Richard D. French is the CN-Tellier Professor of Business and Public Policy at the University of Ottawa. He served as vice-chairman for telecommunications for the CRTC from 2004 to 2007.
The Canadian Radio-television and Telecommunications Commission has acceded to long-standing demands by viewers for greater control over their television services. TV providers must offer a "skinny basic" package at $25 per month offering a minimal package of services, which can be augmented by viewers choosing additional signals on a "pick-and-pay" basis. In addition to the broadcasters organizing their services in packages – until now, a take-'em-or-leave-'em proposition – there will be choice on a service-by-service basis.
The question is, who is going on the diet: the broadcasters, the distributors, or the viewers?
The intuitive appeal of this decision is obvious. But there is a reason why packaging has been a standard business practice in the film and television business for many years. Without a lengthy excursus into the economics of audiovisual production and distribution, one can observe that that much production which turns out to be commercially unviable is carried by a handful of large successes. The rub is that predicting which category any given production will end up in has broken many a career.
This has a number of implications. First, viewers are going to learn a lot about the relative power of broadcasters and cable distributors when they see the pricing of popular channels, which may well come close to the pricing of the packages for which these channels were formerly the engine.
Second, operators of niche channels currently riding in such packages may find themselves unable to compete in this sink-or-swim environment. I leave to the viewers of such services an evaluation of the consequent loss to Canadian culture, if any, but there will be no increase in total choice in the short term.
Third, the CRTC has now positioned itself as the regulator of cable pricing, or at least a part thereof, as well as of the negotiations between television producers and broadcasters, illustrating once again that the creation of "choice" in oligopolistic industries infallibly occasions more regulation, not less.
Within the major groups that both broadcast and distribute, it is a nice question how these policies will move the revenue around among the corporate family members. But for those which tilt heavily in the direction of distribution, it may not be a very attractive development. In a consultation with the CRTC some years ago, Rogers Cable founder Ted Rogers was asked about skinny basic. He immediately and characteristically launched into an enthusiastic and visionary account of how the thing could be done. One had only to look at the nonplussed faces of his executive team to know that this was not really their idea of fun.
The CRTC is condemned to repair the ship while at sea, and the next couple of years may be stormy ones. It should be given credit for proceeding ambitiously where previous administrations had not dared to challenge the conventional pieties and flag-beshrouded dogma which passed for broadcasting-policy argument. It is dismantling the protectionist rigidities painstakingly built into the system to keep the culture lobbies and the corporate beneficiaries if not happy, then quiescent. The process will be neither quiet nor calm, but the medium-term results of the experiment should leave us a broadcasting system more attentive to the revealed preferences of consumers than to the political dexterity of the producers. It will look nothing like "deregulation" however.