Columns

Canadian Broadcasters and BDUs: Can They Compete With “Free”?

Earlier this month, Bell and Quebecor, two giants in the Canadian broadcasting and telecom landscape, became embroiled in a dispute over Sun News Network, the recently launched all-news network. At first glance, the dispute appeared to be little more than a typical commercial fight over how much Bell should pay to Quebecor to carry the Sun News Network on its satellite television package. When the parties were unable to reach agreement, Bell removed Sun News Network, leaving a placeholder message indicating “the channel has been taken down at the request of the owners of Sun News Network.”

While the dispute is now before the Canadian Radio-television and Telecommunications Commission – Quebecor claims Bell is violating the legal requirement against “undue preferences”- more interesting is Bell’s claim about the value of Sun News Network signal.

According to Mirko Bibic, senior vice-president of regulatory affairs at Bell Canada, the market value of Sun News Network is zero because Quebecor makes the signal available free over-the-air in Toronto and is currently streaming it free on the Internet. Given the free access, Bell maintains that the signal no longer has a market value.

My weekly technology law column (Toronto Star version, homepage version) notes Bibic’s comment may be posturing for negotiation purposes, but it highlights the larger problem for Canadian broadcasters and broadcast distributors such as cable and satellite providers.

The reality of the current environment is that all broadcasters must compete with free. Free streaming has become so common that devices such as the Boxee have popped up to offer users a seemingly unlimited array of legal on-demand television programs all streamed via the Internet. Indeed, if the value associated with broadcasts is directly correlated to its free availability online, a growing percentage of broadcaster content has no market value.

The implications for Canadian broadcasters are significant since their ongoing fight for a fee-for-carriage (or value-for-signal) is premised on the notion that their broadcasts have value, independent of their availability on other platforms.

Moreover, Canadian broadcasters continue to rely on foreign (primarily U.S.) content as their most profitable and high profile programming. Given the shift toward online streaming, it is only a matter of time before U.S. rights holders retain their Internet rights to stream content on a global basis. When that happens, Canadian broadcasters will be left vying for less valuable broadcast-only rights.

The situation is little better for Canada’s broadcast distributors who view streaming alternatives with growing trepidation. Free online streaming, when combined with over-the-top video services such as Netflix or new video rental services from YouTube, provides an increasingly viable, low-cost alternative to traditional cable or satellite television services.

The Internet based streams effectively reduce the value of a cable or satellite television subscription since much of what is now offered through those services is, by Bell’s own definition, of no market value.

Claims that broadcast versions of free streamed programs have no market value may be an exaggeration, but there is a harsh truth in the reality that Internet streaming is having a disruptive effect on both Canadian broadcasters and broadcast distributors.  Given these emerging challenges and the vertically integrated market in which Canadian broadcasters, broadcast distributors, and Internet providers are often part of the same corporate family, the backlash is likely to be fierce.

Internet providers already deploy usage based billing schemes to increase the cost of free Internet streaming by hiking the price of Internet access. On the regulatory front, there is the growing push to increase the costs to companies that stream content by imposing broadcast-like regulations.

These moves may create new challenges for online alternatives, but they will not solve the long-term broadcaster and broadcast distributor problems of relying on programs that by their own admission faces diminishing market value.

33 Comments

  1. Anyone using the right marketing can commercially compete with “free”.

    If it weren’t so, Linux would be the most popular operating system on the planet.

  2. Raging lunatic
    Why is Mirko Bibic even still working for bell? He is a jester of the CEO’s court, incapable of saying anything to ANYONE’s benefit – not even bell’s.

  3. Mark:

    Don’t be silly. While Linux is free, for many, it doesn’t offer a 100% equivalent alternative to Windows or OSX. At minimum, Linux does not provide access to the same content (games, applications, etc), nor does it provide an equivalent user experience (and I say this as a die-hard Debian user).

    But devices like Boxee, Google TV, and others, provide the exact same content, on-demand, in quality that is equal to, and in many cases *better* than, the HD offerings provided by existing content distributers. And they can do it more cheaply in part because they have no network infrastructure to maintain. In short: its tough to compete with ‘free’ when the product is fungible.

    Now, IMHO, the long-term solution is pretty simple: dedicated video distribution networks will simply vanish, in the same way that dedicated voice networks have vanished in the telco world (all modern telcos use IP in their backbones, and only flip to dedicated circuits near the home). They’re simple too expensive and complex to maintain. Instead, network operators will provide end-point connectivity, and peering arrangements for efficient content distribution to their subscribers (lest their border connections melt down).

    Will they like it? No. Will they go down kicking and screaming? Yes. But it’s already happening, and there seems little point in fighting it.

  4. The end is nigh
    Given that Bibic spouted total rubbish when “discussing/defending” the UBB fiasco, why is it a surprise when he does this?
    If that guy was paid on productivity, he would owe Bell an awful lot of $$.

    “over-the-top video services such as Netflix or new video rental services from YouTube, provides an increasingly viable, low-cost alternative to traditional cable or satellite television services.”

    I like the understated comment, but I would suggest a different approach – why not state it in a different way, that the conventional cable and sat’ services are already decreasingly viable.

    Netflix, YouTube, direct streaming, iTunes and a few OTA transmissions recorded direct to disk fulfill my requirements 100%

    Let me make this very clear:
    I want to watch….. what I want, when I want, on whatever device I want – and there are plenty of others that feel the same.

  5. @Brett
    “Will they like it? No. Will they go down kicking and screaming? Yes. But it’s already happening, and there seems little point in fighting it.”
    I agree, why fight the inevitable, spend the money elsewhere.

    I would also add that we may well benefit from international access to data, eventually the restrictive content licensing that we deal with now will disappear.

    I have already fixed my access to content problem – I am happy to be able to access F1 racing via a slingbox in the UK, while my associate in the UK can watch Canadian content until his eyes fall out.

  6. RE: Mark
    “Anyone using the right marketing can commercially compete with “free”.

    If it weren’t so, Linux would be the most popular operating system on the planet. ”

    Actually, this also due in large part to anti-competitive practices particularly on Microsoft’s part, specifically illegal software patents, DMCA stupidity, OEM manipulation, vendor lock-in, and so on. Also, GNU+Linux is number one in web servers and supercomputers, WordPress is one of the most if not the most popular blog service and is powered by GNU+Linux, and Android is rapidly becoming the most popular mobile OS. Your original point is correct though, as was demonstrated by the study Geist posted some months ago; I don’t have the link handy.

    “Don’t be silly. While Linux is free, for many, it doesn’t offer a 100% equivalent alternative to Windows or OSX. At minimum, Linux does not provide access to the same content (games, applications, etc), nor does it provide an equivalent user experience (and I say this as a die-hard Debian user).”

    The problems with popular applications not being available with GNU+Linux is a dying problem since Wine has matured enough to the point that even Steam works adequately, for example. As for an “equivalent” user experience, that’s just silly. Many distros do provide an equivalent user experience with the same if not better pointless eye-candy. In addition, you overlook the many benefits that GNU+Linux has that Windows and OS/X don’t have, like no included DRM, more transparent bug reporting, better security, better updating system, the ability to have rolling releases, being much more efficient in system requirements, more customizing ability, and so on.

    “its tough to compete with ‘free’ when the product is fungible.”

    Not at all. You just have to think smarter and not harder. The reason why it is tough for many companies today is that they are stuck in a DRM delusion.

  7. The Issues…
    There are still two main issues to resolve in this fight. Bandwidth caps and regulatory bodies.

    1. Our caps are low…period and all the time they’re trying to find ways to nickel and dime us to death, while most of the rest of the world enjoy unlimited and higher speed services for a fraction of we spend.

    2. The regulatory bodies are currently under a great deal of pressure to impose heavy and expensive regulations upon these streaming services. So, while Netflix is here now, will it be here in a year?, who knows. If Netflix get hit with more regs and more fees they might just opt to pull the plug in Canada and focus on more favorable markets. Broadcasters managed to push Pandora out and that was FAR less threatening than the likes of Netflix.

    I tend to believe this is all for not and the actions the content providers are taking are similarly futile, and insanely dumb, as those taken by the music industry back in the days of Napster. Like the Napster debacle, the collective action taken by the content industry to stifle innovation will go down in history as one of their largest and most devastating business mistakes.

  8. @Eric:

    “The problems with popular applications not being available with GNU+Linux is a dying problem since Wine ”

    You were doing well until you mentioned Wine, at which point you lost all credibility and exposed yourself as yet another blind Linux zealot (and, once again, I say this as a Debian user with 15 years of experienced running and maintaining Linux on both the desktop and the server… sad that I have to get my geek cred out there, but alas, one has never been able to hold a balanced, realistic view of the Linux ecosystem without being branded a shill…).

    Does Wine work in certain, limited cases? Yes. I use it myself.

    Does it enable Linux to provide access to all content available on Windows? No. Which is my entire point. Linux is *not* completely equivalent to Windows. Anyone claiming it is lying to themselves.

    So it’s no surprise that Microsoft is able to compete with free: there are clear differentiators that cause people to select Windows over Linux, not the least of which is, as I mentioned, access to content only available on Windows (many Steam-based games being a spectactular example).

    But the same is most definitely *not* true when comparing tradition content distributors with these internet upstarts. Unlike the Windows/Linux battle, Shaw and Boxee are offering the exact same content. They are, to the end user, essentially equivalent services… the only obvious differentiator being price, where IP-based services have significant advantages, and contain availability, an area that traditional content distributors have traditionally excelled at… until recently, that is.

  9. Devil's Advocate says:

    Time to create their own content
    Once upon a time, TV networks produced a certain amount of their own exclusive content. Stuff like that had value. Recycling everyone else’s already-recycled crap, without creating any of their own produces adds nothing of value to the signal.

    This is a big part of why broadcasting is in the mess it’s in now, AFAIC.

  10. Rationale for broadcast regulations being applied to internet streaming?
    Can someone explain the rationale for broadcast regulations being applied to internet streaming? My (admittedly limited) understanding is that because OTA spectrum and cable vision capability is limited it is necessary to apply regulations that ensure that Canadian content has a place in these media. However, this limitation does not apply to on-demand internet streaming. So how does one rationalize applying a fix (broadcast regulations) to a problem that doesn’t exist (limited internet content carrying capability)?

    Are the Canadian content carriers being totally disingenuous, or am I missing something?

  11. Devil's Advocate says:

    @Mark / Eric
    Until there comes a time when I can launch CorelDraw, Illustrator, or Quark (to use 3 examples from hundreds), or at least REAL EQUIVALENTS of such applications, straight from Linux, and natively (without using anything like Wine), Linux cannot deliver me anything close to an equivalent “experience” of Windows or even Mac.

  12. Linux vs. MS
    Really they excel at different things, hence different markets. Linux excels as a server OS, especially flavors such as Debian or Slackware. While at the same time something like Ububtu Linux is ideal for low end casual users such as my mother, who only use their machine for Internet access and the occasional game of Solitaire. In this case, it’s more secure and results in less support calls due to inadvertent virus infections because she opened up some stupid attachment in her e-mail. Microsoft, on the other hand, is less reliable as a server, but offers a wider range of applications, including Office. If it wasn’t for reliance on MS Office, I suspect many businesses would convert to Linux as a primary workstation OS (Open Office just isn’t there yet). Added to that, most games are designed for use on Windows. Office work and gaming, targeting the two largest software sectors, (With familiarity coming in a close 3rd reason) are what keeps Windows on top.

  13. end user says:

    Devil’s Advocate said:
    Until there comes a time when I can launch CorelDraw, Illustrator, or Quark (to use 3 examples from hundreds), or at least REAL EQUIVALENTS of such applications, straight from Linux, and natively (without using anything like Wine), Linux cannot deliver me anything close to an equivalent “experience” of Windows or even Mac.

    This is getting way off topic but

    I don’t use any off those and every computer in my house running Linux Mint/LMDE works just fine for 98% of daily computer requirements. Strange isn’t it that Linux on the desktop works for me and not you.

    I can do everything from developing camera raw files, editing videos, documents and etc… I’ll take Linux on my computer over MS any day and that’s from someone who doesn’t have a hate on for MS but feels Linux is a much better choice for the average user.

    Hulu desktop works great also on my computers and so doea watching streaming videos on 100’s of sites. If the kids want to play video games they can dust okf the 10 consoles stored in an ottoman next to my tv.

  14. hum.
    Max speaks with a great of conviction, but demonstrates relatively low levels of understanding of the technology involved.

    Who pays your salary boy?

  15. ^ wrong article
    Posted on wrong article. Disregard.

  16. @end user:

    But, again… you’re *missing the point*. And yes, there was one, completely divorced from the neverending Linux-vs-Windows battle. That point is this: Linux and Windows are not equivalent. There are reasons to pick one over the other. The principle difference is in content differentiation, in that there are applications available on Windows, be it games, desktop publishing, etc, etc, that are not available on Linux. So while Linux is free, Microsoft can compete on a basis other than price.

    To steer this back on topic, the legacy content providers have no such differentiation. They and the internet upstarts off the exact same product. But the IP-based solutions are cheaper (or free), more convenient (being on-demand), and in fact often offer a greater breadth of content (good luck finding NetFlix’s documentary selection on your average VoD offering).

    As such, citing the continued existing of non-free alternatives to Linux as proof that you can compete against free is ridiculous, as those competitors have a much broader basis for product differentiation that’s sufficient to incentivize users to pay for their product. The same is most certainly not true (at least today) for traditional content providers.

    Incidentally, DA’s comment about exclusive content plays into this idea: if content networks also produced exclusive content, that would give users a reason to subscribe to a particular service provider… kinda like how many applications only operate on Windows.

  17. RE: Brett
    “You were doing well until you mentioned Wine, at which point you lost all credibility and exposed yourself as yet another blind Linux zealot”

    Why thank you for judging me through one single comment. Of course, I was refering to the fact that I know many GNU+Linux “noobs” who are using Wine for the Windows applications that they can’t let go off and they work well enough not to cause a noticeable decrease in productivity. Of course, they are using more native apps then they are those running in Wine.

    “(and, once again, I say this as a Debian user with 15 years of experienced running and maintaining Linux on both the desktop and the server… sad that I have to get my geek cred out there, but alas, one has never been able to hold a balanced, realistic view of the Linux ecosystem without being branded a shill…).”

    Hey, I never judged you in my posts whatsoever. Whereas you have branded me immediately, I never resorted to namecalling, whether that is calling you a “shill” or otherwise. But please, continue to put words in my mouth.

    Secondly, while I don’t doubt your experience over 15 years, I also know that innovation in the FLOSS world occurs in almost an eye-blink. Wine isn’t what it was 15, 5, or even 2 years ago, and neither is many major FOSS products. Some have stagmated of course, but for the most part innovation is healthy and continuous. I assume that you are refering to GNU+Linux now rather then what it was what is now a fair bit a time ago, but your statements does leave open the suggestion that you are basing your negative views on outdated and obsolete information.

    “Does it enable Linux to provide access to all content available on Windows? No. Which is my entire point. Linux is *not* completely equivalent to Windows. Anyone claiming it is lying to themselves. ”

    You are right. I don’t want GNU+Linux to be a complete equivanlent to Windows, because Windows is a badly programmed operating system. If I wanted it that I would be looking at ReactOS. The problem is that you equate “usable alternative operating system” with with “Windows Equivalent (=clone)”. I never suggested this, and any thought that I did was a misunderstanding.

    “So it’s no surprise that Microsoft is able to compete with free: there are clear differentiators that cause people to select Windows over Linux, not the least of which is, as I mentioned, access to content only available on Windows (many Steam-based games being a spectactular example).”

    Sure, I agree with you here. Some people purposely choose Windows for reasons beyond market manipulation and anti-competitive reasons, though they are few and far between, because Microsoft’s behaviour pretty much all of us in some way. Your basic point though is something I can’t dispute. My point here was to expand on the statemate made by Mark, and to clarify that it isn’t as simple or easy as he put it.

    And again, you use “free” as in no charge exclusively. This bothers me, because it blinds any other positive aspects that GNU+Linux has. It is also against another simplistic generalization, because Microsoft is giving away their products for no charge through various mediums.

  18. Not just Toronto
    “… because Quebecor makes the signal available free over-the-air in Toronto ” Also in Hamilton, Ottawa, and London. And interestingly Quebecor Media has post-transitional digital OTA licenses for all 4 transmitters. Why did they bother if they will shut them down??

  19. end user says:

    Brett said: @end user:

    But, again… you’re *missing the point*. And yes, there was one, completely divorced from the neverending Linux-vs-Windows battle. That point is this: Linux and Windows are not equivalent. There are reasons to pick one over the other. The principle difference is in content differentiation, in that there are applications available on Windows, be it games, desktop publishing, etc, etc, that are not available on Linux. So while Linux is free, Microsoft can compete on a basis other than price.

    They are still the same, they are both an os system with graphical interfaces. Linux desktop might not be useful for you but you and I are not the rest of the world, just because you have no use for it doesn’t mean that I and tens of thousands of people don’t.

    Now for me Linux replaces windows as my daily os. What I do doesn’t require to be tied to windows and windows only software. I don’t play games or create complex spreadsheets or word documents. I do tons of photo editing which is handled quite nicely by RawTherepee and sometimes GIMP so no need for any windows only software in my situation

    For majority of computer users Linux will work just fine, most don’t realize it till they try it. Seen this lots of times from people who are still running Linux as their os after I switched then to it.

  20. So if Bell as TV says internet streaming has no value, does that mean Bell as ISP will stop charging us for downloading it? Didn’t think so.

  21. Irony
    Notice the irony how he claim the signal has no value since there is an alternative freely streamed. It is like bandwidth when it is paid, whether you use it or not it does not cost more (or less).

    Nice double standard from Bibic. Let’s see. If the money has to come from Bell (paying for the signal) then insist that it has no value. If the money has to go to Bell (data cap on top of already paid bandwidth) then it has a high value.

    Disclaimer: I just wish Sun News Network was not granted a license, but that’s a different story.

  22. RE: Hub
    “Disclaimer: I just wish Sun News Network was not granted a license, but that’s a different story.”

    Me too. It’s a very interesting situation.

  23. Crockett says:

    Netflix is here now, will it be here in a year?
    I could say so much about the anti-competitive manipulations of big content but that would take too much space. Instead I’ll talk about the viability of Netflix and other services that are limited or non-existent in the Canadian market.

    First of all it has NOTHING to do with our copyright laws, it’s all about licencing rights and protecting incumbent industries that, for very short sighted reasons, decided to foolishly vertically integrate content and delivery (CTV/BELL).

    IS Netflix a threat? Yes. Will it be driven out? Possibly. If so I offer a possible solution, a VPN [strongvpn.com]. With such a service you are able to bypass all geo-location blocking and subscribe to the services our southern neighbors enjoy. I am uncertain of all the legalities in doing this, so you should look into regulations in your area and act accordingly. But it would be one way to protest against the discriminatory access we have at the behest of incumbents who fail or wish not to innovate.

  24. My point wasn’t to try to say that Linux is just as good as Windows or Mac OSX. Such an assertion invariably leads to philosophical arguments that I have no desire to engage in. It was to simply point out the facts: Linux is free. Linux is not as widely used as some very commercially successful OS’s. Therefore, it logically follows that it is entirely possible to commercially compete with something that is free.

    Period. Full stop. No implications about which is better or which is superior… just looking at the facts.

  25. CBC and CTV stream their news free….
    …. Bell carries them.

  26. Linux
    “My point wasn’t to try to say that Linux is just as good as Windows or Mac OSX.”

    Ummm…. it’s better, especially if you want security and stability.

    If you want games, go buy an Xbox or PS.

  27. maebnoom says:

    Would you guys stop arguing over OS’es? sheesh.
    “Netflix, YouTube, direct streaming, iTunes and a few OTA transmissions recorded direct to disk fulfill my requirements 100%”

    Nice, altho I’d dump iTunes & go with Last.fm for music 😉

    More on topic – bandwidth pricing is where they’ll still gouge us…

  28. Value
    “The Internet based streams effectively reduce the value of a cable or satellite television subscription since much of what is now offered through those services is, by Bell’s own definition, of no market value.”

    I believe the notion that information, once released to the wild, no longer has value, is a notion that has been realized by many of the reasonably proficient interwebbers who are not tied at the hip to maximizing profit from data sales. Coming from a corp as big as Bell Canada, I guess I regard it with suspicion and mistrust, but perhaps they are beginning to recognize that their market is ultimately going to be the equivalent of a utility, and recognize the need to focus on that niche.
    This also brings to (my) mind, that if an internet stream can be used to justify discarding a free service, then the internet access itself must also be basic right, for those dependent on the information flow that they were once getting through the old feed.

  29. Let me just say up front that I apologize profusely for evidently starting an OS war on this topic… it wasn’t my intent, and if people had actually read my remarks instead of making assumptions that anyone who ever brings up Linux in a conversation must be an OS evangelist, they would hopefully see that.

  30. the future
    I’m surprised Bell is fighting tooth and nail over this, I’m sure as soon as the cons are kicked out of office that the replacement government will reform the CRTC and stop Bell and Rogers Duopoly in Canada.
    Bell should be taking this opportunity to get on people’s good side, including moving their call centre’s back to Canada (they say they are in canada, but well seems like they are still in India…), stop gouging customers every chance they get and actually get on our good side.

    They can start by firing Bibic who Canadian’s see as a joke!

  31. Marvin Goldberg says:

    Hurray for Bell….
    No Market Value is correct. Without digital copyright laws this trend will continue.

  32. Crockett says:

    Please put on your trousers …
    G&M – “Chief among concerns raised … whether Canadian Internet service providers were protecting their TV businesses by imposing download limits on consumers.”

    http://www.theglobeandmail.com/news/technology/tech-news/wireless-auction-ubb-dominate-telecom-summit/article2043210/comments/

    To this I can only say ,,, Duh! Severely lowered caps was the telcos announcement the SAME DAY Netflix launched in Canada.

    They weren’t even subtle about it … talk about balls before brains if they thought people would shut up and take it.

    Long live openmedia.ca 😉