2015-03-16

CRTC "Talk TV" Decision #2 - Good For Cord Cutters?

Last Thursday the CRTC announced more changes as a result of the "Talk TV" hearings held last fall. This time around they addressed Canadian content rules, streaming services, and specialty channels. The full CRTC policy paper is available online as is the text of chairman Blais' speech to the Canadian Club of Ottawa in which he covered some of the highlights.

Last week's ruling was important to cord cutters mainly because it clarified how Canadian streaming services fit into the regulatory regime. Read on for details.

Decision #3 is expected later this week, and may have the biggest impact on cord cutting by stemming the tide if everything falls into place. This week's decision is reported to include changes to the way channels are sold, and observers are anticipating a move toward requiring all channels to be available outside of bundles - a full pick-and-pay system. Between the changes to the framework and the manner in which they're eventually enacted by TV distributors, there's at least the possibility that we'll be able to buy just the channels we want and pay reasonable prices for them.

How to Deal with CraveTV and Shomi?

In recent months both Bell and Rogers/Shaw launched streaming services that on first glance look like a perfect way to let you access the TV shows and movies you love without a cable/satellite subscription. Unfortunately however, the business model for both Bell's CraveTV and Rogers'/Shaw's Shomi services are aimed at preventing cord cutting. Both services are available only to those who already subscribe to a TV package, so the TV providers are clearly hoping that having more content and access to that content via a phone or tablet will keep customers from dropping their expensive subscription package.

Shomi executives have at least stated that they eventually plan to offer Shomi to all Canadians over the Internet. For now the service is limited to Rogers/Shaw customers while the service is in its "beta" testing stage. I should add that they have not announced any timeframe for progressing beyond the beta stage and opening up the service to everyone, so it's conceivable that Shomi will be in beta for several years like Google's GMail from 2004-2009.

CraveTV on the other hand is very up front with the fact that their service is only meant for TV subscribers of Bell or their distribution partners. Their FAQ states: "Bell TV, Bell Aliant, Telus Optik TV and Eastlink are the first distribution partners to carry CraveTV, but we're in talks with all television service providers to get it in your hands. If your provider isn't listed, you can help by calling and letting them know you're interested."

Given that both services are delivered over the Internet and set-top boxes and that both are doing their best to license content in an exclusive fashion, the CRTC was put in a difficult position. Existing video-on-demand services offered via a set-top box are prohibited from having exclusive content. If they weren't, a company like Rogers might acquire an exclusive license for a pay-per-view sporting event or the latest Hollywood blockbuster. That would mean that a large portion of the Canadian population would not have access to that content; they might subscribe to a different provider or they might be in a part of the country not served by Rogers. Not even the satellite companies can claim 100% coverage of the Canadian landscape since satellite dishes are banned by some apartment and condo buildings, and other people don't have the required line of sight from their property.

Streaming services that are offered over the Internet without any requirement to subscribe to another service are what the CRTC calls digital media services, and they're effectively exempt from regulation. CraveTV and Shomi as they're currently offered don't qualify as either a new-style digital media service nor an old-style video-on-demand service, so the CRTC had to figure out how to deal with them. The end result is a new classification called "hybrid video-on-demand" that has most of the benefits given to pure-Internet services. Here's the diagram they included in their paper entitled The Way Forward:


It's essentially what CraveTV and Shomi are right now, with the important added requirement that the service is "Also available on the Internet to all Canadians". Others have already pointed out a glaring loophole in the rules based on the simplified text above: price is not mentioned. Unless the rules for the new service type include pricing stipulations, CraveTV and Shomi could say they're in compliance by offering the service without a TV subscription but pricing it much much higher - say $25-50/month instead of $4 for CraveTV and $8.99 for Shomi. I don't think it would take the CRTC very long to close that loophole if it turns out to be necessary.

While Rogers and Shaw are trying to get their way by labelling the service as being in a "beta" phase for now, Bell seems to think that CraveTV already fits the definition of a hybrid service by virtue of the fact that they are working with other TV distributors. As a result, they don't believe they need to change anything, but by my reading they're far from having it available to "all Canadians" as required by the ruling. They also believe that even though CraveTV is the only streaming service in Canada licensed to offer shows like Seinfeld and HBO's Game of Thrones, that does not constitute exclusive content since CraveTV is offered by non-Bell distribution partners such as Telus and Eastlink. Bell is parsing "exclusive" to mean exclusive to a TV distributor rather than exclusive to a streaming service, but I expect the CRTC to see through their creative interpretation and tighten up the wording of the ruling to cover the service as a whole.

Since Jean-Pierre Blais took over as chairman, the CRTC has been doing a much better job of taking the needs and desires of ordinary citizens/consumers into consideration. In the past it seemed that decisions always favoured the large media companies or the creative community, usually at the expense of consumers, but under Blais there has been a noticeable shift toward pro-consumer policies and decisions.

Perhaps most telling is this quote from Blais' speech on March 12th:
If you hear criticisms of our decisions ask yourself this question: Are the arguments advanced by these critics those of the public interest or are they rather those that find their true roots in private entitlement, dressed up to look like they are founded on the broader public interest? 
This town is full of lobbyists whose job it is to spin their client's private interests into something else, to wrap themselves up, as it were, in the flag, and to puff about Parliament Hill with an air of shock and dismay.
I respect their right to do so, but I respect more the rights, expectations and wishes of Canadians we serve.
With that quote in mind, I look forward to the pick-and-pay decision later this week and hope that the pro-consumer trend continues. Perhaps eventually I'll have to rename this blog to "Adventures in Canadian Cord Trimming".

For some additional thoughts and analysis on last week's announcements, the following articles are worth a read:
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