisers.’

The ACA estimates domestic advertisers lose 15% of the English-speaking audience on average to those U.S. specialties.

‘We’ve lived all these years with a partial broadcasting system because our viewership was always diluted,’ adds Bob Reaume, VP media and research at the ACA. ‘This is an important step to get back that audience. Consumers have chosen to watch this. The value in the programming is the advertising audience, and with the 49th Media proposal we get back that audience for Canadian advertisers.’

Shea argues his proposal keeps that space Canadian and that if steps aren’t taken to secure it now, U.S. broadcasters might do it themselves, in the same way U.S. publishers addressed the split-run magazine issue by taking the conflict to the World Trade Organization.

The Canadian Association of Broadcasters is on record as being against the move, suggesting it could lead to other U.S. nets gaining direct access to the Canadian system. Shea says the CAB has proposed a 30% tax on U.S. subscription revenues to mitigate any losses.

‘That is the most aggressive, ridiculous notion,’ says Shea, ‘because all that would happen is that cable subscribers would pay 30% more. It’ll just get passed along.’

The 49th Media proposal kicks back 25% of overall revenues to the CTF, and will offer U.S. partners 25% of total profits derived from ad sales – a proposal which has naturally met with favourable reaction down south.

‘But this also addresses another issue,’ says Shea. Specifically, the U.S. services’ ‘concern over the fact that they do not make a contribution to Canada. They are petrified of two things: being removed from the list of approved satellite signals, and being taxed à la the CAB proposal. This gets them off the hook.’

Objections notwithstanding, Shea hopes the application will be heard by the CRTC this fall.