Vertically integrated companies sacrifice content ‘for the sake of their carriage’: Telus

GATINEAU, QUE.--Vertically integrated carriers generate up to seven times more revenue from distribution and carriage services than from advertising and the sale of content, Telus Corp. told CRTC commissioners Tuesday—which creates an incentive to focus on distribution and guard content. “It makes good business sense to sacrifice the content revenues for the sake of their carriage business,” Michael Hennessy, Telus’ senior vice-president of regulatory and government affairs, said during the second day of the CRTC’s vertical integration hearings. “If one were to lose a little on the content side to do better on the BDU , on-line and wireless side, one will do it every time.” Hennessy pointed to a Telus-commissioned Harris/Decima study that said almost 90 per cent of Canadians want content made available equally to all distributors, but that 54 per cent of consumers would switch providers to get the content they want. But Wade Oosterman, president of BCE Inc.'s Bell Mobility, said Tuesday that not all content needs to be available to everyone. “The suggestion that every single Canadian has a right to every single bit of content that exists on whatever device they might happen to choose is a preposterous thought,” he said. Bell’s senior vice-president of regulatory and government affairs, Mirko Bibic, said the fact that mobile subscribers have another video screen option is not a regulatory problem. “Even if Bell or Rogers or Telus has an exclusive arrangement for TV content on mobile devices, the same content is widely available on conventional TV, specialty channels, through VOD services on set-top-boxes or online, through download-to-own-services, or from one of the thousands of online sites that bypass the Canadian rights market,” Bibic said. Bell firmly defended vertical integration, saying vertically integrated companies have resurrected the broadcast industry and are the best way to ensure innovation and competition against global players. “A continuation of the moratorium and an absolute restriction prevents innovation and it prevents creativity,” Kevin Crull, Bell Media’s president, said. “These are nascent markets where we’re competing with huge global players and we don’t know what business models are going to emerge, and we absolutely require the freedom to be creative. The word ‘exclusive’ has been erroneously confused with anti-competition.” Crull said linear content will rarely be marketed as exclusive but that it’s important to maintain that flexibility. Bibic said interfering with how U.S. rights holders distribute content in Canada could lead them to sell rights to foreign online broadcasters or launch their own online, over-the-top distribution sites in Canada. “A Canadian rights market is critical to the creation of high-quality Canadian content,” he said. Bibic added that vertically integrated companies have existed for a decade and that the CRTC's regulatory framework of undue preference complaints is sufficient to prevent companies from favouring their own content. But Telus and other interveners appearing before commissioners Tuesday called for more safeguards. Hennessy said exclusives should not be permitted on any format or platform, and that quasi-exclusives through head starts should also be prohibited. The proposal was similar to comments Monday from representatives of Rogers Communications Inc., who said all television content should be made available to competitors on ancillary platforms. Hennessy also called for rules to be laid out in advance that define undue preference and that “reduce the level of complexity in the system,” allowing for simpler and more timely arbitration. Score Media Inc. told commissioners Tuesday that it relies on Bell, Rogers and Shaw Communications Inc. to reach more than 80 per cent of its subscribers. Since Bell and Rogers own the two largest sports networks in Canada and Shaw has also applied for a sports specialty channel licence, Score Media chairman and CEO John Levy said the broadcasters would have the incentive and opportunity “to choke off access to our subscribers.” Levy said genre exclusivity, must-carry status and the commission’s dispute resolution process aren’t sufficient to counter the consolidated market power of vertical integration. He said vertically integrated companies want to avoid upfront regulations, “preferring to have their lawyers slug it out after the fact in front of the commission in a quasi-judicial setting,” and that independent broadcasters don’t have the resources to rely on dispute resolution. FreeHD Canada, a new entrant in direct-to-home satellite television distribution, also called for pre-emptive measures against anti-competitive behaviour from vertically integrated companies and a clear definition of what constitutes preferences. “The commission must send a ‘zero tolerance’ message to VI’s by instituting monetary penalties and levying the maximum fines for any violations,” David Lewis, FreeHD’s chairman and founding CEO, said. Bibic said Bell is against all restrictions on exclusive content but that if any are imposed, they must be “symmetrical.” He said Bell is also against establishing rules that work in advance, or ex ante, because doing so would be too complicated. “There are so many permutations and combinations, how could we possibly address them up front in a way that would give us any meaningful guidelines,” he said. “We’re adamant about ex-ante codes and how harmful they would be, and they wouldn’t consider what consumers want, in our view, or allow us the flexibility to do that.” Bibic said Bell would compile a list of principles to submit as a final report to the commission. Hennessy said it is paramount to address exclusivity and create rules to simplify and speed up dispute arbitration. “As everything starts to look the same and the only different thing becomes the platform, clearly the no exclusivity rule should apply no matter which platform it is derived from because it will all ultimately flow to all platforms,” he told reporters Tuesday. mburgess@thewirereport.ca

Vertically integrated companies sacrifice content ‘for the sake of their carriage’: Telus

News | 06/21/2011 9:36 pm EDT

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