MLSE deal gives Bell, Rogers, unfair leverage to hike carriage rates, independents say

A joint bid by BCE Inc. and Rogers Communications Inc. to purchase a controlling stake in Maple Leafs Sports & Entertainment (MLSE) will give the two companies unfair leverage to hike their sports channels' carriage fees, independent broadcast distributors said in documents filed with the CRTC this week. Cogeco Cable Inc., MTS Allstream Inc., Telus Corp. and Bragg Communications Inc. subsidiary Eastlink said the proposed $1.32 billion deal will give Bell and Rogers the ability to charge independent distributors higher prices for the rights to carry their popular specialty sports channels due to the two companies’ increasing consolidation of sports programming rights in Canada. “Increasing the already extensive market power enjoyed by vertically integrated programming undertakings, especially in the area of popular sports programming, will further disadvantage Canadian consumers who wish to exercise choice in the television distribution market and will ultimately drive up prices,” MTS Allstream wrote in comments submitted to the commission on Monday. In December, Bell and Rogers announced a joint bid to purchase a 75 per cent controlling stake in MLSE, which owns the Toronto Maple Leafs and its minor-league affiliate the Toronto Marlies, as well as the Toronto Raptors and Major League Soccer's Toronto FC. The two rival telecommunications companies must obtain CRTC approval to transfer control of the broadcasting licences for MLSE's specialty channels, Leafs TV, NBA TV and Gol TV. The CRTC is consulting on the deal, for which companies filed their submissions this week. In its remarks, Telus, which does not own broadcasting assets, said the commission should look beyond issues that strictly pertain to the transfer of control of the specialty channels, and urged the commission “to take full consideration of the significance of this transaction in further entrenching Canada’s ‘sports duopoly.’” Telus argued that Bell and Rogers, through their sports services TSN and Sportsnet, now control a large amount of broadcasting rights to the most popular sports programming in the country and that the companies will further benefit from privileged access to regional broadcast rights to Maple Leafs, Raptors and Toronto FC games. Telus said this could prevent competing sports services from acquiring the content rights they need to attract a significant following. “Both Bell’s TSN franchise and Rogers’ Sportsnet franchise benefit from significant market power as the only major mainstream sports services in the English-language market in Canada,” Telus said in its June 18 submission. “The acquisition of the sports rights relating to some of the top sports teams as a result of their acquisition of MLSE will act as a further barrier to entry for other mainstream sports programming services,” the company said. Telus and the other distributors said Bell can leverage its coveted sports content into negotiating more stringent terms of carriage or higher carriage fees for TSN and its French-language equivalent, RDS. “If this acquisition is approved, Bell, Eastlink’s largest competitor, will control the rights to almost all premium sports content in Canada,” Eastlink, a broadcast distributor in Atlantic Canada, wrote in its submission. “Increased acquisitions by Bell of content in Canada will not only provide Bell with control over the majority of premium content in Canada, but it will also provide Bell with the opportunity to control its distribution competitors in the market, through restraints on packaging and rates, impacting consumers and competition,” the company said. The four distributors are members of the Canadian Independent Distributors Group (CIDG), which since January has been engaged in a dispute with Bell over the carriage of 29 Bell Media specialty channels. The two sides will head to final offer arbitration with the CRTC on June 29. Easlink and MTS Allstream said in their submissions that the primary sticking point in the dispute is the carriage requirements for Bell’s sports-themed specialty services. While the NHL will retain the rights to 31 regular season Maple Leafs games, Bell and Rogers will have the rights to a remaining 51 games “for perpetuity,” Greg MacDonald, an analyst with Macquarie Capital Markets, told The Wire Report after the deal was announced in December. The NHL negotiates national TV network deals on a league-wide basis, but individual teams negotiate their own regional and local broadcasting deals. CBC/Radio-Canada now holds the rights to most of the 31 games for its Hockey Night in Canada program on Saturday nights until the end of the 2013-2014 NHL season. The NHL said Tuesday that its board of governors had unanimously approved the Bell and Rogers joint-bid to purchase MLSE. The Globe and Mail reported Wednesday that the two companies will not be permitted to issue a joint-bid for the rights to the 31 Maple Leafs games when they become available in 2014. In its submission to the CRTC, Eastlink said Bell and Rogers can leverage ownership of the sports franchises to offer new media content to their telecom customers while denying access to that content to subscribers of competing providers if the MLSE deal is approved. The company said the new media content could be “the deciding factor” for sports fans when picking a provider for Internet or mobile services. Eastlink said Bell has positioned itself for an advantage over smaller distribution competitors by gaining control of “an ever-increasing number of premium services” while investing in “major network upgrades in order to advance its own distribution and broadband networks.” Cogeco said the MLSE deal, when coupled with Bell’s 2010 purchase of CTVglobemedia and its $3.38 billion pending acquisition of Astral Media Inc., “indicates a deliberate strategy on the part of Bell to seek further dominance in the converged Canadian broadcasting and telecommunications industries.” By pursuing the “three major transactions” separately, Cogeco said Bell ensured each deal would “be considered separately for regulatory approval purposes, and thus circumvent regulatory scrutiny of the aggregate result in terms of the impact on competition, the consumer, the Canadian broadcasting system and Canadian telecommunications.” Cogeco said the CRTC should review the MLSE and Astral acquisitions in a single public hearing. In a document filed with the commission Jan. 23, Bell and Rogers said the joint purchase of MLSE “will provide cost certainly” for the companies “for certain sport broadcast rights” and will improve their ability to offer that content on multiple platforms. “It will also ensure that neither Bell nor Rogers has exclusive rights to all MLSE content going forward, thereby providing the potential to spread the content over multiple services,” the companies said. The companies said they will not limit other broadcast distributors’ freedom to carry games broadcast on Bell’s and Rogers’ networks and said the CRTC’s guidelines for vertically integrated companies (those that own broadcast and broadcast distribution assets) will provide “ample protection” to competing distributors. They wrote that “there is no danger of subscribers of competing wireless providers or Internet service providers (ISPs) being precluded from accessing content that Bell or Rogers makes available to its own subscribers on-line or via their wireless networks.” Rogers spokeswoman Leigh-Ann Popek said in an emailed statement that the NHL approval means the company is “one step further in the process of closing the deal.” Bell spokeswoman Jacqueline Michelis told The Wire Report by email that Bell will respond to the distributors in reply comments due with the CRTC next week. nkyonka@thewirereport.ca

MLSE deal gives Bell, Rogers, unfair leverage to hike carriage rates, independents say

News | 06/20/2012 9:33 pm EDT

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