CRTC did not follow some ‘general rules’ for Astral decision, experts say

The CRTC did not follow “general rules” outlined in its diversity of voices policy but did not violate any laws or regulations in its decision to block BCE Inc.’s $3.38-billion bid to acquire Astral Media Inc., regulatory experts say. On Monday BCE issued a formal request to cabinet, asking it to issue a government policy direction to the CRTC as part of the company's plan to re-file a regulatory application to acquire Astral. One of Bell's key points in the request to cabinet is that the CRTC decision, which outright denied the transaction, “erred” in its application of the 2008 diversity of voices policy. That policy outlines acceptable television viewership levels concentrated under one owner. “he Commission went well beyond its own DoV Policy and examined new metrics, such as percentage of television revenue and the number and genre of channels that would be owned by Bell,” BCE said in the request to cabinet. “These metrics were applied without prior notice to Bell and Astral and they were clearly determinative in the Commission’s decision to deny the Transaction.” The commission’s diversity of voices policy states that it will generally expedite approval of transactions in which no company gains control of more than 35 per cent of either the English- or French-language national TV viewership share, a rule that Bell says was not followed. Bell wrote in its request filed with cabinet that the proposed acquisition of Astral “complied fully” with the CRTC's diversity of voices policy, its regulatory framework for large, vertically integrated companies, its common ownership policy for the radio sector, and its benefits policy for broadcasting transactions. In a phone interview, Sheridan Scott, a partner at Bennett Jones LLP and former commissioner of competition, said the diversity of voices policy was not designed to be a firm rule and is a “guidance document” that can take a back seat to other policy concerns. “There’s just no doubt in my mind that there was no rule that said the CRTC will not review it if it’s less than 35 per cent,” Scott said. “There is no such rule.” Bell argues that its English-language television viewing share, after acquiring Astral, would amount to 33.5 per cent. The company's request to cabinet contains the wording of a proposed policy direction to the CRTC to follow more strictly the diversity of voices thresholds. Bell plans to re-file its application if cabinet issues the policy direction. Cabinet cannot outright overturn the decision because no broadcasting licence was issued. Part of Bell's proposed direction says the CRTC should follow the diversity of voices policy and be directed to “expeditiously approve ownership transfer applications involving television programming undertakings which result in the applicant having a viewership share of less than 35% of Total Television Viewing.” Scott pointed out that the preamble to the policy's viewership thresholds includes the phrase “as a general rule,” a sign that the commission wanted the ability to deviate from the policy where necessary. It also says the CRTC will quickly approve transactions below the 35 per cent threshold “barring other policy concerns.” “‘As a general rule’ is always a bit of a hint that this is not written in stone,” Scott said. “It’s a guidance document, as opposed to a regulation, because you won’t see anything in regulations or laws that say ‘as a general rule.’” Pierre-Louis Smith, principal and owner of Stratego Media Consulting and a former chief regulatory officer for the Canadian Association of Broadcasters, agreed that the diversity of voices policy is not binding on the commission. “It says that there can be other policy issues related to a transfer of ownership,” he said. “In other words, it’s not in and of itself the only mechanism by which the commission is looking at the transaction.” The CRTC noted in its decision that the diversity of voices policy was not the only factor under consideration. It also cited the public interest, Bell's market power, and competition, as factors. The decision said 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.” Smith said the only potential problem he identified in the commission’s reference to the diversity of voices policy was its formula for calculating Bell’s total viewing share. The CRTC broke from previous policy by including the viewing share held by Astral’s jointly-owned specialty and pay services, he said. The CRTC decision concluded that 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 Bell-Astral viewing share would reach 33.2 per cent, the commission said. Smith said the CRTC determined that Bell would have influence over the jointly-owned stations if it acquired Astral’s 50 per cent stake in those channels. “This, to me, is a little bit of a stretch,” he said. The CRTC should have only counted 50 per cent of those stations’ audience shares when calculating the total, he said. Bell argues that the CRTC should include the Canadian viewing of foreign channels like CNN or Fox News when determining audience share levels. With American channels included, Bell says, the Bell-Astral English-language viewing share would fall below 35 per cent. Richard Paradis, president of media and consulting firm Groupe CIC in Montreal, said the commission should codify how it deals with foreign channels and joint-ventures when calculating audience shares. “Considering it costs a lot of money to prepare applications ... is it fair to the broadcasters and the industry to think they’re living by guidelines, and then find out after they’ve been through the process that, ‘Oh, somehow our interpretation isn’t the same as yours?’” Paradis said. “That’s really not good for the regulatory environment.” Bell argues that the decision was unexpected and that the company believed it accorded with existing policies. BCE said in its request to cabinet that the CRTC ignored “its own well-established policies and denie a transaction based on new criteria that did not exist at the time the proposal first came before it and that were not brought to the attention of the parties in advance.” Smith said the purpose of the 2008 diversity of voices policy was to provide some clarity for the industry but not as “an on or off switch.” He added: “You’ve got other things that you need to demonstrate in order to get your application approved.” Bell added in its request to cabinet that a policy directive is necessary to “dispel the perception of bias and bad faith” created around the decision-making process by meetings between CRTC Chair Jean-Pierre Blais and Bell's competitors opposed to the transaction. Bell said it was denied any similar meetings. Industry Minister Christian Paradis said last week that the government respects the CRTC decision. Bell could also appeal the CRTC’s decision to the Federal Court of Appeal. Pierre Trudel, the director of the media research centre at the University de Montreal, said last week that such an application must demonstrate that the commission disregarded its regulations or statutes. nkyonka@thewirereport.ca

CRTC did not follow some ‘general rules’ for Astral decision, experts say

News | 10/23/2012 7:29 pm EDT

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