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Canadian Cablers Face Uprising By Consumers

The introduction of eight niche channels has left the Canadian cable industry with a black eye, and the government broadcast regulator reeling from the punch.

A cross-country viewer revolt against hikes in cable prices has forced Canada’s leading cablesystem operator to make a public apology to its subscribers. It has also put a major damper on the launch of the new, all-Canadian channels which were licensed by the Canadian Radio-Television and Telecommunications Commission.

Toronto-based Rogers Cablesystems Ltd., the country’s largest cable company, with 2.9 million subs, has had hastily to revise its methods of marketing the new channels in the face of widespread protests from cable subscribers unhappy with the fee increases and the lack of choice.

Rogers had told its subscribers they would be automatically billed an additional $C2.50 ($1.75) to $C4 ($2.80) a month, depending on where they live, for the expanded package unless they notified Rogers that they didn’t want it – a selling scheme called negative option marketing. The way Rogers bundled the channels, those who chose not to take the more expensive package would lose popular channels such as A&E or CNN.

The vehemence of the consumer revolt stunned the company. Customers showed up at Rogers offices across the country with converters tucked under their arms, prepared to cancel cable service altogether. More than 4,000 subs did cancel, despite the fact that the new services were free for a month. Rogers was pilloried in the media while other cable companies, which were marketing the new channels in a similar fashion, kept a low profile.

Earlier this month, Rogers had to eat humble pie.

“We now know we made a mistake and we apologize to our customers,” Rogers Cablesystems prexy Colin Watson told a Vancouver press conference. The public outcry from irate Canuck couch potatoes compelled Rogers to dump its strategy and allow consumers to keep their existing cable package. Rogers rebundled its channels so that consumers could choose the new Canadian channels for $C2.65 ($1.85) on top of the basic rate. But the company is still counting on 75% to 80% of its subscribers taking the expanded package.

The confrontation, which has received widespread media coverage here, is an embarrassing PR fiasco for Rogers. The brouhaha could prove costly for the fledgling channels, which will now have to fight much harder to achieve profitable levels of penetration.

The channels, which began operating Jan. 1, include performance-arts network Bravo!, music-video outlet the New Country Network, and lifestyle service the Life Network. Some of Canada’s top entertainment companies have stakes in the new services, notably Atlantis Communications, which controls the Life Network, and Alliance Communications, the majority owner of the all-fiction web, Showcase Television.

For the moment, executives at the new channels and indie producers are putting a brave face on the situation.

“What people are clearly upset about are the techniques of some of t he cable companies,” said Life Network prexy Juris Silkans. “But I think we’re going to be able to collectively establish value. But I think it’ll be impossible to launch new services in the same way again.”

The CRTC is slated to license another batch of Canadian specialty services later this year.

New channel support

Canada’s production community has been vocal in its support for the new channels, since they provide fresh windows for the industry’s product, and most producers remain optimistic that the programming will eventually prove popular with Canadian viewers.

“If these services have what it takes to draw audiences, they’ll survive,” said Alliance chief operating officer Gord Haines. “I’m not too concerned about the long-term effects. People are looking for good programming and I think Canadians are capable of producing it.”

Rogers’ sudden consumer sensitivity is an awakening to the arrival of competition, something it has never faced before. Next fall, a direct-to-home satellite service, Expressvu, is due to start up. And the Canadian government could ultimately override the CRTC, which devised a set of criteria for direct-to-home that barred DirecTv Inc. of Los Angeles and its Canadian-owned counterpart, Power DirecTv Inc., from offering direct-broadcast satellite services in Canada.

Delivery duel

The telephone companies, 10 times the size of the cable companies, are also vying to deliver video to the home and have proposed an elaborate game-plan, the Beacon Initiative, to do just that.

With competition at its doorstep, the cable companies have to win customer loyalty.

“If we are not in the hearts and minds of our subscribers,” said Rogers exec Watson, “we have no future.”

The botched launch of the new cable services is the latest setback for the CRTC. The federal government has recently turned back a fistful of CRTC decisions for reconsideration, undermining the agency’s authority and credibility. Many industry observers believe the agency will be defanged.

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