Service providers support TV choice, but not to extent suggested

In interventions submitted as part of the CRTC’s review of the future of the television, both BCE Inc. and Rogers Communications Inc. said they supported a pick-and-pay television system, though details of their submissions showed they did not favour going as far as the CRTC has suggested. In a document submitted to the CRTC as part of the commission's third phase of its Let's Talk TV proceedings, Bell recommended the CRTC mandate a pick-and-pay system for all channels not included in a basic package, noting that viewers “want to choose what content they pay to access and how, where and when they access it, but all without compromising the quality or range of programming options available to them.” Bell, which already offers pick-and-pay in Quebec, noted that such a system would result in higher prices per channel, stating that “if consumers subscribe to fewer services, the very high fixed costs in the broadcasting industry — for both programming services and BDUs — will be spread less widely.” Bell also argued against the CRTC’s proposed “skinny” basic package, saying that any savings from moving to such an offering would be “minimal,” since the price of current basic packages “reflects fixed network, equipment, and customer service costs.” It said that a skinny basic package would cause the price of existing packages to increase. “As a result, customers will either pay more for the same package, downgrade to a skinny basic package and receive less valuable programming, or drop out of the market entirely,” Bell argued. In April, the CRTC proposed 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. Shaw Communications Inc. also came out against the CRTC's proposal for a "small basic" TV package. "Mandated small basic does not respond to any market failure as there is no unmet demand for such an offering," Shaw said in its intervention Friday. "Removing discretionary services from the basic service will merely result in a decrease in the value of the service. Given the significant capital investments and other costs, there will be little downward impact on the price of the small basic service." Shaw said that the CRTC's proposal to make all discretionary channels available on a pick-and-pay basis, or through self-selected bundles, would "result in economic harm for BDUs, broadcasters, producers and advertisers. ... Most important, on average, consumers will pay more for less — including both the customers who select small basic and the customers who are content with existing offers from BDUs." Rogers, in its submission to the CRTC, said it is not currently able to provide the level of flexibility that has been proposed by the commission "without substantial and costly upgrades." However, it said it is developing an Internet-protocol (IP)-based distribution platform over the next one to two years, "which will provide us with the technical capability to offer services in accordance with the Commission’s proposal." The company said that "a new regulatory framework for television that encourages BDUs to offer more choice through smaller pre-assembled packages, pick-packs and a la carte offerings, and allows each BDU to market and sell them to satisfy their customers’ needs, would be an appropriate model for the Commission to pursue in this proceeding." Rogers added that it supports the idea of customers being allowed to build their own "pick-packs." However, it said that service providers should not have to make all channels available on an à la carte basis. Rogers' suggested a model that differed from the CRTC's proposal in that it called for new "skinny" basic service would include the four main conventional U.S. broadcasters — NBC, CBS, ABC and Fox — plus PBS. "Customers view the U.S. 4+1 services as integral to their basic service," Rogers said. "Excluding them would, we believe, be customer-unfriendly." Bell urged the commission to not to eliminate simultaneous substitution,which requires service-providers to switch a U.S. signal with a Canadian one, at the request of broadcasters, if identical programs are happening on different channels at the same time. It said simultaneous substitution “continues to be of critical importance to the Canadian television industry.” Bell added the actual value of simultaneous substitution is higher than the CRTC’s estimates of around $200 million and is “critical to broadcasters and their continued sustainability.” It said that since many substituted programs are ones with the largest audiences, they get the most interest from advertisers. “In effect, they act as revenue drivers for Canadian broadcasters, pushing advertising revenues not only to these top programs, but also to all the other parts of a station’s schedule.” Rogers also said it was against ending simultaneous substitution. "Today, OTA television stations pay significant sums of money to acquire exclusive rights to foreign programs," it said. "Any regulatory measure that would devalue these program rights would cause financial harm to the OTA television sector in Canada." Friday was the deadline for interventions in the CRCT's TV review. It is the third phase of the Let’s Talk TV consultation of the future of television, following a public consultation launched in October 2013, and a questionnaire released in February 2014. The commission will also hold a public hearing as part of the process, which will begin Sept. 8. Quebecor Inc., which operates a TV-distribution service through its Videotron division, which offers pick-and-pay in Quebec, told the CRTC in its submission that it "should lighten the regulatory burden on Canadian broadcasting undertakings" and "forego regulating aspects of the industry that do not require its intervention." Quebecor targeted regulations that require certain channels to be carried, saying: "It is not acceptable that a service that has been unable to evolve its programming to keep pace with audiences’ tastes should still continue to collect, thanks to mandatory carriage requirements, subscription fees in amounts that would be impossible in an environment where market forces operated more freely." Two groups representing advertisers, the Association of Canadian Advertisers and the Canadian Media Directors’ Council, took the same position as Bell and Rogers on ending simultaneous substitution in their submission. They also took a stance against a pick-and-pay system, arguing that it would result in less choice as some specialty channels wouldn’t survive unbundling. The Competition Bureau said in its submission that it supports a skinny basic system and unbundling, since it would “could increase competition among discretionary services and BDUs to the benefit of consumers.” The Canadian Media Production Association said in its submission that the effect of unbundling depends on how it is carried out. It said that if pick-and-pay “were to provide the 'right' mix of choice, affordability and flexibility in packaging options,” it could result in customer satisfaction and reduce cord-cutting. “If done wrong, however, we fear it would not deliver as much choice and value for money as consumers hope for, and would undermine support for Canadian programming and jeopardize jobs in the industry,” the CMPA said. It also said it was concerned a skinny basic could lower broadcast distributors’ revenues. “This is because consumers might choose to subscribe simply to the skinny basic to access their local services and then turn to currently non-contributing, exempt broadcasting services like Netflix to fill out their programming choices,” the CMPA said. Stingray Digital Group Inc., which owns 100 Galaxie music channels said it was “very concerned” about the effect a skinny basic system would have on its business, arguing that it is “vital” for its channels to continue to be widely distributed. “Since launching Galaxie, our business model is based on the widest possible distribution at a low cost — and our commercial arrangements have all consistently reflected this approach,” it said. “A change to this approach at this stage would undermine the very foundation on which Galaxie’s success is based.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and reporting and editing by Derek Abma at dabma@thewirereport.ca

Service providers support TV choice, but not to extent suggested

Broadcast | June 27, 2014

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