My weekly technology column ( Toronto Star version homepage version ) notes that earlier this year, the Canadian Radio-Television and Telecommunications Commission launched a consultation into the policy implications of increasingly popular Internet-based video services such as Netflix. The consultation was the CRTC’s response to broadcaster and cultural groups including Bell Media, Astral Media, ACTRA, the Canadian Media Production Association, and SOCAN, who formed the Online Broadcasting Working Group to urge it to step up to the regulatory plate.

While many feared the CRTC would jump at the chance for new Internet regulation, last week it surprised observers by rightly concluding that its consultation generated plenty of rhetoric about the dangers of an unregulated over-the-top video services market, but no evidence of real harm. Given the lack of evidence and the absence of entry barriers for Canadian companies to establish their own competitive offerings, the CRTC decided to open a “watching brief” with the promise to revisit the issue in another fact-finding exercise next year. The CRTC decision concluded “it is best to allow the over-the-top market to continue evolving, better measurement tools to emerge and entities that contribute to the policy objectives of the Act to take advantage of the many opportunities in this new environment.”

This is close to what I suggested might happen back in July, when I noted “given the lack of actual evidence – this has been a fear-finding exercise rather than a fact-finding one – the CRTC should surely label this a watching brief and wait until 2014.” There is a big difference between waiting until the next scheduled new media review in 2014 and kick-starting another examination of the issue next May, however. The CRTC message to the Online Broadcasting Working Group is “if at first you don’t succeed, try, try again.” By opening the door to two reviews in the span of a one-year period, the Commission hold on new Internet regulation may only be a temporary reprieve.

First, the characterization of online video services as “broadcasters” is open to debate. Online video services share some characteristics of their broadcasting counterparts, but some of those services could also be treated as the Internet equivalent of video rental stores, which fall outside the Broadcasting Act. If the CRTC starts from the presumption that over-the-top video is broadcasting, it is already on the road to regulation.

Second, the CRTC consultation and report examines over-the-top video services almost exclusively through the prism of how they have an impact on established broadcasters and content creators with little regard for consumer interests. The Commission’s report concludes that consumer adoption of these services is “real and growing”, but it surely did not require a fact-finding exercise to figure that out.

Rather than focusing on the potential “harm” of online video services, the Commission should instead adopt a consumer-oriented perspective that seeks to foster the growth of such services [I argued in June 2011 that the entire process featured unnecessary barriers to consumer participation].

The consultation confirmed that consumers are gravitating toward services that offer on-demand access to video content at a price point far below that offered by conventional pay television and broadcaster services. Moreover, the CRTC heard from many broadcasters lamenting the likelihood of increased costs for licensing content given the heightened competition.

These developments may represent a threat to established broadcasters who face the prospect of reduced consumer revenues for their services along with increased expenses for programming content. However, it also holds the promise of more consumer choice, lower prices, and increased demand for creator content. That sounds like a market to be embraced, not shackled with new regulation.

Indeed, rather than offering broadcasters and creator groups another chance to make the case for regulation, the Commission should instead be closely examining the potential barriers to online video services from vertically-integrated media companies that combine broadcasting and Internet services and hold the power to undermine the nascent competition. For example, Internet plans with expensive data caps can be used to increase the indirect costs of online video services when compared with on-demand video services from cable and satellite companies.

The Online Broadcasting Working Group received its fact-finding exercise and the Commission found no evidence of harm. If there is to be another consultation, the CRTC should turn its attention to Canadian consumers by emphasizing what can be done to foster even more competition.