The broadcast distribution sector reaches over 90% of Canadian households. At the same time, six BDUs—Rogers, Shaw, Bell TV, Star Choice, Vidéotron, and Cogeco—control access to over 91% of cable and DTH subscribers. In essence, this small number of BDUs has the power of life or death over news services such as ours, not to mention existing services. For many years now, some of the larger BDUs have on a regular basis shown contempt for our regulatory system, even though it is the same regulatory regime that has allowed them to grow into such profitable entities.
We are before this committee today to bear witness, first, to the pure contempt of the two largest terrestrial BDUs, Rogers and Shaw, which have in our case shown damaging disregard for the CRTC's conditions of licence and expectations, and, second, to the intentional injury this has caused a fledgling pay entrant into the Canadian broadcasting system.
The terms of our licence, which was granted on May 18, 2006, clearly stipulate that Super Channel would be offered distribution comparable with that of the regional incumbent's pay television services. The commission went on to state that without such conditions it would be unreasonable to expect the new Allarco service to meet its business plan, including its commitments with respect to expenditures and exhibition of Canadian programming. Since our launch in November 2007, Allarco has suffered unfair treatment from both Rogers and Shaw, which control over 40% of cable and DTH subscribers in Canada.
Since our letter to the minister of February 12, 2009, we've had to initiate an undue preference claim against one of these major terrestrial BDUs for failure to honour the terms and expectations of our licence from the CRTC. To determine how our service was being sold by the two largest BDUs, we conducted independent phone research on how the customer service representatives at both Rogers and Shaw were dealing with our service offering during January, February, and March 2009. The results were shocking, even though we were spending hundreds of thousands of dollars in advertising with Rogers and Shaw on U.S. ad avails, radio spots, and direct-mail pieces.
For Rogers, out of 320 recorded calls made to CSRs at their call centres, 97% of the calls were directed only to the regional pay TV service, TMN. When the caller asked if there were other movie services available, Rogers VOD was mentioned 24% of the time and Super Channel only 10% of the time. For the most part, our service was negatively portrayed and misrepresented by the CSRs, conferring an undue advantage on their own VOD service and the regional paid TV service, TMN. Where is the fairness principle applied here?
In the case of Shaw, the results were also shocking.
To give you an indication of the negative effects such undue preference has had on our business plan, which preference has cost us tens of millions of dollars, another major satellite provider, which launched us in November, reached and exceeded 7.5% penetration of their English language digital base, and a small provincial telco has recently reached 11% penetration. In contrast, Rogers is sitting at one-third of 1%.