Rogers Communications will acquire Hamilton, Ont.-area independent Source Cable in a quiet $160-million deal.

The transaction was first noticed in Rogers’ quarterly financial report to shareholders, noting that Source Cable provides cable, broadband, and phone service to only a part of the city of Hamilton. Rogers already provides service next to Source Cable’s service area so a transition to Rogers should pose few issues for eastern Canada’s biggest cable operator. The rest of greater Hamilton will continue to be served by Cogeco and Rogers in their respective service areas.

“We’re really excited about purchasing Source Cable,” said Kevin Spafford, Rogers Communications spokesperson. “We view this acquisition as a growth opportunity because the company is well run; the footprint is adjacent to our existing cable systems; they have really good penetration of cable TV and Internet services, and there is potential for new customers as the unbuilt part of the area develops.”

Subscribers are less enthusiastic.

The cable company has always been responsive to its customers and willing to pioneer new technology before larger providers like Rogers.

Source Cable customers may win some extra ethnic language programming now seen on Rogers, but will likely experience a major downgrade in how they deal with their cable provider. Source customers will eventually be exposed to Rogers’ much lower-rated customer service. Broadband customers are also likely to lose their unlimited Internet service, forced to select from Rogers’ usage-capped plans.

Source Cable was started by former city alderman Jim Campbell in 1974. Campbell died two years ago.

Source Cable’s service coverage area is limited to a number of blocks in parts of Hamilton, Ont.

The arrival of Netflix north of the American border has sparked a potential video revolution in Canada that some fear could renew “an erosion” of Canadian culture and self-identity as the streaming video service floods the country with American-made television and movies. But anxiety also prevails on the upper floors of some of Canada’s biggest telecom companies, worried their business models are about to be challenged like never before.

Two weeks ago, the country saw a remarkable Canadian Radio-television and Telecommunications Commission (CRTC) hearing featuring a Netflix executive obviously not used to being grilled by the often-curt regulators. When it was all over, Netflix refused to comply with a CRTC order for information about Netflix’s Canadian customers.

Earlier today, the CRTC’s secretary general, John Traversy, declared that because of the lack of cooperation from Netflix, all of their testimony “will be removed from the public record of this proceeding on October 2, 2014.” That includes their oral arguments.

“As a result, the hearing panel will reach its conclusions based on the remaining evidence on the record. There are a variety of perspectives on the impact of Internet broadcasting in Canada, and the panel will rely on those that are on the public record to make its findings,” Mr. Traversy wrote in a nod to Canada’s own telecom companies.

Not since late 1990’s Heritage Minister Sheila Copps, who defended Canadian content with her support of a law that restricted foreign magazines from infiltrating across the border, had a government official seemed willing to take matters beyond the government’s own policy.

CRTC chairman Jean-Pierre Blais threw down the gauntlet when Netflix hesitated about releasing its Canadian subscriber and Canadian content statistics to the regulator. Mr. Blais wanted to know exactly how many Canadians are Netflix subscribers and how much of what they are watching on the service originates in Canada.

With hearings underway in Ottawa, bigger questions are being raised about the CRTC’s authority in the digital age. Doug Dirks from CBC Radio’s The Homestretch talks with Michael Geist at the University of Ottawa. Sept. 19, 2014 (8:40) You must remain on this page to hear the clip, or you can download the clip and listen later.

Netflix has operated below regulatory radar since it first launched service in Canada four years ago. The CRTC left the American company with an impression it had the right to regulate Netflix, but chose not to at this time. The CRTC of 2010 was knee-deep in media consolidation issues and did not want to spend a lot of time on an American service that most Canadians watched by using proxy servers and virtual private networks to bypass geographic content restrictions. But now that an estimated 30% of English-speaking Canada subscribes to Netflix, it is threatening to turn the country’s cozy and well-consolidated media industry on its head.

Ask most of the corporate players involved and they will declare this is a fight about Canada’s identity. After all, broadcasters have been compelled for years to live under content laws that require a certain percentage of television and radio content to originate inside Canada. Without such regulations, enforced by the CRTC among others, Canada would be overwhelmed by all-things-Americans. Some believe that without protection, Canadian viewers will only watch and listen to American television and music at the cost of Canadian productions and artists.

[flv]http://www.phillipdampier.com/video/BNN Netflix vs the CRTC 9-22-14.flv[/flv]

Kevin O’Leary, Chairman, O’Leary Financial Group is furious with regulators for butting into Netflix’s online video business and threatening its presence in Canada is an effort to protect incumbent business models. From BNN-Canada. (8:45)

A viewer watches Netflix’s Corie Wright testify before the CRTC. (Image: Sean Kilpatrick, The Canadian Press)

But behind the culture war is a question of money – billions of dollars in fact. Giant media companies like Rogers, Shaw, and Bell feel threatened by the presence of Netflix, which can take away viewers and change a media landscape that has not faced the kind of wholesale deregulation that has taken place in the United States since the Reagan Administration.

Before Netflix, the big Canadian networks didn’t object too strongly to the content regulations. After all, CRTC rules helped establish the Canadian Media Fund which partly pays for domestic TV and movie productions. Canada’s telephone and satellite companies also have to contribute, and they collectively added $266 million to the pot in 2013, mostly collected from their customers in the form of higher bills. Netflix doesn’t receive money from the fund and has indicated it doesn’t need or want the government’s help to create Canadian content.

“It is not in the interest of consumers to have new media subsidize old media or to have new entrants subsidize incumbents,” added Netflix’s Corie Wright. “Netflix believes that regulatory intervention online is unnecessary and could have consequences that are inconsistent with the interests of consumers,” Wright said, adding viewers should have the ability “to vote with their dollars and eyeballs to shape the media marketplace.”

That is not exactly what the CRTC wanted to hear, and Wright was off the Christmas card list for good when she directly rebuffed Mr. Blais’ requests for Netflix’s data on its Canadian customers. Wright implied the data would somehow make its way out of the CRTC’s offices and end up in the hands of the Canadian-owned broadcast and cable competitors that know many at the CRTC on a first name basis.

Does Netflix pose a threat to Canadian culture? Matt Galloway spoke with John Doyle, the Globe & Mail’s television critic, on the Sept. 22nd edition of CBC Radio’s Metro Morning show. Sept. 22, 2014 (8:31) You must remain on this page to hear the clip, or you can download the clip and listen later.

Mr. Blais, obviously not used to requests being questioned, repeated demands for Netflix’s subscriber data to be turned over by the following Monday and if Netflix did not comply, he would revoke Netflix’s current exemption from Canadian content rules and bring down the hammer of regulation on the streaming service.

Blais

The deadline came and went and last week Netflix defiantly refused to comply with the CRTC’s order. A Netflix official said that while the company has responded to a number of CRTC requests, it was not “in a position to produce the confidential and competitively sensitive information, but added it was always prepared to work constructively with the commission.”

Now things are very much up in the air. Many Canadians question why the CRTC believes it has the right to regulate Internet content when it operates largely as a broadcast regulator. Public opinion seems to be swayed against the CRTC and towards Netflix. Canadian producers and writers are concerned their jobs are at risk, Canadian media conglomerates fear their comfortable and predictable future is threatened if consumers decide to spend more time with Netflix and less time with them. All of this debate occurring within the context of a discussion about forcing pay television companies to offer slimmed down basic cable packages and implement a-la-carte — pay only for the channels you want — is enough to give media executives heartburn.

To underscore the point much of this debate involves money, American TV network executives also turned up at the CRTC arguing for regulations that would compensate American TV stations for providing “free” programming on Canadian airwaves, cable, and satellite — retransmission consent across the border.

Netflix does not seem too worried it is in trouble in either Ottawa or in the halls of CRTC headquarters at Les Terrasses de la Chaudière in Gatineau, Québec, just across the Ottawa River. Prime Minister Stephen Harper and Heritage Minister Shelly Glover have made it clear they have zero interest in taxing or regulating Netflix. Even if they were, the Canada-U.S. free trade agreement may make regulating Netflix a practical impossibility, especially if the U.S. decides to retaliate.

[flv]http://www.phillipdampier.com/video/Canadian Press CRTC vs Netflix 9-19-14.mp4[/flv]

Dwayne Winseck, Carleton School of Journalism and Communication, defended the role the CRTC is mandated to play by Canada’s telecommunications laws. (1:41)

Vidéotron, Quebec’s largest cable operator, has switched on its upgraded 4G LTE wireless network for the benefit of its mobile customers, offering real world wireless speeds up to 40Mbps.

LTE-capable devices will automatically connect to the new wireless network immediately, boosting speeds and network performance. Customers with older devices that are LTE-compatible may need a new LTE SIM card, available at any of the company’s stores at no charge.

“At Videotron, innovation is rooted in 50 years of history,” commented Manon Brouillette, president and CEO of Vidéotron. “Today, we have reached another watershed in our progress by bringing consumers this state-of-the-art mobile network.”

Vidéotron is a smaller player in a wireless market dominated by Bell (33% market share), Rogers (29%), and Telus (28%) but has grown significantly since the 2008 spectrum auction that allowed the cable operator to build out the wireless network in launched in 2010. Today the company has more than 550,000 customers and between 10-13 percent of the market, mostly in Quebec where Vidéotron’s network reaches 90 percent of the province.

Ottawa is watching the cable company’s performance closely, perhaps believing Vidéotron is Canada’s best hope to be the fourth largest carrier in the country. But most of the company’s wireless facilities are in Quebec and it is unknown if Vidéotron can or will be able to build a nationwide network of its own.

Canadians pay between $495-734 million a year in extra charges just to receive a mailed copy of their monthly bill for cell phone, cable and broadband service. Now the Public Interest Advocacy Centre wants the government to ban charges for mailed invoices.

Jonathan Bishop, PIAC’s Research Analyst, said, “a majority of consumers have indicated their disapproval of being charged extra for a paper bill. Most Canadians believe supplying a paper bill in the mail without having to pay an extra fee is part of the company’s cost of doing business.”

If you ask most cable, phone and satellite companies about their paper billing policies, they will claim the fees are designed to encourage people to adopt more ecofriendly online billing. But the poor and elderly, who often lack Internet access, are forced to pay extra monthly fees just to find out how much they owe their providers.

Some providers have also been quietly increasing those paper bill fees, which now reach as high as $5.95 a month.

Trying to avoid a more formal regulatory proceeding, the Canadian Radio-television and Telecommunications Commission asked 11 major telecommunications companies to attend an informal meeting last week to negotiate curtailing the fees. The meeting fell apart with providers only willing to exempt certain customers from the billing fees, which have become a lucrative new source of revenue for many.

As of last November, 36 companies said they do not charge for paper bills, while 27 others charged between 99 cents – $5.95 a month. Among those with customer-friendly free paper bills: Shaw Communications, Manitoba Telecom, SaskTel and Bell Aliant. Those charging $2 a month for a paper bill include Rogers Communications, Telus, and Bell/BCE.  Rogers and Bell charge the fee for home phone, wireless, Internet and television services while Telus only charges for wireless and Internet bills.

Quebecor Inc.-owned Vidéotron Ltée wants $3 a month for wireless customers seeking a detailed paper bill listing all calls, texts and data used, but a less comprehensive standard bill can be obtained free of charge.

Wind Mobile, one of Canada’s new wireless competitors, charges $4 a month for a paper bill and one of their affiliated companies OneConnect, serving businesses with VoIP service, charges $5.95 a month.

The 11 largely intransigent companies: Bell Aliant, Bell Canada, Cogeco Cable, Eastlink, Globalive, MTS Allstream, Québecor, Rogers, SaskTel, Shaw, Telus only came to unanimous agreement that customers with “no personal or home broadband connection, persons with disabilities who need a paper bill, seniors aged 65 and over and veterans of the Canadian Armed Forces” will be able to avoid a paper bill fee, if charged. The exemptions take effect Jan. 1, 2015.

“While the companies agreed to adopt consistent exemptions to such fees, they were unable to reach a consensus to eliminate them entirely,” said CRTC chairman Jean-Pierre Blais. “Many Canadians who will not benefit from the exemptions will be disappointed with the outcome so far.”

The CRTC is going to further survey Canadians before deciding what actions to take next.

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CTV reports consumers are frustrated about rising paper bill fees. The CRTC’s efforts to end the fees ran into profit motives — Canadian companies earn up to $700 million annually from bill printing. (1:48)

Bell Aliant’s FibreOp fiber to the home service may suffer as Bell/BCE redirects upgrade investments into shareholder dividend payouts.

Bell Aliant customers in Atlantic Canada won’t benefit from Bell Canada’s (BCE) efforts to take subsidiary Bell Aliant, Inc. private unless they happen to be shareholders.

In July, Bell Canada Enterprises announced its intention to privatize Bell Aliant, which serves customers in Nova Scotia, Prince Edward Island, New Brunswick, Newfoundland and Labrador, expecting at least $100 million a year in savings from reduced operating costs and capital investments.

Bell Aliant has operated largely independent of Bell Canada from its headquarters in Halifax, N.S. Bell Aliant customers have received FibreOp fiber to the home upgrades in several Atlantic provinces in recent years, providing more advanced services than Bell’s fiber to the neighborhood platform Fibe in Ontario and Quebec. Bell Aliant customers have also avoided usage caps and usage-based billing, getting access to unlimited use broadband at speeds up to 400/350Mbps.

Politicians in Nova Scotia immediately raised the alarm about the possibility of job cuts. Both Tory and NDP opposition leaders complain the Liberal premier has not done enough to protect jobs.

Bell Canada Enterprises

NDP MLA Dave Wilson said all three parties agreed to work on economic issues for the province. Wilson said he fears if the government isn’t vocal about its support for the jobs, Bell might look to move them elsewhere.

The news is better for those holding stock in the company. Existing public minority shareholders are being offered cash or shares of BCE stock (or a combination of both) in return for selling their Bell Aliant stock.

Bell wants to take Bell Aliant private to get access to its consistent $1 billion in cash revenue earned annually, mostly to satisfy BCE shareholders with a more reliable and consistent dividend payout.

Although Bell promises it will continue to invest in Atlantic Canada, its own financial disclosures show customers in the region will see spending on upgrades and other service improvements cut as a result of Bell’s actions.

Bell has committed to spending an average of $420 million a year across Atlantic Canada, but as an independent, Bell Aliant was investing $578 million annually, primarily on fiber upgrades. Over the next few years $160 million of the investment budget will be diverted to maintain a healthy divided payout for BCE stockholders. As of May 2014, BCE was paying a dividend of $0.6175 per quarter with common shares outstanding of 777.3 million, for a quarterly dividend payout of about $480 million per quarter, or $1.92 billion per year. As Bell Aliant shareholders cash out their holdings or convert them to BCE shares, the growing number of BCE shareholders will require Bell to spend more to satisfy dividend payouts. In fact, BCE may transfer enough money out of Bell Aliant’s operations to raise its dividend for all BCE shareholders to attract new investors.

Reduced spending will mean reduced upgrades for Bell Aliant customers. Bell is not promising significant cost savings from merger-related synergy, so capital spending will likely suffer the most as a result. So will customers.