Undue Intervention: Why the CRTC Got It Wrong on Exclusive Content
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December 13, 2011 10:30 AM
The CRTC yesterday issued a ruling involving a Telus complaint over Bell's exclusive rights over NFL and NHL content for its wireless services and its inability to negotiate similar rights for mobile carriage. The Commission found that Bell gave itself an undue preference contrary to its 2009 new media decision and ordered Bell to take steps to ensure that Telus can access the programming on reasonable terms. While there are dangers of undue preferences in the mobile environment and of unfair behaviour arising from the vertical integration, it is hard to see how this case qualifies.
The CRTC analysis involves a two-step process. First, it considers whether an undertaking has given itself a preference or subjected another person to a disadvantage. If it finds a preference, it moves to a second step to determine whether the preference is undue. Note that the burden of demonstrating that the preference was not undue rests with the undertaking that has granted it.
In this case, the Commission found that Bell granted itself a preference by entering into an exclusive contract for NHL and NFL programming. Note that the NFL programming is not something that Bell produces or otherwise owns. There is also no indication that the Bell's wireless access to the NFL is linked to similar licenses for its broadcasting properties (Bell says the NFL deal was concluded before its purchase of CTV). If this constitutes a preference, then any exclusive contract will seemingly rise to the level of a preference and the party that enters into it may be faced with the burden of demonstrating that it is not an undue preference (which appears to be precisely what the Commission has in mind).
Given the finding of a preference, Bell was obligated to demonstrate that it was not an undue preference. Bell pointed to Telus wireless growth and the availability of other sports programming to suggest Telus wasn't harmed, but the CRTC found that other programming was not comparable to the NFL and NHL and that the exclusivity would "have a significant adverse impact on TELUS’ ability to attract mobile subscribers for its broadcasting content." This may be true, but it is hard to see how this justifies CRTC intervention given that this licensing arrangement that was presumably open to any of the carriers to pursue and does not appear to be connected to vertical integration concerns.
So when should the rules apply? In the case of undue preference in the wireless environment, the CRTC rule arose largely due to complaints by Pelmorex Media (which runs the Weather Network) about unfair treatment for its wireless applications by the carriers. It identified a wide range of concerns that put it at a disadvantage that cried out for regulatory power to prevent such abuse. The Pelmorex problem points to undue preferences by carriers against content providers. This case doesn't involve a complaint by a content provider, however, but rather a potential carrier of content.
This case was not decided on the basis of the recently developed vertical integration rules, though CRTC Chair Konrad von Finckenstein has suggested the outcome would have been the same. I have been supportive of rules that guard against the problems that may arise due to vertical integration where a company like Bell grants an undue preference to its own content (such as CTV content or soon its Toronto Maple Leafs content). Yet those rules are still under development as the Commission is scheduled to release a proposed amendment to the new media exemption order by the end of the year and launch a notice of consultation on draft regulations. Whether the Commission creates restrictions against all exclusive deals or focuses more specifically on those with linkages to vertical integration remains to be seen.
The CRTC has seemingly decided that any exclusive content arrangement will be viewed under the existing new media rules as a preference and will face potential scrutiny to determine whether it is undue. It sends a strong signal to avoid exclusive content deals and foreshadows near-continuous regulatory review of licensing contracts that feels like undue intervention.
Originally posted on Michael Geist's Blog
| Blogger Profile: Michael Geist | |
| Dr. Michael Geist is a law professor at the University of Ottawa where he holds the Canada Research Chair in Internet and E-commerce Law. Dr. Geist has written numerous academic articles and government reports on the Internet and law and was a member of Canada's National Task Force on Spam. He is an internationally syndicated columnist on technology law issues. He is an internationally syndicated columnist on technology law issues. |  |
