Jean-Pierre Blais’ term as CRTC chair was marked by dramatic changes in how policies were developed and in the substance of the policies themselves. As I wrote on his departure, Blais placed the Internet at the centre of the communications systems and worked to gradually revamp broadcast safeguards in an effort to make the Canadian system more globally competitive. With the appointment of new chair Ian Scott and vice-chair of broadcasting Caroline Simard, the established stakeholders will unsurprisingly test the new leadership to see if a change in approach is on the way. Yesterday, Bell took a major step in that direction as it asked the CRTC to rescind its order banning simultaneous substitution from the Super Bowl broadcast in Canada.
Bell had already filed a legal action, asked the government to intervene in the case, and ramped up lobbying pressure from the U.S., but the government rightly declined to overturn the decision with the case still before the courts. I’ve written extensively about the issue, making the case for why the CRTC got it right (if anything, it did not go far enough as simultaneous substitution has become less relevant as more subscribers cut the cable cord). After the Super Bowl broadcast, I argued that the viewership data largely vindicated the CRTC. Indeed, Bell’s data confirms that it massively over-estimated the impact of the simsub loss. In advance of the broadcast, it forecast a $40 million loss. It now claims an $11 million advertising loss, a fraction of its earlier estimate.
The right thing to do for the CRTC would be to follow the government’s lead, declining to take action while the issue remains before the courts. If it feels compelled to act, a broader review of simultaneous substitution that opens the door to removing the policy altogether would be in order. What it should not do is simply grant Bell’s request. For one thing, it would invite reconsideration of a long list of CRTC decisions, creating considerable regulatory uncertainty. For another, the Bell application is incredibly weak, riddled with inconsistent arguments and questionable claims based in part from commissioned research by Communic@tions Management Inc. Bell’s application and supporting documents throw as much mud at the wall in the hope that something will stick with everything from claiming Canadians don’t care about the issue to suggesting that U.S. ads during the Super Bowl could pose health and financial risks to Canadians.
For example, Bell claims that few Canadians care about U.S. commercials (it argues that “only 0.001% of viewers complained to the Commission about the lack of advertising in Canadian Super Bowl broadcasts”), but also makes the case that millions of Canadians chose to watch the U.S. feed with U.S. commercials rather than its Canadian feed with Canadian commercials. The two arguments are at odds with one another: if no one cared, presumably viewership would not have declined as it did.
Bell also emphasizes that Canadians can easily access the U.S. Super Bowl commercials online. Yet its own research from Nanos also finds that 40% of Canadians were unaware of their availability online before the game. Assuming those numbers are wrong (calling into question the validity of its survey data) – most Canadians can access the commercials online – then Bell’s argument that simsub protects Canadians from U.S. commercials that promote unapproved pharmaceutical products or unregulated financial services is undermined given the ease with which that information can also be accessed online.
Bell’s submission also argues that the policy undermines the Income Tax Act policy that grants deductions for Canadian advertising on Canadian broadcasters (but not advertising on U.S. services) because U.S. services offered lower prices to compensate for the lost tax deduction. Yet that is a function of the market at work, not a failure of Canadian policy.
Bell has an assortment of additional arguments (it promises a curated show of ads for free distribution before the game that ignores the finding that the commercials are integral part of the broadcast and it has previously argued that the CRTC ruling interferes with its contract with the NFL, as if private companies should be entitled to use contract to override regulatory decisions), but the headline story coming out of the Bell submission is that the decision cost the economy a staggering $158 million.
If that sounds implausible, that’s because it is. How does Bell arrive at the claim? In addition to the $11 million it says it lost in advertising revenue, there are two sources for the economy claims: lost retail and e-commerce revenues and lost television revenues. The lost retail and e-commerce revenues is a classic piece of guesswork:
1. A 2014 study estimated the value of simsub at $240 million. Since Bell says it lost $11 million on the Super Bowl broadcast, it estimates that the broadcast represents 4.6% of the total value of simsub.
2. The report looks at the total value of retail sales and argues that if the loss of simsub were to shift sales 2/10th of a percent from Canada to the U.S., that would be a loss of $1.1 billion.
3. The report also looks at e-commerce sales, estimating that 38% of Canadian purchases come from the U.S. It then estimates that if the loss of simsub led to a 4% shift to U.S. online sellers, that would result in an additional $1.36 billion loss.
4. Since it estimates that the Super Bowl broadcast is 4.6% of total simsub, it pegs the lost retail and e-commerce revenues at $113 million.
Note that this is all guesswork with little grounding in actual data, examination of actual advertising, or actual data on consumer purchasing habits.
The estimate on lost television revenues is not much better. It estimates the lost revenue for Canadian conventional television at $472 million (nearly double the lost core value). Bell then doubles that nearly doubled number to account for the “ripple effect”. That puts the loss at $986 million. Once again, it takes 4.6% of that figure to arrive at the figure of $45 million. In other words, the $158 million is the product of near-complete guesswork that Bell should be embarrassed to put forward as a serious claim and that the CRTC should have little trouble dismissing as not credible.
Canadians have long had the choice of multiple feeds for major sporting events, including the Stanley Cup, the World Series, the Olympics, and the World Cup. The Super Bowl, which Bell survey data now says “is only of interest to less than half of Canadians”, was the outlier. The CRTC policy created consistency in approach with a limited advertising impact that was only a fraction of Bell’s dire predictions. There is simply no need for the CRTC to revisit the issue.