Unbundled Canadian television channels are coming, and by late 2016 all viewers will be able to pick what they pay for.
Television subscribers will be able to buy only the channels they want, one by one or in small packages, the federal broadcast regulator said Thursday. By the end of next year, TV subscribers will have the option to add those networks to a "skinny" basic cable package that will cost no more than $25 a month.
The bold new rules usher in full-fledged choice on the TV dial, which will undo the highly packaged way Canadians have paid for TV for decades. But the changes will be phased in gradually, giving the industry time to adjust.
The decision caters to consumers who have vented their frustrations to the Canadian Radio-tele- vision and Telecommunications Commission (CRTC), wondering why they had to pay for bundles of channels they don't watch simply to get the ones they like. But greater choice could come with consequences: Some customers may pay more, a number of channels will likely die out and substantial revenue losses across the industry could mean job losses and less new content.
"The CRTC is not making choices for Canadians. It is setting out a road map," said Jean-Pierre Blais, the commission's chairman, on Thursday. "We are forcing the industry to finally face that the world is changing."
The CRTC has faced pressure from Ottawa, which has repeatedly called for pick-and-pay as part of a consumer-friendly agenda.
"We welcome today's decision by the CRTC," Shelly Glover, the Minister of Canadian Heritage, said in a statement. "While we understand that the CRTC feels the industry needs time to adjust to the new rules, we call on all industry players to deliver the choice to Canadians that they deserve in a timely manner."
This is the latest in a series of rulings coming out of Let's Talk TV, a sweeping hearing the CRTC held last year to consider changes to Canadian television. Canadian TV's business model has been built on bundling, and pick-and-pay is expected to shake the TV industry.
Yet viewing habits are changing fast and some Canadians have already ditched cable and satellite subscriptions in favour of cheaper online streaming services such as Netflix or the Canadian-owned Shomi, and free options such as YouTube. More choice might help slow that exodus, but some channels are sure to be more expensive outside of bundles – perhaps as much as $2 more each, according to the CRTC's own research.
"At the beginning of the process, we talked about pick-and-pay. I think people were hearing pick, but they weren't necessarily hearing pay. I've said it before, there are choices," Mr. Blais said in an interview. "You don't have to go far down the road in a Subway, a McDonald's or a Tim Hortons to figure out that the combo or the Happy Meal costs less than an item-by-item selection."
Those who want to keep their current setup will have that option – a nod to the status quo welcomed by cable and satellite companies.
"From a consumer choice perspective, you could not have forced just a pick-and-pay model – some customers like the bundles, we saw it during the hearings," said Maher Yaghi, an analyst with Desjardins Securities.
Distributors must have the "skinny" basic service announced Thursday in place by March, 2016. It will include all local and regional stations, public interest channels such as the Aboriginal Peoples Television Network (APTN), education and community channels, plus provincial legislature networks. If distributors want to, they can add national over-the-air stations such as CTV, City and Global, or U.S. networks ABC, CBS, NBC, FOX and PBS. But they cannot raise the price.
By December of 2016, every other channel must be available both as a standalone choice and in a small bundle of perhaps five or 10 channels, which might be built by the viewer or the distributor. Providers can still offer existing theme packs.
"Today's measures will ensure that Canadians will be the ones who decide how to access television content and what they want to pay for it," said John Lawford, executive director of the Public Interest Advocacy Centre (PIAC).
To mitigate the negative impacts, the CRTC is also introducing a code of conduct governing negotiations between distributors and broadcasters for the rights to carry channels. By September, rules will be in place to balance negotiations between larger and smaller players, though Mr. Blais insists the code is "not to protect one guy or the other."
The largest media companies, such as Rogers Communications Inc. and Shaw Communications Inc., struck a conciliatory tone on Thursday, pleased that bundles remain a prominent option. At the hearings, these firms issued dire warnings about price spikes as fewer users would share the fixed costs of the TV system if they cut back their service.
"We think it's a good decision," said Ken Engelhart, senior vice-president of regulatory affairs at Rogers. But the potential for rising prices "is still a scenario that is a concern," he said.
The biggest changes
By March of 2016, every TV provider will be forced to offer a smaller basic TV package capped at $25 per month. It must include all local and regional stations, public interest channels such as the Aboriginal Peoples Television Network (APTN), education and community channels, plus provincial legislature networks. If distributors want to, they can add national over-the-air stations like CTV, City and Global, or U.S. networks ABC, CBS, NBC, FOX and PBS. But they cannot raise the price.
The actual unravelling of channels will happen in two phases. Starting in March, 2016, every channel outside the "skinny" basic service must be available either a-la-carte – with a fee for each network – or in small, "reasonably priced" packages. Those can either be build-you-own packages put together by viewers, or pre-assembled groups of five to 10 channels chosen by the distributor. By December of2016, every channel must be available both as a standalone choice and in a small-sized bundle. Providers can still offer existing theme packs, such as sports or comedy stations.
In an effort to give TV providers flexibility, and to sustain a diverse range of channels, the CRTC is introducing a code of conduct governing the relationship between distributors and broadcasters when they negotiate the rights to carry channels. The Commission intends to outlaw clauses that prevent pick-and-pay channels or require bundling, and to forbid broadcasters from demanding revenue guarantees tied to the number of subscribers they reach. Cable and satellite companies must also offer independently-owned channels, and promote them equally with their own, to guard against too many smaller players getting squeezed out. The code will take effect by September, 2015.
As it stands, some broadcasters spread content across multiple channels known as "multiplexed services." An example is TMN, in Eastern Canada, which contains numerous movie channels as well as HBO. The viewer must pay for all of them – usually upwards of $20 per month – to get any one. The CRTC will lift a rule requiring multiplex channels to be offered together. But the owners of the channels will decide whether to split them up.