Why Competition Holds the Key to a Broken Broadcast System

Tuesday July 05, 2011
Appeared in the Toronto Star on July 3, 2011 as Why Competition Holds the Key to a Broken Broadcast System

As the Canadian Radio-television and Telecommunications Commission concludes its hearing on the consolidation of the Canadian communications market into a handful of corporate giants (so-called vertical integration) and embarks on a "fact-finding exercise" on the impact of online video services, the only obvious conclusion from the hundreds of submissions and hours of debate is that Canada’s broadcast law framework is broken.

The Commission’s struggle to make sense of the changing corporate and technological landscape - alongside lobbying for new industry codes of practice and Internet regulations - is rooted in a regulatory framework premised on scarcity rather than abundance. When the law was crafted, broadcasters occupied a privileged position, since the creation of video was expensive and the spectrum needed to distribute it scarce. As a result, the government established a licensing system complete with content requirements and cultural contributions designed to further a myriad of policy goals.

Yet among the more than 40 policy goals found in the current Broadcasting Act, the word "competition" does not appear once. The absence of competition may have made sense when there was little of it, but in today’s world of abundance featuring a seemingly unlimited array of content and distribution possibilities, fostering competition among broadcasters and broadcast distributors such as cable and satellite companies might hold the key to reforming the system.

What might a competition-focused broadcast policy look like?  

First, rather than erecting barriers to new entrants with proposed fees, regulations, or investment restrictions, Canadian law would seek to create a level playing field that encourages more competition. This would mean recognizing that video can be distributed across many platforms from broadcast television to the Internet to software games, but that broadcast regulation is not needed where there is no scarcity.

While some argue for the regulation of services like Netflix, the reality is that there is nothing to stop any Canadian company from establishing a competing service. The best way to beat Netflix is in the marketplace, not a CRTC hearing room. Conventional broadcast may still require some regulation (spectrum is still relatively scarce), but new online competitors do not.

Moreover, encouraging greater competition means inviting new competitors into the marketplace. Canada maintains some of the most restrictive rules for foreign investment in the communications sector and this would change under a competition-focused broadcast policy.

Second, broadcasters and broadcast distributors should be forced to compete more aggressively for viewers and original Canadian content. In the current environment, cable and satellite companies package hundreds of channels together in a confusing manner that leaves consumers frustrated with ever-increasing bills, while broadcaster competition is largely limited to outbidding one another for Hollywood hits.

Injecting competition into this environment would include establishing a pick-and-pay option for consumers that would allow them to pay only for those channels they actually want and removing the simultaneous substitution policy that grants Canadian broadcasters the lucrative ability to substitute their feed (commercials included) over the same U.S. feed. Dropping simultaneous substitution, which has turned some Canadian private broadcasters into little more than U.S. affiliates, would force the broadcasters to compete with their own original content and help to ensure that Canadian content is made to be watched, not just made to comply with regulatory requirements.

Third, a competition-focused approach would ensure that the vertically integrated giants do not leverage their controls across multiple platforms to stymie new entrants or independently created content. That would require guidelines on the implementation of Internet data caps (since ISPs can use the caps to hamper online video competitors), enforcement of net neutrality rules to foster different modes of video distribution, and restrictions on the use of exclusivity by ensuring competitor access to content on reasonable terms.

The result would be a sea-change in the Canadian broadcast landscape – broadcasters competing on the quality of their original programming, broadcast distributors on the basis of the value they provide to consumers, and creators on their ability to find an audience in a world of abundance.

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.