Telus, a member of the Canadian telecom triopoly, has admitted that cord cutting in Canada is a real problem during a CRTC hearing.
We are continuing to work our way through the CRTC hearings on the implementation of the Online Streaming Act (formerly Bill C-11). Already, our coverage of the hearings is second to none, but that doesn’t mean we are going to just sit back and relax. We are charging full steam ahead to make it to the end of this round of hearings.
To show what world class coverage of these hearings look like, we’ll point out that we offered coverage of the hearings involving Spotify, Paramount, Netflix, Amazon, Apple, Google/YouTube, Bell, Rogers, Corus, Shaftesbury, Digital First Canada, ACTRA, Unifor, FRIENDS, Michael Geist, Tubi, CBC, the Canadian Association of Broadcasters, and OpenMedia.
Today, we are continuing our coverage with Telus, one of Canada’s telecom monopolies. With a catastrophic failure of enforcing competition laws, the Rogers bought Shaw, reducing the number of large players from 4 to 3. Unsurprisingly, every promise that Rogers came up with that went along with the merger have since been broken. As a result, Canada us left with a pitiful three large players who are essentially free to abuse the market power they now have over Canadian consumers when it comes to accessing the internet and cell phone coverage.
Yet, apparently, Telus wanted to have their say in the CRTC hearings on the implementation of the Online Streaming Act. Telus, admittedly, wasn’t as much on my personal radar when it comes to monitoring what lobbyists were saying, but when I saw their name pop up in these hearings, I decided to go ahead and offer some coverage of it and I found some of the comments… interesting in a weird sort of way. At any rate, what was said during the hearing can be found on the CRTC website. So, let’s get into it.
The opening remarks gets off to a rather bizarre start with this:
11361 Over the last decade, the Canadian broadcasting system has changed dramatically. Subscribers and revenues have been shifting from the traditional system to foreign streaming services, and that trend is accelerating. Traditional broadcasting undertakings have shouldered all the regulatory burdens, both financial and non‑financial, designed to achieve the objectives of the Broadcasting Act, while foreign online undertakings have entered the Canadian market free of any regulatory obligations. This has had a profound impact on the revenues of traditional broadcasting undertakings and the funding for Canadian and Indigenous content that is supported through those revenues. This proceeding is an important first step in addressing that imbalance.
It’s strange because in order for customers to access content online, they need to be a subscriber to a telecom company like Telus. So, it’s a shift that isn’t exactly hurting them in the first place, yet here they are, bemoaning the fact that people are accessing online streaming services. From there, there is an admission that cord cutting is a phenomenon that is happening:
11362 MS. BAJIC: Canadians are cutting the cord in greater numbers every year. But we are still watching a lot of content. In fact, we’re watching more than ever before, the only difference now is we are watching it online as well. In 2012, 83 per cent of Canadian households subscribed to BDU services. Last year, that number declined to just 59 per cent. The problem is not just the cord‑cutters; a growing number of young Canadians have never had a BDU subscription and never intend to get one. What we’re seeing is a generational shift.
Cord cutting is a very large thing that is happening in the market. More and more people are realizing that television programming is not only bad, but continues to get worse. So, the natural question then becomes: why am I paying $100 or more a month for something I don’t like? There’s a gazillion CSI shows and CSI knockoffs that I have zero interest in watching, so why am I paying for that when I have no intention of watching this stuff? What’s more, younger generations tend to be substantially more cash strapped than older generations. They need that money to afford basic living expenses, so it’s kind of a no-brainer to axe television in the first place. Online content is generally much more entertaining in the first place. It’s more convenient, on demand, and easier to find in the first place.
Obviously, this has an impact on those traditional broadcaster pumping out that garbage over the airwaves in the first place. When fewer people are willing to watch low effort content (by the standards of large media corporations), that means fewer people are going to be there to watch the commercials. Advertisers who see this then realize that their reach over the airwaves isn’t what it used to be. So, they invest their advertising dollars where the eyeballs are in the first place – which is typically on the internet.
For traditional broadcasters, there are options. This includes putting time, money, and effort into programming that people might actually want to watch, or, they could simply demand the government give them free money so they can’t continue to pump out low quality garbage no one wants to watch. As you can see with this hearing, they chose the latter. I mean, after all, putting together high quality content takes time, money, and effort, and who has time for that, right? They’re filling hours on the TV schedule, not actually informing and entertaining an audience after all.
For the consumers, however, this just pushes them further into the decision of going internet only. In response, the telecom monopolies raise prices which only further serves to push people away from traditional broadcasting networks. It’s a self sustaining downward spiral.
Telus, it seems, has decided that in light of the cord cutting, the problem is that there is a market imbalance. People are going to streaming services because the content is generally better. That creates an unfair market advantage over the traditional broadcasters who push out their garbage programming. So, the solution is that it’s up to the regulator to fix this:
11363 Creating a level playing field between traditional and online undertakings is a necessary first step towards modernizing our broadcasting system, but it alone is not enough to ensure a robust, sustainable domestic market for the future. It is critical that the new regulatory framework empower Canadian companies to adapt to consumer needs and support the creation, distribution, and discoverability of Canadian and Indigenous programming. The new contribution framework must account for the fact that online undertakings have depleted the revenues of both traditional programming and distribution undertakings.
Now, obviously, it’s unrealistic to mandate that Canadian’s must be strapped to chairs, have their eyes taped open and force them to watch godawful television programming like Meet the Family, so the lobbyists have come up with the next best thing: mandate that they be given free money stolen from the streamers who are actually producing content people want to watch.
11366 As a first step, TELUS has proposed an initial base contribution of three per cent for online undertakings that distribute their services directly to consumers. That contribution will help stabilize funding as subscribers continue to transition from the traditional system to online services.
11367 However, this alone is not sufficient. It must be met with a corresponding decrease in the contribution level imposed on traditional BDUs. While subscribership and revenues continue to decline, BDU costs have not. A five per cent contribution is no longer sustainable.
This obviously makes sense. After all, the costs of funding CEO bonuses aren’t exactly going to be going down any time soon. What’s more, those dividend checks need to be mailed out to shareholders and those hedge fund billionaires need to be paid as well. How is that supposed to happen when an increasing number of people don’t want to watch awful programming like Out There With Melissa DeMarco?
Clearly, in all of this, the customer is wrong. The customer really loves watching awful Canadian programming. So, when they chose, on their own, to get out of the practically abusive relationship with their television set, the customer was clearly wrong and that they really should be coming back to the cable monopolies because… reasons. No really, when Family Feud Canada was made, they weren’t thinking straight! They were drunk! Everyone knows the guy that plays Mr. D isn’t funny, but don’t worry, next time will be different! Please come back!
So, while Telus howls to high heaven about how online streamers don’t have to play by the rules, they, in the very same opening remarks, argued that they shouldn’t be held to any rules. You know, because rules are for other people, not them:
11369 One area of the online TV market that has great potential, but will require the Commission’s support to develop, is the virtual BDU, or vBDU for short. Virtual BDUs can provide significant benefits to Canadians, including lower prices through bundled services, simplified billing and account management, and increased discoverability of Canadian and Indigenous content. However, Canadian companies face significant challenges to be able to launch this type of service. One of those challenges is cost. The second challenge is access to content.
11370 In the next phase of this regulatory process, the Commission will need to ensure that Canadian companies have access to the content they need to create virtual BDU services. Content exclusivity in the online system will prevent the emergence of distribution options, depriving Canadians of the benefits of increased competition, innovation, and affordable offerings. However, the CRTC can and should address the cost challenge in this proceeding. This is why TELUS has proposed that Canadian vBDUs be temporarily exempt from contribution requirements, to help foster the development and growth of these nascent Canadian services in this part of the online TV market.
This is an incredibly hypocritical thing to say. Lobbyists have long said that these regulations should be about promoting and telling “Canadian stories”. So, if anything, the rules surrounding requirements to tell those “Canadian stories” should be fully embraced by lobbyists like them. It would be far more reasonable if they just said that streamers should abide by the same rules. Instead, they took things to another level by arguing that Canadian corporations should be exempt from the rules while slapping on heavy bills and regulations on the streamers instead. Why are these lobbyists demanding that the burden of producing Canadian content be solely for foreign players and not them? It makes zero sense unless you realize that this isn’t about “telling Canadian stories” and that it’s an effort to make Canada as anti-competitive as possible in the online space.
What’s incredible is that the comments by Telus got even more hypocritical:
11371 If the Commission decides that Canadian vBDUs should not be exempt from contributions, then, at the very least, any contribution imposed on them should be calculated only on the value‑add or marginal revenues earned by the vBDU. This is essential for the creation of a viable service. If contribution is applied to a vBDU’s gross revenues, any profit margin will disappear, and the service will never launch.
(insert audience laughter here)
You really can’t make this up. Online streamers have been pointing out all this time that they already make contributions and investment into the creation and distribution of Canadian made content. The lobbyists, in turn, quickly reject that idea for the entirely made up reason that it would mean that they are somehow “exempt” from the rules. They forcefully argue that streamers shouldn’t be permitted to just be left on their own to determine how much money they should be contributing. Yet, ironically, here is one of those lobbyists who basically said that such rules should not apply to the streamers, but instead, those rules should apply to themselves. Wow, just, wow.
During the question and answer section, there were some thoughts bandied about for who should be thrown under the regulatory bus from the online streamer side of things. Telus, more or less, said that the answer is pretty much everyone:
11378 COMMISSIONER LEVY: Good afternoon, and welcome, and congratulations on 10 years of Storyhive. I had the opportunity to judge some of the Storyhive stories in a distant ‑‑ in another life, in a previous life.
11379 Lots and lots of questions because you raise some interesting new wrinkles, if you like, in some of the things we’ve heard from others.
11380 Starting with your proposal of an introduction of a three per cent revenue‑based contribution for online undertakings with 200,000 subscribers, I think linking to subscribers is somewhat different. Why do you think that 200,000 is the appropriate number?
11381 MR. MALEK: Thank you for the question, Commissioner Levy.
11382 Let me start by saying why a subscriber‑based threshold we believe makes sense. And I think the best way to address that is to talk briefly about the Commission’s broadcasting ownership group approach. This is one that’s been proposed in the context of contribution and has been adopted in the context of the registration requirements and the conditions of service thresholds.
11383 The reason I want to talk about this first is because the two issues are related. In the context of the registration requirements and the conditions of service, the Commission acknowledged that, you know, this is resulting in an asymmetric treatment between online undertakings that are part of a ‑‑ that are operated by a traditional undertaking or as part of an ownership group and those that aren’t, and that it would disproportionately impact traditional broadcasting undertakings.
11384 But the impact was considered light enough and the importance to the Commission of monitoring the transition from the traditional system to the online TV market great enough to justify using the broadcasting ownership group approach.
11385 But I think in the context of the contribution requirements threshold, it’s not the same considerations. I think if you apply a threshold based on revenues in this context, what that means is an online undertaking that would be launched by a traditional broadcasting undertaking by a Canadian company, basically, would, in almost every case, be subject to contribution requirements from the very first dollar of revenue that it earns, and that means it may not launch.
11386 And I think this is something that the Commission has long recognized in the traditional system. Small undertakings need room to grow, a bit of a runway, until they can afford to pay contributions or even comply with other regulatory requirements that come with an administrative burden.
11387 COMMISSIONER LEVY: Well, we’re talking about thresholds here of 25 million or 50 million. That’s what’s been suggested. So it’s hardly as though they’re getting, you know, assessed on the very first dollar. They have to meet a threshold.
11388 MR. MALEK: Well, I think if you’re looking at the revenues of the broadcasting ownership group, then that online undertaking when you count the traditional broadcasting undertakings as revenues, it will exceed the threshold. And that’s why a subscriber‑based threshold, we think, would be a way of avoiding that issue. You can have the broadcasting ownership group approach that lets you see the whole picture for the traditional system and its transitional line while giving that runway for growth.
11389 COMMISSIONER LEVY: How would you treat those entities that are free or that don’t have a subscriber equivalent?
11390 MR. MALEK: I think the Commission has already addressed that issue, actually, in the annual digital media survey. I think in the context of that survey, the Commission has described ‑‑ has defined subscribers, sorry, as including paid subscribers as well as freely accessing subscribers. So if you have a user of a free service that’s ad supported, say, that would count ‑‑ that user would count as a subscriber. And what the annual digital media survey requires online undertakings to report is the number of subscribers who are paying the full subscription price, the number who are paying at a discount, and the number who are accessing for free.
11391 So I think by defining subscribers in a way that captures those users for free ad‑supported services, you can address that issue effectively and, in fact, you already have.
So, for Telus, it doesn’t matter which foreign streaming service you are. They have a regulatory gun, and this is a financial stickup. Give them all your money or else. Some of the thresholds being discussed is absolutely insane. Like, any streaming service that has more than 200,000 subscribers? Isn’t that, like, almost every service that operates in Canada? yeah, little wonder why the smaller players are openly talking about exiting the Canadian marketplace.
I think, overall, the Telus appearance nicely highlights the real mentality of the lobbyist organizations throughout this process. Rules for thee, but not for me. They want basically any rules they have to abide by thrown out the window, but at the same time, want other streaming platforms to abide by those rules and, even worse, pay millions upon millions of dollars into the traditional broadcasters slush fund just for the privilege of operating in the country. It’s completely insane, but reflects where we are at in this debate – an atmosphere where common sense has long left the building.
Drew Wilson on Twitter: @icecube85 and Facebook.
