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Speech
Notes for an address
by Namir Anani
Executive Director, Policy Development & Research
Canadian Radio-television and Telecommunications Commission
to the Entertainment Industries Summit
Toronto, Ontario
October 22, 2008
(CHECK AGAINST DELIVERY)
Thank you for inviting me to speak at this important summit again.
My subject is media convergence—and the opportunities it offers in the global environment.
From where we sit at the Canadian Radio-television and Telecommunications Commission, we've been getting a very clear view of the rapid advance of convergence in the industries we regulate. As the industries change, regulation must also change.
Over the past year we have continued to deregulate the telecommunications sector and rely on market forces to the maximum extent feasible, in accordance with the policy direction issued by the government in December 2006.
We will soon be releasing the determinations that emerged from our policy review on broadcasting distribution undertakings and discretionary TV services. During that process we received volumes of evidence in which parties told us about the effects that new digital and Internet platforms are having on their businesses.
In November, we will be holding a public hearing on the accessibility of communications services to people with disabilities. It will address accessibility issues in broadcasting, telecommunications and New Media––all at the same time.
Early in 2009, we will be holding a public hearing on broadcasting in the converged New Media environment.
Even our reporting methods are changing. This year we released our first Communications Monitoring Report. It brings together the information that we used to publish separately for broadcasting and telecom.
Convergence was also the primary impulse for a strategic review called Future Direction. Its purpose was to enhance the Commission's ability to understand the strategic implications of convergence. It resulted in a realignment of our organization that better reflects the environment we are working in.
Now, what does that environment look like?
The term “convergence” has been a buzzword for about ten years in communications, media and entertainment. But now its impact is being felt in more concrete ways.
I'm going to describe the three most common forms of convergence as we know them today, and how they relate to each other:
- convergence driven by technology
- convergence driven by corporations, and
- convergence driven by consumers.
Convergence driven by technology
Everything starts with convergence driven by technology: Internet Protocol and digital devices. Previously we had a range of distinct applications and services, such as telephony, video and data communications. Now we get them all coming together on a single network. And this means significant changes in the way services are delivered to consumers.
Television distribution companies become phone companies, which become wireless companies, which become ISPs. Their services appear in markets as “triple” or “quadruple” plays. A single provider can offer data, television, and fixed and mobile voice services.
We also see a migration to IP content distribution, using devices like the iPhone and Apple TV. Providers can deliver movie rentals on a device like the Xbox.
This kind of innovation accelerates convergence. Clearly, there are differences between consumer electronic products––televisions, computers, phones and game consoles all have different screen sizes. But inside, they've begun to look very similar, with many of the same component radios, storage media and chipsets.
Convergence driven by corporations
Convergence in technology is being mirrored in corporate convergence. Previously, the links in the chain were discrete: production, broadcasting, distribution, applications and services. Now they're being integrated. Mergers and acquisitions are expanding the range of activities that can be undertaken—and they can also solidify market share in areas of core competence.
There can be big payoffs for corporate convergence: reaching new audiences, gaining access to new skills and know-how, acquiring rights to content, and hedging against the uncertainties of the market.
So communications companies around the world are eyeing both their competitors and their partners as potential acquisitions. Here in Canada some of the biggest players have done major deals in the last year or so:
- Astral and Standard
- Rogers and Citytv
- Canwest and Alliance Atlantis
- BCE and Teachers, and
- TQS and Remstar.
Convergence driven by consumers
Now we come to convergence driven by consumers. This is a more recent development.
Increasingly, consumers are asking for a convergence of media and communications offerings. They're calling for open platforms rather than the proprietary ones controlled by the major corporations.
We see growing evidence of this in Europe. Most recently we saw it in the U.S. during the 700MHz spectrum auction. Google demanded, and partially got, auction rules to ensure that consumers' interests are served—regardless of who won the spectrum at auction. Specifically, Google encouraged the FCC to require the adoption of four types of open platforms as part of the licence conditions: open devices, open applications, open services, and open networks.
Government response
Converging technologies, corporations and consumer expectations bring benefits and challenges. So it's no surprise that governments around the world are positioning themselves to respond with policies that optimize the benefits and address the challenges. The result is regulatory convergence.
Some jurisdictions such as Australia, Malaysia, Hong Kong SAR, and the United Kingdom have established a common regulator with responsibility for the telecommunications and broadcasting sectors. Regulators such as OFCOM—the Office of Communications in the United Kingdom—have enacted new converged regulatory frameworks that apply to all electronic communications networks and services.
These frameworks include ex post rules and new tools to enable investigation, enforcement, and arbitration of disputes.
The aim of the OFCOM reform was to:
- establish a harmonized regulatory framework for all communications services
- simplify and minimize regulation, and
- balance the objectives and approaches of competition law with more interventionist regulation to achieve economic and social objectives.
New opportunities and policy implications
Let me now touch on some of the opportunities offered by this new landscape, and highlight some of the policy implications that many governments are grappling with.
We now have an abundance of content and distribution channels, increasing global competition and rapidly evolving technologies that integrate seamlessly together. All this makes for increasing worldwide interconnectedness. This is fertile ground for new business models, new economic activity and cultural enrichment.
The distances that separated the countries of the world have suddenly shrunk, thanks to Internet Protocol. Expansion of communications infrastructures and of foreign direct investment are allowing consolidated enterprises to get bigger and go global.
This means that the opportunity for global exposure for Canadian content has never been greater.
But it's not a one-way street. This environment also enables a whole world of new entrants on multiple new platforms and channels to reach Canadians. So there are economic and cultural dimensions of convergence that we must look at.
Popular content brands originating elsewhere are integrated directly into the network functions of large communications companies, leading to the possibility of increased market dominance. There is a risk that the strength and diversity of Canadian voices will be diminished.
Other issues grow out of the fact that technology has now enabled ubiquity of content on all platforms. That is, we can now see and interact with content on virtually any device. This gives life to new business and economic models. But at the same time, it is fuelling a debate over content rights. This is a major concern for all parties.
In this environment, the old business models built on control of rights are increasingly less relevant. With a multiplicity of platforms, channels and providers, audiences are fragmented—so it is unclear just what the value of those content rights may be. And how are these rights to be protected against piracy?
The advance of mobile communications brings its own set of issues. Mobility is a key platform for expansion in the future, and data is the main driver of growth in the wireless sector in Canada. Data accounts for an estimated 42% of network service revenue growth in 2008, up from 32% in 2007, and 53% in 2009. It made up 55% of network service revenue ARPU (average revenue per user) growth in 2007.
This makes the 700MHz spectrum all the more valuable because of its superior data capacity and extended range. After August 31, 2011, all TV broadcasting in Canada will go digital, and analog terrestrial TV broadcasts will cease. This will open up the 700MHz spectrum for vigorous competition in the wireless arena.
With a multiplicity of platforms available—fixed as well as mobile—these are some of the questions we will have to deal with:
- the accessibility of services to people with disabilities
- reliability and affordability for Canadians in both urban and rural areas, and
- the transparency of terms of service agreements.
Then we have the question of traffic and capacity—not only in Canada, but on a worldwide scale.
Internet penetration is continuing its remarkable growth. Citizens are moving from being content consumers to becoming content producers as well. Can the IP infrastructures handle this exponential growth? Researchers estimate that traffic on the Internet is practically doubling every year.
We've been measuring content in gigabytes—109 bytes—but we're already moving on to the terabyte, which is 1012 bytes. The people who decide such things have prepared for us the peta-, exa-, and zettabyte. I don't know if we'll ever get to the yottabyte, which is 1024 bytes. But it's nice to know it's there if we need it.
This abundance of content raises two issues that are relevant to both the industry and policy makers.
First, we will have to let go of the strategies that were developed for an environment of scarcity, when we had limited spectrum, few platforms, few providers, and little choice. We will have to find strategies for handling virtually unlimited content and making it visible and accessible.
Secondly, such an increase in traffic will confront service providers with the need to balance between investing in new infrastructure capacity, and managing traffic on the existing pipes.
Advertising
My final topic is advertising. Advertising dollars are being diverted to new platforms because they can do more than the old familiar mass media. They can deliver content and brands to particular communities and even individuals. They can allow some level of interactivity, feedback and choice. And the Internet has drawn advertising in recent years not only because campaigns can be targeted, but also because results can be measured directly.
Canadian online ad spending in 2008 is estimated at $1.36 billion. The leading share has gone to Google, followed by Yellow Pages, Sympatico-MSN, CanWest, CTVglobemedia and Quebecor.
Traditional television distributors around the world are fighting back, offering their audiences video-on-demand, Personal Video Recorders (PVRs) and Network Personal Video Recorders, as well as high-definition content. PVR and HD penetration of TV subscribers is still small in Canada compared to the U.S. By the end of 2007, PVR stood at 9% and HD at 13%; they are forecast to reach 28% and 38% by the end of 2010.
So convergence in all of its forms is enabling new opportunities for communications services in Canada and around the world. This has important implications for culture, commerce and policy. Canadian companies will have to be nimble and innovative. They will have to be supported by tools and policies that are suited to an environment of choice and abundance, and where content is present on all platforms.
There's a lot of re-thinking to be done, and here today we have a great opportunity to get right into it.
Thank you very much.
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Date Modified: 2008-10-22
