On Tuesday,
November 24, 2015 at 10:00 a.m. in the Copyright Board's hearing room at 56
Sparks St. in Ottawa with the Board’s new Chair, the Copyright Board will hear
the first contested retransmission tariff hearing in 20 years. To somewhat
oversimplify, the collectives want $2.00 a month per subscriber increasing to
$2.38 by 2018. The Broadcast Distribution Undertakings (i.e. “BDUs” or cable and
satellite companies) want to continue at the current agreed upon amount of $0.98
per month decreasing to $0.90 by 2018.
The
retransmission tariff results from Copyright Act amendments made in
1988 so that Canada could enter into the then new FTA with the USA. Along with
the abolition of compulsory licenses for generic drugs, this was a very major
concession to the USA in the FTA process.
Canada,
unlike the USA, did not spell out a formula in the legislation for what was to
be a distant signal and left the mechanics of it all to the then new Copyright
Board. Distant signals were eventually defined by regulation in an
ultra-complex manner potentially much more generous to copyright owners than
the US mechanism. The Board’s first tariff in 1990, following an extremely long
“inaugural” tariff hearing, was worth about $53 million p.a., an amount about 9
times more than anyone ever expected at the time – even including the proponents
of the tariff. A rather tepid subsequent “criteria” regulation resulted in a
very modest cutback of about $3 million a year in 1993. For twenty years,
Canadian cable subscribers paid $0.70 per month that was included in their
cable or satellite bill for access to “distant” signals. This amount was
increased to $0.98 per month in 2013 and so certified by the Board pursuant to
a negotiated agreement.
Recently
published estimates of the value of the tariff confirm that it is now worth more than $100 million p.a. While $0.98
or $2.00 per month would seem like a small amount compared to monthly cable
charges that can range from
about $40 to about $119 per month, for example, in the case of Rogers,
it quickly adds up to a lot of money for the major parties concerned. To what
extent this cost is passed on to consumers and to what extent it may contribute
to “churn” or cord cutting are probably very interesting questions that may be
addressed in this hearing.
An interesting
aspect of the change in environment that does not seem to arise on a quick scan
of the parties’ cases is that of the issue of vertical integration in the BDU
industries. Certain BDUs are now major content owners. How does this affect the
positions that they take at the Copyright Board and at the CRTC?
The economics
of cable costs and the willingness of consumers to pay the cable pipers may be
about to change, with the increasing rates of
“cord cutting” and reliance on over the air digital signals, Netflix,
and other means of access to programming. These issues may arise to some extent
during this hearing - though it should be noted that this hearing is
about 2014 – 2018 and we are almost half way through the period covered by the proposed
tariff.
In the long
run, however, if the “cord cutting” and other trends continue, this could be
another example of a tariff that will become obsolete sooner or later, along
with the private copying levy, reprography, media monitoring. Meanwhile, it
seems to be worth everyone’s effort to invest in a large and no doubt expensive
cast of lawyers and experts, including some of the “usual” suspects in terms of expert witnesses.
It
will be especially interesting to see to what extent the Board deals with such
issues as cord cutting, the recent “pick and pay” ruling by the CRTC.
In this
regard, it will be interesting to see whether the Board assumes a more than
usual “inquisitorial” role by asking its own questions and relying on its own
research to some extent rather than relying solely on the parties.
This may be
one of the most complicated, arcane and least exciting or readily understandable
tariff issues that have faced the Board in recent years – but for the time
being could be the most economically significant hearing to date. This seems to
be the single most lucrative tariff under the Copyright Board’s jurisdiction.
Although it looked for a time as if private copying or “reprography” might eventually rival the retransmission tariff, both of these tariffs are headed towards potential oblivion in the absence of some dramatic reversal of fate. This, too, could
happen someday to retransmission – but not likely this time around unless the Board
decides to say “a pox on both your houses”.
It is also
the occasion that is expected to mark the debut of the Board’s new Chair,
Justice Mr. Justice Robert A. Blair of the Ontario Court of Appeal.
In any
event, here are the key documents in this file:
Enjoy.
HPK
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