Wired TV Subscription in Decline as OTT Grows

The number of US households with digital cable TV is expected to drop to less than 50% as over-the-top (OTT) platforms such as Hulu, Amazon Prime, and Pluto TV become more popular, according to a report. The move to OTT is part of the cord-cutting trend, where consumers are canceling or reducing their digital cable subscriptions.

While telecom companies have acquired broadcasters and publishers to diversify, OTT platforms have previously been exempt from Canadian Radio-television and Telecommunications Commission (CRTC) regulation. A proposed Canadian bill, C-11, aims to bring online media platforms under CRTC regulation in the same way as traditional broadcasters.

In this article, we will examine the trend of cord-cutting and the growth of OTT platforms, as well as the impact on traditional telecom companies and the potential regulation of online media in Canada.

The Struggle of Scaling Back Digital Cable TV Services

This past Christmas, I was tasked with scaling back my parents’ digital cable TV service. They are seniors now, living on pension income and retirement savings, paying close attention to excessive spending and where they get the most out of their dollars. Like so many others of all ages, they don’t see value in subscribing to a large package of linear TV channels which they don’t watch for over $1,600 a year when most of that could instead be used towards the cost of annual travel, for example.

So after four separate phone calls with my parents’ cable provider in Toronto, 8 hours in total, either on hold or on the line with three different customer service reps in two different departments (including one dropped call after an hour and a half wait) my parents now have a skinny basic package for $25/month after overcoming technical issues that the cable company had in their back office, which took two weeks to resolve.

The egregious amount of time spent to accomplish what should have been a simple account change may be a symptom of the phasing out of digital cable that service providers are in the midst of. Except for grandfathered legacy or skinny basic channel packages, cable companies are ushering their remaining TV customers off of digital cable towards their streaming and wireless/ethernet IPTV offering, which provides 4K UHD picture in Dolby Vision/HDR color and Dolby Atmos sound, when available – all things that I preoccupy myself with professionally, which my parents have no care for as home consumers.

Cord cutting, or cord-trimming, continues this year. It’s anticipated that the number of all US households with digital cable TV will drop further to less than 50% as OTT (over-the-top) platforms like Hulu, Amazon Prime, and Pluto TV become pervasive on every device that can possibly connect to a flatscreen TV, or are already integrated into a Smart TV.

OTT Fills the Niche while Telecoms Get Into Healthcare

Fortunately for my parents, the specialty programming they like to watch appears in abundance on OTT services such as FAST (free ad-supported streaming television) channels. To access it, I got them a 4K Apple TV as their gift to connect to their un-Smart TV. After learning a new remote control and on-screen user interface, they continue to receive their favorite programming through streaming linear TV and SVOD. And they don’t mind ads if it means they get free programming.

No one needs to worry about the telecommunications companies; they are doing just fine while consumers terminate or reduce digital cable subscriptions. Like the telcos that have entered their traditional space, they are companies that have made vertically integrated acquisitions for several years, from Internet connectivity at home to owning the broadcasters and publishers that provide the content on their networks.

BCE Inc., the parent company of Bell in Canada that provides mobile, TV, and internet services, is so diverse that they were once in the energy sector, owning a 42% stake in TransCanada Pipelines back in the 80s. Telus Communications in western Canada now provides property security monitoring and healthcare services in addition to their mobile, TV, and voice offerings.

Canadian Content

As a condition of distributing media, the big telecom companies are mandated by the CRTC (Canada’s equivalent to the FCC) to contribute funds towards the financial support of Canadian-produced media creating Canadian content and to dedicate a portion of their broadcast to Canadian content. On the other hand, online media broadcasting, including OTT and even social media platforms, Youtube, etc., have been exempt from CRTC regulation until now.

Seeing that OTT is getting the market share of cord-cutters, the Canadian government has put forward Bill C-11 to update the Broadcasting Act and bring online media, i.e. Instagram, Amazon, Youtube, Pluto TV, and Tubi, all under the same CRTC regulation. They would be required to prioritize Canadian content offerings and potentially compel the platforms to make a financial contribution towards Canadian content creation from their gross Canadian revenue of subscriptions and advertisements.

Those against the bill as Parliament passed it spoke to unintended negative consequences and saw it as a tool to continue a legacy broadcast paradigm of a bygone era. After much contentious deliberation in a parliamentary committee that saw members of the public being gaslit by committee members, the bill is now with the Canadian Senate, which has made several amendments in the Senate committee that the bill’s critics have well received.

We are actively seeing OTT services like Amazon and Pluto TV provide Canadian content from partners like Corus Entertainment as if the bill is already in effect. You can binge-watch “Border Security” and “Degrassi” right now at no cost.

For now, my parents are enjoying watching content on their Apple TV that they choose for themselves regardless of where it originates without CRTC regulation. Should choice become restricted because content requirements weren’t met, I believe we would then see a surge in sign-ups for VPN services by Canadians to circumvent the bureaucratic gatekeeping.

The bill must now pass the Senate on a future meeting date that has yet to be set, but before then, the public still has the opportunity to provide their comments to the Senate. After that, the bill goes back to Parliament for another round to accept the amendments or make further amendments to send back to the Senate.