CRTC has to begin preparing for its own irrelevance

As the Canadian Radio-television and Telecommunications Commission began its two-week hearing into television policy on Monday, the various interest groups began planting their self-serving stakes. Google doesn’t want YouTube to be regulated by the commission. The Ontario government and others want the CRTC to force Netflix and similar services to contribute to Canadian content. And funds like the Canada Media Fund and Shaw Rocket Fund want to ensure they don’t lose their funding.

It’s all so predictable, which makes sitting through hours of these presentations so boring. But, despite chairman Jean-Pierre Blais’s best efforts, we’re not getting to practical solutions here or any concrete idea of what TV is going to look like in 10 years or even five.

The CRTC’s Communications Monitoring Report shows that the adoption of Netflix alone in Canada is on a dramatic rise. Now almost a third of English-language households have subscriptions. But this hasn’t resulted in a dramatic drop in cable and satellite subscriptions. About 85% of Canadian households have some sort of regulated pay TV subscription, either through cable, satellite or IPTV (Bell Fibe/Telus Optik etc.). The percentage is falling, but not fast enough to panic. At least not yet.

As technology evolves, the difference between YouTube, Netflix and Bell TV becomes more and more irrelevant from a regulatory perspective. Internet-based television connections like Bell Fibe use the same data links to send TSN’s five feeds as they do to send House of Cards and that latest cat video. At this point, we could deliver all television services in Canada to most consumers via the Internet. We have the technology to do that.

Bureaucratic momentum

The biggest reason we haven’t moved everything online is bureaucratic. And not in the sense of regulation (though that’s part of it), but in the sense of having large media empires like Bell, Shaw, Rogers and Quebecor, that own the exclusive rights to high-value programming and deliver it through the regulated system because the regulated system pays them for it and consumers haven’t been too tempted to change that.

So long as the CRTC imposes a 5% tax on cable revenues that are to be redirected to Canadian content (including community television channels), and forces content channels to devote certain parts of their schedules and certain percentages of their revenue to Canadian content, there will be an incentive to move more content out of the regulated system and onto an unregulated one. And eventually we will pass that tipping point where there’s no must-see TV on the regulated system and consumers start abandoning it in droves.

Fortunately for the CRTC, it has time. It can prepare for this. But it has to decide now which way it will go: expand its reach to include purely online forms of video delivery, or contract its reach to eventually get out of the TV regulating business completely.

You can’t regulate Internet content

There have been some cases for the former that try their best to pass the sanity test (Jason Kee, Public Policy & Government Relations Counsel at Google, asked rhetorically if the CRTC would start regulating animated GIFs, too). Proponents of regulatory expansion say the CRTC should only regulate video that is sold, not stuff put on YouTube for free. They say there should be a minimum revenue before regulation kicks in. They say we should focus on companies like Netflix instead of trying to regulate all video.

But there isn’t really a way to do this sanely. Not without censoring the Internet, or dissuading companies like Netflix from making their videos available here, or forcing them to blackout their videos to Canada for fear of being taxed. Or creating some sort of grey market for content, where some content is legal and other content is illegal. Or creating a chill among all content creators in this country. Or just pissing off the Canadian public.

(And the federal government didn’t waste any time making it clear that it will not support any move to tax Netflix or YouTube, with heritage minister Shelly Glover issuing a statement Monday evening.)

The CRTC’s New Media Exemption Order is a policy decision in which it has convinced itself that it can regulate content on the Internet but simply chooses not to do so. It is trying to make rules out of de facto reality to maintain the illusion of control. And while it can control the online activities of companies it already regulates like Bell and Shaw, it can’t control Google, Apple and Netflix without prompting a war that might just end in those companies abandoning our country.

So the CRTC has little choice but to maintain a hands-off approach to Internet content. And that means that eventually, maybe five or 10 or 20 years down the road, it will have to take its hands off television content as well, because there won’t be any difference between the two.

The CRTC needs to start now to plan for the day when television regulation becomes irrelevant. while not allowing the telecom giants to abuse their power in the meantime.

It’s taking steps in that direction, proposing relaxing rules for specialty channels and third-language services, and giving consumers more choice in terms of channel selection. And it’s trying to find ways to encourage more competition for cable TV providers, by extending an exemption order so that smaller players like Colba.net and VMedia can set up TV distributors in big cities using IPTV without needing a licence first.

Cancon’s future

But it faces a bigger challenge in determining how to promote Canadian culture in the future. So much of the Canadian television industry is based on regulated transfers of money, from broadcasters and distributors to production funds to independent producers. That system will eventually collapse or evaporate, and we need to find a replacement.

One possibility is by doing something like taxing Internet access and sending that money to the federal government or a fund like the Canada Media Fund (which is already funded in part by the government anyway). But that creates a system where one government-appointed body acts as the gatekeeper, deciding what Canadian content is worth supporting. It discourages competition and innovation.

Or the CRTC could do nothing, and let Canadian video content stand on its own with little support from the broadcasting system. This could result in Canadian media giants collapsing or being taken over by larger U.S. giants. We could lose a large part of our identity.

It’s a scary thought for the industry, and those champions of Canadian content, but I haven’t seen a viable long-term alternative.

The CRTC’s future

I’m not saying the CRTC will cease to exist. It will still have a vital role to play, so long as there are aspects of telecommunications that need regulatory help. Radio is still broadcast through scarce radio frequencies which need to be regulated, though they too will eventually move to Internet-based distribution.

Internet access needs a regulator so long as there’s a finite number of cables reaching into our homes. And though the technology used to deliver it bears little resemblance to what it was at first, the telephone is still a tool we use regularly and will be with us for some time.

The CRTC has a job to do, to ensure that the TV industry plays fair with itself and keeps the best interest of consumers, workers and the Canadian public in mind. But it also has to look forward to the day when it has to decide to stop regulating the unregulateable and focus on where it can make a difference for the better.

But the commissioners are only human. So we — the industry, the public, the government — have to be part of that discussion. Through our comments and guidance, we must help the regulator build this road toward the future where choice is infinite and the only limit to content is creativity and no one but us can decide what we can and cannot watch.

20 thoughts on “CRTC has to begin preparing for its own irrelevance

  1. Dilbert

    I’m going to add a longer comment later (there is so much to say about this one), but I think the basic concept is this: Everything the CRTC does is like a robotic fish trying to swim up Niagara Falls. It’s artificial, it’s mechanical, it’s unrealistic, and in the end it goes against the very flow of the will of the people. The CRTC has been effectively irrelevant for years already and it’s not going to get any better.

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  2. Mortemer

    I watch both Netflix and YouTube on my Apple TV.
    Netflix Canada is already crippled due to distribution rights held by other Canadian entities so the content being offered is already limited compared to the US Netflix. Not sure how much more regulation is needed.
    I subscribe to multiple YouTube channels that I surf and watch content regularly. The selection of channels and video quality on YouTube has improved over the years and now most are available in HD. Regulating YouTube channels is a nonstarter so not sure why the CRTC is even wasting their time discussing this.
    I would be more interested if I was able to subscribe to a basic cable package offering all Canadian and US networks in HD only (skip the SD crap) bundled with unlimited high speed internet (30 Mbps download speed or higher) for Netflix, YouTube watching and some on line gaming using my PS3 for a “reasonable” price. Unfortunately this is not possible today since the cable companies bundle multiple services together which cost a lot and do not address my needs.

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    1. Fagstein Post author

      Netflix Canada is already crippled due to distribution rights held by other Canadian entities so the content being offered is already limited compared to the US Netflix. Not sure how much more regulation is needed.

      Netflix’s inability to offer some programming in Canada isn’t because of regulation.

      skip the SD crap

      Not everyone has HD televisions.

      Reply
  3. Randall

    Moving all television content to the internet is find is you live in a large city and have a high download speed with no caps but if you live in a rural area in the country, you lucky in many places to get up to 3 mbs and are capped at 20 or 30 GBs a month. I usually just watch shorter videos on youtube or other sites and maybe 2 or 3 movies a month and most of my usage allowance is used up so watching all television content online is out of the question.

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    1. Fagstein Post author

      if you live in a rural area in the country, you lucky in many places to get up to 3 mbs and are capped at 20 or 30 GBs a month.

      That’s one of the technological limitations that’s going to change eventually as wireless and wireline broadband expand into more areas. It’s not going to stay that way forever, and when it does then the difference between “TV” and “Internet video” is going to become more semantic than anything else.

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      1. Dilbert

        Steve, you can forget wireless as a viable broadband alternative. While LTE and similar types of wireless do offer impressive burst speeds, the limits on the number of simultaneous users because of radio frequency bandwidth limitations means that it’s never going to be the true alternative.

        Moreover, as the demand for high speed streaming type video continues to pick up, broadband because even less attractive. It would get to a point where cell companies would need to have one cell antenna for about every 50 homes, which would not be economically viable at all.

        The real long term solutions will be in getting fiber to the house for these remote locations. Dropping 1 to 4 fibers in place of the current phone line will allow companies to bring 1 gig connections to these people which will satisfy the bandwidth needs for the long foreseeable future. Wireless options just don’t cut it when compared to the true solutions. The only question will be “who pays?”, and that I think is a case of the home owner needing to foot at least part of the bill for these significant increases in service levels. For that matter, perhaps the companies that choose to offer services via these fibers could get together as a group and pay for the last mile to be created, so they can all compete.

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  4. Craig

    It makes me think – with so few buyers for stations these days, should US or other foreign companies be allowed to enter the market?

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  5. CD

    Too late. The CRTC should have been preparing for its own irrelevance the day Al Gore invented the internet. Now the only thing the CRTC does is try to kill over-the-air and cable TV and radio by imposing thousands of license restrictions while their competitors on the internet around the world broadcast whatever they want.

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  6. Ragin' Ronic

    This is why I’m believing that, within the next 15=20 years, the Canadian and American telcomedia industries will soon be unified.

    If we take a look at the retail industry here in Canada, a lot more U.S. retailers have been/are setting up shop here. It started with Walmart, and has accelerated over the last few years, especially with the collapse of Zellers, and is spreading to the high-end retail world, with Nordstrom coming here.

    While there are obvious philosophical and cultural differences between here and the U.S., things are, at the subtle level, starting to blend together. The idea of Canada’s own identity kind of fell apart with the proliferation of the Internet. Make no mistake, I like seeing Canadians be successful in what we pursue, but having that success be protected by regulation, sadly, kills chances of success, and makes it seem like those involved in the telcomedia industry are making their money by WAY too many private and public financial subsidies, and that makes those involved a bit….lazy.

    If those subsidies weren’t so prolific, you’d see Canadian actors and actresses step up their game, and drastically improve their efforts, to where they’d become more well-rounded. The regulations they live under makes them not rock the boat too much, and they hold back their true potential in what they do.

    In terms of sports TV, that seems to be the only major revenue stream that Bell and Rogers support their operations on. They’ve basically divided up all major pro sports rights between them, in what I call ‘sports rights hoarding’. And what do they spend that money on? Lobbyists. People that go to the CRTC to protect their executive employers at Bell and Rogers from having to truly compete against each other. And to also keep the border closed to channels like NBCSN, CBS Sports Network, Fox Sports 1, and the big boy, ESPN.

    Personally, I want competition in sports TV in Canada to be an honest one, where TSN and Sportsnet grow the visibility of Canadian sports, and not rely on U.S. sports rights as a crutch, because TSN and Sportsnet don’t want to play off their own strengths. It might be better if TSN, Sportsnet, Fox Sports 1, CBS Sports Network, NBCSN, and ESPN were offered on both sides of the border, with TSN and Sportsnet showcasing Canadian sport to the whole continent.

    And staying on sports, let’s be honest here, who here in Canada has wanted to hear the announcers for any game, involving Canadian teams, from both the U.S. and Canadian channels on cable, instead of the Canadian PBP and colour commentators be the only ones heard in Canada?

    For example, why not allow, in Canada, someone to hear, in a game between the Calgary Flames and Buffalo Sabres, that would air on Sportsnet here and NBCSN in the U.S., Hughson/whoever on Sportsnet, and Emrick/Engblom on NBCSN?

    TBH, the Internet took away whatever genuine exclusivity Canadian TV rights holders had on anything aired on TV anywhere in the world. It also exposed the Canadian version of TV broadcasts of live U.S. TV programming as inferior butcher-jobs, that only were concerned with excess ad-bleed, as if Bell, Rogers, and Shaw are fearful of what the ads promote, especially in what I’d call CTV’s biggest cash cow, the Super Bowl.

    Well, I’ve seen the pure Super Bowl broadcast, from home, for the last 3 years, and can say that there’s nothing truly concerning about what those ads promote. They’re meant to do what they’re supposed to do…let TV viewers have some silly fun between the different acts of what is the hardest single game to win in pro sports. A good breather from the quarter-to-quarter grind of that game.

    The ads that CTV airs in that game, and all the other playoff games, aren’t made brand new. They’re the ones used for the last 5 years, with, frankly, no real creativity nor humor to them. They’re not made as stand-alone entertainment, like the U.S. ads are. Canadian advertising is way too serious, too stiff, and too fearful of evolving itself. Why do you think that the Grey Power ad is aired 750 times a day on Canadian TV?

    It’s just some evidence that Bell, Rogers, et al., became way too dependent on U.S. entertainment properties to prop up their media divisions. Eventually, all those pricey acquisitions added up, and now those media divisions are losing money, in places which the media companies don’t need to be operating in. Canadians would probably save money if the major U.S. media companies could operate here independently, without being forced into mandatory joint agreements with Canada’s telcomedias.

    If a sale of media rights and assets occurred for the telcomedia companies here, then maybe internet speeds could get a lot faster, because Bell, Rogers, et al., would be forced to improve their infrastructure in all regions in Canada. And then, we’d not have to worry about artificially-constrained, and restrictive, data caps.

    But, what do I know, huh?

    =P

    Reply
    1. Fagstein Post author

      If we take a look at the retail industry here in Canada, a lot more U.S. retailers have been/are setting up shop here.

      Retail is very different from broadcasting. Nothing stops a U.S. retailer from setting up shop in Canada.

      If those subsidies weren’t so prolific, you’d see Canadian actors and actresses step up their game, and drastically improve their efforts, to where they’d become more well-rounded. The regulations they live under makes them not rock the boat too much, and they hold back their true potential in what they do.

      Can you be more specific? How are Canadian actors holding back? How does regulation encourage this?

      In terms of sports TV, that seems to be the only major revenue stream that Bell and Rogers support their operations on.

      Not really. Wireless and Internet subscriptions bring in far more revenue for those two companies than sports TV.

      They’ve basically divided up all major pro sports rights between them, in what I call ‘sports rights hoarding’.

      I don’t think “hoarding” is an appropriate metaphor here. They do, after all, use those rights. And who else would be interested in them? There aren’t many sports channels in English not owned by Bell or Rogers.

      Personally, I want competition in sports TV in Canada to be an honest one, where TSN and Sportsnet grow the visibility of Canadian sports, and not rely on U.S. sports rights as a crutch

      Considering Rogers just spent $5.2 billion on NHL rights, and that’s not to show U.S. teams, and TSN’s big draw now is CFL games, I would say they’re doing that already.

      Bell, Rogers, and Shaw are fearful of what the ads promote, especially in what I’d call CTV’s biggest cash cow, the Super Bowl.

      They don’t fear the ads’ content. In fact, they’d like to see more of them on Canadian television. The problem is they’re not getting the money from them, even though they should have exclusive rights to that content.

      And staying on sports, let’s be honest here, who here in Canada has wanted to hear the announcers for any game, involving Canadian teams, from both the U.S. and Canadian channels on cable, instead of the Canadian PBP and colour commentators be the only ones heard in Canada?

      I don’t know if that many care about that. But some, perhaps. Maybe that’s something Rogers could look into providing in some way.

      The ads that CTV airs in that game, and all the other playoff games, aren’t made brand new. They’re the ones used for the last 5 years, with, frankly, no real creativity nor humor to them.

      That’s why CTV has put together a Canadian Super Bowl ad challenge to make the Canadian ads more interesting.

      If a sale of media rights and assets occurred for the telcomedia companies here, then maybe internet speeds could get a lot faster, because Bell, Rogers, et al., would be forced to improve their infrastructure in all regions in Canada.

      I would argue that consumer demand is already driving this. Bell is spending billions on installing a fibre-optic data network for both Internet and television use. Rogers and Videotron are following suit to avoid losing subscribers to Bell in Quebec and Ontario.

      Reply
      1. Dilbert

        Bell is spending billions on installing a fibre-optic data network for both Internet and television use

        Bell is only doing so because they have figured out that (a) their sat network is very expensive to maintain and will likely fail dramatically at some point, and (b) things are much easier when you have a solid monopoly hold on people’s full telecom bill.

        It should also be pointed out as well that nobody (and i mean nobody) is bothering to install any other type of cable than fiber for their network backbones anymore, it’s not longer economically viable to spend money for copper wire connections. Fiber is cheaper and better, and Bell would be using it with or without competition.

        Reply
          1. Dilbert

            No, I am saying that Bell isn’t doing it specifically to improve their network, as much as they are doing it because it’s the current standard. They are marketing it like some big jump and something special, but the reality is they don’t lay copper wire anymore for trunk lines, and that’s that.

            Sort of like the Gazoo crowing about going all color, not mentioning that the printing company’s presses are modern and handle it naturally. :)

            Reply
            1. Fagstein Post author

              No, I am saying that Bell isn’t doing it specifically to improve their network, as much as they are doing it because it’s the current standard.

              Standard set by whom? Videotron is the only other big wireline player in Montreal, and it’s also rolling out a fibre-optic network. I’m not saying Bell is doing this out of a sense of generosity, but it is spending billions of dollars on this, because it has to compete.

              Reply
              1. Dilbert

                It’s standard as in “it’s cheaper than running copper now”. It’s not a question of what others are doing, it’s a question of what makes economic sense. It’s a standard set by the reality of cost versus return, and nothing else.

  7. NaBUru38

    “And the federal government didn’t waste any time making it clear that it will not support any move to tax Netflix or YouTube”

    That decision is valid, but the opposite would be fine too. Of course, amateur videos shouldn’t be taxed, only commercial outlets.

    Taxing online subscriptions to fund national productions is valid (although they could use a general tax instead). Now, it would be absolutely ridiculous to regulate content (national quotas, age limits).

    Anyway, television is the least of concern. Internet oligopolies is what regulators should attack. Internet providers shouldn’t be allowed to have any television or video services.

    Reply
    1. Fagstein Post author

      Taxing online subscriptions to fund national productions is valid (although they could use a general tax instead). Now, it would be absolutely ridiculous to regulate content (national quotas, age limits).

      But do you tax just fee subscriptions? Does ad-supported video count? What about video that comes with subscriptions? If a paywalled newspaper website has video on it, does that get taxed? If so, how much of the newspaper subscription goes to the video tax?

      I’m not saying it’s not doable, but deciding to do it opens a whole can of worms about how.

      Reply
      1. NaBUru38

        “Deciding to do it opens a whole can of worms about how.”

        I agree, therefore I proposed to use a regular tax like VAT.

        “How much of the newspaper subscription goes to the video tax?”

        Well, Internet is multimedia by definition, I agree that it wouldn’t make any sense to distinguish between text, audio and video services.

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        1. Fagstein Post author

          So that means you’re basically adding a tax to all online content providers, from video to podcasts to magazines. Somehow I don’t think a wide-ranging consumer tax on all culture will be well received.

          Reply

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