I’m taking a break for a few weeks, but before here ıs a slightly extended versıon of my column ,ın te Globe and Mail yesterday.
It’s time to step back for a bit from trying to explain, first, that the telecom-media-Internet (TMI) industries in Canada are concentrated, second that they are poorly regulated and, lastly, that this is problematic, not from the perspective of utopian ideals, but of a digital free press in a liberal capitalist democracy like ours.
When I come back I’ll write about other things, I promise (maybe). Before I leave, though, a few thoughts for your consideration.
We live in what Ron Diebert and Rohan Rohozinski of the Citizen’s Lab at the University of Toronto call a ‘constitutive moment’. This means that actions taken now will help lock in the structure, look and feel of the digital, networked mediaspace for years ahead.
Three matters are coming to a head as they wind their way through the CRTC and body politic:
- The CRTC will decide the fate of the pay-per model of the Internet (UBB and bandwidth caps) (starting at CRTC hearings July 11) imposed by the ‘big six’ ISPs on Canadians while they were sleepwalking until all hell broke lose last January when the incumbents got regulatory approval to pin their hated pay-per model on the independent ISPs that serve the five percent of Internet users not served by the incumbents.
- We will see if the CRTC has the wisdom and courage to pick the right tools to effectively deal with vertical integration and concentration across the TMI sectors as a whole.
- a CRTC “fact finding inquiry” will examine whether online video distributors such as Netflix, YouTube, AppleTV and so on will be freely accessible in Canada or regulated like broadcasters.
By my estimation, each hearing involves about a hundred submissions of thirty or so pages each. That’s nearly 10,000 pages. It would be great if you could keep up to speed on these matters while I’m away by bumbling your way through the “truly primitive” website of the CRTC, as Cardozo Law School Professor Susan Crawford refers to it.
But who has the time and resources to do this? The incumbents and their well-heeled lobbyists, that’s who! I am on sabbatical, but still exhausted tracking this stuff day after day.
Others such as the Public Interest Advocacy Centre also take part in these processes as much as they can. For PIAC it’s a real problem, because late in the game it just learned that the CRTC’s fast-tracked “fact finding” expedition on new media isn’t a real hearing, so no funding for them.
The rabble-rousing group, Open Media, is marshalling its resources for this week’s UBB Hearings. Rightly so, since it put the issue of the pay per Internet model on the public radar to begin with. They are boycotting the OTT ‘fact finding’ mission, though, because their resources are stretched thin and to protest the fact that the CRTC buckled to vested interests’ pleadings to have the proceeding advanced from 2014 to now, even though similar examinations occurred just two years ago.
Google and Apple also scolded the CRTC for allowing matters to get all bungled up in a kind of regulatory trench warfare. The CBC and NFB want to deliver their content to as many people, anywhere, anytime and across as many platforms and devices as possible, as well, not new regulations. Mirko Bibic, Bell’s regulatory front man, called this idea “preposterous” at the vertical integration hearings two weeks ago.
This battle over the future of media is not the result of new industrial arrangements, digitization, or newfangled economic theory, but endemic to situations where those who control the medium also control the messages (content).
In the 1900s, for example, the Canadian Pacific Telegraph Co. and Great Northwestern Telegraph Co. (the latter owned by the New York-based goliath, Western Union) had exclusive distribution rights for the Associated Press news wire service in Canada. To fortify their dominant position in the lucrative telegraph business against smaller rivals (e.g. the Dominion Telegraph Co in Canada and Postal Telegraph Co. in the US), the Canadian Pacific Tel. Co. and Great Northwestern Tel. Co. gave away the AP’s news service to the dominant daily newspaper in each town across the country for free.
AP’s service was so cheap because instead of paying the cost for the news service and the telegraph charges for delivering it, the companies only charged for the ‘transmission costs’. This was a boon to established members of the press and AP and a useful tool for the companies’ own efforts to stitch up their lock on the telegraph business. It was also a menace to network competition, rival news services and a diverse press.
Any rival news service that tried to enter the market was at a disadvantage because its subscribers had to pay the ‘transmission costs’ plus the cost of the news service. When the Winnipeg-based Western Associated Press set up a news service in 1907, it found its opportunities blocked because there was no way its subscribers could afford to pay two costs — transmission and for the news service — and stay in business, while AP’s new service was given away free to competitors.
Leveraging control over the wires, the telegraph companies choked the messages flowing through them. As one muckraking journalist, W. F. Maclean, wrote in the Toronto World,
“attempts on the part of public service companies [the telegraph companies] to muzzle free expression of opinion by withholding privileges that are of general right cannot be too strongly condemned.”
The matter was brought to a head by one of the first regulatory bodies in Canada, the Board of Railway Commissioners in 1910. Canadian Pacific Tel. Co. came out swinging, arguing that the BRC had no authority over news services or to compel them to separate the costs of the news service from their transmission costs.
The BRC didn’t wilt for a moment but shot-back that the law compelled it to insure that rates were ”just and reasonable”. Unless transmission rates were separate, explicit and equitable, “telegraph companies could put out of business every newsgathering agency that dared to enter the field of competition with them”, it declared matter-of-factly.
The regulator had all the authority in the world it needed to break up the ‘double headed news monopoly’, and it did.
To be sure, the modalities of communication have changed tremendously since and we now live in an age when information is plentiful, not scarce. Yet, as Tim Wu’s Master Switch, and the mounting evidence before us attests, the basic logic of leveraging content and networks to confer advantages on one’s own services whilst driving others into submission, if not out of business altogether, is alive and well.
Australia, Argentina, Belgium, Brazil, Britain, New Zealand and many others are dealing with their own contemporary experiences of networks being used to trample competition and diminish the range of voices and expression available. Australia created the National Broadband Company in 2009 with $43 billion in funding to spur competition and open networks, for instance.
We have the publicly-owned and financed CANARIE with its ultra fast networks serving hospitals, schools, universities and researchers across the country. However, its modest funding ($30 million/year, roughly), uncertainty about funding levels after March 2012, and its executives’ squeamish view of how little they should compete with the incumbent commercial providers all limit CANARIE’s ability to offer much by way of an alternative network.
In Belgium and Britain, respectively, Belgacom and British Telecom have been forced to give more generous access to their facilities to speed the development of next generation networks. The level of functional separation adopted in the UK is unmatched elsewhere and depended heavily a strong regulator to force it upon a kicking and screaming BT in 2006. It has already led to more telecoms competition, broadband Internet services with greater speeds and capabilities, and lower prices relative to most countries, including Canada.
As an academic, I can dream big, but between my dreams and reality, there is a middle ground represented by measures that the FCC and Department of Justice in the U.S. put in place when they approved Comcast’s take-over of NBC-Universal earlier this year. In return for their blessing, Comcast must meet four fairly tough demands:
- its television and film content must be available to Internet competitors and online video distributors (OVDs), a new category designed to cover Netflix, Hulu, AppleTV, etc.;
- adopt open Internet principles generally;
- “offer broadband services to low-income Americans at reduced monthly prices;
- provide high-speed broadband to schools, libraries and underserved communities, among other benefits”.
These are practical measures that the CRTC could implement. It is a middle of the road choice, not a radical one. It does force the market to deliver a minimum level of social justice, but first and foremost it tries to foster a digital free press fit for a liberal capitalist democracy, rather than striving for abstract utopian ideals or bowing to the status quo.
Down the Rabbit Hole at the CRTC: Regulator and Big 4 Make Molehill Out of Mountain on Telecom-Media-Internet Concentration Issues
As per my usual practice, this post is a slightly altered version of my column in the Globe and Mail today. It is a a wee bit longer and, as is my standard practice, comes more fully-equipped with citations and sources that you can turn to to follow up on, assess my take on things, and so forth.
In the first of two column’s last week I offered evidence and argument as to why the CRTC’s current vertical integration hearings are not likely to deal effectively with the question of telecom-media-Internet concentration in Canada. Sitting in on three full days of hearings last week has convinced me that the prospects may be even dimmer than I thought.
If you know how to say “voluntary code”, “case-by-case dispute resolution”, “skinny basic”, and status quo, you’re in luck because that’s probably what the outcome will be. Some consumers will benefit with slimmed down and more affordable basic cable and satellite packages and there’s a fifty-fifty chance that a hands-off-Netflix approach is in store, if I am right. The pay-per Internet model and less than a handful of telecom-media-Internet behemoths, however, will be still stand astride a set of highly concentrated industries, and we will be the poorer for this.
The hearings had an Alice-in-Wonderland feel, mainly because the evidence offered by all sides was remarkably poor. Consequently, discussion meandered between speculative worries and rose-tinted visions brought to us courtesy of the great media corporations of Canada.
The CRTC’s refusal to do much original research of its own compounds this problem, and compares badly with research conducted by, for example, the FCC and Ofcom, respectively. Like the mythical beaver that castrates itself in self-defense, the CRTC seems to worry that conducting original research might bias its decisions. Strange.
All of the top brass from Bell, Shaw, Quebecor Media Inc. (QMI) and Rogers attended, sometimes with as many as ten to a delegation. With few exceptions (see below), the Big Four stood as one against almost everyone else, but nonetheless they seem to have set the parameters of discussion around less than a handful of touchstone themes:
- That we should rely on market forces to the maximum extent possible.
- Canadian markets are competitive, small by global standards and need big media companies to compete.
- problems that do arise should be settled one by one after they occur rather than establishing clear regulatory rules before hand.
- concerns about the anti-competitive potential of vertical integration are mostly speculative rather than real.
Rogers allowed a crack of light to peak through when it broke ranks with Bell, QMI and Shaw to table a “code of conduct” that would require vertically-integrated media firms to sell programming rights to traditional broadcasters, such as the five CityTV stations that it owns. While the others tried to belittle or ignore Rogers’ stand on this point, the CRTC seemed to like the voluntary code of conduct idea very much. I suspect we’ll have some version of it.
Otherwise, Rogers, Bell, Shaw and QMI united behind the view that smaller rivals should not be entitled to a regulated guarantee of fair and reasonable access to their networks or the content rights associated with TSN, Rogers SportsNet, the History Channel or any of the other 100-plus television channels they own between them.
QMI’s CEO and majority owner, Pierre Karl Péladeau, scoffed at the idea that exclusive content agreements were a problem. Bell’s chief regulatory front man, Mirko Bibic called the idea that audiences should be able to access content on any device from any provider, anytime, “preposterous”.
Brad Shaw, the CEO and part of the family that controls Shaw Media, bristled when I intervened in a journalistic softball scrum to ask him to respond to the possibility that concerns with vertical integration and media concentration are not based on speculation and fear mongering but current evidence and recurring historical patterns. After shrinking back into my shoes, he returned to typical patter about how vital it is for Shaw to be “consumer centric”.
Over the course of the three days, Netflix was set up as a formidable threat to the Canadian broadcasting system. This may be a shock to some, but I got the sense that the CRTC is not all that eager to assume this role, despite enormous pressure from Bell, Shaw, QMI and (less so) Rogers, the Over-the-Top Working Group, media unions, arts and culture groups, the Senate Committee on Canadian Heritage as well as a pending Supreme Court case.
When I spoke with Michael Hennessy, Telus’s Senior Vice-President, Regulatory and Government Affairs, he came across as a thoughtful man and seemed to better understand the idea that just because a company owns the medium does mean that it should control the messages flowing through them. Telus’ primary focus is on connectivity, he told me, not content.
Telus’ periodic work with Google, amongst other things has taught the company, he also said, that it is better to grant as much access to outside content sources as possible and push control out to the edges of the network and into the hands of Internet users. One doesn’t have to be a dyed-in-the-wool Telus fan to accept everything that he claimed, but in my view Telus is on the side of angels on this question – even if this has not always been the case.
Telus’ launch of IPTV services over the past few years has been a success by Canadian standards, but obtaining content rights for its IPTV and mobile video services has been a real obstacle, with Bell standing out in this respect since its acquisition of CTV earlier this year. According to a recent OECD study, Canada ranks 19th out of 27 in terms of the percentage of subscribers to IPTV, while rates in Sweden, Belgium and France are four- to ten-times higher (p. 223). One wonders if this low ranking is related to the problems just described and regulatory rules not up to the task of curbing market power across a number of telecom, media and Internet industries?
Commercial broadcasters have been slow to develop online video services, doing so only around the end of 2007, early 2008. It was the CBC, instead, that blazed the way, only to find one of its early attempts to use BitTorrent to distribute an episode of Canada’s Next Great Prime Minister thwarted by Bell’s ‘network throttling’ practices. The big four have accelerated their efforts in the past year, mainly as Bell, Shaw, Rogers, and QMI import the “tv everywhere” from the US so that existing subscribers can access the companies’ own content anywhere, anytime.
Reflecting the fact that commercial broadcasters have been slow on the uptake, Konrad von Finckenstein asked Péladeau why QMI hadn’t launched an online video downloading service to compete with Netflix? The activities of the “state broadcaster” (the CBC), he responded, excessive regulation, and nervous investors were holding it back. The head of the CRTC also asked for evidence that Netflix was a threat to the television system, but was told by Péladeau that he had none.
Smaller players, in sharp contrast, piled anecdote upon anecdote to show that vertical integration is, in fact, a significant problem. Telus, MTS, SaskTel and Cogeco submitted a “joint proposal” as well that sets out a handful of principles that they want enshrined in a sturdy regulatory framework:
- Access to content by television program distributors and carriers should be on fair and reasonable terms.
- Subscribers should be able to access the content they want from the device they want anywhere, anytime.
- Block booking — tying the rights to purchase one television channel to buying several others, among other things – should not be allowed (a stance consistent with CRTC’s favourable view of “skinny basic”, i.e. a minimalist basic cable tv service).
- A tough regulatory regime is needed before-hand and not after the fact, as the big four would like.
- The regulator must assume a tough stance toward vertically-integrated telecom-media-Internet conglomerates that possess substantial market power.
Most independent broadcasters more or less agree with these ideas, with some minor tweaks. Despite their merit, however, the evidence to support these principles, was not convincingly demonstrated by anyone.
The fact that evidence was probably never going to carry the day anyway, however, struck me hard on Day Three when von Finckenstein called Telus’s proposal “over the top”. Newly-appointed Vice Chair of the CRTC, Tom Pentefountas, added to this sense when he asked Michael Hennessy if Telus’ “proposals essentially take the ‘free’ out of the ‘free market’?”
Across the aisle from me, Bibic, the regulatory pitbull from Bell who had made more than one CRTC commissioner wince and waiver during his presentation a day earlier, smiled broadly like The Cheshire Cat. Day 3, and the endgame was coming clearly into view.
Day 3 and the endgame was coming clearly into view.
A new report by the CD Howe Institute came out today. It’s not big, just 3 pages and seemingly informed by a bunch of guys sitting around a table at the Howe’s ‘inaugural meeting’ last week (June 17).
It is brash, and some might dress it up as bold: drop all limits on ownership of telecoms and media industries in Canada, it says. Full stop.
No phase out. No ‘newcomer advantages’, full stop again. No attempt to separate the ‘medium’ (wires, spectrum, sewer access) and the message (broadcasting, integrated suite of ‘content’ from mags to blogs) from one another. A digital free for all, you might say.
Perhaps the gentlemen, and they were with the exception of only a single woman, thought this might be a good idea while they sat around and chatted last Friday afternoon. Apparently, there were not so many women ‘law & economics’ types available to join them, given that all but out of the 16 places apparently went to the guys and boys from Bell (see below). I guess ‘law and economics’ types like Sheridan Scott, a hard liner in these matters, and Monica Auer, who generally takes the opposite tack by speaking eloquently and passionately on the telecom and media workers’ behalf, weren’t available, or any of the other smart dames roaming these circles as I saw, in the minority, at the CRTC’s hearings this week.
I looked at the composition of ‘the deciders’ not just because their gender was so obviously skewed, but because I recognized the names of most of the guys. One in particular leapt out, Jeffrey Church, a University of Calgary economics professor. By all accounts, he’s an excellent teacher. Professor Church caught my eye because, in addition to advising the ‘big 3Ps’ in Canada as I’ll call them — Petroleum, Alberta Beef Producers, Pharma — Professor Church just wrote an economic analysis for Bell as part of the very, very important vertically-integrated telecom-media-Internet hearings now being held by the CRTC.
According to Church in his voluminous 93 page submission on Bell’s behalf, vertical integration is good for consumers and for Canada (p.5). I disagree, strongly, for reasons set out regularly in this blog (e.g. here) and my column for the Globe and Mail on Monday.
It’s not just Church that is so closely tied to Bell, but also Marcel Boyer, Bell Canada Professor Emeritus of Industrial Economics, Université de Montréal, as the CD Howe report indicates on the back of this slim 3 page ‘report’. 2 out of 16 does not a majority make, obviously, but their presence does stand out.
The rest of the lot in this ‘law and economics’ crowd does not seem very adventuresome, either. I know one professor occupying a BCE endowed chair that won’t be called upon, Professor Robert E. Babe at the University of Western Ontario, for he has traced the propensity of telecoms historically to go from limited competition to ‘total consolidation’ on a regular basis. Let us say that the fact that Howe ‘report’ has zero to say about such notions is not all that surprising.
The 3 page ‘report’ is candid that dropping the foreign ownership limits on everything — telecom, media, internet — will not increase the number of competitors in the market. As it states, “given the small size of the Canadian market, the consensus view saw no major change in the number of national competitors”.
Translation, the big three companies in wireless telecoms — Bell, Rogers, Telus — for instance will still account for about 94% of the market (according to CWTA 2010), but they might be owned by yet a larger foreign based telco (Vertizon, the ‘new’ AT&T, Deutsche Telekom, etc.) or may private equity funds. Me, I have doubts many foreign investors — telcos, priv equity funds, banks — will even come if permitted to do so (or if we want ’em to on such ‘carte blanche’ terms). I’m not alone on this, and hardly radical, given that even the World Bank states that the keys to effective foreign ownership is a ‘strong state’ able to regulate and competition.
Instead, the Council of 15 wise men and 1 smart woman says, drawing on newfangled theory about ‘competitive innovation’ drawn from the right-wing side of Schumpeterian ‘innovation economics’, that “the gains from liberalization would likely result . . . from better performance by telecommunications market participants”. Umm, I hope so, especially because its this same crowd breying for the withdrawal of any meaningful conception of regulation or state intervention. The CRTC’s horizons have been blinkered and public ventures like CANARIE have had their wings clipped. How foreign capital will ‘improve’ performance standards in Canada is not clear to me/self-evident.
The report advocates this ‘regulatory shock and awe’ to be developed in one swell swoop, with no distinctions kept between telecoms and broadcasting, between networks and content, between incumbents and newcomers. The telecom-media-Internet sectors are now so entangled on account of digitization and how people use media that they must be treated together as a whole. Partial agreement there about treating things ‘holistically’.
More targetted measures are suggested as alternative to foreign ownership for whatever “cultural policies” might be left over. Some of these ‘targetted measures’ I believe in — securing financing for content production, shelf space, strong CBC — and they have been promoted by at least two of the same writers involved in today’s 3 page missive (e.g. see Hunter and Iacobucci, with a third author Michael J. Trebilcock).
There are several problems with this “report”, however, that make it’s contribution to public discussion dubious, despite the fact that it will gain much attention.
1. Three pages is not a report and should not be pitched as one.
2. The Council of the Wise is skewed along lines suggested above, ie. by Bell and by Gender. Bell has always had a visible hand in the telecom, broadcasting and media industries, indeed, since it began broadcasting speeches, songs and sermons in the 1880s and took-over the Chairmanship of the 1905 Mulock Commission which had originally been convened to look into the underdevelopment of the telephone system in Canada in the early days of the 20th century.
So, that Bell continues to be front and centre 100 years later, at the dawn of the 21st century, is both a marker of continuity and somewhat unsurprising, but equally suspect/problematic in each of these occasions. The presence of Bell’s hired gun (Church), a Bell sponsored ‘academic chair’ (emeritus, Boyer), and BCE CEO George Cope’s speech at the C.D. Howe two months ago all so bunched up in time and common stance has a whiff of something not quite right about it.
3. While I don’t actually have many problems with increasing competition and dissolving lines between the medium and the message, or the network infrastructure and content, we also need to be upfront about the fact that the former (media infrastructure) are generally scarce and the latter (messages) abundant. In today’s OECD Communication Outlook 2011, it is clear that, generally speaking, the top 2 ‘netcos’ in each of the OECD countries account for between two-thirds and three quarters of fixed and mobile telecom network markets in each of the OECD countries (pp. 56-59). This means:
- that Netcos generally should be regulated for market power, ‘messagcos’ generally not.
- ties between Netcos and Messagcos are congenitally fraught with problems and propensity for anti-competitive behaviour.
- Free speech standards and the values of a ‘networked free press‘ are also at play (and here). As the United Nation’s Human Rights Council recently stated, those standards apply to the Internet and people should have, as Article 19 of the Universal Declaration of the Rights stated before it in 1948, the freedom to receive and impart any information, through any media regardless of frontiers. At the CRTC Hearings on vertical integration the other day, Bell’s Mirko Bibic and Shaw’s brass called the idea that people should have access to any content on any device “preposterous”. The C.D. Howe ‘report’ is oblivious to these considerations.
4. The C.D. Howe report misses reality and the ‘big picture’. Perhaps this is because there is not a whiff of heterodox thinking among the ‘law & economics’ experts who wrote it. Not one ‘ecclectic’ economists, not one wild eyed, crazy lawyer, not a communication and media scholars or a historian in sight.
This is too bad because as long as it continues to be the case, people will continue to talk past one another. And it also means that ‘reports’ like this one, and the policies and approaches that actually do follow close in tow in the ‘real world’, will lack legitimacy.
5. Without being able to expand their horizon, the authors of the C.D. Howe ‘report’ blithely countenance “North American integration”. Economically, as I said above, I don’t have a particular problem with that, although I doubt that things will pan out as they expect, and even that what the Howe folks do expect ain’t much (“better performance” from same number of players).
Politically and culturally, however, there is a problem, not with Cancon and ‘traditionalist/romanticist’ conceptions of culture, but ‘network culture’. Netcos and search engines are now closely allied with state security, military strategy and defense contractors. It’s probably best to keep some clear blue water between these domains. The authors give no hint that they have even thought of this.
Netcos, ISPs, search engines, etc. are also constantly being badgered by lobbyists as well as politicians in Canada and the U.S. to play a greater role on behalf of media and entertainment industries (for most recent and strong opposition to this from within just the mainstream’, see here). The approaches have differed, with the last government in Canada wisely turning down lobbyists push to have ISPs play the role of ‘copyright cop’, disconnecting people who repeatedly are identified as ‘copyright bandits’.
The International Federation of Phonographic Industries (IFPI) launched it’s efforts to lean hard on ISPs and search engines, and less on Digital Rights Management (DRM), in 2008. It has been picking off ‘wins’ for this agenda around the world, but not so much yet in Canada.
Yesterday, CNet journalist Greg Sandoval reported that AT&T, Comcast, and Verizon “are closer than ever to striking a deal with media and entertainment companies that would call for them to establish new and tougher punishments for customers who refuse to stop using their networks to pirate films, music and other intellectual property”. That turn-of-heart, in turn, he reports, was eased by coaxing from the Obama Administration and the National Cable TV Association.
The pressure is already strong in Canada, but so far government and regulators have refused to make ISPs the deputies of the media and entertainment industries or to regulate the Internet as a broadcast distribution medium. On law and order, however, the push is for a stronger state and more compliant Netcos and Searchcos.
While there’s lots of dots to connect between all of these latter points, the key idea is that integration at the network and market levels is going to increase pressure to harmonize tougher matters that impinge greatly on network media, and thus network culture. That the blokes and one women from C.D. Howe have nary a word about this and don’t dare let the phrases ‘network neutrality’ and ‘open media’ cross their lips is a problem of the first order because those concerns, as sure as night follows day, are at the heart of the emergent network media culture. How can foreign ownership be reconciled with these concerns should be the question, rather than if it if good or bad altogether.
In sum, until we can start speaking one another’s language and stop passing off economic and policy platitudes backed by those with big stakes in the game, the nominal ideas presented in this “report” should be shelved and other big questions — vertical integration, for example — put on hold.
Ultimately, Pork, Petroleum and Pharma are not the same as telecoms and media. We need some new thinking for ‘new media’.
Until we recognize this, we’re not going to get very far, at least in a a way that takes into account the full range of issues at hand, rather than the economists narrow measuring rod of value.
As I normally do, this post largely replicates my column for the Globe & Mail today with the addition of a few more links so that you can follow up on things that I refer to. I was at the opening of the hearings today and plan to be there a few more times this week and next. I’ll have more to report in a few days.
Altogether, seventy-eight different parties filed interventions with the CRTC. There are 50 scheduled to give presentations over the next two weeks. You can find all of the links to the briefs and studies filed with the CRTC by the companies and other intervenors here.
The CRTC’s hearings on vertical integration began Monday. For the next two weeks this means that the four major vertically-integrated media companies in Canada – Bell, Shaw, Rogers and Quebecor – could face tough questions about whether they have the clout to dominate telecom, media and Internet services across the country and, if so, what should be done to curb that potential?
The hearings were scheduled last November after the CRTC approved cable giant Shaw’s $2 billion take-over of bankrupt Canwest Media’s television assets (27 television stations, the Global network, 30 specialty cable and satellite channels). It was given added impetus after Bell’s $3.2 billion deal to acquire CTV and the A-channels was given the green light in March.
There is every reason to be skeptical about these hearings given that they are a classic case of “bolting the barn door after the horse has already left the stable”. It is also CRTC approvals all down the line that have allowed integrated media conglomerates to become the norm to begin with.
In the U.S., media conglomerates have become the exception (Comcast/NBC-Universal) after the disastrous AOL Time Warner merger, the collapse of the ‘old’ AT&T, break-up of Viacom-CBC, and so on. Indeed, vertical integration is in retreat in almost every other developed capitalist democracy.
We should also remember that Bell attempted – and failed— to extend its reach from the medium to the message from 2000 to 2006 by taking-over CTV, CHUM, and the Globe & Mail. The fate of Canwest was worse. Yet, we seem to be stuck in a time warp, with CEOs, Cabinet Ministers and the CRTC singing in unison that media conglomerates are all the rage, for much the same reason that they did back in the 1990s.
Be that as it may, Bell, Shaw, Rogers and Quebecor Media Inc. (QMI) do exemplify the trend in Canada. They are the ‘big four’ and the hearings are all about them. They stand at the apex of a set of telecom, media and Internet markets that have grown greatly from $42 billion in revenue in 1998 to $73 billion today (in constant 2010$).
The real issues, however, are not about the sheer size of the ‘big four’, but their market power. Between them, Bell, Shaw, Rogers and QMI control:
- 86 percent of cable and satellite distribution
- 70 percent of wireless revenues
- 63 percent of the wired telephone market
- 54 percent of Internet Service Provider revenues
- 42 percent of radio
- 40 percent of the television universe
- 19 percent of the newspaper and magazine markets
- 61 percent of total revenues from all of the above media sectors combined.
That, by any standard measure of concentration, constitutes a highly concentrated market.
The fact that Bell, Shaw, Rogers and Quebecor stand as gateways to so much raises concerns that they will give undue preference to their own services rather than serve as open gateways to the maximum range of entertainment, communication, knowledge and news possible. In this regard, more is a stake than anti-competitive behaviour, because the range of expression available in a society is a barometer of the quality of freedom of expression and democracy in it. None of the ‘big four’ waxes much about this, however, insisting as they do that the laws of normal economics should be the only measuring rod of value.
To be sure, the ‘big four’ are hardly the only players in town. There is also an important second tier of a dozen or so smaller players that have stuck to their knitting in just one or two media: Telus, MTS, SaskTel, Cogeco, Bragg/Eastlink, the CBC, Astral, Postmedia, Transcontinental, Power Corp, Thomson/Globe & Mail, Torstar and Brunswick News. Then there is a third tier made up of the thousands who fill in the nooks and crannies of the media universe: Wikipedia, the Mark, media workers, star journalists, opinion leaders, blogs, your best friend, personal websites and so on.
The position of all these parties turns on where they sit. To the ‘big four’, to the extent that there’s ever been a ‘golden age’ of media, the picture just presented is it. Thousands upon thousands of actors, big and small, making it nearly impossible for any single entity to exert excess influence over it all.
According to Bell’s hired-gun, University of Alberta economics professor, Jeffrey Church, “vertical integration is beneficial for consumers”. According to him and other briefs filed by the big four, consolidation is good for consumers and Canada because:
- it reflects efficiencies, spurs competitive innovation and is a global trend.
- telecom, media and Internet markets in Canada are “highly competitive”.
- our ‘small media economy’ needs a few deep-pocketed ‘national champions’ to compete globally and invest heavily in innovation at home.
- instances of harm are mostly imaginary and few and far between.
- it helps keep “consumers . . . within the regulated system” (Shaw, p. 4)
The collapse of media conglomerates elsewhere, the evidence of market power above, and the fact that Canada has the eight largest media economy in the world, after France and Italy, and just before South Korea and Spain, should raise an eyebrow or two about claims one through three. Claim four is false (see below), and the last one repugnant.
Many in the second tier and ‘nooks and crannies’ of the media also challenge these claims. Telus, for instance, argues that the harms are real, not prospective. Buying program rights, for example, from CTV, the Comedy Network, TSN and two-dozen other channels, it argues, became a whole lot harder, and more expensive, after Bell Media took them over.
Access, a cooperatively run cable-system-cum-Internet provider in Saskatchewan raises similar concerns. Those that have content, but not distribution networks – Astral, CBC, media workers – make a similar case, but point to how control over networks rather than programming rights can cause real world harm.
Periodic squabbles between Quebecor and Bell highlight much the same point, with Quebecor’s SunTV hobbled in equal measure by self-inflicted wounds and its inability to sign an acceptable ‘contract for carriage’ with Bell. Just last week, the CRTC declared that Bell’s decision to move Shaw’s ‘Cave TV’ service into the upper stratosphere of its offerings conferred an undue preference on channels Bell owned, and ordered the change to be reversed. If these pitched Goliath versus Goliath battles are regular occurrences, we can only imagine the problems that David – the little guy – is having.
While Bell, Shaw, Rogers and QMI operate their own online video services, they assert that congestion problems require them to manage traffic through usage-based billing and bandwidth caps, although such measures cripple rival online video distributors such as Netflix, Apple TV, GoogleTV, and so on. Netflix, for instance, downgrades its services relative to standards elsewhere, and bitterly complains about having to do so, all the time. Smart and savvy telecom guys like Jean-Francois Mezei and rabble-rousing groups like Open Media are convinced that such practices are a deadweight on creativity, innovation, freedom of expression and an open internet.
For the public, the practices just listed and networks that are under-developed and over-priced by global standards constitute subtle yet pervasive constraints on how we use and experience the emerging networked digital media. Stubbornly, Canadians lean against the wind and remain heavy Internet users, downloading and uploading to and from Youtube, virtuously contributing to Wikipedia, and watching porn at rates that rank at the very top by global standards.
All this, too, despite the fact that, as Shaw’s brief repeatedly states, the industry and regulators are one when it comes to the goal of keeping “consumers in the existing broadcasting system”. We can only imagine what things might be like if they strove for the maximum freedom of expression possible, rather than only “as much diversity as practicable”, as the CRTC put it in its 2008 Diversity of Voices decision.
Ultimately, the problems of fully-integrated media conglomerates are congenital, not imaginary. They run hand-in-hand with media history the world over and until we accept that, we’ll have to continue settling for scraps off the table as regulators let the ‘big four’, I mean, the market rip.
My most recent column for the online technology section of Globe &Mail came out Tuesday. It is available here.
The article builds on some recent posts that I have done considering the mounting pressures being put on Internet Service Providers to act more like gatekeepers rather than gateways to the Internet. Four such forces, I suggest, are pushing in this direction:
- a strong push from the ‘copryight’ industries, especially the music industries, to make ISPs and search engines extensions of the copyright enforcement regime. This has become especially strong since 2008, when the International Federation of Phonographic Industries (IFPI) and the Recording Industry Association of America (RIAA) turned to such measures more forcefully, while backing off somewhat from Digital Rights Management (DRM) (see page 3 of the IFPI’s Digital Music Report, 2008);
- the near universal adoption of usage based billing and bandwidth caps by Canada’s ‘big six’ ISPs — Bell, Rogers, Shaw, Quebecor, Telus and Cogeco — and now the mid-sized Atlantic region player, Bragg/Eastlink (although with some recent significant developments from Shaw).
- the fact that all of the major ISPs, except Telus, are vertically integrated and appear to be using usage based billing and bandwidth caps as a kind of ‘television business protection plan’ for their interests in the television industry.
- and finally, the focus of yesterday’s column in the Globe and Mail, the push from national security and law enforcement agencies to build in increasing monitoring and surveillance capacities into their networks, and to conduct ‘warrantless searches’ if proposed new legislation is passed.
Whew, I’m just coming back from blogosphere, and sheesh can things sometimes get tough out there. I’ve been thinking the last few days about an idea based on these forays into blogs, columns for newspapers, and stuff like that: Blogoslama, or what happens when the trolls of cyberspace get nasty.
That’s the title I have for people like Know Your Facts, RightTruth, TheFactCorrector, TheCorrectOpinion, SeektheTruth and, well, you get the picture, that run around blustering and puffing up their chest in umbrage over something or other that you’ve wrote.
Now don’t get me wrong, and sometimes these strange combinations yield fruit. I enjoy the to and fro of online conversations and generally think highly of them, for reasons that I’ve attributed in previous posts to scholars like Yochai Benkler, Nancy Baym, and others who see these activities of valuable forms of ‘sociality’ and public communication.
I also like the interesting characters like Strunk&White and UseYourSpellCheck who politely remind people how important a tidy sentence is to a civil conversation. And there’s others like Grumpy Scientist, TvWorker, and Old Green who speak wisely, although maybe somewhat slower than others in these sometimes rough and tumble places do. Amidst these different voices are some that really make you think, and sometimes to do a rethink.
Sometimes, though, I must admit, I can feel my skin growing thicker. In some wierd way, the old ‘blender theory of truth’ espoused by great liberals is alive and well. This is the theory that if we throw enough ideas into the mix, the truth, or at least the possibility of understanding, will rise to the top. Some say the Internet, and the blogosphere in particular, functions as a giant ‘echo chamber’, hardening opinions and throwing a monkey-wrench in the ‘blender theory of understanding’. In broad brush terms, I disagree.
So there I was just checking in on my recent contribution to The Mark, a piece that takes a blog entry I did on May 27th about cable media conglomerate Shaw’s new Internet pricing polices. A reworked, shorter and much polished version of that appeared this week as “We”ll Lift Your Internet Cap — If you Buy Our Cable TV” on The Mark. Between now and then, little did I know, Shaw had replaced its first new plan with a new, new one — each a ‘better response’ to ‘public consultation’ than the one before.
The story was a response to Shaw’s announcement last month that it would be doubling the bandwidth of its High Speed Internet services, while maintaining the same price and speeds for these services. Even more importantly, it announced that it would be offering two new tiers of High Speed Internet Services that offered even higher speeds and more voluminous bandwidth caps, up to 1TB in some cases and in others no caps at all. Shaw made a big deal of this, splashing about the news that it had made these ‘radical’ changes in light of recently held consultations with its subscribers.
This is and was a pretty big deal, especially in Canada where the user-centric and open Internet has been transformed step by step into a pay model where bandwidth caps are nearly universal and costs out of line with relevant global comparative standards. We have been drifting steadily toward the pay per Internet model, with Usage Based Billing and Bandwidth Caps leading the way. I am opposed generally and strongly to the direction of events.
One fly in the ointment, however, with the big splashy announcement was that the you can only get the high end Internet capabilities by purchasing one of two of Shaw’s television services . . . as they become available over the next 16 months.
As a quote from Shaw’s official site stated: “These broadband packages will come bundled with TV and will roll out in two phases.”
In other words, this was ‘tied selling’, which is a big problem with vertically integrated media conglomerates. It also looked like a Business Protection Plan for Shaws vast television interests, from cables, to DTH satellite service, the Global network and a vast stable of television and radio broadcast stations. And in this regard, Shaw is symptomatic of a broader problem in Canada: the extent that such integrated media conglomerates continue to roam the earth. Elsewhere, such beasts are generally on the wane, although Comcast’s acquisition of NBC earlier this year is an important exception.
Otherwise, in the US, media behemoths such as AOL Time Warner and ATT fell apart (although Comcast NBC is making a comeback), Vivendi in Europe exploded, and the story is similar from one country to the next. The main point for here, though, is that Shaw appeared to be merely tinkering generously with the ‘pay-per Internet’ model and then using it to defend other elements of its media stable. I was also circumspect of its claims about all of this coming from the good graces of the company after a series of consultations with subscribers. I think it had more to do with the intent politics of the Internet that have been at a steady and high boil for at least the past six months — a kind of late realization of the gravity of the stakes at hand, after years of slumber.
Anyway, to make a long story short, as soon as you start talking about concentrations of corporate power and the Internet being bent to private interests, people get their backs up, and in cyberspace, where anonymity is the lubricant of choice, they let you have it
Know Your Facts, who I introduced to you above, blasted me, stating that I should, umm, in his very own words, “No your facts before you write a objective review”. I don’t think that I ever claimed to be objective, but I do claim to be thorough and honest and good with the evidence at hand and that I produce, interpret and put in context. But before I could talk to KYF about the production and interpretation of facts, and how that renders notions of ‘objectivity’ problematic, he wound up and smacked me, FULL CAPS ON.
High Speed Internet services from Shaw are available from Shaw. He sent me a link that went to a Shaw page that required me to tell them where I lived so that Emma, or whatever their silly ‘agent’ is called, could tell me what’s on offer. It was a dead-end.
But I was wondering, had I made a mistake, lost the plot? Was it true, as WordUp said (slinking into the saloon), that by just referring to the ‘big 5’ other media behemoths alongside Shaw that I had blinded myself to reality?
Umm, no. I checked again. And again. The document I was relying on was still there. It clearly said everything I said above. Here it is again for your reference.
But then Craig arrived. Craig, you see, is from Shaw. He seems like a nice guy. He posted something to The Mark, in the comments section under my article. Everything now makes sense.
Shaw changed its pricing again on June 6th. The source I had been relying on had been superceded. The new page is here.
The improvements are considerable and I am glad that Shaw has seen fit to go further than the initial scheme announced to much fanfare. There are still some quibbles that one might gnaw on, but the broad principle that access to the highest end Internet capabilities should not be tied to a subscription to any of Shaw’s television services.
To be sure, Shaw has raised the bar and it is to be applauded for doing so. If it can just get rid of the bandwidth caps altogether and make sure pricing is in line with relevant global comparisons, then, at least when it comes to Shaw, we will be able to rest at ease.
Yet, one thing that also is crucial to this is that the bar set by Shaw should also become the minimum baseline standard adopted by the rest of the ‘big 5’: Bell, Rogers, Quebecor, Telus and Cogeco. Moreover, and to repeat from an earlier post, these must not be seen as a diversion from the central issues that remain core to the upcoming CRTC hearings on vertical integration and UBB.
Ooops, I did it again. Did that screw it all up for you?