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    Why Creators and Consumers Should Welcome the "Netflix Threat"

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    Thursday May 16, 2013
    The examination of the proposed Bell acquisition of Astral Communications took place last week in Montreal with the Canadian Radio-television and Telecommunications Commission hearing from a wide range of supporters and opponents of a deal that only last year was rejected as contrary to the public interest.  

    As Bell and Astral sought to defend their plan, a familiar enemy emerged - Netflix. What does a U.S.-based Internet video service with roughly two million Canadian subscribers have to do with a mega-merger of Bell and Astral?  

    My weekly technology law column (Toronto Star version, homepage version) notes that for the past few years, it has become standard operating procedure at CRTC hearings to ominously point to the Netflix threat. When Internet providers tried to defend usage based billing practices that led to expensive bills and some of the world's most restrictive data caps, they pointed to the bandwidth threat posed by Netflix. When cultural groups sought to overturn years of CRTC policy that takes a hands-off approach to Internet regulation, they argued that Netflix was a threat that needed to be addressed. So when Bell and Astral seek to merge, they naturally raise the need to respond to Netflix.


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    Why Creators and Consumers Should Welcome the "Netflix Threat"

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    Wednesday May 15, 2013
    Appeared in the Toronto Star on May 11, 2013 as Bell and Astral Merger: Netflix Isn't the Enemy

    The examination of the proposed Bell acquisition of Astral Communications took place last week in Montreal with the Canadian Radio-television and Telecommunications Commission hearing from a wide range of supporters and opponents of a deal that only last year was rejected as contrary to the public interest.  

    As Bell and Astral sought to defend their plan, a familiar enemy emerged - Netflix. What does a U.S.-based Internet video service with roughly two million Canadian subscribers have to do with a mega-merger of Bell and Astral?  

    For the past few years, it has become standard operating procedure at CRTC hearings to ominously point to the Netflix threat. When Internet providers tried to defend usage based billing practices that led to expensive bills and some of the world's most restrictive data caps, they pointed to the bandwidth threat posed by Netflix. When cultural groups sought to overturn years of CRTC policy that takes a hands-off approach to Internet regulation, they argued that Netflix was a threat that needed to be addressed. So when Bell and Astral seek to merge, they naturally raise the need to respond to Netflix.

    This is an age-old strategy that seems to resurface every decade. In the 1980s, it was the effort to keep large U.S. specialty channels such as ESPN and MTV out of the market that led to the creation of TSN and MuchMusic. In the 1990s, the U.S. satellite television providers were branded the "death stars" and kept out of the market to allow for Canadian entries. In the 2000s, it was U.S. satellite radio services that were denied entry until acquiescing to minimum Canadian content requirements.

    In this decade, it is the Internet's turn as over-the-top video services such as Netflix are viewed as threats to established Canadian broadcasters, broadcast distributors, and content creators.

    To date, the CRTC has largely skirted the issue by pointing to studies that suggest that Netflix and other over-the-top video providers have only had a minimal impact on the consumer market. But that won't last. Whether Netflix or the myriad of other online video services - from YouTube's forthcoming subscription services to the National Film Board's documentary film Netflix competitor (scheduled to launch in 2014) to sports leagues offering season packages for Internet distribution to film studios launching their own services - the online distribution model is only going to increase in popularity.

    Rather than claiming limited impact, the CRTC should embrace the trend by concluding that the services are a boon to both consumers and content creators consistent with its policy mandate that does not require regulatory change or protection for established Canadian broadcasters.  

    For consumers, the benefits are obvious with more choice, greater convenience, and lower prices.

    Creators also benefit from the proliferation of these services by virtue of the heightened competition for their content. In years past, the competitive landscape in Canada was limited to a handful of broadcasting organizations. The entry of new competitors means there will be a larger ecosystem of distributors, intermediaries, and original producers all vying for enough content to make a compelling offering to consumers.

    The established players unsurprisingly view the new entrants as a threat since they offer competitive content at a fraction of the price of a typical cable or satellite bill, increase acquisition costs, and free consumers from being locked into a small number of service providers.

    Broadcasters and some content creator groups may be comfortable with a highly regulated system that provides a steady stream of revenue, but the new environment creates a more competitive landscape and the promise of increased demand for new creative works. Viewed in that light, the shift toward a robust online video market should be welcomed by the CRTC with open arms, not viewed warily as a threat in need of regulatory intervention.
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    The CRTC's Big Shift: From Tangible Benefits to the Public Interest

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    Monday October 22, 2012
    Last week's Canadian Radio-television and Telecommunications decision to reject the proposed Bell - Astral merger surprised most observers, as few predicted with much confidence that the deal would be flatly rejected. There was good reason to doubt such an outcome, given that the CRTC review of the merger transactions has historically focused on the "tangible benefits" package that often provide millions in funding for new Canadian television and radio productions.

    The result was largely regulatory theatre. The purchaser would typically unveil a benefits package featuring self-interested proposals, often amend those plans at the CRTC hearing to demonstrate it was sensitive to criticisms from various groups, and the CRTC would proceed to further tweak the package to show it was not ready to rubber stamp the transaction.

    My extra Toronto Star column (Toronto Star version, homepage version) notes the process generally served the companies and the tangible benefits recipients well. The merging companies were reasonably assured of getting their deal approved and the tangible benefits recipients received hundreds of millions in funding with few strings attached. 

The problem was that the public was missing from this process. Tough policy issues with a direct impact on the public were put off for another day as the public interest was supposedly served by trickle down benefits generated by market efficiencies or the creation of new Canadian programming.


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    Reactions to the CRTC's Bell - Astral Decision

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    Monday October 22, 2012
    Several must-read posts and articles on the CRTC's Bell - Astral decision from over the weekend from David Ellis, Dwayne Winseck, and Steven Chase of the Globe and Mail.
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