How foreign online streaming will upset Bell and Rogers apple carts

Canadians who want to view specialty channels and watch their favourite showsmust go through their cable providers, like Bell and Rogers.

But some industry experts say that maychange. Theysuggestthat Canadians will inevitably have access to American content streamed online whenonline streamingbecomes the norm and more and more people abandon their cable providers.

It's already happening south of the border. Last week, HBOannouncedthat it will allow Americans tostream its programmingonline next year without having tosubscribeto the cable channel.

While HBO won't be streaming its service into Canada, at least not yet, the experts say the pressure from the public and from some content providers to allow more streamed foreign content is bound to grow. And that couldmeanthat Bell and Rogersmay eventually be relegated to essentially providingthe "pipe"or theactual cables,connecting to householdsthatfacilitateinternet or wireless service.

"[Rogers] controls the pipe asdoes Bell. They will come to the realization, thats their model, forget about content, and all this other nonsense, they dontreally have anything of propriety there to offer,"said FredLazar, an economics professor at York University'sSchulichSchool of Business. "Focus on the pipe, control that, and essentially increase the rates charged there as people start migrating."

• HBO to offer streaming-only online option in 2015
• U.S. TV networks may abandon unbundled Canadian cable for online
• CRTC report shows cost of cable, telecom services increasing
• TV at 75: How HBO and Netflix are forcing networks to evolve
• CRTC hearings: How the outcome could affect your cable and internet bill

'Try and slow the migration'

What [Bell and Rogers are]going to do is try and slow the migration as much as possible and try and better position themselves through different types ofpricing to take advantage of the inevitable migration [from cable to online]," he said.

In a sense, cable companies were the Netflix of their time, Lazar said, mostly providing cable subscribers programming (much of it American)that had been created by others, while also supplying a healthy dose of Canadian content.

But then the internet came along, providing a more directdistribution forum forcontent that allowed customers to pick and choose what they wished to view. Companies like Netflix, which provided quick online streaming access to films and TVshows and catered to binge viewers,roared tosuccess, putting thefuture of cable in jeopardy.

This is why content entertainment companies like HBOare also getting into the streaming business(CBS similarly announced that it too would start a streaming service.)

"Whether its the NFL orwhether it's Universal Studios programming or HBO programming why on earth should you share your revenue with third party cable companiesandaggregatorsand theTSNsof this world and The Movie Networks ofthis world," saidDvaiGhose, cable and media research analyst at the Toronto-basedinvestment bankCanaccordGenuity.

"Surely the mostprofitablemodel for you is to go directly to thecustomer."

Streaming will allowcontent providers to cut out the cable middlemen and provide theirshows directly to the customer.

Netflix wont be necessary, the The Movie Network wont be necessary, youll go directly to these content producers,"Lazarsaid, adding this is why Netflix, ironicallyhas begun creating original content, fearing it may eventually get squeezed out.

Lazar predicts this could begin to take shape in five to 10 years, as the cable companiescontracts with content providers begin to expire.

The Canadian Radio-television and Telecommunications Commission, which is responsible for protecting Canadian content, will initiallymakeit difficult for foreign-produced programming like HBOto be streamed via the internet to Canadians, Lazar said.

However,the broadcastregulator will be overwhelmed by a public demanding those foreign restrictions be removed and their powers will diminish, he said.

Change business model

Sowith fewer and fewer cable subscribers, analysts say Bell and Rogers their business model would need to evolve. For instance, more data usage would producehigher fees, meaning the telecom companies would stand to generate a lot of revenue.

"I think whether its Bell or Rogers, theyre looking at it and saying cable has essentially matured,' and theyre going to start changing their pricing models for internet realizing more and more content will be going by the internet regardless of what the CRTC does," Lazar said,"So to protect their revenuesources as more people cut the link to cable, theyre going to start increasing the rates for the internet connection."

Ghose said Bell and Rogers should embrace the role of becoming just "a dumb pipe provider."

"What is wrong with that?You will need that more than ever," he said.