Television price increases irrelevant, says producers association

In the immortal words of Arnie Schwarzenegger, “I like you, I kill you last”.

Once more the Canadian production community is at it, seeking rents and subsidies,  and regardless of the tone, much of what Mr. Hennessy says below  is accurate.

GATINEAU – That broadcast distributors would increase the price of basic packages if the CRTC licensed new 9(1)(h) services is a red herring, according the Canadian Media Production Association (CPMA) told commissioners on Tuesday.  “We believe that the impact of 9(1)(h) services on affordability’ is a red herring that threatens to overshadow the achievement of more significant objectives under the [Broadcasting] Act”, Michael Hennessy, president and CEO of the CMPA, said during his opening remarks.

The association acknowledges that licensing additional services with mandatory carriage orders may trigger basic package rate increases, but it says this isn’t the sole reason broadcast distribution undertakings (BDUs) raise rates,
which have been climbing steadily for years, regardless. It would be a stretch to blame consumer dissatisfaction with the price of their BDU service on your rare decisions to add new, exceptional Canadian services to basic, said Hennessy.
That may be the spin, but the reality is that the cost of basic is already heavily inflated by inclusion of the BDUs’ own services, including their high-cost sports services.”

All true. But take a look at Figure 3.1.7 below  from the CRTC’s own annual statistical report. You will see that cable television costs have risen faster than the consumer price index, the price of telecommunications other than the Internet, and the price of voice telecommunications. Here it is:

Figure 3.1.7 Price indices [TPI1, BDU2 (cable and satellite, including pay television), Internet access services, and CPI]

This line chart shows the following price indices from 2002 to 2011 Consumer price index (CPI): 100, 102.8, 104.7, 107, 109.1, 111.5, 114.1, 114.4, 116.5 and 119.9; Telephone price index (TPI): 100, 100.2, 100.6, 101, 100.9, 101.6, 105.9, 106.5, 111.2 and 112.3; Cablevision and satellite services (including pay television) index: 100, 104.8, 108.8, 112.5, 116.8. 122.7, 128.7, 135.8, 143.4 and 151.4; Internet access services index: 100, 99.1, 99, 97.1, 96.7, 97.5, 95.8, 94.8, 95.8 and 100.9.

Please note that the more the industry is exposed to competitive pressures, the less the increase of price. The broadcast distribution undertakings (BDUs, that is, cable companies acting as distributors of “broadcast” programming) show the highest price increases across the sector most regulated as to conditions of supply (Canadian content obligations and others). Internet access is a pure play of telecommunications using IP technologies, with neither legacy circuit-switching, nor public service obligations, and exposed to the operations of Moore’s Law more completely than any other sector. Voice telecommunications is largely what is covered in the line marked “TPI”. It is imperfectly competitive, but most of its prices have been deregulated.

Back to Mr. Hennessy, the television producers’ lobbyist, and a fine one indeed. He is in effect saying, don’t blame mandatory carriage of new services for your cable price increases: we are only one of a number of villains, sorry, causative agents.

I agree. The Broadcasting Act itself is the problem. It is directed to produce mediocre productions, and country houses for clever men who milk the system, at staggering costs to the Canadian consumer. We pay the approximate costs of two or three  modern naval destroyers per year, every year, to sustain this regulated system. Personally I would prefer a stronger navy. We are paying for a naval expansion program already in broadcasting and film subsidies.



Statistical note:

  1. The TPI reflects the price changes experienced by a household for a basket of telephone services. The basket of telephone services reflects a weighted-average of consumer expenditures on basic local service, other local services (such as options and features), and long distance, installation, and repair services. However, the TPI does not include wireless or Internet service expenditures.
  2. The BDU price index reflects the price changes experienced by a household for a basket of cable television services. The basket includes both ‘Basic’ and ‘Extended’ cable services. Basic cable service is the minimum service to which all customers must subscribe. Extended cable service is the most popular package of additional channels. The index does not account for ‘bundling discounts.’

Source: Statistics Canada

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