Bloomberg News

Netflix Won’t Face Canadian Broadcast Regulation, CRTC Says

October 05, 2011

(Updates with comments from ruling in fourth and eighth paragraphs.)

Oct. 5 (Bloomberg) -- Netflix Inc. and other Internet providers of TV and movies won’t face regulation in Canada after the country’s broadcast regulator said it didn’t find “clear evidence” that they hold an advantage over cable and satellite broadcasters.

The Canadian Radio-television and Telecommunications Commission, in a statement on its website, said its “fact- finding” study didn’t show companies such as Netflix were harming the traditional broadcast system, though it will continue to monitor the industry and hold more consultations next year.

The Gatineau, Quebec-based regulator examined whether Internet-based movie distributors may need to face regulations, including a requirement to fund Canadian broadcast content, that cable and satellite distributors such as Rogers Communications Inc. must meet.

The evidence doesn’t show on-line providers are “having a negative impact on the ability of the system to achieve the policy objectives,” the regulator said.

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.

Threatens Revenue

Apple Inc. offers on-line viewing through Apple TV, while Google Inc. owns YouTube, which also offers a movie-rental service.

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.

“There is no clear evidence that Canadians are reducing or canceling their television subscriptions,” the regulator said today. On-line and mobile programming appears to complement broadcaster programming, it said.

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

‘Colossal’ Investment

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 on-line 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.

--Editors: Paul Badertscher, Gail DeGeorge

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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