As expected, the CRTC ruled yesterday that it will require cable and satellite companies to offer a mandatory basic service capped at $25 per month (which may include U.S. channels) and a pick-and-pay alternative for individual channels no later than December 2016. As also expected, the doomsayers are out in full force, trying to explain why a low priced service and more consumer choice will lead to higher cable bills. The Globe and Mail’s Kate Taylor predicts “my bet is that most Canadians will find themselves piecing together a smaller cable package that will cost just about the same as the old behemoth.” The National Post’s Terrance Corcoran says that no one will buy the basic bundle and that “what is clear is that, when viewers start picking [bundles and channels], the amount they end up paying could go up.”
Yet that analysis runs counter to what business analysts expect to happen. Maher Yaghi of Desjardins Capital Markets says the changes could “lead to a reduction of $5 to $10 in monthly [revenue per user] as customers get the option to choose the channels they want to watch and move discretionary money toward OTT (over-the-top) services such as Netflix.” Canaccord Genuity analyst Dvai Ghose suggests even bigger declines of $9 to $21 for some customers. In fact, Ghose notes that “current entry-level TV monthly prices for the large BDUs are as follows: Bell Fibe TV $45.95, Rogers Cable $40.48, Shaw $39.90 and Videotron $38.00 and Telus $34.00 ($29.00 if bundled).” A $25 service is obviously going to result in reduced spending for those consumers.”
Critics keep claiming that the changes will result in billions in lost revenue. For example, Friends of Canadian Broadcasting says that more than $2 billion per year could be lost under a pick-and-pay system. The CRTC rejected those claims, but if they are even close to correct, how do you take $2 billion out of the system? By having consumer spend less on broadcast services. It simply makes no sense to suggest that broadcasters will earn less, broadcaster distributors will earn less, but somehow consumers will spend more.
Beyond the obvious economics, critics like Taylor and Corcoran emphasize that consumers will have to piece together bundles or more expensive pick-and-pay channels in order to get what they want. For example, Taylor says consumers will be looking for U.S. channels in their package. They can be included in the basic $25 service, but if they are not, they will be forced onto a higher tier. The fallacy with this analysis is that it thinks of consumer choices as limited to the cable system. This might have been true years ago, when consumers had few other choices (OTA the exception) than purchasing cable services.
No longer. Cable and satellite must now compete with streaming services such as Netflix, sports packages, and (soon in the U.S.) HBO and something that looks a lot like basic cable from Apple. The price points of streaming services are far lower than a cable bill of basic plus lots of bundles or individual channels (there is also an Internet bill, but consumers are buying Internet access with or without streaming services).
Cable and satellite services can try to piece together a crappy basic service without U.S. channels or set high fees for individual channels. But in a competitive market, there will be a strong disincentive against doing so. My bet would be that the major cable providers will include U.S. channels on basic because that is what the market wants and if they don’t, many will simply walk away altogether. Indeed, it was Rogers that specifically asked for the U.S. networks to be included on the basic package. The same is true for high prices for standalone services. Some might be pricey, but typically when there are no other alternatives to the same programming. When consumers have other options – streaming sports packages rather than TSN or Sportsnet rather than TSN – the market will keep prices in check.
Some Canadians will obviously continue to buy expensive bundles or retain their existing service. Old habits are slow to change. But they do change (as the newspaper or music industry can attest). With the new changes, those who currently purchase basic service will certainly save money. Moreover, the next generation of potential subscribers – my kids and my students – will only subscribe if cable or satellite offers better value than the online alternatives.
$25 for basic cable…and then $25 to rent the hardware.
Add to that the fact that I’m sure Bell & Rogers will charge a fortune for each channel.
I’ll stick with Hulu, Netflix, HBO Go, Sling TV and wait for that market to develop.
I checked Shaw website and the basic TV pkg plus set top box rental would cost $34.90 / mo for 6 months then it would jump up to $64.90 for channels some of which I do not want! If this package drops to $25 for basic a month the providers all of which are also ISPs have to make up for the short fall somewhere.
That somewhere will be their internet service. They will dick around with the speed and data caps something that Shaw already did back in January lowering their basic high speed package to 5Mbps down from 10Mbps as well as fiddling with the prices and data caps.
Shaw said the price increases and changes were becuase they needed it for infrastructure improvements because people were using more and more devices on their internet connection at home . Hello! So they are paying for say a 60Mbps connection before the Shaw internet pricing changes were implemented in January. It does not matter if they were using 1 or 30 devices, their internet connection in this example is still limited to 60Mbps. Having more devices on the connection is only to make their data cap be used more quickly. Could it be that the ISPs have oversold their network based on knowing that not every one uses their connection to the rated speed or even approach their monthly data cap and now with this increased usage of devices their network is being overused and they are scrambling to fix its shortcomings?
Be prepared for the ISPS to also enforce data cap overages which I believe Shaw does not currently do.
Greg is right. The $25 sounds great, but what about the required hardware rental? The cable companies could use ClearQAM so we wouldn’t need a box at all, but they’re not going to leave money on the table when they don’t have to.
If they’d offer ClearQAM, I’d come on board for $25/month…but they won’t, so the lowest teir plan will certainly cost more than $25/month despite the CRTC a rule. I’ll stick with my antenna and record shows with my Mac for $0/month.
The CRTC should have *required* ClearQAM for any stations that are available OTA. I think this is the case in the US. There is no defensible reason for not providing such channels in ClearQAM.
Unless I am mistaken, other than the $25 charge for the basic starting package, doesnt Telus already follow this business model? I have the ability to add bundles or single channels.
In the end they have done a good job of shuffling around channels, bundles and price points to the point where for me to get a good range of channels (sports/food/discovery/movies) I might as well just get their mid range bundle package.
Ive trialed Netflix but while I see great value at their price point for what you get, I would prefer to still use the Telus method even though it ends up being about 5x the cost. The overall user experience of sitting in front of the TV and range of choices is still superior with Telus. If Netflix really wants to be an alternative they need to build up their content some more (sports/news/etc) and enhance their user experience in the traditional living room setup.
I am all for picking my own channels. It has irked me beyond belief for so many years that I am paying for channels I never have and never will watch. If they die because no one wants them in the future, so be it. That just means they never should have come into existence in the first place.
As for what it will cost me under this new model, I can’t say yet and it’s only speculation as I don’t know what channels will be in this new “basic” package. Funny how it seems much like what I have now, a basic package with me adding on another. The only difference I see at the moment is an impression that the new basic will be smaller than what I have now and the optional package I’ve added on will not have to include many channels I don’t want just to get a couple that I do. I suspect that this will lead to lower prices for me personally.
Now, to be pessimistic, because that’s my nature, I suspect that the providers will figure a way to milk us in different ways. Specifically, I question those who think going “internet only” is somehow cheaper. Granted, it may give you more control over what you get. You certainly won’t have to pay to subsidize those cable channels that are viewed by a paltry few people. But you also have to subscribe to all those providers to replace whatever it was you were watching on cable. For me, it’s around $50 a month more to drop cable (TV) for strictly internet. Now, I may get more content for that price (netflix and the like) but I really have only so much time in my day to devote to the TV screen. Great for those with big families I suppose but for just my wife and I, well, we can only watch so much and we actually have other things to do with our day. So maybe just a basic cable package with let’s us pick a few channels we need will work out. My fingers are crossed.
The CRTC dropped the ball when they changed the contract term rules and reducing the term down to 2 years from 3. In response, the carriers changed all their plans and increased fees. When customers wanted to renew they were forced into new contracts under the guise of the new CRTC rules. Carriers earn more and customers pay more.
Unfortunately, the CRTC has not gone far enough to define what must be offered in the Basic cable package. The carriers will simply charge more for other services. They may start streaming only for premium content and then charge more for the volume of streams the consumer uses.
The CRTC needs to give more specifics so carriers are required to provide service and their fees are kept in check.
It bugs me when people don’t realize that when they buy a cell phone on a contract, they’re clearly financing their cell phone. Financing a car over 4 years has higher monthly costs than financing it over 5. Its the same thing with cell phones.
So why is everybody surprised their monthly cell phone payment goes up when the contract is 2 years instead of 3?
It has nothing to do with Rogers/Bell/Telus suddenly gouging you for more money. They should actually like it as the client is more likely to upgrade their phone a whole year sooner.
But someone has to pay for that phone. That someone is You.
Agreed. If anything the CRTC should have mandated that cell phone financing be decoupled from cell phone plans. This would have made everything perfectly transparent, as it should be.
With the current packages, sports channels occupy a large chunk of that cost regardless if you watch sports or not. That’s like saying I need to help pay for your tickets to the game. With the new regulations, you shouldn’t need to pay high bundle prices to watch millionaires play for billionaires if you don’t want to.
To get the odd program (not channel) I wanted to watch I had to get Rogers HD Specialty Pack, but they demanded (for no good reason other than greed) that I subscribe to their VIP package first. I was paying them over $100/month to watch very few shows other than basic cable.
I dropped down to basic cable and said goodbye to the show I wanted to watch and waited for it to come out on Netflix. I didn’t need to discuss the latest episode around the water cooler. But I was still paying over $70/ month with their gawdawful DVR.
Then I realized that > 90% of what I was watching was available for free by antenna. So I dumped Rogers (one of the best decisions I’ve ever made) and went OTA. Even after a professional antenna installation, and buying tuner hardware to use an old computer as a DVR, I paid it off in 6 months.
To get PBS I use a U.S. Apple ID for my Apple TV and a service called Unblock-US.com. Bonus, I get both Canadian and U.S. Netflix.
There isn’t much sports available for free, so if you’re a sports nut, this won’t work for you.
Not even the CRTC’s latest decision will entice me back into the horrors of being a Rogers customer. My entire TV viewing bill amounts to $12/month for Unblock-US and Netflix.
In closing I ask, what restrictions has the CRTC put in place to prevent price creep? How long before that $25/month plan gets bumped to $30?
> Then I realized that > 90% of what I was watching was available for free by antenna.
Though my satellite service with Bell was pretty good (picture quality, great PVR), I grew tired of the $90/month. So I BUILT my own antenna with coat hangers and a 2×4 (!!), stuck it in the attic above my garage, and bought a Tablo DVR.
Most of what my family of 5 watch is on Global/CTV/CityTV + PBS in Watertown. We also have Netflix and UnblockUS so we have a great overall selection of stuff to watch.
In addition, our DRV allows us to watch our recorded shows on any computer, tablet, or TV in the house. Couldn’t do that before.
All for less than $20/month.
$90 vs $20 ? Its a no brainer for me.
All this crap by the big boys about lost money haven’t even looked into the cable cutter going back. As a cable cutter this pick and pay will most likely bring me back into the tv world.
i cut my cord because to get the few channels i wanted it was over a $100 a month.
This will work for me.
I’ll only claim to speak for myself – but I would far rather pay $100 for ten channels I want, instead of $100 for 100 channels of which I only want 10. In the second case, each channel sees me as paying $1, while in the first case, the channels I want see me paying $10.
Cgetting $10 from me should care much more about what I want to watch.
I agree. Ramifications, be damned!
As others have mentioned, I am surprised that the CRTC appears to have said nothing about the cost of the hardware (set top boxes) required by satellite services and essentially all cable providers. Won’t they just increase the monthly rental fee or outright purchase cost to compensate for the lost revenue from their basic packages?
>”Cable and satellite must now compete with streaming services”
Agreed innthe US that is the case. But in Canada the big players buy all of the rights broadcast, streaming etc all together so you will never have a cable company and a streaming service competing against one another on the same programming. Add to that the fact that the cable company can use the the fat profits from the cell phone service to out bid competitors on content and suddenly competition is basically dead.
I hope to see and hear more from the CRTC in the future on this.
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All this talk of competition driving the price of (i.e.) US channels down. What competition? Where is anyone in Canada providing legal access to US networks other than the cable and satellite channels?
Hulu (or any other US based service) over VPN does not count. That’s likely violating AUPs and subject to whack-a-mole as VPN providers are found and blocked, etc.
And besides, is my mom is going to set up a VPN so that she can circumvent the expensive cable-and-satellite cartel’s exclusive US network deals?
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I decided to get ahead of the game. I dropped all my themes, and was left with the basic package (Still $50) and one channel that I could not live without.
My price dropped by $48.00/month, and will drop another $25.00 when this ruling takes effect. What I found most interested is that in more than a month since I did this, I have not experienced any feelings of loss.
It makes me wonder how many people out there have loaded up on themes, when in fact one or 2 channel picks would be sufficient.
If anything, this ruling will make everyone take a hard look at what they have, and what they don’t need.