BCE makes final offer on tangible benefits, removes funding for HD news

GATINEAU—BCE Inc. presented the CRTC with a final offer for its benefits package Friday, removing funding for the production of high-definition local news content and lowering the amount for satellite conversion. Lobby groups and companies had previously called some of the proposals, including a satellite upgrade to MPEG-4 technology, too self-serving to be of significant benefit to the Canadian broadcasting system. “Our proposed tangible benefits initiatives are entirely consistent with the commission’s policy … which requires that proposals be ‘beneficial to the public served by the undertakings and to the Canadian broadcasting system as a whole,’” Kevin Crull, CEO of CTVglobemedia Inc., told the commission. Friday was the last day of the CRTC’s hearing on BCE’s acquisition of CTV, where a top issue has been the size and contents of the benefits package attached to the transaction. Companies undertaking a broadcasting acquisition traditionally contribute 10 per cent of the value of the transaction in “tangible benefits” to support the Canadian broadcasting system. On Friday, BCE presented the commission with a new tangible benefits package based on the commission’s valuation of the deal at $2.671 billion, including debt. Bell had applied a five per cent reduction on the value of the conventional broadcasting assets being acquired, arguing that Shaw Communications Inc. was afforded the same reduction when it acquired Canwest Global Communications Inc.’s broadcasting assets last year. Bell also did not include the value of CTV’s news and sports services in its valuation of the deal. Bell’s final proposal does not introduce any new initiatives, but instead redirected funds. Its final proposal of $223.1 million is $13.3 million less than the benefits amount calculated by the commission but $2.3 million higher than the offer Bell presented Tuesday when the hearing opened. Bell had originally proposed to allocate $84 million to move to a new, more efficient compression technology for its satellite television service called MPEG-4. Bell said the conversion would allow it to carry all local stations supported by the Local Programming Improvement Fund (LPIF). But competitors, including Cogeco Cable Inc. and Quebecor Media Inc., told the commission that allowing the conversion would give Bell a competitive advantage since it would eventually be required to make the transition. On Friday Crull said Bell reduced the amount allocated for the conversion to $60 million. “Having heard some of the concerns raised this week, we are prepared to make … meaningful changes,” he said. Crull said the proposal would now carry all local stations, including those not supported by the LPIF, as well as independent stations and seven community stations. Crull reiterated that Bell would not go forward with the upgrade to MPEG-4 without using benefits funds. BCE also answered industry concerns about an offer to allocate $24.5 million to produce high-definition news content for CTV’s stations by removing the proposal altogether. BCE also revised the $68.2 million it proposed to allocate to the production of on-screen programming and multi-platform content. Friday’s proposal raised the amount to $108.8 million, representing 53.4 per cent of the transaction. Several groups, including the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), the Writers Guild of Canada, the Directors Guild of Canada and the Canadian Media Production Association (CMPA), had taken issue with the amount Bell allocated to independent production. The groups suggested the amount should be closer to 80 to 90 per cent of the transaction. On the issue of accessibility, Bell said all programs of national interest produced through the funds would be captioned and described. But CRTC chair Konrad von Finckenstein said Bell should reflect on directing $5.7 million of the funds to creating an independent fund for accessibility efforts. “This is something that is very near to our hearts,” he said. “This … would make the whole package much more acceptable.” Media Access Canada appeared before the commission Wednesday and proposed that a portion of the benefits go to the creation of an independent fund to promote content accessibility. BCE said it would provide the commission with a formal, written answer to the suggestion. Bell also increased the proposed funds for CTV’s conventional A Channel stations, from $25 million to $35 million. “As part of this enhanced benefits proposal, BCE/CTV commits to keeping the A Channels open for at least three years, despite their longstanding financial challenges,” Crull said. During an exchange with CRTC commissioner Louise Poirier Friday about incremental funding for the stations, Crull hinted that, without additional funding from the benefits package, the stations could close. “I haven’t wanted to tell this commission that, absent this, I would close them, because I think that’s a line in the sand that I didn’t want to get into,” he said. Bell’s proposal would allocate $15 million to the stations by August 2011, followed by $20 million in the 2011-2012 broadcasting year. Crull told the commission that, on the whole, the package meets the commission’s objectives. “First, they are directed to sustaining, enhancing and carrying local content while creating new jobs. Second, they will significantly increase the funds available to programs of national interest created by independent producers,” he said. “Third, they address Canadians’ growing interest in having content available on multiple screens.” BCE also commented on concerns expressed during the week about the powers the company would acquire through vertical integration. Crull suggested the commission’s June hearing on vertical integration will address many of these questions. “The commission should clearly reject our competitors’ efforts to concoct hypothetical scenarios in which BCE could possibly behave in an uncompetitive manner, given that existing regulations can address any issues which arise,” he said. “With these assurances regarding the business approach we will adopt, with the extensive protections provided by existing regulations, and with a vertical integration hearing scheduled to begin shortly, it is completely unnecessary to consider regulatory changes related to vertical integration in this forum,” he said. Parties have seven days to file comments on Bell’s closing arguments. The CRTC is expected to issue a decision on the transaction in the coming month. kfournier@thewirereport.ca

BCE makes final offer on tangible benefits, removes funding for HD news

Broadcast | February 4, 2011

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