The fee-for-carriage/local TV debate is over. The CBC has solved it. In was a stroke of absolute brilliance, the Mother Corp. has come up with a system that makes local broadcasters happy, reduces cable costs for consumers, and provides a fair system that doesn't threaten cable companies' profits.

Oh, and they solved the digital TV transition problem too.

Haha, just kidding. Their proposal does nothing of the sort.

On Tuesday, the CBC heralded a submission it made to the CRTC that "offers a solution to the issue of the affordability should a compensation regime for the value of local television signals be implemented."

I asked the CBC for a copy of this submission, and they kindly forwarded it to me. I've uploaded it here for you to read (PDF).

Here is the key part of the CBC's proposal (emphasis mine):

The CRTC should require cable and satellite companies to offer consumers a small, all Canadian basic package which would include all local television stations plus a few other licensed services.  The rate for this small basic package would not exceed a maximum rate established by the CRTC.  This would ensure the affordability of television service for all Canadians.

Consumers would be free to purchase – but would not be required to purchase – any additional services they may want that are not included in the small basic package.  The cable and satellite companies would negotiate with broadcasters to determine the compensation payable for the services they distribute – including the local television services in the basic package.  The CRTC would act as arbitrator in any situations where the parties could not agree.

The CBC explains how this would work in its "straightforward" three-step process:

First, the Commission would need to determine the services to be included in the streamlined basic package.

Second, the cable and satellite BDUs would have to negotiate wholesale rates with the programming services included in the new basic package – including the local television stations.  Commission arbitration would be available if the parties could not reach an agreement.

Third, the Commission would approve the proposed rate to be charged for this basic package.

Wait, hold on a second. Wasn't the entire point of "negotiation for value" that consumers would have the choice of what local television stations they would carry on cable? The CBC's proposal does away with that (what a surprise) and goes back to forcing the cable companies to carry their stations. It mentions that they would "negotiate wholesale rates", but what kind of negotiation can you have when the only response the cable and satellite companies can give is "yes"?

So this would go to "arbitration" in front of the CRTC. Which means the CRTC would simply set the rate for carrying local stations.

In other words, this is fee for carriage.

In fact, it goes beyond fee for carriage. Now the CRTC would set the price for basic cable as well, and say what channels can and can't be carried on it:

Cable and satellite BDUs would not be permitted to include any additional services in the basic package beyond those required by the Commission.

Surely they could throw in some freebies (like advertising channels) and nobody would get hurt.

The CBC's argument includes a lot of charts and data showing that cable and satellite companies are rolling in cash while broadcasters face certain doom. These things, of course, we knew already. It also brings up all the "save local TV" talking points, like how taxes aren't taxes:

It has become all too common in the Canadian communications environment for cable and satellite companies to disguise items on their consumers’ bills as government imposed retail taxes when they are not (e.g., “system access fee”, “government regulatory recovery fee”, “LPIF tax”, “CRTC LPIF Fee”).

While fee-for-carriage is still up in the air, the LPIF fee is a tax as much as the GST is. It's a mandatory percentage fee added to the total price of a service that's taken by the government. The fact that the CRTC says the cable companies should pay it instead of consumers is semantics at best.

It's not that I oppose the LPIF, or even fee-for-carriage, but don't get all bent out of shape because we call a tax a tax.

Cheap cable solves digital TV?

The submission also pretends to offer a solution to the digital TV transition. In addition to requiring many people across the country to modify or replace television sets that are up to half a century old, the transition will mean many Canadians in remote regions won't have access to free, over-the-air TV, because the broadcasters are too poor/cheap to replace the analog transmitters with digital ones.

I've already argued that this digital transition is completely unnecessary, and that goes double for remote areas with few television stations. But the CRTC is going ahead with it anyway, and in August 2011 will create a problem where none existed.

So what is the CBC proposing? Well, their argument is that cheap cable can replace free television:

While not everyone would choose to subscribe to such a service, those who did not would not be deciding on the basis of affordability.

If this sounds a bit familiar, it's because Bell thought up the same thing with cheap satellite. Both seem to ignore the fact that cheap is not free. Though it's unclear how much basic cable would cost under CBC's plan (I'm willing to guess it won't be much cheaper than it is now), it will still be infinitely larger than zero.

There's also another problem with this idea: The CRTC setting the rate for basic cable tips the economic scales, and reduces the incentive for entrepreneurs to enter the cable market, especially in remote areas where the economies of scale don't work out as well in their favour.

Perhaps the CRTC would set a different rate for big-market and small-market cable, but then it starts to get more complicated.

What is basic?

The CBC's submission is based on the premise that basic packages contain a bunch of channels that Canadians don't want and are being forced to pay for. It doesn't list them, nor does it list the channels it would want to keep.

To get some context, I looked at the channels that are included in my basic (digital) service through Videotron:

• 10 broadcast stations:
  • CBFT (2, Radio-Canada)
  • CBMT (6, CBC)
  • CJOH (8, CTV Ottawa's retransmitter in Cornwall)
  • CFTM (10, TVA)
  • CFCF (12, CTV Montreal)
  • CIVM (17, Télé-Québec)
  • CFTU (29, Canal Savoir)
  • CFJP (35, V, ex-TQS)
  • CKMI (46 Global)
  • CJNT (62)
• Three parliamentary channels:
  • Assemblée Nationale
  • CPAC (French)
  • CPAC (English)
• Eight must-carry specialty networks
  • CBC News Network
  • RDI
  • The Accessible Channel
  • Aboriginal Peoples' Television Network
  • The Weather Network
  • MétéoMédia
  • Avis de recherche
  • TV5
• Télé Achats (an advertising network that would be silly to demand subscriber fees)
• VOX, Videotron's public access channel
• Cable barkers, including the Canal Info Videotron (Channel 1), the video on demand barker channel and the Viewer's Choice / Canal Indigo barkers
• GameTV
• Local radio stations, Galaxie and other audio-only services

With the exception of GameTV and the advertising channels (which we're not charged for), these are all part of the basic service because the CRTC requires it to carry them.

So which of these channels would the CBC make discretionary? Surely not the parliamentary channels, nor the cable access channel, nor its own all-news channel.

Maybe I'm on the wrong track. For one thing, Videotron forces its customers to choose a package (either a theme package or an a-la-carte channel package) in addition to the basic service. This would stop under the CBC proposal.

On the satellite side, there's Bell TV, whose digital basic package includes, besides broadcast television stations and must-carry networks, the following:

• Treehouse
• W Network
• CTV News Channel
• Vision TV
• Teletoon Retro
• MTV Canada
• The Shopping Channel

These would also be pulled from the basic package under the CRTC proposal.

There is also, of course, analog cable, in which everyone gets the same service. That includes more channels, including:

• Vision TV
• YTV
• MuchMusic
• TSN
• CMT
• VRAK.TV
• MusiquePlus
• RDS
• Showcase
• Bravo
• Discovery Channel
• W Network
• Canal Vie
• MusiMax
• Canal D

But analog cable doesn't provide for discretionary channels, at least not on the level of digital.

Despite my criticisms, there's some merit to some of the CBC's proposal, specifically the creation of a basic package, whether on satellite, digital cable or analog cable. The practice of forcing people using digital services to add packages to basic lineups needs to stop.

But what the CBC is proposing is fee for carriage, and that's a tax. And it would do nothing to stop the cable and satellite oligopolies from further solidifying their hold on the market.