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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.

Telecom-Media-Internet Politics in Canada: Evidence, Theory & Ideology

We are at a fundamental turning point, a constitutive moment when decisions taken now will set the course of developments across the telecom-media-Internet ecology for years, maybe decades, to come. We’ve just finished one set of hearings, and two more are on the immediate horizon: the CRTC’s hearings on Usage-Based Billing that begin Monday, July 11 and its upcoming so-called ‘fact finding’ hearings on Over-the-Top/new media.

In an interesting and helpful post today, Peter Nowak argued for 7 fundamental guiding rules for telecom issues in Canada, by which he meant the full gamut of issues right across the TMI (telecom-media-internet) spectrum. They are very useful guides and starting points for discussion, and easy to remember to boot. They are:

  1. Ditch Usage-Based Billing
  2. Don’t regulate new media/over-the-top (OTT) services (e.g. Netflix)
  3. Strengthen Net Neutrality
  4. Turf Foreign Ownership Restrictions
  5. Spectrum Set Aside for New Players
  6. Don’t Regulate Cross-media market power (aka vertical integration)
  7. Plan ahead for ‘shared networks’.

I find these very useful starting points; perhaps because I agree with most of them wholeheartedly (1, 2, 3, 5). Others I’d endorse with some caveats (4). Some I would expand on greatly (7). Others I would reject completely because they lack any basis in evidence, history or theory (6).

In terms of foreign ownership, Nowak proposes to drop all of the current limits on ownership of telecoms industries in Canada. He suggests that doing this will increase ‘real competition’ in the market by adding new players. This is not an uncommon position and in my view, its goal of increasing competition is basically a good one. Michael Geist and Mark Goldberg, each in their own way, make much the same point.

There are at least three or four problems, some of which I’ve outlined in another recent post, however, with this notion of dropping foreign ownership, although I am, to repeat, not against the idea in principle. First, there’s a good chance that we could drop the rules and nobody would come. These times are not those of the high-tide of foreign investment, in case anybody has been sleeping under a rock for the past few years.

Second, even if new investment does occur, this doesn’t necessarily mean that new competitors will enter the market. It’s more likely that they’ll just take over one of the incumbents, thereby switching the ‘title’ to the underlying telecom property but not doing anything at all to increase the market, unless the new owners turn out to be better than the current ones.

This is exactly the point made by a recent report by the C.D. Howe Institute. Despite its exuberant support of the idea that all foreign ownership rules across the telecoms-media-Internet board should be dropped, the Howe report was forthright that this would probably not result in more competitors. Instead it would lead to something much woolier: “performance gains” (p. 3).

Good luck assessing that, I’d say. Like “beauty”, performance would mostly be subjective and in the eyes of the beholder. Besides, with all of the existing telecom and broadcast players clamouring for less information disclosure, less regulatory oversight and less transparency, as they did one after another during the vertical integration hearings, how could we possibly know whether this nebulous objective was achieved?

Third, Nowak’s piece is couched in the idea of being a “pragmatic” set of proposals, rather than one that dogmatically sticks to what he sees as the right or left of the political spectrum. Thus unlike the Howe Report’s suggestion to drop foreign ownership rules across the board, he argues that if an integrated telecom-media player wanted to sell to foreign investors, say a US telco like AT&T or Verizon or, just as likely, a private equity group, then Bell Media, for example, would have to sell off its television interests, e.g. CTV (and 28 specialty channels, 28 local television stations and 33 radio stations, although he doesn’t spell that out).

Quebecor would have to do the same with respect to TVA, for example, and its extensive holdings of newspapers and magazines. Rogers would do the same with CityTV, 17 specialty channels and stable of magazines, while Shaw would have to part with its assets in television (Global) and specialty channels (Corus). Fat chance that’ll happen, I’d say.

Moreover, because there is a much broader range of media involved than just telecoms and television due to the fact that the ‘big four’ vertically-integrated media companies (VIMCos) (Bell, Rogers, Shaw, Quebecor) also all have, in different combinations, extensive holdings in radio, newspapers and magazines, it’s not going to be so easy to simply hive of telecoms from television. Indeed, with newspapers and magazines swaddled in their own bundle of tax and investment incentives designed to shore up Canadian ownership, unravelling this stuff will be messy and complicated.

To my mind, this part of the proposal not might have been as fully thought through as it could have been. The C.D. Howe Institute report at least has the virtue of purity and clarity: drop the barriers on everything, telecom, broadcasting, media in general.

Fourth, a very significant problem and one that strikes deeply at whether we want to further allow our culture to be ‘securitized’ and ‘militarized’, US telecom-media-Internet companies and investment capital comes with a lot of national security baggage, particularly so in the telecoms-media-Internet space. Their operations are subject to the Patriot Act and US telecom providers and ISPs have shown a propensity to cooperate with national security agencies in a very murky zone outside the rule of law and without cover of authorized warrants in ways that subsequent courts have found illegal (here, here, here and here).

Microsoft’s acknowledgement in Britain this past week that all U.S. companies like it, whether they admit it or not, are subject to the Patriot Act, was the first real candid acknowledgement of the extra-territorial reach of U.S. national security policy when it comes to matters of the information infrastructure. As Gordon Frazer, managing director of Microsoft UK, admitted, data stored in the cloud was well within the reach of the PATRIOT Act.

The acknowledgement came in response to a question posed by ZdNet journalist, Zack Whittaker. Whittaker asked,

“Can Microsoft guarantee that EU-stored data, held in EU based datacenters, will not leave the European Economic Area under any circumstances — even under a request by the Patriot Act?”

No, Fraser explained, “Microsoft cannot provide those guarantees. Neither can any other company”.

Tying networks, servers, the Internet and everything else in Canada that runs through and on top of these facilities to US national security policy is to sell out fundamental principles regarding open media, transparency and a networked free press for the feint hope that we might achieve a modicum of more competition than we have now, and even then, not ‘real competition’, but rather the kind of newfangled Schumpeterian ‘innovation economics’ pushed by the C.D. Howe report.

But let’s move beyond the issue of foreign ownership to Nowak’s sanguine approach to vertical integration, an approach that I also find problematic. Why? Because he offers no evidence, lessons from history, or theory to support his case.

This is problematic because current evidence shows that concentration across the spectrum of telecom-media-Internet services in Canada is high, in absolute terms, and relative to comparable international standards. I offered a snapshot of this evidence in an easy-to-digest form in my Globe and Mail column last week.

I’ll repeat that here for convenience. In Canada, the ‘big 4 VIMcos’ — Bell, Shaw, Rogers, Quebecor (QMI) — account for:

  • 86 per cent of cable and satellite distribution market
  • 70 per cent of wireless revenues
  • 63 per cent of the wired telephone market
  • 54 per cent of Internet Service Provider revenues
  • 42 per cent of radio
  • 40 per cent of the television universe
  • 19 per cent of the newspaper and magazine markets
  • 61 per cent of total revenues from all of the above media sectors combined.

These numbers are not trumped up in the slightest, and in fact on the matter of the Internet and television services they are actually lower than those offered by the CRTC because of the different methodologies we use. Nowak doesn’t refute these numbers; he just doesn’t deal with them.

Theory tells us that media concentration, for which vertical integration is just one manifestation, embeds a bias for trouble in the ‘structure of the media’. Tim Wu, in the Master Switch, gets things right when he sets up the simple premise that it is important for regulators to curb the potential for companies to leverage power and resources across the three main layers of the telecom-media-Internet system: networks, content/applications and devices.

In theory, I think he is right and, based on the current and historical record, strong measures are needed to prevent companies from leveraging control over any one of these three layers — networks, content, devices — to curb competition and diversity in any other layer.

Nowak is clearly aware of the connection in this regard and he hopes that his first and second principles — ditching UBB and leaving ‘new media’/OTT untouched by regulators — will take care of vertical integration problems by removing the ability of Bell, QMI, Rogers and Shaw from using bandwidth caps and the pay-per Internet model to basically undermine the viability of rival online video distribution services (AppleTV, GoogleTV, Netflix, etc.) that they see as a threat to their own broadcast services. I think that these are important steps, but insufficient to deal with the full range of ways in which leverage across the three layers of the telecom-media-Internet system can be used to hogtie competitors and stifle the fullest range of voices and expression possible.

This is not just hypothetical potential, either, but rather documented by case after case of examples where either access to content or to networks is deployed in the strategic rivalry between less than a handful of players in oligopolistic markets. And when highly capitalized Netcos such as Bell own much smaller content companies like CTV, they have every incentive to use the latter to shore up the position of the former.

The recently completed vertical integration hearings at the CRTC were replete with example after example of this, from network companies such as Telus, SaskTel, MTS Allstream and Public Mobile as well as media content companies, whether the CBC or smaller production companies like Stornoway Productions.

These examples are not just limited to Canada either, but global in scope. They are behind the recent detailed regulatory framework put into place in the US by the FCC and Department of Justice that blessed the merger between Comcast and NBC-Universal, but not before taking comparatively stern steps, especially by Canadian standards, to ensure that NBC-Universal content could not be locked up or used by Comcast to the disadvantage of rivals in the broadcasting business. Furthermore, Comcast was also required to make its television and film content available to Internet competitors and ‘online video distributors’ (OVDs), a new category designed to cover services such as Netflix, Hulu, AppleTV, and so on, and to adhere to open Internet requirements generally.

Other countries such as Australia, Belgium, Britain and New Zealand have dealt with their own experience of networks being used to trample competition and diminish the range of voices and expression possible by going even further to set up rival ‘unbundled’ open networks (Australia) or by mandating ‘structural separation’ between incumbents’ networks (layer 1) and other layers (services, content, devices) in the system. In an important post yesterday, Bill St. Arnaud also talks about the development of networks that are essentially based on pick and choose access to capabilities and functionalities that respond flexibly and recursively to  user generated communication and information needs

The problem, thus, is one that is buttressed by evidence, by theory and by global experience. In light of this, robust measures rather than a sanguine approach to vertical integration is most definitely needed.

And to bring this to a close, the issues raised by vertical integration are not the consequence of innovative, new industrial arrangements or newfangled theory, but rather deeply entrenched historically and indeed endemic to situations where those who control the medium (networks) are also in a position to control the messages (content) flowing through those networks.

Thus, in the first decade of the 20th century in Canada, the Canadian Pacific Telegraph Co. and Great North Western Telegraph Co (the latter under ownership control of Western Union) had exclusive distribution rights for the Associated Press news services in Canada. As part and parcel of the telegraph companies’ bid to buttress their dominance in the highly lucrative telegraph business against a couple of smaller rival upstarts (the Dominion Telegraph Co in Canada and Postal Telegraph Co. in the US), the Canadian Pacific Tel. Co. and Western Union-backed Great North Western Tel. Co. offered one of their premier set of clients — newspapers across the country — access to the AP news service at a very cheap rate. In fact, they gave it away “free”. Sound familiar? (observant readers might also note the persistent recurrence of ‘network infrastructure duopolies’, too)

The AP news service was so cheap because instead of paying the cost for both the news service and the telegraph charges for delivering it from one place to another, Canadian Pacific Tel. Co. and Great North Western Tel Co only charged newspaper subscribers the ‘transmission costs’ for the AP service. The content, under such arrangements, was ‘free’. Of course, this was a real boon to established members of the press and to AP, while it also helped to stitch up the companies’ lock on the telegraph business.  It was a menace to rival news services and a competitive press or telegraph system, however.

The fly-in-the-ointment was that any competitor news service was at a huge disadvantage because its subscribers had to pay the ‘transmission costs’ plus the cost of the news service. Thus, when Winnipeg-based upstart, the Western Associated Press, tried to set up a rival Canadian news service to that of the Associated Press in 1907, it found it’s opportunities blocked at every step of the way because there was simply no way its subscribers could pay two costs — transmission and for the news service — while the AP service was essentially given away free after subscribing newspapers paid the telegraph companies their fees for distribution.

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 whitholding privileges that are of general right cannot be too strongly condemned.”

The matter found its way before one of the long-lost predecessors to today’s CRTC, and one of the first regulatory bodies in the country, the Board of Railway Commissioners. Canadian Pacific Tel. Co. came out swinging, arguing that the BRC simply had no authority over the news services or to compel it to separate the costs of the news services from transmission costs.

Times were different then, it seems, and the BRC didn’t wilt one bit amidst the hot-heated rhetoric but blasted back that it was compelled by  law to insure that rates were “just and reasonable” and that 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” (BRC, 1910, p. 275).

The upshot was separation of control over the wires from control over the news business. The regulator had all the authority in the world it needed to break up the ‘double headed news monopoly’.  It is a lesson that the CRTC and everybody else interested in ensuring that we oversee the creation of the most open media with the maximum range of voices and creative expression possible should pay close attention to.

Of course, the modalities of communication have changed tremendously and we now live in age of information abundance rather than scarcity, but as Tim Wu’s Master Switch and the mounting evidence before our very eyes attests, the basic logic of leveraging content and networks to confer advantages on one’s own operations whilst driving others into submission, if not out of business altogether, is alive and well.

This is a basic and easy-to-grasp point, and until we firmly implant it at the heart of the structure and regulation of the telecom-media-Internet system, we will continue to forgo the economic, political, cultural and personal benefits of the most open network media system possible and which further the goals and values that define a free and democratic society.

On that score, Nowak is right, these are not ‘left’ and ‘right’ issues. They are issues, principles and values of concern to all who take the precepts of liberal capitalist democracy seriously and who see in the status quo a condition that is badly lacking by even that non-ideological/utopian standard.

Source:

Board of Railway Commissioners (BRC). (1910). The Western Associated Press v. The Canadian Pacific Railway Company’s Telegraph and the Great Northwestern Telegraph Company of Canada. In Sessional papers of the Parliament of Canada. Ottawa: J. De Labroquerie Tache, Printers to the King’s Most Excellent Majesty.

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.

Big, Brash & Bold: Drop all Telecom-Media Foreign Ownership Limits

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.

Rubber Stamp or Real Questions?: CRTC Addresses Vertically Integrated Media for Next 2 Weeks

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.

Shaw’s ‘New New’ Internet Pricing Regime — Raising the Bar?

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?

Shaws’ New High Speed Internet Regime: Iron Fist vs the Velvet Glove

Shaw announced plans to implement a new regime for its Internet Access services this week. There is much in the announcement to be commended, and much still to rail against.

First, the much welcomed headline news is that Shaw’s new plans basically double the bandwidth caps for its Lite and High Speed services, while the caps for the Extreme service will be increased from a 100 GB cap to 250. The prices and the speed for each service will remain the same. Nice start!

Second, Shaw is promising much needed investment in broadband networks over the next year and a half and to convert all of its television channels to digital. As the company notes,

In making this move we will triple the capacity of our network, freeing up space for more Internet, HD and On Demand programming.

Third, the new pricing regime makes available some of the fastest and most generous high-speed Internet services in North America. It will most certainly, as Michael Geist, Peter Novak and others have noted, put pressure on the rest of the ‘big 5 ISPs’ – Bell, Rogers, Quebecor, Telus and Cogeco – to fall in line.

Shaw’s new bandwidth caps will be between two (vs Rogers) and five (Bell) times as great as those of the other dominant ISPs, as the following table illustrates.

The commitment to invest heavily in a “major upgrade of our network”, and to convert all its channels to digital, in order triple the capabilities of its networks is good news.  It would seem to bring Shaw closer into line with global trends (and ahead of standards in most of the United States).

The emphasis on network upgrades dovetails with ‘hierarchy of priorities’ set by the CRTC in its Network Neutrality decision too, or as it prefers to call it, the Internet Traffic Management Practices decision. Regardless of terminology, the basic idea is that Network Investment is the preferred method to deal with any congestion that exists. Shaw’s proposal appears to be in line with that idea.

If it acts as a spur for greater investment by the other major telecom and ISP providers, all the better, but we should not hold our breath. Their feet will have to be held to the fire.

Iron Fist Replaced by the Velvet Glove?

But now for the odious bits of Shaw’s intended course of action.

First, the highest speed services with the most generous bandwidth caps, or no caps at all, are only available bundled with either of Shaw’s Legacy TV or its Personal TV model. And these services will also only become available over the next 18 months as its networks are upgraded.

The bundled, highest performance Internet offerings offer speeds of between 50 and 250 Mbps and genereous bandwidth caps of between 250 GB per month and a voluminous 1 Terrabit (TB), as well. The caps are removed altogether in some cases. This is a good thing and appears to bring Shaw’s offerings closer into line with ‘global best practices’.

But tying the highest-performance Internet service to its ‘legacy’ television services is a blatantly protectionist bid — a first line of defense for Shaw’s Global television network, massive cable and satellite distribution system, and big suite of cable and satellite television channels. Enrolling you in its Internet services enrolls you unwittingly into the Shaw Business Projection Plan for all these other services. Your tail wagging its corporate dog.

The fact that Shaw is able to leverage control over its networks to influence the channels of communication flowing through them is not surprising. It is a problem as old as Roman Roads and Venetian Canals. It is a problem of the first order, for all that, and to be resisted now as much as in the past.

In 1910, the long lost precursor to the CRTC, the Board of Railway Commissioners came to a conclusion that would be startling if it happened today. As the BRC found in the ‘double-headed telegraph news monopoly’ case, Cdn Pacific Telegraph Co. and Great North Western Telegraph Co (the latter under ownership control of Western Union) had exclusive distribution rights for Associated Press news services in Canada. Cdn Pacific Telegraph was charging its

. . . subscribers for the commodity, viz., the news, delivered at a flat rate; . . . while in the case of rivals [Western Asssociated Press] the payment . . . was for the transmission, and not the commodity. . . . [T]elegraph companies could put out of business every newsgathering agency that dared to enter the field of competition with them” (BRC, 1910, pp. 274-275).

The bundling of ‘connectivity’ and ‘content’, as Shaw does in its new plans under one corporate umbrella is one of the biggest problems with vertical integration. Always has been, always will be.

Theoretically, the CRTC can do something about this after its upcoming vertical integration hearings next month. It can be taken for granted, however, that Hell will freeze over before anyone seriously considers divestiture of Canada’s big 5 integrated telecom-media behemoths — Shaw/Global (Corus), Bell/CTV, Rogers/CityTv, Quebecor (TVA), Cogeco (Radio).

The government could set up a competitor entity, the Canadian National Broadband Co (CNBC), just like the Australians. That’s not likely to happen either, the price tag of $40 plus billion being only one among many economic and ideological deterrents.

The CRTC should give serious consideration to imposing ‘functional separation’ requirements on the big 5; it would be a good compromise. Not to hot, not too cold — the Goldilocks solution to vexed Internet policy issues.

Just to be churlish, we can also note that Shaw’s plan to convert analog tv channels to digital ones is not a bright, new idea. It is long overdue and coincides with the mandatory switch over to digital broadcasting for the rest of the broadcasting system in August 2011. Shaw’s acceptable use policies are also just as abhorent as they have always been, setting out

  • restrictions on what people can and cannot do with their Internet connections.
  • broad assertions of its authority to act on behalf of copyright claims a
  • its right to make ‘editorial judgments’ about all kinds of content hosted on and moving through its pipes.
  • and to own user created content.

Shaw has moved the ball forward and we should not only hope, but push to have at least the minimum bar it has set met by the remaining ‘big five’ ISPs in Canada that control access to roughly 95 percent of Canadian subscribers: Bell, Rogers, Quebecor, Telus and Cogeco.

The advances so far did not come from the good graces of Shaw. They came from an extraordinary confluence of pressure that has been put on Shaw and all of Canada’s ISPs with greater and greater intensity over the past four to five years.

The three most significant pressures shaping the flow of events are probably:

  • Open Media and the massive public that it helped to mobilize;
  • the ‘tweet’ in the night by then Industry Minister Tony Clement scolding the CRTC for its UBB decision in January of this year and the upcoming hearings to be held by the CRTC this July into the matter which have ensued partially as a result;
  • and crucially, the pressure from investment bankers, who saw mounting public anger and the threat of regulation as a potential danger to Shaw and the others’ bottom line and their ability to raise capital.

Ultimately, while we should appreciate what Shaw’s announcement has put on the table, this should not divert our attention from the fact that much remains. Nor should it give Shaw a free pass when it comes to the CRTC’s upcoming hearings on vertical integration.

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