As skinny basic arrives, experts doubt consumer appeal

On the day Canadian TV providers were required to make their skinny basic options available to consumers, experts expressed skepticism about how many Canadians will sign up for the new offers and their ability to improve the trend toward cord-cutting. Drew McReynolds, an analyst with RBC Dominion Securities, said in a research note Tuesday that the new options launched by the TV providers “are designed to protect profitability and/or incentivize households to largely stick with existing channel bundles, which in some cases have been improved.” The new offers are the result of the CRTC’s move last spring to mandate TV providers to offer a basic package priced at no more than $25 per month as of March 1, alongside a requirement for companies to offer either pick-and-pay or a choice of either self-built packages or small pre-assembled packages. On Tuesday, Telus Corp.’s website was offering a $25 basic package, which did not include the optional U.S. networks, with a $5 discount for customers who chose to bundle that service with other Telus services. The company also offers both theme packs and pick-and-pay options for individual channels, company spokeswoman Liz Sauvé confirmed by email. Rogers Communications Inc., BCE Inc. and Shaw Communications Inc. unveiled their new skinny basic options earlier. McReynolds noted that while Rogers chose to introduce small packages, Bell launched a full pick-and-pay offer, ahead of the December requirement to do so. “While it is rare to see such different competitive offerings in the same television market, pricing and channel selection under both offerings suggest there will be a limited competitive impact as most households in the near-term should largely stick with existing channel bundles,” he said. Shaw’s website offered both options Tuesday. McReynolds said the new options won’t be sufficient to stem the rate of cord-cutting or to attract people who have gotten rid of TV service or never subscribed to TV at all. “On a positive note, a household strategy of skinny basic plus 'dynamic a la carte' (i.e., subscribing to channels for select shows but only for short periods of time) could gain traction,” he said. “Over time, we expect these preliminary options of the BDUs to evolve as the television industry manages overall profitability while weighing the negative impact of cord-cutting against the negative impact of cord-shaving.” Mario Mota, a TV analyst with Boon Dog Professional Services Inc., said in a phone interview the new options won’t be appealing to most customers, and that they carry a risk of backlash because some customers were under the impression they would save money with the new rules. “That’s not necessarily anything that was promised by the CRTC, it wasn’t the TV providers that said that, but people see a skinny basic, $25, they think ‘oh, I’m going to save some money,'” he said. “That was never going to happen for the overwhelming majority of TV subscribers in this country,” he said, explaining that customers who could save with the new options are those who are only interested in skinny basic or a small number of channels. “My concern here is unintended consequences. Now we’ve riled up a bunch of consumers and made them frustrated and angry, because they don’t think they’re getting the benefits they thought they were going to get out of this new regime, so that actually may make matters worse when it comes to cord-shaving and cord-cutting,” Mota said. A cause of some frustration are tactics that TV providers are using to keep people on higher-priced packages, such as not bundling skinny basic, he said. Bell spokeswoman Jacqueline Michelis and Rogers spokesman Andrew Garas both confirmed to The Wire Report by email Tuesday that the companies’ skinny basic packages aren’t eligible for bundling discounts. Mota said that companies “have the prerogative to offer any kind of packaging they want.” “I’m not surprised this is the way they’ve decided to go,” he added, though he asked whether companies that aren’t offering bundling discounts for basic service did so previously. “And if you could, and now you can’t, that raises a lot of questions, and it’s going to make customers very, very frustrated and I think it’ll probably catch the CRTC’s eye, and they’ll probably investigate and look into” why a basic package is now not available as part of a bundle, he said. Neither Bell nor Rogers spokespeople responded to a follow-up question about whether the companies’ previous basic packages were eligible for bundling discounts. Mota said tactics TV providers are using to keep people on higher-priced packages, such as not bundling skinny basic, “really frustrate consumers and customers, and I think for those customers who maybe were sitting on the fence of cancelling their TV package and cutting the cord entirely, this might push people over the edge.” Geoffrey White, a lawyer for the Public Interest Advocacy Committee (PIAC), said the industry’s response to the CRTC’s new rules “has been pretty weak.” “It’s kind of a pouting reaction… everything has been done at the last minute, very quietly, and with tons of strings attached. Installation fees, activation fees, fees, fees,” he said. White added that the “CRTC was very clear. Change was necessary, and affordability and choice were the two things that were driving the skinny basic mandate, and from what I’ve seen so far, the industry’s done a lot to minimize to sort of minimize things,” through additional fees. He said the fees as well as “tied selling” with other services are raising “red flags” for PIAC. Bell’s website stated Tuesday that customers who want to sign up for its skinny basic IPTV package must also subscribe to Internet service. Bell’s Michelis confirmed Tuesday that Bell’s IPTV packages, though not its satellite TV packages, have “always required a Fibe Internet subscription.” In a brief phone interview Tuesday, CRTC spokeswoman Patricia Valladao would not comment on specific tactics like the lack of bundling discounts, but said in a general statement that “if Canadians are not satisfied with what the service providers are offering, they should really shop around for options that are really more interesting for them, and fit their needs and their budget.” TV providers shouldn’t “take this change as an opportunity to replace business practices designed to maximize profits for captive customers with newer forms of anti-consumer behavior,” Valladao said. She added: “We are watching how they are implementing this system as of today, we’re really monitoring the industry, and we will not hesitate to act if some of the companies disregard the wish that Canadians had when they came to us and explained they wanted to pick and pay, they wanted those choices.” CRTC Chairman Jean-Pierre Blais also warned in February that the CRTC will be watching how companies implement those changes. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Charelle Evelyn at cevelyn@thewirereport.ca

As skinny basic arrives, experts doubt consumer appeal

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