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Canadian Radio-television and Telecommunications Commission (CRTC) Chairman Jean-Pierre Blais takes part in a news conference in Gatineau, Quebec June 27, 2013. Viacom filed a final submission to Let’s Talk TV, a sweeping hearing proposing major changes in the television industry launched by the CRTC. The U.S.-based company warned unbundling packages of channels to be offered one by one would set off “a consumer welfare destroying death spiral” for the TV business.

Chris Wattie/REUTERS

American media giant Viacom Inc. is threatening to move its television stations off the dial and onto an online streaming service if the federal broadcast regulator forces cable and satellite companies to offer channels on a "pick-and-pay" basis.

Late last week, Viacom filed a final submission to Let's Talk TV, a sweeping hearing proposing major changes in the television industry launched by the Canadian Radio-television and Telecommunications Commission (CRTC). The U.S.-based company warned unbundling packages of channels to be offered one by one would set off "a consumer welfare destroying death spiral" for the TV business.

The federal government has been pushing a pick-and-pay option as part of a consumer-focused agenda since last fall. But Viacom says such a move would "force a complete re-examination" of the business case for offering its channels on Canadian TV. When the government said, during the hearing, that it wouldn't allow Internet-based video services such as Netflix and YouTube to be regulated, it changed the financial equation.

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Citing "recent statements by the Canadian Prime Minister and the Canadian Heritage Minister," Keith Murphy, Viacom's senior vice-president of government relations wrote in the company's submission that "Due to this lack of regulation, Viacom is seriously considering distribution in Canada through [over-the-top streaming] or the Internet as a possible solution if traditional distribution becomes uneconomical due to new rules being imposed by the Commission."

The move to streaming services such as Netflix – often called "over-the-top" providers – is attractive because, at present, these companies operate under an exemption that leaves them nearly unregulated in Canada, free from the many rules constraining traditional broadcasters.

Most American networks have not made the leap because Canadian TV distributors can still pay far more for the programming rights than online upstarts. But forcing a pick-and-pay system would decrease the numbers of Canadian subscribers to Viacom stations such as MTV, Comedy Central and Spike TV, as well as the ad revenues they generate, the company says.

"It is probably a pretty solid proposition that, in an environment as bad as the regulatory environment that Canada may have, we probably could do as well or better over-the-top," Mr. Murphy said in an interview.

By promising not to regulate online video platforms, the federal government is "opening the gate and saying, go this way," said Gregory Taylor, a researcher at Ryerson University.

"This is absolutely a clear example of what can happen when a government that is probably not thinking much past the next election starts meddling in what are very big-picture questions," Mr. Taylor said.

A spokesperson for Canadian Heritage Minister Shelly Glover reiterated the government's stance that viewers should "not be forced to pay for the channels they don't want [in order] to get the ones they do," and that it opposes any new regulations on Internet video, but said it "isn't going to speculate on the outcome of the CRTC process, or on how individual businesses may or may not respond."

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A spokesperson for the CRTC declined to comment.

The outcome of Let's Talk TV likely won't be decided for several months, but Viacom isn't the only big U.S. company watching the process closely.

The popular A+E network warned in a submission filed on Friday that in a pick-and-pay environment, it "may determine that Canadian distribution rights are too expensive and may have to seek blackout rights for licensed programming or forego programming expected by A&E viewers."

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