“GREAT EXPECTATIONS” CONFERENCE

THE CANADIAN BAR ASSOCIATION

VANCOUVER, BRITISH COLUMBIA. MARCH 28, 1981,

All we can talk about regarding Pay TV in Canada is the future. Except for a couple of experiments with hotel pay television and one controversial example in Saskatchewan, Pay TV does not yet exist in this country.

This is not to indicate that there is no interest. A public announcement by the Canadian Radio-Television and Telecommunications Commission read as follows:

“The Commission has noted growing interest in Canada about the development of various types of subscription or pay television including utilization of cable television as the means distribution.” The announcement goes on to state that, “The Commission has under taken and intends to continue discussions with many parties including the Canadian Cable Television Association, the Canadian Association of Broadcasters and other interested groups in order to determine the best method for thorough examinations of pay television services as an integral part of the Canadian broadcasting system.”

This announcement is dated October 3rd, 1972.

One can never say Canadians jump into new ventures without thoroughly discussing all the implications! What is even more alarming is that, as has happened with many other Canadian initiatives, we were pioneers in the Pay TV business. In the early sixties a Pay TV operation was started in the Toronto area using a system which required one to put a coin in a box to receive the Pay TV material – a concept of Pay TV that still persists to this day.

In the intervening decade, however, the development of Pay TV took place in the United States with-the Canadians watching from the sidelines.

This is not to say that Canadians have not participated in Pay TV. Canadians have been very active in developing cable franchises in the United States, all of which have a high Pay TV content. I believe that Canadians will play a major role in the development of Pay TV in other countries. Perhaps, however, the time is approaching when Canadian entrepreneurs can bring some of this Pay TV experience back to Canada. Ministers of Communications from Jean Sauve through Davie MacDonald to Francis Fox have all made statements that Pay TV is “inevitable,” “will happen within a year”, or similar declarations of intent. As I have only been in the cable television industry for a couple of years, I am optimistic that this time it will happen. I hope, however, that the regulators and politicians will forgive some of my colleagues who have been through four or five previous Hearings on Pay TV if they remain just a bit skeptical.

However, before looking at the regulatory scene there are some basic considerations about Pay TV that should be examined.

THERE IS NO FREE LUNCH

This is only to remind the audience of the obvious. All television is pay television.

First, many people feel that regular network broadcasting is some how free. Of course this is a myth. The viewer or the non-viewer pays for everything that is produced each time they buy a can of peas or a new car – it is all paid for by advertising which ultimately finds its way into the price the consumer pays.

A second form of supposedly free television is that provided by the CBC: This is a second myth as this is of course paid for by tax dollars.

Both these types of supposedly free TV have one thing in common -they are non-discretionary. The viewer pays for the programming whether he or she likes it and whether he or she even watches it. Further, the viewer watches what the network concludes he or she wants to see. The only alternative is to turn the set off. Even then the consumer pays.

If one needs a demonstration that discretionary viewing is a success even in Canada, one only needs to look at the PBS network which is available in many parts of Canada from the United States. As many of you realize, nearly half the supporters of the PBS station in Seattle are Canadian. By donating the PBS station they are involving themselves in a voluntary form of pay television.

Let me reiterate that the main difference between what is commonly called Pay TV and regular television is a user pay concept. The customer can spend his dollars for what he wants to see. Had the mechanism been available in the early days of television, I expect this is the way it would always have been, i.e. television would have been operated as though people were going to a movie or buying a book.

Unfortunately, at that time there was no way to conveniently provide such discretionary viewing and therefore TV went the way of radio with advertising picking up the costs. Unfortunately, as advertising must appeal to as broad an audience as possible, the type of entertainment provided by the regular networks has tended to be a LOWEST COMMON DENOMINATOR approach. It is this type of programming which now is coming under so much criticism as being mindless, juvenile or simply boring. This is not to suppose, however, that the advent of Pay TV as described above would mean the end of network broadcasting. In fact, I believe that there will always be a major role for such general purpose entertainment paid for by general purpose advertising. There is every indication that Pay TV does not diminish the viewing hours of network broadcasting but is in addition to the viewing hours.

Why then all the fuss about Pay TV?

THE REGULATORY SCENE IN CANADA

The CRTC, as our regulatory body, has been placed in a very diffi cult position. Its mandate is to enforce the Broadcasting Act. This has largely been interpreted as ensuring that nothing inter feres with the over-the-air broadcaster. Unfortunately, this has led to an anomaly which has severely constrained the development of cable communications in Canada. Taken to its logical extreme, any­thing that utilizes a television set other than for viewing a broadcaster’s product obviously could fragment the audience. It does not matter whether this is an educational program, an alpha numeric news broadcast, an information retrieval program or whatever.

I suppose one could make the observation that even a new bowling alley in town might adversely affect the broadcaster, but so far no-one has seen fit to close down all such diversions.

One only has to look at the bottom line of most broadcasters to realize that they are really not in need of financial protection. What they are in need of is increasing innovation to ensure that their viewership will continue. Just because they were there first does not mean that they merit eternal protection.

This approach seems once again to be a Canadian syndrome. If someone starts a textile mill in Canada then somehow the Canadian Government ends up protecting that industry regardless of its ability to compete or its desirability for the country as a whole. It is a small wonder that innovation in this country is so often stifled.

The protection of over-the-air broadcasting is a concept that goes back to the early twenties. With limited bandwidths available for broadcasting, the use of the spectrum, of course, had to be carefully regulated. Cable, however, has completely removed this artificial restraint. A standard coaxial cable can carry perhaps fifty video programs along with considerable FM audio programming. If this is not enough spectrum space one can add a second, third or fourth cable providing just about all the information carrying capacity that one could conceivably want.

This is not to imply that over-the-air broadcasting has totally lost its utility but it certainly is not the fragile commodity of pre-cable and pre-satellite days.

I sympathize with the CRTC’s plight. They are doing their best to enter the eighties with legislation designed for the twenties. This is not to imply that some aspects of the Broadcasting Act are not still valid. I believe anyone would sympathize with the desire to ensure the broadcast industry in its broad sense does play a role in national unity, development of Canadian culture, promotion of our two national languages, and similar aims. However, placing artificial barriers in the way of the technically possible is simply not a winning strategy.

As happened when Canada held off introducing television and then held off introducing colour television, we only force our citizens to go elsewhere for new developments. This is happening again as Pay TV signals are available in Canada via satellite in ever increasing quantities.

THE ELECTRONIC RETAILER

As I have been asked to talk about the future of pay television, let me describe briefly what I see for our industry on the assumption that the regulatory authorities will allow this to happen. I view cable as being a new retailing operation providing a broad range of:

• entertainment

• information education

• services

In the entertainment field I would hope that we could provide not just a single Pay TV movie channel but rather a selection of channels offering cultural programming, sporting events, multicultural viewing, religious programming or whatever programming the audiences may want to see.

In the information area, we should be providing all kinds of constantly changing information from stock market reports through weather information, transportation channels or various kinds of information retrieval.

In the education field we should go far beyond passive monitoring of courses and enter the field of interactive education.

In the services areas we should go beyond just providing in-the-home security services and get into energy use monitoring, meter reading any variety of related services.

The concept that ties all these services together is that of tiering. The client should start with the basic tier containing the standard network broadcasts. Hopefully this will be provided at a minimal cost. It has been suggested in some quarters that perhaps this should be Canadian programming only plus community programming and a few alpha-numeric services, e.g. weather. A second tier might be all American network programming. Additional tiers could be any combina tion of specialized channels paid for as the user wishes.

I would hope that in the years to come a concept I have called Telemag might come into being. Rather than broadcasting in the normal sense of the word, the term narrowcasting is frequently used. I would hope that electronic publishing in the form of electronic magazines would become popular. Specialized channels could be devoted to yachting, gardening, bridge or whatever people’s interests may be. Such channels would be supported partly by subscription and partly by relevant advertising just as magazines are at the present time. The advertiser would be delighted to know that all those viewing a particular channel were interested in this product. The user, on the other hand, would like the advertising as it would be relevant to his interests. The implication is that Pay TV need not necessarily be paid for only by subscription.

OPEN SKIES AND OPEN COMPETITION

I am impressed by the approach taken in the United States which encourages the above entrepreneurial activities. Our American friends have recognized that cable television is a very competitive business. We compete with the over-the-air broadcasts. Direct broadcast by satellite is just around the corner. There are video discs, video tapes, the movies and many other forms of entertainment that will keep the cable industry on its toes. The tight regulatory environment we have been operating in will therefore become increasing ly redundant. It has even been proposed that in return for a license to wire an area, the cable company might only be required to provide all Canadian signals such as those in the first tier described above, and that anything else would be unregulated. Such an approach could be very workable and provide the best of both worlds. It would provide the widest availability of Canadian broadcasters’ programming at minimum cost while charging a premium in the form of a converter or perhaps payment for a tiered service to get non-Canadian or specialized entertainment programming or services.

The cable companies expect to compete. Many of the information and monitoring services could be handled by the telephone companies. Cable comes into its own when there is a requirement to carry video services. But even here we are not remote from competition and I believe this is a very good thing.

For example, direct broadcast by satellite will be a boon to many remotely situated or sparsely populated parts of our country. I really doubt that many people in urban areas are going to go back to putting an ugly dish on their roof or in their rose garden, But I do believe that every Canadian should have the right to do so if he or she so chooses.

I am sure there will be many in this audience who will comment on whether satellite transmission is or is not a form of broadcasting or whether it is really private point-to-point transmission. What ever the lawyers may decide, you will never convince the public that a TV station which broadcasts over a range of perhaps a 100 miles is broadcasting, while a satellite which spreads its signals over 5,000 miles is not. Pat McGeer, the B.C. Minister of Communications, worded it as well as anyone when he said, “If you do not want me to receive your signals then keep them out of my backyard.”

If satellite users want security, they will scramble their trans missions.

I believe that cable will thrive in Canada if given the regulatory go ahead. The competition will keep us honest. The broadcasters will still have their role. Canadian culture and national identity can receive a real boost if as is proposed Canadian cable companies agree to put some of their expenditures for product into Canadian productions.

In a word, there should be a situation in which everyone wins – with the public being the biggest winner of all.

GREAT EXPECTATIONS

This seminar is called GREAT EXPECTATIONS. Will we really see all these things in Canada? In the book of the same name, Dickens noted, “Probably every new and eagerly expected garment ever put on since cloth came in, fell a trifle short of the wearer’s expectations.”

I believe that for the next few years we will still have to fight every inch of the way to get an increasingly free environment in which many of these new services can flourish. That just seems to be the Canadian way of doing things.

The logic of allowing new technology to take its rightful place in the broadcasting industry seems inescapable as Minister after Minister of Communications has acknowledged. The lawyers have a marvelous phrase for a situation like that, “Res Ipsa Loquitur – the thing speaks for itself.”