Bell-Astral would have ‘monstrous’ share of French specialty revenues: Quebecor

BCE Inc.’s proposed $3.38 billion acquisition of Astral Media Inc. would give the company a “monstrous” share of subscriber revenues for French-language specialty channels and could deplete Quebec’s conventional TV networks of vital advertising revenues, Quebecor Media Inc.’s Pierre Karl Péladeau and Robert Dépatie said Tuesday. “If you approve this transaction, I think competition will diminish significantly,” Péladeau, Quebecor’s president and CEO, told commissioners during the second day of CRTC hearings into the proposed acquisition in Montreal. Péladeau and Dépatie, president and CEO of Quebecor’s Videotron Ltd. subsidiary, told commissioners that the proposed deal would allow Bell to collect 72 per cent of all fees paid to broadcast distributors for French-language specialty channels. They added that the deal would allow Bell to “dominate” the Canadian specialized television services market, with a 67 per cent audience share and 80 per cent share of advertising revenues. “It’s monstrous and it’s major,” Dépatie said of the market power Bell would control if the deal were approved. “This is not a healthy competition, but a monopolistic level,” he later added. Bell Media, a Bell subsidiary which owns the CTV network and 29 specialty channels across the country, said in March that it had reached a deal to acquire Astral, which owns or has part-ownership of 18 pay and specialty programs. The deal will bolster Bell’s ability to compete against Quebecor in the French-language market by giving it control of popular French-language channels currently owned by Astral, such as Canal Vie, MusiquePlus, and Super Écran. Quebecor owns or has part-ownership of nine specialty channels, one pay-per-view service, and one video-on-demand service, according to data contained in the CRTC’s Communications Monitoring Report, which was released last week. It has partnered with other Bell competitors—including Cogeco Cable Inc. and Eastlink, a Bragg Communications Inc. subsidiary—in a campaign that opposes the Bell-Astral transaction. Péladeau said Tuesday that the acquisition of Astral would put Bell in a “dominant” position with a 67 per cent audience share of the French-language specialty channel market. He said the deal would also allow Bell to control 80 per cent advertising revenues gleaned from French specialty channels. He said Bell could use that market power to lure advertisers away from French-language, over-the-air broadcasters, such as Quebecor’s Groupe TVA Inc., and to starve those stations of vital revenues. “Bell will have the ability to increase or decrease prices and sell the combo of both language markets to major advertising agencies endangering the only source of income for networks such as Group TVA,” he said. As part of the commission’s 2008 “diversity of voices” framework for approving transfers of broadcasting licences, the CRTC said it will generally not approve of any deal that results in a single company or individual gaining more than 45 per cent of the “total television audience share” of either the English- or French-language television markets. Those rules do not specify a specific threshold for specialty service audience share at which the commission would reject any deal. Péladeau told the commission there were no safeguards it could impose on Bell that would protect its competitors from its market power if the deal is approved, and asked commissioners to levy an “outright rejection” of the proposed transaction. Lee Bragg, president and CEO of Bragg Communications, also told commissioners Tuesday that any safeguards it could impose on Bell’s Astral purchase would be ineffective. “I think we’ve experienced some of the past safeguards and how they can be misinterpreted and manipulated,” he said. “I think that the best safeguard is just to not let somebody to get that much bigger.” Bragg told commissioners that Bell’s current stable of television assets had already given the company the ability to force competing broadcast distributors to accept unreasonable terms for carriage of those channels. He said Bell engaged in “horse-trading” with other vertically-integrated companies to increase the established market price for its specialty channels, and then attempted to force those prices on independent distributors. “It will impose its terms without any material movement away from those terms and it will impose rates significantly higher relative to those imposed by other programmers,” Bragg said. He said allowing Bell to accumulate more broadcasting assets “will set us toward a regime where consumers face less choice, higher prices, and ultimately the eventual re-monopolization of Bell.” Earlier this year, Eastlink and other independent broadcast distributors took Bell Media to a CRTC-led final offer arbitration process to settle their dispute over carriage of Bell’s channels. At the time, they argued that Bell was charging too much for those channels, and that it wanted to ensure that certain channels, such as its popular TSN sports service, could not be switched out of the distributors’ lowest-tier television service offerings. In July, the CRTC sided with Bell Media against Eastlink at the end of the arbitration process. Earlier in the day Tuesday, commissioners also heard from Bell on its plans to convert its English-language TSN Radio 690 sports station (CKGM) in Montreal to a French-language format. Bell has applied to convert the station to French-language programming if its Astral acquisition is approved in order to add Astral’s Montreal-area, English-language, FM stations while remaining onside of CRTC rules that limit broadcasters to owning no more than two same-language, same-band stations in large markets with eight or more total stations. Mirko Bibic, Bell’s chief legal and regulatory officer, told the commission that the new, French-language sports station would “fill a void” in Montreal’s French radio market. If the conversion is approved, he said, Bell would also put more English-language sports content on its CJAD AM station. Bibic said the company’s proposal is “a true win-win for Montréal sports fans.” Jacques Parisien, executive vice-president and chief operating officer of Astral Media, told the CRTC that CKGM is of little value to any broadcaster in its current format. “If you don’t allow the application, we will have to let 690 go,” he said. The hearing continues Wednesday with Cogeco, Rogers Communications Inc. and Telus Communications Inc. scheduled to appear. news@thewirereport.ca

Bell-Astral would have ‘monstrous’ share of French specialty revenues: Quebecor

Broadcast | September 11, 2012

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