CRTC blocks Bell-Astral deal, cites concerns over market power

GATINEAU—The CRTC blocked Bell Canada Enterprises Inc.'s $3.38-billion deal to acquire Astral Media Inc., citing concerns about competition, Bell's market power, and a proposal that did not appear to benefit the public interest. “The proposed transaction would not only remove the last major independent, non-integrated broadcaster from the system, but transfer its undertakings to the largest vertically integrated broadcaster and telecommunications service provider in Canada,” said the CRTC decision, issued after markets closed Thursday. The CRTC acknowledged that Bell's English-television viewing share, after acquiring Astral, would fall short of the commission's 45 per cent threshold for denying broadcasting transactions, but said that threshold was not the only consideration at play. “The Commission considers that convergence, integration and scale may lead to a point at which the size of an entity on a national level becomes so large that it hinders effective and healthy competition among Canadian broadcasters,” the decision said. “The Commission is mindful that a healthy communications system also requires entities of various sizes that are able to compete and innovate in a fair environment.” Bell owns 26 English-language specialty channels, including sports channel TSN, and would grow that by another seven English services through the Astral deal, to include popular Astral channels The Movie Network, Family Channel, and Teletoon. According to the CRTC's 2008 diversity of voices policy, the commission will “carefully examine” any acquisition that results in a company acquiring between 35 and 45 per cent of the French or English-language television audience share, and generally will not approve a deal that results in a party acquiring a 45 per cent share. The CRTC said Bell, after acquiring Astral, would have a combined 42.7 per cent viewing share in the Canadian television market, including television services jointly owned with other companies. In the French-language television market, the combined BCE-Astral viewing share would reach 33.2 per cent including jointly owned services. The diversity of voices policy “applies 'as a general rule,' barring other policy concerns,'” the CRTC said. The commission said the deal would give Bell “considerable negotiating power with other distributors” if it took Astral's specialty channels, particularly in the most popular genres of movies, sports and premium content. Its stable of channels would also give Bell extra negotiating clout with studios and advertisers, the commission said. 'he ability to negotiate for every program rights window with programming suppliers and advertisers, when combined with BCE's size and ability to 'bulk buy,' could ultimately reduce, rather than increase competition,” the decision said. If the deal was to proceed, Bell's specialty channels would increase the company's market power to an extent that the CRTC's rules preventing anti-competitive behaviour for vertically integrated companies—those that own both broadcasting and broadcasting distribution assets—“would be insufficient to effectively address disputes and facilitate program availability and distribution,” the CRTC added. Bell did not justify how the deal would spur competition, particularly with Quebecor Media Inc. in Canada's French-language television market, the CRTC said. If the deal was approved, Bell would have gained more than 63 per cent of all revenues from pay and specialty services, CRTC Chair Jean-Pierre Blais told reporters following the release of the decision. "Overall, BCE would have controlled 50 percent of the pay and specialty services, with the highest revenues in Canada, " he said. He added that Bell would have become the largest commercial radio broadcaster in the country with a quarter of all radio revenues. "Certainly it is my intent to put Canadians back at the centre of their communications system and exercise the mandate Parliament has entrusted in us, " Blais said. In response to a question Thursday about BCE re-applying with a modified application, Blais said the CRTC looks at all applications that come before it and cautioned any applicant to carefully review the decision. At a CRTC hearing in September, companies competing with Bell urged commissioners to block the acquisition. Bragg Communications Inc. and Quebecor said Bell could use its stable of English-language specialty stations to force unfair prices or unreasonable terms on competing broadcast distributors that want to carry Bell-owned specialty channels. Quebecor, Cogeco Cable Inc. , and Bragg also launched an online social media and national advertising campaign in August, called “Say No to Bell,” to generate public opposition against the transaction. Telus Corp. said at the time that it also supports the campaign. The campaign called on the public to submit letters voicing their concerns about the acquisition to the federal heritage and industry ministers, members of Parliament, and the CRTC. This summer, the Public Interest Advocacy Centre (PIAC) and advocacy group OpenMedia.ca formed a coalition of groups against the transaction, saying it would lead to excessive media consolidation. The groups are leading an online, public interest campaign called “Stop the Takeover.” Competitor Rogers Communications Inc., in a document filed with the CRTC this summer, called on the commission to block the deal or require Bell to sell English-language TV channels as a condition of approval. The CRTC also denied Bell's application to convert its radio station CKGM Montreal from an English- to a French-language station. Bell had said it was only interested in changing the station's language format if the deal proceeded. In a statement Thursday, Phil Lind, Rogers’ vice-chair, commended the CRTC’s decision. “We believe that Canadians should have fair and open access to content,” Lind said in a release. “This is a good day for consumers." Consumer group the Public Interest Advocacy Centre (PIAC), as well as unions the Communications, Energy and Paperworkers Union of Canada and the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), also issued statements supporting the decision. Cogeco said in a statement it was pleased with the decision and that it “demonstrates the CRTC's desire to ensure healthy competition in the Canadian communications industry and to protect the interest of consumers." The Competition Bureau is also reviewing the deal. In an interview with The Globe and Mail published Sept. 17, outgoing Competition Commissioner Melanie Aitken said the bureau was “increasingly concerned” about Bell's purchase of Astral. Michael Hennessy, president and CEO of the Canadian Media Production Association (CMPA), said uncertainty will hang over the Canadian film and television industries until it's clear who will buy Astral. “We still know that Astral’s on the block. The Greenberg family want to sell,” he said. “What kind of investment decision they’re going to make on film and children’s programming in the English language market, in the short-run, is probably a question.” He said he expects Bell to examine whether it can acquire Astral in way that addresses the regulator’s concerns. “You would assume Bell will look at all possible options in terms of reviewing this decision. I don’t think there’s necessarily that many options,” he said. sdoyle@thewirereport.ca

CRTC blocks Bell-Astral deal, cites concerns over market power

News | 10/18/2012 8:02 pm EDT

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