The Canadian Radio and Telecommunications Commission here in Canada regulates all things pertaining to the internet, cable TV, home phone, Broadcast networks and cellular phone industry.

Recently the CRTC released a decision requiring all cable TV providers to change the way services are sold. The globe and mail described this decisions like this.

“Television subscribers will be able to buy only the channels they want, one by one or in small packages, the federal broadcast regulator said Thursday. By the end of next year, TV subscribers will have the option to add those networks to a “skinny” basic cable package that will cost no more than $25 a month.”

Personally I do not have a problem with this type of cable packaging. In fact I believe it is a good thing for consumers over all. But not without its cost. The problem I Have is with how the packaging has come to be in the first place.

As with many things in Canada, we operate and live within a highly regulated market place within this country. This regulatory environment is a very real contributor to the lack of competition and high consumer price for goods and services as compared to other developed nations around the world. It is also important to understand that most cable TV providers in Canada already offer, give or take, 100 + pick and pay TV channel options for consumers. In addition to that some cable companies also already offer affordable tv, phone and internet packages, The company I work for offers a bundle for 60/month for all 3 services. (most people however are not happy with what the bundle offers and want more for the same price).

Many of the regulations in Canada have resulted in bundling by law. An example of these regulations which is not being repealed is mandatory carriage. Essentially what this means is that in order to have a TV package, consumers are required to purchase first local Canadian content whether they want it or not before they are allowed to buy other content and specialty channels. The CRTC has effectively forced Canadians to buy bundled services because they have deemed local networks to be too important to fail. It is feared that if people were not forced to buy these channels before buying anything else they would somehow go out of business. Considering the overwhelming amount of people who have made this argument with me, I can only conclude they are wrong. Not only that if local channels cannot survive in the local market which is why they are mandatory carriage then clearly they are not catering to consumer demand effectively in the first place. There seems to be such a high demand for local channels that I cannot see these networks loosing out on subscribers in any significant way. When people call me at work I am often asked “do you get the local channels in your basic package” There are a small amount that do not want them however.  Why does the CRTC feel that they should be forced to have these channels if they do not want them. That is after all the premise of their argument to require pick and pay channels for everything else. Consumers should not be required to buy channels they do not want to get channels they do. This set up still requires consumers to purchase for example CBC (which is publicly funded at close to 1 billion a year) before they are allowed to buy discovery channel for example.

The irony in all of this is that the CRTC is still regulating what consumers can and cannot watch. In order for a channel to get into Canada they are required to abide by content laws with a min of 35-50% Canadian content. Which is why we have food network Canada, and not food network, or HBO Canada and not HBO, discovery Canada and not just discovery … (it may also be the reason why so much of what is on these channels is constant repeats as there is not enough Canadian content to fill the gap)

Canadians have been complaining for quite some time about the cost of service and the bundle options. They have felt that there is limited choice and high cost to get the channels and programming they want. I don’t disagree with them. The problem here is that we have within our Canadian culture a crybaby helpless mindset. We don’t think about helping ourselves. The consumers mindset is one of a kid having a temper tantrum at the grocery store. They yell, scream and make demands, then pay the bill and complain to mommy (CRTC) that the big mean cable company won’t give them the service they want at the price they want. The end result is that they run to mommy and daddy to make them change. This leads to more government regulations which results in the most recent decision by the CRTC.

The irony is all of this is that the protectionism regulations set up by the business in the industry who ran the CRTC is what created this problem to begin with. The CRTC has effectively created oligopoly and monopolistic environment which these business work in resulting in the lack of choice and non-competitive environment in which consumers demanded via pressure to regulate in the first place. What we have now is that same regulator which caused the problem to begin with is now supposed to solve the problem they created.

This will not bring more choice as consumers will still have at best 2 choices for cable TV, both offering the same thing as the other at the same price points. To put this in perspective in the united kingdom a quick Google search reveals that there is at least 10 cable companies servicing a country with twice the population of Canada. Canada has about 3 companies to choose from. Rogers, Bell and Shaw, (Telus if you count them). At best 4 companies. We may have half the population but we have less than half the ratio for companies to choose from when you look at national options. In fact there is not one cable company in Canada that provides service to the entire country. There are other smaller providers but they service only small areas of the country. Here is a simple break down

Telus – Alberta and BC

SHAW – Alberta and BC (small parts of Saskatchewan and only Winnipeg in Manitoba)

Rogers – Ontario

Bell – Quebec

Eastlink – Maritime provinces

Sasktel – Saskatchewan

MTS – Manitoba

Northwest tel – Territories and some parts of BC

(general summary only, providers may service some areas not listed in limited fashion)

Essentially you are lucky if you have 2 choices for service providers. With such a make up in the pay TV landscape carved out with the help of the CRTC is it any wonder that this regulator is the problem in the first place. The CRTC is; as far as this blogger is concerned, directly responsible for high cost to consumers. By creating and oligopoly system to provide these services there never has been an incentive to provide lower cost service, because there has never been effective competition within the industry.

Considering the CRTC has mandated a maximum price for these products at 25 dollars for a basic TV package, how long before the CRTC starts regulating internet rates across Canada as they have done already. ( CRTC Cracks down internet rates in the north ). How long before the CRTC starts to regulate and cap rates on cell phone rates, pick and pay channel rates. Even the CRTC has admitted channels will fail in this new market. While that is the nature of free market economics, it should not be because of state mandated regulations that cause business to fail.

The problem we have here is not so much that business is forcing people to pay more than they want, it is that people cannot let go of their “rights” mentality concerning products that are not essential for our livelihoods. These services are not rights. We have created an environment of cry baby wannabe’s that cannot handle the thought of going without. The very idea of refusing to pay the rates they are and cancel their services is just so unthinkable to them. Cable companies know this and it has directly resulted in the high cost of service along with many other regulatory factors for the “benefit” of the consumer .The only option as they see it,  is to ask for more regulation to “lower” their bills.

Consumers in this country generally have no clue how this is going to effect the cost of their bills. Many pick and pay channels go for about 3.00/month right now. Many of which are also included in packages (which make those channels as low as 0.50/channel). with pick and pay even at the 3/month rate which I cannot see going down only up, those same 20 channels in a theme pack for 10/month would now cost 60/month for those same channels. This will not lower the cost of service, it will increase it as every government regulation has done in every industry in the history of state intervention in the market.

I certainly understand that Canada has geographical challenges that contribute to the cost of these services. Canada has one of the largest geographical areas with a small population creating huge infrastructure cost to deliver service to a smaller number of people compared to pretty much every other developed nation in the world that we are often compared to. Canada is in the bottom 12 of the least densely populated countries in the world. Our population is also very highly spread out. This contributes large cost to provide services and something that is often not considered. This alone however cannot justify state intervention in how a business markets and sells its products. Ultimately consumers have much more power than they realize. Sadly in this country however, consumers would rather have the government do their work for them while continuing to pay for the service they claim is not worth the price.

The most effective thing consumers can do is to not pay the prices asked by refusing to purchase the product or service. This is a big reason why many have opted to “cut the cord” and stream all their content online via services like Netflix, popcorn time, you tube, shomi, crave tv etc…

The industry should be able to succeed or die without state intervention based on consumer demand and business marketing. When all is said and done no amount of regulation will really help consumers in the end.