DAILY NEWS Jun 14, 2010 2:08 PM - 2 comments

'Crisis' Looms in Digital TV Transition: CRTC Boss

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2010-06-14

The Canadian TV industry faces a crisis as long-overdue preparations for the switch to digital TV haven not yet begun to ramp up as needed.

"My great concern is that the industry will not be ready," Konrad von Finckenstein, the head of the Canadian Radio-television and Telecommunications Commission, told producers, broadcasters and content creators at the Banff World Television Festival.

He was quoting himself, and remarks he made more than two years ago.

Even so, von Finckenstein said, there are still requests for delays today, and so a crisis in at hand.

The federal government wants over the air TV transmission to go digital in August 2011, but a trial run begin as early as April of that year to work out any possible problems, von Finckenstein proposed.

He referenced the painful and also oft delayed transition south of the border in June 2009, when some $1.5 billion USD was spent on subsidies to help pay for converter boxes so consumers could receive the new signals.

Finckenstein urged cable and satellite providers here to mount a widespread consumer education campaign in Canada. He also pressed the federal government to come up with a fund to help consumers pay for the added costs that may arise.

He warned of a widespread backlash if people who currently pay nothing for TV are suddenly forced to invest in cable or satellite signals.

Nearly a million Canadian households currently relie on analog over the air transmission, and their trusted old antenna, it's been estimated. They do not have TVs equipped to receive new digital signals. About another 44,000 won't have access to TV content at all unless they invest in new technology.

As impactful as the transition may be, then, von Finckenstein is worried that broadcasters have not taken the issue as seriously as the CRTC expects them to.

In prepared remarks for the Banff speech, von Finckenstein wrote:

 

"Canadians want to see high-definition programming on their television sets. If our broadcasting system doesn't adapt to their demands, viewers will be more tempted than ever to watch U.S. programming in HD over-the-air, on cable or on satellite.

This is particularly relevant to the independent producers among you since you are in the business of making compelling programs for Canadians. That means ensuring that your product is shown in the best format possible. You have already purchased production equipment for HD programming. You will no doubt make similar investments in the near future to produce programs in 3D.

You, as independent producers, clearly have an interest in seeing the digital transition carried out on time, and can help build public interest and awareness.

The Commission set the analog cut-off date of August 31, 2011, more than three years ago, giving the industry more than enough time to prepare. This is not a date that we arbitrarily imposed. It was chosen after extensive consultations with the industry and at the request of the government.

In 2008, I spoke at the Broadcasting Invitational Summit-an annual meeting of senior industry stakeholders. I made our position clear by telling them:

"My great concern is that the industry will not be ready. There will be requests for delays, and we will have a crisis on our hands. This must not be allowed to happen."

This date is fixed in stone as far as the CRTC is concerned. It will not be altered. And both Industry Minister Tony Clement and Heritage Minister James Moore have publicly stated that the government has no intention of extending the deadline.

This morning, I'd like to review with you the steps the Commission has taken to facilitate an orderly transition, as well as the pressing issues that are still unresolved.

Most efficient use of spectrum

But first of all: Why did the Commission set a deadline? Why is the switchover to digital television so important?

There are three main reasons, but it all comes down to making the most efficient use of a scarce public resource.

First, the technology available to broadcasters has evolved. Private and public broadcasters have been using the TV spectrum since the 1950s to send their signals to Canadian homes. For much of that time, analog broadcasting was the most effective way to provide televised information and culture to the vast majority of the population.

That is no longer the case.

Today, we have a digital technology that not only improves the picture and sound quality of television programming, but also allows for the broadcast of multiple services on a single channel. This could create interesting opportunities for broadcasters, such as for mobile television services. I would expect that mobile broadcasting is something that would be of great interest to independent producers.

Secondly, spectrum use must be closely coordinated with the United States to ensure that it is harmonized. When they wake up on September 1, 2011, the Americans will expect Canadian broadcasters to have vacated channels 52 to 69. It has been agreed that some of these channels will be repurposed on both sides of the border for public safety services.

Thirdly, the government has earmarked a portion of the spectrum that will be freed up for advanced wireless services. The demand for mobile broadband services is set to explode over the next decade. We will need to move quickly to auction the spectrum if we want to have the capacity meet this growth. Mobile broadband will be a key element of our economy going forward, and I expect that it will feature prominently in the government's national digital strategy.

These three factors help explain why a deadline was necessary and why the transition is so important.

Mandatory and non-mandatory markets

In light of the efforts to coordinate spectrum use with the U.S., the Commission determined that all stations operating on channels 52 to 69 in all markets must convert to digital. We also established a list of 31 markets where the transition will be mandatory, including:

  • provincial and territorial capital cities
  • markets with a population over 300,000, and
  • other markets where there is more than one local television station.

Within these mandatory markets, 174 analog transmitters will have to be converted to digital. We're encouraged by the fact that a number of them are already up and running. To ensure that all of them are converted, the operation of full-power analog transmitters will not be authorized after August 31, 2011.
 
The real challenge, of course, will be in the smaller, non-mandatory markets. In an ideal scenario, every station in these markets will make the transition so that their viewers can also benefit from free access to over-the-air digital television. But we realize that it may be difficult for some broadcasters to absorb the costs associated with upgrading their transmission equipment. That's why we've given them some flexibility so that they may retain their status as conventional broadcasters.

Stations that are on channels 2 to 51 in the non-mandatory markets will be able to continue broadcasting in analog.

However, as I explained a moment ago, channels 52 to 69 will have to be freed up. This involves an additional 17 transmitters in non-mandatory markets. We hope broadcasters occupying those channels will go digital. But they can delay the conversion of their transmitters as long as they move their analog signal to one of the lower channels.

In addition, the rights of analog stations in non-mandatory markets (i.e. mandatory carriage and simultaneous substitution) will be extended to their digital signals that are provided to broadcasting distributors (i.e. BDUs) via direct feed.

Some broadcasters like Télé Inter-Rives and RNC Media have committed to building digital transmitters in mandatory and non-mandatory markets and have already submitted their applications. These smaller broadcasters are to be commended for their initiative.

The longer other broadcasters wait to submit their plans, the more they will be scrambling to find the necessary equipment and qualified engineers at the last minute.
 
The Commission has put in place measures to process applications as expeditiously as possible. We are ready and there will be no delays in issuing approvals.

Over-the-air viewers

On the other side of the coin are the consumers. About 7% of Canadians rely solely on an antenna for their television services. Although the majority of viewers subscribe to cable or satellite television services, some have TV sets in their kitchens and bedrooms that receive over-the-air signals.

Based on the industry's estimates, roughly 900,000 households in mandatory markets may have to take action or else they will not be able to receive the new over-the-air digital signal. A consumer with an older TV set may have to buy a converter box, which retails for about $75, to receive digital signals over-the-air. Should the government want to help with the purchase of converter boxes, a subsidy program of up to $67.5 million would be needed.

In addition, as many as 44,000 households in non-mandatory markets could potentially lose access to free local television after the transition. In these rural and remote areas, satellite is often the only alternative to an over-the-air signal. Satellite providers have indicated that a receiver and dish would cost each household $300 plus installation. Should the government want to help with the purchase of this equipment, a subsidy program of up to $13.2 million would be needed.

However, this would only convert those 44,000 households into satellite customers. They would have to pay the going rate for the television services they used to receive free of charge. This is clearly untenable.

A possible solution for viewers who lose access is what I call the free local package option. Cable and satellite companies could provide these consumers with a package of local and regional television stations at no charge. FreeHD Canada and MTS Allstream are on record as being willing to offer such packages. 

This would require an amendment to our regulations, exempting distributors from having to distribute the full basic television package, which we will gladly make.

Consumer education

Unfortunately, most consumers are in the dark regarding the transition. There have been no attempts at informing them that this is coming next year. The good news is that the majority of Canadians are cable or satellite subscribers and won't notice any difference in their television services. But a small percentage of the population will find themselves in a state of confusion if nothing is done to educate them.

The digital transition must be undertaken in a coordinated fashion in order to minimize the impact on viewers. While we are doing what we can, the government can also play an important role.

Recommendations to government

This past March, we issued a report in which we recommended that the government:

  • set out a clear policy and coordinate the implementation plan for Canada's digital transition
  • fund and lead a coordinated national consumer education and awareness program, and
  • consider funding a consumer subsidy program for the purchase of digital converter boxes and satellite receiving equipment.

As the national public broadcaster, the CBC has a special mandate to reflect Canada to national and regional audiences. According to the Broadcasting Act, its services should be "made available throughout Canada by the most appropriate and efficient means and as resources become available for the purpose."

In the 1970s, the government provided the CBC with capital funding to increase the coverage of its services. Its network of analog over-the-air television transmitters now stretches across the country and reaches the majority of the population. Any policy set by the government should include support for the CBC's digital transition plans.

Follow-up proceeding

After submitting our report, we launched a follow-up proceeding to provide the government with a more accurate picture of how the transition will affect Canadians.

If the U.S. experience taught us anything, it's that the Federal Communications Commission drastically underestimated how many Americans would need to buy digital converter boxes. It ended up having to ask Congress for more funds and distributing 14 million more coupons than it had anticipated.

So in our notice, we asked stakeholders to provide comments on:

  • the percentage of households in both mandatory and non-mandatory markets that currently rely exclusively on over-the-air television, and
  • the size, type and manner of a subsidy program to help pay for digital receiving equipment should the government decide to go this route.

We also asked for comments on three other outstanding issues.

Free local package

First, as I mentioned earlier, the free local package option could ensure that Canadians continue to have access to the local and regional television stations that they currently receive over-the-air. We are prepared to grant an exception to our regulations, which require that distributors provide a full basic service. However, distributors should not be permitted to distribute any other television services with the free local package or force consumers to purchase any other services.

We have asked stakeholders their views on these terms and conditions, as well as which cable and satellite companies plan to offer such a package.

Public awareness campaigns

Secondly, it is in the best interests of broadcasters and distributors to make Canadians aware of the switchover, or else they risk losing viewers and subscribers. To avoid this, they will need to design a vigorous awareness campaign to provide information through public service announcements and other initiatives. We have asked the public and the industry what specific measures broadcasters and distributors could undertake to create greater awareness.

Trial markets

And lastly, should we have a trial market undertake the transition ahead of the deadline? In our view, a trial market would allow all stakeholders to assess whether the measures put in place to educate Canadians were effective, and give us time to implement any necessary changes before the rest of the country switches over. It has been suggested that Winnipeg and Quebec City could serve as good trial markets given their size and distance from other mandatory markets.

We are planning to make public our determinations on all of these points very soon.

Conclusion

The whole world is going digital. Our neighbour to the south, who also happens to be the largest producer of entertainment programming, is already there. I want to make sure you have the broadcasting infrastructure that you need to reach your audiences. The longer we wait, the more tempting foreign HD content will become. Canada has no choice but to make the transition so that everyone can benefit from the opportunities it will bring.

The industry wants its regulator to provide certainty, and that's exactly what we have done in this case. The deadline in mandatory markets and for channels 52 to 69 is firm. We will not change it.

Time is growing very short. It will be a real challenge to get the job done in the next 14 months, and it will require a strong commitment from everyone involved."

 


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Reader Comments

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nissan h

yeah, here's to a la carte cable choices and true competition among providers, regardless of area or region. for sure we need more choice and flexibility in the market's offering of cable TV

but as far as HD goes, I have to disagree...it does matter, and it is a big improvement

over time, it will matter to a lot of us, most of us, maybe all of us. Penetration of active HD homes will soon hit 64 per cent in Canada, according to some Global HD forecasts

and that's without the mandated transition to digital TV, or a tally of YouTube videos!!!

Posted June 16, 2010 03:00 PM


Peter Stelmacovich

I do not believe that most Canadians want high definition. I think most Canadians really don't care. I think most Canadians find cable and satellite fees to be too expensive and would rather pay less for current technology than pay more for hi-def. Most Canadians would like to see more competition in the TV industry - true competition that would allow one to choose which cable company to use, like we currently can choose which cellular company to use. I think that most Canadians, along with their 'free' local package would like to choose extra channels on an 'a la carte' basis, rather than be forced to pay for channels that they never watch.

Posted June 15, 2010 04:32 PM


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