Independent distributors say Bell-Astral would receive 37% of their carriage fees

Independent broadcast distributors say BCE Inc. has not addressed the CRTC's concerns about market power resulting from an acquisition of Astral Media Inc. and that BCE's share of all carriage fees paid by independent distributors would rise from 29 to 37 per cent if the Astral deal goes through. The Canadian Cable System Alliance (CCSA), an association of about 110 small and independent broadcast distribution companies whose members include VMedia, TbayTel, and Cable Cable Inc., said in a regulatory filing with the CRTC last week that its members now pay 44 per cent of all of their carriage fees to Bell and Astral. According to BCE's agreement with the Competition Bureau, under which it would divest 12 specialty channels, CCSA members would pay 37 per cent of all of their carriage fees to BCE division Bell Media, up from 29 per cent right now, the group said. “Even post-divestiture, for every $10 spent on programming by the independent BDUs that CCSA represents, close to $4 would go to one content supplier, Bell Media,” the group of broadcast distributors said. “The proposed transaction would enable Bell to exert that power and control in all of the most important content categories; sports, movies and other premium content.” The CRTC will hold a public hearing starting May 6 on BCE's proposed $3.38 billion purchase of Astral, a radio broadcaster and specialty channel owner. The CCSA filed its comments with the CRTC along with other competitors of Bell's that said the commission should deny the acquisition again, as it did last fall. In that decision, the CRTC blocked Bell's proposal to purchase Astral, citing concerns about competition and the public interest. Bell and Astral then filed a second, reworked application, which the commission published in March. Bell Media would take possession of Astral's most popular specialty channels, including Super Écran, Cinépop, The Movie Network (with HBO programming), TMN Encore, and pay-per-view service Viewer's Choice, the CCSA said, and as a result would own two of Canada's most valuable specialty channels, TSN and The Movie Network. Those two channels alone, the CCSA said, account for 20 per cent of all the wholesale carriage fees that the group's members pay to specialty channel owners each month. The CCSA referred to the CRTC's decision to block the original Bell-Astral merger, which said the commission's regulations for vertically integrated companies would not be enough to limit the merged company's market power. The group, like BCE competitors that filed their comments by the dealine last week, said Bell's new application should be denied and that a consent agreement with the Competition Bureau released in March does not effectively address BCE's resulting market power. The Competition Bureau agreement's checks on Bell did not go beyond the CRTC's existing policy framework for large, vertically integrated companies, the CCSA said in its filing. In regulatory filings last week, BCE competitors Rogers Communications Inc. and Telus Corp. said the deal should be blocked outright. The companies, as well as MTS Allstream Inc., said any approval by the CRTC should warrant additional safeguards on Bell’s market power. In March, Bell and Astral released a revamped proposal for the benefits the companies would spend on Canadian broadcasting as part of the acquisition. The package of $174.64 million, Bell said, would include $124.6 million in spending on Canadian television, 85 per cent of which will go to independent, on-screen productions. In its reworked application, Astral said there are questions over the long-term about the “ability to create 'real' revenue and earnings growth” for Astral's television and radio broadcast assets, and that consumers' rising use of online, over-the-top video services is driving up demand for, and the cost of, digital distribution rights. “We look forward to the CRTC hearings and to a discussion of how a united Astral and Bell Media will serve the public interest, including greater media choice and competition and more new Canadian content,” Jacqueline Michelis, a spokeswoman for BCE, said in an emailed statement last week. In an emailed statement Monday, Michelis challenged CCSA's numbers. She said that, in 2012, "cable subscriber revenues accruing to the pay and specialty services that will be owned by Bell if this application is approved totalled $677.7 million, equal to 28.8% of cable programming costs or $2.88 for every $10 dollars spent on programming by Canadian cable companies—considerably less than the $4 claimed by the CCSA." The CCSA said BCE's “TV Everywhere” plan—in which it will offer video-on-demand and live streaming TV content to TV subscribers via mobile, video-on-demand and online platforms—would help the company maximize returns for investors and prioritize content for Bell TV subscribers. BCE aims to use its growing content and distribution platforms to “maximize revenues from its content properties” and dominate Canada's emerging, “four screen” TV sector, the CCSA said. The CRTC decision that blocked the merger last fall said Bell and Astral did not propose new safeguards on their market power, such as channel divestitures or “functional separation.” Under functional, or operational separation, BCE would be required to establish operationally separate businesses for its wholesale and retail services to prevent discriminatory wholesale pricing or services. In its hearing notice about Bell and Astral’s new, reworked application, the CRTC said it may look at concentration of ownership and “potential market dominance” after the divestiture of some channels, as well as Bell's “negotiating power with other distributors” and “presence in the most attractive genres (movies, sports and premium content),” among other issues. Eastern Canada cable company Bragg Communications Inc., operating as Eastlink, agreed with the CCSA, telling the CRTC in a filing last week that BCE's TV everywhere proposal is not about enabling the Canadian system to compete with Netflix Inc., and that “it is about Bell gaining a preferred advantage over retail distributors who compete with Bell in Canada.” Eastlink said safeguards such as conditions of licence, ex post remedies, and the CRTC's dispute resolution process are not enough, and that the application should be denied. “We need the TMN properties for our platform and also for our new non-linear service, such as Eastlink To Go,” the company said, adding that in past distribution negotiations with Bell, it accepted terms and rates it “never” previously accepted. Shaw Communications Inc., in its submission to the CRTC, supported the acquisition, arguing the deal would be in the public interest. Shaw, a cable company that also owns the Global TV network, said the health of Canada’s broadcasting system depends on the strength of vertically integrated players and their potential to innovate. “Shaw remains of the view that there is absolutely no reason to impose yet another layer of regulations—especially harmful new industry-wide rules and safeguards,” Shaw said. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and reporting and copy editing by Danika Grenier at dgrenier@thewirereport.ca

Independent distributors say Bell-Astral would receive 37% of their carriage fees

Broadcast | April 15, 2013

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Independent distributors say Bell-Astral would receive 37% of their carriage fees

Broadcast | April 15, 2013

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