BCE Inc. chief executive George Cope says Canadian media companies need heft to compete with U.S. giants Netflix Inc., Apple Inc. and Amazon.com Inc.
The argument – now at the core of Mr. Cope's pitch to broadcast regulators on its Astral Media Inc. takeover – is not a new one. Canada's big banks have been making the same case for years: We're small by world scale, so let us dominate at home.
And yet broadcasters, like banks, actually face relatively little foreign competition in Canada, where they still enjoy lucrative and highly protected turf.
Foreigners can own just 20 per cent of broadcasters directly, including cable companies and direct-to-home satellite providers, and up to a third of the voting shares of a holding company that owns broadcast assets. This effectively caps foreign ownership at 46.7 per cent, below the threshold for exerting any control.
Canada is one of few developed countries that continues to maintain foreign ownership restrictions on businesses that are becoming little more than bandwidth-delivery vehicles.
The real issue the Canadian Radio-television and Telecommunications Commission (CRTC) should be pondering is not BCE's size, but how to give Canadians the best of what's available in online movies and TV.
If domestic broadcasters and cable companies won't do so, Ottawa should open the door wide to foreign rivals who will, while maintaining strict content rules to protect Canadian culture.
A recent poll commissioned by the Friends of Canadian Broadcasting found that two-thirds of Canadians believe foreign ownership of broadcast and cable companies would mean less Canadian content.
It's a misguided conclusion. Canadian ownership doesn't deliver Canadian content; Cancon rules do that. Indeed, the rules exist to thwart Canadian-controlled broadcasters from flooding Canadian airwaves with too much cheap and easy U.S. content.
The CRTC's focus should be on giving consumers more of what they want, when they want it, on any device. The very essence of broadcasting is rapidly becoming obsolete. It's all about narrow-casting, with on-demand TV shows, movies, sports and games.
ABC's Wide World of Sports is long gone for a reason. People subscribe to NHL or MLB TV to watch the sports they like, bypassing those they don't. Few viewers still scan the TV guide to see if there's a movie on. They pick exactly what they want on Netflix, order on-demand or swipe it off the web.
That isn't the model Canada's cable, Internet and satellite companies are built on. They're all about bundling their services and TV offerings. If you want discounted Internet, you have to sign up for voice or TV as well. Cable companies sell their channel offerings the same way. Want TSN in HD? You also have to pay for dozens of specialty channels you'll never watch. On-demand offerings remain far behind what's available from Verizon and others in the U.S.
That's the lure of Netflix and Apple TV. These services put consumers in ultimate control of the content. More than 10 per cent of Canadian adults have already signed up for Netflix's streaming service at $7.99 a month, presumably because BCE's Bell, Rogers Communications Inc., Shaw Communications Inc. or Telus Corp. aren't giving them enough of what they want. And they've done so even though Netflix offers Canadians a significantly scaled-down version of its larger U.S. catalogue of shows and movies.
BCE used last week's CRTC hearings to unveil plans to launch a "made-in-Canada" Netflix-like service. The company, which is sitting on $788-million in cash, insists it needs Astral's specialty and pay TV content to launch the new venture.
BCE could have, and probably should have, challenged Netflix two years ago when the U.S. company came to Canada, using its cash to acquire content. Isn't that why Ottawa gave them a protected marketplace in the first place?
It's not the only nakedly self-serving claim the CRTC heard last week. Quebecor Inc. which dominates the Quebec media landscape like no other company ever has, cynically complained that a BCE-Astral combination would create a media "monster" with monopolistic power.
The CRTC would be wise to tune out duelling claims from industry players and focus on consumers and content.
Let BCE grow. Let it go after Netflix and Apple.
But make sure the company has honest competition, even if that means foreign competition.