CRTC approves BCE purchase of Astral, applies new safeguards

The CRTC approved BCE Inc.’s reworked application to purchase Astral Media Inc. for $3.38 billion, with conditions that raise the company’s contributions to Canadian broadcasting by $72 million and apply additional regulatory checks on BCE’s market power. The regulator said in a decision Thursday that it approved the deal while adding regulatory safeguards as conditions that will be put into BCE’s broadcast licences. The CRTC said it will hike BCE’s tangible benefits package related to the deal—which requires the company to commit to projects that benefit the Canadian broadcasting system—to $246.9 million, $72 million higher than Bell’s proposed $174.9 million. “Without the measures we are imposing today, the commission would not have approved Astral’s application. The tangible benefits that will flow from this transaction also bear mention,” CRTC Chariman Jean-Pierre Blais said during a news conference at CRTC headquarters. “It will ensure citizens will continue to receive local programming including news, in the 29 markets where BCE’s local stations are present. In fact, BCE has committed to keep all of its local television stations open until at least 2017,” Blais said. Through the deal, BCE, whose media division currently owns 26 English-language specialty channels including sports channel TSN, would take ownership of Astral’s stable of radio stations and specialty channels. Those include “must have” pay TV services TMN, TMN Encore and HBO Canada programming. During a public hearing on the deal in May, competing broadcast distributors such as Cogeco Cable Inc., Telus Corp., and Eastlink (owned by Bragg Communications Inc.), urged the CRTC to again block the deal, as it blocked BCE’s initial application last fall. They argued the purchase would give BCE, a television, mobile phone, and Internet service provider, too much market power and the ability to demand excessively high rates for competitors’ access to its content, or the power to outright deny them access. In a decision last October, the CRTC denied BCE's first application, saying it had concerns about the public interest, competition, and ownership concentration in the broadcast sector. BCE and Astral came back with a reworked application and an agreement with the Competition Bureau, announced in March, to sell off 12 specialty and pay channels, including Teletoon and Disney, with half of them going to Corus Entertainment Inc. To address concerns from competitors, the CRTC said it will put conditions into BCE’s licences. According to the decision, those conditions will require the company to: adhere to the regulator’s code of conduct for large, vertically integrated broadcast companies, which is intended to limit anti-competitive behaviour; provide a 90-day notice for the launch of a new television or programming service and abide by a prohibition on “tied selling,” or the negotiation of online and on-demand rights at the same time as traditional, linear rights; accept a “no head start” rule for digital media content exclusives and commit to “not unduly withhold non-linear rights, or impede others from obtaining such rights, from competing distributors”; provide competing broadcast companies with “commercially reasonable access” to advertising inventory on BCE’s radio properties; file with the regulator all of BCE’s carriage and content sharing agreements within five days after they start so the CRTC can “monitor BCE’s commercial arrangements with its programmers and distributors”; and enter into the CRTC’s dispute resolution process where carriage and content licensing agreements for BCE’s broadcast content are not renewed within 120 days from the expiry of the existing agreement. Phil Lind, executive vice-president of regulatory at Rogers Communications Inc., said in a statement Thursday the approval is not "the ideal solution" to protect Canadian consumers, though "this is the Commission’s decision." "Canadians have said they want more choice and flexibility when it comes to their favourite programming. By imposing new conditions of license on Bell, the CRTC has clearly acknowledged the potential negative impacts on consumers of its decision to approve the transaction," Lind said. He said Rogers will review the decision and any safeguards imposed by the CRTC "must protect the ability of all distributors to deliver affordable and innovative programming on multiple platforms." The CRTC said it will make an exception for BCE to exceed its radio ownership concentration policy, and operate four English-language radio stations in the Montreal market. That exception will permit BCE to keep TSN Radio, or CKGM in Montreal, under its ownership. “Given the strong support expressed by Montreal’s English-language minority community for this station, BCE will have to maintain its current sports format for at least seven years,” the CRTC said in a release. At the news conference, when asked what message he’s sending to industry through the approval, Blais said “there are benefits to consolidation,” and acknowledged a trend in larger, converged media companies globally. “But I think the message is, if you want to be a large media player in the market, we have policies in place and we will not hesitate to apply those policies and scrutinize transactions that go above the limits we have set,” Blais said. In its decision, the regulator said it would not be appropriate to open up competition among specialty channels by eliminating niche programming requirements known as “genre protection,” as some competitors proposed during the hearing. It said the issues should be considered “in the context of a policy review,” adding that the regulator’s three-year plan includes a review of genre protection policy. As part of BCE’s benefits package for Canadian broadcasting, the company is required to spend $175.4 million in the television sector and $71.5 million in radio, the CRTC said. The decision said it would be inappropriate to limit the code of conduct conditions, as BCE proposed, to the company’s agreements with distributors that have fewer than 500,000 subscribers. The CRTC directed BCE to respond by July 29 with applications to make the changes to its licences. In a release Thursday, consumer group the Public Interest Advocacy Centre (PIAC), which had argued for the CRTC to block the deal, said the decision will lead to “an unprecedented level of media concentration and vertical integration and a weaker diversity of voices,” as well as less choice and flexibility for consumers. PIAC said it is unsure how effective the licence conditions imposed on BCE would be. The group said it was “somewhat encouraged” that Bell will have to file all affiliation agreements with the CRTC. John Lawford, PIAC’s executive director, said in a telephone interview that “it’s a big trust exercise … for us to see whether the commission can adequately police this new regime.” Lawford said “we have to live with it and see what the CRTC does when the inevitable push comes to the inevitable shove down the stairs, and who gets hurt, and whether the independent folks can really survive in this environment now.” Eastlink spokeswoman Jill Laing said in an emailed statement that the company is “disappointed” with the decision and that it would issue a more formal statement Friday. Bell said on its Twitter account Thursday afternoon that it is “assessing the details” of the decision and will issue a detailed statement before markets open Friday. Veritas Research analyst Neeraj Monga said in an interview on BNN Thursday that BCE may be unhappy with the CRTC requirement to file its carriage agreements with the commission. “I wouldn’t expect that to be a deal breaker though,” he said. Monga said he does not expect BCE’s competitors to rush out to acquire other broadcasters to keep pace, in part because "it doesn’t seem to me that there’s any more consolidation left to do." He said Canada now is the most vertically integrated country in the OECD. —With reporting by Simon Doyle at sdoyle@thewirereport.ca, files from Anja Karadeglija at akarad@thewirereport.ca, and files from and editing by Nick Kyonka at nkyonka@thewirereport.ca

CRTC approves BCE purchase of Astral, applies new safeguards

News | June 27, 2013

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

CRTC approves BCE purchase of Astral, applies new safeguards

News | June 27, 2013

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Related Stories

Astral wins ad deal with Ottawa airport

Bell/Astral tangible benefits proposals partially approved

Corus puts Mario Cecchini in charge of radio

BCE-Astral obligated sale of MusiquePlus approved

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us