Shomi, CraveTV could be pulled if PIAC challenge succeeds: analyst

The Public Interest Advocacy Centre (PIAC) on Friday asked the CRTC to prohibit Rogers Communications Inc., Shaw Communications Inc. and BCE Inc. from restricting the availability of their streaming services, a move that could lead the companies to kill the services outright if it succeeds, according to Cannacord Genuity analyst Dvai Ghose. Rogers and Shaw’s Shomi is only available to Rogers and Shaw’s Internet or TV customers, while Bell’s CraveTV is offered to those who subscribe to TV service from Bell, Telus Corp., Northwestel Inc. and Eastlink. Through its two applications, submitted jointly with the Consumers’ Association of Canada, PIAC is challenging such “tied selling,” the group said in a press release. Should the CRTC’s challenge be successful, Rogers, Shaw and Bell "would pull the services," Ghose said in an email Friday. “Shomi and CraveTV do not appear to be profitable as standalone services at this time and are aimed at overall broadband and TV customer retention. I think PIAC should realize that there is a cost to providing such services which is not necessarily covered by the $4 per month charged by CraveTV or even the $8 per month by Shomi,” he said, adding that Netflix Inc.’s standalone service is “profitable due to global scale.” Troy Crandall, a telecom analyst with 3Macs, said in a phone interview that CraveTV and Shomi are designed to be “value-adds” to the providers that offer them, and that they would not be economical as standalone Internet services at their current prices. He said the companies are essentially subsidizing the products to encourage subscriptions to their other services, and that they would be reluctant to offer products that could “cannibalize” their conventional television services. Crandall said if the companies were forced to offer their streaming services as standalone services, they would have to raise prices “considerably,” though it would be possible to compete with Netflix even at higher rates if the content they are offering is attractive. He noted that Bell has rights to HBO content, which is not available on Netflix. In its complaints, PIAC said the CRTC should require Rogers and Shaw to make Shomi available to all Canadians with Internet access, regardless of their Internet or TV service provider. It said the CRTC should require Bell to apply for a licence for CraveTV, or if it determines CraveTV can operate under the digital media exemption order, to “confirm that tied selling of online streaming services with BDU services is a violation of the exclusivity rules.” PIAC claims Shomi and CraveTV violate both the Telecommunications Act and the Broadcasting Act’s broadcast distribution regulations and rules around vertical integration, as well as the digital media exemption order. Richard Paradis, president of media consulting firm Groupe CIC, said in an email that PIAC’s applications have “a good point,” since all three companies “are promoting these services and it is not clear how these services are tied either to existing licences, or if they are stand alones and in many ways are operating outside of regulation but yet tied to regulated services to reach consumers.” He said it would “be interesting to see the Commission's take on this following up on the recent decisions against Bell and Videotron,” in which the CRTC said Bell and Quebecor Inc.-owned Videotron can no longer exempt their mobile-TV services from data charges. PIAC said in the submissions that the broadcasting distribution regulations have a “prohibition against undue preference or disadvantage,” while the digital media exemption order includes prohibitions against undue preferences, exclusivity, and “anti-competitive 'head starts',” where a broadcast distributor makes a programming service available on its own distribution platform before making it available to other broadcast distributors. The Telecommunications Act also includes undue preference and unjust discrimination rules, it added. PIAC said that the link between access to CraveTV and a TV subscription “renders CraveTV an extension of the licenced system, in which case, CraveTV requires a licence and should be held to the relevant conditions of licence and contribution requirements.” “PIAC-CAC further contend that the tied sale of online streaming services to a BDU service is contrary to the Canadian broadcast policy objectives, and to sanction that tied selling would also be contrary to Canadian broadcast policy objectives,” the submission said. It said that “by favouring the BDU access system as a whole, this harms competition, the business case of independent ISPs, and consumers who wish to fine-tune their viewing experience and the access platform of their choosing, and reduce their monthly communications expenses.” PIAC said restricting Shomi “gives Rogers and Shaw, large VI service providers who control access to key platforms, a competitive head-start against other service providers such as independent BDUs and independent ISPs who may wish to offer Shomi to their subscribers.” PIAC also called for a review of the digital media exemption order, which it said would be “timely.” Bell Media spokesman Scott Henderson said in an emailed statement Friday that “it’s unfortunate that PIAC and CAC are complaining about Canadian creativity and investment with an innovative product that is offered at a very competitive price. CraveTV is pro-consumer in that it provides a superior collection of premium TV programming for just $4 a month.” Henderson said the service “was designed to strengthen the Canadian broadcasting system by offering a complementary, value-added service. It’s a service that has been made available to all Canadian distributors, with five on board already and four more to launch next week. Our objective is to make CraveTV available to as many Canadian TV subscribers as possible.” Rogers spokeswoman Patricia Trott and Shaw spokesman Chethan Lakshman both said in separate emails that "we are currently in beta" for Rogers and Shaw Internet and cable customers and are in discussions with other BDUs to carry the service, and that as "stated at launch,” the companies are evaluating other distribution models. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and Derek Abma at dabma@thewirereport.caand editing by Peter Henderson at phenderson@thewirereport.ca

Shomi, CraveTV could be pulled if PIAC challenge succeeds: analyst

News | 02/06/2015 10:02 pm EST

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