A race to the home

Cable, satellite and telephone companies battle for control of the small screen.

Maclean’s, February 27, 1995 

Telford Fenton could not be happier about what he gets on his TV set. “It’s terrific,” says the 62-year-old Toronto painter. “Turner Classic Movies is great — it’s exactly like being at the movies in 1948. You get all those old movies, and not colorized, either — black and white. The Bloomberg Direct News service is great, too — there’s so much information, you can’t take it all in.” Neither Turner Classic Movies nor Bloomberg Direct’s financial news service comes from Fenton’s cable hookup. His is one of an estimated 5,000 Canadian households using an 18-inch dish to receive the four-month-old U.S. direct-to-home satellite service, DirecTV.

‍     But Fenton’s service may be in jeopardy: Canadian enterprises the Family Channel pay-TV network and Canadian Satellite Communications have been threatening a joint lawsuit against the Los Angeles-based DirecTV Both companies claim that DirecTV is violating their exclusive rights to broadcast certain programs in Canada. Family Channel’s vice president of business affairs, John Riley, says DirecTV has been warned about alleged copyright violations, but DirecTV’s response has not provided "sufficient comfort” that the company is complying with demands to cut off Canadian subscribers picking up the satellite’s signal. “We’re weighing our options for the next move,” he says. Late last week, the parties agreed for the first time to a face-to-face meeting.

‍     That confrontation is part of a larger war no control the choices offered Canadian TV watchers. Another combatant is Power Broadcasting Inc., a wholly owned subsidiary of Montreal’s Power Corp., which has formed a joint venture with DirecTV — called Power DirecTV — to broadcast selected Canadian Programming into the United States.

‍     Eventually, Power DirecTV aims to deliver direct-to-home satellite service in Canada. Meanwhile, another Canadian satellite service, Expressvu Inc., is set to start operations in September, offering a package of cable and pay-per-view services — and promising to deliver it all for about the same amount as current monthly cable fees.

‍     Now, another group of players is clamoring to join the fray. The nation’s telephone companies want access to television sets — an area that so far has been the domain of cable companies. That monopoly will be challenged next month when the telephone companies will ask the Canadian Radio-television and Telecommunications Commission (CRTC) to give them permission to deliver a mix of information and entertainment programming — everything from conventional TV fare and movies to interactive video games, electronic shopping and information services — to Canadian viewers. And they intend to provide that service using fiber-optic and conventional phone lines linked to home computers and televisions.

‍     The cable companies, meanwhile, are gearing up m defend their turf. In written submissions to the CRTC, they are asking that their programming monopoly be extended for seven years — the length of time they estimate it will take them to develop the necessary equipment to compete with the range of services the phone companies propose to offer. “Our position is simple,” says Richard Stursberg, president of the Ottawa-based Canadian Cable Television Association. “Competition is good, as long as everyone plays by the same rules.” According to Stursberg, the telephone companies’ entry into the television business should be postponed until the cable companies are authorized to offer full telephone service.

‍     The cable operators want to offer consumers “pick-and-pay” arrangements, whereby viewers will eventually be able to choose exactly which combination of channels they want, paying only for those they receive. But Stursberg says that developing the required hardware — a mix of fiber optics, regular coaxial cable and a rudimentary set-top computer to process the two-way flow of information — is slowing that progress. “The set-top box necessary for that to work is a stumbling block,” Stursberg says. “Right now, the individual units are too expensive.” But Rogers Communications Inc., for one, is working with software developer Microsoft Corp. of Redmond, Wash., on prototypes.

‍     The telephone companies, which maintain that they are winning the technological race, want a go-ahead from the CRTC to deliver a range of entertainment and information services to consumers. Stentor, a consortium of nine regional phone companies, is testing systems in selected areas across Canada. They include a videoconferencing project in B.C. hospitals, a New Brunswick experiment linking TVs and telephones for enhanced telephone service and a video-on-demand trial in Regina. Video-on-demand allows viewers to select and watch shows at their convenience, not just when a broadcaster wants to deliver them. It turns a consumer’s television and set-top into a “virtual VCR” Consumers can call up programming from their couches using a remote control and can then stop, rewind or fast-forward what they are watching. If Stentor gets what it wants from the CRTC’s so-called convergence proceedings in March, “consumers in urban areas will begin to see some of these services in as little as two years,” says Brian Milton, who is the Stentor official in charge of liaison with government and regulatory bodies.

‍     Meanwhile, controversy rages around DirecTV’s small satellite receiver — “right outside the window,” says Fenton, “so I can knock the ice off in the winter.” He paid $1,700 for the dish and an accompanying set-top decoder box, which reconstitutes a digital signal beamed from a single high-power satellite. Digital signals offer better picture and sound quality than existing cable — and DirecTV offers virtually every network or programming service currently available in the United States, as well as pay-per-view movies and events. Fenton’s typical 89 channel package costs $49 per month, automatically billed to a credit card. But there is a catch: DirecTV cannot have Canadian subscribers. While there is no law prohibiting Canadians from owning the dish or receiving the signals, the U.S. company is not authorized by the CRTC to operate in Canada. Still, some Canadians have gotten around that regulation by establishing a U.S. address — either through a post office box or obliging friends or relatives (Fenton uses the Florida address of a friend).

‍     The satellite signal itself spills at least 150 kilometers over the border. But the growing market in Canada for DirecTV upsets many Canadian producers, distributors and broadcasters. They claim that when DirecTV airs many of its programs, it is violating copyright arrangements between producers and Canadian broadcasters, who pay money for exclusive rights to air those same programs in Canada. In a speech to the Canadian Club in Toronto last month, Michael MacMillan, chairman of the Toronto production company Atlantis Communications, cited a TV-movie deal his company made with the CBC and the U.S. Disney Channel for its Lost in the Barrens. Each broadcaster paid Atlantis for broadcasting rights on a one-time basis. But, MacMillan points out, when Disney programs are broadcast from DirecTV’s satellite, “neither Atlantis nor CBC receives a dime from Disney for what is basically a second sale of the Canadian rights and a flagrant violation of copyright laws. In simple language, that’s theft.”

‍     But DirecTV says that it is trying to comply with Canadian law by switching off Canadians who are receiving its signal illicitly. The situation usually comes to DirecTV’s attention when a Canadian subscriber orders a pay-per-view show through the set-top unit The box automatically dials the company’s Los Angeles office, revealing that the caller has a Canadian telephone area code. Tom Bracken, DirecTV’s communications vice-president, says that in such cases DirecTV sends a message via the set-top unit advising the customer to call the company’s service center in Los Angeles within 24 hours or they will be cut off. Bracken would not say how many Canadians have been disconnected. To avoid detection, some Canadian customers simply forgo the pay-per-view service or order their pay-per-view choices personally through customer service 800 lines. Others buy a device that simulates a U.S. area code after connecting to the call-identification systems. Many of the DirecTV units in the Toronto area come from Davin Satellite Systems in Concord, Ont., 40 km northwest of the city. Owner David Gibbins started offering the dish and set-top hardware package in December.

‍     Gibbins says he sells 20 units a month and gets calls from curious potential customers every day. “People are mad at the cable companies and the CRTC,” he adds, “for telling them what they can and cannot watch.”

‍     By September, viewers will have yet another option when Expressvu, a Canadian consortium that includes Western International Communications, Tee-Comm Electronics and BCE Inc., promises to offer its direct-to-home service more cheaply than DirecTV or cable. In addition to 65 channels, all identical to options currently available on different cable systems across the country, the Expressvu menu will include 22 pay-per-view services — mainly movies at the outset, and eventually expanded coverage of hockey and National Football League games.

‍     Meanwhile, Power DirecTV’s foray into the domestic market has been thwarted by a CRTC ruling in August, 1994, stipulating that Canadian direct-to-home services must get their signals from Canadian satellites and can broadcast only programming already approved by the CRTC. Power DirecTV failed to win CRTC go-ahead by proposing to draw part of its programming from U.S. satellites.

‍     Now, partly as a result of vigorous lobbying by Power DirecTV, the federal government has appointed a three-man committee to review its policies on satellite TV and other broadcasting issues. The committee — a joint undertaking by the federal Heritage and Industry ministries — is expected to make its recommendations this summer.

‍     As the communications contenders slug it out, Telford Fenton will continue channel surfing through his many options. “The government is a bunch of fools,” he says, dismissing attempts to regulate what people watch. And as satellite dishes and fiber-optic cable open up the possibilities on the small screen, “What’s on TV tonight?” is an increasingly loaded question.

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