Canadians may not want pick and pay TV as much as they think

Channels could go dark, prices could rise if regs are tightened

Canadian consumers clamouring for unbundled, a la carte TV channel subscriptions may be cheering the federal government’s goal of forcing cable and satellite distributors to unbundle their offerings. But the move may come at a cost.

Currently, Canadian television consumers are unable to simply pick the channels they want to subscribe to. Instead, they must often select – and pay for – bundles of channels even if they have no intention of watching most of them. Imagine having to buy an entire fruit basket every time you want to pick up an orange.

Major obstacles remain

Still, the so-called pick-and-pay approach, announced in the government’s throne speech yesterday as part of its consumer-friendly push – it also wants to ease international wireless roaming fees and simplify credit card charges – may not be as straightforward a process as Ottawa hopes.

The move could face some significant regulatory and contractual limitations. Telus CMO Dave Fuller says his company is on-board with Ottawa’s plans, and has already structured its Optik service around pick-and-pay principles. But there’s only so much a distributor like Telus can do, and the media companies that own the content may stand in the way.

“Those guys do not like pick and pay at all,” Fuller told Yahoo! Canada. “They all want packaging restrictions. They’re very particular about what their channels are packaged with and you can’t make any changes to those packages without their consent. They all insist on penetration targets that ensure the channel reaches a certain percentage of their base audience. And many of them prohibit pick and pay.”

Fuller says the existing contracts between distributors and content providers will have to be significantly overhauled before pick-and-pay can proceed. And even then, it may not be enough because the CRTC’s regulatory power doesn’t cover U.S. channel distribution rights in Canada.

“The thing the government has to do is change the environment vis-a-vis the media companies and the content licenses they’ve asked the [broadcast distributors] to sign,” said Fuller. “Otherwise we’ll get nowhere on this.”

Content owners at risk

Fuller also warns of collateral damage to existing channels, citing the specific reference to “protecting Canadian jobs” as a tipoff.

“Presumably that's some tacit recognition of the fact that there are swaths of the Canadian industry that today are propped up by the economics of bundling,” Fuller said. “If consumers were left to pay just for the channels they want, far fewer of them would get these channels than get them today, which impacts the subscription revenue that that channel gets.

“Either a bunch of channels become insolvent,” he added, “or others will only survive by having a pick and pay price that is far higher than the subscription price that they charge today when they’re inside a bundle.”

Despite the risks, Rogers says it’s high time the government moved in this direction. The carrier ran an a la carte pilot in London, Ontario between November 2011 and March 2012 to gauge consumer interest.

“We’ve been advocating for years for more flexible cable packaging because we know it’s important for our customers,” the company said in a statement. “We think the system has to adapt in order to meet the changing needs and tastes of customers and are encouraged that the federal government is committed to doing what’s right for cable TV consumers.”

In the end, Canaccord Genuity says there’s no guarantee the throne speech comments will lead to eventual action.

“There were few details except for comments that any such move would protect Canadian jobs,” the company wrote in its post-speech comments. “This suggests that Canadian content rules will not be relaxed, making the implementation of a la carte even more complicated.”

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca