Telus asks CRTC to go easy on vBDUs for initial base contributions into broadcasting system

Gatineau, Que. – Telus Corp. asked the CRTC to go easy on virtual broadcasting distribution undertakings (vBDUs) during the commission’s hearings regarding contributions to support the Canadian broadcasting system. “One area of the online TV market that has great potential, but needs CRTC support to develop, is virtual BDU which has benefits such as lower prices, simple billing and increased discoverability of Canadian and Indigenous content,” Jordan Mador, Telus senior manager of consumer products and content services, told the CRTC Thursday. “But companies face challenges to launch the services, like cost and access to content.” Telus owns Stream+, which is a bundle of streaming services, exclusive to Telus mobility customers, that includes Netflix Inc., Apple Inc.’s Apple TV+, Discovery+ and TelusTV+. Mador said the company is proposing that the CRTC temporarily exempt Canadian vBDUs from contribution requirements to help foster the development and growth of these “nascent” Canadian services. If not, Telus proposes that the CRTC at least base initial contributions on the value-add or marginal revenues earned by the vBDUs rather than their gross revenue. “This is essential for the creation of a viable service. If contribution is applied to a vBDU’s gross revenues any profit will disappear and the service will never launch,” he said. “Foreign BDUs have established themselves in the Canadian market and now is the time to empower the Canadian companies to participate in this market too.” According to Lecia Simpson, Telus director of regulatory affairs, 83 per cent of Canadians were still subscribed to traditional broadcasting in 2012, and 10 years later that number dropped to 59 per cent. “Traditional broadcasting undertakings have shouldered all the regulatory burdens both financial and non-financial,” she said. Telus is proposing that BDUs direct two per cent of their annual revenues to the creation of local programming, and that the CRTC impost an initial contribution of three per cent for online undertakings that distribute their services directly to 200,000 subscribers, while also decreasing the contribution level for traditional BDUs because “5 per cent is no longer sustainable.” “Online undertakings have depleted the revenues of both traditional programming and distribution undertakings,” Jelena Bajic, Telus vice-president of consumer strategy and planning, said. The National Pensioners Federation, Public Interest Advocacy Centre (PIAC), and Open Media, who appeared before the CRTC as a coalition representing Canadian consumers, cautioned against setting the bar too low or too high. John Lawford, PIAC executive director and general counsel, said if foreign streamers are forced to pay too much they may exit the Canadian market or skyrocket consumer bills while too much flexibility will compromise the commission's ability to meet the objective of the Broadcasting Act. On the other hand, providing traditional BDUs with too much flexibility will lead to the “uncontrolled abandonment of the system” while keeping stringent rules will lead to them cutting broadcasting services to Canadians. “Consumers have the most to lose financially,” he said. “All parties must compromise.” Other stakeholders have criticized the CRTC for moving too quickly on contribution requirements when it has not yet settled on a new definition for Canadian content or sorted out other policy issues. Yuka Sai, staff lawyer for PIAC, said it is reasonable for the commission to act now and inject some immediate support into the system, when asked by the commissioners what kind of impact Canadians would feel if the CRTC did not take any action after this hearing. “We don't believe there will be any immediate acute harm from the perspective of individual consumers specifically, but we do recognise… that there is a need for more support in the cultural and production sector,” she said, adding that with the broadcasting industry in decline, consumers can no longer enjoy traditional media and quality Canadian content. “And so if the commission does not do anything to reverse that in some way right now, then we might see a continuing decline of that sector.” The groups recommended that audiovisual companies making $50 million in Canadian revenue, and audio-only companies earning $25 million in Canadian revenues be directed to contribute four per cent of their Canadian revenues to the broadcasting system. That would apply to both traditional and online undertakings. Lawford said he was surprised to hear Rogers Communications Inc. propose a two per cent initial contribution, but speculated that traditional broadcasters would then ask for the same rates. “Our concern is that that would be destabilizing, so that's why we're asking both at about four per cent,” he told commissioners. Lawford added that the CRTC should treat its base contributions as interim while the other elements of the system are being ruled on and urged the CRTC to sort out which streamers are considered “BDU-like” and which are considered programmers. The Canadian Association of Broadcasters, represented by president Kevin Desjardins at the hearings, views companies like Netflix as audiovisual programming undertakings, and therefore, proposed a 20 per cent base contribution, while online audio undertakings, such as Spotify AB, would only contribute four per cent. Desjardins did not share Lawford’s concerns over market exit when asked by commissioners if online streamers are likely to react to contributions imposed on them, in the same way that Canadian broadcasters respond to the financial pressures that they're under. “I think that the investments that they're making in Canada remain investments that they are making in themselves,” he said. “The work that's being done here is being drawn here for a number of reasons that make excellent business sense to them. We've got a great dollar from their perspective, there's tax incentives, there’s all of these sorts of things that are drawing people.” – Reporting by Jenna Cocullo at jcocullo@thewirereport.ca and editing by Paul Park at ppark@thewirereport.ca

Telus asks CRTC to go easy on vBDUs for initial base contributions into broadcasting system

News | December 8, 2023

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Telus asks CRTC to go easy on vBDUs for initial base contributions into broadcasting system

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