CRTC’s New Vertical Integration Rules Include New Safeguards, but Won’t Stop the Price-Gouging

September 21, 2011 – The CRTC’s decision on vertical integration today is nothing more than a half-measure, says citizen engagement organization OpenMedia.ca. Earlier this year the group hosted a 500,000-strong campaign against usage-based billing—a problem stemming from a distinct lack of competition in the Internet service market and vertical integration. While the examination of vertical integration was an important step in itself, the results are less than impressive.

The code of conduct established today prevents some anti-competitive content hoarding, but the CRTC is still allowing companies to offer exclusive Internet and mobile content to their customers, unless it was originally produced for television or another unrelated medium.

The term ‘vertical integration’ refers to companies that own both content and the methods of distributing it. For many, the problems with excessive vertical integration are clear: there would be nothing to prevent big companies from hoarding and giving preferential treatment of their content, thereby creating an anti-competitive content market and an incentive to restrict access to independent online content.

The CRTC had issued this review of vertical integration following their approval of Shaw’s acquisition of Canwest Global in October, and Bell’s acquisition of CTV one month earlier.

The CRTC’s measures fail to meaningfully address the reality of vertical integration: concentration in Canada is extremely high by global standards, and more than twice as high as in the US. For instance, four large companies—Bell, Shaw, Rogers and QMI—control 86% of cable and satellite distribution, 70% of wireless revenues, and 54% of Internet Service Provider revenues.

“With this kind of power, the Big Four has both the incentive and the means by which to exercise undue preference when it comes to content,” says OpenMedia.ca executive director Steve Anderson, “and to price-gouge Canadians in the markets they jealously cling to.”

“Without strong rules from the CRTC, large vertically integrated corporations will severely impede competition in Canada, and ultimately prevent Canadians from accessing diverse content.”

About OpenMedia.ca

OpenMedia.ca is a national, non-partisan, non-profit public engagement organization working to advance and support an open and innovative communications system in Canada. Our primary goal is to increase public awareness and informed participation in Canadian media, cultural, information, and telecommunications policy formation.

OpenMedia.ca is best known for coordinating the Stop The Meter campaign earlier this year. The Stop The Meter campaign is widely considered the biggest online citizens’ campaign in Canadian history, involving nearly half-a-million Canadians.

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Contact

Lindsey Pinto
Communications Manager, OpenMedia.ca
778-238-7710
[email protected]

More information

As quoted from the CRTC’s press release, the new framework for Vertical Integration includes the following conditions:

• Prohibit companies from offering television programs on an exclusive basis to their mobile or Internet subscribers. Any program broadcast on television, including hockey games and other live events, must be made available to competitors under fair and reasonable terms.
• Allow companies to offer exclusive programming to their Internet or mobile customers provided that it is produced specifically for an Internet portal or a mobile device. This includes supplementary programming such as behind-the-scenes video clips of a television program, as well as original content.
• Adopt a code of conduct to prevent anti-competitive behaviour and ensure all distributors, broadcasters and online programming services negotiate in good faith. To protect Canadians from losing a television service during negotiations, broadcasters must continue to provide the service in question and distributors must continue to offer it to their subscribers.
• Implement measures to ensure that independent distributors and broadcasters are treated fairly by large integrated companies. At least 25 per cent of specialty services1 distributed by a large integrated company must be owned by an independent broadcaster. In addition, broadcasters launching a new pay or specialty service must make it available upon request to all distributors as an individual service, even if a commercial agreement has not been finalized.