Bloomberg News

Netflix Said Not to Face Broadcast Regulation in Canada

September 30, 2011

(Updates with Netflix closing price fifth paragraph.)

Sept. 30 (Bloomberg) -- Netflix Inc. won’t face regulation in Canada after the country’s broadcast agency rejected calls from BCE Inc. and other cable providers that argued the Internet-based movie company has a competitive advantage, two people familiar with the matter said.

The Canadian Radio-television and Telecommunications Commission will announce next week it won’t undertake a formal review of Netflix and other online providers, the two people said, on condition they not be identified because the decision hasn’t been made public.

The Gatineau, Quebec-based regulator held consultations on whether Internet-based movie distributors should fund Canadian broadcast content and face other regulations that cable and satellite distributors such as Rogers Communications Inc. must meet. Denis Carmel, a spokesman for the commission, said the CRTC doesn’t comment on speculation.

Netflix, based in Los Gatos, California, has been at the center of disputes with cable and satellite companies in Canada since it began offering unlimited movie downloads for C$7.99 ($7.67) a month last year. The service has signed up 10 percent of the broadband households in Canada, a feat that took six years in the U.S., Ted Sarandos, chief content officer, said at a Sept. 14 conference.

Netflix gained 7 cents to $113.27 at the 4 p.m. close of trading on the Nasdaq Stock Market. The stock hit a 13-month low yesterday, following reports that Amazon.com Inc. and Microsoft Corp. plan products that may siphon users. Apple also offers online viewing through Apple TV, while Google Inc. has a movie- rental service through Youtube.

Canadian Content

Canada’s major distributors have argued the increased competition threatens to reduce revenue and will make them less able to contribute to the fund for local content production.

Prime Minister Stephen Harper’s government also has quelled efforts by companies such as Montreal-based BCE and Rogers Communications of Toronto to impose per-use billing on smaller service providers on concern that it would stifle Internet-based providers such as Netflix.

Quebecor Inc. Chief Executive Officer Pierre Karl Peladeau said in June the arrival of companies such as Netflix is spawning an uneven playing field for Canadian carriers, which are subject to regulatory restraints and have made “colossal” investments into network infrastructure.

Netflix has said that Canadian companies are exaggerating the threat it represents, claiming its service has increased competition in the market, encouraging Canadian companies to introduce their own online video services.

By seeking help from regulators to slow down Netflix, Canadian telecom companies are trying to “create another competitive barrier to entry,” Netflix lawyer David Hyman said in an April 27 letter to the regulator.

BCE, the country’s biggest phone company, rose 41 cents, or 1.1 percent, to C$39.29 at 4 p.m. on the Toronto Stock Exchange. Rogers, Canada’s largest mobile carrier, jumped 48 cents to C$35.87.

--With assistance from Hugo Miller in Toronto and Andrew Mayeda in Ottawa. Editors: David Scanlan, Steven Frank

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net


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