CRTC’s approval of MLSE deal shows VI regs are working, Bell says

BCE Inc., the country's single largest broadcast and telecom company, cited the CRTC's approval of the sale of sports company MLSE as evidence that the commission's existing regulatory framework to prevent abuses of market power is working. In a reply comment filed Aug. 20 for the CRTC's consultation on Bell's proposed $3.38-billion deal to acquire Astral Media Inc., Bell said the commission's dispute resolution system and regulatory framework for large, vertically integrated companies provide checks and balances to prevent uncompetitive behaviour. This month, the CRTC approved a joint acquisition of MLSE by Bell and Rogers Communications Inc. for $1.32-billion. MLSE owns the Toronto Maple Leafs, the Toronto Raptors, Major League Soccer's Toronto FC and other properties including sports specialty channels. The CRTC noted in that decision that its vertical integration rules and dispute resolution processes “provide a mechanism to address allegations of potential abuse of market power in the context of a commercial negotiation, which is the focus of the concerns expressed by interveners.” Several of Bell's competitors, as well as groups representing content producers and consumers, have criticized the Bell-Astral deal, saying it will give Bell an unfair advantage in the broadcast market. Those companies and organizations have called on the CRTC to block the acquisition or require Bell to sell off Astral’s English-language pay and specialty channels. This month, Bell competitors Telus Corp., Quebecor Media Inc., Cogeco Cable Inc. and Eastlink launched an advocacy campaign and attendant website, saynotobell.ca, to generate public opposition against the purchase. Bell said in its reply comments that the CRTC decision approving MLSE “specifically rejected similar complaints by some of the same interveners, finding that its policy framework for vertically-integrated companies, Code of Conduct for Commercial Arrangements and Interactions, and dispute resolution and other procedural mechanisms, provide recourse for potential abuse of market power.” Bell said its competitors' “aggressive and expensive multiplatform campaign” contributed to the more-than 800 comments the CRTC received for its public consultation on the acquisition. The company said organizations involved in the proceeding are using the opportunity “for regulatory gamesmanship to take aim at a competitor.” Opponents of the deal “attempted to position this transaction as bad for consumers, even though it will be extremely positive for consumers and is entirely consistent with established Commission policy,” Bell said, arguing that it “will benefit consumers by stimulating innovation and increasing competition.” The companies involved in the “Say No To Bell” campaign say that, through the acquisition, BCE will control 42 per cent of Canadian private commercial television revenues, 45 per cent of English-language television audiences and 35 per cent of French-language television audiences. They say Bell would own 79 TV channels, 107 radio stations, more than 100 websites, and have the power to monopolize the Canadian broadcasting system. Bell said the campaign, which is ongoing, has sought to influence public opinion through the saynotobell.ca website, television commercials, full-page newspaper ads, as well as “extensive English- and French-language coverage in Québecor's English- and French-language television stations and English- and French-language Sun, Journal, and 24Hours/24H newspapers.” Bell added: “The same group has exerted inappropriate and intense pressure on supporting interveners in the press and otherwise to change their positions.” A combined Bell-Astral will have a 24.4 per cent audience share for French-language television, “far short of French-language media conglomerate Québecor's 29.6%,” Bell said, citing BBM data. Astral owns specialty channels The Movie Network/HBO Canada, Super Ecran, Family, Disney Junior, Disney XD, Canal Vie, Canal D, Vrak.TV and Teletoon; as well as radio stations NRJ, Rouge FM, Virgin Radio, EZ Rock and The Bear, among other broadcast assets. Part of the discussion surrounding the deal is Bell's “tangible benefits” spending. Companies purchasing broadcast assets, according to CRTC policy, must spend about 10 per cent of the value of the transaction on the benefits, which are projects and programming for the Canadian broadcasting system. Bell has proposed a $200 million benefits package for the deal. Companies and cultural groups have taken aim at Bell's $40 million benefits project that will support a plan by NorthwesTel, a BCE telco subsidiary, to improve northern telecom switches and to roll out a mobile broadband network in the North. In a release Tuesday, Bell emphasized its spending on cultural content in Quebec and announced a partnership with Cirque du Soleil. The partnership involves $15 million in new investment in Québec content development, which is not part of Bell's tangible benefits package for the deal. Bell and Cirque du Soleil will launch a new company to develop, sell, licence and distribute entertainment projects around the world, Bell said. Cirque du Soleil will contribute programming such as television productions and an upcoming 3D feature film called Cirque du Soleil: Worlds Away, the release said. In its reply comments, Bell referred to a third-party valuation of Astral by PricewaterhouseCoopers, arguing that Astral is operating in a challenging market. PwC, for the purposes of calculating Bell's tangible benefits, valued Astral's broadcasting assets at $1.393 billion for television and $2.406 billion for radio, for a total value of $2.406 billion. Astral's ability to grow specialty channel subscribers “over the long run is becoming increasingly challenging as the market for Astral's TV services matures, with some services coming under pressure from OTT , pick and pay options and other substitute offerings,” Bell said. “Astral is already seeing its subscriber figures come under pressure from a variety of sources. Similarly, Astral does not expect to generate significant price increases in its subscription rates over the very long term,” the company said. Bell said the broadcasting sector is facing competitive pressures from traditional and new providers for the licensing of content, which is “putting increased pressure on costs,” and that this “has already had an impact on some of Astral's services and in the long run, is expected to mitigate the ability to drive earnings growth.” The radio sector is vulnerable to changes in technology, challenging the sector's ability to retain listeners and generate advertising revenue, Bell said, and added that this has been in a weak market where new radio licences are being granted. “These challenges are partially offset by the fact that radio is still a viable market for local advertising and the fact that many people spend time in their cars commuting to work,” Bell said. The commission will hold a public hearing on the deal in Montreal starting Sept. 10. news@thewirereport.ca --- CORRECTION: An earlier version of this story incorrectly said Bell's partnership with Cirque involves $80 million in new investment. The partnership involves an investment of $15 million. Bell announced a separate investment of $80 million in Quebec programming on Aug. 15.

CRTC’s approval of MLSE deal shows VI regs are working, Bell says

Broadcast | August 28, 2012

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