Quebecor conducting legal analysis of CRTC’s exclusive content moratorium

Quebecor Media Inc. is conducting an internal legal analysis to determine the CRTC's authority to implement a moratorium on exclusive content agreements for mobile and online platforms, Quebecor president and CEO Pierre Karl Péladeau says. “We're asking ourselves, and we're going to go through a legal review, if the commission has any jurisdiction or competence on wireless and on broadband,” Péladeau told analysts during a conference call Tuesday. On Monday, the CRTC imposed a moratorium on new exclusive content deals for vertically integrated companies’ mobile and online platforms until the commission deals with the issue at a hearing in June. The moratorium came as part of a commission decision approving BCE Inc.'s acquisition of CTVGlobemedia Inc. In early February, the commission held a public hearing on the transaction, where Telus Corp. and Cogeco Cable Inc. told the commission it should implement safeguards on Bell to protect competitors from undue preference. At the opening of the hearing, BCE president and CEO George Cope said the company may want to offer exclusive content once the transaction had closed. In its decision Monday, the commission cited BCE’s comments about exclusivity as a cause for competitive concerns, and imposed a moratorium on new exclusive programming agreements for mobile and online platforms until the commission issues a decision on a policy for vertically integrated players. “For a large wireless carrier, we think it's necessary to be prudent,” CRTC chairman Konrad von Finckenstein said Monday. “We think it is a small price to pay.” Von Finckenstein added that the commission did not propose a moratorium on Shaw Communications Inc.'s acquisition of Canwest Global Communications Inc.'s broadcasting assets because Shaw has yet to launch its wireless services. Although the moratorium was primarily intended for Bell, the commission said it also expects other vertically integrated companies to abide by it. During a quarterly conference call with analysts Tuesday, Péladeau said the company's initial reaction to the decision was that it was “pretty strange.” “To me, there are two laws, two pieces of legislation, the Broadcasting Act and the Telecommunications Act, and the Broadcasting Act certainly has the full right to consider and manage what broadcasters in Canada will broadcast. But on the telecom side, that's pretty strange, because there's no such thing as a programming or content concept in this piece of legislation,” he said. Péladeau added that the company will add to its perspective about the moratorium soon. Serge Sasseville, Quebecor's vice-president of corporate and institutional affairs, said in a follow-up email that the company has yet to make an internal decision about the issue, and would not comment on how the moratorium or a possible ban on exclusive content for mobile or online media could affect the company. A CRTC official said the CRTC has the power to apply a moratorium on new agreements, not existing ones, until the issue is examined at the June hearing. The CRTC does not currently regulate content exclusivity on mobile and online platforms, but in late January, the CRTC's executive director of broadcasting, Scott Hutton, said companies concerned about undue preference on the platforms could approach the commission with their concerns. Rules mandating the sharing of content could negatively impact Quebecor, which has led the Quebec content market thanks to its proprietary, French-language programming. Quebecor recently entered an agreement to manage and name a new arena in Quebec City, where it intends to bring back NHL hockey team the Quebec Nordiques. Observers have said the company could use a hockey team to generate more exclusive content and give it an edge over Bell, its main competitor in the province. Bell and Quebecor are competing in the Quebec market on several fronts, including wireless and television services. Bell is currently rolling out Internet protocol television (IPTV) services in the province. Maher Yaghi, an analyst with Desjardins Securities, wrote in a research note Wednesday that Bell is likely to implement more aggressive promotions as its IPTV footprint increases, adding that the situation could lead to a price war in the province. Yaghi wrote that he expected Quebecor to launch customer retention programs to cut customer losses. Bell did not comment on the CRTC’s moratorium by deadline Wednesday. Yaghi said by phone that the moratorium is unlikely to have a significant effect on Quebecor, because until now content has not been a factor for consumers picking a wireless service provider. “It's very hard for me at this point in time to understand how you can make a business case on the exclusivity side for wireless products, because they all have something the other guys want,” he said. But that situation may change, Yaghi added. He also questioned whether the moratorium could impact Bell, noting that the company pursued its acquisition of CTV mainly to ensure access to content at reasonable prices. Dvai Ghose, an analyst with Canaccord Genuity, said by phone that the moratorium is a negative for companies like Bell and Quebecor. But he added that, on the positive side, the companies can profit from selling their content to competitors. “No one's saying give it away for free,” he said. “I don't think necessarily that Bell will suffer as a consequence of this decision.” Ghose also noted that owning exclusive content on mobile and online platforms can be tricky for companies. The content is often provided free to consumers and supported by advertising, he said. But advertising revenues go down when the content is exclusive because the audience is restricted, he added. Michael Hennessy, Telus' senior vice-president of regulatory and government affairs, said Monday that the moratorium is positive for the company, which does not own content. In January, Hennessy had said that a CRTC decision that banned Quebecor from owning exclusive content on video-on-demand services set a precedent for mobile and online platforms. René Guimond, Cogeco's vice-president of public affairs and communications, said by phone that the company is satisfied that the commission imposed a moratorium. He added that the company is looking forward to expressing its views at the commission's June hearing. Rogers Communications Inc. declined to comment. kfournier@thewirereport.ca

Quebecor conducting legal analysis of CRTC’s exclusive content moratorium

Broadcast | March 9, 2011

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