MOST OF THE arguments we found in the Bell Canada Enterprises submission to the Broadcast and Telecom Legislative Review panel we’ve heard before, which is not surprising since the largest telecom and media company has of course been front and centre when it comes to the issues at play under the Acts.
That said, it wants fee for carriage back, too.
Telecom
The 1993 Telecommunications Act was drafted to move from almost a century of near-monopoly provision of traditional wireline home phone telephony to competitive markets, reminds the Bell document.
So the company has asked the panel to implement measures to illustrate that statement of competitive fact: “Rather than regulating every retail and wholesale service by default (i.e., unless they have specifically been forborne), the Telecommunications Act should provide for regulation only after a finding of significant market power (SMP). This is the modern approach applied in other jurisdictions, such as the EU, because in the absence of SMP there can be no economic justification for regulation.” Bell also notes that this was a recommendation of the Telecommunications Policy Review Panel, way back in 2006.
“Under a modern legislative scheme, Commission decisions related to SMP have vast financial consequences for the parties involved and long-term investment and market consequences for the country. In these circumstances, rigorous independent and expert oversight would provide significant public policy benefits. In the Canadian context, the Competition Tribunal is best placed to provide this oversight,” adds the Bell submission.
Consistent with the previous statements by Bell, it adds that the Panel should: “Limit telecommunications wholesale regulation (i.e., mandated access to facilities) to instances in which: (i) unjust discrimination/undue preference has been established; (ii) the TSP that controls the relevant facilities possesses significant market power such that denying access to those facilities would result in a substantial lessening or prevention of competition; and (iii) it is not feasible for the complainant to duplicate the facility to which access is sought. This codifies the existing and widely-accepted essential facilities test.”
“The costs of transitioning to 5G will be significant and sustained. As of today, Canadian carriers are prepared to incur those costs… but a lack of commitment to the policy of facilities-based competition will be particularly problematic.” – Bell Canada
Canada should embrace a strict facilities-based policy, it continues. “The costs of transitioning to 5G will be significant and sustained. As of today, Canadian carriers are prepared to incur those costs (as we have done with every other generation of wireless technology), but a lack of commitment to the policy of facilities-based competition will be particularly problematic,”
The company also argues for a right of way regime like the one in UK. “Canada should replace the requirement to obtain prior consent with a notification regime in order to facilitate the faster and wider roll-out of advanced telecommunications networks.” This won’t fly well with the municipalities and the provinces, but it doesn’t hurt to ask.
Broadcasting
On the broadcasting side, Bell is consistent with the largely held consensus: Make those who benefit from broadcasting in Canada contribute to our system. However, Bell does not advocate deep legislative change, but a policy direction to the CRTC. “We recommend an approach that would have all services exceeding certain size thresholds make equivalent contributions to Canada’s cultural policy objectives. While this approach could be implemented by the Commission today under the existing Broadcasting Act, the Commission appears to be seeking policy direction from Government. The Government should therefore issue a direction or amend the Broadcasting Act in a manner that indicates its preference that the Commission act in this area.”
The submission then proposes a formula for this. “Our recommendations in this regard include: (i) requirements that foreign linear and OTT programming services with more than $1 billion in annual revenue worldwide or Canadian revenues in excess of $300 million should contribute 20% of their Canadian revenue to the Canada Media Fund (CMF); (ii) foreign linear and OTT distributors that meet the revenue thresholds in item (i), should contribute 5% of Canadian revenue to the CMF.”
It also endorses “the longstanding call for foreign companies operating in the digital realm to collect and remit Canadian sales taxes when they sell subscription services in Canada. This change would eliminate a significant competitive cost advantage that results in digital services from these foreign firms being 13% less expensive than the services offered by their Canadian counterparts.
“The historic model of free OTA distribution of television stations supported only by advertising revenues is no longer sustainable.” – Bell Canada
“At the same time as these new obligations are created, the existing obligations of licensed Canadian programming services and broadcasting distribution undertakings (BDUs) should be adjusted to better align with these newly created foreign contribution requirements,” it continues.
As well, Bell proposes to bring back fee for carriage! “The long-term viability of local television news and journalism are at risk in Canada. The historic model of free OTA distribution of television stations supported only by advertising revenues is no longer sustainable. In the context of this legislative review, our recommendation to remedy the crisis in local television is to amend the Broadcasting Act to create a statutory right enabling local television stations to charge licensed and exempt BDUs a fee in exchange for the right to retransmit their signal,” says the Bell submission, which explains that it could contribute another $250 million annually – which would come from the pocketbooks of Canadians, of course.
Conclusion
We’ll end our peek at Bell’s lengthy submission with an excerpt that lays out just what the company feels is at stake with this legislative review. It’s a direct quote from Canadian Matthew Ball, who is the former head of strategy at Amazon Studios who said last year:
“Even when underestimated, Netflix's ever-escalating, industry-leading content spend remains a point of fear and fascination in the media industry. Each year, Netflix's subscriber base and revenues grow (an average of 29% and 35% over the past five years), but its content spend grows faster (39%). And as the company has embraced its streaming business and washed its hands of its profitable DVD business (which Netflix stopped marketing in 2013), cash losses have swelled.
“In 2014, Netflix generated $16MM in cash from operating activities, but by 2017, it was losing $1.8B. In 2018, cash burn is expected to grow to $3-4B and CEO Reed Hastings has promised negative free cash flow will persist for ‘many years.’ The company also reports more than $9.1B in debt payment obligations (up 93% year-over-year) and has $18B in content obligations (up 27%).
“…Netflix's goal is to have more subscribers than any other video service in the world, and to be the primary source of video content for each of these subscribers. The company doesn't want to be a leader in video, or even the leader in video – it wants to monopolize the consumption of video; to become TV.”
