Independent BDUs cite fears over exclusivity, confidentiality in BCE-CTV deal

Television distributors are calling on the CRTC to establish confidentiality protection measures and safeguards against exclusivity for BCE Inc.'s acquisition of CTVglobemedia. “As a vertically integrated company, BCE would gain access to very detailed and highly sensitive information about its competitors in the BDU market that it would not otherwise have,” Cogeco Cable Inc. wrote in its submission to the commission's hearing on the deal. Tuesday marked the deadline for interventions on BCE’s application to acquire control of CTV for $3.2 billion. The comments are a preview of what the commission may hear in its upcoming hearing on vertical integration in June. Distributors Cogeco, Telus Corp., EastLink and MTS Communications told the commission they are concerned BCE's vertical integration will give it the upper hand in business negotiations. “Now when we negotiate for content from a broadcaster, that broadcaster is no longer negotiating with us simply as a broadcaster,” Michael Hennessy, senior vice-president of regulatory and government affairs at Telus, said in an interview. “We are actually negotiating with the people we compete with in the cable, satellite, Internet and wireless business.” Hennessy said Telus is not against the BCE-CTV deal, but that the CRTC must enforce mechanisms to regulate how vertically integrated companies interact with competitors and consumers. “You need safeguards against exclusivity and safeguards against raised prices. You need to ensure the distributors are getting content in a timely way, and you need some kind of mechanism to ensure that people comply with the rules and that there are penalties if they don’t,” he said. Cogeco told the commission it is against further industry consolidation. “Cogeco disagrees with BCE’s position that the existing safeguards are sufficient to prevent BCE-CTVgm from granting itself undue preference. The safeguards must be strengthened and supplemented to limit the opportunities for BCE-CTVgm to act on incentives to engage in unduly preferential behaviour or disadvantage its competitors,” the company wrote. Cogeco said it is concerned BCE will use detailed subscriber information from distributors obtained during carriage negotiations for CTV to give its distribution service an unfair advantage. Cogeco’s submission asks the commission to “impose structural safeguards for competitively sensitive information” and to prohibit the exclusive distribution of content. EastLink also told the commission it should establish confidentiality safeguards. “The carriage contracts we have with CTV for their dozens of specialty services carry very sensitive information. Without appropriate protections in place to ensure that there is no access from one of our largest competitors, we have a very large concern,” Jill Laing, a spokeswoman for Eastlink, said in an interview. Eastlink is required to provide subscriber information and business plans to CTV and other content providers during routine carriage contract negotiations, Laing said. “Our primary concern is around access to that information and having the appropriate protections in place to prevent it from getting into the hands of one our largest broadcasting competitors,” she said. Hennessy also expressed concerns over confidentiality. “Confidentiality is critically important. When was dealing with an independent CTV, they wanted to know what our number of subscribers was, what we expected our growth to be, what cities we were rolling out in, what our marketing plan was. This is just what you do when you do an affiliation agreement,” he said. “If CTV doesn’t have some sort of separation or confidentially framework in place, we need to know we are dealing with wholesale people who aren’t going to turn around and give that confidential information to Bell Television.” But Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs, said in an interview that Bell does not plan on operating in any way that would be inappropriate, and that distributors have been addressing these issues with other vertically integrated companies for years without complaint. “We will continue to operate in accordance with longstanding industry practice. Independent would now be dealing with our competitors that are also vertically integrated. I don’t see why this is a Bell-specific issue only,” he said. Bibic added that it is Bell’s intention to distribute CTV’s content widely and on many platforms, but that there could be some exceptions. “Our attempt to buy CTV’s assets is in order to continue to have CTV be the number one media asset in the country, and in general we are going to want to distribute that content as widely as possible to as many viewers as possible,” he said. “In many, many, many cases CTV’s content will be available on many or all platforms to many or all customers. There may be cases when it makes sense to have unique niche content available to Bell subscribers on a particular platform. That happens today, and its not just Bell that does that,” he said, citing Rogers Communications Inc.’s exclusive mobile World Cup soccer coverage as an example. But Chris Pierce, chief corporate officer of MTS, said in an interview he is concerned that Bell sees the CTVgm acquisition as a way of accessing exclusivity in new media. “Its strategy behind acquiring this kind of content is to be able to offer unique content to its mobile customers. That is the very antithesis of fair access for competitors to content,” he said. “Canada’s broadcast structure has not been built around broadcast distributors being able to prefer themselves in terms of content. Our broadcast system has been built up around encouraging Canadian production of content, not competition.” Shaw Communications Inc. supported the acquisition in its submission. The company said vertical integration will enable Canadian companies to offer maximum value and programming choice to Canadian viewers across multiple platforms. Rogers wrote in its submission that the transaction should serve to strengthen CTV by providing it with long-term ownership stability through a single strategic shareholder. Bibic said Bell is pleased with the number of positive interventions it received, and views most negative interventions as competitors utilizing the CRTC hearing as a platform for voicing their speaking points. “Most of these negative interventions are about competitors strategically arguing particular points, and most of those should not be dealt with at all in our Feb. 1 hearing on BCE-CTV. They are far more appropriately dealt with at the CRTC’s vertical integration hearing in June,” he said. asmith@thewirereport.ca

Independent BDUs cite fears over exclusivity, confidentiality in BCE-CTV deal

Broadcast | January 17, 2011

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