BCE’s sharp attacks on regulator aimed at cabinet, experts say

Bell Canada Enterprises Inc.’s aggressive remarks towards the CRTC over its new vertical integration rules is a part of a strategy to appeal to the Conservative cabinet, industry experts say. The question for Bell is whether the strategy could backfire and pose a risk to its regulatory and consumer relationships. Bell made headlines in recent weeks as Mirko Bibic, BCE’s senior vice-president of regulatory and government affairs and Kevin Crull, president of Bell Media Inc., spoke out strongly against the CRTC’s vertical integration decision. Following the decision, Bibic told The Wire Report that the commission’s decision was “rather interventionist” and that the 12 new proceedings created by the decision warranted the headline, “Regulation begets regulation.” Bell’s comments continued last week when Crull launched what industry insiders are deeming something of a humiliating attack on the commission at a Broadcast Executives Society luncheon in Toronto, Ont. Crull said the CRTC’s new package of rules for large, vertically integrated companies—those that own both broadcasting and broadcast distribution assets—was “severely misguided” and unnecessary. He said he was “afraid our regulators are doing significantly more harm than good lately,” and that “it’s clear that the CRTC believes large-scale companies are a bad thing—so much so that last week’s decision actually rewards companies who decided not to invest in broadcasting.” Ian Morrison, a spokesman for watchdog group the Friends of Canadian Broadcasting, said Bell’s strategy could be an attempt to benefit from the end of Konrad von Finckenstein’s regulatory reign as chair of the CRTC, which comes Jan. 25, 2012. Morrison pointed out that Prime Minister Stephen Harper has also been known to be against regulation, favouring a market-based approach. Bell could be trying to appeal to the leanings of the Harper government, which if it had its way, would be inclined to take apart the regulatory regime on broadcasting, Morrison said. “It could be that the strategists at the top of Bell think that now is the time to kind of push or try to weaken the regulator’s interest,” he said. Independent technology analyst Carmi Levy said in an email that Bell may be upset by the CRTC decision because it did not have as much time as the other vertically integrated players—Rogers Communications Inc., Shaw Communications Inc. and Quebecor Media Inc.—to enjoy the benefits of exclusive content. “Bell, having just gotten into the game, is likely more than a little ticked that the CRTC has decided to end the party before it can even begin to dance,” he wrote. “Bell executives likely wanted at least a little more time to reap the rewards of the just-closed deal to acquire the pieces of CTV.” Levy added that being stopped by the commission so early in the game probably hurt Bell much more than it did the other three national carriers. John Lawford, counsel with the Public Interest Advocacy Centre (PIAC), agreed in an interview that Bell’s very public opinion's about the regulator and its vertical integration decision are strategic. “It makes the CTV acquisition look a little less exciting from their point of view there’s a lot of money involved,” he said. In September of last year, the company announced its acquisition of CTV, which would grow Bell’s TV, wireless and online services for a number of years. But under the CRTC's vertical integration decision, Bell and other vertically integrated players lost their right to distribute exclusive content online and via mobile—which could make its CTV acquisition less valuable. The commission ruled that TV broadcast programming on new media platforms must “be made available to competitors as part of a licensing agreement, or other such arrangements, thereby ensuring the availability of the programming to consumers of competing distributors on fair and reasonable terms.” Lawford said Bell’s tactic might be to create enough noise to get the Conservative cabinet to hear its concerns as it selects a new CRTC chair. “They are coming out aggressive at this point to say, ‘We are not happy, we want someone who is more favourable in the chairmanship, and we don’t expect miracles, but we want the cabinet to look at this seriously,’” he said. Dvai Ghose, an analyst with Canaccord Genuity, said he wonders if Bell's strategy will pay off. “I’ve been noticing for a while that Bell is very aggressive with the regulator and I wonder whether that’s in the company’s interest,” Ghose said. The CRTC's decision on vertical integration emphasized the interests of consumers, and Ghose said that, by opposing the ruling, Bell risks appearing as though it is taking a stand, not just against the regulator, but also consumers. “They are capturing the attitude of the majority of Canadians on this topic,” Ghose said. “I think they look anti-consumerist in the minds of the general public.” Ghose pointed to Telus Communications Co., which lowered its mobile data charges with services like Koodo, simplifying its wireless plans. The company took proactive moves in advance of any rules being enforced by a regulator, he said. “It’s better to do it before you are forced to do it,” Ghose said. “That way you look pro-consumerist.” Levy agreed, saying Bell's opposition to the vertical integration decision risks incurring the wrath of customers who do not “appreciate their carrier calling for more vendor lock-in.” He added: “Bell is banking on the fact that as much as Canadian consumers like to gripe about not getting more value for their entertainment and online buck, they’ve tended to be more talk than action, often choosing to stay with their existing carrier after the initial furor has died down.” But Canadian consumers are also becoming more active, meaning that companies must be careful about maintaining good relationships with them, Levy added. “As they become more savvy about what they consume, from whom they consume it and how much it should cost,” Levy said, “players that generate even the slightest perception of consumer unfriendliness could find themselves struggling to maintain subscriber loyalty.” Ghose said the Tory government is also likely to appoint someone as chair of the CRTC who shares the government's objectives—which may not line up with those of Bell. CRTC’s vertical integration decision aligns with the government's policy of protecting consumers, he noted. “My view is that they are more likely to put someone in who is more aligned with them on these issues,” Ghose said, “which means that it is likely to be less aligned with Bell than more aligned with Bell.” Morrison added that it is not usually in a company’s best interest to attack a regulator. “There’s always a cost to a regulated business in attacking the regulator,” he said. He said Bell’s approach is strange considering that the company’s entire empire is regulated by the CRTC. “Bell Media, after all, is a subsidiary of one of the largest companies in the country,” Morrison said. “You would think that they wouldn’t fire from the hip without considering the interest of the shareholders.” Bell has taken strong positions on previous issues, such as wholesale usage-based billing and net neutrality rules, but it is rare for the company to speak out so strongly, analysts say. Insiders now note a shift in the industry, with BCE appearing to switch roles with Shaw, a company that earned a reputation for public spats with the CRTC and its calls for less regulation. “I understand the change in Shaw’s leadership role has mellowed them a little bit,” Lawford said. “ I’m sure they are of the same mind. If Bell does a cabinet appeal, Shaw will pile on,” he speculated. For now, Shaw is probably “happy to have Bell go punching,” Lawford added, and “there’s no point in sticking their neck out.” Bell declined an interview for this story, saying it has nothing further to add on the vertical integration rules. dgrenier@thewirereport.ca

BCE’s sharp attacks on regulator aimed at cabinet, experts say

News | 10/03/2011 7:12 pm EDT

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