By Ahmad Hathout
Bell urged the CRTC on Wednesday to loosen the rigid rules surrounding how broadcasters and programmers are allowed to negotiate the packaging and payment of content.
The vertically-integrated company said there are certain commission rules dating back to 2015 that are hampering the ability of both the distributor and programmer to get the best commercial outcome in a system that is now flooded with online options.
“Since the introduction of the wholesale code, there’s a lot of prohibitions on specific packaging terms in our negotiations with BDUs,” Ben Keys, Bell Media’s director of content distribution, said Wednesday. “And what that sort of forced both parties to do is come up with pricing, highly complex pricing now that has to address an infinite number of outcomes in packaging or penetration. That’s created a lot of tension in negotiations and, frankly, we’ve seen more protracted commercial negotiations since 2016 than we did prior to.”
“We believe this is in part the result of the Commission using its role in these negotiations to attempt to achieve public policy objectives – such as preferred retail market offerings – rather than commercial outcomes,” Keys said in Bell’s opening. “It is also in part the result of the Commission’s reluctance to allow parties to proceed to arbitration and the extended period of time that has been required for the Commission to issue decisions.”
Bell noted, for example, that it cannot negotiate a lower rate with a distributor of its programs in exchange for broader penetration. “If you’re a programming service, you can’t reach a deal with BDUs to say, ‘tell you what, it’s one cent for every subscriber, but you have to put me in every one of your subscribers’ homes,’” Mark Graham, Bell’s senior vice president of legal and regulatory, told the CRTC on the first day of a weeks-long hearing into the market dynamics between those players.
“The BDU might say, that’s great. This is new content for my subscribers, barely increases my cost. I want to do that. So the BDU might want to do it. Programming service might want to do it. Commission’s rules say it can’t be done,” he continues, noting the commission was concerned at the time of a lack of choice and flexibility for consumers.
But that has changed with the flood of online streamers, which are not restricted in the same way as the traditional system, Graham said. He conveyed that wholesale negotiations should allow for mutually beneficial tinkering to best compete against those online options and then have the commission act as a backstop if agreed terms cannot be secured.
“But the arbitration process should be focused on achieving a commercial outcome,” Graham said. “If you do that, then the traditional system will have more commercial success, it will better meet audience needs, and that will serve Canadians.”
A more specific example of what Bell says is a problem in the market is the $25 “skinny basic” TV package that the CRTC mandated a decade ago.
Steve Cummings, Bell’s vice president of content distribution, said the fixed nature of the plan has challenged the broadcaster on several fronts.
The context is that there are now many direct-to-consumer streaming services that, purchased separately, would be uneconomical for a large portion of Canadians. Broadcasters like Bell and Telus have introduced bundles that package some of those popular streaming services with their own products for a lower price than if they were purchased separately.
By comparison, the skinny basic TV package is frozen in time. “It gets really hard then to get them from $25 to $35 to $45 to $55,” Cummings said, with Bell noting that the price has not kept up with inflation. “And I think if we had an ability to bolster our entry level packages with more content, it would, number one, drive more value to the consumer. And it would also give us an opportunity to move them up the value chain over time.”
In other words, Bell is asking for the ability to add discretionary services to the package.
Cummings added that the skinny basic option would also benefit by allowing the broadcaster and the programmer to hash out the details of that distribution. “I can’t go to a distributor and say, I’m going to give you 100% penetration across all of my services. I’m going to give you the 2.7 million homes that we service with TV today. And by doing so, we’re going to agree to a relatively lower rate than what we would have otherwise agreed to. You’re going to make up the difference on advertising revenue and eyeballs,” Cummings said.
“I’m going to benefit on offering my customers a better service, better package. I will lower my churn. And then the consumer benefits because they have access to more content. I think that’s one of the challenges we face.”
Bell also suggests that the CRTC sustain the services that are required to be carried by the broadcasters, known as 9.1(1)(h), by drawing them from funds buoyed by contributions from Canadian and foreign streamers. This way it doesn’t rely on wholesale rates that have put pressure on broadcasters, who have been the victims of the cord-cutting phenomenon that Bell says has contributed to a 21-per-cent revenue decline among broadcasters since 2015. Bell notes that the same sector currently loses approximately five per cent of subscribers each year.
Ultimately, the broadcaster recommends that the commission consider a mediation and arbration model with a “clear and prescribed timeline for negotaition,” after which the parties automatically move to arbitration, unless they agree otherwise; that mediation and arbitration be based solely on commercial factors, which would “eliminate a disconnect between commercial negotiations and arbitration and avoid the uneven application of public policy factors”; that these processes be conducted by independent commercial arbitrators; and that the commission allow for the consideration of multiple services wthin a single negotiation and arbitration.
The CRTC is also expected in this proceeding to review the standstill rule, which requires the parties to maintain the status quo until an agreement is reached. There have been some ongoing high-profile carry disputes: Corus and Rogers are currently engaged in one that dates back to September 2023; Rogers and Bell are engaged in their own fight; and Telus is currently engaged in a carry dispute with both Corus and Bell.
Screenshot of Mark Graham, Bell’s senior vice president of legal and regulatory, on Wednesday
