THE INCENTIVES FOR THE great, big vertically integrated Canadian cabletelbroadcellcasters to act unfairly towards everybody else has become too great to ignore and new protections against potential perils are needed, say many companies in their submissions to the CRTC ahead of June’s hearing into vertical integration.
(Editor’s note: This preview originally ran on April 29th. We’re re-running it here as a preview of the hearing, which gets under way Monday in Ottawa with Rogers first up. As usual, Cartt.ca will be there. But if you can’t be there, it will be streamed live on cpac.ca – and available for replay the following day in the channel’s online VOD portal.)
Of course, the big entities whose very creation caused this hearing to be called in the first place, say the rules in place now will work just fine and no one needs to worry about them. Instead, we need the regulatory flexibility to compete against Netflix, Google, Apple and so on.
Evoking some of its legendary, long-ago complaints about big, bad, Bell, Rogers Communications’ submission comes down on the side of those wanting additional protection. Noting the new Bell/Bell Media and Shaw/Shaw Media hold a 33.5% and 32% share, respectively, of the TV viewing audience in Canada, Rogers’ submission said: “We are concerned that without the implementation of certain regulatory safeguards, vertically-integrated entities that own and control substantial broadcasting assets may engage in behaviour that, intentionally or not, will unfairly inhibit competition and harm Canadian consumers. We are, therefore, proposing that the Commission adopt several measures, including a prohibition on the acquisition of exclusive program rights and a Rights Holder Code of Good Practices designed to prevent vertically-integrated entities from abusing their market power.”
Independent broadcaster Pelmorex, owner of The Weather Network and MétéoMédia, went some steps further in its application, saying it’s far more concerned than it was back in 2007 when the CRTC went through a (similar-in-subject-matter) Diversity of Voices proceeding.
Then, it was worried about the market power of the big BDUs. Now that they are all married to big broadcasting divisions, too, the weather company’s alarm level has been raised. “Many of the benefits of an increased reliance on market forces in place of ex-ante (before the fact) regulation will now become distorted because of the total domination of the broadcasting industry by a few vertically integrated distributors,” reads its submission.
Pelmorex calls for genre exclusivity to be maintained; for access and linkage rules to stay in place; strict regulation over the data generated by digital set top boxes; that reports on penetration of BDU-owned channels and independent ones as well as expiry dates and terms of specialty affiliation agreements be filed; and that ad avails on foreign specialty services be dedicated to independent broadcasters.
“Access and genre exclusivity are not enough. New rules encouraging subscription to independent services are needed to neutralize the natural tendency of vertically integrated distributors to promote their own services,” said Pelmorex in its submission.
Unshockingly, Bell Canada’s submission has a differing point of view, noting vertically integrated companies are a good thing as they stabilize and strengthen media companies, generating content for Canadians and generally meeting the objectives of the Broadcasting Act.
The existing regs work well and proposed new solutions to fix what bad things some think will happen “are flawed, unnecessary and counter-productive,” reads Bell’s submission.
The company also opposes the moratorium the Commission has imposed on exclusive content deals saying it conflicts with good public policy and acts against the normal market forces (Telus, as we wrote this week, has another opinion).
However, if the Commission insists in carrying forward this moratorium (which some of the creative groups, like the Writers Guild, also say should be enforced permanently), Bell says that it should apply across the board – everything except to traditional TV channels. “(S)hould the Commission impose a permanent ex ante prohibition on exclusives held by traditional vertically-integrated companies, then it must be employed symmetrically, i.e. its application must not be limited to traditional vertically-integrated players only, but rather apply to all broadcasting industry stakeholders,” says Bell. “The moratorium would cover all content intended to be distributed on new media platforms and which also first aired on conventional or specialty linear television.”
So, for example, Global TV would have to share the on-line rights of Survivor with CTV.ca, if they asked.
Count Corus Entertainment as another supporter of integrated media companies, as it noted bigger is the only way to compete in a global media world, one where the company has had some success (providing content to multi-platform portals KidsCo in Europe, Asia and Africa and to qubo in the U.S.).
Despite the constant change and complaints though, “the Canadian broadcasting system is stronger today than it has ever been.”
Corus, (controlled by the Shaw family, which also owns Shaw Communications/Shaw Media), advocated six aspects that should be considered in any new approach to policy and regulation:
• Embrace the merits of fostering a Canadian-owned but globally competitive industry;
• Increase the probability of success of the Canadian media industry by encouraging the creation of larger and stronger enterprises;
• Develop a Canadian industrial strategy for the production of Canadian content;
• Recognize that private media enterprise success is what will lead to a stronger cultural system, not the current system of progressive fees, conditions and tariffs;
• Allow licensed Canadian broadcasters to experiment;
• Recognize that our small market requires that government continue its support of the research, development and implementation of intellectual property.
The company noted (as it has in other submissions) that Google spent as much in R&D ($1.5 billion) in 2008 than the entire Canadian radio industry can earn in revenue in a year.
“Our media environment is changing. The Commission knows that. However, it must also understand that its ability to regulate and protect the domestic market is limited. We need to come up with a new mix of incentives, supports and protections to ensure a continued vibrant Canadian presence,” reads the Corus submission.
Building on the sentiment that the CRTC has lost its ability to protect the Canadian marketplace through its regulations, Shaw Communications called for a reduction in certain regs.
“The modern – and still evolving – highly-competitive communications environment demands an ex post (after the fact) regulatory framework with reliance on a strengthened undue preference regime. In recognition of the realities of the digital environment, the Commission should further reduce the regulatory burden imposed on Canadian BDUs and broadcasters,” wrote Shaw’s regulatory staff.
“The Commission must further develop the policy framework to address the fact that non-Canadian over-the-top service providers (OTTs) are broadcasting in Canada. Shaw thrives on competition and we have consistently advocated choice and value for Canadian consumers. However, to meet this objective, we require symmetrical rules. To the extent possible, the Commission should take steps to eliminate or mitigate the complex set of regulatory requirements and obligations that currently apply asymmetrically to licensed Canadian programming undertakings and BDUs.”
Er, no, say the Independent Broadcasters Group (a regulatory partnership of independent broadcasters ZoomerMedia, Ethnic Channels Group, Stornoway Communications, TV5, APTN, Fairchild Media, and Channel Zero). With 69% of the combined TV services in the hands of Bell, Quebecor, Rogers and Shaw, the level of vertical integration in our industry exceeds what generally makes competition regulators worry.
The way it is now, small broadcasters can’t even launch new channels. “The industry has developed so that a small number of vertically integrated BDUs, each on their own, now possess sufficient market power to prevent the launch of new Canadian services, which, given the size of the Canadian market, require national distribution in most markets to succeed. What is more, these BDUs have every incentive to do so since they will be competing directly in their role as programmers and broadcasters with any new services that they do not own,” writes the IBG.
“Remedial measures are required to address the huge imbalance between vertically integrated BDUs, and non-vertically integrated broadcasters.”
However, the group of companies likely most concerned about the vertical integration of carriage and broadcast are the members of the Canadian Cable Systems Alliance (CCSA), the group of over 100 independent cable and telecom companies spread across Canada who not only rely on Bell, Rogers, Quebecor and Shaw for programming, but also for signal transport as most CCSA members are rural, facilities-based carriers.
A brand new policy framework to address the risks of anti-competitive behaviour, before they can happen in the market, is a must, it says.
“Without such a policy framework in place, the dominant, vertically integrated enterprises that control content, signal transport systems and consumer-facing distribution systems have the incentive and the ability to raise prices and – through pricing and other commercial terms – to effectively deny access to content to both rival distributors and the Canadians they serve,” wrote the CCSA policy team.
With control of those inputs, the vertically integrated enterprises have the incentive and ability to reduce and, in smaller markets, completely eliminate competition from rival BDUs. In the long term, the resulting absence of competition would disadvantage Canadian consumers.”
The hearing gets under way June 20 in Ottawa.
