Download pdf - Shaw Final Submission to CRTC 2014-190

Mr. John Traversy October 3, 2014

Secretary General

CRTC

Ottawa, Ontario

K1A 0N2

Filed electronically

Dear Mr. Traversy:

Re: Broadcasting Notice of Consultation CRTC 2014-190 – Let’s Talk TV – Final

Comments

Introduction

1. Shaw Communications Inc. (Shaw), on behalf of Shaw Cablesystems (Shaw Cable), Shaw

Direct and Shaw Media, provides these final comments in response to Broadcasting Notice

of Consultation CRTC 2014-190 – Let’s Talk TV (BNC 2014-190). In the same spirit of

collaboration and constructive dialogue that characterized Shaw’s written submission and

oral appearance, Shaw submits these comments with the objective of pursuing a regulatory

framework that will increase customer choice and flexibility, while also strengthening the

Canadian broadcasting system.

2. Shaw’s concern throughout this proceeding relates to the potential negative impact if some

or all elements of the proposed new framework for the television system were to be

imposed too quickly or in a manner that does not appropriately balance other

considerations. The result could well be irreversible damage to the cultural and economic

fabric of our broadcasting system. Accordingly, the focus of Shaw’s final comments is to

put forward a more moderate approach, one that will achieve the ultimate goals set by the

Commission for this proceeding while at the same time preserving the continued

contributions made by all participants in the broadcasting system.

3. There should be no misunderstanding; Shaw embraces the view that customers should have

greater control and choice. It is not our objective to preserve the status quo but rather to

advocate a series of steps which, if adopted, will result in increased choice and customer

flexibility in our television system. Specifically, as discussed in further detail below, Shaw

submits the following:

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Today’s dynamically competitive digital environment drives significant innovation and

investment in response to customer demands for “anytime, anywhere” content.

Therefore, the Commission can continue to rely on market forces to increase customer

choice while at the same time establishing certain regulatory minimums to achieve the

objectives of the Act and protect the public interest.

A more measured and “stepped” approach by the Commission is warranted to ensure

that the transition to more pick-and-pay and more programming choice is implemented

in a manner that avoids negative outcomes, such as job losses, diminished Canadian

content, loss of Canadian and non-Canadian programming services, higher overall

prices and less value to Canadian consumers. Any harm to Canada’s culture and

economy would be inconsistent with the policy objectives of the Broadcasting Act (the

Act) and the objectives of the Government.1

Certain proposals (such as the elimination of simultaneous substitution) should not be

implemented. Other proposals (such as the elimination of genre protection) should be

carefully considered and, if implemented, be done so on a more gradual basis.

Achieving the right balance between regulation and market-driven choice in a dynamic

digital environment

4. The Commission has asked parties to take into account “the evolving technological and

economic landscape”2 in formulating a policy approach that is sufficiently adaptable and

sustainable and effective over time. Shaw agrees that this question is fundamental to the

deliberations in this proceeding. In response to the rapidly changing and unpredictable

digital environment, Shaw has successfully made the shift from a traditional cable

service provider to a network and content experience company. Through this evolution, we

have remained laser-focused on meeting and exceeding our customers’ demands. The next

five years and beyond will be about delivering value and choice for our customers –

providing them with the content they want, when they want it, and on the device they want

it on. As Brad Shaw, CEO, explained during Shaw’s appearance before the Commission:

Our objective is to work with the Commission to achieve an adaptable and

sustainable policy framework to increase choice, while preserving jobs, ensuring

continued contributions to Canadian content and strengthening the broadcasting

system we have built together over the last four decades.

It is Shaw's belief that we must allow market forces to be the primary driver of

customer choice. We are not trying to preserve the status quo: there is no status quo in

today's dynamically competitive environment … We are willing to disrupt our

business to seize the opportunities and to answer the challenges of today's digital

1 In Seizing Canada’s moment: prosperity and opportunity in an uncertain world: Speech from the Throne, October

16, 2013, the Government stated, at page 12, that it “believes Canadian families should be able to choose the

combination of television channels they want. It will require channels to be unbundled, while protecting Canadian

jobs” [emphasis added]. 2 Broadcasting Notice of Consultation CRTC 2014-190-3, August 21, 2014.

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environment. The challenges are very real: cord-cutting, audience fragmentation, a

dramatic shift to targeted online advertising and the global competition for

programming rights.3

5. In response to questions from the Commission, Mr. Shaw further acknowledged that the

challenges presented in today’s environment are “scary”. Nonetheless, Shaw remains

committed to taking risks, responding to competitive challenges and serving our

increasingly sophisticated and demanding customers:

… our story is about serving Canadian customers. It's about providing choice. It's about

competing. It's about innovating … It's very difficult, and it's unnerving, but we believe

that we can get there. We believe that we can provide more value and more choice and

more competition … in a managed, stepped approach.

We want to continue to invest and innovate, but it becomes challenging.

Even with Shomi, there is a whole millennium that we want to serve, a whole different

customer base … We truly have to look and say: Wow, what are the things we need to

do that will help serve Canadians, but knowing that the traditional business model will

have to change.

And it's not very clear. I think we have to work together. We have to find the right steps

as a whole industry to get us there.4

6. “Getting there” requires a carefully calibrated regulatory framework that avoids unintended

consequences, including ultimately diminishing customer choice and affordability,

undermining investment and innovation and creating an incentive for Canadians to leave

the broadcasting system.

7. Although they compete with licensed players, certain non-Canadian OTTs have now

clearly expressed their view that they do not operate in Canada pursuant to the Act or

subject to the jurisdiction of the Commission or any other Canadian authority. Shaw finds

it unfortunate that this proceeding was, to a significant extent, initiated based on a

perception that licensees operating within the regulated broadcasting system were not

sufficiently responding to OTT competition or developing business models that offer the

same level of choice and customization. Not only have we demonstrated a strong

willingness to compete (by launching shomi and investing in Rdio, for example), we have

also willingly engaged in a constructive conversation with the Commission about how we

can satisfy the interests of Canadians as consumers, citizens and creators in the context of

the current business environment and the objectives of the Act. By contrast, non-Canadian

OTTs refused to engage in meaningful dialogue regarding their role in the television

system – thereby making it clear that they did not consider that they had any role to play in

relation to the achievement of the Act’s objectives. Accordingly, the Commission (by

removing their interventions from the record) is now proceeding without any input from

3 CRTC Transcript, September 11, 2014, paras. 8503-8505.

4 CRTC Transcript, September 11, 2014, paras. 8700-8717.

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such parties, notwithstanding its continuing quest for further evidence that “Internet video

providers can support the policy objectives under the Broadcasting Act, as well as others

relating to competition and innovation—without the need for any additional regulatory

action by the Commission.”5

8. In view of these developments, it would be unreasonable for the Commission to impose a

new business model and/or regulatory burdens on licensees (such as one-sided revenue

contribution rules affecting the provision of online content by licensees) who are striving to

serve their customers through investment and innovation while acknowledging their role in

the Canadian broadcasting system. Further asymmetrical regulatory treatment of licensed

and exempt digital broadcasting undertakings – that effectively advantage exempt non-

Canadian undertakings that have no regard for the Commission’s jurisdiction, process or

for the objectives of the Act – cannot be in the public interest.

9. Unlike those entities that operate unlicensed non-Canadian content experience platforms,

Shaw is not dismissing the importance of regulation in Canadian broadcasting. Rather,

Shaw’s position in this proceeding is informed by the Commission’s statement that:

Some of the objectives may be achieved without regulation, through the evolution of

the marketplace or the changing technological environment. Regulatory intervention is

only warranted where specific outcomes or objectives would not be achievable without

it. Where regulatory measures are necessary, the Commission considers that they

should be as simple as possible, proportionate, easily administered and adaptable to

change.6

10. The importance of the principle that customer choice be primarily market-driven cannot be

overstated. Competition – both within our broadcasting system and from foreign platforms

– continues to increase. As the recent Brief from the C.D. Howe Institute observes, it would

be inappropriate for the Commission to impose a mandatory pick-and-pay regime in the

current environment, given:

… the economically benign character of bundling in this context, the increasingly

competitive nature of the industry, along with the complexity of any regulation

associated with pick-and-pay.”7

11. The ongoing strength and relevance of the Canadian broadcasting system will depend on

investment, innovation, scale and stability. Competition will be a key element in driving

these outcomes. However, we believe there is a key role for the Commission. Indeed, we

have built a tremendous and successful Canadian broadcasting system through the

collective efforts of regulators, the creative community, broadcasters and distributors.

Going forward, appropriate regulatory minimum protections to achieve the objectives of

5 http://www.crtc.gc.ca/eng/archive/2014/lb140929.htm and http://www.crtc.gc.ca/eng/archive/2014/lb140929a.htm

6 BNC 2014-190, at para. 35

7 Let the Market Decide: the Case Against Mandatory Pick-and-Pay, C.D. Howe Institute, E-Brief, September 25,

2014 (the “C.D. Howe Brief”), at page 7.

http://www.crtc.gc.ca/eng/archive/2014/lb140929.htm

http://www.crtc.gc.ca/eng/archive/2014/lb140929a.htm

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the Act, as well as regulatory certainty, will be critical to preserve and enhance the strength

of the system.

12. Timing will also be critical. Shaw submits that the imposition of mandated and immediate

unbundling of programming services would not only be impractical, it would invite

potential economic “shocks” to the system that would ultimately be negative from the

standpoint of consumer welfare and preserving jobs. Predicted outcomes of “unbundling

alone” include the following:

… a finding of annualized loss due to unbundling alone in the broadcasting sector of

6,698 FTEs of employment in 2020 and an annualized loss of $769 million in GDP for

the Canadian economy in 2020.

Factoring in the impact on television production leads to an overall plausible worst case

impact of unbundling of 10,674 FTEs of employment losses and an annualized loss of

$1 billion in GDP for the Canadian economy in 2020.8

13. While Shaw acknowledges that it is difficult to quantify with certainty the ultimate impact

on the system from an ill-conceived or unjustified layer of additional regulation, it is

possible to posit a range of sensitivities given the inherent underlying economics that

would ensue from mandated unbundling. This was described in detail in Shaw’s economic

evidence filed in this proceeding. The Oliver Wyman Report succinctly described this

scenario:

… while intending to provide more choice and flexibility to consumers, the CRTC’s

proposed approach could actually hurt consumers and the industry in several ways: by

ultimately decreasing prices for only a minority of consumers while increasing prices

for the majority who choose to stay with their current package; by decreasing overall

programming diversity as well as funding for Canadian program production, especially

independent production; by limiting content discovery, and by negatively impacting

profitability at most steps of the industry value chain.9

14. In fact, predominantly all of the economic evidence filed in this proceeding demonstrates a

consistent view that the Commission’s proposals will inevitably result in economic harm.

Bell’s economic expert explained the dilemma at the public hearing:

When you implement a la carte, people watch less television. That means they are

getting less value.

8 CMPA Undertakings, September 19, at pages 7-8. A “best case” scenario (with a combination of features and

safeguards) would still result in “a finding of an annualized loss of 2,233 FTEs of employment in 2020 and an

annualized loss of $256 million in GDP for the Canadian economy in 2020. Factoring in the impact on television

production leads to an overall plausible best-case finding for unbundling of an annualized loss of 3,558 FTEs of

employment in 2020 and an annualized loss of $334 million in GDP.” 9 Oliver Wyman Report, at page 1.

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So the empirical study is the economic studies that have been done and are not in any

way ambiguous on these counts. What the studies do agree is that some minority of

consumers with very limited preferences for channels would likely benefit.

So it's not that there [would] be no beneficiaries. But you are talking a transfer and the

net of the transfer is a loss and the loss is not just for the consumers who prefer larger

packages. It's for the entire ecosystem and everything that supports it. It shrinks. And

that's what we're talking about doing here.10

15. Shaw also notes that the totality of the economic evidence filed in this proceeding

contradicts the position articulated by the Competition Bureau, which argued that bundling

has the effect of reducing or removing competition between discretionary services.11

As

noted by parties on the record of the proceeding, the Bureau failed to “refer to a single

economic study.”12

In fact, contrary to the statements of the Competition Bureau,

competition law and economic analysis demonstrate both the potential economic harm

from the Commission’s proposals for mandatory pick-and-pay as well as the economic

benefits of the existing approach:

The first step in a policy analysis of pick-and-pay is to understand why BDUs would

bundle in the first place … The question, then, is not whether BDU bundling departs

from market principles, but whether the motivation for bundling reflects some kind of

market failure that pick-and-pay regulation would address.

…

Competition will affect the ability of BDUs to profitably bundle regardless of

regulation. If consumers dislike bundles, they will increasingly be able to shift with

little cost to alternatives on the Internet such as Netflix, or channel-affiliated websites.

Indeed, there already is evidence of the BDUs adopting strategies to respond to

competition. In Quebec, for example, Videotron offers the option of relatively narrow

bundles of channels to its subscribers. In addition, Rogers and Shaw recently

announced the creation of a streaming service similar to Netflix, called Shomi.

Establishing an elaborate regulatory regime to deal with a practice that will soon be

subjected to even more intense competition would be a mistake.

In any event, the most plausible explanation of bundling by BDUs suggests that it is a

form of price discrimination, which is generally considered benign under competition

law, or at least not worth regulating. It is not clear what the economic benefits of

mandatory unbundling would achieve, and indeed there is the danger that it would hurt

economic efficiency.13

10

CRTC Transcript, September 10, 2014, at paras. 4206-08. 11

CRTC Transcript, September 8, 2014, at para. 759. 12


C.D. Howe Brief, at pages 4-6.

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16. The foregoing underscores the unique economics governing mandatory pick-and-pay and

other unbundling measures. This in turn calls into the question the assumption that

regulatory intervention to achieve unbundling is necessary or warranted. At a minimum,

the Commission needs to take a more cautious approach given the uncertainty.

17. At the same time, Shaw acknowledges that, in consideration of the Government’s policy

direction and the Commission’s stated objectives in this proceeding, the implementation of

a new framework based on choice and flexibility can be workable. Under Shaw’s

proposals, unbundling will be achieved within an appropriate timeframe. In view of the

significant risk and uncertainty in the current environment, a stepped and moderate

approach is not only justified, it is the only logical or defensible course of action. It has the

further advantage of giving the Commission the opportunity to quickly adjust course if any

of the predicted negative consequences begin to emerge.

The need for a measured and gradual approach

18. Shaw agrees with the “identified outcomes” in BNC 2014-190, namely, a Canadian

television system that: fosters choice and flexibility in selecting programming services;

encourages the creation of compelling and diverse Canadian programming; and empowers

Canadians to make informed choices. However, discussion during the oral phase of the

proceeding clearly emphasized the need for the Commission to take a measured and

gradual approach to the implementation of a new regulatory framework – especially any

form of mandatory unbundling. As the Chairman explained, with reference to the analogy

of crashing marbles in “the old Kerplunk game”:

… it has taken years to build this regulatory system – probably decades, frankly. I am

not suggesting that we take as long to dismantle it, to adapt to a new environment, but

there is a management of change that needs to occur, and how much change the system

can absorb within a short period of time.14

19. Peter Bissonnette explained the “step-by-step” approach that would address these concerns:

One of the things that we have talked about in our guidelines is the pace of change. We

believe that, in our guidelines, where we have proposed 50 plus 1 percent, that's a floor.

We know that the world is unfolding, and we know that, as we go into this new world

of choice and freedom of selection, things will evolve.

We also know that we can't, any more than you can, define what the risk is associated

with your options or the options that we are proposing, because even in our Guidelines

there are going to be some cost impacts … So what is the event that we are concerned

about that is going to drive all of this, potentially, disruption?

So pace is really important in this, and you have said that.15

14

CRTC Transcript, September 10, 2014, at para. 5308 15

CRTC Transcript, September 11, 2014, at paras. 8688-8696.

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20. In our responses to undertakings filed on September 19, Shaw pointed out the potential for

negative consequences for consumers and the industry if all or many of the Commission’s

proposals in this proceeding are implemented too quickly or are improperly sequenced. An

additional benefit of a stepped implementation is that both positive and negative impacts of

new provisions can be measured and evaluated on an ongoing basis. This approach strikes

an appropriate balance by setting out meaningful and achievable steps to increase choice,

while being “adaptable to change.” It thus minimizes uncertainty and provides the practical

ability to “adjust course” if problems arise that threaten achievement of the objectives of

the Act or that risk harm to consumers.

21. As Shaw stated in several instances in its written submission, its appearance before the

Commission at the public hearing and in its undertakings filed with the Commission, step-

by-step implementation permits the system to evolve in response to market dynamics.

This, we submit, is the least intrusive approach; it is also the sole rational course, given the

pace of change and potential impacts of the new framework.

22. Shaw is pleased to note that many parties in this proceeding have recognized the

importance of the objective of managing the pace of change, consistent with what we put

forward to the Commission. As Rogers noted in its September 19th

undertakings, “a well-

planned and phased in approach is essential to facilitate a smooth transition for the

broadcasting system and for Canadian television viewers as a whole.” 16

In that regard,

Rogers has proposed that implementation would begin in 2015 and unfold through the end

of 2018.

23. Shaw also notes that, significantly, a broad range of interveners, in some cases representing

diametrically opposed views on substantive issues, nevertheless uniformly cautioned the

Commission to proceed carefully, in view of the stakes. A clear narrative in favour of

careful and staged implementation developed over the course of the oral hearing.

Following are examples from a number of parties with otherwise diverse interests:

How would unbundling make the system stronger or create more or better Canadian

programming? None of this would further the objectives of the Broadcasting Act. It is

essential that your commission study the options carefully, as it has in the past, to

ensure the vitality of our carefully constructed broadcasting ecosystem. Adopting an ill-

conceived, focus-group-generated proposal would do a disservice to all Canadians, and

once Canadians experienced the results they would know whom to blame.17

***

I hope with all these complications in our world that the Commission moves slowly and

carefully to allow the broadcast and production community to adjust to the dramatic

changes in the way we're all consuming content.

16

Rogers’ response to undertakings, September 19, Appendix C, at page 1. 17

CRTC Transcript, September 10, 2014, at para. 6184.

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For my company, Insight Productions, the current system has never worked better. For

all our partners, our Canadian broadcast partners, it's never worked better for us, in

terms of promotion, funding and getting big hits on the air.18

***

So you end up in a world where, as Oliver Wyman modelled it, you have a small group

of customers paying 10 percent less and getting a whole lot less and you've got

everybody else paying a whole lot more for the same thing. That's the kind of outcome

that the gloom and doom parties are saying to you really means the end of the system,

because you end up kind of having a bad outcome for consumers and probably

wrecking the system. So that's why we feel if it's all passed on to consumers that is not

going to work.

We have to have everybody sharing some of the risk, everyone managing this process

carefully and then we can end up with a scenario that's better for consumers.19

***

… our biggest concern is the risk of making multiple, major changes to the system. The

majority of interveners in this process have warned of significant negative impacts from

pick-and-pay, lost viewers, lost revenue, lost channels, lost programming, and lost jobs.

If the Commission is committed to pick-and-pay, then we believe that it must act very

carefully on other fronts, with a gradual rollout of its plans combined with close

monitoring along the way.20

***

… Chairman and Commissioners, we hope that in your deliberations you'll think

carefully about our existing system that has been built over many years.

This hearing demonstrates that we all need to be mindful of the potential unintended

consequences that could result from removing parts of the regulatory framework that

has served us well.21

***

Consumers will benefit from a good renovation, one that does not pull out a support

beam leading a floor or two above to collapse -- or, as the Chair put it, creating the

"kerplunk" moment.

18


CRTC Transcript. September 11, 2014, at paras. 8231-8232. 20



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The system was built over time, in a very intelligent way, each part playing a role,

whether it was creating jobs, providing diversity, Canadian content, or access for

visible minorities and other under-served constituents.

There is no need to start over.

What we suggest is a stage transition, with a clear outcome and clear rules to achieve

that outcome …

I think we're not the first people here to say that we think the pick-and-pay requirement

-- the requirement for complete pick-and-pay or build-your-own-system packages is a

bridge too far.

A gradual move in this direction could work, allowing broadcasters and BDUs time to

react and plan.

The 50% model for pick-and-pay discussed here earlier this week is a good middle

ground.22

***

Now, the system has to transform in a way that adapts to the technology, and we are

going to have to be careful. We are cautious here that these changes could just get rid of

us, and we would have no say. We wouldn't be at a future hearing because we would

have no business.

So we want to be put in a position where we can keep working, if everybody has to take

a hit -- and I think there will be losers and bigger losers on the revenue side. I think that

is the experience of the music industry and other industries.

We want to work and find ways to temper that, so that we can then become part of the

future.

At some point, though -- I mean, it is a saveable system, because we have such a

creative and vibrant culture. We just have to figure out how to turn that so that the

broadcasting system can be made workable.23

24. The above testimony underscores a significant degree of consensus in this proceeding,

namely that too many changes, implemented too rapidly, would impair the broadcasting

system’s ability to adapt in a manner that preserves consumer welfare and maintains the

current levels of contribution to the system by the various stakeholders. Moreover, an

immediate overlay of new regulations would be inappropriate: such measures would be

difficult to amend in the event that unintended and damaging impacts emerge as a result of

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these strictures. There was no resistance to change but, as noted above, a measured or

“stepped approach” was considered to be more appropriate.

25. A key element of such an approach is embodied in Shaw’s proposed Market Guidelines to

Maximize Choice and Flexibility. If adopted, the Guidelines will govern all commercial

agreements and enable more programming choice and flexibility, including pick-and-pay.

This will occur following the elimination of certain current obstacles in the wholesale

market, including:

requiring both Canadian and non-Canadian services to permit pick-and-pay;

eliminating unreasonable penetration-based rate cards;

eliminating requirements to distribute a service on the same terms as at a prior date; and

eliminating MFN provisions.

26. As Shaw explained throughout this proceeding, the Guidelines strike an appropriate

balance between regulatory oversight and reliance on market forces to drive choice, while

also protecting jobs and Canadian content. We submit that the implementation of the

Guidelines will have a real and meaningful impact across the entire industry and moreover

respond to the Order in Council and Speech from the Throne.

27. As we noted in our response to undertakings, the Guidelines can be introduced as a “stand-

alone set of expectations”, or alternatively, incorporated into the existing Code of conduct

for commercial arrangements and interactions per Shaw’s proposed “Enhanced Code of

Conduct.” By incorporating the revised elements of our Guidelines into the Enhanced

Code, the Commission will immediately have in place an effective regulatory measure that

will be responsive to the discussion and record of this proceeding. Not only will it be

immediate in its impact, it will also be flexible and capable of being adjusted if unforeseen

events and circumstances arise in the future. The Enhanced Code will:

provide behavioural discipline;

provide a basis for dispute resolution or an undue preference complaint; and

leave open the option for the Commission to impose the Code’s provisions as COLs in

the event that a licensed or exempt BDU or programmer is found to have not met the

Commission’s expectations.

28. As noted in Shaw’s September 19th

undertakings, the Commission's experience with the

existing Code of Conduct is instructive. When the Code was initially established (pursuant

to Broadcasting Regulatory Policy CRTC 2011-601), several parties argued that the

Commission did not have the power to impose it as a COL and would have to delay

implementation until each licensee came forward at their respective licence renewal and

agreed to assume the obligations by way of a COL. This concern proved to be unfounded:

Shaw and other licensees affected by the Code of Conduct viewed its provisions as binding

regulatory measures and took steps to immediately adhere to its requirements. In

circumstances where certain parties failed to meet expectations or disputes arose, the

Commission appropriately intervened.

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29. In view of the foregoing, Shaw submits that an approach based on the Guidelines or an

Enhanced Code is preferable as the Commission, broadcasters and distributors will together

be better positioned to manage the pace of change, while at the same time protecting jobs,

ensuring that the economic engine of the Canadian broadcasting system remains strong and

safeguarding the system's ability to provide Canadian content.

A Summary of the Key Shaw Proposals

30. The following summarizes the key aspects of Shaw’s proposals relating to choice and

flexibility (based on the “roadmap” filed with the Commission):

Small Basic: Shaw does not support the proposal for a small basic service, for the

following reasons:

o it will not address affordability issues because fixed costs will not change;

o it will lead to increased prices for the vast majority of customers who are satisfied

with their existing basic service and other options; and

o it will set off cascading negative economic impacts.

In view of these concerns, Shaw has put forward an “Option C” pursuant to which

BDUs would be required to offer a small basic service that includes the services

enumerated by the Commission in the Working Document, as well as other services

selected by the BDU. The small basic service would not include high-cost Category C

sports services (or any other services that materially increase the price of the basic

service). The retail price of basic would not be capped. The small basic service would

be promoted in an equivalent manner to other packages.

Mandated pick-and-pay: 100% pick-and-pay cannot – and should not – happen

overnight. Rather, after a period of implementation of a 50% requirement, the

Commission can re-evaluate its approach based on the impact on consumers and the

industry. If the approach is working, the Commission can consider raising the

requirement to a higher minimum percentage with the ultimate goal of potentially

making 100% of services available as pick-and-pay.

This approach will have a real impact as every negotiation and every commercial

agreement will develop a rate card for pick-and-pay. Driven by competition and

consumer demands, BDUs will change the way they provide programming services to

subscribers by offering increased pick-and-pay, flexible BYOP options, smaller

packages and at least one basic package without sports. To be clear, 50% is a floor –

not a cap.

Canadians will immediately benefit from steps taken by BDUs to increase choice and

flexibility given the requirement to offer at least 50% of services as pick-and-pay. With

the elimination of the obstacles to pick-and-pay as proposed in the Guidelines and with

application to every programming service and BDU, customer demand and competition

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will determine which services are offered as pick-and-pay. Moreover, a rich mix of

services will be offered on a pick-and-pay basis:

o affiliated and unaffiliated;

o VI and non-VI;

o Canadian and non-Canadian; and

o very popular and niche.

BYOP: BYOP introduces significant issues with existing billing systems and customer

care. Accordingly, minimum thresholds for the number of services that are offered as

BYOP are not appropriate. BDUs should begin to introduce BYOP offerings on or

before December 15, 2015. The pricing, composition and number of services offered as

BYOP should be determined by individual BDUs. Following a period of BYOP

implementation, the Commission can evaluate the approach based on an assessment of

the benefits to consumers, industry compliance and the impact on all stakeholders.

Other proposals are not simple and proportionate

31. Shaw has specific concerns with respect to certain proposals made by other parties,

including those put forward by Telus, the Independent Broadcasters Group (IBG) and Blue

Ant Media. These proposals do not strike the appropriate balance as they entail too much

regulatory intervention and oversight that ultimately will have the effect of thwarting

market dynamics and market competition, to the eventual detriment of the consumer.

32. For example, Telus has proposed micro-regulation of the wholesale commercial

environment. As the Chairman observed, there are questions about whether this proposal is

consistent with the objective for regulatory measures that are “simple, proportionate, easily

administered, and adaptable to change.”24

Shaw strongly submits that the Telus proposal is

entirely inconsistent with this objective. Telus has also proposed significant amendments

to the Exemption order for digital media broadcasting undertakings. If adopted, these

amendments would collapse the distinction between “conventional television

programming” and content made for new media and digital media platforms. Shaw submits

that such a step is not warranted; no evidence has been put forward in this proceeding to

justify a departure from the Commission’s approach to encourage innovation and increase

competition with respect to content not made for traditional television.

33. Similarly, Blue Ant Media is seeking to persuade the Commission to impose new and

highly interventionist rules, not only through a re-written Code of Commercial

Arrangements and Interactions but also by immediately incorporating this amended Code

into proposed regulations. As Shaw noted above, such an interventionist approach is not

warranted. Moreover, Blue Ant’s proposal would effectively fix the current distribution

arrangements of all Category A and Category B independent programming services without

any regard for market dynamics, consumer preferences, or other considerations. This would

result in a significant departure from the Commission’s evolutionary approach to the issue

of programming access and packaging by BDUs.

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34. These proposals, if adopted, would result in the Commission micromanaging the specific

terms and conditions of access in commercial affiliation agreements. Such an approach

would, in lieu of market outcomes, impose commercial arrangements by “regulatory fiat”,

contrary to the Commission’s stated objectives in BNC 2014-190.

Other Commission proposals should either not be implemented or be introduced more

gradually

35. Consistent with the proposed stepped approach, Shaw recommends that many of the other

proposals in BNC 2014-190 and the Working Document that significantly impact

programmers should not be implemented until after the next series of licence renewal

hearings, and in some cases should not be implemented at all. This will provide the

industry with necessary time to consider the impact of the new framework and to adapt to

the new environment. Moreover, this approach will ensure that the totality of the proposals

do not result in unintended negative consequences for consumers and do not undermine

achievement of the fundamental content objectives of the Act. The foregoing approach

should be made applicable to several proposals, as set forth below:

Simultaneous Substitution: The record was clear that simultaneous substitution allows

Canadian broadcasters to realize the full value of the rights they purchase by providing

viewers with the most popular non-Canadian programming while also licensing and

exhibiting high quality Canadian programming. The result is more programming choice

for Canadians at no additional cost. Shaw does not agree with proposals that

simultaneous substitution should be eliminated for live event programming. This would

be far too intrusive and would have the practical purpose and effect of protecting access

to non-Canadian advertisements at the expense of the objectives of the Act. A less

intrusive step would be to establish a working group process to ensure that all – or most

– technical issues that impede effective substitutions are addressed. Shaw reiterates our

commitment to participate in such a working group.

Preponderance: The ability of BDUs to satisfy the preponderance rule through the

“offer” approach should not be implemented until December 15, 2016 to minimize the

impact on programming services.

Affiliation Agreement Issues: The Enhanced Code would apply to all programmers and

BDUs, whether or not they are vertically integrated; provide a framework for dispute

resolution; and include expectations to help ensure customer choice and affordability.

Going forward, and if necessary, a follow-up proceeding could be held to assess the

need for further changes to the Enhanced Code as the market, consumer expectations

and the broadcasting system evolve. The Commission can consider whether additional

action is necessary to address situations of non-compliance (incl. COLs).

Access for non-vertically integrated (VI) programming services: This measure would

be implemented through the Enhanced Code. Shaw submits that the requirement that

BDUs “facilitate” multi- platform programming strategies is unreasonable: the concern

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is rooted in the potential for anti-competitive behavior, which should not be extended to

include a requirement to enhance the position of competitors. A prescribed expectation

to do so would impede market developments and would likely result in unjustified

regulatory gaming, undermining the effective roll-out of services to consumers.

Finally, the Commission should delay implementing any changes to the genre

protection policy and to programming exhibition and expenditure requirements until the

next series of licence renewals.

Conclusion

36. Our objective is to work with the Commission and other participants in the Canadian

system to achieve an adaptable and sustainable policy framework to increase choice, while

preserving jobs, ensuring continued contributions to Canadian content and strengthening

the broadcasting system, all of which have been accomplished in a measured and calibrated

manner over the last four decades.

37. Shaw submits that our original Guidelines, now incorporated in our Enhanced Code of

Conduct and other proposals, as set forth above and in our earlier written and oral

submissions and responses to undertakings (which are incorporated by reference), will

provide an appropriate level of regulatory oversight to the Commission, while at the same

time allowing the industry to respond to the real challenges facing our system, produce

high-quality Canadian content, and maximize choice and flexibility for Canadians. The

dual objectives of more value, choice and competition alongside a thriving Canadian

broadcasting system can be realized through a carefully managed and stepped approach to

introducing a new television framework.

38. There is a way forward. This is not about protecting the status quo. To the contrary, Shaw’s

objective is to assist in the development of a modernized framework that sets the stage for

competition, innovation, choice and exceptional customer experience. This modernized

framework will, among other things, unbundle channels while protecting as many jobs as

possible.

Sincerely,

Peter Bissonnette

President