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J. David Ellis

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The CRTC Picks What's on Your TV But You Pay for It

Posted: 04/23/2013 5:30 pm

Tuesday, April 23 marks the opening of another critical public hearing at the CRTC. It will be considering applications to expand the mandatory distribution of channels on the basic TV service. The outcome will tell us a great deal about how far CRTC chair Jean-Pierre Blais will go to protect consumer welfare.

Let's start with some harsh numbers about rising costs. According to CRTC data released last fall, the period from 2002 to 2011 saw a total rise in TV subscription prices of 50 per cent - two and a half times the rate of the Consumer Price Index. During the same period, the cost of subscribing to a TV service in the United States rose nearly as fast, way ahead of U.S. inflation rates, according to the FCC. And one of the biggest culprits is channel-bundling, foisted on American TV distributors by media conglomerates like Disney and Viacom, which own top program services like ESPN and Comedy Central. Channel-bundling is causing TV fees in the U.S. to rise so quickly even distributors are worried.

Selling TV channels in bundles or tiers isn't new and certainly isn't an American phenomenon. In fact, Ottawa invented what may be the world's most arcane regulations for how programming must be distributed by Rogers, Bell and other broadcasting distribution undertakings, or BDUs.

The system behind these elaborate rules punishes Canadian consumers in two ways.

First, as in the U.S., our retail TV service isn't regulated, meaning providers can raise rates at will, because our market is deemed to be competitive. A second factor adds a whole other burden for Canadian viewers: the cultural policy goals enshrined in our Broadcasting Act. Over the years, almost everything the CRTC has done in administering the Act has been designed to ensure a steadily expanding supply of Canadian programming.

This long-standing obsession with supply-side goals might have been less harmful to consumers if only policymakers paid some attention to the demand side - what viewers actually watch and what they'd prefer to pay and not pay for. The supply-side approach is bad enough when viewers are left with some choice.

But mandatory carriage makes a bad thing much worse, and in our system does so without any need to demonstrate how millions of captive viewers will stand to benefit. The benefits to industry, on the other hand, are obvious. Ottawa has always invoked industrial policy and positive outcomes like rising industry revenues to defend cultural expenditures. Thanks to the Canada Media Fund and other taxpayer and consumer subsidies, our production sector now gets the overwhelming majority of its financing from you and me - not from its production or financing partners.

The absurdity of programming by regulatory fiat is nicely captured in the debate raging over whether the Sun News channel deserves the CRTC's blessing, having been much demonized for its Fox-News-like politics. The Starlight movie channel, by contrast, has received approving nods because of what it will allegedly do for our cultural sovereignty. But these debates simply prove why the current system is unacceptable. Do you want some arbiter to decide what TV services you should pay for in perpetuity on the basis of whether those services have political, social or cultural views acceptable to others?

The criteria the Commission will be using to pick the winners require that each applicant offer evidence "demonstrating the exceptional importance of its service to the achievement of the objectives of the Broadcasting Act." With one minor exception, none of these criteria has anything to say about what Canadian audiences like to watch or have watched in the past. Instead, the list of seven imperatives for a better collective life fall back on precepts that outlived their relevance 20 years ago -- like a commitment to social and cultural policy objectives "reflecting Canadian identity."

The current system has yet another deep flaw: it's an open invitation to applicants to indulge in advocacy research. Applicants seeking CRTC approval invariably offer up survey research findings to show there's pentup demand for what they intend to program. This exercise is notoriously unreliable, in part because respondents are usually asked questions like whether they approve of certain cultural benefits, in the spirit of motherhood and apple pie.

The Starlight applicants, for example, have submitted a study of their own and one conducted by Canadian Heritage, both of which are intended to prove that Canadians want more Canadian movies on TV -- meaning there's a "gap" in the TV market that needs to be fixed.

Even if there really is such a gap, you would think the government that gave us stirring survey results about Canadian support for Canadian culture would put its money where its mouth is. Instead of a regressive levy on all TV subscribers, the officials at Heritage could, for example, arrange to give more money to Telefilm Canada, which is in the business of financing and marketing Canadian cultural products. Unfortunately, the Harper government isn't setting the example many in the production business would like, since it has been cutting not expanding the budgets of Telefilm and the other cultural agencies. 

Contrary to what those involved in this hearing may think, budgetary restraint doesn't mean it's now the patriotic duty of every Canadian TV subscriber to make up the federal budget shortfall. Canadians said they wanted Stephen Harper as their prime minister when they voted at the ballot box - the survey that really counts. What we got was a PM who isn't exactly famous for his support of our nation's media culture. If our own federal government refuses to kick in a few more million a year to show just how important Canadian culture is, then why should the rest of us?

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