Rogers would look at buying TMN, urges CRTC to order Bell to divest the channel

MONTREAL—Wireless and TV provider Rogers Communications Inc. told CRTC commissioners that the regulator should order BCE Inc. to divest popular pay TV channel The Movie Network, with HBO, as part of its acquisition of Astral Media Inc. And if the CRTC ordered the divestiture, Rogers said, it would be interested in purchasing the popular pay channel. “We would certainly, at least, take a look at TMN,” Ken Engelhart, Rogers’ senior vice-president of regulatory affairs, told CRTC commissioners Tuesday, adding that the regulator should not be concerned about whether there would be a buyer for the service because TMN (including HBO Canada) and its sister service, TMN Encore, “spin off lots of cash.” Engelhart said independent buyers may be interested, such as Michael MacMillan, chief executive of Blue Ant Media Inc. BCE, which is before the CRTC this week for a hearing on its proposed acquisition of Astral for $3.38 billion, would end up with too much market power, and as a TV, mobile, and Internet service provider, would have the incentive to put other companies at a competitive disadvantage, Rogers officials told commissioners. The company said BCE’s Bell Media division has been asking for excessively high rates for competing distributors’ access to its TV Everywhere platform and content, which Bell says it will launch with the TMN content, as well its existing programming, including that of the CTV network and premium sports channel TSN. Telus Corp., Cogeco Cable Inc. and other distributors also complained about Bell’s multiplatform rights fees in their written filings for the hearing. “The fees Bell Media is demanding for accessing these multiplatform rights substantially exceed the rates we pay to other content suppliers,” said Pam Dinsmore, vice-president of regulatory at Rogers. “TMN’s movies and iconic series have been the cornerstone of new services, such as Rogers On Demand and Rogers Anyplace TV. If divestiture is not ordered, it will turn Astral from a partner to a competitor,” she said. Engelhart said the company has had problems negotiating with BCE, which he said initially refused to make its content available for Rogers’ video-on-demand service. He said BCE then offered the multiplatform rights for its TV Everywhere service to Rogers, priced at five to 10 times “normal market rates, and well above what we currently pay other domestic and foreign suppliers.” BCE also offered distributors the mobile wireless rights to the content for $8 million and then went ahead and offered the content to its own mobile subscribers, who had it exclusively while Bell engaged in “protracted negotiations” with Rogers and Telus and later received an offer for “a minimum guarantee of $3 million,” Engelhart said. At the hearing Monday, BCE chief executive George Cope rejected the complaints about high rates, and said the company’s model is to try to distribute the content to as many people as possible through as many distributors as possible. “Our model fails if we don’t distribute this content through every one of those channels. Our stock will be hammered, the business will fail,” Cope said. The Rogers officials said they support vertical integration in the industry—where companies own distribution platforms as well as content—though there must be limits to how big and how many media assets a vertically integrated company can have. Engelhart said even a merger between BCE’s CTV network and Astral would be questionable. Engelhart said the CRTC’s dispute resolution process take months to resolve carriage disputes and does not prevent a vertically integrated content owner from getting its programs into the marketplace first, exclusively to its own subscribers. David Purdy, senior vice-president of content at Rogers, said a six-month advantage could mean subscriber losses in the “tens of thousands” because BCE is competing with Rogers for entire households—not just TV subscribers—and bundled mobile, Internet and landline phone services. Purdy said BCE does not need TMN to compete with foreign-owned, online competitors like Netflix Inc. because all companies will be rolling out “all you can eat,” online and on-demand services. In an interview at the hearing Tuesday, Purdy added that he expects all broadcast distributors to at some point roll out on-demand content libraries that aren’t tied to TV subscriptions—as they are now—to better compete with online alternatives. “You have to embrace OTT as a distributor. That means you have to embrace new models that are standalone,” Purdy said. “I think you’ll see some that are not necessarily tied to mobile or Internet subscriptions.” Bell spokeswoman Jacqueline Michelis said in an emailed statement Tuesday that Rogers has a “long term” deal to carry TMN and that Bell Media offered Rogers the mobile rights at “extremely reasonable” rates. “It’s clear, both in their claims about TMN and TV Everywhere, that they would rather have regulatory intervention supersede market negotiation,” Michelis said. “Rogers can certainly bring a formal complaint to resolve TV Everywhere pricing, but they would need to bring forward some real evidence." Michelis rejected Engelhart’s comment that a merged Bell-Astral would hold too much market power. “Together Astral and Bell Media will account for 35.7% of English language viewing. That’s 1.7% more than Bell Media’s current share,” she said. Executives with Telus, which does not own broadcasting assets, also appeared at the hearing Tuesday. They said the CRTC must patch up “gaps” in its vertical integration regulations, applying to large, vertically integrated companies, to head off anti-competitive practices. Ted Woodhead, senior vice-president of government and regulatory affairs at Telus, said rules should be put in place and inserted into BCE’s licence conditions to ensure fair access to Bell Media’s advertising platforms. Bell and Astral radio properties took more than 80 per cent of Telus’ advertising spending last year, Woodhead said. He said he agrees with Rogers that the dispute resolution process, or final offer arbitration, at the CRTC needs to be faster, and that multiplatform content exclusives can harm competitors within “a matter of days or a week.” “Whatever the time frame is, it has to be quick and it has to be decisive,” Woodhead said of the arbitration process. He said BCE’s sale of TMN to another vertically integrated company would not address Telus’ concerns about the industry. “There is a level of vertical integration,” he said. “The way to deal with that, in our view, is through timely enforcement, and certain, clear, and transparent rules that proscribe certain behaviours.” John Lawford, executive director of the Public Interest Advocacy Centre, which also appeared at the CRTC hearing Tuesday, said Rogers’ proposal to the CRTC is a way to manage the situation from the company’s point of view but it does effectively address BCE’s resulting market power. “The deal does make Bell bigger and there will need to be better safeguards ,” Lawford said. He said broadcast distributors, down the road, may face CRTC wholesale rate regulation for the carriage of TV services. PIAC told commissioners that the Bell-Astral deal is not in the public interest and urged the regulator to deny the application outright. The public interest group hired Carleton University communications professor Dwayne Winseck to produce a study on media concentration in Canada, who said that, based on revenue data, Canada’s broadcast market is “a highly concentrated, tight oligopoly.” Winseck said the impact of the Bell-Astral merger would increase media concentration primarily in Canada’s national and English-language radio markets as well as the national and English-language pay and specialty channel markets. The CRTC is holding an application on BCE’s reworked application to acquire Astral after the regulator denied an initial application last fall, citing concerns about BCE’s market power, competition, and a deal that it said wasn’t in the public interest. BCE officials told commissioners Monday that the company addressed the CRTC’s concerns about market power and viewership shares in the English and French markets, referring to its agreement announced in March with the Competition Bureau, under which BCE will sell off 11 specialty channels to Corus Entertainment Inc. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and copy editing by Nicholas Kyonka at nkyonka@thewirereport.ca --- CORRECTION: An earlier version of this story incorrectly said Rogers had reached a mobile TV deal with Bell for $3 million when Rogers had received an offer for the rights for $3 million.

Rogers would look at buying TMN, urges CRTC to order Bell to divest the channel

Broadcast | May 7, 2013

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

Rogers would look at buying TMN, urges CRTC to order Bell to divest the channel

Broadcast | May 7, 2013

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Related Stories

Astral wins ad deal with Ottawa airport

Bell/Astral tangible benefits proposals partially approved

Corus puts Mario Cecchini in charge of radio

BCE-Astral obligated sale of MusiquePlus approved

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us