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Why Are Consumers Missing from the CRTC's Online Video Ruling?

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Tuesday October 11, 2011
My weekly technology column (Toronto Star version, homepage version) notes that earlier this year, the Canadian Radio-Television and Telecommunications Commission launched a consultation into the policy implications of increasingly popular Internet-based video services such as Netflix. The consultation was the CRTC's response to broadcaster and cultural groups including Bell Media, Astral Media, ACTRA, the Canadian Media Production Association, and SOCAN, who formed the Online Broadcasting Working Group to urge it to step up to the regulatory plate.

While many feared the CRTC would jump at the chance for new Internet regulation, last week it surprised observers by rightly concluding that its consultation generated plenty of rhetoric about the dangers of an unregulated over-the-top video services market, but no evidence of real harm. Given the lack of evidence and the absence of entry barriers for Canadian companies to establish their own competitive offerings, the CRTC decided to open a "watching brief" with the promise to revisit the issue in another fact-finding exercise next year. The CRTC decision concluded "it is best to allow the over-the-top market to continue evolving, better measurement tools to emerge and entities that contribute to the policy objectives of the Act to take advantage of the many opportunities in this new environment."

This is close to what I suggested might happen back in July, when I noted "given the lack of actual evidence - this has been a fear-finding exercise rather than a fact-finding one - the CRTC should surely label this a watching brief and wait until 2014." There is a big difference between waiting until the next scheduled new media review in 2014 and kick-starting another examination of the issue next May, however. The CRTC message to the Online Broadcasting Working Group is "if at first you don't succeed, try, try again." By opening the door to two reviews in the span of a one-year period, the Commission hold on new Internet regulation may only be a temporary reprieve.

First, the characterization of online video services as "broadcasters" is open to debate.  Online video services share some characteristics of their broadcasting counterparts, but some of those services could also be treated as the Internet equivalent of video rental stores, which fall outside the Broadcasting Act.  If the CRTC starts from the presumption that over-the-top video is broadcasting, it is already on the road to regulation.

Second, the CRTC consultation and report examines over-the-top video services almost exclusively through the prism of how they have an impact on established broadcasters and content creators with little regard for consumer interests. The Commission's report concludes that consumer adoption of these services is "real and growing", but it surely did not require a fact-finding exercise to figure that out.

Rather than focusing on the potential "harm" of online video services, the Commission should instead adopt a consumer-oriented perspective that seeks to foster the growth of such services [I argued in June 2011 that the entire process featured unnecessary barriers to consumer participation].

The consultation confirmed that consumers are gravitating toward services that offer on-demand access to video content at a price point far below that offered by conventional pay television and broadcaster services. Moreover, the CRTC heard from many broadcasters lamenting the likelihood of increased costs for licensing content given the heightened competition.

These developments may represent a threat to established broadcasters who face the prospect of reduced consumer revenues for their services along with increased expenses for programming content. However, it also holds the promise of more consumer choice, lower prices, and increased demand for creator content. That sounds like a market to be embraced, not shackled with new regulation.

Indeed, rather than offering broadcasters and creator groups another chance to make the case for regulation, the Commission should instead be closely examining the potential barriers to online video services from vertically-integrated media companies that combine broadcasting and Internet services and hold the power to undermine the nascent competition. For example, Internet plans with expensive data caps can be used to increase the indirect costs of online video services when compared with on-demand video services from cable and satellite companies.

The Online Broadcasting Working Group received its fact-finding exercise and the Commission found no evidence of harm. If there is to be another consultation, the CRTC should turn its attention to Canadian consumers by emphasizing what can be done to foster even more competition.
Comments (8)add comment

Un-Trusted Computing said:

Out of the mouths of babes
The CRTC knows the truth on this one, but they still have a mandate to protect the usual suspects. So rather than sending them packing until 2014, they're giving them the "opportunity" to get on their game between now and 2014.

The minister of industry should re-affirm the 2014 date rather than the CRTC and put an end to this charade.
October 11, 2011

Jason said:

To Regulate or not Regulate
I find it interesting that the incumbents are fighting to remove regulations with regards to vertical integration and wholesale ISP billing practices; but then demanding regulation for over-the-top video services.

I find this a little bit hypocritical on their part. It's no big secret why they are doing it, but it's still hypocritical.
October 11, 2011

Byte said:

Which "cultural groups"?
I certainly would like to know which "cultural groups" were consulted as most of the groups listed are actually business groups. Cultural groups sounds like people who care about the Arts; SOCAN cares about the Dollar while ACTRA is a labour union.

What would be interesting is to have the CRTC put some research into the obstacles that keep services like Spotify out of Canada and why Netflix.ca is a mere shadow of its US counterpart.


October 11, 2011

Crockett said:

... a little bit hypocritical??
Well, we really don't need to expand on that much.

I do also want to point out that what is good for the consumer ... is not always bad for the creator. The losers in this formula are actually going to be the distributors/providers, and with their ever increasing fees and annoyingly structured 'packages' will any of us shed much of a tear?
October 11, 2011

Jonathan said:

Regulation is a bad idea
Regulation of the internet is a terrible idea but it would be Bell's dream come true. Bell would love to control what Canadians watch on the internet. It angers Bell that Canadians can watch what they want without be told what to do. Inevitably, the CRTC does whatever Bell wants so it looks like OTT services will be regulated sooner rather than later. Consumers will lose and Bell will win. The CRTC always does Bell's bidding. Whatever Bell wants, Bell gets. Consumers have been pushed to the side in this important debate by the CRTC while all that matters is the input from Bell.
October 11, 2011

Anon-K said:

...
Crockett, agreed. There are at least 4 groups of interests here, as you've identified. The CRTC need to tread a fine line to ensure that they don't at least appear to be pre-judging the issue, not just on the side of the broadcasters but neither on the side of any one of the groups of interest. The only ones who win from a court appeal is the lawyers.

One issue to be remembered in all of this, however, is that the "conventional" broadcasters are supposed to pay into a Canadian content creation fund. Since the CRTC decided that Netflix, etc, don't need to pay into this, there is no creator support from them.

Is this necessarily a bad thing? I suppose that depends on your point of view. Certainly if you are directly impacted its a bad thing. Personally I am undecided on this issue.

As far as costs go, I'd also like to see some sort of projections... in particular for the cable providers the existing infrastructure supports both cable TV and internet access; this allows the costs of maintaining the infrastructure to be spread across both business units. If the cable TV BU is no longer viable, the infrastructure costs need to be absorbed completely by the internet access BU. Is there sufficient revenue from this BU to do this and still turn a profit? This is more than the simple incremental cost of a byte, it includes all of the associated costs with fitting out and maintaining the infrastructure, including leasing real estate, power, purchasing equipment and copper/fibre optic cables, wages, interest on loans, etc.
October 11, 2011

ScytheNoire said:

...
Because CRTC & Conservatives cater to Corporations, not the people.

Look how well it's been working for America.
October 11, 2011

bob said:

Internet
Yeah, we can get more ways for get information, video, news and so on. www.youtube.com
October 13, 2011

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