Competitors using Bell-Astral hearing to push for better distribution rates, BCE says

Broadcast distributors turned down BCE Inc.'s proposed deals to carry its content on online, mobile and video-on-demand platforms, Bell said, as the company accused competitors of coordinating their strategies in the CRTC's merger approval process to get lower distribution rates. In reply comments filed with the CRTC Tuesday for Bell's proposed $3.38 billion purchase of broadcast company Astral Media Inc., Bell said that, in 2012, it provided competing broadcast distributors with “a comprehensive offer” for the right to distribute Bell's content on on-demand and online platforms. BCE was responding to competing distributors that told the CRTC in comments this month that they could not get access to the company's content for on-demand platforms at reasonable rates. The comments were made as part of the CRTC's public consultation on the transaction, with a hearing starting May 6 in Montreal. BCE and Astral told the commission in their reply comments that it appears the distributors are trying to apply pressure for better distribution deals. "The appearance is that these BDUs have adopted a coordinated strategy to leverage the Bell-Astral ownership transfer process as a platform for securing access to non-linear rights on terms that the commercial market would not confer,” BCE said. “The BDUs have claimed that the fees associated with Bell Media's offer are 'extremely high' and 'well above the fees that every other broadcaster charged for access to non-linear rights,' even though this is not a Bell-Astral transaction issue,” BCE said. The company said it met with executives with the Canadian Cable Systems Alliance (CCSA), an association of about 110 small and independent broadcast distribution companies whose members include VMedia, TbayTel, and Cable Cable Inc., to discuss its offer and explain how competing distributors can have access to the company's TV Everywhere product. The CCSA has not provided a counteroffer since, Bell said. The CCSA declined to comment. BCE, a vertically integrated company with mobile wireless, broadcast, and wireline divisions, said in its reply comments that it will combine its content with Astral's—which will include valuable TSN and HBO content—for a TV Everywhere service to better compete online. The company said it wants its Bell Media content to be viewed by as many “eyeballs” in the country as possible, even if that means it is carried by competing distributors on online and mobile platforms. BCE will make its TV Everywhere service available to competing distributors in three options: using Bell Media's platforms; through Bell Media's embedded player; or by “ingesting” the Bell content into the distributors' own platforms, the company said. BCE said that, compared to market rates, its fees remain low for popular sports channels TSN, TSN2 and RDS, and provided a chart showing that mainstream sports channels in Canada receive wholesale carriage fees of $5 to $7 per subscriber per month, while sports services in most major markets in the United States receive between $12 to $15 and that, in the larger markets of New York and Los Angeles, they receive $15 to $20. Two of the most expensive specialty channels on the market—Bell Media channel TSN and Astral channel The Movie Network (with HBO content)—accounted for 13.8 per cent of all cable TV operator's programming costs, Bell said, which is “considerably less” than the 20 per cent number put forward by the CCSA, Bell said. Ann Mainville-Neeson, director of regulatory affairs at Telus, said in an emailed statement Wednesday that the broadcast distributors' comments to the CRTC were not coordinated. The distributors' concerns about BCE's rights fees support “the contention that Bell, as a large network access provider which controls significant content rights, has incentive and opportunity to thwart competition,” she said. “ur experience and the benchmarks we have established with other content providers shows that Bell's offer is much more expensive than other deals we have signed,” Mainville-Neeson said. She said many broadcast distributors are concerned about the CRTC's dispute resolution process because they do not believe it will be enough to address market power issues. “Since the vertically integrated companies serve over 80 per cent of the subscriber market, there is no real need to secure distribution from independent distributors. That, coupled with the guarantee of full retroactive fees , means that there is no incentive for the vertically integrated company not to hold out for excessive rates,” she said. Mainville-Neeson said both traditional TV and video-on-demand and online rights should be accessed and negotiated in bundles because “consumers will see greater value in subscribing to the linear programming service if it means that they can also get that service on their tablet or on video on demand.” Bell and Astral also filed a report conducted by Communications Management Inc. that said BCE, following the purchase of Astral and the divestiture of 11 specialty channels under an agreement with the Competition Bureau, would have a 30.5 per cent revenue share of the Canadian, English-language TV broadcasting market. That would compare with Shaw Communications Inc.'s 18.4 per cent share of the revenues, CBC/Radio-Canada's 15.7 per cent, Rogers Communications Inc.'s 12.7 per cent, and other, smaller broadcasters' share of 10.6 per cent in the English market, according to the reply comments. Bell's viewing share of the national English TV market would be 34 per cent, the report said, compared to Shaw's 23 per cent, Corus' 12.6 per cent, Rogers' 8.9 per cent, CBC's 8.2 per cent, and other broadcasters with 11.1 per cent, the report said. 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 or more. Last fall, the CRTC blocked BCE's initial proposal to purchase Astral in its entirety, citing concerns about competition and the company's resulting market power. In the French TV broadcasting market, the Communications Management data said, BCE would end up with a 24 per cent share of the revenues, compared to 21.2 for Quebecor Media Inc., 40.2 per cent for CBC, and 9.6 per cent for other, smaller broadcasters. In French market viewership, BCE would have a share of 22.6 per cent, with 31 per cent for Quebecor, 17.4 per cent for CBC, 20 per cent for other, smaller broadcasters, and 8.6 per cent for Remstar Corp. “Bell's presence in television programming will be similar to Shaw-Corus in the English market and Quebecor in the French market,” BCE told the CRTC, adding that it would be positive for the media sector in Quebec. “It will transform French-language broadcasting from a market dominated by one vertically integrated entity (Quebecor) to one comprised of three vertically integrated entities (Quebecor, Bell-Astral and Shaw-Corus), the highly popular Société Radio-Canada and a variety of independent broadcasters,” Bell said. Bell also responded to competing companies that said the CRTC should deny the transaction because Bell did not propose additional regulatory safeguards to check its market power. BCE proposed new safeguards, including a condition of licence obligating its Bell Media division to negotiate online, and on-demand distribution rights at the same time as carriage agreements for traditional TV packages. Bell said the condition should apply to all companies, and not just Bell Media. The CRTC said in broadcasting decision 2012-208 last April that it would not require Bell Media to negotiate the on-demand rights to its content at the same time as traditional TV packages so long as the company offered the on-demand, online rights to distributors on “commercially reasonable terms.” Last November, Bell and Astral extended the deadline to close the deal until June 1, 2013, and each company has the right to postpone it again until July 31. The CRTC on Wednesday published an agenda for the hearing starting May 6. Bell and Astral are scheduled to appear on the Monday and Friday of that week, with intervening groups and companies appearing Tuesday, Wednesday, and Thursday. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and copy editing by Nicholas Kyonka at nkyonka@thewirereport.ca

Competitors using Bell-Astral hearing to push for better distribution rates, BCE says

Broadcast | April 17, 2013

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Competitors using Bell-Astral hearing to push for better distribution rates, BCE says

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