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Michael Geist's Blog

CRTC Should Force Broadcasters To "Compete Just Like Any Other Sector"

Appeared in the Toronto Star on April 20, 2013 as CRTC Should Force Broadcasters to Compete

Last month, Jean-Pierre Blais, the chair of the Canadian Radio-television and Telecommunications Commission, delivered a much-discussed speech at the Canadian Media Production Association's annual conference. The CMPA is Canada's leading organization for the production of Canadian film and television programming and Blais' message was intended to both congratulate and challenge the industry.

On the congratulatory side, Blais noted the Canadian film and television production had a record year in 2012, growing by over $500 million over the prior year, by far the highest total and fastest growth in over a decade. Canadian television production led the way, increasing 21.3 per cent in 2011/12, for a ten-year high of just under $2.6 billion. Most of the increase was due to English-language programming, with fiction production growing by over 41 per cent.

Blais' challenge came in several forms, but the comment that attracted the most attention was his remark that "under my watch, you will not see a protectionist. I'm a promotionist." Most observers took the comment to mean that the CRTC will not focus on mechanisms such as Canadian content requirements and foreign restrictions as a means to advance Canadian culture.  Rather, with billions being spent on the creation of Canadian programming, it is better to concentrate on marketing and promotion of those works.

Yet there was a second comment that garnered less attention, but that may ultimately prove more important. After encouraging the industry to become more innovative and entrepreneurial, Blais warned "you will need to compete, just like any other sector."

That may sound unremarkable, but to an industry that has often focused on creating rather than competing, it represents a potential sea change.  

For example, most of the funding for the record amount of Canadian English-language television programming came from taxpayers and broadcasters, not the original producers of the content. According to Profile 2012, an annual report on the state of the industry, only ten per cent came from private funding such as production companies and private investors. Canadian distributors covered 18 per cent of the total costs, with foreign distributors kicking in an additional nine per cent.  

That still represents less than half of the total financing costs for Canadian English-language television programming. Federal and provincial tax credits provided the largest chunk of funding, covering 29 per cent of the cost, while broadcaster licence fees constituted another 25 per cent. The Canada Media Fund, which is jointly funded by the taxpayers and cable and satellite providers, covered the remaining ten per cent.

The notion of competing in the market should take centre stage this week as the CRTC conducts its hearing on whether Canadians who subscribe to cable and satellite television packages should be required to pay for channels such as Sun News Network and Starlight, a proposed all-Canadian movie channel. The regulatory process has been likened to winning the lottery, since channels selected for mandatory carriage are guaranteed millions in revenue regardless of whether Canadians watch or even want the channel.

The best approach would be to scrap the mandatory carriage rules altogether.  Instead, the Commission could require cable and satellite companies to offer all licensed channels to their customers. That would enable consumers to decide what they want to pay for and assuage broadcaster concerns that some distributors may withhold access to their programming altogether. 

That shift in approach would represent a significant change in Canadian broadcast policy, effectively establishing a framework that requires the industry to compete for subscribers. As CRTC Chair Blais would say, just like any other sector. 

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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Canadian Wireless Association Breakup Points To Industry Divide on Competitiveness

Appeared in the Toronto Star on April 13, 2013 as Deep Divisions Surface in Canada's Wireless Industry

The Canadian wireless sector was shocked last week by the abrupt departure of the three major new entrants - Wind Mobile, Public Mobile, and Mobilicity - from the Canadian Wireless Telecommunications Association. The new entrants took the CWTA by surprise, issuing a stern release claiming the association has shown consistent bias in favour of Bell, Telus, and Rogers, the three incumbent providers. Moreover, the companies pointed to a blatant disregard for new entrants and alleged that the CWTA had failed to honour repeated promises of fair representation.

The move is a major blow to the CWTA, which has long promoted itself as the voice of the industry. For example, during the recent CRTC consumer wireless code hearing, it opened by telling the commission that it “represents virtually all of the major companies in Canada's wireless telecommunications ecosystem.”

No longer.

While analysts searched for a specific incident that led to the departure, the more likely explanation lies in the ongoing battle over the state of competitiveness of the Canadian wireless sector.  The question is not a mere academic debate since key government policies, including the framework for the forthcoming multi-billion dollar spectrum auction, the creation of an enforceable consumer wireless protection code, and the rules on much-hated three-year wireless contracts, all hang in the balance.

The CWTA has long argued that the Canadian market is competitive and that no government intervention or additional regulation is needed. Indeed, as far back as 2000, the association told officials “the Canadian wireless market has been competitive from the outset.”

As study after study pointed to high consumer prices and comparatively low subscriber rates, the government began to entertain the possibility of a set-aside in a spectrum auction to pave the way for new entrants into the market.

Once again, the CWTA argued against the approach, claiming that the market was already competitive and that no intervention was needed. The government rejected the CWTA’s position, leading to the 2008 set-aside and the eventual entry of Wind Mobile, Public Mobile, and Mobilicity into the market.  

The new entrants succeeded in providing lower-cost alternatives, yet the incumbents did little to alter their approach, hoping that the new competition would be short-lived. Provincial governments became involved with several proposing new wireless consumer protections.  The CWTA first argued against provincial involvement in the issue and later against immediate implementation of a national code being crafted by the CRTC.

For the new entrants, an association committed to fighting efforts to enhance competition and consumer protection was an association fighting against their own interests since their long-term viability depends on maintaining policies designed to promote further competition. While the CWTA and the new entrants may have been able to paper over their differences on technical issues, the competitiveness issue was too important for compromise.

At the recent CRTC hearing on a consumer wireless code, Wind Mobile openly broke with the CWTA, telling the commission that

“The CWTA has elected to take certain positions over the express objections of WIND Mobile (on the basis that such positions are not "industry positions" but rather those of a BRT-dominated CWTA board). Accordingly, without needing to single out positions taken by the CWTA which align with those of WIND Mobile, WIND Mobile simply states that WIND Mobile does not support the CWTA submission.”

Moreover, Mobilicity had already publicly differed with the CWTA on consumer issues back in 2011, stating that it was “exceptionally disappointed with the CWTA's lack of foresight in continuing to act only in the interests of the Big Three wireless oligopoly.”

Viewed in this light, the only surprising thing about the decision to abandon the CWTA is not why, but rather what took so long.  The move sends a strong message to the government and the CRTC that there remain deep divisions within the industry with many legitimate concerns about competitiveness of the Canadian wireless market.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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The Challenge of Enforcing the Do-Not-Call List Against Foreign Telemarketers

Last October, the CRTC announced that it was taking action against two India-based companies for violating Canada's do-not-call list. The action against Pecon Software Limited was particularly noteworthy, as the Commission ordered a stop to the violations and payment of $495,000. Andrea Rosen, the CRTC's Chief Compliance and Enforcement Officer was quoted as saying that "foreign-based telemarketers have been put on notice that they must comply with our rules when calling Canadians."

The tough talk was welcome, but months later, the CRTC has struggled to get Pecon Software to pay up. Liberal MP Lawrence MacAulay asked the government to provide an update on the action and Canadian Heritage Minister James Moore provided the following update to the House of Commons on Friday:

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Debate Over Wireless Competition in Canada Continues in the House of Commons and on the Air

The debate over the state of wireless competition in Canada continues to rage. Last week, I appeared on CBC's The Current, as part of a 30 minute segment devoted to the wireless industry. The issue was also discussed during Question Period at the House of Commons, with Industry Minister Christian Paradis focusing on competition and consumers:

We want to enhance competition and investment in this country, and this is why we adopted this policy back in 2008 for the AWS spectrum. Let me say that the price went down by an average of 11% since then, and we will continue this way with the 700 megahertz spectrum. We launched consultation with the industry to make sure that we enhance competition and provide better choice and better rates for our consumers.

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Open Media: Why High Cell Phone Bills Have Nothing to do With Canadian Geography

OpenMedia has an interesting post that takes a close look at the claim that the large Canadian geography is responsible for high cell phone prices. The post notes that coverage actually focuses on as little as 20 percent of the country.

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