Get yer grimy paws off my Netflix, again (the dance mix)

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 Last week the Wire Report ran a story by Nick Kyonka headlined “CRTC vertical integration rules encourage OTTs to buy sports rights: Gourd.” No prizes for guessing where the chair of the Online Broadcasting Working Group (OBWG) was headed with that worrisome observation:

The CRTC’s new regulatory framework governing vertically integrated companies may have given too much of an advantage to online content providers such as Netflix Inc., Google Inc., [and] Apple Inc.

As I explained in a pair of posts last July (“Get yer grimy paws off my Netflix”), the OTT cabal has shown they will stop at nothing to persuade the CRTC and political friendlies that new, innovative online competitors must be stomped out. They’re bad for the broadcasting system, bad for Canadian culture, bad for Canadian citizens. The group’s claims would be laughable if they weren’t part of a deadly serious attempt to win concessions. To say nothing of the fact they’re doing all this with the publicly acknowledged support of the CRTC. This time, however, the OBWG is trying to put the public interest in double jeopardy.

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On top of wanting to regulate or tax (foreign) OTT out of their barbed-wire garden once and for all, the group is (politely) blaming the CRTC for trying to soften the market power of Canada’s network media oligopoly (Bell, Rogers, Shaw, QMI) by putting restrictions on exclusive programming deals. The key provision is in para 22 of the CRTC’s “Regulatory framework relating to vertical integration” (Broadcasting Regulatory Policy CRTC 2011-601). It stipulates that any programming designed primarily for television must be made available to other distributors in digital media form, i.e. it must not be “dependent on the subscription to a specific mobile or retail Internet access service.”

And why is that a problem for the OBWG? Because “foreign-owned over-the-top providers like Apple or Google could licence new media sports rights from Bell Canada Enterprises Inc. and Rogers Communications Inc.” When it comes to popular sports programming, that in turn could push audiences “away from traditional broadcasting to online services.” To put this in really simple terms: “An over-the-top service, particularly if it’s defined as a distributor, is a competitor” – an observation that does a nifty job of turning “competitor” into a four-letter word.

The problem with Gourd’s chopped logic is it conceals the big, fat elephant in the room – the one that made the Commission introduce vertical integration rules in the first place. (Back in June, Peter Nowak wrote a funny/serious post on the vertical integration hearings, which he described as a telecom industry “pillow fight”. He titled the piece “What to do about vertical integration? Absolutely nothing.”)

I haven’t got the text of Gourd’s speech in front of me, but my guess is he never got around to mentioning any of the following: a) his best buds have been doing better and better over the last decade; b) they face less and less competition in the media industries; and c) the Big Four enjoy the best market power booster of all: control of both the content flowing into Canadian homes and the pipes that carry them. This is how Dwayne Winseck summed up the saga a few weeks back in his Globe column:

“Combining all of the segments of the network media (except wired and wireless because their size overshadows everything else), the big four’s share of the mediascape has risen steadily: Bell (CTV), Shaw (Global), Rogers (CityTV), QMI (TVA). In 1984, the big four accounted for 40 per cent of all revenues; in 2010, their share was 54 per cent – a far bigger slice of a much bigger pie.”

As far as the scary competition from OTT is concerned, Dwayne offered this perspective in his blog about the relative scale of the Netflix threat to all we hold dear:

“Just for the sake of argument, even if Netflix gets $8 per month for each of its million subscribers in Canada, that’s $96 million dollars a year in revenue, or .6 percent of the total for all segments of the television industry. Of course, that’s nice if you can get it, but it is a mere drop in the Canadian television bucket, and hardly worth revamping the rules for, as many entrenched interests would like the CRTC to do.”

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I’ll suck the soul out of your culture and take your money too

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The WR article ends with the casual mention of another shocking breach of due process that comes full circle back to where this whole circus began:

[Alain Gourd] said he expects [a] report [on cord-cutting] to be turned over to the CRTC during informal, private consultations this month. “The CRTC, I feel, expects that with this confidential setting, some information that might not have been filed last summer may be filed this time,” he said.

More secret CRTC meetings? Seriously?

There I was this afternoon, sitting forlornely in Starbucks, wondering what to make of a regulatory system that would embarrass a banana republic, when in walks an old friend who once lorded it over these guys as a CRTC Commissioner. David McKendry was notorious for raising hell with his dissenting opinions, meeting with consumer advocacy groups and, gasp, doing his own research, to the chagrin of many staffers. He chided me for writing ill of the Commission. Too easy, he said, like shooting fish in a barrel.

David reminded me that when the Commission was a house truly divided between telecom and broadcasting, the staff lawyers took procedure and due process very seriously – in telecom. Intervenors were obliged to testify under oath and were routinely cross-examined by opposing parties. The industry was treated for what it was: too important to end-user welfare to be left to posturing and a disregard for truth or empirical evidence.

On the broadcasting side, however, David and his colleagues lived on a different planet. Participants in broadcasting hearings could lie from start to finish and when they did, it was with complete impunity. Some of David’s dissents were about elementary procedural matters – matters of fairness and accountability, such as providing sufficient notice to the public to allow for a balanced proceeding. But everyone got used to playing fast and loose with the rules – when there were rules.

The CRTC has reorganized the house divided a lot since McKendry wandered the hallowed halls. It has made gestures in its operations and publications to the fact that convergence has pretty much wiped out the old differences that provided the rationale for the cultural goals of the Broadcasting Act and the consumer protection goals of the Telecommunications (though the KvF Commission has done a lousy job even under the latter mandate). They have a Director General of Convergence Policy. They’ve published two attempts, two years running, to explain how the Commission is “Navigating Convergence.”

And what do we have as a result? A sense of due process in broadcasting that would never be tolerated in a telecom proceeding. Of course the ultimate solution is to scrap the legislation and start over again. In the meantime, the Commission has no business engaging in continuing, large-scale consultations with their biggest licensees behind closed doors – with no public agenda, no disclosure of conflicts, no balance in the representation of parties, no meaningful protection of the public interest. Bad enough we’ve had decades of broadcasting proceedings without a safeguard as basic as an oath to inject some truth into hearings. But at least in a public hearing we can hear what’s going on, truthful or otherwise.

Have Commission counsel given the nod to secret meetings?

Which brings me to a couple of questions I have for John Keogh, the CRTC Senior General Counsel, and Bernard Montigny, General Counsel for Broadcasting.

1 – Were these two senior legal officers asked by the Chair or other internal authority to offer an opinion as to possible improprieties arising from continuing secret meetings with the OBWG? If they were consulted, did they give their blessing? Did they have reservations?

2 – Given that the Commission has already conducted sub rosa proceedings on OTT, and is apparently scheduled to conduct more, have Keogh and Montigny encouraged this behavior based on any explicit legal, regulatory, ministerial or cabinet authority?

3 – Do Keogh and Montigny believe the secret meetings with the Commission are beyond ethical and legal reproach? Do they believe the secret meetings are in the public interest? If so, why?

Charity begins at home

Yesterday in a post entitled Net Neutrality Enforcement Put to the Test, Michael Geist waxed just slightly on the side of cautious optimism concerning the CRTC’s management of the Canadian Internet. He notes, for example, that the Commission has promised to make the ITMP framework more “transparent.” He makes a point as well concerning enforcement:

“On the enforcement front, it appears the Commission is prepared to adopt a more muscular approach. Rogers will be the first Internet provider to face enforcement actions, the result of painstakingly detailed complaint over the throttling of online games (thereby rendering some unusable) by the Canadian Gamers Organization.”

I’m a little less sanguine than Michael over whether the Commission is really headed in a new direction. The CGO complaint, which I’ve been writing about on this page over the last several weeks, may be a good sign. Or it may fizzle, with Rogers getting an insignificant slap on the wrist.

I think there’s also an issue of priorities here. The various ITMP issues involved are important; and yes, things may be getting better. But I don’t see how the Commission can be expected to discourage the bad behavior that is stock in trade for Rogers, when it seems to have lost its own moral compass.

This is a quasi-judicial tribunal. It’s not the post office. And despite the self-styled “online broadcasting” moniker, this matter isn’t about repurposing Cancon from TV to digital media. It’s about the future of the Canadian Internet. This week there’s a lot of crazy talk going around Washington about whether to preserve a free and open Internet. Today, for example, the White House announced it will veto any attempt by the Senate to kill the FCC neutrality rules. It may all end badly for the Americans. But at least their regulator isn’t conducting secret meetings with the largest media conglomerates in America about how to manage the future of their Internet.

D.E.