Internet TV: Canadian growth could be stunted

A growing number of Canadians are choosing to watch television online while also running up against repressive usage caps.

Internet usage caps a problem for online viewing

Sami Smidi demonstrates an internet capable television in Jan. 2011. Although available in Canada, televisions like this could leave users with a higher internet bill thanks to low usage caps. (Ryan Remiorz/Canadian Press)

As the lion's share of television transmission towers make the switch from analog to digital on Aug. 31, more Canadians are also watching television through other channels entirely, most notably on the internet.

According to a study conducted by the think-tank Media Technology Monitor, 34 per cent of Canadian internet users watch TV online, for about 30 minutes each week. Indeed, the percentage of Canadians who accessed the internet through their television, whether to surf or otherwise, rose to eight per cent in spring 2011, up one full percentage point from last fall.

For Tom Copeland, chair of the Canadian Association of Internet Providers, this trend does not come as a surprise.

"I think it's just another way to deliver the content," he said. "If you look at things historically, we started with over-the-air signals and moved to cable and satellite.

"This isn't a revolution, it's an evolution."

And while this evolution is giving Canadians more freedom in the way they access television content, the technology remains in its infancy in this country, largely because of the heavy caps put on internet use by the major internet service providers. The mid-range priced plan with Rogers, for example, caps users at 60GB per month.

Netflix bandwidth

Even though a Netflix subscription only costs $8 a month, a steady stream of use could eat up your monthly bandwidth allowance, especially if you access high-definition content. Here is a breakdown:

Movies: Approx. 3.6GB for a two-hour movie in HD and about 700MB for the same length in SD

TV shows: Approx. 1.5GB for a 30-minute episode in HD and 400MB for the same epsiode in SD

So, with a 60GB monthly usage cap, you could watch 20 HD episodes of Being Erica along with 8 HD movies. Keep in mind, though, these numbers mean you would not be able to use the internet for anything else, like YouTube or music download services, without paying overage fees.

Gregory Taylor, a post-doctoral researcher at Ryerson University in Toronto who has studied internet access in Canada extensively, suggests these caps belie Canadians' overall usage of the internet.

"As far as broadband access goes, we're among the highest users of internet in the world," he said.

"These caps, though, are restrictive when it comes to watching television online," Taylor said.

John Lawford, counsel for the Public Interest Advocacy Centre, a consumer watchdog group, says these caps will continue to leave Canadians in the dark in comparison to countries like the United States, where over-the-top television services like Netflix and Hulu are used by a large amount of online users.

"[The caps] are effective barriers to entry for over-the-top television and movie services in Canada because they're lower than most other countries," he said. "In the States, where caps can average 200 or 300GB per month, the average viewer can get away with watching a decent amount of high quality content.

"Here, our caps are low enough that they overage fees may kick in just when those services, like Netflix, might be useful."

Despite the caps, Canadians are still signing on to Netflix at a decent speed: the MTM report indicates six per cent of Canadians have subscribed to the online service since its launch in Sept. 2010.

Lawford, however, says these numbers may be deceiving as they do not indicate the percentage of those subscribers who use the service on a regular basis.

"You might try Netflix for a month but then when a massive bill comes in, it may not be worth it," he said, indicating subscribers may just keep the service for irregular, off-chance use.

"But the internet service providers, who also happen to be owned by companies that now own content, can be gatekeepers and protect their own services," he said. "Rogers' on-demand service online, for example, doesn't count towards your cap. That's cheating, as far as I'm concerned."

However, discussions on internet caps have been mired in a regulatory swamp for months, Taylor says.  

"There have been repeated hearings at the CRTC about this issue and there is no clear answer," he said. " These talks include whether something like Netflix should be able to offer unlimited downloading when they're using Bell's [network] backbone, for example."

For Lawford, the regulatory red tape has been stretched far enough.

"The broadcasters got together and forced the CRTC's hand into conducting another investigation into over-the-top content providers," he said, pointing out Canada's regulator had already discussed the issue two years prior. "What changed? The only thing that changed is that Netflix came to town and was an enormous success.

"Is it really destroying Canadian television? I think it's complimentary, not confrontational."

Clogging the network

According to Taylor, the argument from companies like Bell and Rogers is that if caps were higher or non-existent, their online networks would end up in a log-jam with everyone free to download as much content as they see fit.

Tom Copeland says if network congestion was an actual concern for the major telecommunications companies, monthly usage caps do not address this problem at all.

"The caps are arbitrary and artificial in nature," he said. "That a person who wants to watch 100GB of video, evenly distributed over three to four hours a night, may not be causing any congestion on the network and yet they're going to get that big bill at the end of the month.

"If the purpose is to better manage the traffic on the network, then you should be managing it when the congestion occurs and where it occurs. This is simply the case of applying a user fee above and beyond what people pay."

Canadian content could suffer

As it stands, a company like Netflix, in essence an online broadcaster, does not have to pay into the various production improvement funds like other companies do — funds that benefit the continued production of Canadian content. Some argue that if Netflix continues to proliferate into more Canadian homes, it should be beholden to the same regulations as its traditional counterparts.

Lawford says this will prove to be the next major hurdle for the company and they may decline the challenge.

"The broadcasters want to convince the CRTC that Netflix is looking to operate as a direct competitor when in essence they would compliment the system and offer more access to content," he said.

"These new rules that would put Netflix under the umbrella of a broadcaster, albeit over the internet, would be so prohibitive because of all the regulatory hoops that they may not bother with their Canadian operations.

"If they did, they'd have a massive uphill battle against these fully integrated companies that have been in existence for decades."

He points out that if things do not change, Canadians could find themselves lagging behind other countries in terms of the creation of new, homegrown, internet-based content, created without the need for big broadcaster dollars.

"Who's to say what is Canadian content?" he asked. "Maybe there would be a period where new content wasn't created by Astral or CTV but in the same time span there could exist a dearth of user-generated or independent content."

A new television frontier

No matter the arguments made for or against watching television online, the reality of the situation suggests that its popularity will continue to rise in Canada, says Taylor.

"Canada is an early test case for internet television because it's the first country outside the United States to get Netflix," he said. "In the U.S., Netflix itself constitutes something like 20 per cent of internet traffic during prime time.

"That's why this service matters so much in this argument — It's not at that level yet in Canada."

"I want to see if anyone else will come in the marketplace," said Lawford.

"Anytime people with a whole bunch of broadcasting interests tell you that they're the best way to give it to you, it really doesn't work that way.

"They don't have a lock on the future and they can't see whether they have the best way to deliver content."