LibertyVoice

Taking pot shots at Canada’s national broadcast regulator has practically been a national sport for many years, as observers from across the political spectrum paint the Canadian Radio-television and Telecommunications Commission as too interventionist, too luddite, too slow, or a combination of all of the above.

As my recent technology law column (forgotten with all the copyright activity – Toronto Star version, homepage version) notes, in recent years, the commission has worked to shed its negative reputation by increasingly adopting decisions that favour letting consumers and businesses decide broadcast winners and losers. For example, the recent fee-for-service decision promotes a negotiated settlement between broadcasters and cable companies with the CRTC betting that consumer expectations will provide sufficient incentive to ensure that local programming remains accessible to viewers.  

Yet despite the seeming preference for market-led solutions, that approach appears to have been largely forgotten in a recent decision involving a small new broadcaster devoted to emerging musical artists in Quebec.  Rather than giving consumers the opportunity to decide whether there is a need for such a station, the CRTC blocked the application for a broadcast licence in a decision that featured a spirited dissent from Quebec-based commissioner Michel Morin.

At issue was Glassbox Television Inc.’s licence application for the launch of AUX TV, a national, French-language specialty programming broadcaster that planned to offer programming devoted to emerging music, including assistance for emerging artists. The same company already offers a version of AUX TV in English.

Given the CRTC's focus on the promotion of Canadian culture, this application would seem like a proverbial slam dunk.  While the Astral Group's MusiquePlus has offered French music programming in the Quebec market for years, it provides little coverage of emerging artists.  In fact, even though emerging music videos are required to constitute 50 percent of MusiquePlus programming, those videos are broadcast from 12:30 a.m. to 9:00 a.m. on weekdays and from 1:00 a.m. to 8:00 a.m. on weekends.

Sensing a competitor in the marketplace, MusiquePlus objected to the AUX TV application, arguing the proposed programming would be directly competitive with its existing service.  Avoiding direct competition has been a cornerstone of CRTC policy for many years, but it has typically been willing to define new offerings flexibly to allow for new entrants (CRTC skeptics will rightly note that true reliance on the market would welcome competitive offerings since that is the very definition of a market-led, consumer-driven system.)

Despite a clear opportunity in the Quebec market and a comparable service in English, the commission rejected the application, offering a terse opinion that AUX TV would compete with MusiquePlus and that it was “not convinced that the safeguards presented in the application are sufficient to eliminate this risk.”

That reasoning brought a stinging response from Morin.  Noting the CRTC's concern with marketplace risk, he argued “the commission's role is not to eliminate competition in order to protect a service. Is ours a market economy or a state-controlled economy? This is no longer the 1970s, when the commission worked to establish a regulatory framework designed to protect a budding industry. We are in the second decade of the 21st century. No, thank you. Bring on competition as far as I am concerned!”

Morin's dissent places the spotlight on a decades-long debate on the appropriate role for the CRTC.  Protecting broadcasters from competitive entrants may have seemed like a good idea when there were a limited number of channels and Canada's specialty market was in its early stages, unready to do battle with well-established U.S. giants.  Today, specialty programming is the most profitable marketplace segment and competition comes from not only from other channels but unregulated Internet streaming as well.  The AUX TV decision marks an unfortunate blast from the past and provides a reminder that market-led solutions are still not guaranteed in Canadian broadcasting.

The CRTC has released its decision on Bell's usage based billing, ruling that it can continue to use the practice with wholesale ISPs, provided that it charges UBB rates to all of its retail Internet customers. Mark Goldberg notes this requirement effectively means Bell will not be able to implement usage based billing (at least in the short term), given that it risks losing many of its long term retail customers.

My weekly technology law column (Toronto Star version, homepage version) takes a look back at last week's CRTC broadcast policy decision and report on the consumer impact.  The piece covers much the same terrain as two blog posts on the same issue.  I note that after months of intense lobbying and marketing that pitted broadcasters ("Local TV Matters") against cable and satellite companies ("Stop the TV Tax"), the Canadian Radio-television and Telecommunications Commission weighed in last week with its much-anticipated broadcasting regulatory policy decision.

Broadcasters were generally viewed as the short-term winners, since the CRTC opened the door to negotiations on a new fee for local television signals, subject to a court ruling confirming the Commission's jurisdiction to implement such an approach.  That left some very unhappy – cable and satellite companies warned of increased costs, while the CBC lamented that it was a "dark day" for public broadcasters after it was excluded from the proposed negotiating process.

Two perspectives were largely missing from the decision, however. The consumer impact was left to a second report, released the following day, in which the commission admitted that prices would go up, but maintained Canadians would continue to pay based on past experience of steady price increases imposed by cable and satellite companies.  That conclusion prompted a stinging minority report from Commissioner Michel Morin, who argued the CRTC was defending "the interests of the industry to the detriment of consumers who, for their part, remain powerless."

The second missing perspective was the failure to account for the emergence of the Internet as a significant delivery channel for broadcast content.  Indeed, it seemed appropriate that on the day the CRTC released its decision, a new study was published that found Canadians now spend more time online than watching television.  

While the world is increasingly moving online, the CRTC decision acted as if the Internet scarcely exists.  It mentioned the Internet only once, acknowledging that it is a platform for content distribution.  Moreover, the report did not include any references to streaming, YouTube, podcasts, BitTorrent, or peer-to-peer (the technology used in 2008 by the CBC to distribute its content).

The reality of how consumers access broadcast content was surely worth considering in the context of a broadcast policy that envisions the possibility of blocking U.S. broadcasts of television shows where a Canadian broadcaster has purchased local rights to the program and failed to negotiate a fee with a cable or satellite company.  In other words, if the Canadian broadcaster chooses to negotiate for a new fee but fails to reach a deal, it will have the right to mandate blocking broadcast of programs from both local and foreign sources.

That could result in millions of Canadians regularly encountering blank screens instead of expected programs.  Given the increasing expectation of on-demand program viewing, the policy would harm both broadcasters and broadcast distributors, sending more Canadians away from broadcast television to the Internet where there are no blackout messages and most programs are readily available in both legal and illegal forms.

This may be precisely what the CRTC is counting on, hoping the blackout option is so unpalatable to both parties that it will force them to reach a deal.  Consumers may not be inclined to wait around for this particular fight to be resolved, however.  

Given that they now spend more time online than watching television, the programs are readily available online, and U.S. over-the-air digital signals are freely accessible to a sizable percentage of the Canadian population, basing a broadcast policy that presumes consumers will continue to pay escalating fees and be willing to settle on forced program scarcity in a world of abundance hardly seems like a recipe for success.

Denis McGrath posts an insightful analysis of this week's CRTC broadcast policy decisions, accounting for a broad range of perspectives.

The CRTC released its follow-up report to cabinet yesterday on the consumer impact of new fees associated with fee-for-carriage/value-for-signal (as a side note, the Commission's approach on releases – the financial reports on broadcasters and BDUs last week, the broadcast policy on Monday, and the consumer impact the following day – feels far too manipulative and staged.  There was no good reason not to release the broadcast policy and its consumer impact simultaneously).

The Commission conclusion amounts to an acknowledgement that prices will go up, but it believes that Canadians will continue to pay based on past experience of steady price increases imposed by cable and satellite companies.  It states:


It does not appear, however, that significant affordability issues would be created by a VFS regime that resulted in modest price increases, as both subscriber levels and average per customer BDU subscription revenues have steadily increased since 2002…While the Commission recognizes that low income households would feel the impact of an increase in the price of basic television services to a greater extent, the reality is that, for most Canadians, the price of such services would still remain low relative to overall personal disposable income. This suggests that many Canadians may be opposed to an increase in the price of basic television services but are still able to afford it. For those consumers, the decision to retain such services is one based on a number of factors and not solely on affordability.

In other words, the Commission simply doesn't believe Canadians will change their television purchasing habits if faced with new additional fees.  In fact, the CRTC believes Canadians will continue to pay even though "a VFS regime, as proposed by broadcasters, may not increase consumer value in local programming because, as currently conceived, it does not guarantee incremental local programming or greater consumer choice."  Guided by these views, the Commission proceeded to reject calls for greater consumer choice in the form of "skinny basic" or a "pick-and-pay" approach.

There are additional noteworthy recommendations (the creation of a new complaints agency, urging the government to step up its action on the digital transition), but far more interesting is the stinging minority report from Commissioner Michel Morin.  Morin does not mince words in calling out the CRTC's failure to genuinely address consumer concerns:

The ramifications of the new basic service subscription rates will only be established through negotiations among the parties. The Commission defends the interests of the industry to the detriment of consumers who, for their part, remain powerless.  These consumers are the same 11 million Canadian subscribers who have been hit since September 2009 with the first bill for the $100 million resulting from the establishment of the Local Programming Improvement Fund (LPIF) (1.5% of the BDU's bill to the subscriber) with no guarantee as to any increase in content. How much will the bill be this time? $100 million? $200 million? $300 million?

Morin argues that a cheaper, skinny basic service is needed, not only to provide a lower-cost alternative but also to better reflect the reality of the current environment:

A limited basic service – one that would be less expensive because it would include a reduced number of imposed discretionary channels – would have fit in perfectly with this shift toward the pull culture, one of freedom of choice for the consumer. This service would have resolved the problem of affordable access by giving the consumer the option of subscribing and therefore paying for a private conventional channel which, because of a recognized value assigned to its signal, would no longer be offered free of charge.

Morin closes by blasting a proposed new complaints commission, noting that the consumers are seeking greater choice, not a new way to complain about their service.  Canadian Heritage Minister James Moore has indicated that the consumer perspective is his top priority on the fee-for-carriage issue.  One can only hope that he reads the Morin minority report.

The CRTC's release of its much-anticipated broadcasting regulatory policy decision set off a flurry of comments yesterday with broadcasters welcoming the prospect of negotiating fees for their local signals, broadcast distributors warning of increased costs, and the CBC arguing that the decision was a "dark day" for public broadcasters after it was excluded from the negotiating process.  While there is understandably considerable discussion in the decision on programming requirements, the media focus centered on the fee-for-carriage issue.  On that front, the CRTC has opened the door to negotiations, subject to a court ruling confirming the Commission's jurisdiction to implement such an approach.

It seems appropriate that on the day the CRTC released its decision, a new study was published that found Canadians now spend more time online than watching television.  While the world is increasingly moving online, the CRTC decision acts as if the Internet scarcely exists.  The broadcasting policy decision mentions the Internet once (acknowledging that it is a platform for content distribution) and does not including any reference to streaming, Youtube, podcast, BitTorrent, or peer-to-peer (used by the CBC to distribute its content).  The word "consumer" is mentioned five times, though the consumer perspective will be addressed in a second report due later today to Cabinet.

Why is this relevant in a broadcast policy decision?  The reality of how consumers access broadcast content is surely worth considering in the context of a broadcast policy that envisions the possibility of blacking out U.S. broadcasts of television shows where a Canadian broadcaster has purchased local rights to the program and failed to negotiate a fee with a cable or satellite company.  In other words, if the broadcaster chooses to negotiate and fails to reach a deal, it will have the right to mandate blocking broadcast of programs from both local and foreign sources.  I wrote about the possibility of blocked signals last fall, noting:

The proposal, which would lead to millions of Canadians regularly encountering blank screens instead of expected programs, would perversely increase the attractiveness of U.S. programming.  Moreover, given the increasing expectation of on-demand program viewing, it seemingly would send more Canadians away from broadcast television to the Internet where there are no blackout messages and most programs are readily available in both legal and illegal forms.

Of course, this may be precisely what the CRTC is counting on as it hopes the blackout option is so unpalatable both to broadcasters and broadcast distributors that it will force the parties to reach a deal.  Consumers may not be inclined to wait around for this particular fight to be resolved, however.  Given that they now spend more time online than watching television, the programs are readily available online, and U.S. over-the-air digital signals are freely accessible to sizable percentage of the Canadian population, basing a broadcast policy on forced scarcity in a world of abundance hardly seems like an optimal approach.

The CRTC has launched a new consultation on the reporting requirements for new media broadcast undertakings.

Last fall, the Canadian Radio-television and Telecommunications Commission issued its much-anticipated Internet traffic management ruling, better known as the net neutrality decision. The case attracted national interest as the CRTC established several key requirements for Canada’s Internet providers.

These included new transparency obligations that forced ISPs to disclose their network management practices, such as why the practices were introduced, who will be affected, when it will occur, and how it will impact users' Internet experiences (down to the specific impact on speeds). The CRTC also opened the door to complaints about network management practices by establishing a test that any harm to users be as little as reasonably possible.

Several months later, Canada's ISPs have had ample time to comply with the new requirements, yet my weekly technology law column (Toronto Star version, Ottawa Citizen version, homepage version) reviews the policies from the biggest ISPs – including Bell Canada, Rogers Communications Inc., Shaw Communications Inc., Telus, Cogeco Inc., and Groupe Vidéotron – and reveals a decidedly mixed bag.

Two of the six providers – Telus and Vidéotron – do not have explicit network management practice disclosures since neither currently uses throttling or traffic shaping technologies that limit the speeds of some applications.  Of the remaining four providers, no one makes it easy to find the disclosures and at least two may not be compliant with the CRTC requirements.

Bell features the most detailed disclosure, providing specific information about its policies and their impact.  While critics may object to the positive spin the company uses to describe limitations on its service, it has done precisely what the CRTC asked.  The Rogers policy is not quite as extensive, yet it also covers much the same terrain, including a description of the policy, the frequency of traffic shaping, and the resulting limitations in their service (including the specific impact on speed).

By contrast, neither Shaw nor Cogeco appear to meet the CRTC requirements.  Shaw's policy, which can be found within its terms of use, does not disclose the actual speeds users encounter when it throttles peer-to-peer activity.  Cogeco, which implausibly claims "customer experience is never affected by the application of [its] measures," similarly does not disclose the speeds that result from its throttling practices.

Not only are two providers arguably failing to meet the transparency requirements, but some traffic management practices may be ripe for complaint.

Telus and Vidéotron once again get a pass, since neither uses throttling technologies, opting instead for economic measures that add additional costs for heavy broadband users.  Shaw's policy also appears compliant with the CRTC minimal harm threshold, since it limits its throttling practices to actual instances of congestion on specific segments of its network.  

Meanwhile, Rogers and Cogeco continuously throttle all upstream P2P traffic. Both providers admit that the limits on their service occur on a 24 hour, 7-day basis, regardless of whether the network is actually experiencing any congestion.  For example, Cogeco claims "it is [our] experience that congestion created by P2P can occur at any time within a 24-hour period."  This may be true, but the failure to limit throttling activities to instances of actual congestion is surely grounds for a CRTC complaint.

While Bell limits its throttling practices to specified periods, its defined period is so broad that it too may be the target of a complaint. Bell discloses that its throttling practices, which target upload and download traffic, runs from 4:30 pm to 2:00 am.  By covering nearly half the day, the company could face questions about whether the policy limits harm as much as reasonably possible.

The CRTC's net neutrality guidelines garnered well-deserved plaudits last year, yet the true test will be whether the guidelines will be enforced effectively.  Last month, the CRTC sent letters to several ISPs – including Shaw, Rogers, Cogeco, and Bell – seeking action.  The ISPs have yet to respond.

CRTC Chair Konrad von Finckenstein tells the Globe that the commission has no plans to try to extend its regulatory reach.

SaveOurNet.ca points to a letter written by NDP MP Charlie Angus to Industry Minister Tony Clement late last year on net neutrality.  The money paragraph focuses on the enforcement side of the CRTC's Internet traffic management guidelines:

I urge you to do what is in your power to curtail ISP's discriminatory traffic-shaping practices. In order to make Net Neutrality a reality in Canada, I would ask that you direct the CRTC to adopt it as part of Canada's internet policy, and enforce it through regular compliance checks of ISP traffic.

As the traffic management guidelines take effect, Canadians should begin to see more detailed disclosure of ISP traffic management practices and the possibility of complaints or investigations.