Media: Regulator says cable viewers willing to pony up more for TV

J. Sturgeon | Vancouver Sun | 03.24.10

TORONTO - Cable subscribers have shrugged at rate increases in the past and may be willing to do so again if new fees are passed on to them, the national broadcast regulator suggested yesterday.

In a report submitted to the federal Cabinet, the Canadian Radio-television and Telecommunications Commission said it does not believe "significant affordability issues would be created" for consumers if a new compensation regime were introduced as early as 2011.

Called "value for signal" or "fee for carriage," the new system would see big cable firms such as Rogers Communications Inc. and Shaw Communications Inc. for the first time pay conventional TV networks such as Global and CTV Inc. a fee for station signals.

On Monday, the CRTC moved to adopt the controversial measure to help offset declining revenue at network TV stations and preserve the Canadian content they produce.

Yesterday's report stems from a rare order-in-council from Heritage Canada in September and a subsequent public hearing in December. The Harper Conservatives have been cautious to support a CRTC ruling that would raise consumer costs and create a potential voter backlash.

The regulator's recommendation would almost certainly do just that, causing "modest price increases" for cable.

But Canadians may be willing to eat the charge, the CRTC's submission suggests.

The average cable rate was $53.22 a month last year, CRTC figures show. That's up almost 50% since 2002 when rates were deregulated, representing an annual rise of 5.6% to the average bill.

"Such results do not seem to suggest a significant withdrawal of demand for [cable or satellite] television services when consumers are faced with rate increases," the CRTC said.

The rise has help lift revenue and profit at the major cable firms. Now, with the fortunes of networks dimming, the CRTC aims to buoy the entire system with a new negotiation regime similar to one that exists in the United States.

The CRTC has put the decision to the Federal Court of Appeal, which is to determine whether it has the jurisdiction to impose what some term a new "TV tax."

The move opens a new battleground on which the broadcast and cable-satellite consortiums will continue the years-long fight over fees for over-the-air station signals.

Mirko Bibic, senior vice-president of regulatory affairs at BCE Inc., which operates satellite service Bell TV, said the telecommunications giant is preparing its case. Phil Lind, vice-chairman of Rogers Communications Inc., the largest cable company in the country, also said the company would fight the decision in court.

CTV or Global could not be reached for comment. (Global is owned by Canwest Global Communications Corp., parent of the National Post.)

The most critical scrutiny, however, could come from the federal government, which has the option of overturning Monday's decision.

Prime Minister Stephen Harper reiterated his party's position during Question Period yesterday. The government, he said, is "concerned about anything that imposes fees on consumers without their consent."

The price tag on an individual station signal is anyone's guess. Specialty channels such as TSN and HGTV command upwards of $1 or more a month, a fee lumped into a customer's cable bill.

In previous proceedings, the CRTC has used a price of 50¢ per subscriber for local station signals. All in, estimates received by the commission during hearings last year ranged from as low as $1 per subscriber per month to as high as $10.

But "since any fee charged would be the result of a negotiation, there is no way to accurately predict what the ultimate charges would be for consumers," the CRTC admitted.

Media: Great on paper, iPad not ready to save printed word yet

By J. Sturgeon | Financial Post | 01. 30. 2009

They stole headlines last year and were championed as the saviours of the newspaper, magazine -- in fact, all print media. This year, industry observers say e-readers like the Kindle made by Amazon.com will take off with consumers as we continue to shift reading habits from paper to screens.

Steve Jobs brought things to a fever pitch this week when his Apple Inc. introduced the iPad, a device many said would accelerate and revolutionize that trend. With it would be the return of paid content.

"We're going to stand on [Amazon's] shoulders and go a bit further," the celebrated chief executive said during the introduction of the product: an oversized touchscreen device with the dimensions of a large hardcover book.

Integral to Apple's e-book approach is the creation of iBooks, an application that serves as a storefront for the Cupertino, Calif. firm's new online e-bookstore. It will sit on the iPad's main screen, allowing readers to purchase major titles from the world's biggest publishers, including Penguin and Harper Collins.

Still, if the iPad is to convince readers to pay for digital print products, it struggled to impress veteran media observers.

"It checked off on its to-do list everything that was obvious. Make an e-reader application. Make sure you have a bookstore integrated into it. Use the elegance of the device to create a reading experience and be able to pull books off bookshelves. All of that," said James McQuivey, media technology analyst at Forrester, a U.S. researcher.

"But there is an opportunity missed here to take it to the next level."

In general, the iPad is simply an enlarged version of the iPod Touch with the addition of an e-book application, many analysts said.

For instance, the New York Times, which plans to begin charging for its Web content next year in another attempt to stem falling ad revenues, unveiled a new app for the iPad at the presentation. Yet there is no indication it differs to any great degree from the free one now offered on the iPod Touch through Apple's App Store.

As important, innovation on the social media front -- which could provide a value-added service and thus, be worth paying for -- is lacking from the iPad's e-reader experience. There is no way for users to tell their friends or Twitter followers automatically what they are reading (or buying).

"[Apple] could have demonstrated a much more integrated reading experience," Mr. McQuivey said.

It does not mean it cannot be done later on. But the iPad's saviour status took a tumble in the wake of Mr. Jobs' presentation on Wednesday.

That may not be lost on Apple, which priced the base model at a modest US$499 (16GB). The most expensive model is only US$849 (3G-capable, 64GB), perhaps in recognition that Apple has not reinvented the wheel with the iPad as it did with the iPod in 2001 and the iPhone in 2007, analysts say.

Canadians can get their hands on it in March. But it will be a version strictly made for local Wi-Fi networks. After that, a more expensive "3G" model that can access the Web through a cellphone carrier's wireless network will be introduced, possibly in late spring or early summer --it will be available first only in the U.S. through AT&T.

"Apple was in a position to say, 'Look, we're going to partner with publishers that create apps that are innovations in reading.'" Forrester's Mr. McQuivey said.

It may still be, but the iPad and its army of developers have more work to do yet.

jasturgeon@nationalpost.com

Telecom: Virgin Mobile boldy moving up market to ward off new threats

By J. Sturgeon | Financial Post | 12.21.2009

Competition will be the watchword for Canada's wireless industry next year, as established players face off against a cast of new entrants poised to steal market share.

While the current operators are talking tough, questioning whether any of the new startups have the right strategy or wherewithal to challenge meaningfully, a shakeup of the entire sector looms.

Nowhere are the crosshairs of the new players trained more closely than on the lower end of the market -- existing cellphone users who merely want inexpensive voice and text-messaging services or Canadians who own no mobile phone because they find current prices prohibitive.

It means the discount or "flanker" brands of Canada's big three wireless firms -- Fido, owned by Rogers Communications Inc., Koodo, owned by Telus Corp., as well as Solo and Virgin Mobile Canada, owned by BCE Inc. -- will face the fiercest competition.

For one of them, the threat is affecting a reinvention, says its president.

"Early next year, we'll be in the first phases of a very different Virgin," said Robert Blumenthal, the head of Virgin Mobile Canada.

What that means is unclear -- Mr. Blumenthal is mum on details. But he did reveal that Virgin will begin selling Apple Inc.'s iPhone.

It is a move, he says, that signifies a transition at Virgin from a discount sibling to BCE's Bell Canada, which fully acquired it this spring, to a full-weight partner, offering a complete suite of services for consumers who are increasingly demanding faster and more sophisticated devices.

"You'll see a great expansion in our portfolio and us being able to offer higher-value devices and services," he said in an interview last week. "Where we had been traditionally lower down in the marketplace, we'll be expanding to realize our true potential."

In the new year, Public Mobile Inc., DAVE Wireless Inc. and Videotron ltee will all launch, joining WIND Mobile, which began offering services last week in Toronto and Calgary. DAVE and Videotron have been quiet on their plans, but Public Mobile has stated repeatedly it will offer cheap, flat-rate voice and text services for perhaps $40 a month across its coverage areas between Windsor, Ont., and southern Quebec -- the most populous region in the country.

Mr. Blumenthal says the threat is overstated, but admits that pricing pressure will be a theme for next year and that Virgin is "considering everything."

One thing is for certain: He wants Virgin to get simple.

As it stands, Virgin offers dozens of prepaid and contract plans, not to mention several "add-on" options. "The easier you can make the decision, the easier to sell, the easier to buy. It helps sales and it helps the consumer make choice," he said.

Virgin Mobile, a subsidiary of the U.K. conglomerate, originally entered Canada four years ago with its celebrity CEO Sir Richard Branson partnering with Bell. The Montreal firm supported Virgin with its network in exchange for shared revenues.

In May, Bell acquired Mr. Branson's half for $143-million while agreeing to continue paying licensing fees. It was then that Mr. Blumenthal, a former Telus executive, joined Virgin.

The division has become a key driver of wireless growth for Bell. Analysts suggest Virgin now occupies as much as 15% of the telecommunication giant's wireless base.

However, if it is to maintain momentum, Mr. Blumenthal says Virgin must leverage Bell's new network upgrade to capture higher-margin smartphone users, which make up the fastest-growing market segment.

"Over time, I have a belief that as more people become wireless users and their wireless usage becomes more of a necessity than a luxury ... people tend to move up."

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Card-card issuers told to tighten up lending as defaults rise

By J. Sturgeon | Financial Post | Feb. 4, 2009

Credit-card issuers are being advised to run regular credit checks, reduce limits on certain cardholders and even close inactive accounts after a report yesterday said delinquencies are on the rise.

Unpaid credit-card bills have been piling up since the financial crisis morphed into recession in the fall, a new report from accounting giant Deloitte says, putting as much at $800-million in jeopardy of being written off.

Households have glutted themselves on debt for the past half-decade, increasing total credit-card liabilities by 40% to $80-billion. As the jobless rate climbed and income generation began to grind to a halt late last year, delinquent accounts jumped by 5% to 10%, said the report's authors.

Now, the spectre of a wave of delinquencies hangs over issuers' balance sheets.

"Canadian consumer debt levels are higher then they were in previous cycles," said banking analyst Robert Sedran of National Bank Financial, adding that he has forecast loss rates to climb higher in 2009.

Historically, Canadian credit-card issuers which include the chartered banks, credit unions, U. S. subsidiaries such as Amex Bank of Canada and big retailers, absorb losses of about 4% annually, the report said.

Yet the delinquency rate has increased by between 50 and 100 basis points since October, with the likelihood that losses will grow, said Mr. Sedran.

Canadian Imperial Bank of Commerce, for example, has already witnessed its loss rate climb above 5% last quarter, the analyst said.

"Where they get to, that's the big question for the year."

The advice Deloitte gives issuers looking to preserve their balance sheets include more credit checks, the ending of automatic account increases and, in some cases, reducing limits or eliminating accounts "where there has been a deterioration in the credit score."

The report also advises institutions to establish a "watch-list" on accounts with "unusually high" use of cash advances.

"Circumstances for cardholders are changing quickly," said Pat Daley, partner at Deloitte and one of the report's authors. "Customers who had impeccable credit scores six months ago may be in trouble today."

Some of the more than 23 issuers in Canada have already moved to tighten standards.

Canadian Tire Corp. said this week it was raising the general interest rate on late payments from its retail cardholders

to 19.5% from 18.99%, annualized. Toronto-Dominion Bank changed agreement terms at the beginning of December, raising rates to almost 25% on overdue accounts.

The report follows measures outlined in last week's federal budget to kick-start the flow of credit back to cash-strapped consumers, including easing pressure on indebted cardholders. Jim Flaherty, the Minister of Finance, said the budget would enhance disclosure requirements on banks and institutions that offer credit cards to help determine costs, revenues and profit margins on services, information institutions are not compelled to divulge under current legislation.

Critics have charged that the proposals specific to credit-card issuers are just too vague.

National Bank's Mr. Sedran said he has not received any tangible guidance that banks are implementing more stringent measures yet, but said he expects them to in the near future.

"You tend to relax some of your lending standards when the economy is performing well and you tend to tighten them when the economy isn't performing well because obviously the risks are rising."