Quebecor files Cabinet appeal of CRTC’s ExpressVu cross-subsidization ruling

Quebecor Inc. has launched a Cabinet appeal of the CRTC decision that concluded that BCE Inc. wasn’t inappropriately cross-subsidizing Bell Express Vu LP’s entry into the Ontario and Quebec markets. The Quebec media giant charges that the satellite TV distributor is being subsidized by profits earned at BCE’s regulated telephone company Bell Canada. But BCE believes Quebecor doesn’t stand a chance with the appeal, and calls the financing of Bell ExpressVu an investment rather than a cross-subsidization. "This is a very straightforward matter. It was when it went before the commission and it still is," Bernard Courtois, executive counsel for BCE Inc. and Bell Canada, tells Canadian Communications Reports. "The petition and the original request were not very credible. And it’s very transparent what (Quebecor’s) objective is. The fundamental point is that if Vidéotron and Quebecor have their way, there can be no competition for their cable business. "If you are going to enter into this market, you’re going to have a period of years before you can become profitable, and if you don’t have a chance of becoming profitable, then you’re not going to survive," he says. "These are startup businesses requiring big investments. It’s a red herring to focus on other parts of the business that aren’t in startup phase." Besides, adds Courtois, Vidéotron is doing the same thing by using profits from its cable arm to fund its entry into the Internet and telephony markets. In its appeal to Cabinet, Quebecor asks the government to order the regulator to re-examine its October 8, 2002 decision that stemmed from a complaint it filed on April 4, 2002. Quebecor wants Telecom Decision 2002-61 reconsidered under both the Broadcasting Act and the Telecommunications Act. Another Quebecor request made in the appeal to Cabinet is that the CRTC be directed "to make recommendations to the government on how best to address this (cross-subsidization) problem, whether via policy, regulation or legislation." It also wants Cabinet to tell the CRTC to "inquire publicly into the nature, extent and implications for the Canadian broadcasting industry of continued cross-subsidization by BCE of the operations of Bell ExpressVu." But Courtois points out that the CRTC has already had a written inquiry into the matter, and that it found the complaint had no basis (CCR, Oct. 10/02). "This (no steps taken to guard against cross-subsidization) has left BCE free to use its monopoly local revenues (from its telephony operations) to finance its massive subsidies of Bell ExpressVu. The impact of this behaviour is already evidenced by Bell ExpressVu’s market share numbers," reads Quebecor’s petition to Cabinet dated January 6, which is signed by president and CEO Pierre-Karl Péladeau. "There is no doubt in my mind that, if left unchecked, this behaviour will ultimately result in the dominance by Bell ExpressVu of the digital broadcasting distribution market." Quebecor further notes that since BCE became the sole owner of Bell ExpressVu in 1997, more than $1 billion has been invested into the satellite TV operations and the company currently runs at an operating loss of $170 million per annum. "Yet despite years of significant losses, Bell ExpressVu shows an insignificant debt of only $57 million. The money to cover the losses comes from the most profitable element of the BCE empire – local telephony," reads the Quebecor petition. The petition also states that Bell ExpressVu had only 2,000 customers in 1997, but today has more than 1.2 million. The increase in customers, Quebecor alleges, is due to a subsidization of satellite dishes and receivers. But Courtois counters with other numbers. He says Canada’s two satellite TV distributors have only taken 10% of the overall cable market, while Bell has lost 15% of its local telephony business to new entrants. "In effect, there’s more competition for local telephony customers than there is for cable. Yet cable believes this is a disaster and simply refuses to accept this, at least in the case of Vidéotron." Cabinet has a year from receipt of the petition to respond.

Quebecor files Cabinet appeal of CRTC’s ExpressVu cross-subsidization ruling

Broadcast | January 16, 2003

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