JUST BECAUSE BELL Canada, Quebecor Media, Rogers Communications and Shaw Communications are all broadcasters, specialty service operators, TV distributors, phone companies and broadband providers doesn’t mean they think alike. They do, however, agree on this generation’s “Death Star”. We’re looking at you, Netflix.
In their submissions to the CRTC’s TV Policy Review, the four big vertically integrated behemoths are on board together with certain things, such as maintaining simultaneous substitution (which is actually something virtually every industry submission we’ve read demands be kept), decreasing the amount of Canadian content which must be shown, while spending more money on fewer big projects, and that Netflix and their ilk just might kill them all if action isn’t taken, soon.
Quebecor’s submission is perhaps the most hyperbolic and direct. “If the Commission fails to act by lightening the regulatory burden on Canadian broadcasting undertakings, Netflix will become Canada’s largest television distributor and broadcaster in the not-so-distant future,” reads the QMI submission (its emphasis).
“Increased competition from OTT services, which are subject to NO regulatory requirements, is significantly undermining the sustainability of the Canadian broadcasting system. Meanwhile, Canadian broadcasting undertakings need to meet a long list of regulatory requirements, including obligations to contribute to Canadian programming. Their regulatory burden must therefore be lightened; they need greater latitude if they are to keep television viewers within the Canadian broadcasting system and slow the trend towards cord-cutting and cord-shaving,” adds the QMI brief.
The other VI companies recognize the threat of over-the-top video providers (Netflix, mostly), but none got the point across quite like Quebecor.
The companies differ, though, on a number of the questions the Commission put to the industry and Canadians in its public notice. For example, while all four talk a great game about providing more consumer choice, and wanting to do more, the ways they would go about it – or the conditions attached – make each submission distinct.
For example, Bell Canada has asked the Regulator not to mandate a new, skinny package of basic channels such as was suggested (locals plus must-carries) in the official public notice. Consumers want more flexibility in adding channels over and above basic and that’s why the company supports pick and pay for all channels on top of basic, so that customers “never have to pay for a channel they don't want just to get one that they do, while also ensuring that a full range of other packaging options can emerge through competition and market forces,” reads the Bell submission. The company has asked, however, that the American border stations, known as the 4+1s (NBC, ABC, CBS, Fox + PBS) be banned from basic because their duplicate programming which has been purchased for the Canadian market by Canuck broadcasters, harms local stations.
However, the company has attached a big condition to its support for full pick and pay: that we move to free market wholesale negotiations among all companies with 500,000 or more subscribers (basically, everyone bigger than Eastlink) “so that market forces can develop the business models necessary to support pick-and-pay.” That would mean no more standstill provisions between parties and the possibility that a carrier – or a broadcaster – could withhold signals from customers in a carriage fight.
Bell also proposed a new class of channels with new subscription fees: the local specialty. This new channel would retain all the benefits local TV stations now have (must-carry in basic packaging, simultaneous substitution) but would be able to charge subscription fees and shut off its expensive transmitters. CORRECTION: These channels could not, however, be pulled from customers during contract negotiations. "Given the must carry status of local specialty services, the standstill rule would apply and parties would be able to use the Commission's dispute resolution process in the case of a dispute," reads the Bell submission. Cartt.ca printed erroneous information in an earlier version of this story stating local specialties could be removed in a contract fight. That is not Bell's position. Cartt.ca regrets the error.
While all acknowledge local TV is in serious financial trouble dealing with the structural change of the video business – and all outlined their financial challenges in detail, only Bell proposed such new ideas in their submissions. None of the other three want to walk away from OTA TV just yet.
ROGERS BACKED THE IDEA of a skinny basic service, but one which includes the U.S. 4+1 channels – and while is all for choice, only proposed that a minimum of 50% of specialty services be distributed on an a-la-carte basis. “Customers view the U.S. 4+1 services as integral to their basic service,” reads the Rogers submission. “Excluding them would, we believe, be customer-unfriendly… In addition, Canadians can receive the U.S. 4+1 services either over-the-air via a digital antenna or through new companies that provide customers with the ability to receive and stream local TV signals through an app. In our view, for those customers who want to subscribe to a small basic service, BDUs must be able to remain competitive in the face of these over-the-air (OTA) and online alternatives.”
When it comes to the flagging fortunes of its local stations, Rogers noted its Citytv stations are forecast to lose $45 million this year (before the NHL deal kicks in) and it hoped its license renewal terms would help. Besides that, however, Rogers also proposes “the Commission reduce Canadian exhibition requirements to 50% throughout the broadcast day, remove all prime time programming restrictions, and eliminate requirements relating to programs of national interest (PNI) so that scarce programming dollars can be devoted to local Canadian programming. Adopting these proposals will provide an immediate boost to the financial well-being of OTA stations and will give each of them the tools to develop its own strategy and address the challenges it is facing,” reads its document.
The company even proposed letting VI companies with cable community channels and local OTA broadcast channels join forces and work together, sharing costs and resources.
“The Commission’s proposals (especially a small basic and unlimited pick-and-pay regime) are based on the false premise that there is a lack of choice within the broadcasting system.” – Shaw Communications
Shaw, while collaborating with Rogers on one report, and with both Bell and Rogers on another, noted the policy framework released by the CRTC with the public notice “is not sufficiently forward-looking as it does not provide an appropriate response to the threats from outside the system.
“The Commission’s proposals (especially a small basic and unlimited pick-and-pay regime) are based on the false premise that there is a lack of choice within the broadcasting system,” reads its submission, which went a step further to say the proposal for a small basic is “actually anti-consumer.”
“Mandated small basic does not respond to any market failure as there is no unmet demand for such an offering. Removing discretionary services from the basic service will merely result in a decrease in the value of the service. Given the significant capital investments and other costs, there will be little downward impact on the price of the small basic service.”
(Ed note: And, if Bell’s local specialty plan is adopted, one would think the price of the skinny basic package would likely go up.)
Shaw, as Rogers, also said BDUs should only be required to offer 50% of the specialties on offer in a pick-and-pay format and added the U.S. specialties here will likely balk at such packaging. “Faced with a requirement that they agree to being offered on an a la carte basis, many popular non-Canadian services may choose to exit the Canadian market – further reducing choice,” reads Shaw’s submission.
(Ed note: None of the U.S. broadcasters who filed submissions came out and said they’d pull out of Canada if there is to be mandated a-la-carte. They mostly said things like AMC Networks’ EVP and general counsel Jamie Gallagher, who wrote in a two-page submission: “AMC’s market leading reputation has been built on a willingness to take creative risks and make substantial investments in high quality, big budget, television programs. The level of investment and creative risk required to create ground breaking original programs, could simply not be supported if AMC was marketed as an a la carte service. This type of packaging would never have provided the type of revenue reliability and certainty that a network requires to make this type of high quality “must have” programming that consumers increasingly demand and to re-invest in such high-quality programming on a continuous basis.”)
Shaw also came up with a short list of “Market Guidelines to Maximize Customer Choice and Flexibility”, one of which might trouble its other VI brethren – each of whom own sports channels, where Shaw does not. One of the Guidelines is “to ensure that customers are not compelled to purchase certain high-cost services (like sports) as part of the basic package, customers must be able to purchase these services in one or more of the following ways: on a pick-and-pay basis; in a discretionary package; or in a basic service package, provided that at least one of the basic service packages offered by the BDU does not include these services.
“There is an obstacle to satisfying consumer demand for more packaging flexibility: extreme penetration-based rate cards.” – Rogers Communications
“By ensuring that at least one basic service package must exclude high-cost services, the Guidelines will appropriately protect BDU customers from being forced to underwrite the acquisition of high-cost programming rights. An example is the recent trend among sports-based specialty services to acquire high-cost professional rights for broadcast on regulated platforms (and on other platforms including Internet, mobile, etc.). These developments underscore the fact that sports services may need to transition to premium services.”
Both Shaw and Rogers took hard swipes at penetration-based rate cards (PBRCs) with “punitive terms” without actually naming the PBRC they dislike most: Bell’s. (Click here for background on that…)
“There is an obstacle to satisfying consumer demand for more packaging flexibility: extreme penetration-based rate cards,” reads the Rogers submission. “Under these extreme PBRCs, the wholesale fee a BDU is required to pay to a broadcaster, if one of its service’s penetration declines, is so exorbitant that the BDU simply cannot afford to offer the service in a smaller package or on a pick-pack and a la carte basis. We have been confronted with a PBRC that is designed not only to make a service whole for subscriber revenue losses, but also for any reductions in advertising revenues that may or may not materialize as a result of fewer customers choosing to subscribe to the service.”
Fewer customers choosing to subscribe. That’s the kicker isn’t it? That’s the dominant fear and colossal challenge the VI companies and the CRTC will confront starting September 8 with Netflix, Google and Amazon all slated to appear on day one.
ED NOTE: This is the 13th story of 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 dozen are linked below.
Does the industry fear what the set-top box data might say?
What’s the value of individual services – and how can consumers complain?
The CRTC must act to save local television
Different rules for different language markets
Genres have long been monkeyed around with. Do they still need protection?
Is basic bloated? Does it need a diet?
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…
Original artwork for Cartt.ca by artist Paul Lachine, Chatham, Ont.
