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

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    Tuesday April 23, 2013
    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 my weekly technology law column (Toronto Star version, homepage version) notes 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."


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

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    Monday April 22, 2013
    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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    CRTC Should Put Consumers First and Drop 'Must Carry' Requirements

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    Tuesday January 29, 2013
    Canadians frustrated with ever-increasing cable and satellite bills received bad news last week with the announcement that the Canadian Radio-television and Telecommunications Commission will consider whether to require cable and satellite companies to include nearly two-dozen niche channels as part of their basic service packages.  If approved, the new broadcast distribution rules would significantly increase monthly cable bills with consumers forced to pay for channels they may not want.

    My weekly technology law column (Toronto Star version, homepage version) notes that two issues sit at the heart of the broadcast distribution rules.  First, whether the CRTC should grant any broadcaster mandatory distribution across all cable and satellite providers such that all subscribers are required to pay for them as part of their basic packages. Second, in the absence of mandatory distribution, whether broadcast distributors should be required to at least offer the services so that consumers have the option of subscribing.



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    CRTC Should Put Consumers First and Drop 'Must Carry' Requirements

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    Tuesday January 29, 2013
    Appeared in the Toronto Star on January 27, 2013 as CRTC Should Put Consumers First and Drop 'Must Carry' Requirements

    Canadians frustrated with ever-increasing cable and satellite bills received bad news last week with the announcement that the Canadian Radio-television and Telecommunications Commission will consider whether to require cable and satellite companies to include nearly two-dozen niche channels as part of their basic service packages.  If approved, the new broadcast distribution rules would significantly increase monthly cable bills with consumers forced to pay for channels they may not want.

    Two issues sit at the heart of the broadcast distribution rules.  First, whether the CRTC should grant any broadcaster mandatory distribution across all cable and satellite providers such that all subscribers are required to pay for them as part of their basic packages. Second, in the absence of mandatory distribution, whether broadcast distributors should be required to at least offer the services so that consumers have the option of subscribing.

    Twenty-two channels are vying for mandatory distribution status as part of the current review, which includes a comment period and a hearing scheduled for late April. Some have likened the process to winning the lottery, since mandatory distribution guarantees broadcasters millions in revenues. For example, 25 cents per subscriber - the amount the Aboriginal Peoples Television Network currently receives - generates $30 million in revenue in each year for the broadcaster (it wants the fee to increase to 40 cents per subscriber).

    These proposed cash grabs could add hundreds of dollars to cable and satellite bills if approved. Sun TV News, which previously disavowed mandatory distribution by likening it to a tax on all cable and satellite subscribers, now wants the CRTC to require those subscribers to pay it 18 cents per month until 2017.  Starlight, a proposed new Canadian film channel, hopes to generate hundreds of millions in revenues from mandatory distribution, much of which would be used fund the creation of new Canadian films.  

    While the financial benefits for broadcasters are enormous, the policy represents a near-complete elimination of consumer choice for the channels at issue. Rather than convincing millions of Canadian consumers that their services are worth buying, the broadcasters need only convince a handful of CRTC commissioners that their service meets criteria such as making "an exceptional contribution to Canadian expression." That is supposedly a high bar, yet it is surely far easier than convincing millions of people to pay for your service each month.

    Last year, CRTC chair Jean Pierre Blais emphasized that the Commission's top priority was to "put Canadians at the centre of their communications system."  The mandatory distribution rules do the opposite.  Rather than focusing on consumer interests and choice, the rules place broadcasters at the centre of the communications system by offering up the prospect of millions in revenue without regard for what consumers actually want.

    There are few, if any, broadcasters that can be considered so essential as to merit mandatory distribution. Niche cultural broadcasters have a myriad of distribution possibilities and should be forced to compete like any other content creator or distributor.  In fact, even broadcasters that position themselves as "public services" can often be replicated by Internet-based alternatives.

    While the anti-consumer mandatory distribution rules should be scrapped, the Commission can enhance consumer choice by making "must offer" the default for broadcast services.

    Cable and satellite companies should theoretically welcome the chance to offer more options to subscribers, but the vertical integration between broadcasters and broadcast distributors may create anti-competitive incentives. With Bell, Rogers, Shaw, and Videotron each controlling a major broadcaster, it may make economic sense for those distributors to prioritize their own channels while offering their customers less choice.  

    The role for a CRTC that places Canadians at the centre of their communications system is obvious - stop treating Canadians as ATMs for the broadcasters by dropping mandatory distribution altogether, while requiring broadcast distributors to offer all licensed channels to their subscribers in a pick-and-pay format so that at long last consumers get to decide what they want to watch and pay for.

    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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