BUSINESS

Changing Channels: What The CRTC's New Rules Mean For The Future Of TV (Q&A)

03/20/2015 02:50 EDT | Updated 03/20/2015 03:59 EDT

When Canada’s telecom regulator announced the end of mandatory channel bundling Thursday, many of us were skeptical about whether it will be a true win for consumers.

The CRTC’s new “pick and pay” model that gives consumers more control over their cable packages won’t be introduced until late next year, giving industry players time to adjust.

The decision was meant to give consumers more choice and flexibility in their TV packages. It will create a “skinny basic” cable bundle that will cost no more than $25, and give consumers the ability to choose individual channels or small bundles.

But in an era of cord-cutting, abundant options online and customer frustration with the big telecoms, we had a lot of questions about whether these changes are enough to keep Canadians plugged in or whether they’re too little too late. And it turns out, so did our readers.

We asked for your most pressing questions about the new cable package model and put them to the experts to find out what these changes really mean.

HuffPost: Break it down for us. What is the impact of these changes on consumers. Is this pick and pay decision a win?


Maher Yaghi, telecom analyst at Desjardins: Overall, it’s a small win for consumers. It could have been a lot better, but it’s a start. I think what’s happening is the CRTC is still trying to play catch up to the new technology. In the amount of time this new decision is going to take before it becomes reality, I think you’ll see a lot of consumers deciding not to wait and we’ll continue to see consumers cut their TV connection and go purely online for their needs for entertainment and there’s no stopping that.

Carmi Levy, technology analyst at Voices.com: The net impact of these changes will be to force more Canadians to consider cutting the cord and consider using their broadband internet service to a greater degree to watch television and other multimedia entertainment. Carriers that are also internet service providers ... will be in a position to sell richer internet packages to their customers, so they may make less money on television but they’ll make more money on providing the internet. I expect at some point economies of scale will kick in so larger amounts of gigabytes will be available for less money, but that will take some time.

HuffPost: The new rules won’t fully be in effect until December 2016, why do we have to wait so long?


Carmi Levy: Consumers always want positive change to happen yesterday but I think there needs to be a recognition that this is almost like the Titanic … it doesn’t turn on a dime. What the CRTC has done is essentially undo 40 years of television policy and that doesn’t happen overnight. So even though the timing isn’t as fast as most consumers would like, they’ll need to accept the fact that there are likely thousands of jobs on the line and … decisions of this magnitude should not be acted upon overnight.

Maher Yaghi: The problem is there are affiliation agreements between the cable companies and the broadcasters that determine how much the broadcaster gets from the cable company on each channel and these are commercial contracts that were signed and usually [run] two or three years... So you need time for these affiliation agreements to come to a close.


HuffPost: Many people voiced concern that after the CRTC ended three year contracts on cell phones, their internet prices went up. How will unbundling affect users’ monthly bills? Will we be feeling the pain elsewhere on the bill?


Maher Yaghi: For consumers who want to keep all of the channels they currently have, the average bill might be higher. But what this decision will allow is for the consumer who actually asks themselves “what do I really watch” to tailor his channel lineup to reflect what he watches on a regular basis. Your average total bill will probably come down, but you have to be proactive in deciding what you want to watch. We believe the average bill for the consumer will drop by five to ten bucks.

Carmi Levy: We might see some bill shock in the short term. But long term the potential is certainly there for us to save money as we shift more of our entertainment budget over to the internet and internet access prices normalize to adjust to that.

Your traditional television bill will probably not go down appreciably, if at all. I suspect that in most cases it will probably go up a bit, but you will no longer be paying for things that you don’t want. At the same time the market for internet-based television services will continue to accelerate and because it is largely outside of the CRTC’s regulatory purview, expect pricing to continue to be very aggressive there.

Carmi Levy: It’s illustrative that the only dollar figure mentioned was the $25 cap on the entry level package. The CRTC didn’t mention anything about how much additional channels or additional packages would cost … if the CRTC is not going to mandate limits on that then there’s nothing stopping cable providers from charging whatever the market will bear.

And so does that mean that things will become more expensive? That’s inevitable. How much more expensive? That all depends on market conditions and it all depends on how television providers choose to respond to this new policy.

HuffPost: What does the skinny basic package include? Do we have to have it to get individual channels?


Maher Yaghi: The skinny package will mainly include your local broadcasting TV stations, such as CBC, Global and CTV -- the large conventional channels in Canada. It will include some aboriginal channels, some public community or assembly channels like CPAC. Those are mandatory. The CRTC said that cable companies could include other channels into that mix such as ABC, CBS, Fox, NBC -- the U.S. broadcasters -- but that the price could not increase to more than $25 a month.

HuffPost: What is the incentive for a provider to include a wider array of channels in the skinny basic package, when they could just charge more for each American channel?


Maher Yaghi: Basically they could make those U.S. channels specialty channels and charge money. It’s hard to say right now specifically what’s going to happen on that. The only hedge you get as a supplier of service is to get the favour of the consumer because at the end of the day it is still a competitive world out there for the cable providers… So you can see a reasoning where Rogers decides: “If I include those U.S. channels in my basic package and Bell does not, a consumer will come to me rather than going to Bell.” But eventually this is not going to last for long because Bell is going to follow suit or vice versa so it will depend who drops the ball first and then the ball gets rolling.

Maher Yaghi: Right now, the average consumer pays an equal amount of dollars for channels except the high end movie channels like HBO that cost a lot more money. But in the unbundled world, the channels that have the most demand will cost you more. It’s … supply and demand so probably what you’ll see is that the sports channel cost will be much higher than a channel that caters to a very specific genre.


Carmi Levy: If the CRTC had intended to set a cap for the individual channels it would have done so as part of this policy announcement. Even though it is the national telecom regulator it can only go so far to constrain pricing decisions made by television providers. It’s one thing to put a limit on the basic entry level package, it’s quite another to essentially mandate pricing for the entire range of offerings. If the CRTC had gone that far the television providers probably would have had an absolute fit and probably would have taken legal action.

There’s the potential for individual channels to become more expensive because they’re now going to have to fight increased competition from other channels.

HuffPost: So are we going to see more competition in terms of pricing? Could we see Rogers charge more for TSN because it is owned by Bell than for SportsNet, which is Rogers-owned?


Carmi Levy: There’s certainly lots of room for competitive pricing between providers and the smart providers are going to use competitive pricing models to try and attract and retain consumers. But there’s a limit to how far they can go. If the competitive pricing becomes predatory pricing, I can virtually guarantee the CRTC will clamp down on that and hard.

You can’t punish the competition simply because you own that channel. I think consumers expect competition but they also don’t expect onerous rules that lock them into one provider or another simply because they want to watch a certain channel.

HuffPost: What will this mean for specialty and independent channels and consumers’ access to them? Will some die off?


Carmi Levy: Specialty channels are especially vulnerable at this point in time simply because in many cases they’re the ones that are least likely to make it into that skinny basic package and so they are essentially being cast out of that protective cocoon of bundling and they will in many cases be forced to fight for market share on their own.

The more niche a channel is, the more precarious their position will be in this new world … In many cases, conventional channels may stop operating as traditional television channels and they might fold up shop and restructure themselves as internet only plays. Some of them might not survive and the ones that do survive might end up costing more.

Carmi Levy: If you look at the overall direction the CRTC is taking, they do recognize that the broader industry conditions are changing. They do recognize that the internet is changing the rules of how we consume, how we subscribe to, and how we pay for subscription services. So the regulator is opening up the floor for greater levels of internet competition. There’s nothing stopping other providers from making their pitch to the regulator to offer similar services online to Canadians. The CRTC has left the door open to that and you can expect that the industry is going to move in that direction and the CRTC is going to be overseeing that move.

Carmi Levy: This was part of an earlier CRTC ruling that said basically you can’t make these streaming services available only to your own customers, you have to open them up to everybody.

We live in an era where often the television service provider from whom you purchase your cable or get your subscription is the same as the network carrier that delivers a signal to your house, which is the same as the television network or channel that provides the original content. Look no further than Bell, which owns CTV, which is an internet service provider and a cable company. This is one of the big unanswered questions of this conglomerated media era is that the CRTC has to mandate behaviours from these companies that are in the best interest of consumers and not just their investors.

Carmi Levy: This isn’t just about the big guys, in fact there was specific language in this decision to reassure smaller players that they’ll continue to have access. It specifically mentioned the wholesale market, which provides opportunities for smaller providers to have access to the national networks without the larger owners of those networks taking punitive action against them in the event of a dispute. So the CRTC recognizes very clearly that it needs to level the playing field between urban, well-served areas and rural areas that have not been well-served by traditional broadcasters as well as online and wireless services.

If anything the CRTC wants to not only maintain that balance between small and large but to reduce the disparity between the two.

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