The year 2014 will see more key developments in broadcasting around the world and in Canada. These developments are all related to the topics we have addressed under InfoComm, from Usage Based Billing (UBB) for Internet access service to rebuilding the Last Mile.
Already, Sony has announced that it is launching an Over-the-Top (OTT) streaming video service in the U.S. and elsewhere, creating a well-funded option to cable, telco and satellite video distribution services. These incumbent distribution companies will fight to keep their current revenue share using selective price increases, UBB and download caps for their internet access offerings, exclusivity for attractive programming and other avenues.
In Canada, Rogers has just announced joining the OTT bandwagon by making deals with major OTT suppliers such as NetFlix. This marks an important strategic turn for the company as well as a validation of the OTT delivery model. It also marks another chapter in the long story of large Canadian companies waiting for the establishment of U.S. brands and then buying in.
This comes on top of Rogers having acquired NHL distribution rights marking the end of CBC’s participation in this historic territory. Distributor owned programming services continue to muscle in on what used to be the territory of the conventional TV broadcaster whether private sector or government owned. In effect, the specialty channel model has pushed the conventional broadcaster model out of an important market segment. It also affects CBC’s revenue creating a funding challenge and another round of debate on the role of the CBC.
The CRTC has launched its “Let’s Talk TV” initiative, an extensive public consultation process in line with its “consumer-friendly direction”. The federal government’s directive to the CRTC to move in the direction of “pick-and-pay” approaches was announced shortly after the start of “Let’s Talk TV”. All this will roll out in 2014.
Two U.S. legislative initiatives in the same direction came after the Canadian regulatory initiatives. Two bills were introduced in the senate, one promoting pick-and-pay (or a-la-carte) and the other preventing cable owned internet access companies from discriminating against competing OTT video services. This similarity in the regulatory agendas in both countries shows that much of the policy debate is driven by technological development independent of national markets and established regulatory policy.
While all of these developments point to a future of more OTT and consumer choice, consumers are moving there at a stately pace. The CRTC’s Communications Monitoring Report show that private conventional broadcasters suffered a 5.9% revenue decline in 2012 showing that this function is at the front line of the losses, while cable and satellite still achieved a small increase (1.1%). Rogers, Shaw and Cogeco had small losses in number of subscribers, although Videotron, in the Quebec market, had small gains. Bell satellite continued to gain subscribers while Shaw stayed about the same.
Most of the cable losses, however, were to telco based IPTV services. In any case, the number of cord cutters, people who have abandoned video distributors for pure OTT, remains small, allowing the incumbents time to adapt. It is the growth that has gone elsewhere. Keep in mind, however, that the numbers above end in early 2012. There has been plenty of water under the bridge since then.
New distribution competitors are also launching in Canada. These are the independently licensed IPTV distributors that have been given an opportunity to take on the large incumbents.
Last Mile developments are also having an impact in the U.S. In the U.S., Google continues to expand its Kansas City FTTH operation and has expanded to other cities. The municipal networks movement continues to expand offering a new form of competition to the conventional telecom infrastructure. Neither have yet gained a foothold in Canada with the exception of a number of remote aboriginal communities, usually relying on satellite for the long haul signal transport.
These developments are closely interrelated and there will be interesting developments throughout the year.