Go to the Globe and Mail homepage

Jump to main navigationJump to main content


Why is television content so cheap in the U.S.? Add to ...

Wondering why BCE just bought CTV? Or why Shaw Communications snapped up the TV assets of what used to be CanWest Global Communications? Look south. The future of the home entertainment industry is being born. It's a baby boom of new players and content-delivery approaches, and the new arrivals are shaking up Wall Street, Madison Avenue and Hollywood. The revolution will be televised. But maybe not in Canada.

Apple, Google, Netflix, YouTube, Amazon.com, Hulu and others are all jockeying for the opportunity to transform how you watch television, and who you pay for it. That's why Canada's incumbent broadcasters and telcos-their comfort long assured by high regulatory and technological walls-are huddling together and building even higher defences.

The first Visigoth trying to ride across the border is Netflix Inc. It has deep pockets, the love of Wall Street analysts and a share price that's climbed about 800% over the past two years. It's also brandishing the severed head of its most recent victim on a pike, former video store king Blockbuster Inc. Netflix started out as a way to rent DVDs by mail, but it's rapidly morphing into a video-on-demand service. According to a recent study by Sandvine, an Internet traffic consultancy, Netflix's peak viewing period is the same as regular TV's: prime time. Between 8 p.m. and 10 p.m., Netflix accounts for more than 20% of non-mobile North American Internet use.

Netflix arrived in Canada in September, offering unlimited online viewing of the titles in its TV and movie library for $8 a month. In its first week, one in 10 Canadian Internet users visited Netflix.ca.

Netflix is a threat, because it could allow consumers to cut the cable cord. But Canada's telco conglomerates live by more than monthly TV fees alone. More video over the Web isn't necessarily bad news for them, because they control all roads to your home. For example, the telco giants are also the country's biggest Internet service providers (ISPs).

In fact, on the very day that Netflix announced its Canadian invasion, Rogers Communications lowered monthly download limits for many of its Internet subscribers. Coincidence? Not likely. If you're going to watch a lot of TV and movies online, you're going to need a lot of bandwidth. Download caps, and extra charges for exceeding them, are the norm at telco-controlled ISPs. They're a way to earn back revenues that could be lost if you cut off the cable cord.

A recent decision by the Canadian Radio-television and Telecommunications Commission (CRTC) seems to have been designed to ensure that the incumbent giants won't lose revenue. Several independent Canadian ISPs have long offered unlimited bandwidth plans, and at relatively low cost-putting downward pressure on prices. Those ISPs have to buy time on the big telco's networks. In a surprise decision in October, the CRTC ruled that the giants can charge extra-usage fees on the wholesale bandwidth that they sell to independent ISPs, just as they do with retail customers. Say goodbye to unlimited bandwidth plans.

The telcos also own the country's main broadcasters. (In addition to the BCE-CTV and Shaw-Global hookups, there's also Rogers-CityTV.) Their most popular programs are almost all U.S. imports. As such, they have reason to worry about the rise of Hulu. It offers on-demand TV, online. It's owned by NBC Universal, News Corp. (which owns Fox TV) and Disney (parent of ABC), three of the world's biggest creators of TV programs and movies. In August, hulu.com recorded 27.1 million unique visitors and streamed 1.4 billion videos. Earlier this month, it launched a $10 (U.S.) per month subscription service, offering unlimited viewing of most programs from Hulu's parents. "If people decide that they don't have to pay for pay TV," said one worried U.S. satellite TV executive, "then one of the pillars [of the TV industry] starts crumbling."

The thing is, Canadians can already watch a lot of first-run TV on the Web: I haven't had cable in years, yet I've seen dozens of episodes of 30 Rock at citytv.com, kept up with The Office on globaltv.com and reprised a whole season of the cancelled Terminator: The Sarah Connor Chronicles at ctv.ca. Those programs, and others, all come from Hulu's corporate parents. For years, U.S. networks have earned a pretty penny selling Canadian broadcast rights to Canadian TV networks. It's an arrangement that Hulu's parents aren't likely to end any time soon-particularly given that Canadian broadcasters are now owned by deep-pocketed telcos, who will pay whatever they have to for programming rights, in order to protect their investment. Hulu, not surprisingly, isn't available in Canada.

What it all means is that how you watch TV is going to change. How you pay for it is going to change. But who you pay? Up here in Canada, probably not much will change. Big Telco controls the vertical. They control the horizontal. Do not adjust your set; they now return us to their regularly scheduled programming.

Report Typo/Error

Next story




Most popular videos »

More from The Globe and Mail

Most popular