GATINEAU – The press release headlines sound pretty good, but it’s in the conditions, the details, where all this talk of consumer choice and flexibility gets bogged down.
The three largest Canadian vertically integrated media and carriage companies (Bell, Shaw and Rogers) each issued press releases Friday – the day their submissions to the CRTC on its TV Policy Review were due – saying, and we’re paraphrasing here: “boy oh boy, are we consumer friendly and choice leaders!” The big three each said they support more pick and pay, or a-la-carte channel selection, so that Canadians don’t have to pay for channels they don’t want, while trying to come up with a way to do it and save jobs.
In its throne speech earlier this year, the federal government set the tone on this hearing. Despite the enormity of everything television being under review, the speech from the throne made a promise to Canadians that the traditional cable bundles will be busted up so they can buy channels one by one if they wanted to.
(Ed note: We’re about to embark on more than two months of analysis on this proceeding and we realize there are cable, satellite and IPTV providers all serving Canadians. That said, we’re going to use the term “cable bundle” when it comes to the a-la-carte battle. It’s just a term we all know and use.)
A little over two months from now, Canada’s broadcasting industry – and related organizations and companies (or companies which feel they might be under threat), and anyone else who said they want in, will gather in Gatineau to start to figure out how the labyrinth of CRTC policies which govern the TV sector can be unravelled and improved. Pick-and-pay is just one thread being tugged at.
Over the past six days, we’ve read through some or all of 19 submissions from various companies and groups and we can say beyond a shadow of a doubt that it’s not just the three largest broadcasters who advocate for increased consumer flexibility. Just about everyone says they want Canadians to have many more options when it comes to paying for their traditional TV channels.
Everyone says in their submissions that the TV game has changed and so must many regulations. They either need to be tightened, loosened, added to, subtracted from, and so forth. At first blush, however, Corus Entertainment appears to be a bit of an outlier on pick and pay. Heck the first paragraph of its executive summary gets right to the point:
“Corus submits that the Canadian broadcasting system is working well for all constituents including consumers, and that a regulated a-la-carte regime would destroy the existing infrastructure and lead to a massive reduction in jobs across Canada,” reads the submission.
“We believe the problem the Commission has set out to solve is framed incorrectly. The problem is not an absence of choice. There is an abundance of choice. The problem relates to the current value equation,” adds the submission.
“‘Choice’ has become a code for ‘give me half the channels at half the cost’.” – Corus Entertainment
“The Commission used the term ‘Canadian television system that fosters choice and flexibility in selecting programming services’ without really stating that the issue has never been choice, but rather cost. ‘Choice’ has become a code for ‘give me half the channels at half the cost’. This is completely counter to the regulator’s intent, and as we (and many others) have noted, it will lead to a wholesale disaster in Canadian television.”
Telus, the largest distributor of programming that doesn’t also own any traditional media, disagrees and lays blame for the lack of options available to consumers at the feet of the broadcasters. “Consumer perception of choice, or lack thereof, is likely the greatest threat to the Canadian broadcasting system as more and more un-regulated services become viable alternatives to the regulated TV distribution system. Telus encourages the Commission to take steps to ensure that consumers have access to real choice, not unreasonably high priced options which make the exercise of choice unattractive, uneconomical and unaffordable,” reads its submission.
While its Optik TV has seen success (now with about 850,000 subscribers) offering smaller packages of channels than many, that has been done at a cost – and Telus would like to do more. “(C)ontractual obligations set by programming services constitute the greatest impediment to providing more choice to subscribers,” the western telco continued. “Many programming services which have benefitted from favourable packaging by distributors which artificially boosted consumer uptake of their service (for example by being included in large ‘tiers’ with numerous other popular services) are seeking to maintain these same artificially high revenue levels of days gone by. Such artificially inflated costs for programming services is unsustainable. Telus submits that this is where the Commission needs to focus its attention, rather than mandating new packaging rules for BDUs.”
The primary packaging rule the Commission has asked about is a mandated “skinny basic” package – a new initial buy for customers of BDUs which would be nothing but local stations, public broadcasters and 9(1)(h) must-carries. Few in the industry thinks this a good idea. The public interest groups do, however.
“The Commission’s proposal for small basic is actually anti-consumer,” reads the Shaw Communications submission. “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.”
Basically, there is very little in the way of programming costs embedded in the basic service prices of Canadian BDUs. In that price can be found the carriers’ plant and equipment costs, customer service, marketing, communications costs and so on.
The members of the Canadian Cable Systems Alliance, however, support the CRTC’s call for a small basic package, as long as it sticks to digital, since many CCSA members still offer analog cable service and the older technology makes it very difficult to shrink basic cable packages. Other than that, “CCSA considers that the mandatory buy-through portion of a BDU subscription should be kept at as low a cost to consumers as possible,” says the group which represents 115 independent communications companies. (It’s largest member however, EastLink, speaks for itself on regulatory matters.)
“Having said that, the Commission should also be aware that it is in the basic service – the service that all BDU subscribers must buy – that the BDU recovers its infrastructure costs… The Commission should therefore take into account the prospect that creation of a small, Canadian-only basic service may not result in a dramatic reduction to the cost of entry-level BDU service to consumers,” added the CCSA.
The staple product for all basic packages, fat or skinny, have always been local Canadian broadcasters (and the U.S. broadcast stations, the 4+1s). There is no doubt that local TV stations, whether independent or under control of the large vertically integrated companies, face serious financial stresses. While most submissions spoke to reducing Canadian content requirements in order to duck costs, Bell Canada made a concrete proposal (with conditions) which was, unbeknownst to both, seemingly also backed by the CBC.
Bell wants to be able to shut off its off-air TV transmitters and make all of its local stations local specialty stations. They would keep their existing programming obligations and rights to carriage – but they would also be able to negotiate carriage fees with BDUs. There are certain folks who will call this something like “a new name for fee-for-carriage”. (Ed note: Actually, a few e-mailers have already pointed this out…)
“Local television stations must have access to subscription revenues.” – Bell Canada
“(L)ocal television is clearly in structural decline. The Commission has attempted to implement a number of regulatory changes or initiatives, seeking to provide relief or additional revenue for local television (e.g., removal of advertising limits or lower Canadian content requirements). They have not worked. This is a structural issue, requiring a structural regulatory change,” reads Bell’s submission, which also said the U.S. 4+1s should be removed from the basic service, something neither Rogers nor Shaw support.
“A new approach is needed. Local television stations must have access to subscription revenues. Even with their significant scale advantage, local television stations in the US now depend on a dual revenue stream for survival. A similar approach is needed in Canada, to provide a chance for the sustainability and continued existence of Canadian local television,” adds the Bell submission.
The CBC, it would seem, is on side with Bell on this. The Corp. recommends the Commission “implement a regulatory framework that is flexible and technology-neutral by eliminating the requirement of over-the-air (OTA) transmission for the licensing of conventional broadcasters,” reads its submission. “Conventional television stations that choose not to operate OTA transmission systems should have access to affiliation fees from BDUs on the same legal basis as all other licensed services do today.”
Then, the CBC went a step further, too, saying the CRTC should “create a new funding mechanism to support the production of Category 1 local news programming. All broadcasters licensed to serve local markets would be eligible to draw on this fund. Monies for this fund would come from a new contribution by BDUs equal to 1% of BDU gross revenues from broadcasting services.”
After just getting rid of the LPIF, we’re not sure the BDUs would be down with that…
Ed note: We have three writers working on more than a dozen stories breaking down the various issues facing commissioners and the industry during this landmark process, one that could very well change the very nature of the audiovisual business in Canada. We even had a couple of original illustrations commissioned for this important CRTC hearing. We will publish new stories throughout the summer and look forward to your feedback, either in the comments boxes or in a confidential e-mail to editorial@cartt.ca.
Original artwork by Canadian artist Paul Lachine, Chatham, Ont.
