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CRTC New Media Hearings – Day Nine: Astral, Rogers, Cogeco, Shaw, CTV, CCSA

On Tuesday, the Commission conducted hearings with leading broadcast and telecom companies including Astral Media, Rogers Communications, Cogeco Cable, Shaw Communications, CTV GlobeMedia, and the CCSA. The lively discussion focused on the ISP levy, with strong opposition to the levy and even the hearings themselves. The following review was compiled by University of Ottawa student Yael Wexler.

 

Astral Media

Introduction: In the development of new media, Astral is still in experimental mode, testing new business models. Thus, content deals can be as short as 12 months. Astral lacks accurate and comprehensive measurement of new media's impact on consumer behaviour and broadcast advertising. It recommends keeping the new media space open for development and to continually assess its impact on the Canadian broadcasting system.

Business Model

New media is not independent of the broadcast operations, but rather direct extensions. Digital media further strengthen the Astral brand, reinforce its attraction in broadcast service, and enrich the audience experience by personal interaction. The online activities are necessary for the survival of the broadcast activities. There is as of yet no business model for making the online forum profitable in its own right.  Continued investment is needed.

Canadian Content

All the web content accords a strong standing to Canadian content; Canadian hosts participate in online chat and blogs. Astral competes against foreign players in new media as well as against unregulated and regulated Canadian industries like newspaper, magazines, gaming companies and new online social networks, even user-generated content. Canadian broadcasting can compete and stay relevant.

It is not possible to measure Canadian content consumption in new media

For technical reasons of capture and measurement, the ISAN approach brought up by the Chair is an incomplete solution to measuring content. ISAN information is encoded in the data of the web file, not the header. Deep packet inspection only looks at the header, so ISAN will not measure Canadian content. To read the ISAN would require decoding the date and where there is no standardization for encoding, measuring content is not feasible. Tagging content as local or foreign would require persuading the creators of content, and this is unlikely to occur. Astral supports continued research into the new media environment, but measuring content is currently impossible.

Impact of new media

The data is inconclusive. While viewership is strong, the advertising market is low. Broadcasters and producers are looking for flexibility in this area, which is why we're seeing contracts of 12 months or so. Online services are more of a marketing tool for our traditional media.

Proposals for new media support

Astral needs an industry-based solution, not a regulatory one. Astral proposes three things:

a)     copyright reform, to offer a speedier clearance process for getting professional Canadian content online;

b)    limiting tax deductions for advertising in foreign new media;

c)     the establishment of a federal new media tax credit to support content creation.

Request a direct dispute resolution tool

In new media, content providers make deals with distributions gatekeepers to disseminate the content. We request an undue preference provision in exemption orders of new media regulation. If this environment doesn't move towards greater openness, and gatekeepers limit our access to this content, we believe that dispute resolution in front of the Commission is the best method of moving forward. This issue is especially sensitive as some gatekeepers are other forms of new media broadcasting not falling under the Telecommunications Act like QuickPlay or MobiTV, who do not carry content, but package it for wireless.

Rogers Communications

Introduction: Rogers is a diversified media com company, with many sectors in the broadcast and telecom industries. They are governed by both the Broadcast and Telecommunications Act. 

Barriers to broadcasting on the internet cannot be remedied by levying ISPs

Main types of internet video:

Webisodes: Canada is not falling behind in webisodes. There is no evidence that there is a business case for this type of programming or that most viewers are interested in accessing this. As there is little to no demand for webisodes, there is no need for an ISP levy to be used to fund Canadian content webisode generation.

Made for TV: Rogers' business model is created around the fact that most common form of video viewership online is re-exhibition. Advertisers prefer to pay for ads when the content has been proven profitable on TV. Canadian viewers should have access to Canadian shows online. But Rogers faces these barriers:

1.     Cost

2.     Cannibalization (may lose TV revenue by posting the same content online)

3.     Discovery (users need to find the Canadian content)

Rogers' proposed solution: The Purdy Portal

The Online world can be a complement to the traditional media, and not compete. Rogers cable is developing new broadband video portal that will change internet broadcasting into money making endeavour. With traditional broadcasting the cost to Rogers is fixed, but with internet broadcasting, the more viewers the more it costs to put it up. Therefore, Rogers is reluctant to put up this content. The Rogers video portal solves this problem:

1.     Helps viewers find Canadian programming from all partners, no matter which ISP they use

2.     Service will reduce distribution costs so even niche markets can find their content online

3.     Rogers will provide the servers

4.     Cannibalization problem – online service will only be available to those who have TV package, so these people can see their content online at no additional cost

5.     Discovery problem – Rogers will heavily promote the service,

6.     The service will further the needs of the broadcast act because the portal will follow the TV schedule and layout.

The service would be free for paying cable users: Rogers will tether the online availability to clients of Rogers cable subscribers. This would require either recognizing the modem or using a password, neither would violate privacy. No matter who your ISP is, you can have access to the online portal if you're a Rogers cable customer. So it won't breed competition in among the ISPs, but we'd be willing to cost-share this service with small cable companies. The revenue would also be stabilized by the fact that digital ads are growing, traditional ads are in retrenchment. We will see more pre-roll video (ads appearing before a video).  The content providers would have to pay their online rights, not us. And this online portal would give the content providers incentive and biz case for getting online rights.

What is portal going to look like? The intent is to make the portal more robust than the current video on demand (vod) Cable portal. The online portal would have better search and personalization services, but would look consistent with the vod service. The content will be replicating the TV packages as they're currently sold and the user will get the impression that this is a value-added extension of the TV package.

ISP  levy would harm growth of internet service in Canada

Canada's broadband activity is larger than any G8 country, but not meeting demand. Huge investments are needed to grow the broadband pipes and an ISP levy would divert resources from needing to expand pipes. The costs of transport, and streaming to customer, are onerous on the provider. Rogers is able to put the content closer to the consumer and reduce the transport costs.

Imposition of an ISP levy would be unlawful

Chair did not want to get into legal issues, this is to be solved in court if the levy is imposed. ISPs are not regulated pursuant Telecom Act. An activity under the Telecom Act and Broadcast Act cannot be reregulated by both at the same time. CRTC cannot exact ISP levy in Telecom Act by Broadcast Act.

New broadband service to be launched would fix many of the problems existing for internet traffic

Rogers argues that there is no viability for a fast lane for Canadian content, for instance, if something came from a .ca address, as was suggested by the Chair. All Rogers' content goes on the fast lane; we only traffic shaped on the upstream and only in peer-to-peer sharing. Therefore, putting Canadian content on the fast lane is unnecessary because it already is. Moreover, Rogers would need a specific list of what needed to go in the 'fast lane' in order for the routers to give it priority. The network is already faster than what is required by content providers. So providing an incremental fast lane would not have much of a difference.

Measuring Canadian content usage: Chair suggests that using deep packet inspection enables Rogers to measure what comes from a .ca address. Rogers denies the fact that a lot of traffic has migrated to the internet; professional video viewership on the internet is low. ISAN is a measurement code, Rogers can measure how much consumption of a video occurs but it will represent less than 1% of video on internet. The problem with measuring internet consumption is that is cannot be done, unlike TV consumption. Rogers denies the possibility. The ISAN address is not on the packet but the file; moreover, the .ca address has a lot of American content. There's no way for Rogers to know what kind of files are being used until they are recompiled at the user pc.

Challenge of .ca is that the content is not specifically Canadian and based on the way .ca addresses are issued the domain there are a lot of people who  se .com. com addresses have fewer restrictions, so more people still use those. Also, our Canadian content comes through American servers.

Cogeco Cable

Introduction: Cogeco's services are limited to bdu and vod and fulfill the Broadcast Act. They offer high speed internet service and telecommunications for both residential and business clientele. They do not produce market programs for viewing through internet connections. Under the Telecommunications Act, they have to maintain third party access at rates approved by the commission.  Cogeco opposes the proposed ISP levy.

The levy would be illegal under the Telecommunications Act and Broadcast Act.

Cogeco did not get into this issue in great detail except to put it on the agenda.

The tax is redundant and would overburden Canadians.

Cogeco claims that an ISP levy in service of generating Canadian content would be redundant. Canadians who use the internet should not have to pay a tax to support the production of Canadian programs in addition to the large license fees and federal and provincial taxes already exacted on telecommunications.

There is little demand for professional content online. There is some broadcasting in new media with limited shelf space. Professional content is widely accessed through traditional media, which is already highly funded. Successes in the made-for new media content are rarities and the new media covers a very small percentage of the media viewing.

Measuring internet content is not feasible

The Chair's suggestion of measuring the quantity and availability of content in new media environment is not feasible, technologically and as a business model. Internet can be used in a variety of ways and hasn't been administered until now in terms of measurement. Using identifiers to better measure the hits would raise enormous problems of standardization across ISPs. There is no need to reinvent the wheel in this respect. The internet already has a well established infrastructure of search engines, and customers can already find the content they want.

Funding for Canadian content should be present no matter what service. However, Cogeco will not replicate the industry-based solution proposed by Rogers. The funding mechanisms are already in place for Canadian content and Cogeco has not yet research their own possible business models. Rogers' client base is not the same as Cogeco's and any solution must take this into account.

Moreover, it is not productive to make mandatory rules for an industry when a service is at the concept stage, as Rogers suggests. Cogeco is not a broadcast company, just a telecommunications, but provides internet access at defined speeds. Cogeco claims they already are doing a great deal as a broadcaster of Canadian programming, by respecting the series of rules, and contributing for the license of a video on demand product as well as subsidizing Canadian content.

Cogeco is concerned with the management of the new fund for Canadian content. In the traditional media, there is a complex administration of the money, but in new media, how it will be controlled is unclear.

A regime overhaul is required

Cogeco expresses a need for a regime overhaul along the lines of European countries where there is no legal or administrative distinction between telecom and broadcast. Canadian laws are almost twenty years old on this and don't offer a comprehensive digital strategy.

Shaw Communications

Introduction:  Shaw is the major, full-service broadcast and telecom company in Western Canada. Similar to Rogers, they strongly oppose the proposed ISP levy and further regulation of their industries. Shaw seeks an unregulated environment in which to work.

Content available should be made not by regulation; consumer demand should be the arbiter

Shaw strongly opposes any further regulation of their industries. The hearing turned quite acrimonious because of this issue, especially during the question period. Confirming what Rogers and Cogeco Cable had reported, Shaw denied being able to use deep packet inspection to measure Canadian content traffic. They contend that there is so little use of professional videos on the internet, and people use the internet widely for email or file sharing of user-generated content. Shaw only measures the bits coming and going, and not content. While admitting that they do not measure the substance of internet usage, they argue that video usage is not prevalent, therefore there is no need for an ISP levy to support Canadian professional content.

Shaw does not plan on replicating Rogers' portal unless there is a good business model for it.

An ISP tax would seriously reduce Shaw's ability to invest in broadband and hinder Shaw's efforts to provide wider internet access in Canada

The tax will only lead to a costly administrative body

Shaw contends that broadcasting production has been a disaster in Canada; it has been an inefficient subsidy program. To continue to subsidize through taxes is problematic and promoting Canadian content does not call for a tax on the ISPs. If there were such a tax, it would lead to a costly and inefficient administrative body. The new Canadian Media Fund (CMF) announced by James Moore, Minister of Canadian Heritage and Official Languages, takes an investment approach to producing Canadian content, which Shaw agrees with. Shaw had to admit that, as prompted by the Chair, if there was an ISP levy, Shaw couldn't complain that they did not know how it would be administered, as the new CMF would be just that, and they support it.

The greatest barriers to accessing Canadian content is the capacity and infrastructure/location of the ISP

Shaw is pursuing the government objective of increasing bandwidth capacity country-wide, to which Shaw responds with ever increasing bandwidth for their customers. To serve the customers and their customers, they need to make significant investments. Shaw argues that in previous cases where they have raised prices they have lost customers and worries that with a new tax the same trend would occur. However, Shaw did not have any exact figures to support their claim and it was received with incredulity by the Commission.

CTV Globe Media

CTV Globe Media similarly opposes the ISP levy. They have a robust digital and traditional media product portfolio, and pair the two services together in many ways. Their business model is to focus on traditional media, and make it flow naturally to new media, instead of creating two separate channels. CTV is the premiere Canadian digital destination, in French Canada as well. They have received numerous accolades for their digital services, especially with its traditional media pairings. They have a proprietary online video player, and expect it to double in subscriptions in 2009. They made available CTV content with digital rights on Itunes, for example. CTV's digital media provides an additional platform for viewers and is attracting wide digital advertising. Internet ads fragment advertising revenue from traditional media though, and video advertising (for ex: pre-roll) constitutes only about 1% of internet advertising. Digital services provide opportunity for CTV to advertise for what they are airing on conventional TV. It also gives CTV a new forum of competition in the market. Over time, it's going to evolve into a bigger opportunity for CTV, but they do not see a day when conventional TV will be irrelevant to their business model.

CTV is contributing to the new media development of home-grown Canadian programming.

For example, CTV created the Upload Yours online feature to discover new Canadian comic talent. So they are already committed to programming Canadian content.

CTV also contends that they cannot measure the digital use and portion of which is Canadian content in order to figure out how to monetize future growth in the area.

Legal Questions

CTV would like to see the copyright laws modernized.

ISP revenues should be spent on investment

Regulating ISP revenues should be spent on CTV's own investments and business model, and not concentrated into one fund, outside of their decision-making power.  CTV is still exploring what they do to ensure that traditional media subscriber revenue is protected. If they were to participate in the Rogers portal, it would need to be universally accepted. The industry cannot function on one point of entry, but CTV would not rule out this partnership possibility just yet.

Canadian Cable Systems Alliance (CCSA)

Introduction: CCSA offers the small systems point of view on key issues in the current debate. None of their members have gone into the wireless business, so their comments refer exclusively to the internet.

The small ISP provider business model cannot handle increased regulation or taxation

ISPs are but the pipes, and there is no way yet to monetize on the traffic in those pipes that reflects their content. A new deduction in small ISP revenue is would be sorely felt. Being able to provide internet service has been a key element of commercial viability for small systems. Small cable's profit margins continue to fall as programming costs for traditional media rise. Broadband is widely available in Canada, and retail ISP is an important business for rural and remote Canada. Without ISP, these small cable services would have gone under and is often the only provider in an area. The Commission should take into account the fundamental need for small ISPs in Canada, and the ISPs need for protection from further onerous regulation and taxation.

Measurement of content is a challenge

CCSA would support ISAN measurement so long as additional content inspection or reporting requirements aren't placed on the small ISPs. Small systems exemptions would be necessary if this went forward. Measurement should occur at the site of content creators and broadcasters, rather than ISP pipe delivery.

Content

There is a great deal of professional-quality content online, most of which has been repurposed from its original forum. It is used to promote programming on traditional or specialty TV subscriptions.  A lot of full programming available for TV subscription is now available online. This creates free competition for the BDU's costly services. Therefore, BDU's must remain unregulated so as to stay competitive. Content made freely available online should be freely available to BDU's for dissemination. Repurposing TV content for online viewing shows that BDU's are transferring into multiplatform models. Therefore, traditional broadcasting may soon reduce their demand on existing broadcasting funds from which new media may then partake.

Small BDU's would certainly look to participating in the Rogers portal, but not with the cost-sharing model they currently proposed. Also, this type of service would not be available to all small ISP's, due to the lack of bandwidth capacity. Some are even still dial-up. Only about 80-90% of our customers have high speed. With new uses of the internet it is hard to keep up with the demand for bandwidth. Many of our markets are still co-op based as well, and in rural areas, subscribers bear the brunt of the costs.

Discovery of Canadian content is not a problem

Canadian content is well represented online. Therefore, there is no need for promotion of Canadian content in new media, as it already is a promotional platform itself. The internet is a fundamentally democratic environment and has rendered itself such in an unregulated space.

9 Comments

  1. Quick, someone actually explain BitTorrent to Rogers
    “With traditional broadcasting the cost to Rogers is fixed, but with internet broadcasting, the more viewers the more it costs to put it up.”

    This is where the power of P2P comes in. Streaming can be implemented in such a way that those watching the stream can also upload to other watchers, much like BitTorrent. Of course, that won’t work, because then they’d have to stop throttling BitTorrent…

  2. Nice summaries
    Thank you.

    -R

  3. Well done
    This is by far the best summary posted to this site during the hearings — well done. Jay, it does not sound like you understand how Bittorrent works. Rogers’ description applies to it almost perfectly.

  4. @Listening
    Care to explain that? My comment was in reference to Rogers’ statement that cost of Internet distribution would increase based on the number of people accessing that content. I’m assuming by cost, they are referring to bandwith. For a traditional server-client model, it is true that popularity of a certain piece of data would result in much cost to the maintainers of the server, as every client would be accessing the same finite group of servers, resulting in much cost to the provider given the large “pipe” needed to provide all the data to all the clients at the same time.

    With Bittorrent however, every client also becomes a server. As each client downloads the chunks of data, it also becomes a server of the data it has already downloaded. In this way, there are no real clients and servers anymore, only peers (hence the name peer to peer), and the more popular a file is, and more people downloading it, the more sources for the file exist, and therefore less dependence on any one source. This would allow the “host” of the content to get away with a smaller “pipe” as the bandwith is distributed across all peers. Smaller pipe means smaller cost.

    As someone relatively familiar with the technology (at least on a high level), this is my understanding of it. However, if I’m somehow mistaken, I would greatly appreciate you explaining to me how and why.

  5. CTV
    “CTV would like to see the copyright laws modernized.”

    Let’s hope they weren’t refering to a C-61 transformation…

  6. @Listening
    Jay describes it very well, and in fact very much hints at the next generation in P2P. P2P in the next few years will look a lot different. Files will be streamed very much like on Youtube. You’ll be able to watch the video while it’s downloading, same with audio files…and the next P2P will most likely run on port 80 which is the http port, and very much undetectable to DPI throttling, and untraceable to the big bad media companies.

    What rogers is explaining with regards to offering video content is basically where P2P will be going in the near future. To bundle this service in is an extremely smart idea on rogers part, since DPI will basically be useless in the next 18 – 24 months when the new P2P arrives.

  7. Cliff Dawe says:

    No Again on the Jim Prentice Bill C-61
    No Again on the Jim Prentice Bill C-61 or anything else like it! Shove that Bill where the sun don’t shine!
    The citizens of Canada have already said no! Were sick of these facist corporations coming in and trying to force laws on us that nobody wants! Get lost already!

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