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Archive for September, 2011

CRTC’s New Telecom-Media-Internet Vertical Integration Rules and Elephants in the Room

The world has been sitting on pins and needles since the CRTC’s hearings on vertical integration in the telecom-media-Internet industries held in June.  CRTC’s just come out with its new rules on the subject today. You can see the press release here or the full decision here.

A lot was at stake. 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 propsed code. Everybody else disagreed: Telus, CBC, Access Communications, public interest groups, Channel Zero, the Weather Channel, and in a qualified way, Astral.

Rogers also 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.

Arguments were made about small markets needing big media players, and that argument front-ended the CRTC’s press release today.  In fact, however, 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 Canadians, but rather carriers the provide clear channels and the most open media set-up possible, full stop.

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 on this one: Good (para 22).
  2. Programs created specifically for Internet or mobile distribution by the big 4 can be exclusive. Score on this one: 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 US 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: sure, seems pretty good to me (para 104).
  4. Status quo maintained with respect to independent television producers access to schedules of the big four’s specialty channels (25 percent) and broadcast schedule (satisfactory).
  5. End of “block-booking”, the practice of tied selling where access to one channel is tied to taking a block of several channels. It was outlawed in the US for Hollywood in 1948 (S.Crt’s Paramount Decision), and it came to television in Canada today. Score: thumbs up (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 ala carte.  And what happens if they don’t? Another round of hearings, that’s what. Score: pass for at least trying and the cute raised eyebrow. If you don’t regulate, you can always browbeat these behemoths into doing something, suggesteth the latter. I don’t know, this one just seems to punt the issue down the line (less than satisfactory, but with words of encouragement so that KVF can do better next time).

So, on points 1, 2, 3 and 5, 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 different interests 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 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 common carrier sections (non-discrimination, equal treatment) provisions in the Telecommunications Act (1993)(secs. 27, 28 and 36), and specifically dealing with broadcast programming, are ignored, referenced only in passing. Vertical integration has rendered these a bit of a fiction, but the CRTC does have enormous powers under these sections.

That it has not leaned on them at all shows how far common carrier/network neutrality principles, 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 this is a good thing.

The second big elephant in the room is that there’s nothing in the new rules establishing parity of treatment between rivals’ online video distributors (OVDs) such as Netflix, AppleTV, GoogleTV, etc., on the one hand, and the big four’s own online “tv everywhere” initiatives and IPTV offerings, on the other. With the ‘common carrier’ principles apparently in hibernation, perhaps this is not surprising.

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 apply to almost all Internet access offerings in Canada. For Netflix and other OVDs, the caps apply and bandwidth is 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 (although accounting for less than 1 percent of industry revenues) and the strong push by  Shaw, Astral, a report of 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.

In contrast, the FCC and Department of Justice approved the Comcast — NBC (Universal) amalgamation in January earlier this year on the condition that Comcast – NBC (Universal) not give preferential treatment to its own online tv services over those of rival OVDs or withhold NBC-Universal programming rights from OVD providers either. The CRTC’s decision address the latter point, but does nothing with respect to the first. A half victory?

We also need to remember that even the incomparably stricter measures adopted by the FCC -DOJ conditions in the Comcast – NBC case are modest in comparison to steps like structural separation and alternative network build outs that have been taken in, for example, the UK, NZ, Australia, Sweden, Chile, Romania, . . . . These measures were simply off-limits in the current proceedings.

Bell, Shaw, QMI and Rogers, of course, argued all along that the need to regulate them was always speculative and groundless.  But that is simply not born out be the evidence provided during the hearing by Telus, Access, MTS Allstream, SaskTel, Channel Zero, Wind, etc.. All of the latter parties argued that the problems are all too real and that 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. It is certainly a step in the right direction that the CRTC explicitly disagreed with the Big Four’s Panglossian view of the world, and has at least taken some steps to deal with the real issues at hand.

But the CRTC treads lightly in this domain and one thing that you won’t find in its decision is the actual evidence regarding the heavily concentrated state of the TMI industries in Canada. Yes, I state these numbers regularly, but it’s worth repeating them and also my consistent refrain that when you allow those who control the medium to control the messages flowing over it, 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 percent 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.

Should ISPs Enforce Copyright? An Interview with Prof. Robin Mansell on the UK Case

Should Internet Service Providers (ISPs) be legally required to block access to websites that facilitate illegal downloading and file sharing sites or cut off the Internet connections of those who use such sites?

In Canada, the answer is no, and recently proposed legislation expected to be re-introduced soon, Bill C-32, the Copyright Modernization Actwould not change this state of affairs, despite all the other flaws that it might have (see here for an earlier post on the proposed new law).

That’s not the case in a growing number of countries, notably the United Kingdom, New Zealand, France, South Korea, Australia, Sweden and Taiwan. Indeed, after pushing hard for the past decade to get stronger, broader and longer copyright laws passed, as well as using digital rights management to lock content to specific devices, in 2008 the IFPI (International Federation of Phonographic Industries) and the RIAA (Recorded Industry Association of America) turned to giving first priority to the idea that ISPs should be legally required to block ‘rogue websites’ and adopt “three strikes you’re out measures” that cut off the accounts of Internet users accused repeatedly of illicitly downloading and sharing copyright protected content online.

While not formally required by law to do so, Canadian ISPs such as Bell, Rogers, Shaw, Cogeco, Telus, Quebecor, etc. have agreements with the recorded music industries and other “copyright industries” to disable access to illicit sites. Moreover, the Terms of Service/Acceptable Use Policies explicitly state that they reserve the right to do just this.

Exactly what the conditions are, and how often they are use, well, who knows? The arrangements, as I just said, are informal – something of a blackhole rather than an open Internet, essentially.

As Rogers Acceptable User Agreement explicitly states, for example:

“Rogers reserves the right to move, remove or refuse to post any content, in whole or in part, that it, in its sole discretion, decides   . . . violates the privacy rights or intellectual property rights of others” (“Unlawful and Inappropriate Content” clause”. (also see Bell’s Acceptable User Policy, p. 1)

So, it is not that Canada is some kind of “free Internet” zone, but rather one where there terms are set privately by ISPs (our major TMI conglomerates) and the “content industries”. This seems like a really bad idea to me.

The UK adopted an even worse approach, however, by giving such measures the force of law when it passed the Digital Economy Act in 2010, a law that was sped through Parliament in near-record time (i.e. 2 hours debate) after incredible levels of lobbying from the music, film and broadcasting industries (see here). Two major ISPs in the UK, however, BT and TalkTalk, have fought these measures tooth and nail, but have suffered a series of defeats in the courts.

I recently spoke with Professor Robin Mansell, who took part in these proceedings as an expert witness on behalf of BT and TalkTalk. Her experience sheds much light on the potential impact of these measures on the evolution of the Internet and Internet users. I also asked her about the tricky role of academics in such cases, given that being an expert witness essentially bars you from discussing details of the case, a position that obviously clashes with academics’ obligation to make knowledge public.

Professor Mansell is a Canadian who completed her Ph.D. at Simon Fraser University. She is a Professor of New Media and the Internet at the London School of Economics, where she was Head of the Media and Communications Department (2006-2009). She has been a leading contributor to policy debates about the Internet, the Information Society, and new information and communication technologies. She was also President of the International Association for Media and Communication Research (IAMCR) (2004-2008) and has served as a consultant to many UN agencies as well as the World Bank. You can learn more about her here.

Although the Court of Appeals rejected BT and TalkTalk’s challenge to the Digital Economy Act in June, several other developments in the UK since May have kept the issues on a high boil and still unresolved:

  1. The Hargreaves Report published in May was scathing of the lack of evidence underlying the development of copyright policies, and how “lobbynomics” rather than evidence has been driving the policy agenda (for an earlier blog post on the report, see here);
  2. Another High Court decision in July required BT and other ISPs to block access to the site Newzbin;
  3. The Government decided to adopt all of the proposals in the Hargreaves Report in August;
  4. The measures in the Digital Economy Act requiring ISPs to block illegal file-sharing sites were put on hold in August after a report by the British telecom and media regulator, Ofcom, found that the measures would be unworkable (also here).

Dwayne: How did you become an expert witness in the BT/TalkTalk challenge to the Digital Economy Act? And who was backing the adoption of these measures?

Professor Mansell: I was invited by BT’s Legal Division to do so.  They came to me on the recommendation of another academic who was serving as an advisor to the regulator, Ofcom, and so could not do it for conflict of interest reasons.  They also invited Prof. W. Edward Steinmueller, University of Sussex, to work with me, since he is formally trained as an economist and could take on the ‘copyright economist’ from the US who was expected to appear on behalf of the creative industry actors who have pushed so hard for the law.

The key players arrayed against BT and TalkTalk, in addition to the Government, included the following members of the ‘creative industries’: the British Recorded Music Industry Association, the British Video Association, the Broadcasting Entertainment Cinematograph and Theatre Union, Film Distributors Association, Footabll Assocation Premier League, Motion Picture Association, the Musicians Association, Producers Alliance for Cinema and Television and Unite. The Open Rights Group, somewhat similar to Open Media in Canada, also filed an intervention that, essentially, supported BT and TalkTalk’s position, but from a basis steeped more in open Internet values rather mainly business considerations.

I have training in economics, but no formal degree as mine are in Communication (Political Economy) and Social Psychology.  As far as we know we were the only academics hired by BT/TalkTalk to participate in the High Court Judicial Review of the Digital Economy Act (DEA) 2010.

We realised we would be bound by confidentiality once we signed on.  In the UK, our initial report challenging the measures set out in the Act came into the public domain after the judgement, but not the evidence submitted by the creative industry players against the BT/TalkTalk case or our rebuttal to that.

We had both worked and published on issues of copyright before and felt that there was a chance that the Judge might rescind the Act – a small one, but we thought it worth trying. This was the only way we could see that the provisions of the Act might be overturned since it had got on the books in the last days of previous Labour Government.

In the event, the Judge decided that the DEA should be implemented for two main reasons 1) there is no empirical evidence of what its impact will be from anyone’s perspective – just claims and counterclaims; 2) it is for Parliament to decide how copyright legislation balances the interests of the industry and of consumer/citizens, not for the courts.  BT/TalkTalk appealed the decision and lost again.

Dwayne: What implications does the most recent court set-back have for principles of open networks/network neutrality, copyright, privacy and user created content (UCC)?

Robin: The central issue in this case was whether the ‘graduated response’, or ‘three strikes you are out’, strategy being lobbied for by the creative industries to curtail online P2P file-sharing that infringes copyright is a disproportionate response to file-sharing practices that are ubiquitous.  Another issue was also whether the implementation of the measures by ISPs (with a court order) is likely to have a chilling effect on the way people use the Internet.

From the copyright industry point of view, the central issue was whether the government and ISPs would support their argument that this strategy is essential to their ability to stem the losses they are experiencing in the music, film and broadcast programming sectors which they attribute to infringing downloading by individual users – and more importantly to enable them to recover the lost revenues, or at least some of them. The creative industries players argued that it was essential for ISPs to play an active role in stemming the tide of copyright infringement.

The bigger issue of course is whether P2P file sharing is simply indicative of one of many ways in which Internet users are finding creative ways of producing and sharing online content in a ‘remix’ culture where the norms and standards for good behaviour online have changed enormously and with little evident regard amongst some Internet users for existing copyright provisions. In the face of these changes, the incumbent creative industry companies are seeking ways of extending their control over the use of copyrighted digital information in many ways, just one of which is stronger enforcement of copyright legislation which currently makes it illegal to copy even for non-commercial purposes of private use and creates a narrow window for licensing for educational use.

BT/TalkTalk framed the issues mainly in terms of the threat to their own business interests in terms of reputational and financial costs if they are required to divulge the names of their subscribers to the creative industry firms (albeit with a court order) when they are accused of infringing copyright.

We framed the issues in four ways:

  1. the disproportionality of the DEA response in light of changing social norms and behaviours online which means that there is little if any evidence that the threat of punishment will change online behaviour;
  2. the disproportionality of the response because it sets a wide net that is very likely to encompass those who use ISP subscribers’ access to the Internet (family, friends, users at work, in public places, etc.) for purposes of which the subscribers themselves have no knowledge;
  3. the lack of disinterested evidence on industry losses and revenue recovery since all the quantitative evidence is based on creative industry data or on studies which are flawed in terms of methodology; and
  4. the implications for trust and privacy when Internet users are being monitored for this purpose.

In this specific case, the arguments did not tip over into debates about network neutrality, but they easily could have. The techniques that are used to monitor subscriber online activity go in the direction of the same deep packet inspection techniques that also enable ISPs to discriminate among different types of Internet traffic.

However in this case, they were only being asked to provide subscriber information based on the monitoring performed by firms hired by the copyright industry firms themselves to monitor spikes in volume and the sites from which downloading occurs. This doesn’t go directly to what ISPs themselves are doing or not doing with respect to monitoring types of traffic, so technically isn’t about network neutrality. The ultimate effect, however, is not all that dissimilar.

Dwayne: You have mentioned for two years running now during talks at IAMCR that the role of ‘expert witness’ is a double-edged one, on the one hand allowing scholars a seat directly at the table while on the other hedging about the scholar’s role with all kinds of requirements about the nature of the facts and evidence that can be submitted, non-disclosure agreements, etc.

Can you elaborate a bit more on this conundrum? What would be your advice to those torn between the ‘expert witness’ and ‘activist’ scholar role?

Professor Mansell: This issue is always on my mind!  The role of an ‘expert witness’ in a court case can vary a lot depending on the jurisdiction. In the UK you can end up knowing quite a lot more as a result, but you also cannot write about it in an academic way because you cannot cite the sources which remain confidential even after the case is over. After the case is over of course you can argue as you wish retrospectively, but then ‘the horse has left the barn’.

Another issue is the problem of what counts as evidence.  The courts look for some kind of irrefutable quantitative evidence. Failing that they look for persuasive theoretical arguments about how the world ‘might be’, overlooking the unrealistic assumptions about how economic incentives work in the market or they look for generalisations from fairly flimsy empirical studies about what mainly US college student report about their own copyright infringing behaviour and future intentions.

The problem for the ‘expert witness’ is that while it is possible to refute the assumptions of theory and poorly conceived methodologies, it is not possible (usually) to present quantitative empirical evidence that is any more robust because it simply doesn’t exist.  It is possible to present good arguments (based on political economy, sociological or cultural analysis of changing norms, market structures and dominant interests, and power relations).  But if you know that the Judge is likely to be persuaded mainly by the economics arguments, one is not going to get very far.

Thus, the question arises as to why enter the fray in the first place? Why not work as an activist or work as an academic to influence the policy makers directly before the legislation gets on the books?

Both routes are needed, but time constraints often mean that they are hard to achieve in a consistent way.  And of course interacting continuously with policy makers raises its own challenges.  Not the least of these is that if they are setting the agenda and are already echoing the prevailing view that the balancing of interests in copyright protection is clear and unproblematic. It is a real uphill battle to depart from this view – and a strong likelihood that the door to the room or corridor where policy decisions are made will be shut.

In the case of copyright enforcement and the UK judicial review of the DEA, there are critical scholars in the community who could have been taken on by BT/TalkTalk and who are likely to have promoted the view that the whole of the copyright regime needs to be dismantled in favour of an open commons; they were not invited to participate by those setting the terms of engagement.

The Open Rights Group did participate in the judicial review as an intervener and their argument was quoted by the Judge, but this didn’t alter his view it seems.  In terms of the academic evidence, he basically said that this was a complex issue which should not be put before the courts.

Dwayne: The Court dismissed the challenge to the Digital Economy Act, finding that it was entirely within the purview of the UK Parliament to pass laws of this kind and to strike the balance between the competing interests in the way that it did. You described this as a total loss. Can you explain why and what the implications might be?

Professor Mansell: I think I said this because the Government claimed that the DEA is aimed at balancing legitimate uses of the Internet and freedom of expression against the costs of implementing technical sanctions against Internet users, assuming authorisation by the courts.

The Court accepted our argument about the ambiguity of the results of empirical studies of online user intentions and behaviours with respect to copyright infringement. It also accepted the argument that Internet users may take steps to avoid legal liability resulting in a chilling effect on the development of the Internet. But, it did not accept that such an effect would exceed the benefits of enhanced copyright protection.

Ultimately, it left it to Parliament to decide the appropriate weighing of the interests of the creative industries and Internet users, which the Government claims has already been done in the legislation.  So we go round and round …  the DEA enforcement legislation goes ahead and the copyright legislation it is designed to enforce stays in place – a ‘total loss’ (for now till the next round).

Meanwhile the creative industries as we know are experimenting with all sorts of new business models in their bid to change the way they raise revenues through the provision of digital content.  Perhaps the shear pressure of mass Internet user activity and infringing downloading will eventually give rise to fairer models – we can wait for this to happen, but it is a shame that the rights of these users are likely to be infringed and some will be punished for behaviour that one day may be seen as entirely appropriate and even welcomed!

We argued, that in light of uncertainty about the direction of change in social norms and behaviour online, legislation that seeks to suppress P2P file-sharing by bringing legal actions against individual infringers is likely to disrupt, or alter the course of, Internet development in ways that cannot be assumed to be benign. The evidence favours the interests of the rights holders and the interests of those engaging in infringing file-sharing are downplayed or excluded. This cannot be said to be a proportionate response to the incidence of infringing file-sharing.

Since the judicial review, an independent report commissioned by the Prime Minister (The Hargreaves Report) has emphasised the need for change favouring better access to orphaned works subject to copyright and copying for private and research purposes and greater emphasis on the impact of legislation on non-rights holders and consumers.  But, it still says that the DEA provisions for the ‘graduated response/three strikes you are out’ should go ahead until such time as there may be evidence that it is not working.  Again, the harms will already have occurred even if evidence shows that the measures are not working the way the industry claims they will and Internet users continue their infringing downloading activity.

Dwayne: Last question, Robin. Do you think that the recent moves by the UK government to adopt the Hargreaves Report in whole and to put aside ISP blocking requirements change the picture?

Professor Mansell: There is a difference between the provisions in the DEA to go after individual file sharers through the ‘Graduated Response’ tactic, which is going ahead, and the concerns expressed by ministers as to whether they can get ISPs to take down the big enabling sites.  My understanding is that is the issue under discussion.

Some of the other Hargreaves recommendations may well start to go ahead – we will see how quickly, but they do not go to the specific issue of using ISPs to help bring charges against individuals.  



Media and Internet Concentration in Canada, 1984 – 2010

Last time we spoke, I said that over the next few posts I would be unravelling a mass of data that I’ve been assembling on the telecom-media-Internet (TMI) industries in Canada. The data has just been updated for 2010 with yeoman’s help from Adam Webb and now I’m putting it to use.

Last week I did so in a bid to illustrate the growth of the network media industries over time, paying attention to where this was greatest, which sectors have stagnated, and those that have declined. The purpose of this post is to address the question of whether the telecom-media-Internet (TMI) industries in Canada have grown more concentrated between 1984 and 2010, or less?

Of course, you are no doubt asking, why bother?

Repeating what I said last time, the most important reason to do this is because, as Prof. Philip Savage (2008) argues, “the media ownership debate occurs in a vacuum, lacking evidence to ground arguments or potential policy creation either way” (p. 295). I agree. One aim of my work here and as part of the International Media Concentration Research (IMCR) project is to help fill that gap.

I did a similar post on this topic last year, and now my aim is to annually update the account while broadening and improving the quality of the coverage along the way.

So why is there this void to begin with? I blame the lack of a systematic body of empirical data for the TMI industries mainly on three things:

(1) the issues at stake are highly politicized,

(2) gathering data on these industries is not easy and

(3) the CRTC’s minimalist approach to disclosing information.

Besides just trying to fix things, I think that assembling reams of data and peering deeply into it offers amazing insights into how all of the bits and parts and moving pieces of the TMI industries fit together, evolve, mutate, grow and become more differentiated and complex over time. I can think of few better ways to obtain detailed knowledge of our ‘subjects/objects of analysis’ than by pouring through data covering a span of roughly a dozen TMI sectors over more than a quarter-of-a-century.

Too often ideology and wishful thinking carry the day when it comes to issues of media ownership and concentration. There is no particular school or perspective that has a lock on this either, and when we look out across the writing on the topic, it is useful to look at four different ‘schools of thought’.

Some critics see media concentration as constantly going from bad to worse, robbing us of “democracy’s oxygen” or creating “Canada’s most dangerous media company”, as the subtitle to another book stats (Winter, 1997; Edge, 2007). Yet, such accounts work rather fast and loose with the evidence, in my opinion, and I’m not sure it’s the scholar’s task to revile or revere media companies without first having a really good handle on the issues involved.

A second group tries to tries to hug the middle ground, head-to-the-grindstone measuring how changes in media ownership affect media content. Their conclusion? Not much, and that the evidence is mostly “mixed and inconclusive” — as if “impact on content” is the main issue at stake or the absence of change might not be a significant problem in its own right (Gitlin, 1978)?

A third school group sees concern with media concentration as ridiculous. Millions of web pages, thousands of news sources, social networking sites galore, pro-am journalism, user-created content and a cacophony of blogs at our finger tips, 700 television channels licensed by the CRTC, and 94 newspapers supposedly publishing everyday. Smartphones in every pocket.

How could anyone believe that the media are still concentrated amidst all this choice? MIT media economics professor, Ben Compaine (2005), has a terse one-word retort for anyone who still sees a problem here: Internet.

Many journalists in Canada seem to have an innate affinity with this view, regularly invoking “ferocious competition”, “a crowded marketplace” and the “marketplace of ideas”, as I saw three times in just the last week, in reference to the state of television, online music, and professional journalism in Canada. But devoid of any data, I get the feeling that these are not so much meant to accurately describe the world, but rather to be taken as articles of faith and to assure us that the machinery of capitalism and democracy is in good working order.

Despite an absence of data, journalists are in good company with Compaine, who argues that while the democracy of the marketplace of ideas might be flawed, it’s getting better, not worse. The best exemplar of this work in Canada is probably that of economist and iconoclastic consultant to the commercial media players, Kenneth Goldstein (see MeasuringMedia).

Hard as it might be for some to fathom, however, there is a fourth school of thought that says that digital media and Internet are no more immune to consolidation than any other media in the past. For all those who guffaw at charges of media concentration, it is easy to point, for example, to the fact that only about a third of the 94 daily newspapers said to exist are actually still publishing original content on a daily basis. Of the 700 television channels listed in the CRTC’s books, less than 200 are up and running and more than half of them belong to just four companies — Bell (28), Shaw (52), Rogers (17) and QMI (13). Their share of the market, as we will see, is higher yet.

In The Master Switch, Tim Wu argues that there are strong and the recurring tendencies toward consolidation in the media industries, and that there is no reason to believe that core aspects of the Internet, say search engines (Google), Internet access (ISPs), online music (Apple), social media (Facebook), devices (Apple, Google, Nokia, RIM, Sony Ericsson), are any less susceptible to the pressures of consolidation than their predecessors.

Eli Noam (2009) similarly sees digitization as a double-edged sword: economies of scale are magnified as the costs of information production, transmission, storage and display fall. This furthers concentration within some markets. However, it also reduces barriers to entry, allowing some new competitors to emerge, too.

A two-tiered digital media system is taking shape as a consequence, Noam states, in which many specialist firms revolve around a few “large integrator firms”. This applies as much to “traditional” media conglomerates (e.g. Disney, News Corp., Time Warner) as it does to digital media giants (e.g. Apple, Google, Facebook, RIM, etc.) (pp. 33-39). Technology is important in this equation, but where capital is invested is king.

Andrew Odlyzko of the Digital Technology Centre, University of Minnesota, observes that all of these issues involve a centuries-old “conflict . . . between society’s drives for economic efficiency and for fairness” that “has never been resolved completely”. Policy issues like network neutrality will never go away until basic political choices like these are dealt with.

“Should something like net neutrality prevail, the conflict would likely move to a different level. That level might become search neutrality . . . .”, Odlyzko says (p. 3). Cloud neutrality might be next and so on and so forth.

Does this mean that a massive trust-busting effort on the digital media frontier is in order? Umm, maybe, but not so fast. More importantly, it means that we should pay close attention to assembling evidence and interpreting what it means. It also tells us that the answers to these issues will not turn on data alone, but politics.

Indeed, talk about media concentration is often code for a much bigger discussion of political philosophy and democracy, and it is on such matters that outcomes here will ultimately turn (Baker, 2006; Peters, 2004; McChesney, 2008; Curran & Seaton, 2010). No wonder things are so complicated and hotly contested.

On Method

To answer the question at hand, I began by defining the range of media to be studied as follows: wired & wireless telecoms; broadcast tv; pay & subscription tv; cable, satellite & IPTV distributors; newspapers; magazines; radio; Internet access; Search Engines; Social Network Sites; and Smartphone Operating Systems. I then collected data for each of these sectors over a twenty-six period, 1984 – 2010, again with yeoman’s help for the 2010 data from Adam Webb.

Data for each ownership group/firm in each sector was then assembled. I then group each of the sectors into three categories, assess the concentration level in each category, and then scaffold upward from there to a portrait of the network media industries as a whole: (1) network infrastructure; (2) content: (3) online media.

I typically drop wired and wireless telecoms from the whole of what I call the network media industries because the size of these sectors means that they tend to overshadow everything else. As you might imagine, keeping track of twenty-six years of data for 13 different segments, three categories, and one composite picture of the network media as a whole is not easy, and sometimes it all feels a bit like herding cats. Suggestions and constructive criticisms are always welcome.

Lastly, I use two common tools — Concentration Ratios (CR) as well as the Herfindhahl – Hirschman Index (HHI) – to depict levels of competition and concentration over time. The CR method adds the shares of each firm in a market and makes judgements based on widely accepted standards, with four firms (CR4) having more than 50 percent market share and 8 firms (CR8) more than 75 percent considered to be indicators of highly levels of concentration.

The HHI method squares and sums the market share of each firm to arrive at a total. If there are 100 firms each with a 1% market share, markets are highly competitive, while a monopoly prevails when one firm has 100% market share. The following thresholds are commonly used as guides:

HHI < 1000                                     Un-concentrated

HHI > 1000 but < 1,800             Moderately Concentrated

HHI > 1,800                                    Highly Concentrated

For those do-it-yourselfers, here’s a handy list of resources that you might find helpful so that you can gather and assemble your own information.

The Historical Record and Renewed Interest in Media Concentration in the 21st Century

Now of course, there’s no analysis without out a wee bit of historical context, as I always like to say. There has always been, even if episodically, keen interest in media ownership and concentration in Canada and the world since the late-19th and early-20th centuries.

In 1910, for example, the Board of Railway Commissioners (BRC) broke up the three-way alliance between the two biggest telegraph companies — Canadian Pacific Telegraph Co. and the Great Northwestern Telegraph Co. (the latter an arm of the New York-based goliath, Western Union) – and the American-based Associated Press news wire service. Why?

The BRC did this because, it argued in the face of much corporate bluster, letting the telegraph companies give away the AP news service for free to the top newspaper in cities across Canada in order to bolster their hold on the lucrative telegraph business would “put out of business every news-gathering agency that dared to enter the field of competition with them” (1910, p. 275).

In a conscious bid to use telecoms regulation to foster competition amongst newspapers, and to free up the flow of news on the wires, the BRC effectively dismantled the alliance. For upstarts such as Winnipeg-based Western Associated Press – which had initiated the case – it was a significant victory (Babe, 1990).

Media concentration issues arose episodically thereafter and came to a head again in the 1970s and beginning of the 1980s, when three inquiries were held: (1) the Special Senate Committee on Mass Media, The Uncertain Mirror (2 vols.)(Canada, 1970); (2) the Royal Commission on Corporate Concentration; and (3) the Royal Commission on Newspapers (Canada, 1981).

Things lay dormant for more than two decades, but sprung to life after a huge wave of consolidation in the late-1990s and turn-of-the-21st century thrust concern with media concentration back into the spotlight. Three inquiries were held between 2003 and 2007: (1) the Standing Committee on Canadian Heritage, Our Cultural Sovereignty (2003); (2) the Standing Senate Committee on Transport and Communications, Final Report on the Canadian News Media (2006);[i] as well as (3) the Canadian Radio-Television and Telecommunications Commission’s Diversity of Voices inquiry in 2008.

Structural Transformation: Two (three?) Waves of Consolidation and the Rise of TMI Conglomerates

The media economy in Canada grew immensely from $19.7 billion in 1984 to $56.1 billion in 2000 and to $68.7 billion in 2010 (‘real dollars’), as I noted last post. Between 1984 and 1996, new players meant more diversity in all sectors, except for newspapers as well as cable and satellite video distribution, where concentration climbed significantly.

Conventional as well as pay and subscription television channels were already expanding. In terms of ownership, incumbents and a few newcomers – e.g. Allarcom and Netstar –cultivated the field, their share of the market growing steadily in tandem with the number of services available, with minor shuffles along the way.

Concentration levels remained very high in wired line telecoms in the 1980s and early 1990s, too. Wireless was developed by two companies, Bell and Rogers. As had been the case in many countries, telecoms competition moved slowly from the ends of the network into services and then network infrastructure, with real competition emerging in the late-1990s before the trend was reversed and concentration levels again began to climb.

In the 1980s and early-1990s, consolidation took place mostly among players in single sectors. Conrad Black’s take-over of the Southam newspaper chain in 1996 symbolized the times. In broadcast television, amalgamation amongst local ownership groups created the large national companies that came to single-handedly own the leading commercial television networks – CTV, Global, TVA, CHUM, TQS – by the end of the 1990s.

While weighty in their own right, these amalgamations did not have a big impact across the media as a whole. There was still significant diversity within sectors and across the TMI sectors. The CBC remained prominent, but public television was being eclipsed by commercial television as the CBC’s share of all resources in the television ‘system’ slid from 46 percent in 1984 to half that amount by 2000 and about 18 percent today.

Gradual change defined the 1980s and early-1990s. Things shifted dramatically by the mid-1990s, however, as two (and maybe three) waves of consolidation swept across the TMI industries. A few highlights will help to illustrate the trend:

Wave 1 – 1994 to 2000: Rogers acquisition of Maclean-Hunter (1994). Peaks from 1998 to 2001: (1) BCE acquires CTV and the Globe & Mail ($2.3b); (2) Quebecor takes over Videotron, TVA and the Sun newspaper chain ($ 7.4b) (1997-2000); (3) Canwest buys Global TV ($800m) and Hollinger newspapers papers, including National Post ($3.2b).

Wave 2 – 2006-2007.  Bell Globe Media re-branded CTVglobemedia, as BCE exits media business. CTVglobemedia acquires CHUM assets (Much Music, City TV channels and A-Channel).  CRTC requires CTVglobemedia to sell City TV stations – acquired by Rogers (2007). Astral Media’s buys Standard Broadcasting. Quebecor acquires Osprey Media (mid-size newspaper chain)(2006). Canwest, with Goldman Sachs, buys Alliance Atlantis (2007) (Showcase, National Geographic, HGTV, BBC Canada, etc) – and biggest film distributor in Canada.

Wave 3 – 2010? Canwest bankrupt. Newspapers acquired by Post Media Group, TV assets by Shaw.  BCE makes a comeback, buys CTV.

The massive influx of capital investment drove consolidation across the telecom, media and Internet industries during these periods is illustrated in the Figure below.

Figure: Mergers and Acquisitions in Media and Telecoms, 1984 – 2010 (Millions$)

Sources: Thomson Financial, 2009; FPInformart, 2010; Bloomberg Professional.

We can see a clear trend towards increased investment in mergers and acquisitions beginning in 1994, mounting steadily to unheard of levels by 2000, a fall after the collapse of the TMT bubble, and significant rise again between 2003 and 2007, before falling off sharply after the onset of the Global Financial Crisis (2007ff).  The patterns closely parallel those in the US and globally.

Whether Shaw’s and Bell’s (and Post Media’s) acquisitions at the end of the decade constitutes yet a third wave, or just tidying up the wreckage of Canwest, it is still too early to tell.

Consolidation has yielded a fundamentally new type of media company: the media conglomerate. Extremely popular in the late-1990s everywhere, many media congloms have since collapsed or been dismantled in other countries (AOL Time Warner, AT&T, Vivendi, etc.).

In Canada, they are still all the range, where four such behemoths and a half-dozen other large but more specialized companies part their size, that now make-up the core ‘big 10’ companies in the network media economy: Bell (CTV), Shaw (Global), Rogers (CityTV), QMI (TVA), CBC, Post Media, Cogeco, Astral, Telus and Torstar. A detailed chart of each by ownership, capitalization, revenues, and sectors operated in is available here.

Looking at media concentration from the vantage point of the ‘big ten”, the media have become more concentrated than ever. Their share of all revenues (excluding telecoms services) between 2000 and 2010 hovered steadily around 71-75% — a substantial rise from 63% in 1996, and an increase further still from 56% in 1992. The levels are more than twice as high as those in the U.S., based on Noam’s analysis in Media Ownership and Concentration in America (2009).

Breaking the picture down into the following three categories and applying the CR and HHI tools provides an even better view of long-term trends:

  • ‘network infrastructure’ (wired and wireless telecom services, ISPs, cable, satellite and other OVDs);
  • ‘content’ (newspapers, tv, magazines, radio)
  • ‘online media’ (search, social, operating systems).

At the end, I combine these again in slightly different form to complete the analysis of the network media industries as whole.

Cont’d on Page 2 . . . . . . . .

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