CCR Update

April 14, 2004 CHUM Ltd. signs deal to purchase Craig MediaToronto-based CHUM Ltd. announced April 12 that it has signed a definitive $265-million agreement to purchase all of the shares of Craig Media Inc., which owns the A-Channel conventional TV stations in Edmonton, Calgary and Winnipeg, the new over-the-air station Toronto One, and a number of digital specialty channels. Because its flagship Citytv station is located in Toronto, and its New VR station based in nearby Barrie is beamed into the city, CHUM says it will sell Craig’s Toronto One station. The CRTC must approve the deal. CHUM says it will file the necessary paperwork with the commission by mid-May. CHUM plans to finance the acquisition through bank debt.CRTC drops ‘likelihood of carriage’ requirement for Category 2sThe CRTC has decided that it will no longer require applicants for Category 2 digital specialty TV channel licences to provide evidence “of a reasonable likelihood that the service would receive carriage” (Broadcasting Public Notice 2004-24). The CRTC introduced that requirement after receiving many more applications than it had expected (CCR, Oct. 10/02). After complaints about the additional requirement, the CRTC initiated a process to come up with a way that it could process all Category 2 licences in a timely manner. In its decision released April 8, the CRTC has decided to require applicants to identify in their Category 2 licence applications all existing Category 1 and analog pay and specialty services with which their proposed services would be partially competitive. Applicants must spell out why their proposed services would not be directly competitive with such existing channels.Shaw Communications posts $17.1-million profitShaw Communications Inc. announced April 2 that it had posted a $17.1-million profit on a consolidated basis for its fiscal 2004 second quarter ended Feb. 29. Consolidated revenue, including from the U.S. cable systems Shaw sold last June, increased to $530.7 million in the quarter from $521.4 million in the same quarter a year earlier. “Management’s focus on growing our customer base, improving our service levels and improving our product offering and bundling strategies led to strong top line revenue results,” said Shaw CEO Jim Shaw in announcing the financial results. “This revenue growth, combined with cost containment measures, resulted in another quarter of solid double-digit operating income growth.”During the quarter, the company acquired 35,305 new Internet customers and 15,778 new digital TV customers. Its basic cable TV base remained stable.The increase in revenue is partly due to rate increases of $1 and $2 per month on most of its TV packages in most service areas. The increases are expected to generate an additional $1.5 million a month when fully implemented by the end of May.The $17.1 million profit figure includes financial results from Shaw’s direct-to-home satellite TV distributor Star Choice Television Network Inc., which increased its customer base by 6,483 in the second quarter. The satellite division, which includes the satellite TV unit, posted negative free cash flow of $1.1 million in the second quarter of this year compared to negative free cash flow of $33.7 million in the same quarter a year earlier.During an investors’ conference call April 2, Shaw said the cable division would test a Voice over Internet Protocol (VoIP) telephony service this year. He told analysts on the conference call that the telephony initiative would be the responsibility of executives currently running the cable TV division. “Our team is fully engaged in developing, planning and implementing our voice product. We remain very excited about the prospects of offering our customers the triple play bundle of voice, video and data,” noted Shaw.Cable, DTH satellite TV revenues up $554 million: CRTC reportRevenues were up for both Canada’s cablecos and direct-to-home (DTH) satellite TV distributors, but only the cable players registered a profit, according to statistics released last week by the CRTC. Cable distribution industry profits grew 15.8% to $695.5 million before interest and taxes on revenues of $4.16 billion in 2003 from a year earlier, according to the CRTC. Cable revenues were up 7.9% from 2002, partly due to increases in customer prices. The income came from 6.87 million basic cable TV subscribers and 5.42 million non-basic subscribers, according to the CRTC document. The number of basic cable subscribers in 2003 was down 2.1% from the 7.01 million recorded in 2002.The country’s satellite TV distributors also saw their revenues grow 27.2% to $1.2 billion in 2003 from $945.8 million a year earlier. Those figures include the struggling wireless cable industry, or multipoint distribution systems (MDS), which registered a revenue drop of 13.7% in 2003 and continues to lose money. The number of basic tier subscribers to DTH satellite TV distributors and wireless cable jumped 9.2% to 2.2 million subscribers. Both Bell ExpressVu LP and Star Choice Television Network Inc. indicated at licence renewal hearings late last year that they expected to break even by the end of this year.Vidéotron ltée offers more channels in digital TV packages in certain regions of QuebecVidéotron ltée announced April 6 that new channels and services will be phased into its illico digital TV service between April 7 and April 30. The new additions include 12 new digital specialty channels in Quebec City, 22 new channels in Ville Saguenay, Saint-Félicien, Rivière-du-Loup, Saint-Pascal and La Pocatière and eight new channels in Montreal and Gatineau. CHUM Ltd.’s Citytv will be added throughout Quebec, and two religious channels, EWTN and Salt + Light, will be added in all Vidéotron systems. The cableco also announced the addition of some more high-definition channels.Rogers files preliminary shelf prospectusRogers Communications Inc. announced April 7 that it was filing a preliminary short form shelf prospectus with the securities regulatory authorities in all provinces. After review of the prospectus, Rogers plans to file a final short form shelf prospectus in all provinces and with the United States Securities and Exchange Commission. The cableco could raise US$750 million through the sale of Class B non-voting shares, preferred shares, debt securities, warrants, share purchase contracts, units or any combination of these securities. Rogers states that the nature, size and timing of any financing under the prospectus would depend upon the company’s assessment of its funding requirements and general market conditions.Commission to consider various TV, radio licence renewals at June 7 public hearingThe CRTC will hear applications to renew CHUM Ltd.’s CKVU-TV Vancouver, CIVI-TV Victoria and VisionTV licences, as well as a number of licences for new Category 2 digital specialty TV licences at a June 7 public hearing in Gatineau QC. It will also consider numerous applications for radio licence renewals, new radio licences and other radio applications in the Atlantic region, Ontario, British Columbia, Yukon Territory, Alberta and Saskatchewan. Comments are due by May 13 (Broadcasting Notice of Public Hearing 2004-3).Shaw ordered to comply with CRTC decision to open up networks to third-party ISPsThe CRTC last week ordered Shaw Communications Inc. to immediately comply with its decision ordering the cableco to open up its networks to a third-party Internet service provider (Telecom Decision 2004-24). Having gotten the CRTC to rule that it had the right to use Shaw’s network to offer its own branded high-speed Internet service in 2003, Cybersurf Corp. returned to the commission to ask it to ensure Shaw complies with the decision (CCR, Dec. 13/02). The CRTC directed “Shaw to make its higher-speed retail IS available for resale to Cybersurf pursuant to the rates and terms and conditions specified by the commission in Decision 2003-87, so that Cybersurf is in a position to provide higher-speed retail IS to its customers” within 45 days of Shaw receiving in writing from Cybersurf the area in which it wishes to launch.INTERNATIONAL NEWSConsumers Union, Public Knowledge oppose new FCC anti-piracy proposals for radioThe Consumers Union and Public Knowledge have sent a letter to the Federal Communications Commission (FCC) asking it to refrain from issuing new anti-piracy proposals for digital broadcast radio before it reviews technical costs and benefits. The FCC proposal, which has not been released yet, is said to include the use of something similar to a “broadcast flag” for radio. “There are neither pressing technological issues nor spectrum-related issues that require the commission’s immediate action to protect digital radio content,” noted the letter to the FCC.Number of digital TV sets shipped to reach 93 million units in 2008: In-Stat/MDRThe number of digital TV sets shipped will reach 93 million in 2008, up from 17 million units in 2004, predicts In-Stat/MDR. The market research firm further states that unit shipments will be spread worldwide, with Asia being the largest of the DTV set markets. In-Stat/MDR says that the Federal Communications Commission order to integrate digital tuners in the United States, increasing numbers of terrestrial broadcasters in Europe going digital, and a reduced price differential between analog and digital sets will fuel the growth.4 million TV households receive and watch HDTV programmingJust over 4 million TV households currently receive and watch high-definition television (HDTV) programming, and several market challenges, such as a lack of HD content, the high cost of HD equipment and a lack of public knowledge about the benefits of HD, are reining in the sector’s growth, according to In-Stat/MDR. The market research firm also found that Japan is leading the HDTV charge with 2 million households receiving and watching HDTV programming, followed by the United States with just over 1.5 million households. In-Stat/MDR predicts that total worldwide terrestrial, satellite and cable TV households watching HD programming on an HDTV set will rise to almost 6 million by the end of 2004.FCC could fine Clear Channel US$495,000 over broadcast of indecent materialThe Federal Communications Commission announced April 8 that it had issued a notice of apparent liability for forfeiture against Clear Channel Communications Inc. for apparently willfully broadcasting indecent material in connection with the Howard Stern Show on six of its TV stations. The FCC has proposed a total of $495,000 in forfeitures against those Clear Channel stations. The amount represents the maximum statutory amount of US$27,500 for each of 18 total apparent indecency violations.

CCR Update

Broadcast | April 14, 2004

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