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Winners, losers and opportunities lost in the CRTC vertical-integration ruling

A lot was at stake in the CRTC's hearings on vertical integration in the telecom-media-Internet industries held in June. The big four vertically integrated media companies in Canada — Bell, Rogers, Shaw and Quebecor Media (QMI) — said there was no problem, and proposed that, at most, the CRTC should accept some amalgamation of their proposed code. Everybody else disagreed: Telus, CBC, Access Communications, public interest groups, Channel Zero, the Weather Channel, and in a qualified way, Astral.

The commission came out with its new rules on the subject Tuesday. You can see the Globe story here, the press release here or the full decision here.

Arguments were made about small markets needing big media players, and that argument front-ended the CRTC's press release today. As I've said in previous posts, Canada's total media economy is not small, but the eighth largest in the world, and growing fast. We don't need "big media" to coddle small outfits, but rather the carriers provide clear channels and the most open media set-up possible, full stop.

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Rogers carved out a somewhat distinct position given that with its CityTV network being the smallest of the big four's holdings (QMI/TVA, Bell/CTV, Shaw/Global (Corus), suggesting a code with a bit of teeth so that it could feed its own mobile and Internet operations. A complete list of positions is available here.

So, what did we get? The CRTC announced six key measures, but there's at least two big elephants in the room that we need to consider, too. Here's the six headline items:

  1. The big four — Bell, Shaw, Rogers, QMI — cannot offer TV programs exclusively to their own mobile or Internet subscribers. They must make them available to Telus, Wind, Access Communications, MTS Allstream, etc. Score: Good (para 22).
  2. Programs created specifically for Internet or mobile distribution by the big four can be exclusive. Score: Umm, I suppose it’s a good one (para 23).
  3. No disrupting people’s experience in front of the telly. In other words, no black outs like the kinds that have bedevilled relationships between Bell and Quebecor in the past and which have periodically erupted in the U.S. between, for example, Time Warner and Comcast on the distribution side of the business and Disney, Fox (NewsCorp) and Scripps Howard on the content side, when things get nasty over carriage (transmission) and programming rights. Score: Good (para 104).
  4. Status quo maintained with respect to independent television producers access to schedules of the big four’s specialty channels (25 per cent) and broadcast schedule. Score: Just satisfactory.
  5. End of “block-booking,” the practice of tied selling in which access to one channel is tied to taking a block of several channels. It was outlawed in the U.S. for Hollywood in 1948 (United States v. Paramount Pictures Inc, 334 US 131), and it came to television in Canada today. Score: Win (para 63).
  6. CRTC admonished the vertically integrated companies to come up with a broader range of “pick and pay” models within six months allowing people to order television and programming services à la carte. And what happens if they don’t? Another round of hearings, that’s what. Score: Pass with room for improvement. I don’t know, this one just seems to punt the issue down the line.

So, on points one, two, three and five, some clear "wins" for competitors and consumers. Point four holds the line, while point six will require us to wait and see if the different players can sort things out amongst themselves. Otherwise, well, more consultations, hearings and decisions. Indeed, the CRTC points to many instances where additional consultations, hearings and decisions might be needed if the parties can't sort things out by themselves.

One particular issue worthy of mention here is the CRTC's efforts to push Bell, Rogers, Shaw and QMI to share subscriber info collected and stored in their set-top boxes with independent programmers (para 141), albeit with due deference to privacy laws and concerns. The threat of yet another round of consultations on just this issue also now hangs in the air if the two sides are unable to work things out themselves.

And how about those elephants-in-the-room, you ask? There's two, I'd suggest, and they're inter-related.

First, references to the existing provisions in the Telecommunications Act (1993) – the common carrier sections 27, 28 and 36, and specifically so when it comes to broadcast programming – are completely ignored, referenced only in passing. Vertical integration has rendered these a bit of a fiction, but the CRTC has enormous powers under these sections. That it has not leaned on them at all shows how far the common carrier/network neutrality principle and the rule of law have been eclipsed by a "cobbling-things-together-as-we-go-along" approach. Even from the perspective of "the market," I don't think that can be a good thing.

The second big elephant in the room is that there's nothing in the new rules establishing parity of treatment for rival online video distributors (OVDS) such as Netflix, AppleTV and GoogleTV versus the big four's own online "TV everywhere" initiatives and IPTV offerings. With the "common carrier" principles apparently in hibernation, perhaps this is not surprising.

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What this means is that when Bell, Shaw, Rogers and QMI stuff TV programming/video down their pipes, it won't count against the bandwidth caps that characterize almost all Internet access offerings in Canada. For Netflix and other OVDs, the caps apply and bandwidth measured bit by bit. Call this the Netflix choke-hold, and the CRTC seems to have done nothing about it.

This element of the decision is a lost opportunity and one can't help wonder if its a byproduct of all the fuss being made about how OVDs like Netflix are supposedly ravaging the foundations of the incumbents' TV operations (and yet somehow accounting for less than 1 per cent of industry revenues) and the strong push by Shaw, Astral, the Senate Committee of Canadian Heritage and the incumbent industry-driven Over the Top Services Working Group to have such entities regulated as broadcasters. For anyone thinking of setting up a similar OVD operation in Canada, this element of the decision seems like bad news.

The extent of this loss can be seen by comparing it to the model adopted by the FCC and Department of Justice when they approved the Comcast-NBC/Universal amalgamation in January this year. They required that Comcast not give preferential treatment to its own online TV services over those of rival OVDs nor withhold NBC-Universal programming rights from OVD companies. The CRTC's decision address the latter point, but does nothing with respect to the first. A half victory?

Just how far the CRTC's approach falls short can be further realized once we remember the incomparably stricter FCC-DOJ conditions in the Comcast-NBC case are modest compared to such steps as structural separation and alternative network build-outs imposed in the U.K., N.Z., Australia, Sweden, Chile and Romania.

These measures were simply off-limits in the current proceedings.

Of course, the big four argued all along that need to regulate them was always speculative and groundless. But that is simply not borne out be the evidence provided during the hearing by Telus, Access, MTS Allstream, SaskTel, Channel Zero, Wind, etc., wall of which argued the problems are all too real and the gaining access to CTV content, for instance, became a whole lot harder once Bell acquired it earlier this year. The historical record, as I've also argued, is also quite unequivocal on the folly of allowing those who own the medium to control the message.

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At the very least, the CRTC does seem to have disagreed with the big four's Panglossian view of the world, where nothing needs to be done, and at least taken baby steps to deal with a real issue.

And just to point out one thing that you won't find in the CRTC's decision is the we bit underpinning all of this, and that is the heavily concentrated state of the telecom-media-Internet industries in Canada. Yes, I state these numbers regularly, but it's worth repeating that when you allow those who control the medium to control the messages as well, predatory behaviour and choke points on the free flow of information will arise as sure as night follows day.

So, again, just as a reminder, here was the picture in 2010 of Bell, Shaw, Rogers and QMI's share of the entire TMI industries in 2010:

  • 84 per cent of cable and satellite distribution
  • 78 per cent of all television revenues
  • 66 per cent of wireless revenues
  • 54 per cent of Internet Service Provider revenues
  • 53 per cent of the wired telephone market
  • 39 per cent of radio

That is, ultimately, the source of the issues at hand, and unfortunately, the CRTC's decision today seems mostly to be tiny pin pricks in the side of the real elephant-in-the-room.

Dwayne Winseck is a communications professor at the School of Journalism and Communication, Carleton University in Ottawa. Prof. Winseck been researching and writing about media, telecoms and the Internet in one way or another for nearly 20 years. He most recently edited The Political Economies of Media. You can read more comment on his blog, Mediamorphis. His column will appear every second Tuesday.

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