DAILY NEWS Sep 24, 2013 8:32 AM - 0 comments

CRTC Calls for Fresh Look at Broadcast, Telecom in Light of Digital Media Developments

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2013-09-24

More and more Canadians are turning to the Internet and Web-based streaming media services to get their TV, radio and movie content, and that means it is “time for a fresh look” at the country’s broadcast and telecom regulatory structure.

In remarks prepared for a speech to the annual conference of the Canadian Cable Systems Alliance, Peter Menzies, the Vice-Chairman, Telecommunications, Canadian Radio-television and Telecommunications Commission, said the CRTC can no longer act as a gatekeeper in the face of new and emerging digital media distribution platforms, including services like Netflix.

CRTC Chair Jean-Pierre Blais was originally scheduled to speak at the convention, called Connect 2013.

Menzies noted that in an upcoming CRTC report, stats will show that the number of Canadian subscribers to the U.S.-based streaming movie service is up seven per cent over last year, and that just over 17 per cent of all Canadians subscribe to the service.

He made several references to upcoming CRTC public consultations on the future of television in general, and the impact new delivery platforms have on traditional business and creative models.

He said the public, the industry and all its participants will have input into new approaches to media industry operation and regulation.

But Menzies began his planned presentation with a word of congratulations to the CCSA on its 20th Anniversary, as he addressed the association’s annual general meeting in Mont Tremblant, QC. He noted that the cable industry organization has grown from a dozen members to more than 100, and thanked them for a job well done.

"A key part of our job at the Commission,” he continued, “is to ensure that all Canadians have access to a wide range of high-quality services in broadcasting, telephone and Internet. And by that, I mean all Canadians, wherever they may live across this vast country of ours.

Independent cable system operators perform an essential function within our communication system. Most of you serve small communities. You have to be nimble and innovative to compete in your markets, and from all reports you are doing a great job of providing your customers — with whom you are the most familiar — with the diversity of choice that they want and need
to have.”

Menzies also noted the work done by broadcasters, distributors and the Commission to implement new rules on excessively loud TV commercials, and he went on to describe other changes in the industry.

“We understand the challenges you face every day to ensure the success of your businesses at the local level," Menzies' remarks noted. "Beyond that, you also have to face the same challenges as the entire communications industry. Change has never come so quickly as it has in the past few years.

“In a few days, we will release the 2013 edition of the Communications Monitoring Report. I thought it would be interesting to share with you a few statistics from the report that demonstrate just how quickly the world has been changing.

- 62% of Canadian households subscribe to Internet services featuring download speeds of at least 5 Mbps.

- Anglophones spent 20.1 hours online per week in 2012, against 18.2 hours in 2011. That’s an increase of more than 10%.

- Francophones spent 13 hours online per week in 2012 (that’s roughly the same amount as the previous year).

- 33% of Canadians watched online television programming.

- 4% report that the only place they watch television programming is nline.

- Typical users watched over 3 hours of Internet television per week (that’s up from 2.8 hours in 2011).

- 17% of Canadians subscribed to Netflix (up from 10% in 2011).

- The number of Canadians that own a smartphone jumped from 38% in 2011 to 51% in 2012. That’s a massive increase in the neighbourhood of 34% in one year.

- The number of Canadians that own a tablet more than doubled — almost tripled, in fact — from 10% in 2011 to 26% in 2012.

- 6% of Canadians watched television programming on a tablet or smartphone.

- 20% of Canadians streamed the signal of an AM or FM station over the Internet; 14% streamed audio on a tablet; 13% streamed a personalized Internet music service; and 8% streamed audio on a smartphone.

- In 2012, Canadians downloaded an average of 28.4 GB and uploaded 5.4 GB per month.

So we're looking at a communications environment that is radically different from what it was only ten years ago.

Since then, the structures, the business models, the products and the technology of the industry have been dramatically transformed — to say nothing of the needs, the tastes, the expectations and the behaviour of consumers.

Both the industry and the regulator have had to adopt a spirit of innovation and creativity.

One of the biggest changes is the convergence of broadcasting and telecom technology, combined with massive consolidation in the industry. I know this is of great concern to you as independent players in the smaller markets.

The communications industry in Canada is now dominated by a handful of major vertically-integrated players with extensive infrastructure, wide ownership of content and very deep pockets.

This concentration of power provides them with the efficiencies and synergies they believe are necessary to adapt to this changing world. But with those benefits of mass comes risks that you know only too well threaten the diversity of the system, and it's part of our job at the CRTC to see what can be done about moderating those risks.

As you know, one of the biggest consolidations ever was approved by the
CRTC in June: the takeover of the Astral broadcasting assets by BCE. The
Commission assessed the value of the transaction at over $4 billion.

A consolidation on this scale always carries the risk — as was pointed out
to us — that the massively expanded new entity could start throwing its
weight around in anti-competitive ways. Many clearly fear the company
could exploit its power in the market at the expense of smaller
independent players, as well as suppliers and consumers.

That's where the regulator comes in. As you know, this was the second time
around for the BCE/Astral application. In 2012, we rejected their first
proposal.

There were a number of important factors that influenced that decision.
One of them was the concern that the combined company could restrict
access to its programming services or offer them to its competitors only
at above-market rates.

This could threaten the availability of diverse programming choices to
Canadians. It could endanger the ability of distributors to deliver
programming at affordable rates and on reasonable terms on multiple
platforms.

Therefore, the Commission made sure that the terms we finally approved
this year included unprecedented safeguards:

- The expanded BCE, including its related entities, must adhere — as a
condition of licence — to certain sections of our code of conduct for
commercial arrangements that are designed to reduce the potential for
anti-competitive behaviour with the aim of ensuring fair treatment for
independent programming services.

- It must not unduly withhold online and mobile rights from competing
distributors — even if BCE is not exploiting the rights itself.

- BCE must file with us all of its affiliation agreements with programming
services and TV distributors, within five days of their execution. We
won't be approving them, but this requirement will enable us to monitor
what's going on, and we'll be able to investigate any concerns over
improper conduct. If BCE is giving itself or one of the other big players
a better deal than it gives the independents, we intend to know about it
and we can take action.

- We've been especially concerned about the possible impact of terms and
conditions on subscribers to distributors that serve rural or low-density
areas. So we'll consider that impact in determining whether the terms and
conditions are reasonable.

- If an existing affiliation agreement is going to expire, BCE must reach a
new one no later than 120 days before the expiry date. If it fails to do
that, it must enter into a dispute-resolution process supervised by the
Commission. This mechanism will benefit independent operators by
shortening delays and reducing the risks of retroactive fees and interest
costs following a CRTC decision.

We're confident that these measures will help to level the playing field
and offer you protection in your dealings with a player that holds much
greater market power.

We've been working hard to put measures in place to help ensure that you
can continue to provide a diversity of choice to your customers. The
Commission is very much aware of your business realities. You have been
heard.

In fact, we're very pleased that earlier this month, you welcomed CRTC
staff as observers to the meeting where you discussed what an "ideal
affiliation agreement" might look like. We're always ready to hear about
your concerns.

I'd now like to turn to the local telephone market. In 2006 we opened up
competition in the markets of the small incumbent telephone companies. We
reaffirmed that decision in 2011. Also in 2011, we opened local phone
service to competition in the operating territory of Northwestel, in the
North.

These steps have enabled service providers to enter markets that were
previously closed to them, giving consumers access to a broader range of
products and services.

Competition offers more choice to Canadian consumers. It also opens up new
business opportunities for service providers and encourages innovation.
The CRTC strongly favours an environment that's open to competition. We
are pleased to see that some of you have entered new markets and become
competitive local exchange providers.

A few minutes ago I ran through some statistics that reflect the radical
changes that our communication industry is going through. Where is this
taking us? What does this mean for the Commission's work as the
regulator?

We cannot make good decisions unless we make ourselves available to listen
to, learn about and consult with everyone involved in the areas we
regulate. That means all the players in the communication industry, and
the most important stakeholders of all: the people of Canada. Or as the
late Premier of my province, Ralph Klein, used to call them: Martha and
Henry — the Mr. Everyman and Ms. Everywoman whom you and we ultimately
serve.

This fall we will be beginning a conversation with Canadians on television
— as we know it and as we may come to know it. This proceeding is an
important part of our three-year plan of action. It's time for a fresh
look at the assumptions that underlie our framework for the regulation of
broadcasting.

That framework was constructed to carry out the mission assigned to us by
the Broadcasting Act. For decades, we have followed a well-established
pattern: We issue licences to broadcasting networks and to cable and
satellite service providers, with certain conditions attached to ensure
that the aims of the Broadcasting Act are advanced.

Over the years, the framework has evolved, mostly in response to changes
in technology, industry economics and the interests and choices of
Canadian consumers. These regulatory responses have been well-suited to
the developments of their own times. But the overall result has been a
complex system of rules built on an old foundation that was never designed
to support them.

One of the old assumptions was that the CRTC could act effectively as a
gatekeeper. Those who wanted to broadcast to Canadians had to do so under
our rules, and Canadians — Martha and Henry — had little access to
broadcasting that hadn't been channelled through those rules.

But now the Internet and all the devices that can reach it directly have
created a borderless world. We can no longer define ourselves as
gatekeepers in a world in which there may be no gates. We can't tell
Canadians what to watch, nor should we. They are free to enjoy a much
wider range of information and entertainment than ever before. And they
are.

How can we act as an enabler of Canadian expression, rather than as a
protector? How can we shift our focus from rules and processes and
procedures to actual outcomes? How can we help Canadian creators to take
advantage of all the opportunities in the new global environment — one in
which the opportunities may exceed the threats? How can we ensure
Canadians see their realities, hear voices that are familiar to them and
get the information they want and need in the television shows they
watch?

Our conversation with Canadians will be about the future of television,
which is still the medium that Canadians rely on for most of their
programming content. But of course we expect that the conversation will go
way beyond the familiar box in the living room.

The first stage of our conversation will involve Canadian viewers — the
Marthas and Henrys — from across the country. We'll then be hearing from
members of the industry, distributors like you, broadcasters, news people
and content creators.

We look forward to hearing from the CCSA and its members. We also
recognize how close you are to the communities you serve, and we hope we
can count on your help in making those communities aware of this
initiative and encouraging them to take part.

We have no doubt that you as independent operators have the creativity and
the entrepreneurship that are needed to move our communication system
forward. We invite you to help us achieve the goals of the Broadcasting
Act as we all take on the challenges of the 21st century.”


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