CRTC struggling to rein in rising phone, TV prices

Skyrocketing phone and television prices are a key area of concern for the CRTC, but the regulator has no easy answersfor fixingthe problem, according to a report issued this week.

"Although it requires further study, it appears that bundling strategies are having the effect of enabling service providers to maintain price levels," the Canadian Radio-television and Telecommunications Commission said in its lengthy NavigatingConvergence report,released on Tuesday.

"With the exception of internet pricing (which has fallen slightly), telephone and[television] pricing has been on an upward trajectory in comparison with the overall consumer price index."

The regulator said cable and phone companies are using bundled services where customers are offered a package of phone, wireless, television and internet astheir main"competitive weapon" because subscribers with multiple services are less likely to defect to a competitor.

'Competitor inability to offer triple- and quad-play services has the potential to entrench the dominant position held by incumbent facilities-based providers.' CRTC report

Once locked in, the companies are raising prices at a higher rate than standard consumer inflation, the regulator said. This is a problem not just because consumers are paying more but also because alternative competitors some of whom can only offer a single service are put at a disadvantage.

"It seems unlikely that in the short- to mid-term, the most sophisticated bundles of internet/phone/television (the 'triple play') will be offered by any other than the incumbent facilities-based providers," the CRTC said. "Competitor inability to offer triple- and quad-play services has the potential to entrench the dominant position held by incumbent facilities-based providers."

Phone services were deregulated in 2006 after an order from the federal government. Then Industry Minister Maxime Bernier said that by allowing phone companies such as Bell and Telus to set their own prices, consumers would benefit from more choice and flexibility.

Numbers from the CRTC report show that that has not happened and that prices have climbed.

Television costs, meanwhile, have skyrocketed since deregulation in 2002. Estimates have pegged the increase in a typical bill at 70 per cent over that time. Television providers have said the higher costs are the result of additional and improved services, such as digital and high-definition. About 90 per cent of Canadian households subscribe to television services, the CRTC said.

Handful of gatekeepers

New wireless companies such as Wind Mobile and Mobilicity will help boost competition and lower cellphone prices, but their overall effect will be mitigated by "the continued popularity of bundles and continued contract provisions," the report said.

The CRTC anticipates it will have to review certain regulations and even consider re-regulating other areas in the next few years in order to counter potentially anti-competitive actionsfromconverged serviceproviders such as Bell, Rogers, Telus and Shaw.

"Consumer protection is likely to become a more important consideration for the commission in the mid-term as a handful of providers establish themselves as the primary gatekeepers to all manner of communications services using digital technologies," it said.

The report played down the idea of lifting foreign ownership restrictions identified by many industry analysts, including a federally appointedpanel, as a majorcause of the lack of competitionin the industry as a solution. Foreign companies have little incentive to fund local programming, the CRTC said, which runs counter tothe regulator'smain purpose as a protector of Canadian culture.

"Should legislative changes occur that permit greater foreign participation in the Canadian communications landscape, there may be a requirement to examine enforcement mechanisms and regulatory tools to ensure that non-Canadian entities comply with Canadian regulations designed to achieve ... cultural and consumer objectives," the report said.

Wide-ranging report

According to a CRTC spokesman, the reportwas a wide-ranging "state of the union" study designed to outline areas of regulatory concern for the near term. Itwas not meant to prescribe or predict any action,he said.

The report identified the internet's disruptive influence on traditional telecommunications and broadcasting business models in Canada and suggested that a more holistic approach will be needed to regulating these markets in the future. New copyright legislation and a national digital strategy is needed so that the regulator has a better framework from which to work, it said.

The CRTC would also like to work more closely with Industry Canada and Canadian Heritage in determining how issues such as the subsidization of Canadian content should be handled in the internet age.

With anincreasing number of telecommunications and broadcasting options becoming available online, the revenue that traditional service providers used to earn is becoming fragmented, the report said. In the near term, this will force a reconsideration of requirements to fund Canadian programming, as well as subsidized services such as universal phone access.

"The provision of programming has transcended one-way broadcasting models and can no longer be technologically constrained to geographically based providers," the report said."Initiatives aimed at the preservation of Canadian programming and the protection of consumers may be increasingly required in the programming sphere."

For the time being, the CRTC reportsaid,the status quo can be maintained in most services. Geo-blocking technologies thatprevent Canadians from accessing television programming on U.S. websites, for example, seem to be working, so no immediate action is needed.

"At this point, it may be premature to suggest either the extension of existing regulatory structures to new services, or the loosening of regulation on incumbent entities," the CRTC said.