Pelmorex calls for industry-wide regulations on market power of integrated companies

The Weather Network owner Pelmorex Communications Inc. is calling on the CRTC to implement a series of new industry-wide policies to “safeguard” against excessive market power from vertically integrated communications companies that have more than a 25 per cent audience share. “Concentration in the industry, and in particular vertical integration, is going to continue, frankly,” Paul Temple, senior vice-president of regulatory and strategic affairs at Pelmorex, said in an interview. The company’s proposals are laid out in an Aug. 23 submission filed for the CRTC’s proceeding on Shaw Communications Inc.’s $2-billion acquisition of the broadcasting assets of Canwest Global Communications—a purchase that industry insiders say will make Shaw the largest and most integrated communications company in the country, with wireless, Internet, television distribution and broadcasting assets. Pelmorex is arguing that further media consolidation and vertical integration is increasing the need for general rules to ensure large communications companies do not show “undue preference” toward their own content. “If we’re going to be faced with this situation again in six months or a year or whatever, we should be developing reasonable rules that can apply to any of these ,” Temple said. According to the CRTC’s diversity of voices policy, the commission “carefully examines” broadcasting transactions that result in one person controlling between 35 per cent and 45 per cent of the national television audience share. Pelmorex suggests applying a new set of rules to the broadcasting distribution operations of large, vertically integrated companies that have a 25 per cent audience share in the markets they serve. The company’s proposals relate to the carriage of specialty channels and television services. It suggests requiring large cable and satellite distributors to report annually on the television services they carry, whether they have a stake in any of the channels, and the number of paid subscribers. The company also suggests a “3:1 rule” on cable and satellite packages, so that, for every three “related services” the distributor carries in a package—defined as services in which the company controls more than a 10 per cent stake—the distributor must also carry at least one unrelated Canadian service. Pelmorex suggests reversing the ratio for basic packages, so that three unrelated Canadian services are carried for each related service. A general 3:1 rule is now in place on the channels that distributors carry, but Pelmorex argues it should also apply to individual packages offered such as basic, extended basic, or genre packages like sports and news. Pelmorex adds that the CRTC should create a “confidential registry for affiliation agreements” to keep track of programming agreements for large distributors that meet the 25 per cent audience share threshold. The company argues that the rules should for now be applied to Shaw as conditions of licence, but Temple said the CRTC should also consider the safeguards as part of a new regulatory policy. The call for industry-wide rules on vertically integrated companies comes as production groups like the Canadian Media Production Association (CMPA) and competitors like Telus Corp. are calling on the CRTC to impose conditions of licence on the Shaw-Canwest deal. Michael Hennessy, Telus’ senior vice-president of government and regulatory affairs, told The Wire Report by email that there are limits to the rules that the CRTC can impose through the Shaw-Canwest proceeding, but agreed that “rules of general application are ultimately required.” “In any deal where increased concentration and vertical integration takes place, there is a higher risk of self-dealing and a greater threat to diversity and competition from unaffiliated suppliers,” Hennessy wrote, noting that Telus has called for conditions on the deal such as a prohibition on the offering of exclusive content on all platforms. When the commission announced the proceeding on the Shaw-Canwest transaction, it said it “may wish to discuss” its impact on the television market, its affect on Shaw’s market power and the potential for “anti-competitive behaviour.” Temple said Pelmorex has requested to appear at the CRTC’s hearings on the Shaw transaction, scheduled for Sept. 20 in Calgary, Alta. In its submission, Pelmorex points to events in the United States, where cable giant Comcast Corp. is seeking to purchase a controlling stake in NBC Universal for $13.75 billion US. Critics of the transaction say it could give Comcast too much power in the control of programming distribution online. U.S. House Representative Rick Boucher has called for conditions on the deal, such as restrictions on the NBC programming that Comcast can provide through its TV Everywhere service. The U.S. Justice Department is also investigating potential competition issues arising from the deal following pressure from competitors DISH and DirecTV. Pelmorex said it looks forward to discussing the relevance of the Comcast-NBC transaction at the commission’s public hearings. The CMPA wrote in its comment on the proceeding that combining Canwest Global’s assets with the Shaw-controlled broadcasting assets of Corus Entertainment will put Shaw “very close” the CRTC’s diversity of voices threshold of 35 per cent audience share nationally. Pelmorex has also submitted that, according to the CRTC’s 2010 Communications Monitoring Report, Shaw, Corus and Canwest will “form one of Canada’s largest programming undertakings, controlling one in three hours of Canadian English-language television viewing.” The company will also control “Canada’s largest discretionary services group, controlling 40 percent of English-language pay, specialty, and pay-per-view audience share,” Pelmorex wrote. It added: “Providing safeguards is not Shaw’s responsibility. Rather, it is the market regulator’s—that is, the CRTC’s.” Bell Canada and Rogers Communications Inc. declined to comment for this story, and Shaw is not commenting on the proceeding except through its replies to the CRTC submissions and its appearance at the hearing. sdoyle@thewirereport.ca --- CORRECTION: An earlier version of this story incorrectly described Pelmorex's proposed 3:1 rule. The company suggests that the rule apply to cable and satellite packages, so that for every three “related services” the distributor carries in a package, it must also offer at least one unrelated Canadian service. The ratio is reversed for basic packages, so that three unrelated Canadian services are carried for each related service.

Pelmorex calls for industry-wide regulations on market power of integrated companies

Broadcast | September 1, 2010

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