Is “Pick-and-Pay” the way?
2014 was a busy year in television, with the Canadian Radio-television and Telecommunications Commission’s (“CRTC”) “Let’s Talk TV” hearing taking centre stage. It was a sweeping hearing in scope and in its ambition to address all things television. The Commission chose not to deal directly with the emerging over-the-top market despite both Netflix and YouTube being asked to appear.
The rationale and timing for the hearing is clear: the federal government remains focused on fixing industries it considers unfriendly to consumers and scoring points in doing so before this year’s federal election. The television industry is certainly rife with many such practices. In the CRTC’s own report prepared by Harris/Decima, the top complaints from Canadians were the flexibility of channel changes and the cost of services (study can be found at crtc.ca).
Instead of focusing on both problems, the Commission began by focusing on only the first issue – allowing consumers to pick their own channels. They introduced (and the government promoted) the idea of a “Pick-and-Pay” requirement as a solution to cure both problems.
This idea has superficial appeal but it ignores industry requirements and the power dynamics of the Broadcasting Act, 1991 (the “Act”). The Act, which was not up for review, sets out the governing principles, including the importance of Canadian expression, diversity, employment and the airwaves as a public good. In practice, the Act governs such things as the CBC and Canadian channels that have specific Canadian license conditions. These channels provide diversity, expression, jobs and a large percentage of the exports from the system, but they also lack the marketing power to survive in a pure Pick-and-Pay market.
A purely consumer driven model also does not consider industry power dynamics. When cable launched, carriers were granted monopoly control of the consumer relationship in consideration for building the infrastructure. They then would negotiate with the channels for terms of carriage in the wholesale market. Channel brands held power for decades, until the number of services grew into the hundreds and customer control became essential. Carriers’ ability to control marketing and packaging allowed them to take over the system.
In Canada, this has led to vertical integration of the system as over the past decade carriers such as Bell, Shaw, Rogers and Videotron have acquired more than 80% of available channels. Vertical integration has led to cable price increases in areas such as sports and premium services. For example, Bell Media have 41 channels, Shaw Media have 23, and Rogers have made a significant investment in NHL hockey. Most of the other channels, including Canadian independents, have seen their fees go down over the past decades even as cable bills have gone up.
Canada is now perhaps the most corporately concentrated media market in the industrialized world. A consumer-based approach will have little impact when carriers still control the marketing, packaging and pricing in the wholesale market. Market forces cannot work with so little room for competition.
Canadians who think they will be able to pick all their own channels at a highly reduced price are going to be disappointed. The Commission must find the wisdom to strike the best consumer choice, balancing the requirements of the Broadcasting Act with new rules to protect the system from the monopolizing impact of vertical integration. In any event, regulatory lawyers will have lots to do in 2015.
Brad Danks, LLB (1991) is currently Chief Operating Officer of OUTtv Network and an Adjunct Professor of Law at the University of Victoria.