Services could be opened to all, but no price limitations means discrimination could continue.
CRTC Rules Loophole:
In my post last week on Shomi and Crave TV – the Netflix-like streaming services from Rogers, Shaw and Bell – I did my best to delve into the confusion resulting from upcoming changes in CRTC rules.
One thing I missed is the big loophole that will ultimately give the companies everything they’re looking for. Despite the CRTC’s best intentions to the contrary, consumers don’t stand to gain anything unless the rules are tweaked to include pricing stipulations.
Under the new rules, Rogers, Shaw and Bell will have to choose how to classify Shomi and Crave TV. Here again are the three options available to them:
The video-on-demand option, on the right side, is probably the least desirable. It would require the companies to pay into Canadian content creation funds and offer a certain amount of CanCon. It would also forbid them from hoarding exclusive content. Bell, for example, would have to make its HBO library available to other cable providers.
The “digital media exemption order” option on the left, where Shomi and Crave TV would have to be available to all Canadians over the internet regardless of who their ISP or TV provider is, is also undesirable. Even though it allows exclusive content and doesn’t have any CanCon requirements, it’s also not what the companies have in mind. Shomi and Crave TV are intended to keep subscribers tied to other services, otherwise they’d already be offered on a standalone basis.
The new “hybrid” model in the middle offers Rogers, Shaw and Bell the best of both worlds: the ability to have exclusive content and remain exempt from CanCon requirements. The downside is that Shomi and Crave TV would have to be made available to everyone over the internet without any other tied services.
That would normally be a tough choice for the companies were it not for one key loophole, brought to my attention by Paul Anderson, president of independent ISP egate Networks. As he points out, the CRTC makes no mention of what price Shomi and Crave TV would have to be offered at in such a scenario:
@peternowak If a provider goes hybrid do they need to offer to all Canadians AT THE SAME COST? Shomi w/ Rogers TV – 7$/mo, w/o 250$/mo?
— Paul Andersen (@pandersen) March 13, 2015
Theoretically, if Shomi and Crave TV were put into true competition with Netflix, the U.S.-based service would provide price discipline. Netflix has set the bar at $8.99 a month, so Shomi and Crave TV would have to be priced appropriately – probably lower – if they were to stand a chance of attracting subscribers.
But again, as Anderson points out, that’s not necessarily a priority for Rogers, Shaw and Bell:
In other words, the companies could happily classify their services as “hybrid” to be exempted from CanCon requirements and to get the green light for exclusive content. They would have to offer Shomi and Crave TV to everyone in exchange, but they could then charge whatever they want for the standalone services.
Sky-high standalone prices – say, $20 a month – coupled with lower bundled prices would ultimately discourage subscribers from signing up for just the streaming services. Despite “officially” being available to everyone, Shomi and Crave TV could still continue to effectively operate as tied services.
It’s a loophole that would serve to continue the limited-availability status quo, which is probably not what the CRTC intends.
The regulator is going to need to close this loophole during its consultation on the issue, perhaps by insisting that hybrid services need to be sold at the same price regardless of whether they’re delivered via cable or the internet.
Otherwise there’s no point to the new rules, other than to give Rogers, Shaw and Bell everything they want.