CRTC’s 12 new proceedings mean regulatory pendulum is swinging back, insiders say

The CRTC's 12 follow-up proceedings related to its vertical integration decision are key to ironing out a few wrinkles but are also a reflection of CRTC chair Konrad von Finckenstein’s “heavy” regulatory hand, broadcasting insiders say. The CRTC released a decision last week that seeks to rein in vertically integrated companies' abilities to use their control over content and multiple distribution platforms for anti-competitive ends. The decision's new rules range from a ban on exclusivity for TV programs on new media platforms to requirements forcing vertically integrated companies to carry one independent specialty channel for each of their own affiliated channels. The decision also establishes a code of conduct for commercial arrangements between producers, distributors, and new media services. The CRTC said in its decision that the code would create a framework that would “provide all players with a fair opportunity to negotiate key elements, such as programming rights and details of carriage.” The decision includes 12 follow-up proceedings to work out further details—a move that insiders say is another sign that the CRTC appears to be tightening its regulatory grasp. “There have been more hearings in the last few years, and I’ve been in the industry a long long time,” Peter Bissonnette, president of Shaw Communications Inc., said in an interview. “Maybe that’s attributable to the chairman. He’s encouraged that kind of regulatory involvement.” Among the 12 consultations, one is an information request of companies about their moves to address consumer choice. Companies must report to the CRTC on “how they've provided consumers with more choice and flexibility” by April 1, 2012. If the commission finds those reports insufficient, it said it will open a proceeding to determine what regulations should be placed on broadcast distributors to ensure consumer choice. Another proceeding will look at exclusivity, and another will study protections for independent broadcasters and independent broadcast distributors, particularly in relation to the commission's new media exemption order and preventing large companies' “head starts” on content. Other proceedings will focus on setting specific audit provisions for vertically integrated broadcast distributors; the protection of confidential information; and access to broadcast distributors' customer information. Following the decision last week, von Finckenstein told The Wire Report that the proceedings are necessary to work out issues that don't have easy answers. “Some of these issues are very intricate and difficult,” he said, pointing to the new proceeding on the protection of confidential customer information as one example. Vertically integrated companies' broadcast distribution arms shouldn't be sharing sensitive information with their programming arms, he said, but how to do that is another question. “How do you actually do it? This is not that simple. Everybody at the hearing agreed that we need something. Some people recommended drastic solutions, saying there has to be a discrete unit in the company that does only these negotiations and doesn't talk to others,” he said. “It doesn't make sense, we all agreed, it has to be done. Let's work out how we do it.” Some industry insiders are calling the CRTC's new proceedings evidence of unnecessary, heavy-handed regulation. Three of the proceedings will be held on the commission's new dispute resolution process, including one dealing with the CRTC's decision to implement a “standstill” provision to protect independent broadcasters. The provision will be enforced when a broadcaster and a broadcast distributor fail to reach a carriage agreement in which consumers may lose access to scheduled or anticipated programming. The CRTC said the provision was designed for reasons of consumer protection. Telecom analyst Iain Grant criticized the decision, writing by email that it makes one wonder “what exotic treats the commission has been imbibing recently as it tries to cuddle more closely with consumers.” “‘Your’ television programming is THAT fundamental to you that we need the commission to dictate marketplace rules that it thinks makes sense?” Grant, managing director of the SeaBoard Group research firm, wrote. “Perhaps it is time for Harper to rein the commission in again, or better, eliminate the commission and start again with a new marketplace oversight body.” At a speech to a broadcast luncheon Monday, Bell Media president Kevin Crull came down hard on the decision, saying the CRTC's efforts to "oversee practically every aspect of our business," from pricing and product availability to packaging, is outdated and hurts productivity and competitiveness. "It's clear that the CRTC believes large-scale companies are a bad thing, so much so that last week's decision actually rewards companies who decide not to invest in broadcasting," Crull said according to notes received from the company. "This decision does not benefit consumers and it is a striking illustration of a regulator expanding its mandate, presumably in an effort to remain relevant, by imagining problems that just don't exist while ignoring the necessary hard work on threats to our broadcast system that do exist. Mr. Regulator, let's support job growth for the media sector in Canada, not for the regulatory sector." Cogeco Cable Inc. welcomed the new proceedings, with Yves Mayrand, vice-president corporate affairs, saying some changes are necessary. “There are a number of areas where some detailed changes must be considered, changes of processes and regulations,” Mayrand said in an interview. He added that Cogeco did not view the decision or its following proceedings as “slowing down or delaying really anything larger groups might wish to pursue.” Shaw and Cogeco both said they will prepare to participate in the upcoming proceedings. “The one that’s most meaningful to us would be the packaging and flexibility that we can offer our customers,” Bissonnette said, adding that Shaw will submit its comments by the April 1, 2012 deadline. Ian Morrison, a spokesman for the watchdog group the Friends of Canadian Broadcasting, said in an interview that the 12 follow-up proceedings are nothing out of the ordinary for the CRTC. “They kind of listened and they’ve sorted and they’ve chewed on it,” Morrison said in an interview. “They’ve made a policy and that’s consistent with the way they do things.” Morrison said the vertical integration decision indicates that the pendulum of the commission's work may be swinging back. “They have been moving away from a kind of 'trust them' approach with the players when it was towards that in the recent past,” he said. “It’s just starting to look like a pendulum swinging back and I welcome that.” Morrison said vertically integrated companies have the strength to step on smaller video and audio providers. “It’s obvious that some regulation is needed,” he said. If the CRTC continued steadily towards deregulation it would eventually lead to no regulations, he added. “The principals, or the Bells of this world, would be able to do whatever they damn well please,” he said. “That would clearly not be in the interest of viewers.” Joel Fortune, counsel for the Independent Broadcast Group, agreed in an interview that some of the proceedings are more material than others. “In some cases, the devil will be in the details,” Fortune said. “There’s going to be a lot of lobbying at different levels, if I understand Bell’s reaction correctly.” The CRTC, which makes approximately 10,000 regulatory decisions per year, said regulations will be drafted and then reviewed by the Department of Justice. If the department deems them to be a reflection of commission policy, they will be published for comment. Michael Hennessy, vice-president of government and regulatory affairs at Telus Corp., said the new proceedings are “not a matter of heavy-handed bureaucracy.” Many of them are housekeeping work, which is required to give effect to regulation and report information, he said in an interview. “If you look at it very carefully,” Hennessy said, “it’s a shift away from making protectionism in broadcasting towards a greater interest in consumer choice and consumer protection.” Morrison said the decision bears the current commission’s regulatory stamp. “It is well known that this particular type of CRTC, the one that is making this decision, has the heavy hand of regulation of Konrad von Fickenstein on it.” dgrenier@thewirereport.ca

CRTC’s 12 new proceedings mean regulatory pendulum is swinging back, insiders say

Broadcast | September 26, 2011

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