CRTC imposes ‘heavy handed,’ ‘interventionist,’ consumer-friendly vertical integration rules

GATINEAU, QUE.—In a highly anticipated decision Wednesday, the CRTC took several steps to check the power of vertically integrated broadcast companies, including a ban on the companies’ ability to offer their own TV programs exclusively on new media platforms. “ entities have both the opportunity and incentive to give undue preference by providing themselves with exclusive access, on various distribution platforms, to content that they control,” the commission said in its ruling, which followed a hearing this summer with broadcasters, carriers and producers. The commission ruled that TV broadcast programming on new media platforms must “be made available to competitors as part of a licensing agreement, or other such arrangements, thereby ensuring the availability of the programming to consumers of competing distributors on fair and reasonable terms.” Concern about exclusivity has emerged in a new broadcasting environment in which all of the major broadcasters in the country are owned by major communications companies that also operate broadcast distribution, Internet and wireless services. Following the release of the decision, CRTC chair Konrad von Finckenstein told The Wire Report in an interview at the CRTC's offices in Gatineau that mobile exclusives do not make sense. “If this content is now being distributed over a wireless app, why should this content be exclusive? This doesn't make sense to us, because the effect would mean you have to buy a separate handset. You have one, but it's only with one provider,” von Finckenstein said. In what it called an effort to encourage innovation, the commission said it will allow mobile and Internet exclusives “for programs that are created specifically for new media platforms.” Other significant conditions imposed on vertically integrated companies now include requirements to carry one independent specialty channel for each of their own channels they carry, and to offer their channels on a stand-alone basis, as opposed to bundled, to other distributors. The commission also imposed prohibitions on rolling out new programs and services before offering them to competing distributors and established dispute resolution mechanisms to ensure interested distributors a fair deal in carriage agreements. In cases where an agreement cannot be reached, the commission said it may step in to determine carriage rates. Mirko Bibic, senior vice-president of regulatory and government affairs at Bell Canada Enterprises Inc., said in an interview Wednesday that the decision is heavy-handed and imposes unnecessary regulation when the CRTC has signalled deregulation. “The commission has now indicated its willingness to step in and set rates at any hint of a dispute between programming services and BDUs ,” Bibic said. “I don’t think that any provider or stakeholder in the industry should welcome a regulator intervening and setting rates in a dynamic and competitive marketplace.” Bibic said Bell will move “full steam ahead” with its multiplatform strategy and that the company will make its content available to as many distributors as possible. But the CRTC decision limits companies' freedom to experiment with content online, he said. “The inability to even try and test out exclusives, that’s another heavy handed form of regulation, especially when you have providers stepping forward saying, 'Look, we’re going to make our content available to everybody,’” Bibic said. “There may be situations where we want to test new things—let us do it. That was rather interventionist.” The commission also imposed a requirement that vertically integrated companies make their distribution packages more flexible so consumers are can purchase individual channels without having to pay for others. Vertically integrated broadcast distributors are to file reports to the commission by April 1, 2012, detailing how they have increased consumer choice. The commission said it will consider taking further steps to enforce flexibility if it is not satisfied with those reports. “With respect to the consumption of programming today, Canadians expect to be in control of what they watch, and these expectations are likely to be heightened with the ongoing transition to digital technology,” the CRTC said in its decision. “The Commission is concerned that the lack of choice and flexibility could motivate consumers to leave the regulated broadcasting system.” Michael Janigan, executive director of the Public Interest Advocacy Centre (PIAC), told The Wire Report Wednesday that the group is pleased with the decision. “We are pleased that the commission has acknowledged and determined that vertical integration brings the potential for an abuse of market power and specific action has been taken to acknowleged this,” Janigan said. The CRTC hasn't gone far enough to protect consumers, he said, and it could have implemented rules for better consumer choice, such as a cheaper, skinny basic service offering local channels and limited other programming. "While the CRTC has dealt with some issues, it has kicked the can on the effect on individual consumers. Consumers still lack power with respect to a modified slimmed down basic service, and by not making a certain determination, Canadians still lack the ability to choose their television service and price them accordingly." Another significant aspect to Wednesday’s decision is a new framework for the channel carriage agreements between vertically integrated and independent companies. The commission established a code of conduct for commercial arrangements between producers, distributors, and new media services, creating a framework that would “provide all players with a fair opportunity to negotiate key elements, such as programming rights and details of carriage,” the decision noted. For cases in which a vertically integrated company is accused of giving itself an undue competitive advantage in negotiating carriage rights, the CRTC imposed reverse onus conditions that would require the companies to prove that they did not break the rules. The provision has applied to vertically integrated broadcast distributors, but it will now also apply to them as broadcasters, the commission said. Should carriage disputes be sent to the CRTC for resolution, the contents of the dispute will be made public, the commission added. In an effort to improve the timeliness of dispute resolution, the commission imposed a mandatory mediation mechanism that will complement the previously offered optional mediation services. The commission also granted independents the security of a “standstill” provision that will apply in cases where the failure of broadcasters and distributors to reach carriage agreements could affect consumers’ access to scheduled or anticipated programming. This provision, the commission said, was designed to help protect consumers, a common theme in the 36-page decision. The commission did not give independent broadcasters everything they had asked for. The CRTC declined to impose a requirement on broadcast distributors to share valuable customer information with broadcasters. After asking companies to weigh in on the commission’s jurisdiction to impose administrative monetary penalties in cases where companies violate its regulatory framework, the commission said it agreed with Bell and Telus Communications Co., which had argued that such powers would require legislative changes. Many aspects of Wednesday’s decision will require the CRTC to conduct further proceedings to determine how they should be imposed. That leaves room for companies to argue against aspects of the decision. “Today’s decision paves the way for 12 follow-up proceedings,” Bibic said. “We go from one decision to 12 follow-up proceedings. That is basically kind of the headline, ‘Regulation begets regulation.’” The CRTC chair said the decision will lead to follow-up proceedings because it dealt with “very intricate and difficult” issues. “If you are a vertically integrated company, you have access, obviously as a distributor, to the information as a programmer, but you have your own programming arm. That information that you can obtain by virtue of distribution shouldn't be used to pass on to your programming ,” he said. “But how do you actually do it? You know, this is not that simple." Bill Sandiford, president of the Canadian Network Operators Consortium (CNOC), a coalition of small Internet service providers (ISPs), said Wednesday that the decision was “great.” "It's an excellent decision that will go a long way in terms of television distribution markets in the future,” Sandiford said, pointing to protections for independent broadcasters and a code of conduct for carriage agreements. “We're certainly very pleased with the way that it went. It's a great decision. The CRTC should be commended on doing such a thorough job on this one." Rogers Communications Inc. vice-chair Phil Lind said his vertically integrated company was pleased with the consumer aspects of the ruling. “In general, we’re very happy with the decision. It comes down squarely in favour of the customer,” Lind told The Wire Report. Lind noted that the ban on exclusive content will be good for consumers because it will ensure they don’t need to purchase packages from multiple service providers for access to programs. “The whole decision seems to reflect what was good for the consumer,” Lind said. news@thewirereport.ca

CRTC imposes ‘heavy handed,’ ‘interventionist,’ consumer-friendly vertical integration rules

Broadcast | September 22, 2011

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us