BCE not commited to sharing all content following CTV acquisition

GATINEAU—BCE Inc. president and CEO George Cope told the CRTC Tuesday he can’t guarantee the company will not use exclusive content after it completes its acquisition of CTVglobemedia Inc.’s broadcasting assets. “We’re not prepared to make the same categorical commitment that Shaw made,” Cope said. “If undue preference means nothing can be exclusive, then I don’t understand what the term undue preference means. We may provide preference from time to time to Bell, but not undue.” On Tuesday, the commission opened a four-day public hearing on BCE’s acquisition of CTV. The commission evaluates the value of the transaction at $2.671 billion, $32 million more than estimated by BCE. At the opening of the hearing, CRTC chair Konrad von Finckenstein said the transaction will further the trend of convergence and vertical integration in the communications sector. Competitors such as Telus Corp. have expressed concern that Bell could engage in anti-competitive behaviour by using some of its newly acquired CTV content exclusively to give it a competitive advantage. Cope told the commission in his opening statement that the company will be “open for business” when it comes to selling the rights to content. “There will be other service providers which will want content from us and we will be open to supplying it on a commercial basis, just as we will continue to utilize non-CTV content when it makes sense to do so,” he said. But Cope tempered his comments by adding that there may be cases where the company chooses to offer exclusive content on its services while still respecting the commission’s undue preference rules. “We foresee ourselves, for example, generally adopting a subscription-based wireless distribution model, much like the one currently used by specialty services in the linear broadcasting world,” he said. Von Finckenstein questioned whether Bell would make some of its content exclusively available on its handsets, pointing to an announcement in September that the company would offer unique Business News Network content on Bell mobile devices. The chair said he was looking to BCE to ensure the company would not break the commission’s rules during the period between the transaction’s approval and the CRTC’s implementation of a new vertical integration framework, which the commission will discuss in the course of a public hearing in June. Cope said the company intends to enter agreements with competitors and move towards a subscription-based model to ensure consumers can purchase access to content. He added that competitors can approach the commission to discuss any complaints they may have with Bell’s approach. “We would hope the commission would take great comfort: one, in current rules, and two, in how we will approach this asset,” he said. “We haven’t even owned it for a day yet, and the assumption is that we’re going to do something that isn’t in the interest of the Canadian marketplace. That’s not our strategy at all. Our strategy, quite frankly, was to make sure that the content industry wasn’t 100 per cent controlled by the cable industry.” Cope also said content is often available on over-the-top platforms online, giving all Canadians access to it. But Michael Hennessy, Telus’ senior vice-president of regulatory and government affairs, said by email that content available online isn’t enough of a guarantee. “The problem is that even if some content is available online, and it often is not, it is not going to be the same quality as a managed wireless service,” Hennessy said. “Otherwise Bell would not want exclusive rights.” Hennessy told The Wire Report in an interview last week that limiting access to wireless programming is bad for consumers because it forces them to purchase a handset with specific providers. Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs, said in a brief interview following the hearing that there is a difference between “preference” and “undue preference.” “There is a standard to undue preference that the conduct has got to substantially adversely affect the other party. There is no way that a piece of content in an infinite universe of content available on wireless but not on another wireless provider is going to have that impact on the wireless market,” he said. Cope told the commission BCE wants to acquire CTV for access to its own content and to better compete with other vertical integrated companies. “We didn’t want to buy all our supplies from our competitors,” he said. Von Finckenstein also raised concerns about whether the transaction could allow Bell, as a broadcasting distributor, to access sensitive information within its broadcasting division that would give it a competitive advantage when negotiating carriage agreements with other broadcasters. But Bibic told the commission that the company signs confidentiality agreements when negotiating with competitors, which it intends to respect. On Tuesday, the Competition Bureau issued a statement saying it does not intend, for the moment, to investigate the BCE-CTV transaction, but added that the Competition Act provides it with one year to bring the matter before the tribunal if necessary. “The Bureau will closely monitor the activities of the parties and regulatory developments in the broadcasting industry to determine whether it is appropriate to take such action prior to the expiry of that one-year period,” the agency said. The bureau said it is aware of the issues relating to exclusivity arrangements and the handling of competitive or sensitive information under vertical integration. The CRTC also raised concerns over Bell’s tangible benefits package for the transaction at the hearing. A tangible benefits package, or funds paid to support the Canadian broadcasting system, traditionally represents 10 per cent of a transaction’s value, which would amount to about $267 million, according to the CRTC’s estimate. But Bell has argued it shouldn’t have to pay any benefits because its acquisition of CTV is a simple reversal of its divestment of the assets in 2006. On Tuesday Bell presented the commission with two versions of a revised tangible benefits package. The first package, worth $142.7 million, would allocate funds to independently produced programs of national interest, local news, satellite carriage of all stations supported by the Local Programming Improvement Fund (LPIF), and radio benefits. The second package, worth $220.8 million, would add funding for the production of local news in high-definition as well support for CTV’s A Channel stations. But von Finckenstein said that allocating $24.5 million to the production of high-definition news content for CTV’s local news stations would give the company an advantage over competitors. “All along you’ve said, ‘Don’t impose on me something that you don’t impose on my competitors. Don’t give me a competitive disadvantage.’ And you’re here asking for the exact contrary, a competitive advantage over your competitors because we have not allowed anybody else to use benefits money for this,” he said. Von Finckenstein said stations will inevitably move towards high-definition content. But Bibic said moving to high-definition news programming isn’t essential to compete. “If it’s inevitable, why hasn’t it been done after all these years?” he said. The hearings will continue Wednesday in Gatineau. A decision on the transaction will be issued within 35 days. kfournier@thewirereport.ca

BCE not commited to sharing all content following CTV acquisition

News | 02/01/2011 10:17 pm EST

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