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Posts Tagged ‘Media and Internet Concentration’

Code Yellow: Threats to Freedom of Expression, Online and Off, in Canada

This morning the Huffington Post published an article I wrote for PEN Canada as part of its ‘Non-Speak Week’, “a string of events and exchanges exploring the state of freedom of expression here in Canada”, according to the group. The original version of the piece, with links, is reproduced below.

We reach certain points in time, what the critical media scholar Robert McChesney calls “critical junctures”, or that the sociologist and media historian Paul Starr calls “constitutive moments”. Now is one such moment, and choices and decisions made nowcould tilt the evolution of the network media ecology in Canada toward a more closed, surveilled and centralized regime instead of an open one that strives to put as much of the internet’s capabilities into as many people’s hands as possible. The latter approach maximizes the diversity of voices and is essential to any free press — digital, networked, or otherwise — and to the role of communications media in a democracy.

Threats to an open media and internet ecology, and thus to creative and expressive freedoms in Canada, are unlikely to arrive outfitted in jackboots. Instead, they will arise from the slow, cumulative outcome of decisions that will affect levels of media and internet concentration, internet surveillance for law enforcement and national security reasons, and a concerted push to turn internet service providers (ISPs) and digital intermediaries such as Google and Twitter into agents on behalf of the entertainment and software industries’ copyright maximalist agenda.

In terms of media and internet concentration, Canada already has some of the highest levels of concentration and cross-media ownership in the world. The ‘big four’ telecom-media-internet (TMI) giants – Bell, Shaw, Rogers and Quebecor Media Inc. – already control roughly half of the network media economy in Canada. This is set to get much worse if the CRTC gives Bell’s bid to take-over Astral Media the green light in a decision expected later this year.

The problem of media and internet concentration is crucial to freedom of expression for many reasons. First, large TMI conglomerates are often rickety enterprises that spend more to pay down the debt incurred by acquisitions and mergers than good journalism, investment in new technology and infrastructure, or supporting open media.

Second, these same entities have turned to soft tools of censorship such as usage-based billing and bandwidth caps to protect their investment in legacy media and which are transforming the user-centric internet into the pay-per Internet. Such measures constrain what we can and cannot do with our internet connections. They privilege incumbents’ own online video services while discriminating against other sources. Bandwidth caps are not unique to Canada, but the fact that they are near universal among the big players and set at very low levels with high prices relative to global standards, does set us apart from the rest of the world.

Lastly, a small number of massive integrated media and internet companies are more regulable than many entities of different stripes and sizes. In short, a few big firms make for juicy targets for those who see them as potential tools in their own efforts to push either a law and order agenda, as was the case last year with the Investigative Powers for the 21st Century Act (Bill C-51), or part of the arsenal of a strong copyright enforcement regime, as some sought but did not fully achieve with the Copyright Modernization Act passed earlier this year.

I think we need to push back against the tide. As part of my efforts to do so, over the past year I joined with the Digitally Mediated Surveillance research project and the New Transparency Project to create a video to discuss why internet surveillance and the Harper Government’s proposed lawful access bill specifically are bad for privacy, democracy, civil liberties and an open internet.

That bill died last Parliament and was to be reintroduced with the Government’s omnibus crime bill passed earlier this year. Its essential aim was to have ISPs and telecommunications providers retool their networks with far greater surveillance capabilities and to require telecoms providers, ISPs and search engines to disclose subscriber information, including name, address, IP address, and email addresses, to law enforcement officials without court oversight.

Fortunately, this aspect of the omnibus bill was stripped out at the last minute in the face of withering public criticism led by groups such as Open Media, dissent within the ranks of the Conservative Government, and even a broadside against it in one of Rick Mercer’s famous rants.  The victory is significant, but a similar bill sits in the wings waiting for an opportune moment to be reintroduced. Moreover, University of Ottawa law scholar Michael Geist observes that telecoms providers and ISPs already comply with over 90% of requests from law enforcement requests for information about their subscribers without a warrant.

As I said earlier, a few massive firms are more likely to be pliable entities than recalcitrant ones. This example shows that this is, in fact, the case. Such murky ties outside the formal rule of law do not bode well for freedom of expression in Canada, online or off. For an open network media ecology and citizen’s rights to autonomy and to express themselves freely to flourish, the collection, retention and disclosure of personal information between private media companies and the state should be minimized, not maximized.

The final factor in this trilogy of forces bearing down on an open internet is the copyright maximalist agenda. A strong version of this was visible earlier this year in the United States with the Stop Online Piracy Act, or SOPA. SOPA would have required: (1) ISPs to block access to ‘rogue websites’, (2) search engines to make such sites disappear from their results, (3) payment providers like Paypal and Visa to cut-off payments, (4) and advertisers to cut-off suspect sites from advertising placement, among other things.

The fundamental remaking of the Internet such activities contemplated unleashed a firestorm of protest, ultimately leading to a tactical withdrawal of SOPA. Yet as SOPA was being withdrawn in the US, copyright maximalists here in Canada were on a roll.

They deployed their hyperbolic rhetoric that carved up the world into good guys and bad guys, with repeated references to “wealth destroyers”,  “parasites”, “rogues” and “pirates” to make their case for why Canada needs strong digital locks, longer copyright protection terms, and for ISPs and search engines to step up to the plate on their behalf.

Copyright maximalists spurned claims that their agenda had anything to do with freedom of expression, but last year a United Nations’ report on internet and human rights argued exactly the opposite point of view:

“. . . [C]utting off users from Internet access, regardless of the justification provided, including on the grounds of violating intellectual property rights law, [is] disproportionate and thus a violation of article 19, paragraph 3, of the International Covenant on Civil and Political Rights” (p. 21).

Article 19, in case you didn’t know, sets out freedom of expression and opinion as a fundamental human right at the global level and calls on the 167 countries that are party to it to promote and protect such rights to the fullest extent possible.

In a powerful testament to the ability of “the Public” to influence arcane matters of policy and law, the copyright maximalist’s got only a fraction of what they wanted: digital locks yes, but no term extensions or requirement that ISPs, search engines and other digital intermediaries serve as tools on their behalf.

These examples suggest that when it comes to freedom of expression, there will be no smoking gun, just a slow tilt biasing the evolution of the telecom-media-Internet infrastructure in favour of greater control on behalf of incumbents, the state and copyright maximalists. For freedom of expression to flourish, we need to keep our eyes wide open to such efforts by stealth that seek to transform the network media ecology into one that is more closed, controlled and regulable.

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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.

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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Crony Capitalism?: Revolving Door between Telecom-Media-Internet Industries in Canada and Ex-Politicos

Where do ex-politicians go when they retire? It would appear that they take up sinecure amongst the boards of directors at Canada’s leading telecom-media-Internet (TMI) companies.

The appointment of recently retired Industry Minister Jim Prentice to Bell Canada’s board of directors and Stockwell Day’s appointment to Telus, respectively, in the last two weeks has tongues wagging. Many think it ain’t right, others see no problems; I see it as business as usual, systemic and a big problem that contradicts the ideals of a free press and any notion that TMI policy in this country is anything more than industrial policy and a major industry player protection racket.

Of course, not everyone sees things this way. As one lobbyist from the software industries in Canada badgered me over the weekend on Twitter, what’s an old political hack suppose to do when they leave office? What’s wrong with Prentice and Day taking up shop at Bell and Telus?

Well, lots. If it was just Prentice and Day stepping from the halls of Parliament to paneled boardrooms of Corporate Canada, perhaps it would be exceptional and not much to be worried about.  However, if we look at the boards of directors at the top ten TMI players in Canada, we see that they are not the exception but the rule. The boardrooms are brimming with their type, with a total of fourteen directors – an ex Prime Minister (Brian Mulroney at QMI), an ex-first lady (Mila Mulroney at Astral), two former Chairpersons of the CRTC (Francois Bertrand at QMI and Andre Bureau at Astral, and more, as the chart below shows – occupying these coveted spots.

Top 10 Telecom-Media-Internet Companies and the Ties that Bind

Ownership Politicos as Directors Family Members as Directors Links With Other MediaCos
Astral Greenberg Andre Bureau (CRTC chair)

3

Paul Godfrey (PostMedia)
Mila Mulroney Phyllis Yaffee (Dir. Torstar)
Bell Publicly Trade (Diversified) Jim Prentice (Cons. Ind. Minister) Not Relevant
E. C. Lumley (Lib. Cab. Min)
Carole Taylor (BC Fin Min)
Cogeco Audet (64%)

1

Rogers (36%)
PostMedia Godfrey (6.5%) David Emerson (Lib. Cab. Min)

1

Quebecor Péladeau Brian Mulroney (Cons. PM)Francoise Bertrand (Chair CRTC)Kory Tenycke (VP Sun News, ex Harper Dir. of Communication)

1

Rogers Rogers John H. Tory (ex. Ont. PC leader)David Peterson (ex Lib Premier Ont.)

4

Issabelle Marcoux (Transcontinental
Shaw Shaw Sheila Weatherhill (PM Advisory Cmmt on Public Service)

3

Torstar Atkinson, Thall Hindmarsh, Campbell, Honderich Roy Romanow (ex Premier of Saskatchewan)

2

Phyllis Yaffee (Dir. Astral)
Globe & Mail Thomson (65%)

2

OTPF (25%)
Bell (15%)
Telus Publicly Traded Diversified Stockwell Day (ex CPC Cab. Minister) Not Relevant

14

16

Sources: Corporate Annual Reports and Forbes Corporate Executives & Directors Search Directory <http://people.forbes.com/search&gt;

Things are particularly strange in Canada by the added fact that eight of the top ten TMI companies in this country are family-controlled. This degree of media mogul control and political ties to the inner sanctums of top media companies is reminiscent of an ‘ancien capitalism’, where families and the ‘political class’ are in charge rather than citizens and ‘expert’ managers at the helm of publicly-traded firms where ownership is dispersed and corporate operations transparent.

Things are different in the US, where Eli Noam points out in his authoritative Media Ownership and Concentration in America that the number of owner-controlled media firms fell from 35 percent to just 20 percent between 1984 and 2005 (p. 6). I think that Noam slightly exaggerates the decline given that five of the top global media conglomerates — Comcast (the Roberts family), News Corp (Murdoch family), Viacom-CBC (Redstone family), Bertlesmann (remnants of Bertlesmann and Mohn families) and Thomson Reuters (Thompson family) – are of this type. Moreover, the media baron still cuts a large figure at the top ICT and Internet companies to, think: Apple (Jobs), Facebook (Zuckerberg), Google (Page, Brin and Schmitt), Microsoft (Gates and Ballmer), Yahoo! (Yang), IAC (Diller and Malone) and CBS (Redstone).

The ongoing case of the telephone hacker scandal in the UK reminds us that with the Murdock family – Rupert and his son James – at the helm, we are far from the end of the era when media moguls ran supreme. Thus, while not totally unusual, the degree of ties between moguls and political appointments at Canada is of a different kind and more extensive. Such arrangements are backwards, if you will, and more like nations with a tradition of oligarchic capitalism, as in Russia and Latin America, then in the liberal capitalist democracies of the US and Europe.

It is not that we just have an outmoded system of family control with ex-politicos having positions of influence right across the ranks of TMI sectors, but also that the main players have ownership stakes in one another’s companies, as is the case with Rogers owning about a third of the equity in Cogeco and Bell a residual 15 percent stake in the Globe and Mail.

Also blunting the sharp edge of competition and independence between different players in the market is the fact that directors on the board of one company sit on the boards of supposed rivals. Phyllis Yaffee, an industrial stalwart with oodles of experience and one who actually does have the expertise and savvy to fill a directors’ shoes is on boards at Astral and Torstar. Paul Godfrey, also an old hand and savvy operator in the business, sits on the boards at Astral and PostMedia Co. —  the company a company that he has spearheaded the development of to assume ownership of the twenty odd newspapers (Ottawa Citizen, Windsor Star, National Post, Calgary Herald, Montreal Gazette, etc.) left behind by the wreckage of Canwest. That wrecked vassal is yet another company that was family controlled (the Aspers) and not shy about stacking its board with ex politicos (e.g. Derek Burney, ex. Chief of Staff for Harper).

We also, as I have said repeatedly in this blog and elsewhere, a very highly concentrated set of industries. Altogether, the big 10 firms listed in the table above account for just under three quarters of all revenues in the TMI industries (excluding wired and wireless telephone services). I think the two are related.

It is not just that all our TMI industries, individually and as a whole, are very highly concentrated, but that policy and regulation in this country does not deal with this fact. Instead, policy-makers and regulators, to a large degree, cultivate concentration on the grounds that whatever problems this raises will be offset by industrial gains.

As David Ellis pointed out the other day, the CRTC does not regulate the TMI industries on the basis of any known standards of market concentration, but functions primarily to grease the supply-side of the industrial machinery that make up the TMI sectors.

The problem is not just that this leaves consumers and citizens on the sidelines while industry calls the shots. The problem is that the phenomenon of politicos on the boards of directors at the major TMI companies, and the revolving door between the regulator and government policy-shops on one side and industry on the other are pervasive, enduring and systemic.

What this means is that we cannot just look for one-off instances of influence peddling, as in, say, the allocation of spectrum in past and forthcoming wireless auctions, as Peter Nowak points out. Nor is that putting Harper’s former Director of Communication, Kory Tenyecke in the position of VP at QMI’s Sun News will leave a dirty trail of finger prints on every story covered, with lurid tales of stories spiked and stories spun to favour Harper and the Conservatives.

To be sure, a few cases of such things will happen, with one or two leaking out to become grist for the mill and confirming some people’s worst fears. The problem is deeper than that, however, and less easy to suss out in terms of what it all means. However, as I showed during the election this year, it is true that of the twenty-two papers that issued endorsements for Prime Minister in the last election, all but one stood foursquare behind Harper — a wall of Conservative editorial opinion behind the Conservative candidate for PM.

Yet, the meddling hand of direct owner or political influence is much more subtle, and rarer than this. Instead it takes place at two more general levels: corporate policy making and the allocation of resources, say, resources for faster Internet connections, more journalists and coverage of world affairs and the environment versus cut-backs, low levels of investment and fluffy content to titillate and instigate bickering rather than understanding and civil discourse. It is at this general level that directors hold sway. Indeed, that’s what they’re hired for, to set long term policy and make sure that those directly controlling the purse-strings do so wisely.

Beyond this, the real problems are three-fold: First, the revolving door between regulator (CRTC) and those who make the rules while in government, on the one hand, and the TMI companies, on the other, institutionalizes an approach to media policy as industrial policy and a strategic game. The extent of this also means that everybody in the game must adopt a similar strategy, which only aggravates the problem and makes things all the less apparent in terms of who and what is really calling the shots.

Consequently, regulation and policy-making is not so much about guiding the development of telecom, media and Internet in relation to democratic and free press values but industrial policy concerns. As I stated earlier, the CRTC serves principally to grease the supply-side machinery of these industries, rather than regulating in the public interest or in relation to a broad understanding of how people actually use media facilities and what we want. Perhaps this is not surprising, given that the last known sighting of the CRTC’s old motto, “communication in the public interest”, was in December 2008 (see here). It has disappeared from the top of its webpage and prominent place on the front of publications ever since. No wonder some commissioners and the vice-chair have a hard time understanding the link between media and democracy.

Such arrangements are an affront to common sense and to principles of a free press in liberal capitalist democracies. They smell bad and smack of crony capitalism unfit by even the standards of liberal capitalist democracies.

Finally, they fly in the face of liberal theories of a free press. According to classical theories of the free press, and especially Whig tales of press history from the rise of advertising-funded mass media in the late-19th and early-20th centuries, the media are suppose to be independent of government. They are also to serve as a watchdog nurturing the public sphere rather than as waiting lapdogs for retired politicos in the hope that they can tilt the industrial policy-making game in their new masters’ favour.

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