CRTC backs pick-and-pay while acknowledging ‘risks’

The CRTC has officially endorsed a move toward pick-and-pay television, though it has admitted the transition to such a model is unlikely to be pain-free. The commission proposed in a report Thursday that television-service providers be required to allow customers to choose all their channels beyond a basic package that consists of Canadian over-the-air channels, those deemed to be of public interest such as CPAC or the Aboriginal Peoples Television Network, provincial educational channels, community channels and services operated by provincial legislatures. It suggested that subscribers be allowed to choose discretionary channels one-by-one or build their own packages. “To ensure the television system fosters choice and flexibility, the CRTC is proposing that the basic television package that all subscribers receive be slimmed down and get back to basic,” the CRTC said in a press release. It was following up on an order the government made in November to look into the feasibility of a pick-and-pay television regime. Customer choice is among the ideas that will be explored in a public hearing to be held Sept. 8, which the CRTC also announced Thursday. It is part of the CRTC’s Let’s Talk TV process, which is reviewing regulations in the TV broadcast industry. In the notice of consultation issued by the CRTC regarding that hearing, it said it will also address issues such as simultaneous substitution, making it easier for non-Canadian services to enter Canada, fostering local programming and funding mechanisms for Canadian content. It will also look at the measures necessary to ensure the “availability of non-vertically integrated programming sources and ,” implementing a set-top box audience measurement system, and fostering a more dynamic marketplace for broadcast distributors, among other things. The deadline for submissions is June 25. Scott Hutton, the CRTC’s executive director of broadcasting, said the commission’s proposals come with “a variety of risks,” including higher prices, the disappearance of some channels and job losses. “There are some risks associated with it,” he said in a phone interview, “but we think we have something that can both respond to Canadians’ expectations and be able to uphold the objectives of the Broadcasting Act.” Some of those risks are that prices for channels increase and customers end up without better value than they do under the current system, he said. While the CRTC’s report acknowledged that distributors “have an incentive to maintain the current pre-assembled packaging practices since they also benefit from the stability of revenues provided by large packages,” the report does not suggest any mechanisms that would stop distributors from pricing individual channels so prohibitively that it would discourage customers from the pick-and-pay option, a fear that some observers have expressed in the past. “We’ll have a public hearing and we’ll have to look at those issues,” Hutton said, pointing out that a smaller basic package would also have a lower price. He said that while there will likely be “renegotiations and changes” regarding prices of individual channels, “there is competition. You can receive channels over-the-air to a certain extent, and Canadians have been consuming programming on other platforms, so there is that test of the market on that front.” On whether the CRTC would get involved should that competition not serve to keep prices down, Hutton said: “It’s certainly a question that we expect to have to deal with in the hearing.” He said the disappearance of smaller channels is another risk of pick-and-pay, but having an ensemble of choices, including the option of pre-assembled bundles, lessens that risk. “A lot of Canadians continue to be satisfied with what they are getting now. … We’re maximizing the number of options to Canadians by ensuring those who like bundles can continue to get them,” he said. Results of a survey done for the CRTC by Harris/Decima, also released Thursday, found 50 per cent of those polled who subscribe to a TV service were satisfied with the flexibility they have in selecting channels versus 36 per cent who were dissatisfied. Meanwhile, 36 per cent said they were satisfied with the cost of their service, compared to 44 per cent who said they were dissatisfied. The surveys were conducted with 801 Canadians between Dec. 4 and Dec. 21, with a margin of error of 3.5 per cent, 19 times out of 20, the CRTC said. Another potential consequence acknowledged in the pick-and-pay report is that some U.S. broadcasters might not allow their channels to be offered on a stand-alone basis, a situation that broadcast distributors have warned about in the past. “It’s an issue,” Hutton said. “We have to go with an open mind into the hearing, and we’ll certainly see where people stand on the public record on that issue. There are risks involved for everyone, and the primary risks are certainly with the programming services, so one can understand why all programming services, whether Canadians or American, would be concerned.” Hutton said the CRTC is willing to be flexible on elements of its proposals, and the consultation will also help determine how many Canadians would switch to a pick-and-pay service. “That is in part why we need a hearing, is to be able to develop better evidence and a better understanding of how Canadians will react to such a proposal,” he said. While the CRTC has heard from Canadians so far in the consultation process, with the launch of the latest phase, industry will now have a chance to participate. Hutton said he expects that phase will hold “very serious and frank discussions in the context of both their written submissions and the oral hearing.” He added: “This represents significant change, this represents a look toward the future, so there will certainly be a lot of debate, concern. But I think the industry knows it’s important to have this conversation.” Most telecom and media companies contacted by the Wire Report did not respond to requests for comment Thursday. Patricia Trott, spokeswoman for Rogers Communications Inc., said in an email: “We’re reviewing the CRTC’s report and we look forward to the public hearings scheduled for this fall. We believe in more choice and flexibility for customers, and we’ll continue to advocate for change so we can deliver what customers want.” Based on a description of CRTC’s report, which he had not yet seen, TV-industry analyst Mario Mota said in a phone interview that the effect of the suggested regulatory changes would not necessarily be dramatic. “If the price their channels in such a way and provide good value in bundles, it may not precipitate any significant changes in consumer buying habits anyway,” said Mota, co-founder of Boon Dog Professional Services in Ottawa. Mota added that service providers could see negative pressure on monthly revenue if enough customers try to save money by subscribing to fewer channels. It could also affect broadcasters, as some might see fewer subscriptions and, as a result, less advertising, Mota said. Some, he added, might not survive the change and “that’s not necessarily a bad thing.” “In today’s world where consumers have the ultimate choice … and you get to decide who the winners are in the marketplace, if you can’t survive in that environment then perhaps you don’t deserve to survive.” Mota said the CRTC’s position on this issue is not surprising. “I think the writing’s been on the wall ever since the government asked the CRTC to look into ,” he said. “And certainly it’s the way the industry and the marketplace have been going anyways. Whether it’s the CRTC putting out a report, whether it’s the government pushing them to do so, this is the way the world was going anyway.” Heritage Minister Shelly Glover, the minister responsible for the CRTC, issued a statement Thursday that said: “The CRTC report sets out a roadmap to greater channel choice, which is consistent with our commitment to provide Canadian families with the flexibility and choice they want.” Industry Minister James Moore, in a conference call with journalists Thursday, said that CRTC Chairman “Jean-Pierre Blais and the commission have taken up the challenge and come forward with different ways of providing consumers with more choice in the kind of products that they want to consume in television. It points us in the right direction for putting consumers first.” Kelly Lynne Ashton, an independent TV consultant in Toronto, said the business model of pick-and-pay means prices will go up. “The scenario that has to happen is that, economically, pick-and-pay does have to mean your individual services are going to be more expensive. That’s just the economics of it,” she said. “That’s the business model.” She said that the lower prices per channel afforded by pre-assembled bundles are going to be one reason why many customers will opt to keep their bundles. “When Canadians actually see the math, they’ll go for what will be the cheaper option,” she said. — With reporting and editing by Anja Karadeglija at akarad@thewirereport.ca and Derek Abma at dabma@thewirereport.ca and reporting by Peter Henderson at phenderson@thewirereport.ca

CRTC backs pick-and-pay while acknowledging ‘risks’

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