Why the CRTC Should Pass on Pick & Pay TV

By C.D. Howe Institute —— Bio and Archives September 26, 2014

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A proposal by the Canadian Radio-Television and Telecommunications Commission (CRTC) to mandate “pick-and-pay” television offerings for Canadians is deeply misguided, according to a report from the C.D. Howe Institute. In “Let the Market Decide: The Case Against Mandatory Pick-and-Pay,” authors Lawson Hunter, Edward Iacobucci and Michael Trebilcock find that mandating consumers to be able to subscribe to pay and specialty services on a service-by-service basis would be a slippery slope to still more regulation, and would become irrelevant at best in the ongoing telecom revolution.

“Attempting to regulate pick-and-pay or product offerings would launch the CRTC on a more interventionist role in the entire content and video distribution business, once again demonstrating that regulation often begets more regulation,” state the authors. “This would almost certainly require the CRTC to supervise the prices for unbundled products, as otherwise, broadcast distributors could offer larger bundles at steep discounts to discourage à la carte consumer choice.” The report finds that bundling can better maximize company profits without pricing consumers out of the market, as buyers have different preferences, and thus different demand, for different products. “Just as diversification in a stock portfolio reduces variance in the portfolio’s return, bundling can reduce the variance across consumers in their willingness to pay.” The authors also argue that the government should not try to support Canadian content through a “Netflix tax” or the existing Canadian content regulations. Instead, production subsidies, increasingly financed out of public revenues and maintaining a national broadcaster (the CBC in English-speaking Canada) as the main means of promoting Canadian content would be a less distortionary approach. Hunter, Iacobucci and Trebilcock predict that, over time, competition facing cable, satellite, and telecommunications service providers will be even stronger. “It is inevitable that market forces will provide increasing discipline to broadcast distributors in coming years,” state the authors, adding that “this alone should cause the CRTC to exercise caution in considering possible mandatory unbundling.” “Our view is that the economically benign character of bundling, along with the increasingly competitive nature of the industry, and the complexity of any regulation associated with pick-and-pay, combine to imply that the government should not mandate service offerings to consumers,” they conclude. For the report, click here: