Speech by Peter Menzies, Vice-Chairman, Telecommunications, Canadian Radio-television and Telecommunications Commission
To the annual conference of the Canadian Cable Systems Alliance
September 23, 2013
Check against delivery
Thank you very much.
And thank you for inviting me to speak to you this morning. I’d like to start by congratulating the CCSA on its 20th anniversary. In that time, the organization has grown from a dozen members to more than 100. That’s a testament to the excellent work the CCSA has done representing you.
A key part of our job at the Commission is to ensure that all Canadians have access to a wide range of high-quality services in broadcasting, telephone and Internet. And by that, I mean all Canadians, wherever they may live across this vast country of ours.
Independent cable system operators perform an essential function within our communication system. Most of you serve small communities. You have to be nimble and innovative to compete in your markets, and from all reports you are doing a great job of providing your customers — with whom you are the most familiar — with the diversity of choice that they want and need to have.
I'd like to take a moment here to acknowledge the important work you've done in the past year to implement our new rules on excessively loud TV commercials. Canadians all across the country made it very clear to us how annoying it was to get their eardrums blasted whenever the ads came on. So we worked with broadcasters and distributors to solve this problem.
You’ve made the necessary investment in equipment and staff training, and we thank you for getting the job done. I'm sure your subscribers are very grateful for your actions too.
Changes in the industry
We understand the challenges you face every day to ensure the success of your businesses at the local level. Beyond that, you also have to face the same challenges as the entire communications industry. Change has never come so quickly as it has in the past few years.
In a few days, we will release the 2013 edition of the Communications Monitoring Report. I thought it would be interesting to share with you a few statistics from the report that demonstrate just how quickly the world has been changing.
- 62% of Canadian households subscribe to Internet services featuring download speeds of at least 5 Mbps.
- Anglophones spent 20.1 hours online per week in 2012, against 18.2 hours in 2011. That’s an increase of more than 10%.
- Francophones spent 13 hours online per week in 2012 (that’s roughly the same amount as the previous year).
- 33% of Canadians watched online television programming.
- 4% report that the only place they watch television programming is online.
- Typical users watched over 3 hours of Internet television per week (that’s up from 2.8 hours in 2011).
- 17% of Canadians subscribed to Netflix (up from 10% in 2011).
- The number of Canadians that own a smartphone jumped from 38% in 2011 to 51% in 2012. That’s a massive increase in the neighbourhood of 34% in one year.
- The number of Canadians that own a tablet more than doubled — almost tripled, in fact — from 10% in 2011 to 26% in 2012.
- 6% of Canadians watched television programming on a tablet or smartphone.
- 20% of Canadians streamed the signal of an AM or FM station over the Internet; 14% streamed audio on a tablet; 13% streamed a personalized Internet music service; and 8% streamed audio on a smartphone.
- In 2012, Canadians downloaded an average of 28.4 GB and uploaded 5.4 GB per month.
So we're looking at a communications environment that is radically different from what it was only ten years ago.
Since then, the structures, the business models, the products and the technology of the industry have been dramatically transformed — to say nothing of the needs, the tastes, the expectations and the behaviour of consumers.
Both the industry and the regulator have had to adopt a spirit of innovation and creativity.
Convergence and consolidation
One of the biggest changes is the convergence of broadcasting and telecom technology, combined with massive consolidation in the industry. I know this is of great concern to you as independent players in the smaller markets.
The communications industry in Canada is now dominated by a handful of major vertically-integrated players with extensive infrastructure, wide ownership of content and very deep pockets.
This concentration of power provides them with the efficiencies and synergies they believe are necessary to adapt to this changing world. But with those benefits of mass comes risks that you know only too well threaten the diversity of the system, and it's part of our job at the CRTC to see what can be done about moderating those risks.
As you know, one of the biggest consolidations ever was approved by the CRTC in June: the takeover of the Astral broadcasting assets by BCE. The Commission assessed the value of the transaction at over $4 billion.
A consolidation on this scale always carries the risk — as was pointed out to us — that the massively expanded new entity could start throwing its weight around in anti-competitive ways. Many clearly fear the company could exploit its power in the market at the expense of smaller independent players, as well as suppliers and consumers.
That's where the regulator comes in. As you know, this was the second time around for the BCE/Astral application. In 2012, we rejected their first proposal.
There were a number of important factors that influenced that decision. One of them was the concern that the combined company could restrict access to its programming services or offer them to its competitors only at above-market rates.
This could threaten the availability of diverse programming choices to Canadians. It could endanger the ability of distributors to deliver programming at affordable rates and on reasonable terms on multiple platforms.
Therefore, the Commission made sure that the terms we finally approved this year included unprecedented safeguards:
- The expanded BCE, including its related entities, must adhere — as a condition of licence — to certain sections of our code of conduct for commercial arrangements that are designed to reduce the potential for anti-competitive behaviour with the aim of ensuring fair treatment for independent programming services.
- It must not unduly withhold online and mobile rights from competing distributors — even if BCE is not exploiting the rights itself.
- BCE must file with us all of its affiliation agreements with programming services and TV distributors, within five days of their execution. We won't be approving them, but this requirement will enable us to monitor what's going on, and we'll be able to investigate any concerns over improper conduct. If BCE is giving itself or one of the other big players a better deal than it gives the independents, we intend to know about it and we can take action.
- We've been especially concerned about the possible impact of terms and conditions on subscribers to distributors that serve rural or low-density areas. So we'll consider that impact in determining whether the terms and conditions are reasonable.
- If an existing affiliation agreement is going to expire, BCE must reach a new one no later than 120 days before the expiry date. If it fails to do that, it must enter into a dispute-resolution process supervised by the Commission. This mechanism will benefit independent operators by shortening delays and reducing the risks of retroactive fees and interest costs following a CRTC decision.
We're confident that these measures will help to level the playing field and offer you protection in your dealings with a player that holds much greater market power.
We've been working hard to put measures in place to help ensure that you can continue to provide a diversity of choice to your customers. The Commission is very much aware of your business realities. You have been heard.
In fact, we're very pleased that earlier this month, you welcomed CRTC staff as observers to the meeting where you discussed what an "ideal affiliation agreement" might look like. We're always ready to hear about your concerns.
Local competition in telephone service
I'd now like to turn to the local telephone market. In 2006 we opened up competition in the markets of the small incumbent telephone companies. We reaffirmed that decision in 2011. Also in 2011, we opened local phone service to competition in the operating territory of Northwestel, in the North.
These steps have enabled service providers to enter markets that were previously closed to them, giving consumers access to a broader range of products and services.
Competition offers more choice to Canadian consumers. It also opens up new business opportunities for service providers and encourages innovation. The CRTC strongly favours an environment that's open to competition. We are pleased to see that some of you have entered new markets and become competitive local exchange providers.
Conversation on "television"
A few minutes ago I ran through some statistics that reflect the radical changes that our communication industry is going through. Where is this taking us? What does this mean for the Commission's work as the regulator?
We cannot make good decisions unless we make ourselves available to listen to, learn about and consult with everyone involved in the areas we regulate. That means all the players in the communication industry, and the most important stakeholders of all: the people of Canada. Or as the late Premier of my province, Ralph Klein, used to call them: Martha and Henry — the Mr. Everyman and Ms. Everywoman whom you and we ultimately serve.
This fall we will be beginning a conversation with Canadians on television — as we know it and as we may come to know it. This proceeding is an important part of our three-year plan of action. It's time for a fresh look at the assumptions that underlie our framework for the regulation of broadcasting.
That framework was constructed to carry out the mission assigned to us by the Broadcasting Act. For decades, we have followed a well-established pattern: We issue licences to broadcasting networks and to cable and satellite service providers, with certain conditions attached to ensure that the aims of the Broadcasting Act are advanced.
Over the years, the framework has evolved, mostly in response to changes in technology, industry economics and the interests and choices of Canadian consumers. These regulatory responses have been well-suited to the developments of their own times. But the overall result has been a complex system of rules built on an old foundation that was never designed to support them.
One of the old assumptions was that the CRTC could act effectively as a gatekeeper. Those who wanted to broadcast to Canadians had to do so under our rules, and Canadians — Martha and Henry — had little access to broadcasting that hadn't been channelled through those rules.
But now the Internet and all the devices that can reach it directly have created a borderless world. We can no longer define ourselves as gatekeepers in a world in which there may be no gates. We can't tell Canadians what to watch, nor should we. They are free to enjoy a much wider range of information and entertainment than ever before. And they are.
How can we act as an enabler of Canadian expression, rather than as a protector? How can we shift our focus from rules and processes and procedures to actual outcomes? How can we help Canadian creators to take advantage of all the opportunities in the new global environment — one in which the opportunities may exceed the threats? How can we ensure Canadians see their realities, hear voices that are familiar to them and get the information they want and need in the television shows they watch?
Our conversation with Canadians will be about the future of television, which is still the medium that Canadians rely on for most of their programming content. But of course we expect that the conversation will go way beyond the familiar box in the living room.
The first stage of our conversation will involve Canadian viewers — the Marthas and Henrys — from across the country. We'll then be hearing from members of the industry, distributors like you, broadcasters, news people and content creators.
We look forward to hearing from the CCSA and its members. We also recognize how close you are to the communities you serve, and we hope we can count on your help in making those communities aware of this initiative and encouraging them to take part.
We have no doubt that you as independent operators have the creativity and the entrepreneurship that are needed to move our communication system forward. We invite you to help us achieve the goals of the Broadcasting Act as we all take on the challenges of the 21st century.
Thank you very much.
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