Shaw Communications seeks regulatory approval to merge cable, satellite units

Shaw Communications Inc is using a familiar argument in attempting to have regulatory firewalls between its cable and satellite businesses removed. In an application to the CRTC gazetted Aug. 17, the cable giant says it should be allowed to take advantage of corporate "synergies" - like its competitor BCE Inc, which controls satellite distributor Bell ExpressVu LP, broadcaster CTV Inc and telephone company Bell Canada. "Bell ExpressVu is not subject to such structural separation conditions and is thus free to achieve the benefits of synergies that are denied to Star Choice. This fact makes clear that Star Choice and Cancom are a significant disadvantage to ExpressVu," Shaw senior VP of corporate and regulatory affairs Ken Stein, and Cancom/Star Choice senior VP of operations Brad Shaw write in a June 29 application - PN 2001-95. This level-the-playing field argument is similar to one the cable industry successfully used to convince the regulator to allow increased cable ownership of analog channels (CCR, Feb. 14/01, June 21/01). Shaw's application to the CRTC follows Shaw-owned Star Choice Television Network Inc being awarded a licence renewal for only two years because of commission concerns about non-compliance with licence conditions. Those conditions included structural separation between Star Choice and Shaw-owned Canadian Satellite Communications Inc (Cancom) and Shaw Communications (CCR, June 7/01). Shaw is proposing merging the human resources, legal, administrative, investor relations, accounting and technical operations at its cable unit and Star Choice. It says it will keep the customer services, and sales and marketing divisions separate. One exception would be the Cancom/Star Choice SRDU business unit, which would share these services "since the businesses operate on a common technical platform and the customer base is common," the application notes. Another would be Shaw's cable unit, which would market and bundle services with its Shaw@home Internet service. Shaw contends that the merger is necessary because "Cancom/Star Choice's needs for financial and other support from Shaw are increasing rather than diminishing." Shaw says it has so far contributed $868 million to its satellite activities, and that the "support of Shaw will continue to be a prerequisite to the continued growth of Star Choice." It points out, for example, that the backing of Shaw was necessary for Cancom to secure U.S. $200 million in debt financing in March. Fundamental inconsistency Shaw officials also tell the CRTC that there is a "fundamental inconsistency" between the commission's decision that allowed Cancom and Star Choice to merge for the purpose of fostering competition with other satellite providers, such as BCE, and its decision to impose structural separation. The regulator imposed the condition to "ensure that no undue preference or advantage passed between Star Choice and Shaw, or any of Shaw's affiliates." The company also argues that the separation condition was implemented, in part, to ensure that Star Choice emerged as a strong competitor to cable at a time when both it and Bell ExpressVu served a total of 400,000 subscribers. That market has since grown to about 600,000 for Star Choice and more than 800,000 for Bell ExpressVu - evidence that DTH satellite has already emerged as a competitive alternative to cable, Shaw argues. "In the applicant's view, modification of the existing conditions will allow more effective competition in DTH, BDU and SRDU market places for the benefit of consumers and customers, and will enhance the achievement of the CRTC and government policy goals for greater competition and competitive balance," the Shaw submission concludes. Shaw's cable unit serves about 2.3 million customers. Interested parties have until Sept. 17 to file written comments on Shaw's application.

Shaw Communications seeks regulatory approval to merge cable, satellite units

Broadcast | August 30, 2001

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