On Thursday, the Canadian Radio-television and Telecommunications Commission approved three new channels for mandatory distribution on domestic cable and satellite services, renewed a number of other distribution orders and authorized more orders for carriage, but not for mandatory carriage and its associated, unavoidable fees for cable consumers.
What caught newsies’ attention, however, was the CRTC’s rejection of a mandatory distribution application by Sun News Network, among 11 others. The rejection is bad news for Sun and its finances, and Quebecor Media Inc., its parent.
Yet while distressing to some – if pleasing to those in the North who want to ensure that all have access to the proceedings of the Nunavut and Northwest Territories legislatures – the decisions will be among the last gasps of an aged and irrelevant regulatory regime.
Mandatory distribution cable and satellite distribution is the financial lifeblood of domestic content providers. Without this form of tied sales, cable distributors domestic content will remain anemic, and their income dependent on the whims of fickle consumers – who face countless choices – and on the whims of advertisers, who endlessly search for evidence that their spending on broadcasting turns into profitable sales. It is a shrinking business line.
As all of us know, mandatory carriage and cable (and then satellite) regulation depend on the notion of fixed spectrum, or bandwidth. If the airwaves are public property and bandwidth limited on them, and cable and fibre systems are treated as regional monopolies to be protected by legislation and regulation, it is only reasonable that public views and interests be reflected in those rules – through, presumably, a creature such as the CRTC.
And as all of us also know, that view that is long, long past its prime. Bruce Springsteen released 57 Channels and Nothing On in 1992; it has been at least a decade since the phrase “500-channel universe” became common. Neither of those numbers had enough significant digits to reflect the choices available to consumers through alternative distribution mechanisms, most obviously the Internet. And new generations of wireless networks are in the process of expanding bandwidth immensely beyond what the last decade has seen.
Successful ventures – meaning those that the market will support – will depend on content, broadcast video and audio quality, and some degree of platform flexibility. The latter matters, as network broadcasters know, and as many under-30s also know, as they forego televisions in favour of better and literally more flexible monitors. Technology will outrun regulation.
To its credit, the CRTC has proposed for public comment a set of ideas on how to regulate national news content. This is good, even if the comment window closes in a month, yet it too will ultimately prove beside the point.
The reason I say so is not only will technology bypass content regulation, so, too, will consumer’s patience for it. That is because mandatory carriage is explicitly a form of tied sales, as I mentioned above. Tied sales are defined in Section 77.(1) of Canada’s Competition Act, the term means:
(a) any practice whereby a supplier of a product, as a condition of supplying the product (the “tying” product) to a customer, requires that customer to:
(i) acquire any other product from the supplier or the supplier’s nominee, or
(ii) refrain from using or distributing, in conjunction with the tying product, another product that is not of a brand or manufacture designated by the supplier or the nominee, and
(b) any practice whereby a supplier of a product induces a customer to meet a condition set out in subparagraph (a) (i) or (ii) by offering to supply the tying product to the customer on more favourable terms or conditions if the customer agrees to meet the condition set out in either of those subparagraphs.
That is pretty clear – and the general practice almost certainly would be illegal, were it not permitted and, indeed, actively enforced as a matter of law and regulation.
This, quite simply, is a world that consumers and markets will eventually tire of, and governments eventually will catch up.
Finn Poschmann is vice-president, research, at the C.D. Howe Institute, where he chairs the institute’s Competition Policy Council.