Regulators will not block Bell-Astral deal, industry sources predict

The Competition Bureau and the CRTC will not block BCE Inc.'s $3.38-billion acquisition of Astral Media Inc. and will seek concessions from the companies or put conditions on the deal, according to the predictions of six industry insiders and an analyst surveyed by The Wire Report. The Wire Report contacted six industry sources who are following the transaction, as well as analyst Iain Grant, and asked them whether the Competition Bureau or CRTC would block the deal and for their predictions on regulatory outcomes. The industry insiders were provided anonymity for their frankness and because they were not authorized to speak publicly about the issue. None of the industry sources contacted is part of the ongoing “Say No to Bell” campaign against the deal led by Bell's competitors. All six of the sources said they predict the regulators will approve the deal and that they expect conditions or concessions to be part of the approvals. More than one source said the regulators will be concerned about Bell's growing concentration of ownership in the English-language television market and that one of them could require Bell to divest some English-language specialty channels. In an interview with The Globe and Mail published Sept. 17, following a week of CRTC public hearings on the transaction in Montreal, outgoing Competition Commissioner Melanie Aitken said the bureau is “increasingly concerned” about Bell's purchase of Astral. “We are watching closely,” Aitken told the Globe. “There have been a lot of complaints during the course of our review and we are increasingly concerned about vertical integration and its effect on competition.” The Competition Bureau declined a request from The Wire Report for an interview with Aitken. Bell competitors Quebecor Media Inc., Cogeco Cable Inc. and Bragg Communications Inc. have led a campaign against the deal, saying it will lead to a Bell monopoly in TV audience share. The Public Interest Advocacy Centre (PIAC) and advocacy group OpenMedia.ca have also formed a coalition of groups against the transaction and are leading a campaign called “Stop the Takeover.” According to the CRTC's 2008 diversity of voices policy, the commission will “carefully examine” any acquisition that results in a company acquiring between 35 and 45 per cent of the French or English-language television audience share, and generally will not approve a deal that results in a party acquiring a 45 per cent share. According to CRTC data released this month in the Communications Monitoring Report, Bell-owned TV stations, pay channels, and its 29 specialty channels, amounted to a 33.7 per cent viewing share of English-language TV services in the broadcast year ending Aug. 31, 2011. That would grow to 39.7 per cent when combined with Astral’s six per cent viewing share for the English-language TV services it owns. Astral also jointly owns specialty channels with Shaw Communications Inc. and Corus Entertainment Inc. that amounted to another 3.06 per cent of the national English-language viewing share in 2011, the CRTC data shows. Bell owns 26 English-language specialty channels and would grow that by another seven through the Astral deal, including popular Astral channels The Movie Network, Family Channel, and Teletoon. Rogers Communications Inc. has called on the CRTC to block the deal or require Bell to sell English-language TV channels as a condition of approval. CRTC Chair Jean-Pierre Blais raised the question of blocking the deal at a hearing last week on Sept. 14. “Just to be clear, is there any reason for us to think that we gave the impression that a 'no' is not an option?” he said in response to an exchange between commissioner Timothy Denton and George Burger, an adviser to VMedia, an independent Internet and Internet-protocol TV provider. One industry source surveyed said the concern from regulators will be focused on Bell's concentration of English-language television channels. “I would not be surprised if the CRTC forces them to divest some of their channels on the English side,” the person said. Another suggested that more concern will emerge more from the Competition Bureau because the CRTC feels that its regulatory framework for vertically integrated companies—those that own both broadcasting and broadcast distribution assets—is working well enough to stop anti-competitive behaviour resulting from industry consolidation. One person surveyed said the Competition Bureau will look at the total “might” of Bell in the sector and that, if the bureau sought to block the deal, it must do so by challenging it in court. The source predicted that the Competition Bureau will not issue a decision on the transaction until a new commissioner is appointed to replace Aitken, whose last day as commissioner is Sept. 21. The insider said a thorough economic analysis of the deal would have to be done to predict whether the bureau would go so far as trying to block it. “At first blush they have good reasons for blocking it,” the person said, adding whether the bureau has the courage to follow that through remains an open question. Iain Grant, managing director of the Seaboard Group, said by email that if the Competition Bureau's decision was to be made under Aitken's leadership, the bureau would reject the acquisition. He added the decision could go either way under Aitken's successor. “The Competition Bureau would look at the merger in a more clear-cut way –less nuance and fewer temptations to micro-manage trade offs,” he said. The CRTC, Grant said, “may see its way clear to bless the deal” with safeguards. Those could require Bell to make its content available on a timely and affordable basis to competing carriers, Grant said, adding that the CRTC could impose a “content-tax where Bell must subsidize Canadian voices and content, but not several of the initiatives it put forward” as part of the deal. Another industry source predicted that if the Competition Bureau sought to challenge the deal in court, Bell would fight it. “They would be so ticked off if the Competition Bureau did that,” the person said. “I'm not sure the Competition Bureau has a really great case.” More than one person surveyed predicted the CRTC will adjust the “tangible benefits” package Bell must pay as part of the deal to support the Canadian broadcasting system. Another industry source who is following the proceeding said there is “no chance” the CRTC or Competition Bureau would block the deal. The insider predicted there will be “sabre rattling” and “demagogic blowhardism” with concessions that allow the regulators “to walk away claiming victory.” Sheridan Scott, a partner at Bennett Jones LLP and former commissioner of competition, said there are strict processes and deadlines within the Competition Bureau that would result in a timely decision, with or without a permanent commissioner in place. It's expected that an acting commissioner will replace Aitken and it is “highly unlikely” that the government has an appointment ready to announce, Scott said. She expects the CRTC and Competition Bureau to communicate with one another on at least questions of process, she said. Greg Scott, a spokesman for the Competition Bureau, said the bureau's review is ongoing and it “will not be affected by the transition to a new commissioner.” news@thewirereport.ca

Regulators will not block Bell-Astral deal, industry sources predict

Broadcast | September 21, 2012

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Regulators will not block Bell-Astral deal, industry sources predict

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