GATINEAU – The quest of both the CRTC and the federal government to ensure consumers have more choice in their TV packages is running into some difficult headwinds. Vertically integrated broadcast distributors as well as content developers acknowledge that Canadians do say they want more channel flexibility, but they don’t want a so-called “skinny basic” tier of TV channels.
In the official TV Policy Review Notice of Consultation (2014-190), the Commission has proposed a basic cable package that only includes local Canadian TV stations, the 9(1)(h) must-carry channels, provincial educational services if they exist, and in some cases, the community channel and provincial legislature services. All other discretionary services (Canadian or American) would be available on a pick-and-pay basis – as well as whatever packages carriers come up with. The CRTC also notes that while a third of Canadians who participated in the Phase 1 and 2 of its Let’s Talk TV process are dissatisfied with current channel flexibility, half are satisfied.
The three English language vertically integrated (VI) providers pick up on this last point, noting that a majority of Canadians just want more channel packaging flexibility, not a small basic service with discretionary services on an a-la-carte basis. Bell Canada highlights the results of a survey done by Hill + Knowlton Strategies to support its argument that “consumers’ primary concern is with how services are made available beyond the basic package and not with the composition of the basic package itself.” The H+K study says only 18% of Canadians believe the basic package has too many channels and 67% say the basic package provides good to moderate value.
“Even when not confronted with the necessary trade-offs, more Canadians oppose a move to skinny basic than support it. When told that certain services (such as TSN, YTV, and CBC News Network) would not be included in a skinny basic package, 52% of Canadians oppose it compared to just 22% that support it,” says Bell.
Shaw Communications argues that rather than move to a mandated skinny basic package combined with a-la-carte for all other services as proposed by the commission, a better approach would be implement regulatory minimums for basic in conjunction with a market driven mechanism for discretionary services.
There are several key points to its proposal: High-cost services such as sports must be made available on a stand alone basis, in a discretionary package or in a basic package that doesn’t include these services; customers shouldn’t be limited in their ability to pick a service because it’s in a large or expensive tier; volume discounts and penetration-based rate cards are allowed but make-whole provisions – which force carriers to maintain the level of revenue returned to a broadcaster despite falling subscriber numbers (and include potential lost ad revenue, too) – wouldn’t; broadcasters should permit their services to be distributed on a stand alone basis; and BDUs must make 50% +1 of their services available on a pick-and-pay basis.
This type of approach, argues Shaw, “will provide BDUs with the flexibility necessary to adapt and compete – in a dynamic environment – with OTT services that are rapidly entering Canada.”
Corus Entertainment also disagrees with a mandated skinny basic. Services such as children’s programming from Treehouse and YTV that have been on basic for decades would suddenly find themselves on the outside looking in. The combination of lower subscriber numbers and reduced advertising dollars would only serve to hurt these services.
“The Commission should let the market decide how to best serve customers through various options from different BDU… Some BDUs already offer skinny basic as a differentiator in the market – the Commission should not insert itself in this basic marketing too.” – Corus Entertainment
“The Commission should let the market decide how to best serve customers through various options from different BDUs,” says Corus. “Some BDUs already offer skinny basic as a differentiator in the market – the Commission should not insert itself in this basic marketing too.”
Besides, many believe that a mandated skinny basic would not yield the price benefits envisioned by many. The BDUs, even small ones represented by the Canadian Cable Systems Alliance (CCSA), say the retail price of basic won’t see dramatic decreases because it covers the majority of infrastructure, set top box, customer service and marketing expenditures – and very little in terms of programming.
Both Rogers Communications and Shaw point to an Oliver Wyman Inc. report, TV Unbundling: An Economic and Consumer Experience Impact Assessment of the CRTC’s Proposed Approach, (Appendix B, here) which says “only a minority of consumers” will see the lower price benefits of a small basic package. The majority, the report argues, will end up paying more for the same lineup services they have now.
While the VI providers and content companies are saying a mandated skinny basic isn’t the right option, Telus says that the bigger problem is how the VI companies force the packaging of their discretionary services in basic. Describing this as “the root cause” of the consumer choice problem, the firm argues that by preventing packaging provisions on minimum penetration requirements or make-whole penetration-based rate cards, additional rules around packaging won’t be required.
“Freed from the shackles of existing affiliation agreements, many BDUs, especially new entrants, will take the opportunity to better cater to their customers’ demands and other BDUs will face competitive pressure to follow that lead.” – Telus
“Freed from the shackles of existing affiliation agreements, many BDUs, especially new entrants, will take the opportunity to better cater to their customers’ demands and other BDUs will face competitive pressure to follow that lead,” says Telus.
Opting to institute a skinny basic won’t, however, be a panacea, argue CBC/Radio-Canada and Bell. Both say there needs to be a new model for funding local television if it’s going to survive. CBC calls for affiliation agreements between conventional stations and BDUs and Bell wants to see local stations turned into specialty channels which can then take advantage of a subscriber fee system.
Not fee-for-carriage/value-for-signal again? Not again!?
This is the sixth story from our ongoing, summer-long breakdown of the official submissions made to the CRTC for it's Let's Talk TV TV Policy Review. The first five are linked below.
Pick and pay in Canada strikes out with U.S. media heavyweights
U.S. border stations want to use Let's Talk TV to wrest cash from Canadian BDUs
Should Yankee go home? The changing role of U.S. channels in the Canadian broadcasting system
No “Netflix Tax”, company warns CRTC
Snap Judgements: Everyone wants more choice – tied to a lot of ifs, ands, buts…
