LIFE IN OTTAWA ISN’T easy for those pushing their agenda on a government which has but one goal for the moment: Stay. In. Power.
Communications policy – well, any policy really – is in limbo as the minority Liberal government tries to save its own skin in the face of Adscam and the Gomery Inquiry.
What that means is of the dozens of things on Canadian Cable Telecommunications Association president Michael Hennessy’s plate right now, many are leftovers, sure to be in need of re-heating again after what’s expected to be another federal election this spring or early summer.
So, what is on his plate? Cartt.ca’s editor and publisher Greg O’Brien chatted with Mr. Hennessy last week to find out. What follows is an edited transcript.
Greg O’Brien: What’s it like in Ottawa these days?
Michael Hennessy: It’s so confusing here – election, not election. At the best of times, it’s very hard to get people focused on communications policy and this is not the best of times. There’s a lot of legislation and policy making going on from many of the Internet issues to the telecom review, copyright reform, and Radiocommunication Act amendments. Many of these things have been around for a number of years and still remain up in the air.
GOB: What is top of mind in Ottawa, in terms of communications policy? What is the government thinking of when that topic pops into their heads – in the off-chance it does, I guess.
MH: You really have a lot of different things at work. At the CRTC, they’re dealing primarily with the local telephone market and voice over IP. The Industry department is focused on – I think in this order: the telecom review; spam; and the implications of lawful access legislation. Although, they have been also working with Heritage on the copyright amendments.
Heritage on the other hand is still struggling with how to respond to the Lincoln report and their big issues seem to be how do you get more local and regional programming happening. I could give them a hint and say: Did you notice all the community channels we have, maybe? Addressing the restrictive rules on what you can do (on those channels) would be good. Then there’s Canadian content and particularly production, CTF (Canadian Television Fund) and Telefilm issues.
In many respects it remains a very full agenda. But I keep having this feeling that it’s the same agenda I’ve been dealing with for the last couple of years.
GOB: That’s just it, the issues never seem to get resolved. Look at the amendments to the Radiocommunication Act. That’s been work, work, work and then start over again – three times in a row now.
MH: At this point, nobody in the decision-making apparatus of government is focused on anything else than survival of the Gomery Commission and the potential timing of the election. I would think that no matter where you are in the spectrum of issues in communications, whether it’s broadcasting or telecom – anybody I talk to shares the same immense frustration.
You get tired of listening to the same rhetoric of “nation-building” and “economic growth enabling cultural bridges” without recognizing this is a business, that investment decisions have to be made and you’ve got to move on.
GOB: Getting to those investment decisions goes back to the story I had last week about Rogers and digital migration – where Rogers just went ahead and carved their own deal with programmers on their own – so that they can do certain things now and other things down the road, hopefully regardless of what the Commission decides I guess.
MH: I think that there was a message to the Commission there. Rogers has very unique circumstances in terms of being able to offer anything in a bundle that Bell can offer, but has limitations in terms of packaging. Their deal on migration in many respects, is much more of a deal based on the fact that they’re fully duplicated (carrying all channels in analog and digital) right now.
What we are trying to argue before the Commission on this is you really have to rely on commercial negotiations. You can’t have the hammer of consent that’s hanging over the industry right now (where analog specialty services have to provide permission before cablecos can carry them digitally only) that the Commission could fix with expedited dispute resolution, which they seem to be moving towards.
And, there needs to be a recognition that depending where people are on the spectrum, some people are going to fully migrate, some people may continue to incrementally migrate some services. Others will do large-scale duplication. It’s going to be a real mix.
GOB: And, because of the way the Rogers cable system has been constructed (860 MHz basically from end to end), it’s not a deal that can easily be applied to other cable operators, correct? (Few, if any, other cable companies have a plant as robust as Rogers’.)
MH: It can’t. The real telling point is that if you’re not in the fully duplicated 860 environment, anybody – like a lot of the small systems – has to go down a different (digital migration) path in order to get the flexibility to compete and to create the capacity that is increasingly required for HD.
I think the best the Commission can do is recognize there has to be negotiations and for us, the most significant thing for many of our members is that as long as consent is required that gives the hammer to one side of the negotiations and you can’t have it. The whole environment that we’re moving to in digital is a shared risk environment. Nobody is going to take on a risk prematurely if they think they have the leverage to avoid doing so in the short run. And that may be damaging in the long run unless we can make those moves.
GOB: Speaking of taking investment risks, what do you think of the progress on high definition television in Canada by the broadcasters? What do you think has to be done in order to encourage or force the broadcasters’ hand (to offer more HD and Canadian HD content)?
MH: I’d say it’s hard for the Commission to go back on its over-the-air policy. We’re stuck with that. But they don’t have to compound it by giving away capacity anymore for services that aren’t significantly high-def.
I think we’re starting to get the sense of a consumer backlash, of consumer frustration with turning on the channels that purport to be high def but aren’t. We’re on the front lines on that because it’s our CSRs who have to deal with customers. It’s our distributors who will, eventually, fight that next black market if there’s more HD available across the border… This (proceeding) that we have had on HDNet to me demonstrates a tremendous inflexibility in the current system because, fundamentally, everybody knows that channel is not going to cause any harm to the system.
GOB: How long has it been since the first application (to add 100% high definition U.S. channel HD Net to the eligible satellite list)?
MH: Over two years now.
I think on this issue, we’ve lived up to our commitment on HD… Something like an HD Net and maybe a couple of other channels like that will just turn on the heat. You have to have some kind of incentive for broadcasters to take longer term risks. The protected analog environment has led to very stable revenues and positive returns over a very short period of time. In the world we’re moving into, you’ve got to think longer term.
HD, in my mind, would just do tremendous things for the brand but broadcasters are worried they don’t see the ROI (return on investment) yet.
GOB: When it comes to that policy making, on issues like this and digital migration, are there ways the Commission should be thinking about how to re-tailor certain policy decisions for smaller cable companies?
MH: Absolutely. If you look at systems with under 20,000 subscribers, you’re talking about less than 20% of the overall market. They’re not going to be around unless they have increased flexibility. The problem with the small guys is that the satellite keeps getting bigger and bigger – and they are the ones who suffer the most from the competition.
You may see some of the smaller companies with some of the more creative migration scenarios. They will be more likely to do some more full-scale migration faster. They’re stuck in a box.
GOB: You could almost use a smaller system as kind of a test bed to see how digital migration goes under certain circumstances.
MH: What we’re looking for from the Commission is flexibility. The Commission knows they don’t have the answer – and when you’ve struggled with this for two years and don’t have the answer, the best thing they can do is to not create a framework – just create the opportunity for people to go and negotiate.
Once you’re beyond a predominance of Canadian channels, there shouldn’t be a lot of other carriage rules. It just doesn’t work.
GOB: What was your reaction to Friday’s decision on bundling local telephony (where the CRTC decided to keep letting incumbent telcos bundle regulated local phone services with other de-regulated telecom services).
MH: The philosophy, we like. They recognize that competition hasn’t taken hold yet. They recognize the damage that could be caused by targeting and bundling. Then where we feel a bit let down is while they’ve put some limits on targeting, the flexibility that the telephone companies have to bundle kind of gets you close to the same place anyway.
What really disappointed me was that on the bundling issue where they rejected Rogers and CCTA’s arguments, they never addressed the arguments of the Competition Bureau, which had already said this could be a very bad thing.
That one is painful and it makes me somewhat nervous. If we see much more flexibility for the telephone companies on the voice over IP decision (coming this week), then the forbearance proceeding could be much ado about nothing – the door might already be open. (The CRTC is going through a process of trying to decide what telecom segments it will no longer regulate, or forbear from.)
I’m pretty positive in the end that VOIP is essentially a substitute. When you look from everybody from the questionable Bell service (Bell began offering a VOIP service to some regions in Quebec last month) to Vonage and Primus and anybody else who has entered this space, for all the talk about innovation and different phone service, it sure looks like a duck. It’s priced like a duck and those are all duck-like features.
I think the Commission’s preliminary view was (correct), then what they’ll do is – recognizing the huge political pressures that are on all of these issues now – try to put some interim flexibility for the telephone companies into play to soften the blow that they’re not going to de-regulate VOIP. Then they’ll sell the whole package that VOIP will be part of “deregulate or not” questions in the local forbearance hearings.
I’m sure that’s their strategy.
The only problem is that given where the telephone companies sit today in the residential market, I’m not sure they really need more help…
The thing we still haven’t really picked up on when it comes to communications policy is how much convergence and competition require a much faster ability to change both the business models and regulatory models.
We don’t have that luxury of benign disinterest any more. You ignore things at your peril and that takes us back to why it’s so sad to see what really amounts to a continuing vacuum when it comes to communications policy and what the real convergence, competitive global world actually means. Even the telecom review that we’re moving into is very limited because you’re really dealing with the digital home, which is so much more content focused.
The longer we prevent the movement to a digital world and the flexibility across all communications sectors that it requires, the less chance we’re going to have to create domestic models to compete.
