1. Telecom: Content Competition "The Future of Competition and the Evolution of the Marketplace” Insight Conference: 7 th Annual Telecommunications Forum Nov 9, 2010 David Keeble www.davidkeeble.com

2. Online Aggregator Telephony Mobility ISP Broadcaster Producer BDU 3 - playOTTWireless Vertical Integration ShawQuebecorTelus Incumbents RogersBell New Entrants

3. New entrant competition  New entrants can compete in content IF: –They become BDUs, –Regulated, facilities-based or –An open Internet/mobile platform becomes the main video delivery means.

4. The Baseline: according to Nielsen “Each week the typical American consumes almost 35 hours of TV, 2 hrs of timeshifted [DVR] TV, 4 hrs of internet, 22 minutes of online video and 4 minutes of mobile video.”

5. And yet  Right now, internet/mobile video usage is quite low, compared to other platforms –1.5% of all video usage  And yet video delivery is said to occupy over 50% of the total capacity of the Internet –Partly because on-demand is a very inefficient delivery method compared to broadcast.  Prediction: –Linear TV will survive, because the industry is not going to expand the capacity of the Internet by 30x to provide the same services consumers are already paying for.

6. Usage Prediction Aggressive scenario  Internet-delivered VOD business model improves because  piracy is discouraged by ISPs,  content providers make more content available,  encouraging growth of internet-delivered VOD  4x growth over 5 years  Is there enough $ to pay for this, given other on-demand platforms?

7. The Value of Vertical Integration  Vertically integrated incumbents can create a unique consumer value deal via: 1.The 4-play bundle 2.Ownership of many robust networks Serving home, mobile, car … –Note DTV mobile Many forms of on-demand, not just one 3.Exclusive rights to unique content –Consumers buy content, not pipes

8. The CRTC’s Role  Canadians do NOT want to subscribe to two content bundles to get a complete service. –NHL playoffs available only on “Carrier X” is acceptable when usage is small, and other platforms dominate, but ….  Can CRTC afford to allow content to be held exclusively within proprietary delivery systems?

9. Exclusive Content?  TV services use exclusive program rights: –but TV services must be generally available to all BDUs. Category 2 services may not be carried on all BDUs.  When BDUs themselves obtain content directly for VOD, they do so non-exclusively.  But there is no regulation of “Internet” or mobile delivery. –OTT: Netflix, Google unregulated –Suspicion that telecom content plays are designed to create exclusive content deals for their portals Or “better bargaining” cross-silo

10. Defining the internet!  Services “delivered and accessed over the Internet” are exempt from regulation –Reckoning that the Internet was an open platform that could not be regulated –But it never defined “the Internet”? –If content is only available to subscribers to one proprietary delivery network, is it still “accessed over the Internet”?  Commission must decide what “Internet” means.  Federal Court: ISPs are not broadcasters - as long as they “have no control or input over the content made available to Internet users.”

11. Exclusive Content on an ISP?  Joining Rogers on Demand Online –“Everyone Can watch hundreds of full length TV shows and movies for FREE. –All Rogers Customers Can access exclusive content simply by joining. –Rogers Cable TV Customers Can watch shows from their specialty channels by joining.”

12. CRTC Proceedings  Exclusive content is not specifically raised in the vertical integration proceeding (2010-783) –Indirectly, via General: possible anti-competitive behaviour by BDUs How to define when a BDU has conferred an “undue preference” on itself.  The “conditions of licence for VOD” proceeding prohibits exclusive rights for VOD –Possible amendment – exclusive content allowable if service is available to all BDUs.  But neither proceeding deals with Internet providers e.g. the ISP portals, Netflix or Google TV.

13. Conclusion  As telcos move into content area, the competitive environment will depend in part on the regulatory treatment of exclusive content rights.  Stay tuned, CRTC may have to re-engage –if the market does not encourage Cross-silo provision New entrants. David Keeble www.davidkeeble.com