New Zealanders have a great affection for and affinity with Canadians. Like us, their country is often overshadowed by a bigger, bolder, noisier neighbour, and yet discussions about Canadian politics, economics, and culture in this country are rare.
When it comes to telecommunications and broadcasting policy it might be time to make an exception, especially in light of the proposed Vodafone and Sky TV merger (see blog on the deal currently before the Commerce Commission). It is instructive to see what happens in a market where vertical integration – telcos owning substantial media assets – is allowed to occur with few, if any, conditions imposed by the regulator.
In a report by Canadian Professor Dwayne Winseck of the Canadian Media Concentration Research Project he writes that all the major commercial TV ownership groups in Canada are owned by telephone companies and BDUs (Broadcasting Distribution Undertaking). Together the telcos in Canada account for nearly 75% of the revenue of the total media economy, which in 2014 was $75.4 billion. Google, Facebook and Netflix combined account for less than 5% because internet advertising makes up only a small percentage of total media revenue.
What can happen when a country’s mass media is owned by its telcos is that business models are designed around low data caps. These prevent customers from consuming all the media they’d like to for fear they will go over their data cap and be financially penalised. Zero rating is then introduced. This means that customers can consume all the media they like as long as it’s owned by the telco they subscribe to and the data allowance kicks in when they watch content owned by other companies.
We’ve experienced a similar situation in NZ the past, before the regulation of mobile termination rates. Consumers subscribed to plans in which they could call/text people on the same network for substantially less than people who subscribed to a competitor’s network. It resulted in Auckland and Northland being dominated by Vodafone, and the rest of NZ being dominated by Telecom (now Spark) and no room for a third competitor to enter the market.
Reading Professor Winseck’s report I got the impression that the telcos in Canada are using access to media – in the same way Vodafone and Telecom had used calling/texting – as the bait to lock customers into their network.
If that is indeed what has happened, and if a similar situation were to occur in New Zealand, it would be disastrous. Not only would it limit people’s access to competitive services, it would compromise New Zealanders’ ability to produce and distribute their own content. Our stories are unique and they are too precious for their distribution to be dependent on telco business models.
If the Vodafone and SkyTV merger is allowed to proceed it must be with conditions that recognize the significant market power the Vodafone has in telco markets (fixed and mobile) and that SkyTV has in the broadcasting market. There are precedents for this in other countries, which I will write about in my next post.