Market forces being tuned out

By Peter Nowak, CBCNews.ca

It's been a tough week for telecommunications companies on both sides of the border, but a good one for class-action lawsuits. First, a Saskatchewan court gave the thumbs up to a class-action lawsuit by lawyer Tony Merchant against Canada's cellphone companies. Merchant is seeking the return of up to $20 billion that he says has been unfairly charged by the providers through their monthly system access fee. The providers have been falsely identifying the fee as a government-mandated charge, he says. The providers plan to appeal the ruling.

Down in the United States, antitrust lawyer Maxwell M. Blecher has filed a lawsuit against television providers for forcing customers to take packages of channels that include individual channels they neither watch or want. Blecher says forcing consumers to take channels they don't want inflates their monthly bill, so he wants television providers to offer them "a la carte." Consumers should be able to pick and choose they channels they want, he says.

The system access fee is endemic to Canada and has been a thorny issue in one form or another for at least the last 10 years. A lot of heat is starting to come down on Canada's wireless providers, so the system access fee issue may finally get some resolution this time around.

The television issue has also been around for a while, but unlike system access fees, IT could have relevance on both sides of the border despite the suit being filed in the United States. (By the way, the U.S. suit has not yet been classified as a class-action.)

U.S. television providers have yet to issue a response to the suit, but certainly a defence they will use is that forcing consumers to take channels they don't want is the only way to keep those channels afloat. After all, a less-popular channel would only get a fraction of the viewers and therefore ad revenue than a more popular one, such as HBO, might get. By not being packaged with other, more popular channels, the smaller ones may not be able to cut it.

The situation is more complex in Canada because of regulations from the Canadian Radio-television and Telecommunications Commission. To promote Canadian content, the CRTC requires television providers here to offer one local channel for every U.S. or foreign channel. However, under these CRTC regulations, Canadian providers have the option of offering single channels a la carte over digital as long as they also offer them as part of their channel packages.

Very few providers have chosen to do this, aside from certain overseas ethnic channels, which means they could theoretically be exposed to the same type of lawsuit.

The U.S. suit raises many questions on both sides of the border, but perhaps the biggest one is: Should popular channels be forced to subsidize less-popular ones, or should television be opened up to free market forces where only the best ones survive?