Critics focus on ‘inter-corporate transfer’ and telecom funding in BCE-Astral benefits package

BCE Inc.’s proposal to spend $40 million in broadcasting benefits on the rollout of mobile broadband services by its subsidiary NorthwestTel Inc. in remote northern communities does not benefit the broadcasting system and is an improper use of the funding, a screenwriters group and a telecom competitor in the North said. Bell, which in March said it reached a deal to purchase Astral Media Inc. for $3.38 billion, filed documents with the CRTC this month that proposed to spend $200 million in tangible benefits relating to that sale, including $61 million in radio benefits and $139 in television benefits. Bell proposed that $40 million of the $200 million in benefits go to subsidiary NorthwesTel's modernization plan for the roll out of a wireless network to support broadband Internet in some of Canada’s most remote northern communities. The CRTC requires companies purchasing broadcast assets to spend about 10 per cent of the value of the transaction on projects and programming that benefit the Canadian broadcasting system. Kelly Lynne Ashton, director of policy at the Writers Guild of Canada, said NorthwesTel’s broadband upgrades should not be considered a benefit to the broadcasting system. She said her organization will file an intervention asking the commission to redirect that money towards “on-screen benefits” such as Canadian productions. “We think it’s an inappropriate allocation and it’s not consistent with CRTC policy,” she said. “It’s a pure telecom expense.” SSi Micro Ltd., which operates in Nunavut and the Northwest Territories and is one of NorthwesTel’s main competitors, said in a release Monday that NorthwesTel’s modernization plan is a “Trojan Buffalo” for the North. NorthwesTel's request to spend tangible benefits on upgrading its telecom network “does not fit the CRTC’s benefits test for broadcasting takeovers,” the SSi Micro release said. “As per the CRTC, benefits should be directed to the broadcasting system as a whole.” SSi said NorthwesTel is holding northern residents “hostage” by pining its modernization plan on the CRTC’s approval of the Bell-Astral benefits spending. Northwestel’s plan is a “blatant broadside attack on competition” in the North that aims to “sink competitive alternatives” by subsidizing the cost of expanding wireless networks into “communities where competitors already exist,” SSi Micro said. The issue is expected to come up at a CRTC hearing on the Bell-Astral transaction scheduled to start Sept. 10 in Montreal. NorthwesTel says its proposed rollout of a wireless broadband network in remote northern communities will benefit the broadcasting system by increasing northerners’ access to online video and their ability to share northern-produced video with the rest of Canada. “They don’t have the luxury of a cable TV service, and many of them don’t even have the luxury of an over-the-air type service,” Paul Flaherty, NorthwesTel’s president and CEO, said in a phone interview with The Wire Report. “What we’re proposing is that the wireless broadband service we’re putting in has a direct benefit to broadcasters, not only broadcasters in the South, but people in the North who would like to broadcast content elsewhere,” he said. Flaherty said broadcasting and telecom have converged online and that the sectors can benefit one other. In a follow-up email, Flaherty referred to a 1993 CRTC notice that said tangible benefits can be allocated according to three categories: operating expenditures, capital expenditures for technical improvements, and grants and contributions to Canadian talent or programming funds. “The use of the Astral funds in the Modernization Plan, aligns with the category of capital expenditures for technical improvements,” Flaherty said in the email. “We will be improving or creating the access vehicle (Internet) for consumers to view broadcast content.” Ashton said the proposed broadband initiative is an infrastructure cost that has more to do with competing in the northern wireless market than with distributing Canadian programming. “I think it’s important that the North have broadband, but I don’t think that’s something that the benefits should be spent on,” she said. “I don’t see how that benefits the entire broadcasting system.” Ashton acknowledged the commission made exceptions to its tangible benefits policy when it allowed Bell and Shaw Communications Inc. to include infrastructure costs in their benefits packages when those companies purchased CTVglobemedia and Canwest Global, respectively. Shaw's benefits package included $23 million to upgrade 67 analog transmitters to digital and Bell spent $5 million to upgrade master control units at A-Channel (now CTV Two) stations as well as $30 million to increase its satellite TV capacity and the number of local stations carried on satellite. Ashton said the CRTC made those exceptions because the projects supported initiatives commissioners supported, but the decision made the commission’s tangible benefits policy less predictable for industry stakeholders. “Now, the broadcasters all think that infrastructure is an acceptable allocation when the stated policy says it’s not,” Ashton said. “That is the danger in saying, ‘We like this program, let’s make an exception for it.’” In December, the CRTC ordered NorthwesTel to undertake a plan to upgrade its aging and in some cases outdated infrastructure. Flaherty said the $40 million benefits spending goes beyond wireline switch upgrades that the commission ordered NorthwesTel to undertake, and will deliver wireless broadband service to 45 remote northern communities, each with less than 700 inhabitants. Without a CRTC approval of Bell’s tangible benefits plan, Flaherty said, NorthwesTel must scale back that component of the plan. “Forty million dollars is a significant amount of money, and that’s the 45 sites,” he said. “I’m not saying none of the 45 would be done, but a significant number would no longer be done.” One industry source said “all the broadcast industry players” will intervene against Bell’s proposed benefits package because they view the wireless broadband project as falling outside the broadcast system and the tangible benefits policy. The source, who asked to speak anonymously, said the broadcast and Canadian production sector was “maddened” by the benefits policy exceptions the CRTC made for the Bell-CTV and Shaw-Global transactions. “There’s no predictability,” the broadcast industry source said. “You don’t know what’s fair game and what’s not.” Ashton said several groups will be against the proposal, including the Canadian Media Production Association (CMPA), the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), the Directors Guild of Canada, the Canadian Media Guild, and the Communications, Energy and Paperworkers Union of Canada. She said Bell’s proposed benefits package does not abide by a generally accepted rule that 85 per cent of the benefits flow to on-screen productions. Bell's benefits proposal currently dedicates about 69 per cent to on-screen funding, she said. Michael Hennessy, president and CEO of the CMPA, said in an emailed statement that the 85 per cent requirement for on-screen productions is more important in a more concentrated broadcast sector. “iven the degree of concentration that will arise in the market as a result of the takeover and the consequent loss of another independent window to license and exhibit content, we believe it is critical that the full 85% of benefits, that can be allocated to on screen under CRTC policy, be so allocated to on screen productions, as opposed to inter corporate transfers,” Hennessy said. Deadlines for interventions in the CRTC proceeding are due Aug. 9. nkyonka@thewirereport.ca

Critics focus on ‘inter-corporate transfer’ and telecom funding in BCE-Astral benefits package

Broadcast | July 25, 2012

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us