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.”

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The CRTC released its TalkTV decision this afternoon and – as expected – it includes a mandatory basic service capped at $25 per month (which may include U.S. channels) and mandates a pick-and-pay alternative no later than December 2016.  Why did the CRTC conclude that it needed to regulate a pick-and-pay option?  Because the public wanted it and it was convinced that cable and satellite providers would not do it on their own. This passage from the decision tells you everything you need to know and gets it exactly right:

while some parties argued that it would be sufficient to prohibit programmers from preventing BDUs from offering programming services on a pick-and-pay or build-your-own-package basis, this approach does not take into account the fact that vertically integrated BDUs have every incentive to ensure that their related programming services are insulated from the financial pressures that come with greater choice and packaging flexibility. As such, BDUs, and vertically integrated BDUs in particular, may not be sufficiently incented to make the necessary changes to their current offerings or might make these changes at a much slower pace than that desired by Canadian subscribers. Moreover, the Commission considers that BDUs have not generally demonstrated that they would willingly move to more flexible packaging options on their own.

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The CRTC will release its latest decision in the TalkTV consultation later today as it announces much-anticipated plans to require cable and satellite companies to offer consumers the option of picking the television channels they want without requiring them to purchase expensive bundles. The decision, which builds on earlier rulings that focus on a more competitive marketplace, will fulfill the government’s promise to bring in consumer choice for television packages, which was a prominent part of its 2013 Speech from the Throne.

The specifics are yet to come, but the CRTC will likely require distributors to offer a basic service of Canadian and mandatory channels at a relatively low price (a 2014 working document suggested a cap of between $20 – $30/month), offer consumers a pick-and-pay option, and adjust the Canadian content requirement for bundles.

Consumers will emerge as the clear winners, benefiting from increased choice and the potential to lower their monthly bills. Yet the CRTC decision will undoubtedly be greeted by doomsayers who will argue that pick-and-pay will increase prices and decrease choice (because some channels will fold).

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