Consumers oppose fee hike, CRTC says

In a CRTC-authored report on public reaction to fee-for-carriage, the commission reveals a largely negative response to a possible fee increase, a reaction not necessarily tied to affordability, but perceived value.

At first largely silent on the impact the fee-for-carriage debate is having on consumers, the CRTC has released a report outlining public and industry response to the heated regulatory battle that has now been deferred to the Federal Court of Appeal.

The 25-page report, titled ‘The Implications and Advisability of Implementing a Compensation Regime for the Value of Local Television Signals,’ summarizes the reactions based on the December 2009 public hearing and solicitation of public comment on the debate. Through these avenues, the CRTC received close to 190,000 public comments and close to 164,600 comments from the two PR campaigns conducted by CTV, CBC, Global, A, CHEK, V and NTV (‘Local TV Matters’) and Bell, Bell Aliant, Cogeco, Eastlink, Telus and Rogers (‘Stop the TV tax’).

Consumers, the Commission concludes, are largely opposed to a fee increase spurred by value-for-signal, or VFS, as it refers to the broadcaster-carrier negotiation framework announced Monday. The two primary themes that emerged, the report says, were a concern for the future of local television and an overriding opposition to paying more for the programming. ‘It is clear from the record of this proceeding that most consumers are opposed to paying more for television services,’ the report states.

A similar conclusion was reached by Mediabrands Canada and M2 Universal last year when the media agency conducted a study of 1,000 Canadian adults gauging consumer reactions to a possible fee increase brought on via fee-for-carriage, Hugh Dow, chairman, Mediabrands Canada, tells MiC. The study found that 42% of people interviewed said they would cancel their conventional channels rather than pay more for them, while only 16% said they’d pay more to keep them.

‘So obviously there would be a very significant consumer backlash to any increase in fees,’ he says. ‘Admittedly, that was a year ago, and perhaps things were a little tighter for consumers than they are now, but regardless, that’s a phenomenal amount of consumers that are obviously not prepared to pay any more. The implications for that are major. If they cancel channels, that means no viewing, and no viewing means no advertising revenue.’

In the report, however, the Commission notes that there are some interesting caveats to the consumer’s overall opposition to a fee. It found that the PR campaigns waged by the broadcasters had a influence on the public, most significantly in the ‘Stop the TV tax’ campaign which claimed fees per month could be as high as $10, a figure on which, it says, many commenters based their reactions. ‘The consumer reaction to such a fee can be characterized as one of outrage,’ the report states.

However, when asked at the hearing how they would react to a fee regardless of price point, the most common responses from the public were that would either switch to ‘other sources’ of TV programming, ‘re-evaluate’ their cable packages or even their choice of TV as their information and entertainment medium of choice.

Perhaps most interestingly, the Commission reports that the value people assign to TV is not necessarily tied to affordability, citing as an example a 17.2% increase in total BDU subscriptions since 2002, despite a 47% increase in average per-customer BDU subscription fees in the same period. This, the report says, indicates that there would not be a ‘significant withdrawl’ in demand for BDU services in the face of a rate increase. If there had been a decline with higher subscription costs, there might be concern, but the data does not support such a conclusion, it says.

Based on the hearings and public commentary, the CRTC says in the report that it does not believe that ‘other platforms’ yet pose a significant threat to the viability of television. ‘The likelihood of mass migration at this time to other platforms in response to increased cable or satellite bills is low, as these alternate platforms are not yet equivalent to television either with respect to the availability of programming or the quality of the viewing experience.’

In an interview with MiC, OMD managing director, digital and emerging media Gilad Coppersmith says that he does not believe fee-for-carriage would drive more people to the web for TV programs, but noted the popularity of online TV could affect the amount of the fee charged.

‘However, as viewing on the web becomes the first choice for a greater number of viewers, as it is with some people already, I would expect serious questions to be raised as to the amount of fees that the TV companies will legitimately be able to charge the cable and satellite providers for those consumers to watch the same content on a TV screen [as they could on the web].’

Nick Barbuto, VP, digital solutions at Cossette, believes the shift to online TV is already well on the way, a trend he says he thinks will increase if pre-roll takes the place of the pay-per-show models currently in place for distributors such as Xbox and iTunes. He likens the shift to the cell phones versus landlines debate in the early days of the decade.

‘I was talking with some young people recently about viewing television, and a lot of them who are getting their own places are not even subscribing to traditional cable anymore. It definitely feels like that transition point for people that grew up with cell phones and said ‘why do I need a landline anymore?’ It feels like we’re right at that crux again. I have no doubt that transition will continue to increase, where you see cable and telephones lines become conduits for the internet, rather than conduits for a select menu of programming, on the traditional TV side anyway.’