Tags: canada | cable | bundling | end

Canada Ends Cable Bundling; Is America Next?

Friday, 20 March 2015 12:35 PM

Canada's communications regulator will require cable companies to let customers choose the channels they want, one of the first countries in the world to mandate so-called a la carte pay-TV.

The decision will dismantle the system of bundling networks in packages that has underpinned the cable businesses of companies like Rogers Communications Inc. and BCE Inc.

By March 2016, companies will have to offer a smaller basic cable service with educational and local TV for no more than C$25 ($20). By December of that year, they'll have to let consumers choose the channels they want, a system known as "a la carte."

Canadians have long complained about paying for channels they never watch and millions have signed up for Internet streaming services like Netflix Inc. In the U.S., the industry is also shifting toward "skinny bundles," not forced by regulation, but driven by companies like Dish Network Corp. offering alternatives to the traditional cable package. Apple Inc. plans to debut an online service this year with about 25 channels, people familiar with the effort said this week, adding pressure on programmers that have relied on packages of hundreds of channels.

Canada's cable operators have been bracing for the possibility of an a la carte world for months following regulatory hearings in September on the future of the industry.

BCE and Rogers, the country's two largest cable providers, have started streaming services of their own. They said at the hearings that they were open to so called pick-and-pay bundles, warning costs could go up and less popular channels would die out. Smaller rivals including Shaw Communications Inc., Quebecor Inc. and Telus Corp. will also be affected by the ruling.

"There will be a transition process and a situation here where in the near-term you may see earnings impacted," said Andrew Pyle, a fund manager at ScotiaMcLeod Inc. in Peterborough, Ontario, who overseas about C$300 million, including positions in Rogers, BCE, Telus and Shaw. "Longer term, this is where the industry is going and the bigger players will position themselves to be there too."

'Resistance Is Futile'

Like in the U.S., the Canadian cable industry is grappling with a shift to Internet TV. Some customers are shutting off their traditional pay-TV services and watching video exclusively online -- the so-called cord-cutters.

"Resistance is futile, Canadians as viewers demand it, they want the choice, they want options because broadband is offering it for them everywhere," said Jean-Pierre Blais, chairman of the Canadian Radio-television and Telecommunications Commission.

Rogers said the change will help keep customers who would have otherwise dropped their cable subscription altogether.

"It might be less revenue than it is today, but it's more revenue than it would be without that option," said Ken Engelhart, the Toronto-based company's head of regulatory affairs.

Telus, based in Vancouver, called the decision a "real win" for customers. Scott Henderson, a spokesman for Montreal- based BCE, declined to comment.

The changes won't necessarily guarantee cheaper cable bills in the long term, said Dave Heger, analyst at Edward Jones in St. Louis, because the operators may increase prices for the most popular networks.

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Canada's communications regulator will require cable companies to let customers choose the channels they want, one of the first countries in the world to mandate so-called a la carte pay-TV.
canada, cable, bundling, end
Friday, 20 March 2015 12:35 PM
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