Commission, Shaw, discuss how to ‘enshrine’ content-sharing

Shaw Communications Inc. says intends to make its Canwest Global television content available to competitors because it’s “a benefit to offer the rights to everyone.” Shaw vice-chairman and CEO Jim Shaw told the commission Tuesday that denying competitors access to content—which it will acquire through its $2-billion purchase of CanWest Global Communications Corp.’s broadcasting assets—is not on the company’s agenda. During the first of three days of CRTC hearings to review the Canwest Global transaction, Shaw said it will make the content available to competitors for their television and new media platforms. “It’s a benefit to offer the rights to everyone,” Shaw president Peter Bissonnette told the commission. In comments submitted ahead of the hearings, Shaw competitor Telus Corp., which does not own any broadcasting assets, said Shaw’s purchase of CanWest will make it “the largest vertically integrated media company in Canada," which will have “serious implications for the Canadian broadcasting system given the potential for self-dealing and anti-competitive behaviour.” Telus asked the CRTC to impose a “strict prohibition on content exclusives on all platforms” to ensure that it or any other competitor would be able to purchase the rights to Shaw’s content. During the hearing, CRTC chair Konrad von Finckenstein brought up the example of CTV’s exclusive broadcasting rights to the 2010 Olympic Games and its arrangement with Bell Canada, so that only mobile subscribers with Bell could access the content on their smart phones. “What you’ve basically said is that you’re willing to negotiate with others for fair value of those ,” von Finckenstein said. “How do we enshrine that in this approval? If there is an approval?” Brad Shaw, the company’s executive vice-president, said he wasn’t “totally sure” how content negotiations would be enshrined, but added, “Certainly our commitment is to offer all rights, broadband and mobile, to all competitors. We would look for the same thing coming back from them.” In its presentation to the commission, Shaw highlighted the importance of vertical integration between carriage and content as Canadian companies increasingly compete with international platforms like Google TV, Apple TV and Hulu, which offer “over-the-top” content online. “Vertical integration is critical to competing with over-the-top applications offering unregulated, on-demand viewing alternatives to Canadians across various platforms, including broadband and mobile devices,” Brad Shaw said. “This acquisition will create a strong entity with sufficient linear and broadband platforms to compete for and maximize the value of content rights.” Pelmorex Communications Inc., which operates The Weather Network, expressed concern ahead of the hearing that Shaw could exercise excessive market power through vertical integration. The company suggested the commission reverse its “3:1 rule,” in which a distributor must carry one unrelated service for every three “related services” it carries in a cable or satellite specialty package. Related services are defined as channels in which the company controls more than a 10 per cent stake. Under Pelmorex’s recommendations, Shaw would need to carry three unrelated channels for each related channel in a package. When asked about reversing the 3:1 rule, Ken Stein, Shaw’s senior vice-president of corporate and regulatory affairs, said, “We would not want to be disadvantaged with respect to other licensees, so I would say no, we would not want to have that provision.” Von Finckenstein said that if the commission imposed the rule on Shaw, it would apply the same conditions on Bell Canada Enterprises, which recently announced plans to acquire its remaining equity and full ownership of CTV for $1.3 billion. As part of its deal to purchase CanWest, Shaw proposed a $203-million “tangible benefits” package to help support independent performers and producers. Benefits packages, a regulatory requirement in major broadcasting transactions, typically represent 10 per cent of the value of the deal. Shaw’s proposed package includes $95 million in tangible benefits funds that Canwest had yet to pay as a result of its purchase of Alliance Atlantis Communications in 2007. Interveners to the proceeding, such as the Canadian Media Production Association (CMPA), have maintained that the $95 million should not have been included in Shaw’s benefits package. The $95 million carry-over from the Alliance Atlantis deal did not arise as a major issue Tuesday as commissioners questioned Shaw. In its benefits package, Shaw also proposed to put $23 million toward plans to build 67 over-the-air digital television transmitters in areas where the digital transition, scheduled for Aug. 31, 2011, has not been mandated. CRTC commissioner Rita Cugini noted Tuesday that some parties would argue that building the transmitters is the “cost of doing business” and should not be part of the benefits package. Paul Robertson, Shaw’s group vice-president for broadcasting, said it would take about five years to convert all the non-mandatory markets to digital over-the-air signals. Von Finckenstein said that as many as 30,000 rural Canadians could be left in the dark when they lose their analog television signals after the digital conversion. He said Shaw has a “golden opportunity,” as one of Canada’s incumbent satellite television providers with Shaw Direct, to use some funds from the benefits package to subsidize access to its satellite television service in areas that will be cut off through the digital transition. CRTC approval is the last hurdle Shaw must face before its purchase of CanWest can be completed. The transaction could close as early as month’s end if the company receives regulatory approval. jmigneault@thewirereport.ca

Commission, Shaw, discuss how to ‘enshrine’ content-sharing

Broadcast | September 21, 2010

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