WordsByNowak

One of the CRTC’s edicts last week that was cheered by consumers was the requirement of television providers to give subscribers more choice and flexibility in their packages. The order, which the TV companies must comply with by April or risk incurring an inquiry by the regulator, seems to be a direct answer to the most common complaint from subscribers, which is that they are paying for a multitude of channels yet watching only a few of them.

It’s also one of those typical kindly grandfather moves by the CRTC, which always seems to know what’s best for all of its dimwitted grandchildren. With the growing availability of TV shows on the internet, a pick-and-pay system for traditional television subscription is also the best way to protect that particular business. If consumers can pick the channels they want and pay less for them, they’ll be less inclined to cancel their subscriptions outright, which is also good for providers, or so grandpa’s thinking goes.

On the surface of it, this sounds like good news for subscribers. Perhaps they will finally be able to pick only the channels they want, thereby cutting out all the useless noise (Speed channel, anyone?).

That’s great, but anyone who thinks this will result in big savings hasn’t been paying attention to how things work in Canada. The conventional logic would mean that less channels equals less monthly charges, right? Wrong.

According to the CRTC’s annual Communications Monitoring Report, the average TV subscriber currently shells out $59 a month. That actual amount varies across providers of course, with some being higher and some lower. A quick calculation from Rogers’ numbers, for example, shows that company’s monthly bill is closer to $68. TV providers are not likely to want to significantly cut into their bread and butter.

A look at Quebec, which has had a degree of this sort of pick-and-pay system for a little while now, is instructive. The cheapest option on cable provider Videotron, for example, is a basic service plus 10 channels of the subscriber’s choice for about $39. Bell used to offer a basic package plus 15 channels starting at $40, but a quick perusal of its website now turns up only a basic-plus-30-channel package for $49. Add in a bunch of extra fees, such as a receiver or PVR rental or Videotron’s $3 charge for high-definition signals, and the final bill edges closer to between $45 and $55.

That’s getting pretty close to the CRTC’s stated average monthly bill - and it’s for a significantly slimmed-down channel package. In other words, going with such an option is a good way to carry on one of Canada’s favourite traditions: getting less for more. And here’s the kicker: as Videotron states in its fine print, at least half the channels subscribers pick must be Canadian, thanks to CRTC regulations. Say hello to the Zeste channel, whatever the heck that is.

There’s no guarantee that these are the sorts of options TV providers will bring to the table in April as their best offer for the rest of Canada, but the Vegas odds are probably pretty good that they will. In that case, will it be enough to stop subscribers from cutting the cord? Or, more importantly, will it be enough to encourage new subscribers - especially kids who are already watching most of their shows online - to connect the cord in the first place? Not likely. It shouldn’t surprise anyone, then, when grandpa ambles up off his old rocker and ends up getting involved.

As was obvious in my Gears of War post last week, I’ve been doing a lot of soul searching about video games lately. Actually, it might be more accurate to say I’ve been searching for the soul of video games, if they have one. I’ve been thinking a lot lately about aging - I’m 37 now - and how that applies to games. I’ve been writing about them for 15 years or so, so my first natural inclination is to think, “I’m too old for this crap” (to paraphrase Danny Glover). After all, video games are kids stuff, right?

Quite the opposite. My generation is the first to be brought up on games. We started playing them as kids, so it’s understandable that everyone older than us may indeed view them as kids stuff. But to us, it’s a medium that has always been part of our lives, so video games are as much “kids stuff” as television, movies or books. The older generation’s condescending view is only likely to persist until they die off. Like many people, I look forward to such a world (just kidding… mostly).

That’s why I’ve been on the bent of late of trying to think of games in a more serious light. Yes, their primary purpose is supposed to be fun, but when the medium is aging along with the generation that created it and we ourselves are maturing, shouldn’t we take it more seriously?

As I lamented in that Gears post, part of the whole problem is in how games are reviewed. I wrote about how they’re not judged on the same level as other media - a movie that gets a 90 on Metacritic, for example, is probably a great movie in every regard while a game that scores a similar rating might have serious flaws. There’s something very wrong with that.

Most reviewers rate games on a different system than their film counterparts. While movie reviewers typically rate on a scale of four or five stars, games typically get graded from one to 10, or one to 100. Metacritic and other all-important review aggregators typically convert star ratings on all media into the 100% system, for reasons I’m not sure of.

There is a case to be made for scoring games out of 10 or 100. After all, when gamers are plopping down $60 or $70 for a game, they want to know if they’re getting their money’s worth. They want details on everything. A movie can be rated out of five and, if the review is inaccurate, the consumer is only out $12 or so. The stakes are bigger with games.

But such a system treats games solely as a product, which they are obviously not. Games are an artistic and entertainment medium that can do more than just titillate our adrenaline glands; they can spur emotions and thoughts, just like movies or music.

Some review publications, such as CNET and GamePro, have converted to the star system to reflect this reality. It’s an approach I wholeheartedly agree with and am adopting as of today over on MSN (I gave X-Men Destiny and FIFA 12, both of which hit stores today, three and four stars out of five, respectively - links to come). Just like those publications, I’d toyed with the thought of doing away with a rating completely, but it’s obvious that readers like to have that at-a-glance reference. I know I do as a reader.

The star-rating system is better because it takes the niddly-piddly out of the review. One star means the game is terrible, two stars means it’s bad, three means it’s okay, four is good and five is perfect. Anything more than that seems unnecessary and often comes down to splitting hairs. I agonized over whether to give Gears of War 3 an eight out of 10 but ended up settling on seven because it had problems I just couldn’t forgive. Translating that to stars, 3.5 seems just about right for that particular game. It was pretty good, but it didn’t move me.

More to the point, star ratings are much more in line with how just about everything else is reviewed. If we want games to be treated equally as other media, they should be rated the same way.

Rogers, Canada’s biggest cellphone carrier, made waves on Friday by taking its lobbying efforts for the next auction of wireless airwaves to the public. The company launched a website that urges Canadians to write to their MPs in support of a wide-open auction, rather than one that will set aside licenses for new cellphone companies.

The auction, expected to happen next year, will sell off the valuable 700-megahertz spectrum that was recently freed up when most Canadian markets converted to digital over-the-air television signals. Many are seeing this auction as the last, best chance for any new competitors to Canada’s big three - Rogers, Bell and Telus - to solidify a position. The previous auction, which had a set aside for new entrants, netted the likes of Wind Mobile, Mobilicity and Videotron, which boosted competition in major cities and supposedly brought prices down, all of which was the government’s intent in giving newcomers a break. In 2008, when the government announced the previous auction’s rules, it made no bones about the fact that wireless prices were too high and usage of mobile phones was too low.

With its new website, Rogers is purveying the message that an open auction without set-asides is the only way that Canadians in underserved rural and remote areas will get its super-fast Long-Term Evolution network. “I want to see Canadians from coast to coast and in cities, towns and rural areas have access to this technology,” says the posted form letter that visitors are asked to send.

I’ve touched on this before. As things stand right now, an open auction without a set-aside for new entrants would effectively amount to an auction with a 100% set-aside for the big carriers; they simply have every incentive to buy every last chunk of spectrum at hugely inflated prices if it means shutting new competitors out. And without that spectrum, new carriers are effectively dead in the water. Making sure the new carriers get some spectrum, most probably through a set-aside, is therefore a no-brainer.

The implied threat of rural customers not getting service is also a red herring. It’s perfectly natural for telecom companies to roll out service in more profitable urban centres first. It’s also perfectly natural that when growth in those places slows, carriers expand to so-called “green fields” where there are new customers. In a way, more competition in cities is good for rural areas because it creates a race to get there. The underserved nature of many of these communities can be considered another byproduct of the uncompetitive market Canada has had across the board. In that way, the government doing the reverse of what Rogers is asking might be the best way to actually achieve the company’s supposed goal.

Aside from that, the attempt by Rogers to rally the public to its cause - a process known as astroturfing, in that it’s effectively faking grassroots support - is a phenomenally bad idea that is likely to backfire spectacularly. Such efforts always do.

Most recently, AT&T got burned when it tried the same logic and tactics in drumming up support for its proposed takeover of T-Mobile. AT&T trumpeted the message that the merger was the only way to ensure a rollout of advanced wireless services to rural customers and convinced a number of special-interest groups, one way or another, to back it. The Gay and Lesbian Alliance Against Defamation, for one, recently sacked much of its leadership for doing so, then withdrew the support those individuals had promised.

In just one Canadian example, the Chamber of Commerce took heat in 2009 for supporting Bell and Telus in their effort to overturn a CRTC decision that would have given smaller internet providers access to higher speeds. Bell and Telus tried the usual tack, that axing smaller companies’ access was the only way to guarantee their own continued broadband investments, and enlisted their own special interest and lobby groups as support. Some groups that fell under the Chamber’s umbrella, such as the Canadian Federation of Independent Businesses, didn’t necessarily agree with its position and spoke out, doing much to invalidate the whole effort.

Such things can and will happen as lobbying over the next auction ratchets up, which really raises the question of how gullible the telecom companies think the public, the media and the government are. There’s no other explanation for why they keep trying with such doomed-to-fail tactics.

That said, there is still the essential substance of what Rogers is asking for. While a set-aside for new companies is a no-brainer if the status quo holds, there is no reason to believe it will. Before the auction happens, the government is also expected to finally take action on the festering foreign-ownership issue. The exact limits are overly complicated, but foreign companies are currently prevented from having a significant ownership stake in any Canadian telecommunications provider that actually has its own infrastructure and networks. It’s an archaic rule that most developed countries have long since liberalized.

With a majority government in power, it’s looking like the Conservatives are finally getting down to the business they started last year with a consultation on the matter. In that process, they put down four options: do nothing, raise ownership limits to 49%, lift all restrictions on companies with less than 10% market share with bigger companies coming later, or throw the doors open completely. The smart money is on option #3: the first is out and the second is unlikely because it’s effectively like the first, while the fourth could be problematic.

Lifting foreign ownership rules on all telecom companies would likely result in a flurry of mergers and takeovers, both within Canada and from without. My take on what might happen in such a situation is a bit dated, but some of it is still probable (especially Bell and Telus merging). Nevertheless, it’s very unlikely the government wants a string of high-profile, multibillion-dollar mergers to take place in the lead-up to an auction. With that auction a year or two at most away, that’s also probably not enough time for such deals to be enacted, reviewed and consummated.

So what would happen if restrictions were lifted on smaller or entirely new companies? It’s obviously hard to say definitely, but here too the fate of Canada’s wireless market likely lies with whether or not there’s going to be a set-aside for smaller carriers in the next auction.

If the government follows conventional wisdom and decides that - since foreign ownership restrictions are being lifted - the playing field should be equal, then the smart bet is on consolidation. With no set-aside, there will only be room in the auction for deep-pocketed players. Russia’s Vimpelcom, which currently financially backs Wind Mobile, is best situated for that possibility. It would likely take ownership of Wind and possibly try to buy the other two startups, Mobilicity and Public Mobile.

There is the possibility that a fifth large player, perhaps AT&T or Verizon, could get involved and bid on spectrum as a first step toward building its own network from scratch, or buy Mobilicity and/or Public Mobile to get its foot in the door. But, given that the United States - a country with 10 times the population of Canada - is having trouble supporting four national carriers, that’s a remote possibility at best.

Things would get very interesting if, however, the government lifted foreign ownership restrictions and promised a set aside for small and new carriers. While a wide-open auction might effectively declare that the Canadian market is all but settled between four players, an additional set-aside would still leave some wiggle room. There might still be consolidation among smaller players, but they wouldn’t necessarily have to merge. Wind could be bought by Vimpelcom while Mobilicity could sell to AT&T, for example, which would raise the odds of there being more than four carriers left standing after the auction.

Simply put, more players in any market means better prices and innovation will eventually result. It also means some of those players are going to lose money, or perhaps not make as much as they hoped. If a removal of foreign ownership restrictions is a given, the government must then decide on whether its plan to get more competition in wireless has been effective yet. If the answer is yes, an auction with no set-asides is the way to go. If the answer is no, then perhaps new competition must be further stimulated through another set-aside.

The CRTC’s recent Communications Monitoring Report actually quantified the impact of the new cellphone carriers. So far, they’ve amounted to the average cellphone bill decreasing by a whopping 95 cents. That, and the fact that most Canadians still complain about overpaying, means the government’s path forward seems pretty clear.

The CRTC has been quite busy of late coming to the rescue of the poor, beleaguered consumer. That’s nice, but it prompts a few questions, such as: What happened? Why the change of pace? And why now?

On Wednesday, the broadcast and telecom regulator released an edict on vertical integration, or the recent trend that has seen companies that distribute things like TV shows and radio programs buy up the same producers and rights holders of those shows and programs, thereby introducing the danger of exclusive programming. The CRTC said this situation - which could potentially result in consumers having to subscribe to Bell TV to see hockey and Rogers TV to watch baseball, for example - was bad for consumers and essentially forbid it.

On Thursday, the regulator also issued guidelines on how it plans to handle complaints over service providers’ internet traffic management practices (ITMPs). The CRTC laid down its ITMP framework, which is designed to prevent ISPs from unfairly discriminating against certain kinds of internet traffic, back in 2009. The new ruling spells out how individuals can take providers to task when they feel that so-called net neutrality rules have been violated. The regulator says it will also play the name-and-shame game, where it will regularly report violators and the number of complaints it receives.

In both cases, the regulator placed the consumer front and centre. With Wednesday’s vertical integration decision, chairman Konrad von Finckenstein said: “Canadians shouldn’t be forced to buy a mobile device from a specific company or subscribe to its internet service simply to access their favourite television programs.” In Thursday’s net neutrality press release, he said: “The guidelines we issued today will help Canadians understand which practices are permitted and how to make a complaint.”

Well, well, well. Welcome to the party, CRTC. Nice of you to show up. Where have you been?

It’s hard not to be cynical about the apparent change of heart. After all, this is the same regulator who for years has been endorsing and pushing anti-consumer regulations and decisions, like the bone-headed approval of usage-based billing, the attempt to block the launch of Wind Mobile and the ongoing failure to enforce net neutrality in the first place.

It’s the same regulator whose spokesman the inimitable David Ellis quotes on his blog as saying, “We are not a consumer protection agency.”

With vertical integration, the regulator earlier this year approved Bell’s takeover of CTV with some conditions, the biggest of which was the requirement of a big investment in the production of Canadian programming. It also rubber-stamped Shaw’s acquisition of Canwest last year and launched a hearing into the effects of such vertical integration, which apparently resulted in Wednesday’s ruling.

While it’s true the CRTC placed a moratorium on any exclusive content arrangements when the Bell-CTV deal was announced in March, it didn’t take a rocket scientist to figure out that such was the end game of all involved players. Exclusive content was always at the root of the numerous billion-dollar takeovers, yet the regulator allowed them to happen anyway. Wednesday’s decision could easily have been included as a precondition to any of the deals going ahead and may have, in fact, caused some of the acquirers to think twice.

Instead, the new ruling is surely just the beginning of what will be a long and arduous battle that may go to the courts or cabinet, especially if Bell has anything to say about it, and of course it does.

On the net neutrality guidelines, well let’s just say 2009 called and it wants its complaint back. Consumer groups and politicians alike have since day one been critical of the framework for putting too much onus on internet users to prove issues and for being non-transparent. Again, these are criticisms that should have been prevented in the first place, or dealt with much sooner otherwise.

So why is the CRTC suddenly getting wise to the wants and needs of consumers? The most likely reason is because von Finckenstein and the other commissioners are getting tired of being embarrassed. On the Wind Mobile issue, the commission was thoroughly red-faced when the government overturned its decision, which led to the wireless carrier starting up. The CRTC was also caught with its pants down on usage-based billing, which resulted in a particularly embarrassing and somewhat sad grilling by commissioners of Open Media, the advocacy group that led the anti-UBB charge, during a hearing this past spring.

The truly cynical might say the new attitude is an effort by the chairman to get himself back into the good graces of the government. Von Finckenstein is reportedly seeking another term, but that seems about as likely as the vertically integrated media companies throwing their hands up and accepting the regulator’s Wednesday decision, or ISPs abandoning their throttling practices altogether.

In the end, although it’s easy to criticize the CRTC for being largely anti-consumer over the past few years, it really isn’t the regulator’s fault. Its split personality is a direct result of conflicting messages it has received from the government. When the Conservatives took office back in 2006, they told the commissioners to ease off regulating and instead let “market forces” do their thing. As I’ve harped on many, many times, with foreign ownership restrictions creating major barriers to new competitors of all stripes, market forces have never actually existed, so neither has competition in all the areas the CRTC governs.

The regulator has therefore been charged with trying to keep the chickens (aka consumers) happy while the wolves run the henhouse. No wonder it’s suffering from a major case of schizophrenia.

I’m nursing a pretty nasty cold so I’m going to take a rare sick day. With any luck, I’ll be back on Friday with something semi-coherent to say. Till then…