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Opinion: The high cost of unbundling TV channels by Ian Morrison

Nov 26, 2013

Bundling has served Canadians well and gives value to subscribers

Source: Vancouver Sun

Hang on to your pocket books. Thanks to Ottawa’s recent promise, the cable guys could soon be jacking up your cable TV rates even higher.

How could that be, you might wonder?

After all, much like a born-again consumer crusader, the Harper government’s speech from the throne declared: “Our government believes Canadian families should be able to choose the combination of television channels they want. It will require channels to be unbundled.”

Here’s why we viewers should be skeptical.

Some people dislike paying for channels they don’t watch. They would rather just pick and pay for channels that appeal to them. Although they assume they will save money by subscribing to fewer channels, they are in for an unpleasant surprise should pick-and-pay become reality.

The CRTC stopped regulating the price of cable and satellite channels 11 years ago, believing, falsely as it has turned out, that competition would discipline prices.

Instead, the price of the least expensive package available from Canada’s cable territorial monopolies has increased by more than 80 per cent, four times the rate of inflation.

Shaw’s prices have skyrocketed from $22 to $40, Rogers’ from $23 to $43 and Videotron’s from $19 to $37, most of this on the watch of Stephen Harper’s government.

Since the end of rate regulation, the annual profit before interest and taxes of big cable has shot up from $1.15 billion to $2.57 billion, an increase of 103 per cent after inflation.

This amounts to a transfer of more than $10 billion from viewers to cable owners’ pockets in the 7½ years since the Conservative government came to power, with not a peep from Mr. Harper’s government — until last month.

The big cable monopolies — Shaw, Rogers and Videotron — will simply re-price the channels on offer so the aggregate cost to subscribers will be at least equal to what they take in under the current bundling system — while increasing their already overwhelming leverage over smaller Canadian broadcasters. CRTC’s recently retired vice-chair for broadcasting, Michel Arpin, has estimated that under pick-and-pay the monthly cost of TSN, Canada’s most popular specialty channel, would jump to $9.

There will be winners and losers.

The winners will include popular U.S. channels that will now have a chance to increase their carriage fees once they are unbundled from packages with smaller Canadian services. This will send more Canadian subscribers’ money south, leaving less for Canadian creators. TSN, RDS and SportsNet will win big-time. Losers will include niche Canadian channels such as Biography, Mystery and Bold that have made expensive programming commitments to the CRTC. CBC NewsNet, CTV News Channel and that favourite of the Conservative caucus, Sun TV News will also lose.

Bundling has served Canada well because of the value it represents for subscribers. From its origins, bundling has grouped what the industry calls “drivers” with other, less established choices. One of the reasons Canadians enjoy access to so many U.S. cable channels is that the cable monopolies convinced the CRTC decades ago to approve their distribution to market bundles that include fledgling Canadian channels.

Under pick-and-pay, Canadians will have fewer channels to choose from and, when they hear about an important soccer game in Europe or a popular drama on a channel they used to get, they will call their supplier and find it will cost them a bundle to gain access to that channel.

When our Heritage Minister stood in Question Period and said “Canadian families work hard to make ends meet, and every dollar counts” and “Canadian families should be able to choose the combination of television channels they want,” she managed to convey an erroneous impression she was talking about the same thing.

A hint of the seat-of-the-pants origin of this throne speech proposal is the government announced it in October but only last week asked the CRTC to report on its impact.

If the Harper government was serious about reducing the cost of TV channels, it could direct the CRTC to re-introduce rate regulation. This would redirect some of the huge profits of the monopolies to help the pocket books of Canadians. Unless that happens, what we are hearing from our government is nothing more than a sleight of hand. As Canadians come to experience its impact on their screens and in their pocket books, they will know whom to blame.

Ian Morrison represents Friends of Canadian Broadcasting.

© Vancouver Sun