WHILE SAYING HIS company has not yet decided on a course of action, Bell Canada’s regulatory chief says thanks to the CRTC’s new vertical integration policy, he wants to start over when it comes to our broadcasting laws and its regulation.
(Explained here, the new policy: prohibits exclusives on linear TV content when it comes to mobile and online platforms; bans tied selling of specialty services ensuring BDUs can buy them from programmers one at a time; calls for consumers to be able to buy more specialties one at a time in a pick-and-pay format; outlines a specific code of conduct for vertically integrated companies when negotiating with other companies to prevent anti-competitive behaviour (including a standstill provision so that consumers don’t lose access to their TV channels; and new linkage requirements to protect independent broadcasters.)
“The one thing I think this decision crystallizes in my mind is I will become a staunch advocate of the need to take a deep look at the Broadcasting Act, modernize it and reassess the role, structure and mandate of the CRTC because I don’t think the Regulator should intervene, especially on price, in a well-functioning marketplace,” said Mirko Bibic, SVP of regulatory and government affairs for Bell Canada.
The Commission’s new vertical integration policy (which is not really complete pending a dozen new public processes the decision has spawned upon its Wednesday afternoon release) is a heavy-handed attempt at price regulation and an innovation-killer, added Bibic.
“I think it’s always unfortunate when in a fast-paced, innovative industry like ours… a regulator decides that it wants to intervene in a heavy way and meddle in relationships between suppliers and their customers when there is no evidence there’s a problem,” he said.
Insisting there have been few complaints about carriage and pricing since Shaw Communications bought Canwest Global and Bell bought CTVglobemedia, this new policy will create massive problems where there were none. “Now, at the whiff of any dispute between a programmer and a BDU, one of the parties can raise their hand and the CRTC will intervene and set the terms and conditions. That’s called price regulation and the CRTC had said it was not in the business of regulating price – but now they are.
“It’s completely unnecessary and the heaviest form of regulation possible in any industry.”
However, one of the other “big four” vertically integrated carrier/broadcasting companies, Rogers Communications, is rather pleased with the Commission’s release.
“We think it’s a big victory for the consumer,” Rogers’ executive vice-president, regulatory, Phil Lind, told Cartt.ca. The option of making more channels available on a pick and pay basis is what Canadians have been asking for, for years, for example. Plus, the new policy ensures that in any carriage dispute, customers won’t bear the brunt of the shock since channels can not be removed by either party as negotiation, mediation or arbitration is ongoing.
“You can’t withhold service now,” noted Lind. “And this, combined with vertical integration, totally negates the rationale for fee for carriage. It’s a very strong signal that the reasons for fee for carriage are now over.”
The decision is a victory for Rogers in that the CRTC’s new policy adopts what Rogers was asking for when it comes to content exclusives. Rogers proposed that linear TV content must be made available to all carriers on any platform, while ancillary products can be exclusive, and that’s what the policy says. There was much concern during the hearing that customers would have to buy multiple mobile subscriptions to access the video content they wanted while on the go simply because various companies own the rights to different content.
Lind called the new exclusives provisions “the fairest way to do it… Having to have three different handsets from three different service providers is just crazy.”
Bell’s Bibic, on the other hand, worries this ban on exclusives of linear TV content will crush any attempts at new platform experimentation. Besides, the threat that Bell would withhold content is a red herring since the company’s goal is to monetize its content any way it can, not hold it back.
“In terms of exclusives, we want to sell our content because we want to make money… We want to monetize it,” said Bibic. Bell Media’s offering of its content on all platforms “is good for consumers. We don’t need a regulator to tell us that,” he continued, “but a regulator telling all parties that they can’t ever consider exploiting a piece of linear content exclusively online or on mobile, in the absence of any evidence that that experimentation will cause any problems, is not good because now no one can even try to innovate or experiment even temporarily to differentiate themselves.”
For Michael Hennessy, the senior VP of regulatory and government affairs at Telus, Bibic’s rationale is a bit disingenuous as he says coming to an agreement to offer Bell Media’s CTV Mobile channels to Telus wireless customers has so far proven impossible. However, Hennessy is hoping the vertical integration policy will now fix that.
“The Commission really has put the most emphasis I’ve ever seen in a broadcast decision on issues of consumer choice, access and affordability,” said Hennessy. “It’s a complete affirmation of the consumer’s right to access content on any screen without being forced to switch to a more costly service.”
As for the CTV Mobile content, now available just on Bell Mobility and Bell-owned Virgin, “I think what it will do is bring everybody back to the negotiating table,” he continued. “(This) will put us back in a new round of very productive negotiations.”
“Telus’ position on this continues to be sheer nonsense,” countered Bibic. “The Bell Media mobile TV offer… has been made available to everyone and it has been made available to Telus. They may not like the price, because of course everyone wants to pay less, but if Telus were less concerned about scoring points in the media or before the Regulator, this would have been done long ago.”
(Ed Note: As for the other two of the “big four” vertically integrated companies, Shaw Communications and Quebecor, we’ve heard from sources who have chatted directly with their regulatory folks that it appears Shaw will come out in favour of the policy while Quebecor will not. We asked for interviews with executives from each of those companies and while Quebecor declined saying they needed time to digest the decision, Shaw did not get back to us prior to deadline.)
WHEN IT COMES TO THE smaller, independent, and non-vertically-integrated companies in the industry, the wire owners like the new policy, while the programmers do not. The Canadian Cable Systems Alliance, which represents about 100 independent Canadian BDUs, is satisfied with the new policy while the independent broadcasters used terms like “thin soup” and “crumbs” to describe the document they say falls well short of helpful.
“We think the CRTC did an excellent job,” said the CCSA’s primary regulatory consultant Harris Boyd. “On the pricing side, in providing guidance to what are ‘reasonable’ rates, they went further than we expected or even proposed with the criteria in there to help determine what would be reasonable and what wouldn’t.”
Within the new code of conduct, Boyd was pleased with the prohibition on tied selling, too, “which means all services have to be made available on a stand-alone basis,” he said. The fact the policy says there can be no minimum penetration or packaging requirements demanded by specialty channel owners, which would have meant “letting other people determine how you make your offers to customers,” is also a good thing, said Boyd.
(Ed Note: According to sources, both the CCSA and Cogeco Cable have filed, or are prepared to file a complaint against Bell Media’s proposed carriage agreement for all 29 of its specialty channels, one that 140 BDUs have already signed, says Bell. This agreement is reportedly a 10-year long demand, calls for a signing fee and sizable rate increases for all channels say sources who asked not to be named. It will be interesting to see how this new deal fares under the new policy should Cogeco, the CCSA and any others appeal to the Commission for help.)
Bell’s Bibic noted that 140 completed agreements shows the deal is, in fact, a good one, asking: “Wouldn’t you say that’s evidence the market is working?”
Among the small broadcasters, the policy has left a bitter taste. While the companies are pleased the linkage rules will seem to benefit them (VI companies now have to carry three category B services for every one of their own and at least one has to be from an independent), they are less than confident even that new rule will be that helpful, overall.
“I guess when a few crumbs fall off the table and you’re starving, you should just eat them and be glad they fell as compared to complaining the whole loaf didn’t land on the floor,” said Cal Millar, president of Channel Zero (owners of CHCH, CJNT, Movieola and Silver Screen Classics). “The new three to one is better than nothing… but if you can lump in every other language to get your bases covered in terms of carrying independents, it’s not going to do anything,” he added, explaining the new policy’s wording doesn’t mention the language of the market.
“I can’t imagine they wrote it that way,” he said.
But what really has the independent broadcasters angry is the Commission ignored their pleas for ex ante rules and instead opted for strengthened dispute resolution, or ex poste. Small broadcasters are always loathe to drag the big BDUs before the CRTC because they fear retaliation, even if they do win. They would have preferred some hard and fast up-front regs.
“We said to the Commission ‘don’t put us in the position where we have to spit in the eye of our customer and come to you and then even if we win, they find some way to hurt us after the fact. It’s hard for a category B to avail itself of dispute resolution’,” said Millar. “It’s really nice that you can wear a new suit to your own execution and you can enforce the rules to make sure you’re allowed to buy one, but I don’t think it will change the outcome.”
Added Bill Roberts, president of ZoomerMedia’s TV division (Vision TV et al): “It’s one thing for Quebecor to launch a complaint against Bell and the behemoths go up against each other. It’s totally different for a small broadcaster who is trying to launch a new service or promote an existing service to complain about one of its largest three or four customers.”
However Roberts does appreciate there is at least a provision where his channels can’t be taken down if there is a carriage dispute. “Another bone in this thin soup is that the Commission clearly recognizes the importance of independent broadcasters… they do say that when there is a dispute with the CRTC a standstill will kick in the moment you register that dispute. That’s helpful.”
Overall, however, “the policy is hugely insufficient and not very inspirational with regard to the integrity of diversity of ownership and diversity within the Canadian broadcast system.”
