Rogers-Shaw merger will result in content exclusivity, “force” consumer to switch services: Telus

Telus Corp. executives told the CTRC that if the commission approves its acquisition of Shaw Communications Inc.'s broadcasting assets, Rogers Communications Inc. will gain the scale to buy exclusive access to foreign content. Rogers could use that exclusivity to benefit their distribution business at the expense of their competitors and consumers. Tuesday was the second day of the commission’s hearings into what Telus called “the most significant merger ever proposed in the Canadian broadcasting system.” “Rogers fails to acknowledge -- let alone address -- the risks to the broadcasting system that the merger creates and the harms to competition and to consumers that are certain to follow. Those harms are real, substantial, and non-remediable,” Telus vice-president telecom policy and chief regulatory legal counsel, Stephen Schmidt, told commissioners. The comments echo concerns Telus wrote to the commission in its intervention on the matter, in which the company stated that “Rogers will effectively become a gatekeeper for programming due to its increased incentive to withhold affiliated content from rival” broadcast distribution undertakings (BDUs). Additionally, Telus wrote in September, it wants the CRTC to require the Shaw family to divest its controlling interest in Corus Entertainment Inc. and require Rogers to continue funding local news production by Global TV. “The Canadian broadcasting system was built around a principle of non-exclusivity of programming to create healthy competition between BDUs. This merger will change that as Rogers will be able to use content exclusivity to force consumers to ascribe to their distribution service,” Schmidt said at the hearing. Schmidt argued that Rogers would become a gatekeeper of English-language Canadian programming services because the services will depend on the company for continued survival and Rogers will also use vertically integrated affiliates to give itself exclusive access to content. He added that no commission safeguards can prevent the scale Rogers would gain or protect its competitors and the public interest. Rogers would have an “unmatched” distribution that covers about 36 per cent of all BDU subscribers and 47 per cent of all English-language subscribers, with their network passing 80 per cent of all English-language homes in Canada, according to Telus executive vice-president of home solutions, Zainul Mawji. “Rogers will have the scale to secure exclusivity for foreign streaming services across Canada at a time when foreign broadcasters are rapidly embracing online distribution in the Canadian market,” Mawji said. She used the example of Rogers leveraging their relationship with Comcast Corp. -- whose X1 platform Rogers is already integrated with -- to buy the national rights to foreign streaming service NBC Universal’s Peacock, which has 54 million U.S. subscribers and is owned by Comcast. “They could make it available to their video customers and only their customers. If they do that, no other BDU would be able to offer that content to their customers. And Canadians will also be unable to buy it directly,” she said. Mawji argued that although it would be expensive to buy those national rights, it would make economical sense if they serve nearly half of the English-language market “and use exclusivity to grow to 80 per cent of the market.” “For many foreign streaming services, that will be an attractive offer. It will allow them to avoid or defer the significant costs of selling directly to consumers and integrating their app with multiple BDUs, which is costly.” She further argued that Rogers will deny competing BDUs access to their content to force consumers to switch to Rogers’ services. If not, she said, Rogers will "unreasonably" raise rates or delay and deny access to competing BDUs for the newest content and functionalities of their services. “This level of market power will also allow Rogers to dictate rates and terms of carriage for independent programming services, which will inevitably weaken those services. This is a structural problem to which there is no viable solution,” she said. Telus director of Regulatory Affairs, Lecia Simpson, said that the CRTC’s regulatory framework is not robust enough to protect BDUs from these anti-competitive incentives and that vertically integrated entities are constantly undermining its non-exclusivity principals. She noted that in 2017, Rogers unsuccessfully tried to bypass the principle and deny Telus access to their Sportsnet service when it attempted to withdraw from dispute resolution. “In the past few years, vertically integrated companies have challenged the validity of competitive safeguards that will address vertical integration, such as the wholesale code and the standstill, before the Federal Court of Appeal. These challenges to the commission's policies and jurisdiction have become a significant and growing source of uncertainty in today's wholesale market,” Simpson said. “The damage is often done before the remedy is obtained.” Telus senior strategy manager Wayne Lindo noted that the CRTC’s Digital Media Exemption Order (DMEO) does not prohibit exclusivity that is tied to a video subscription, and only prohibits exclusivity when it is dependent on subscription to a specific mobile or retail internet access service. Lindo said that means Rogers could air hockey games on an online service rather than on Sportsnet, and then make that service exclusively available to their cable subscribers while their non-customers would lose access. He noted that in 2015 the CRTC dismissed a complaint by BCE Inc. against Rogers’s NHL hockey app, GamePlus, ruling that Rogers could offer it exclusively to its own customers because the content wasn’t produced primarily for traditional television. Telus director of regulatory affairs Antoine Malek told British Columbia and Yukon commissioner Claire Anderson that dealing with exclusivity through conditions of license does not present fairness issues with respect to other BDUs. “I don't believe it does. Because it's a question of opportunity. I don't think any other BDU has that opportunity. And I also think that there is another way that you can deal with it,” he said. In regard to local news funding, when asked by Anderson why Telus preferred funding be left in the hands of Global TV over CityTV, Mawji said it is because one per cent of Western Canadians watch the latter, while 20 per cent rely on GlobeTV. Simpson added that the impact to its funding would deplete the overall local news resources because Global would become independent and seek its same $13 million funding from the local news fund which is supported by all BDUs “and is expressly set aside for those who aren’t vertically integrated to be able to support their production and $13 million would be more than half of the fund today.” “ So now, just by coming out west, is going to take that $13 million that Shaw has relied on to support their local news production, send it to City and then try to draw from the community… their entire proposal relies on externalizing that to the detriment of truly independent local news production,” she said, adding that there was no assurances put forward by either company on the first day of the hearings regarding how they would be spending the $13 million. -- Reporting by Jenna Cocullo at jcocullo@thewirereport.ca and editing by Michael Lee-Murphyat mleemurphy@thewirereport.ca.

Rogers-Shaw merger will result in content exclusivity, “force” consumer to switch services: Telus

Broadcast | November 23, 2021

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Rogers-Shaw merger will result in content exclusivity, “force” consumer to switch services: Telus

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