GATINEAU – Do consumers really want the ability to pick the Jenny Craig of TV packages, a.k.a. the oft-debated, ultra-lean, skinny basic package?
It has been one of the primary questions coming from CRTC chairman Konrad von Finckenstein and his colleagues over the first three days of the Commission’s hearing into vertical integration.
The idea has been bounced around for a couple of years (especially during the fee-for-carriage battles), however it has really taken hold of the imagination of the panel of commissioners this week.
In a nutshell, a mandated skinny basic package would force cable, satellite and telco TV distributors to offer a very short list of channels as their point of entry package for customers: a set of local off-air stations and public broadcasters along with those with 9(1)(h) protection such as APTN, The Weather Network and the Accessible Channel. So no U.S. 4+1s, and no other specialties would be eligible to be in the package.
The reason the issue has found its way into this hearing is twofold. 1) There is a fear that the vertically integrated media and distribution companies will alter their existing basic packages to load them up with their own specialties. A mandated skinny option would prevent that from happening and force an offer that would likely be a low-cost entry point, even though the Commission has said it won’t make any rate determinations. 2) As the whole world moves to a pick-and-pay environment for media, a skinny basic would offer a very low threshold of entry into the system for consumers who perhaps don’t want much more than what a skinny basic would offer. The Commission believes this would add choice and boost competition.
Each of the vertically integrated companies (Rogers, Quebecor, Bell and Shaw) which have appeared before the Commission this week have denied their customers want a skinny basic package. Historically, people have always wanted more video, not less – and since the beginning of cable in Canada, Canadian viewers have wanted access to American programming to go with their Canadian fare. Basic cable has always included a set of U.S. channels.
After hearing both Rogers and Quebecor dismiss the idea on Monday,, von Finckenstein and Bell Canada executives got into a bit of a verbal tussle over the idea on Tuesday. Then, Shaw shot holes in the idea Wednesday.
After claiming it has already offered a very small basic package to customers to no success, Bell views skinny basic with disdain. Citing acquisition costs, subsidies for set-top boxes, call centre costs, billing, costs of maintenance, and regulatory fees, it’s just too expensive to do when so few customers would take the package, claimed Bell’s SVP regulatory and governmental affairs, Mirko Bibic. In short, it’s inefficient.
“We maintain the positions we have had when we have discussed this two or three times over the years, that it would be an inappropriate measure,” said Bibic.
“Customers aren’t interested, the economics don’t work and the entire system is built on the way it’s developed today,” added Bell Media president Kevin Crull, in noting how packaging support has helped niche services survive when sold with more broadly-popular channels.
“On this last point, I cannot just take that down silently. You just are not being truthful,” responded von Finckenstein to Crull. “First of all, you say you can afford it, you have done it in the past, and then you are saying there was no uptake. We have now an integrated industry, we have OTT, we have a huge offering otherwise.
“Why don’t you let the customer choose? Let them decide whether they want a skinny basic or not. You have done it before, so obviously it is feasible… why is it not now and why would it be contrary to your philosophy to let the customer decide rather than making him buy a larger package which includes stuff he doesn’t want?”
Responded Bibic: “In fact, it is not economically feasible. Lots of things are tried that turn out not to be economically feasible. We tried it, there was no customer take-up and the financials just don’t work. They don’t work.”
Shaw Communications hit similar points when they faced the commissioners Wednesday morning.
Company executives noted it does offer a stripped-down basic package which president Peter Bissonnette characterized as a “chubby basic.” According to the Shaw web site, its basic is a pack of over 30 channels which includes all the OTAs, a set of 4+1s, the 9(1)(h) channels and some specialties.
“We’ve been in this business for some time and we think we understand our customers and their preferences,” said Bissonnette.
Von Finckenstein noted that Shaw has done the choosing on all the specialties in it’s bigger basic package, not the viewer, and pushed the company again on why it opposes putting basic on a diet. “The point is surely the consumer should be in charge and not you,” said the chair saying of Shaw’s packaging: “This basically says I know better than what the consumer wants.
“If you had a skinny basic, it could be up to the customer (which channels to take) beyond that.”
Shaw officials wouldn’t budge, however. “No one is coming to us asking for locals and 9(1)(h) on a skinny basic,” said SVP planning Michael D’Avella.
“Customers drive the decisions and the products and the services we deliver,” said company CEO Brad Shaw in an interview after his appearance during the hearing. “If there was an appetite where people were saying ‘give us just the educational channels and just the 9(1)(h)’s’ we’d certainly cater to that but the market just isn’t going that way.
“People are looking for more services and how they access them is in a totally different way and across multiple platforms, so if there’s a market there we’ll be there to service it.”
But what about offering customers what could be considered the ultimate in skinny basic – the ability to go a-la-carte, and pick channels one by one?
“I love where you’re going,” said Shaw. “It’s all about a-la-carte and pick and pay and choice and creating choice for customers. We’re in the process of going all digital… where things will become much more flexible in how you can offer services, but I don’t see one programming service saying ‘I want to be a stand-alone.’ Everyone wants to be together because there is safety in numbers.”
The day prior, however, Shaw’s biggest competitor out west, Telus, seemed on board with the Commission’s idea. “The main advantages of having fewer channels in basic is it propagates consumer choice about the channels that you want to get,” said Dave Fuller SVP and chief marketing officer at Telus.” So yes, many consumers will add additional channels. The point is they will add the channels that they choose to want to watch as opposed to… an extensive basic package where there are 55 channels and of which… maybe 20 they don’t want.”
Perhaps the best, most honest assessment of the idea of a skinny basic came right at the end of the day Wednesday, when Channel Zero and CHEK Media were wrapping up their appearance and commissioner Stephen Simpson asked about the independent broadcasters’ thoughts on such a spare offering.
Both companies have stations that are already must-carries and would likely be in any such package.
Said John Pollard, president of CHEK: “We would want to be on skinny basic, if it’s a possibility, but the difficulty may be in monetizing it for the BDUs,” he noted.
Added Channel Zero’s (CHCH, Metro 14 Montreal) Cal Millar: “We’re totally onside with the objective, but not sure the strategy will work.”
The hearing continues Thursday as Cogeco, CACTUS, CEP, CBC, EastLink and the CCSA appear.
