Distributors asking for VOD regulatory flexibility to compete with over-the-top TV

Canada’s incumbent television distributors are telling the CRTC they need more regulatory flexibility for their video-on-demand (VOD) services to better compete with over-the-top video providers such as Netflix and Apple TV. “Our goal is to ensure that the rules that govern our video-on-demand service are not too onerous and that we have the flexibility to provide similarly type services to the competition that is coming in over the Internet on the unregulated platform,” Pamela Dinsmore, Rogers Communications Inc.’s vice-president of regulatory affairs for cable, said in an interview. In submissions to the CRTC on Oct. 25 for its consultation on requirements for video-on-demand services, Rogers and Shaw Communications Inc. are arguing for lighter regulation to compete with unregulated multinational companies that provide content online—particularly less onerous Canadian content contributions. “ew global competitors, like Netflix, Apple TV, Sony TV, and Google TV are actively entering the Canadian marketplace and seeking to exploit any content, advertising and customer acquisition opportunities they find,” Jean Brazeau, Shaw’s senior vice-president of regulatory affairs, wrote in the company’s submission. “They are using their scale and program relationships and their dominance in the broadband video space to offer unlimited supplies of movies and television programming to Canadian consumers on an unregulated basis.” Over-the-top services like Apple TV, Netflix and Google TV deliver on-demand programming to TVs through online connections that go “over the top” of broadcasters. Some distributors say the playing field remains uneven when Canadian players must compete with unregulated, foreign multinationals online. Rogers said in its submission that it is required to pay a contribution to support Canadian programming. The company says it contributes to 2.5 per cent of its VOD revenues and 2.5 per cent of its cable revenues—a requirement it calls “double taxation.” “Ideally, we don’t believe there should be any double taxation at all on any revenues,” Dinsmore said. “We should only pay once, not twice, on any revenues.” Although Rogers says it is not against the contributions in principle, the companies say that the regime is unfair because foreign, over-the-top competitors don’t pay any fees. Last March, the CRTC put into place a new regulatory framework for video-on-demand services. Under the new framework, the commission allowed advertising on VOD services but said that they should “be permitted only in programming acquired directly from an unrelated licensed Canadian broadcaster or from a related broadcaster that has also acquired the linear rights to the program.” Ann Mainville-Neeson, Telus Corp.’s director of broadcast regulation, said in an interview that the commission gave VOD providers flexibility in its new framework. “For the time being, I think the commission has struck a reasonable balance and has at least taken note of over-the-top competition,” Mainville-Neeson said. But the CRTC does not regulate new media, and Mainville-Neeson acknowledged that foreign, over-the-top players do not have to incur the same costs as Canadian VOD providers. “While there are definite social benefits to things like improving accessibility, it is a cost to Canadian companies which is not borne by those foreign players,” she said. Rogers also asked the commission to maintain some of the programming flexibility it now has with its VOD service. Dinsmore said the company can offer additional programming on its VOD platform, like a Howard Stern package, that it does not offer through its traditional linear television offerings. “We just want to be sure that, to the extent our unregulated competition is offering programming that we’re not offering, we can still go out and create these kinds of packages,” Dinsmore said. But Carmi Levy, an independent technology analyst, said in an interview that Canada’s incumbent carriers maintain the upper hand over foreign competitors. “The carriers are at a particular advantage at this point in time because in many respects they are the gatekeepers for these services for most consumers,” he said. “As we’ve already seen earlier this year, Rogers has gone through a round of whittling down its bandwidth caps for its subscribers, not coincidentally around the same time that Netflix was announced.” Last July, Rogers reduced the download cap for its “Lite” service from 25 GB to 15GB. Some industry observers speculated that the move came in reaction to the announcement that Netflix planned to enter the Canadian market and offer unlimited movie and television downloads for $8 a month. Levy said the CRTC could decide to regulate over-the-top competitors down the line but added the commission will always lag behind technological innovation. “The CRTC has never met a medium it didn’t want to regulate at some point,” Levy said. “I think it’s inevitable that eventually the agency will weigh in on regulating content that is delivered over the Internet.” Earlier this year, the commission established new reporting requirements for new media undertakings that are affiliated with traditional broadcasters. The CRTC is also establishing a new media working group to help develop standards for the reporting of new media revenues and expenditures. The working group is expected to issue a baseline report to the commission by the first quarter of 2011. Mainville-Neeson said it would be impossible for the CRTC to regulate foreign online services like YouTube and Netflix. “To the extent that these new players are coming in, and cannot really be regulated by the commission because they are not Canadian, I think instead the commission needs to recognize and take appropriate measures with respect to the Canadian companies,” she said. On June 4, 2009, the CRTC decided to extend its new media exemption order for an additional five years, leaving the digital media space exempt. Under the exemption, audiovisual content made available on mobile devices or delivered on the Internet cannot be regulated under Part II of the Broadcasting Act, which outlines the CRTC’s powers to regulate Canadian broadcasting and puts in place Canadian content, exhibition and spending rules. “While broadcasting in new media is growing in importance, we do not believe that regulatory intervention is necessary at this time,” CRTC chair Konrad von Finckenstein said in a release last year when the new media exemption was extended. “We found that the Internet and mobile services are acting in a complementary fashion to the traditional broadcasting system. Any intervention on our part would only get in the way of innovation.” But Rogers maintains that unregulated new media services are competing on an “uneven playing field.” “The requirements imposed on licensed VOD undertakings under the current VOD Policy have created an uneven playing field,” Dinsmore wrote in Rogers’ submission. “Licensed undertakings are finding it increasingly difficult to compete with these ‘over-the-top services’ that have no regulatory obligations.” jmigneault@thewirereport.ca

Distributors asking for VOD regulatory flexibility to compete with over-the-top TV

Broadcast | October 28, 2010

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