Increased cord cutting and Netflix use creates more competition for telcos
by Peter Vogel
In 2016, like the preceding couple of years, Canadians continued their love-hate relationship with home television service providers.
Some switched providers. Others abandoned home TV service altogether, becoming members of an ever-growing pool of so-called cord-cutters.
Still others purchased grey-market Android TV boxes that come pre-programmed with hundreds of TV channels.
A very few installed antennas, whether the indoor type reminiscent of rabbit ears of yesteryear, or a roof-mounted unit, and began watching completely free, raw, uncompressed, HD over-the-air content, albeit from the handful of channels available in the Vancouver area.
And the American streaming service Netflix became almost ubiquitous in Canada, serving for some as their de facto television service. So widespread has the adoption of Netflix become that discussion is brewing about taxing it, partly to offset tax revenues lost due to cord cutting. (As a foreign-owned streaming service, Netflix is not required to pay value-added taxes like GST.)
As of Dec. 14 Amazon Prime Video has entered the Canadian market as a direct competitor to Netflix. The service is free for customers of Amazon’s Prime Delivery service.
Adding to this upheaval in media delivery, 2016 saw the federal broadcast regulator step in with two major developments that affect how Canadians may subscribe to cable TV plans.
In March came the arrival of basic or so-called “skinny” TV packages after the Canadian Radio-television and Telecommunications Commission spelled out how telcos had to provide basic plans costing no more than $25 a month. The plans had to include over-the-air channels available in each local market, as well as a number of specialty channels.
The CRTC also designated an optional lineup of five American channels – the four broadcast networks plus PBS – that could be included with the basic packages.
In the Vancouver market, the two major service providers, Shaw and Telus, waited until very near the March 1 deadline before announcing their $25 packages. Shaw’s includes the American channel lineup. The Telus Optik TV $25 package does not.
On Dec. 1, the CRTC’s second edict – pick-and-pay channel pricing – came into effect, although at this stage it isn’t clear whether it will have any competitive effect on the marketplace.
In my own case, I switched from a full-service plan to Shaw’s $25 package, saving around $80. The company was completely above board about the plan, and the agent I dealt with on the phone made no attempt to dissuade me or pressure me into adopting a mid-range alternative.
In contrast, I made various visits to local shopping mall Telus booths, where there was usually initial denial of any such plan’s existence. Or I would be offered some other plan in the $35 range. Nothing about the $25 plan was ever provided in print. In fact, one mall booth agent attempted to display the channel lineup on his tablet computer, inadvertently revealing a manager’s email categorically stating there were to be no brochures identifying the company’s $25 plan.
Let’s face it, these big telcos have had an easy ride for decades, with ever-increasing prices for their television delivery service. Now, as they face the prospect of cord cutting and plan downsizing, they are looking for other ways to preserve their revenue stream.
One way has been to raise Internet service rates. Both Shaw and Telus offer home Internet service in B.C. and have regularly increased rates until recently. In August, Shaw surprised almost everyone by offering a 150-megabit home Internet plan (with a 1-terabyte monthly data cap) priced at $50 per month for new subscribers and $80 for existing users.
The Shaw offer undercut even its own plans, rattling Telus, whose 150 speed service is only offered where it has fibre. Shaw’s 150 package is available on its entire network.
Before celebrating the newly arrived 150 plans, let’s look ahead a couple of years. After Telus’s $42 promotional period, its 150 up-and-down service almost doubles to $80 a month. Shaw shows its regular rate climbing to $100 a month at the end of the contract (although this is down from the initially pegged $135 a month).
Expect the two companies to continue some type of price war over the next several years, especially in this high-speed segment of the market. Telus has a three-year plan to get fibre access to all locations in the City of Vancouver. Also be on the lookout for competition from third-party resellers after the CRTC ruled that the big telcos must give them access to their fibre networks at competitive rates.
Home television and Internet service delivery will remain an area of change for 2017 and well beyond. Have you recently changed your TV or Internet plan? Let me know what you’ve changed and how much you are saving, if anything. We will run a collection of responses in a future column.
In the meantime, check with your service provider to make sure you are getting the best possible deal for both your Internet and television feeds.
Follow me on Twitter (twitter.com/PeterVogel) and Facebook (facebook.com/PeterVogelCA).