Bell’s Alt TV has one Foot in broadcasting, the other in the Internet

Bell pulled the curtain back on its new Alt TV service last week. As advertised, it’s a cheaper version of its “Fibe TV” broadcast product. It’s aimed at the cord-cutting, cord-shaving and cord-nevering customers that cable TV is increasingly losing or not winning.

But despite Bell CEO George Cope’s previous signalling, Alt TV is not an unregulated Internet streaming service like Netflix or Bell’s own Crave TV.

Foretold as Bell’s aggressive (and perhaps self-cannibalizing) move from the CRTC-regulated world of cable TV, to the unregulated world of “over the top” Internet streaming, Alt TV turns out to be a regulated television service after all.

Alt TV will find its way into households on Bell’s Internet-Protocol TV (IPTV) fiber distribution system, the same system that already delivers media-laden data bytes for Fibe TV. Alt-TV uses a self-installed video streaming device, not a PVR, and it can’t record programs.

And Alt TV is a little cheaper than its big sister Fibe TV.

What’s important for viewers of Canadian content and local news is that Alt TV is still a traditional “broadcasting distribution unit (BDU),” the CRTC terminology for cable TV.

So like Fibe TV, little sister Alt TV will be obliged by the CRTC to contribute five per cent of its revenues to Canadian content in film production, community TV, and local news. That’s big money: according to the CRTC’s last published data (2015), Canada’s cable companies annually contributed $285M to film production and $152M to community TV.

For those wondering why Bell didn’t just keep the five per cent levy for itself and go to an “over the top” product to which anyone with an Internet connection could subscribe, you have to understand the advantages that Bell reaps by keeping Alt TV within the traditional system.

Like Fibe TV, the Alt TV product takes full advantage of the CRTC-regulated system as a BDU. This way, Bell can supplement its own CTV channels on Alt TV with programming from the CBC, Rogers, and Corus that it already purchases for distribution on Fibe TV. Without that programming from other media companies, Alt TV would be a decidedly thinner product.

Alt TV can also exploit the revenue opportunities in simultaneous substitution, meaning it can continue to buy the exclusive Canadian distribution rights for hit American shows, especially big events like the Oscars (and until lately the Super Bowl, but that’s a longer story). The profits from those big shows pad the bottom line, which makes it easier to pay for Canadian content and local news. This would not be possible if Alt TV, like Netflix or Crave TV, was unregulated Internet TV.

With one foot still squarely in the regulated broadcasting system with Fibe TV and Alt TV, Bell is nonetheless firmly planting the other in the Internet.

Alt TV will only be sold to customers who subscribe to Bell’s Internet service with an unlimited data plan.

It sounds like the business plan is to make up the revenue lost by lowering the price for Alt TV as a “Fibe TV lite” by selling the same customers more data. And for good measure, Bell retains television customers.

The challenge for regulated TV is daunting. Cord-cutting is no myth. Based on CRTC data, consumer preference has turned the corner. For the first time in history, in 2015 Canadian cable TV companies began losing customers. Netflix is gaining Canadian subscribers exponentially.

So watch this space.

A year from now, Alt TV could be a brilliant business move that also keeps Bell’s customer base within the regulated system.

Or it could be a bust, and we are staring straight down the slope towards an unregulated Internet broadcasting system in Canada.