A Makeover for Canadian Broadcasting

After decades of serving the interests of big broadcasters, Canada's television regulations may finally turn in favour of viewers at home.

The 46-year-old Broadcasting Act is a complex statute that lists more than twenty broadcasting policy goals. Yet for decades, Canadian policy has largely boiled down to a single objective: Maximizing the benefits from the broadcasting system for creators, broadcasters, and broadcast distributors such as cable and satellite companies.

Consumers were nowhere to be found in that objective and it showed. Creators benefited from Canadian content requirements and financial contributions that guaranteed the creation of Canadian broadcast content.

Broadcasters flourished in a market that permitted simultaneous substitution (thereby enabling big profits from licensing U.S. content) and that kept U.S. giants such as HBO, ESPN, and MTV out of the market for years in favour of Canadian alternatives. Cable and satellite companies became dominant media companies by requiring consumers to purchase large packages filled with channels they did not want in order to access the few they did.

Canadians may have been frustrated with the broadcast system, but there were no obvious alternatives and their views hardly mattered in a regulatory system dominated by the established players. Last week, the Canadian Radio-television and Telecommunications Commission sent an unmistakable signal that these longstanding rules are about to change.

Television unbundled

The commission launched the third phase of its Let's Talk TV consultation by opening the door to hitting the reset button on broadcasting regulation in Canada. It posed 80 questions on reforming virtually all aspects of the current system as part of a hearing scheduled for September.

The Commission's starting point is that the "distribution and packaging of television services should be reviewed to maximize consumer choice and flexibility." That alone is a dramatic shift since consumer choice and flexibility have never been major policy priorities.

The headline change will be mandating the unbundling of television channel packages offered by cable and satellite companies. The CRTC envisions requiring a "skinny basic" service that primarily features local Canadian conventional stations. For almost everything else, consumers will be able to pick individual channels or customize their own television packages.

Broadcasting executives have dismissed consumer demands for greater flexibility, but the CRTC notes that Canadians have jumped at the chance for greater flexibility when it is offered. For example, 70 per cent of Quebecor's new customers choose an option to build their own television packages.

Consumers 'cutting the cord'

The established broadcasters will warn ominously about increased prices or the loss of some of their less popular channels, but with the government committing to consumer choice for television in the throne speech, unbundled television is a done deal.

In fact, the bigger question is how far the CRTC is willing to go in its overhaul of Canadian broadcasting regulation since the initial policy document places just about everything up for grabs. This includes dropping the preponderance rule that requires consumers to receive a majority of Canadian channels in their television packages, allowing virtually all non-Canadian services into the market (except where the foreign channel would have an "undue negative impact on the Canadian television system"), eliminating genre exclusivity, and discontinuing the requirement for over-the-air broadcasts.

Moreover, the CRTC has raised the prospect of putting an end to simultaneous substitution, acknowledging that it is an irritant to consumers and that its economic value may be relatively small.

The Commission admits that many of these changes would cause a major upheaval in the market and it is looking to explore funding options for local television stations and financing and promotion for new Canadian content.

The CRTC consultation is likely to spark a huge outcry from the creator, broadcaster, and broadcast distributor communities with public relations and lobbying campaigns that will make last summer's wireless battle against Verizon seem tame by comparison. Yet with consumers increasingly "cutting the cord" by dropping conventional broadcasting choices and broadcasting revenues in free fall as advertisers shift to the Internet, change seems inevitable.

The CRTC's consultation feels revolutionary, but it many ways it is merely catching up to market shifts that have been underway for several years.