Canada's broadcast regulator is proposing new rules that would offer the owners of CraveTV and Shomi the prospect of looser regulation if they make their services available to all Canadians directly online with no television or Internet subscription required.
The proposed regulations would allow the owners of such video services to offer exclusive content, avoid a requirement that they contribute to Canadian programming and deliver their offerings over television set-top boxes as long as they also make the services available over the Internet.
As viewing habits evolve, the Canadian Radio-television and Telecommunications Commission said the new flexibility would allow Canadian content providers to "compete on an equal footing with online video services."
The companies that offer those services, however, have so far positioned them as a means to retain subscribers of their traditional distribution businesses.
BCE Inc., Rogers Communications Inc. and Shaw Communications Inc. still have the option to follow the existing rules for video-on-demand services – which are delivered through set-top boxes – as long as they comply with all of the regulations and do not keep content exclusive.
Alternatively, the regulator said they could offer their services entirely over the Internet and be subject to the digital media exemption order (DMEO), which exempts providers from the regulatory trappings that come with licensing.
Since the proposal leaves those options open, consumer groups argued that it's unlikely the owners of CraveTV and Shomi will make the services available to "anyone with an Internet connection," which is the "over-the-top" streaming video model exemplified by Netflix Inc.
The CRTC announced the change Thursday in conjunction with a series of announcements on the future of television. It also issued a notice of consultation calling for comments on the proposed wording of what it calls a "hybrid" option for video-on-demand services.
(Read more on those announcements: CRTC to relax Canadian content rules on television)
"We're offering a third way for Canadian services to provide their content to Canadians and it comes with a number of benefits and a significant condition – that condition is that it has to be offered over the Internet without being authenticated against a [television] subscription," Sheehan Carter, senior manager of English and third-language television at the CRTC, said in an interview.
"Canadian video-on-demand services will be able to offer exclusive content as long as they are available to all Canadians over the Internet. This means that Canadians would not need to have a cable or satellite subscription in order to access these services," the CRTC said in a background document.
The new category would allow the services to be offered over television set-top boxes but without the associated regulations of video-on-demand services as long as they are also offered over the Internet.
To qualify for the exemption from the regulations, the proposed rules say such services "shall not be offered in a way that is dependent on a subscription to any [cable or satellite television service] or to a specific mobile or retail Internet access services."
BCE's Bell Media launched CraveTV in December while Shomi, a joint venture of Rogers and Shaw, launched in November. The services both offer thousands of hours of television programming – along with movies in the case of Shomi – for a monthly fee. (BCE owns 15 per cent of The Globe and Mail.)
Like Netflix, CraveTV and Shomi have the exclusive Canadian rights to many of the past seasons of television shows on offer. However, unlike the U.S. streaming giant, the Canadian services both require subscriptions to other proprietary communications services such as television or Internet.
Bell says the decision will not change the way it offers CraveTV, which is only available to customers who also have a TV subscription with Bell or one of the television providers with which it has struck distribution deals.
Spokesman Mark Langton said CraveTV is already a licensed video-on-demand service and complies with rules around Canadian content and funding. He said the service does not offer exclusive programming because Bell has struck deals with other television providers such as Telus Corp. and Eastlink and is open to negotiating with any provider that wants to sell its customers CraveTV.
"We make CraveTV available to all Canadian TV providers and that's been a successful approach we can continue. We now have the option of instead keeping CraveTV exclusive to Bell TV if we also offer it as an over-the-top service," Mr. Langton said in an e-mail. He said Bell is also offering CraveTV to subscribers through an Internet-based app by relying on the DMEO (this is the same regulation Netflix relies on to operate in Canada with light to no regulation).
Representatives for Shaw and Rogers did not comment directly on how the "hybrid" category would affect Shomi, and both said their companies were still reviewing Thursday's CRTC decisions.
The Public Interest Advocacy Centre and Consumers' Association of Canada (PIAC-CAC) filed applications challenging both CraveTV and Shomi last month, arguing that tying the services to existing TV subscriptions runs counter to broadcast and telecom legislation as well as the CRTC's rules.
The commission sent PIAC-CAC a letter Thursday indicating it was "returning" the applications and suggested PIAC-CAC consider the new regulatory policy before deciding whether to refile the applications.
"PIAC-CAC are skeptical that today's decision will have the effect of motivating Bell, and Rogers and Shaw, to make their content available online to every Canadian as a true 'over-the-top' service instead of requiring Canadians to (a) buy a [television] subscription (Bell's Crave) or (b) or an Internet or [television] subscription (Rogers or Shaw's Shomi)," PIAC-CAC external counsel Geoff White said in a statement Thursday.
"What today's decision does not do is declare that Bell, Rogers and Shaw are such 'hybrids,' and therefore it appears that the commission will allow the closed, tied model to continue," he said. "The CRTC appears to be trying to provide an incentive to become a hybrid [video-on-demand service] – if you do that, you don't have to abide by the traditional licensing requirements (namely CanCon financial obligations). It's a way to lighten the financial burden on those services in exchange for a requirement to make it available online."
He added that the consumer groups are considering whether to bring fresh applications.
The deadline for comments on the CRTC's proposed changes to the video-on-demand rules is April 27.