Who pays for local programming on TV?

August 24 2009 by Ellen Roseman

TV stations should pay for local programming, since they have the advertising revenue to support it. But they’re crying poor and saying that costs should be subsidized by cable TV and satellite TV operators.

The Canadian Radio-Television and Telecommunications Commission agreed and told the cable and satellite companies to set up a local programming improvement fund (LPIF). But it didn’t tell them they had to absorb the cost.

Result: Consumers pay the bill. The carriers just downloaded it onto us.

Many customers of Rogers Cable wrote to me after receiving letters about the new charge. But Bell is also asking customers to pay without even advance notice by mail. Instead, it has a notice at its website.

You have to wonder about a government agency that imposes a sizeable charge — and increases it at the last minute before it takes effect on Sept. 1 — and acts surprised when it’s passed along to customers. The outcome was predictable. So why not do something to head it off?

If you write to the CRTC, this is a typical answer you receive:

The CRTC established a Local Programming Improvement Fund (LPIF) to conserve and improve local television programming. In establishing the appropriate level of contributions to be paid by cable/satellite companies to broadcast local programming, the CRTC considered a number of factors including the ability by cable/satellite companies to contribute to the Canadian broadcasting system.

Given their reported profits, the CRTC is of the view that there is no justification to pass the cost on to consumers. If your cable/satellite company has decided to increase the fees for your service, it is a business decision that is not regulated or mandated by the CRTC.

Let’s not get carried away by our distaste for Rogers and Bell. Let’s also lay the blame where it belongs on the CRTC, which didn’t do its regulatory duty.

And let’s not forget CTV, which overpaid for broadcast rights to the Vancouver Olympics. With its ad revenues shrinking, it then had to orchestrate a campaign to transfer local programming costs to Canada’s cable and satellite companies.

15 comments

  1. G. C. Hodgson

    Aug 25 2009

    The CRTC is broken. It doesn’t represent the interests of Canadians as a whole but, rather, the entrenched interests of the telco oligopolies. The above is just one example of the CRTC dropping the ball. Another is its failure to hold Bell accountable for its anti-competitive behaviour towards its wholesale internet customers.

    I think it’s beyond time to abolish the CRTC as it now stands and institute a new commission that will actually do the job the CRTC is failing to do.

    You can sign the petition to abolish the CRTC:

    http://dissolvethecrtc.ca/node/1

    Online petitions aren’t worth the paper they’re printed on, but it’s a start and maybe, if enough people sign, it will gain some attention to an issue that has been ignored for too long.

  2. Paul Griffin

    Aug 25 2009

    A few points:

    1) My understanding is that the monies collected by the networks DO NOT even have to be used for local programming. Another case of the CRTC caving. So now there’s even more money to buy US programming, which may or may not be shown. More Canadian programming?? Surely, you jest.

    2) It is totally unfair that we are to be charged a % of our total bill and not some flat fee. So for those (like myself) who already support the networks and Bell by subscribing to more services, including all those obscure niche channels, we get hit even harder, to the point that I will likely drop some programming to achieve a “neutral” position. But I suppose the networks will then go hat in hand to the CRTC when people stop watching their “chimpanzee” channels. And don’t forget, come July 1/10, we will be paying another 8% thanks to Dalton.

    3) And lastly, to the folks who went to CFTO’s splashy new High Definition studio open house a few months ago: Did you sign their CRTC petition regarding local programming? Did they explain, in the interest of fairness, how YOU could end up paying? Was the free hot dog good? What’s the taste in your mouth today?

  3. AM

    Aug 25 2009

    Recently, I received a letter from Rogers telling me that they’re going increase my cable bill by 1.5% due to the CRTC LPIF fund. The letter explains that this is a fee mandated by the CRTC and that all the money collected goes directly to the fund.

    However, when I look at the information at http://www.crtc.gc.ca, this is not what the CRTC said. It reads: “As a temporary measure for the upcoming broadcast year, cable and satellite companies will contribute 1.5 per cent of their gross broadcasting revenues to the fund, an increase of 0.5 per cent.”

    I called Rogers to complain about it and was told that the fee is mandated by the CRTC and there is nothing they could do about. The person I spoke with made it very clear that this is not open for discussion.

    Following that, I contacted the CRTC. The response was not very helpful.

    I’m not sure what bothers me more, being ripped off by Rogers or being told by the CRTC: “Too bad, but it isn’t our problem”.

    I was under the impression that one of the functions of the CRTC was to protect consumers from being gouged by greedy corporations. Obviously, this is not the case. What is the point of having the CRTC?

    Going back to the early 70′s when we were able to choose which cable company we wanted to deal with, there was no need for protection from the CRTC.

    But when the CRTC changed the rules and decided that each geographical area should have only one cable company, things changed. And since we didn’t have the option of choosing a different cable company any more, protection for the consumer became necessary.

    Yes, I know that Bell, as well as other companies, offer wireless TV service, but this service is not exactly the same as the cable service from Rogers, so – in my opinion – it’s not really direct competition.

    With Rogers cable, I can connect my TV, my stereo, my VCR and my DVD-R directly to the cable. With Bell and other companies, I would need a converter box for each device. The converter boxes add to the monthly cost and make it very difficult to record shows unattended.

    Regards,

  4. PP

    Aug 25 2009

    Funny thing, the first line of Rogers letter to me on this subject states: The CRTC has established a new fund to which cable TV and satellite companies are required to contribute.

    Nowhere in that sentence does it state: …a new fund to which cable TV and satellite companies are required to charge their customers to contribute.

    How does a company that makes significant money on its cable business decide to pass this onto each customer?

    Either Rogers or Konrad von Finckenstein, Q.C., Chairman of the CRTC, should be held accountable. Doesn’t he know that this is exactly what Rogers would do?

    How is the CRTC managing the priorities of Canadians when they let the providers pass along the charge? This isn’t Konrad’s first day on the job.

  5. DF

    Aug 25 2009

    I have never before contacted any public forum on any issue. However, this one speaks of “sneaky and underhanded” games.

    CRTC is holding public hearings in September on the the 1.5% surcharge to consumers, which Rogers and Bell have decided to pass on to their customers.

    The submission deadline is August 19. Most consumers are just receiving the letter from their cable companies (Rogers and Bell), leaving very little time for anyone to get up to speed and submit their comments.

    The whole deal is being put together without any public consultation. The process for consumers to submit their comments to CRTC is crazy. No regular person can follow the directions without a CRTC person to walk them through and “connect the dots”.

    When I called Rogers Ombudsman office, they simply stated that CRTC can collect surcharges from their customers, like 911 surcharge (which I know we all agree is critical).

    Maybe I’m the only consumer who feels like the proverbial “ham in the sandwich” for the Federal Government and Rogers/Bell inability to negotiate, or at least let their customers decide on whether or not they want to contribute.

  6. RF

    Aug 25 2009

    I have no problem with Rogers passing on the LPIF fee. Why should they pay it? But why should I pay it?

    I feel so strongly about this that I immediately cancelled my cable. In fact I immediately disconnected my TV. I will probably see if rabbit ears will work for the few channels I watch. I watch mostly just the news, so I don’t think I’ll really miss it if it comes to that.

    The LPIF seems to be carriage-fee by stealth. But worse.

    Why should I pay anything to subsidize the operations of TV stations that I mostly cannot receive and probably wouldn’t watch if I could?

    I cannot imagine having any interest in any purely local programming concerned with the affairs of some place where I don’t live.

    In general, I have no problem with my taxes being spent to provide government services to other parts of the country, to individuals in need, etc. But I seriously object to being ‘taxed’ by the CRTC to subsidize the operations of private TV stations.

    I’m not part of the problem, so why should the CRTC force me to be part of their solution?

    I know nothing about the business of operating a TV station and producing local programming, but I have to believe that the costs of local programming is the smallest part of a station’s operating costs.

    I’m assuming that ‘local programming’ is local news and local events. Assuming one hour of news in the morning, one at noon, one at the dinner hour and one at night, that is four hours of programming.

    Some local news would be repeated on later broadcasts and some would not be local news but provincial, national and international provided by others, at a cost of course, but still these costs must be much less than the costs of purchasing all the other programs from the US and other sources.

    Many stations are parts of chains, so the costs of any non-news Canadian programming would be shared across the chain. i.e., ‘subsidized’.

    It would be interesting to know what the cost of their local programming is, compared to the total costs. But of all the other programming they offer during a day, wouldn’t local programming have the highest ratings? Viewers may be able to see many other programs on other cable stations, but stations that are serving these smaller markets must have few, if any, competitors offering local news.

    Therefore, wouldn’t local programming attract a lot of advertising from local businesses? I wonder why a TV station needs to have its local programming subsidized by all cable subscribers across the country.

    Maybe a better managed station would do quite well. Maybe the stations that are supposed to get the subsidies should be allowed to work out their financial problems on their own — or go bust and be replaced by someone who can make a go of it.

    Even if I’m wrong about the sustainability of local programming in areas with smaller potential audiences, I still don’t see why I should subsidize the stations.

    Here’s a thought: If the people served by these stations want better local programming (are they complaining about the quality or are the TV stations complaining about the costs?), why don’t they subsidize their local stations by paying what would be, in effect, a carriage-fee through their cable or satellite company? (Of course, antennas might make a comeback.)

    That would be fair. The people getting the better local programming pay a somewhat higher price. The rest of the public doesn’t receive these stations and therefore doesn’t pay a carriage-fee for them. Problem solved.

    P.S. Where will this stop ? Similar subsidies for small-town newspapers by charging extra for other newspapers? Subsidies for live theatre putting on Canadian plays in small towns by adding a tax to theatre tickets in larger cities ? Etc.

  7. Rogers spokesperson

    Aug 25 2009

    In the interest of transparancy, we have advised customers of the fee and have also communicated that Rogers receives no financial benefit from this fee.

    Ellen, here is the text we use for customers’ queries on this file.

    Customer Response:

    “The CRTC has required Rogers to contribute to the Local Programming Improvement Fund. We are passing through this fee to our customers as we do all CRTC regulated fees.

    “Rogers makes significant investments in our network and technology each year to offer you the best possible in-home experience.

    “The yearly cost to absorb the new CRTC LPIF contributions by cable TV and satellite companies would be tens of millions of dollars. It would impact innovation and the delivery of future services like new HD and Digital channels, multicultural and on-demand programming.

    “In order to be able to continue making these investments, we will pass through our contributions to LPIF to our customers.”

    Some customers are confusing the LPIF charge with the issue of fee for carriage. The CRTC will be holding a hearing in November to discuss the concept of fee for carriage.

    The over-the-air broadcasters (CTV, Global, etc.) have lobbied the CRTC to force cable and satellite customers to pay for local over-the-air signals. Rogers, along with our industry peers, has fought this proposal successfully in two previous hearings and will argue against it again at this hearing.

    We do not want to see an additional tax levied on our customers — one that could result in new charges of $5 to $10 per month.

    We do not charge for these signals today and do not think it is fair to require our customers to do so in the future. These signals are available free today to anyone with an antenna. It would be unfair to penalize our customers and require payment for something that is currently free.

    The OTA (over the air) signals are funded through advertising and receive benefits from our distribution, including improved picture and sound, priority placement on the dial and simultaneous substitution.

  8. Dave Ings

    Aug 26 2009

    Finding most TV programming to be mindless, my wife and I canceled our cable service almost two years ago. We don’t miss it much and I’m able to avoid the various taxes and fees imposed by unelected CRTC bureaucrats.

    Cable TV is arguably a dinosaur service in any event, on the verge of being swept away by direct distribution over the Web. The actions of the CRTC will most likely accelerate this trend.

  9. David

    Aug 26 2009

    Some simple math: The fee was already 1% of gross, making an annual fund of $68 million, according to the CRTC.

    The CRTC is temporarily (as they say) increasing this fee from 1% to 1.5%. That’s a 0.5% increase, bringing the estimated fund to $100 million. A difference of about $35 million.

    I am not too upset about this 0.5% fee being passed along to consumers. There’s debate for the fairness either way.

    What bothers me is that the fee being passed to consumers is the full 1.5%. Not only is the revenue of the increased fee being passed along, but Rogers is therefore taking this opportunity to increase its own revenue, making the CRTC out to be the bad guys.

    “Rogers spokesperson” said “The yearly cost to absorb the new CRTC LPIF contributions by cable TV and satellite companies would be tens of millions of dollars. It would impact innovation and the delivery of future services like new HD and Digital channels, multicultural and on-demand programming.”

    So instead of losing tens of millions, the industry is now making an extra 2 times tens of millions; does that mean we’ll see a marked increase in innovation and special services? I highly doubt it.

  10. PM

    Aug 28 2009

    This is the second stab in the back by the CRTC in the past little while.

    Actually, this one is more than just a stab in the back because as Canadians use the internet more and more (and we will always grow), they have allowed Bell to charge us significantly more if we go over “their” preset usage rules.

    This CRTC decision also affects thousands of existing contracts that users may have with a Bell competitor that uses Bell’s wires to cover internet traffic from the third party.

    I’m hoping that you can write something about this… perhaps in conjunction with another Toronto Star writer that might seriously drum up some anti-CRTC response.

    http://www.dslreports.com/forum/r22854579-From-Rocky-OUTRAGEOUS-CRTC-Descision

    You are the best! I love reading your stories, and you have helped me many times!

  11. JE

    Aug 29 2009

    Canada once again proves that it is a dinosaur when it comes to technology and consumer rights. We are charged a system access fee for cellphones and now a fee for local programming? A Rogers customer service rep informed me that CRTC mandated that the fee be charged to consumers; quite different than what the Rogers spokesman claims.
    Quite frankly, I don’t watch any local programming because it isn’t worth watching and this fee isn’t going to make programming any better. I’m still holding out hope for competition in cable, but as long as CRTC runs things it won’t happen in my lifetime (and I’m only 28).

  12. Cynthia

    Aug 30 2009

    It’s not just Bell and Rogers. My august bill from Eastlink had an additional 79 cents put on bringing my analog cable bill to over $60/month. There was no notice in my bill that this was going to start appearing on our bill in august, but they still managed to waste money by placing an envelope in my bill when I’ve been paying online for over 5 yrs.

  13. Mark Henschel

    Sep 7 2009

    Notwithstanding the problematic CRTC ruling, the benefits of cable as described by the Rogers monopoly representative — namely, the OTA (over the air) signals are funded through advertising and receive benefits from our distribution, including improved picture and sound, priority placement on the dial and simultaneous substitution — are minimal with the advent of digital signals.

    In fact, OTA HD is typically uncompressed and better than that provided over cable.

    And my experience with Rogers is that glitches in picture and sound are inexplicably worse than the broadcast signals I can receive in Markham — which are free.

  14. Kevin Crannie

    Sep 13 2009

    Bell and Rogers are saying that the 1.5% LPIF is a mandated fee that consumers have to pay. Unfortunately, this is not true.

    It is a fee that cable and satellite companies are required not to pay. In my conversation with the CRTC of August 15, 2009, it was stated to me that it is my choice whether to pay the fee or not; I am not required to pay the fee, as it is NOT a mandated fee by the CRTC.

    That said, each month I’m deducting the 1.5% LPIF fee from my cable bill. This is a fee that Rogers and Bell are required to pay.

    As a customer of Rogers cable, this is the third increase in one year. In October 2008, Rogers slapped customers with a 0.5% LPIF fee; in March 2009, Rogers raised cable rates by 9%; and in September 2009, Rogers passes the cost of 1.5% LPIF fee onto consumers.

    In a written statement to the President and CEO of Rogers, I’ve expressly stated that I will not be paying the 1.5% LPIF fee, as I’m not required to pay this fee.

    The wording of the CRTC should have read that cable/satellite companies are restricted from passing the 1.5% fee onto consumers.

    The blame must be laid on the shoulders of the CRTC for failing to stipulate what is required of cable/satellite companies.

  15. Michelle Obama

    Oct 5 2009

    The onus falls upon the Government of Canada, for not knowing how to co-ordinate the falling of prices with improved technologies for all of its constituents, coast to coast.

    http://www.shoutle.com/unfettered-crapulent-advertisements.html

    Ellen, darling, keep up the good work! If Canadian Telecoms have to increase prices, then, it means that the Government should open doors to all the other Telecom giants so that we can all fairly compete at the market. At this point, Canada is the perfect haven for antitrust violations, in the name of its own decrepit communications authority and boards.

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