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CRTC chief talks legislation for services such as Netflix

Chairman of the CRTC Konrad von Finckenstein arrives to testify at a House of Commons science and technology committee to discuss the billing practices of internet providers on Parliament Hill in Ottawa on Thursday, February 3, 2011.

Pawel Dwulit/THE CANADIAN PRESS

The chairman of the federal broadcasting regulator has raised the possibility of legislation to deal with the onslaught of so-called over-the-top services such as Netflix, Google TV and Apple TV.

Pointing to research that shows Netflix – which became available in Canada last September – was by March responsible for 13.5 per cent of downstream Internet traffic during peak hours, Konrad von Finckenstein said it's "obviously a huge issue" that needs to be explored.

"Some people in the audience think it's just a new window that's being created," the head of the Canadian Radio-television and Telecommunications Commission said at the Banff World Media Festival on Monday. "Others think it's a paradigm shift and the sky is falling."

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The OTT services are available at low cost and are not required to program Canadian content or contribute to its creation. Last week, a Netflix spokesman told The Globe and Mail that it expects to reach one million subscribers in Canada by this summer, exceeding the company's earlier estimates.

"We've had great, tremendous growth in Canada," said Steve Swasey, vice-president of corporate communications. "That's fuelled our expansion plans for elsewhere in the world later this year."

Recently, the CRTC issued a call for public input on the matter, following the recommendations of an industry working group and the standing committee on Canadian heritage.

"It's something that's moving very fast and I don't want to deal with it when it's too late," von Finckenstein said. "Maybe it's not even [the CRTC's to deal with] Maybe it is something that has to be done by legislation or whatever. But I want to understand it. I want to [find out]what the hell is going on here. … And then decide does anything need to be done? Maybe not, maybe yes, and by who."

A week ahead of CRTC hearings on vertical integration, von Finckenstein commented that vertically integrated companies are in the best position to take on the OTT providers.

"They have obviously realized that platforms are shifting; nobody quite knows which will be the dominant platform … so the simplest thing [is to]own all platforms. And so therefore if this happens, if there's a paradigm shift etc., and you're one of the vertically integrated companies, you're going to transfer your customers slowly but surely from your cable site to your ISP [Internet service provider]site. … We have four companies which dominate the landscape. And they will clearly survive. There will be road kill; there will be people who are going to suffer. It's not clear who they are, but I don't think it will be among those four."

The issue is clearly on the minds of people in those conglomerates. On Sunday, Bell Media president Kevin Crull said during a panel discussion that vertical integration can't be seen as the "bogeyman" of the industry and remarked that he was worried about "heavy-handed regulation" setting the industry back.

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But von Finckenstein does have concerns about the impact of the model on some sectors of the production community.

"Vertical integration … spells dangers particularly for two groups: the independent broadcasters and the independent distributors," he said. "That's why we called this hearing: Everybody come forward, tell us what are your concerns and what are possible solutions."

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