This week's CRTC mandatory distribution hearing has placed the spotlight on a fascinating disconnect between the Commission and the Canadian broadcast community. Despite months of telegraphing its intent to promote consumer choice over broadcaster revenues, the first two days of the hearing have featured repeated presentations from groups who have not gotten the message. CRTC Chair Jean-Pierre Blais could not have been clearer in a speech last October:

In our decision, we noted that consumers increasingly expect to be in control of what they watch. It makes sense that consumers and the distributors who serve them should have more flexibility in packaging choices. While we acknowledged the value of predictable revenues to the programming services, we decided that the days of guaranteed wholesale rates are over. Programming services cannot expect to remain completely insulated from the growing demand for greater choice by Canadians.

He followed that up in March by telling the production community that it "will need to compete, just like any other sector."

Despite the messaging, many of the groups seeking mandatory distribution evidently don't get it.

The CRTC kicked off its two week broadcast hearing on mandatory distribution yesterday with a steady stream of proposals hoping to hit the jackpot by winning mandatory distribution (and guaranteed millions) from cable and satellite distributors. I've written (here and here) about why mandatory distribution should be dropped altogether, but yesterday's hearing provided the best evidence yet. CRTC Chair Jean-Pierre Blais started the hearing by making it clear that the Commission would establish a very high threshold - consistent with the Act - before forcing any Canadians to pay for channels they may not want. Over the course of the day, no one came close to meeting even a low threshold.

As the hearing veered from proposals backed by studies suggesting consumers weren't interested in their product to claims that broadcaster costs were "totally retarded", it became apparent that the mandatory distribution process is a last gasp for many failed, failing or never started broadcast proposals. The Commission heard from channels that broadcast distributors won't carry, that advertisers won't support, that few subscribers pay for, and that don't have any content (user generated content was the answer for two such proposals leading one Commissioner to ask why people wouldn't just watch YouTube). Even the Sun News Network, the headliner of the day, acknowledged that its complaints about undue preference by other distributors would not meet the legal standard, that it is already available to 70% of cable subscribers, and that Videotron, which shares the same parent company, has not placed the channel on basic service, even though it is seeking an order from the CRTC requiring everyone else to do so.  

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.

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."

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.

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."

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.  

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.

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.