BCE says CRTC’s possible condition for arbitration not necessary

Any new condition on BCE Inc. that requires CRTC arbitration to resolve disputes before TV content distribution agreements expire would not be “necessary or appropriate,” and if it is imposed as part of its acquisition of Astral Media Inc., the provision should apply to the industry as a whole and not just BCE, the company said. BCE was responding to a possible licence condition raised by the commission on Friday at a public hearing on the company's application to purchase Astral for $3.38 billion, where executives with Bell said a condition requiring CRTC arbitration on expiring agreements seemed reasonable. “With respect to the Pre-Expiry FOA mechanism in particular, as stated at the hearing, we do not believe such a mechanism is necessary or appropriate given the absence of any evidence on the record (or otherwise) of market failure, anti-competitive behavior, or any systemic issues,” BCE said in a filing with the regulator Monday. At the hearing Friday, CRTC Chair Jean-Pierre Blais raised the possibility of a licence condition on the company as a way to address concerns from competitors that had said BCE's growing ownership of premium sports and entertainment content, including Astral's TMN and HBO programming, would give the company an incentive to charge competing broadcast distributors excessively high rates for distributing its content, or block them from accessing it. The possible condition would say that wholesale rate negotiations for the distribution of Bell Media channels and its online and mobile content would automatically go to the regulator's final offer arbitration process if a licensing and distribution agreement is not reached six months before the expiration of an existing agreement with the BCE media division, according to the discussion at the hearing. Blais said the condition could help “focus the mind” and ensure deals are reached before CRTC involvement is necessary. “If there is a rule that says if you haven't gotten it done 'X' months before the expiry, you have to come to the commission, that, too, Mr. Chairman, will focus the mind,” Mirko Bibic, executive vice-president and chief legal and regulatory officer at BCE, said at the hearing Friday. “In fact, it will focus the mind of both parties to the negotiations because they will both know that they will be in front of the Commission having to deal with the affiliation agreement, linear or nonlinear, for a Bell Media service,” Bibic said. BCE chief executive George Cope added: “It sounds to all three of us as an enhancement commercially for everyone to the process, by, to use your term, focusing the mind earlier, and getting these things so, frankly, we are not dealing with them after the fact.” In its regulatory filing with the CRTC, BCE said the provision would not be not necessary and that, if it is imposed, it should apply “equally to all programming services and it would be unfair to impose a new obligation asymmetrically on Bell Media alone.” BCE added that, for any such condition, the rule should kick in 90 days “or at most” 120 days in advance of the expiry of the affiliation agreements. “While in the initial discussion at the hearing 6 months was used as an example of a reasonable period, on reflection a period of 90 or at most 120 days would be more appropriate,” a footnote in the document said. The company added that “the entire process for final offer arbitration takes approximately 70 days from start to finish.” A condition of licence imposed on BCE, as part of the transaction approval, would not necessarily require a formal consultation with industry, though an amendment to the regulator's broadcasting regulations would. The CRTC held a hearing in Montreal last week on BCE's reworked application to acquire Astral, a radio station and specialty channel owner, after the commission denied an initial application last fall due to concerns about the company's resulting market power and competition in the marketplace. Blais cautioned people at the hearing Friday that all of his questions were asked to put them on the record and that they did not indicate where the CRTC is headed with BCE's application. Competitors of BCE's, including cable TV operators Cogeco Cable Inc. and Quebecor Media Inc., said last week that BCE could leverage its growing stable of media assets in anti-competitive ways. Blais, at the hearing on May 8, acknowledged that there appeared to be problems with vertical integration, where companies like BCE control both media assets as well as TV, mobile, and online distribution platforms. Those companies fall under a special regulatory code the CRTC introduced in 2011 to prevent anti-competitive behaviour. “How can we, going forward, ensure that there is a disincentive or at least a downside to parties not sitting down and negotiating in good faith?” Blais asked executives with Cogeco. BCE said in its regulatory filing that it is committed to a condition requiring its media division to provide all competing broadcast distributors with a notice 90 days before it launches a new program or channel, which would define the “general terms of carriage of the service” for distributors. That condition would address concerns expressed by Rogers Communications Inc. and other competitors that BCE could benefit from head starts on content exclusives. “There should be no rate regulation and agreements successfully negotiated commercially should not be required to be submitted to the Commission for approval or otherwise, as any such rules would undermine the ability and incentive of the parties to ever reach commercial agreements,” BCE said. “As a matter of regulatory policy, the Commission should only intervene where negotiations break down or where there is systemic market failure,” the company said. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and copy editing by Nicholas Kyonka at nkyonka@thewirereport.ca

BCE says CRTC’s possible condition for arbitration not necessary

Broadcast | May 14, 2013

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