Astral purchase will bolster Canadian programming and infrastructure, Bell says

BCE Inc.’s intended $3.38-billion acquisition of Astral Media Inc. will protect Canadian content producers from increasingly competitive online, foreign services that are not bound by Canadian content requirements, George Cope, Bell’s president and CEO, said during the first day of a CRTC hearing into the deal Monday. “The Canadian system needs companies with the scale to compete against foreign content companies like Netflix , Apple , Google and Amazon ,” Cope said during the company’s opening remarks at the hearing in Montreal. “With scale, Canadian companies can make the investments in Canadian content and technology required to go head to head with these well-financed global competitors." Bell announced in March that it had reached a deal to acquire Astral, the country’s largest independent broadcaster, which owns a host of French and English-language pay and specialty stations. The deal has come under fire in recent weeks as competitors such as Quebecor Media Inc., Cogeco Cable Inc. and Eastlink—a Bragg Communications Inc. subsidiary—have argued that it would allow Bell to hold a dominant market position due to its large stable of broadcasting properties. On Monday, Cope said Bell will launch an online streaming service for Canadian consumers that is similar to the over-the-top service offered by Netflix if the deal is approved. He said the new, on-demand service would make Canadian and international movies available to consumers from Astral’s HBO Canada and The Movie Network (TMN) pay-TV services, as well as news, entertainment and sports content from other Bell and Astral-owned broadcasting services. He told commissioners that following the acquisition, the on-demand service would be available across multiple platforms, and in both official languages. “Combining the unique pay TV strengths of Astral with Bell Media’s broad range of programming will create a Canadian service that truly stands apart from those of international providers,” Cope said. Astral, which owns the exclusive rights to HBO in Eastern Canada, said last December it had plans to launch an online, on-demand Canadian service that would be modeled on the “HBO Go” streaming platform available in the U.S. In the U.S., the HBO Go platform is only available to consumers who subscribe to HBO through a broadcast distributor, and Astral said its own service would only be available to cable, satellite and Internet protocol (IPTV) subscribers who subscribe to its HBO and TMN services. Cope said Monday the proposed new Bell service would be available “to all Canadians through the cable, satellite or IPTV provider of their choice.” Bell did not respond by deadline to an emailed request to comment on whether the service would be available to consumers who do not subscribe to any television service provider. Cope said in his opening remarks that even after the transaction, Bell would not be large enough to threaten the diversity of Canada’s media landscape. As part of the commission’s 2008 “diversity of voices” framework for approving transfers of broadcasting licences, the CRTC generally expedites approval of deals that do not result in any one person or company gaining more than 35 per cent of the “total television audience share” of the English- or French-language television markets. Those rules say the commission will “carefully examine” any acquisition that results in a party acquiring between 35 and 45 per cent of the audience share, and generally will not approve a deal that results in a party acquiring a 45 per cent share, or higher, in French or English television. Cope said the deal will result in Bell controlling a 24.4 per cent French-language viewing share and a 33.5 per cent combined English-language viewing share—figures which he said were “well below” the 35 per cent threshold for an extensive review. He added that the company’s French-language viewing share would remain six percentage points below Quebecor’s, which holds a 30.5 per cent share of the French-language market according to data released in the CRTC’s annual Communications Monitoring Report last week. Bell’s competitors, which have launched a campaign against the Astral acquisition, have said the deal would give Bell a 42.8 per cent English-language audience share. If the CRTC does move to require Bell to divest any of its television assets as a result of the transaction, Cope asked that the company be allowed to determine which services it will sell, and which it will keep. He said any requirement that the company sell off its TV assets would “harm” the streaming service the company intended to roll out. During the hearing, Bell also presented commissioners with a list of radio stations it says it intends to auction off in order to remain onside of CRTC ownership rules if the deal is approved. Under the CRTC’s common ownership policy, broadcasters are limited to owning no more than two same-language, same-band stations in large markets with eight or more total stations. In smaller markets with less than eight stations, companies are limited to owning no more than three same-language, same-band stations. Bell said in May that it would have to auction off 10 radio stations as a result of the rule if it is allowed to acquire Astral’s radio holdings. In the list provided to commissioners on Monday, Bell said the stations it would sell include Vancouver stations CISL-AM, CKZZ-FM and CHHR-FM; Winnipeg stations CFQX-FM and CHIQ-FM; Calgary station CKCE-FM; Toronto FM stations CHBM and CFXJ; as well as Ottawa stations CKOB-FM and CJOT-FM. Under questioning from CRTC chair Jean-Pierre Blais, Cope said Bell would also consider agreeing to keep its local, over-the-air TV stations on the air for the next five to seven years in order to gain approval for its Astral acquisition. In order to do so, he said, Bell would have to ensure its competitors would also be required to maintain their over-the-air stations over that timeframe. “We can’t put our shareholders in an uncompetitive position to agree to something from a regulatory perspective that would give them an advantage over us,” Cope said. In its opening remarks, Bell said it has also increased its proposed tangible benefits package from $200 million to $241.3 million, and said it would spend that money over seven years, instead of ten, if the deal is approved. 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. Cope said the company added an additional $41.3 million to its proposed benefit package that would go to the creation of independently produced French-language programming and the launch of a new national news service based in Montreal. “As an organization with a strong track record in news, Bell Media looks forward to bringing a fresh perspective to French-language news and information services,” he said. Mirko Bibic, Bell's chief legal and regulatory officer, also told commissioners Monday that the company would be opposed to dedicating $40 million in tangible benefits towards an independent public fund to improve northern wireless infrastructure. In July, Bell asked the commission to direct those benefits to its northern subsidiary, NorthwesTel Inc., to bring wireless infrastructure to 47 northern communities that do not currently have access to broadband Internet. It says the project will benefit Canadian broadcasting by allowing those communities to access online Canadian content. Bell's northern competitors have said allowing the company to expand its network with benefits money will "kill" northern competition. Tom Pentefountas, the commission’s vice-chair of broadcasting, asked Bell if it would put the proposed $40 million into an independent fund for the project instead. “If we we’re going to have a public subsidy mechanism, that should be the government’s task, not BCE,” Bibic said. “If it’s a question of being a pseudo-government subsidy, we would withdraw that proposal and put it towards other things.” Bibic said the company could not afford to complete the project if not allowed to direct the benefits money to NorthwesTel. The hearing continues Tuesday with Cogeco and Shaw Communications Inc. scheduled to appear after their presentations were postponed Monday. dgrenier@thewirereport.ca

Astral purchase will bolster Canadian programming and infrastructure, Bell says

News | 09/10/2012 11:23 pm EDT

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