CRTC adjusts approach to deregulation of online content, opens ‘watching brief’

The CRTC has tweaked its approach toward the deregulation of online content platforms, opening a “watching brief” on over-the-top services and scheduling a more comprehensive consultation on the issue in May 2012. The commission reported Tuesday the results of the fact-finding consultation it opened in the spring about over-the-top, online content services. Although the consultation produced “inconclusive results,” the commission said, stakeholder submissions indicated several observations that warrant opening a watching brief on the issue and another, more comprehensive consultation next spring. “Given the fast pace of change in this environment, the Commission intends to maintain a watching brief on OTT , and conduct financial data collection and another fact-finding exercise in May 2012 to determine if the scenarios put forth by parties with respect to potential regulatory impacts and opportunities have materialized,” the CRTC said. “It expects that at that time stakeholders will be able to provide rigorously collected data, including public opinion research, internal customer surveys, historical revenues and expenses associated with OTT services, market intelligence, qualitative and quantitative evidence with respect to the state of closed captioning and described video for OTT programming and other such quantitative evidence, that will assist the Commission in better evaluating the impacts and opportunities offered by this environment.” The CRTC launched the consultation last spring, which it billed as a “fact-finding exercise” and not a regulatory proceeding, following requests to do so from a working group of broadcasting insiders and the House of Commons heritage committee. New media services like Apple TV and Netflix—which the CRTC noted are available at “attractive price points”—right now benefit from a new media exemption order and do not face regulations under the Broadcasting Act. Submissions for the consultation from some broadcasters, such as Shaw Communications Inc., called for Canadian content obligations to be deregulated to level the playing field with online competitors. Other companies and cultural groups called for over-the-top services to be obligated to contribute to the Canadian system as broadcast distributors are required to do. Alain Gourd, an independent broadcasting consultant and chair of the broadcasting industry working group of 35 executives, said in an interview Wednesday that the CRTC appears to have started a “journey” that he hopes will lead to a full policy review of the new broadcasting environment either by the CRTC or an expert panel appointed by the government. Gourd, who spoke Wednesday on his own behalf and not the working group, noted that the consultation scheduled for next spring will take place under a new CRTC chair, as current chair Konrad von Finckenstein will depart in January. “This notion of a journey is a very appropriate one because this path will allow us to monitor what, in my opinion, will probably end up being an important change for the Canadian broadcasting system,” Gourd said. Gourd said he believes over-the-top services will have a significant impact on Canadian broadcasting and cited American 20th century researcher Roy Amara, who said, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” Vertically integrated player Bell Canada Enterprises Inc. said Wednesday that it looks forward to the commission's consultation next spring. “We continue to believe there should be regulatory symmetry between domestic broadcasters and foreign OTT broadcasters,” Jacqueline Michelis, a spokeswoman for the company, said in an email statement. “On that basis we see the CRTC's decision to revisit the issue next spring as a positive step, and one in which we'll certainly take part.” Broadcasters, cultural groups and other stakeholders will also have an opportunity to discuss the CRTC report as early as next month when they gather for an annual, informal meeting with the regulator in the Ottawa, Ont. region on Nov. 16-18. “The CRTC will continue to monitor the evolving communications environment, and this growing activity will be the main focus of its annual consultation with the broadcasting industry in November 2011,” the commission said. The CRTC noted that its consultation did not produce “clear evidence” of findings but indicated several observations, including that the traditional broadcasting system “continues to support Canadian programming even as services emerge to deliver content to Canadians in new ways.” The report added that online and mobile video programming is growing but existing measurement tools cannot “accurately reflect trends in consumer behaviour.” The CRTC also noted there “is no clear evidence” that Canadians are abandoning the subscription TV system for cheaper, over-the-top alternatives. The commission also tweaked its language about whether over-the-top services compete with the traditional broadcasting system. In 2009, following a 2008 proceeding to review its new media exemption order, the CRTC said the exemption should be maintained to foster innovation in the sector. At that time, CRTC chair von Finckenstein concluded that “Internet and mobile services are acting in a complementary fashion to the traditional broadcasting system” and regulatory intervention would “only get in the way of innovation.” On Wednesday, the commission said over-the-top content “appears to be complementary” to the traditional broadcasting system—and that it will now keep the issue under review. The CRTC also addressed the benefits of digital media, noting that consumers have more choices and creators are “taking advantage of the digital environment to produce innovative content and to reach Canadian and global audiences,” and that Canadian broadcasters and distributors are launching their own online and mobile services. Some online programming services have established “viable business models” and are competing in the marketplace for programming rights and viewers, the commission added. As over-the-top content consumption grows, Internet and wireless networks “may encounter capacity constraints,” the report said. Although the new environment is creating uncertainty for established business models and some stakeholders have called for new regulatory obligations on over-the-top services, “they did not submit evidence of harm to the traditional broadcast system,” the CRTC said, adding that regulation could slow down innovation and competition in a global marketplace. “The Commission considers that extending regulatory obligations normally achieved through licensing to exempt undertakings could lead to unintended consequences in a global, digital environment.” Netflix Inc. did not have much to say about the report Wednesday, but Steve Swasey, a spokesman for the company, said by email: "Any decision that gives consumers more choice is fine with Netflix." The Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), which is calling for regulations requiring over-the-top providers to contribute to Cancon funds, issued a release Wednesday saying it is disappointed the CRTC is not reviewing its exemption order. “It's only right that they should pay something back to the same system they’re making a profit from,” Stephen Waddell, ACTRA's national executive director, said in a statement. The Canadian Media Production Association (CMPA) also issued a release Wednesday, saying the commission's watching brief shows it is “taking the OTT issue seriously.” sdoyle@thewirereport.ca

CRTC adjusts approach to deregulation of online content, opens ‘watching brief’

Broadcast | October 5, 2011

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