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Canada's four biggest cable companies should contribute 10 per cent of their total revenues - including phone and internet - to the Canada Media Fund (CMF) and other federally sponsored cultural funds, the Friends of Canadian Broadcasting says in a submission for Industry Canada's digital economy consultation.
"The Canada Media Fund, and other federally-sponsored funds can be augmented substantially by tapping into the huge profits of the four big cable monopolies, whose profit before interest and taxes in 2009 exceeded 25%," the Friends, an independent watchdog group, wrote in its submission.
"FRIENDS recommends a 10% levy on revenues, and preventing these monopolies from recouping the contribution from their subscribers."
The digital economy consultation closed on Tuesday. As of July 13, more than 2,000 individuals and organizations had registered to file comments and ideas, and comments continued to be posted Wednesday.
Broadcasting distributors now currently contribute five per cent of their revenues to the CMF, which has an annual budget of $350 million.
The Friends estimated that a 10 per cent levy, collected from Rogers Communications Inc., Shaw Communications Inc., Videotron Ltd. and Cogeco Cable Inc., would generate $461 million in funding.
Rogers, unsurprisingly, criticized the proposal Wednesday.
"I think it's an old media proposal in a new media world," Ken Engelhart, Rogers' senior vice-president of regulatory affairs, told The Wire Report.
Engelhart said a "tax" on cable providers would not solve programming issues in the digital environment.
He said the problem is that new platforms like Hulu are going to "completely disintermediate the Canadian broadcasting system and leave Canadian content producers out in the cold."
Engelhart added: "The idea that taxing cable is going to help the problem is wrong. It's going to make the problem a lot worse."
He said distributors instead need to offer competitive online services like Rogers' on-demand online web portal. Rogers, he said, is spending millions of dollars on the distribution of online and wireless content to compete for cable subscribers.
"Those cable services are all governed by regulations that ensure a preponderance of Canadian content," he said.
In a separate submission, Cogeco wrote that it now contributes to the CMF but said it would oppose a cultural levy on Internet services.
"We have opposed--and will continue to oppose--any attempt to tax Internet access services or other digital telecommunications platforms and services in order to cross-subsidize Canadian digital content creation, distribution or marketing, as this would run directly against the goal of rapid deployment, accessibility and affordability of next generation networks and pervasive e-adoption in Canada," Cogeco wrote.
But Ian Morrison, a spokesman for the Friends', said in an interview that the 10 per cent levy is a way for the government fund much-needed Canadian programming.
"The government posed a question: Where can we find the money to do all this stuff? This is a response to the government's request," he said.
"We're just trying to make the case in the submission that when you enjoy benefits from regulation, in their case territorial monopolies, you also have obligations. The benefits and the obligations should balance in some way. Their 25 per cent [in profits] suggest there is an imbalance at the moment."
The Friends submitted that the 10 per cent levy should apply to cable companies' cable, home phone and Internet revenues, and that the companies should not be permitted to recoup the contribution by raising their retail rates.
Morrison said phone and Internet services should be included in the levy because they are part of the same infrastructure that provides broadcasting services.
"Much of the financing of that infrastructure has been made with subscribers" funds that the CRTC has authorized," he said.
"How does home phone or Internet reach you? Over those same wires - those were financed by cable subscribers' money."
Howard Bernstein, a former television producer who has worked for most of the major English networks in Canada, said in an interview that he supports more funding for the CMF and Canadian content, but said the Friends' proposal should have also considered the satellite distributors.
"How can you charge Rogers and Shaw and not charge Bell [Canada]?" he said. "But any more money for production, I'm all in favour of it."
The Friends also called on the federal government to reform the CBC's governance. The group said the public broadcaster has "walked away" from its mandate to broadcast Canadian content in prime time.
The Friends pointed to a three-week survey conducted in February and March 2010 that found that 25 per cent of prime time scheduling featured non-Canadian programming. The group said 98 per cent of the CBC's prime-time schedule in 2000 was made up of Canadian programming.
"The CBC/SRC's senior leadership is failing to fulfill CBC's mandate in Canadian content," the Friends said, questioning the experience of CBC CEO Hubert Lacroix and "one of his two immediate subordinates."
"FRIENDS recommends that the government reform CBC's governance to increase its competence and accountability," the group said.
Morrison said the CBC's leadership lacks experience in broadcasting, adding that the broadcaster's CEO and board of directors should be selected through an arms-length process and no longer subject to government "patronage appointment."
"The problem is that the most senior people, who set the direction and make the decisions, are being placed there by government patronage," he said.
But Angus McKinnon, a CBC spokesman, told the The Wire Report by email that the CBC's senior executive team "is among the most experienced in the industry, within Canada and abroad, with expertise across the broad spectrum of production, programming, finance, regulation, marketing and other aspects of large-scale multi-platform network broadcasting."
McKinnon added that the CBC is committed to Canadian programming, and that the broadcaster's fall, winter and spring prime time schedules consist almost entirely of Canadian content, and that programming between 8 p.m. and 11 p.m. is Canadian.
The CBC invested $670 million in Canadian television programming last year, McKinnon said, more than all the other conventional broadcasters combined.
"Viewed in this context, Friends' suggestion that we're walking away from Canadian programming is ludicrous," McKinnon wrote.
Bernstein said that the CBC is airing more Canadian content than did in the late 1980s, and that the real issue is funding.
"What about the days when Disney and Golden Girls and all that stuff was on in prime time on CBC? Those are considered the golden years of CBC, and I don't recall anyone complaining about the CBC in those days. They ran lots of American content," Bernstein said.
The Friends also recommended that the CBC's budget be increased from $33 to $40 per capita over a multi-year period.
Source: The Wire Report, 07/14/2010
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