Bell-Rogers mobile TV deal raises ‘horse trading’ concerns, consumer group says

Mobile providers Telus Corp. and Bragg Communications Inc. could pay higher prices to access TV content on wireless devices following a mobile TV rights deal announced last week between BCE Inc. and Rogers Communications Inc., said Janet Lo, legal counsel at the Public Interest Advocacy Centre (PIAC). In releases last week, Bell and Rogers said they had reached a deal to swap the mobile distribution rights to their over-the-air and sports specialty TV stations. Through the agreement, Bell’s wireless customers will have access to Rogers-owned City and Sportsnet content on their mobile devices, and Rogers’ customers can access Bell-owned CTV and TSN content. Lo said she is concerned the deal is content “horse trading" that will lead to artificially inflated prices for other providers that want to distribute Bell and Rogers content on mobile devices, such as Telus and Bragg-owned mobile provider Eastlink. The end result, she said, could be higher prices for consumers. “We always have concerns where vertically integrated companies are trading rights to various content that they own without getting into the particulars of what the prices look like or how it works out per customer,” Lo said in an interview last week. “It’s hard to know if it’s the most economically efficient deal for consumers.” Lo and critics of Canada’s vertically integrated broadcast companies say the content swapping agreements can artificially inflate the prices of their programming rights by establishing higher rates to distribute the content. Prices established in trades can be used as market rates to fencepost negotiations with distributors that don’t have their own channels or program rights to trade, competitors of Bell's say, and independent distributors can either accept the rates, or face long delays in gaining access through CRTC dispute resolution processes. Louis Audet, chief executive of broadcast distributor Cogeco Cable Inc., which does not own media content, raised the issue at a CRTC hearing into Bell’s acquisition of Astral Media Inc. in May, arguing that the practice puts independent distributors at a competitive disadvantage. “The vertically integrated players make deals amongst themselves, whereby the money goes in circles, such that one recovers from the other what he has just consented to the other,” Audet said. “Who remains holding the bag? The non-vertically integrated company and its consumers.” Audet said he suspected horse trading between vertically integrated players as a primary cause of Cogeco’s increased costs to distribute Bell-owned channels under the two companies’ most recent carriage agreement, which was signed following a CRTC final offer arbitration process. He said the costs for carrying that content rose 37 per cent from the start of the previous long-term agreement, signed with CTVglobemedia Inc. before Bell purchased the broadcaster in 2011. “This is telling us that market power and vertical integration have caused the majority of companies, or of subscribers served by these vertically integrated companies, to agree to have the wholesale rates go up,” he said at the time. “That is market power and it is horse trading.” Ken Engelhart, Rogers’ senior vice-president of regulatory affairs, said at the May hearing that Bell initially offered competing distributors mobile rights to its content at a price of $8 million. He said the company then distributed that content to its own mobile subscribers “on an exclusive basis while it engaged in protracted negotiations with Rogers and Telus.” Bell later offered that content for “a minimum guarantee of $3 million,” he said. Bell and Rogers did not release details of the mobile TV distribution agreement last week, though Lo said the companies will use the rates from that deal to establish market value and seek similar prices from other distributors. The rates may not be “viable” for independent wireless carriers such as Telus and Eastlink, which don’t have TV channels to trade, and may prevent them from offering the Bell- and Rogers-owned content on their mobile platforms, she said. Consumers could end up paying more to access the content on independent providers' mobile devices if there are fewer competitors offering the channels, she added. “We don’t know what the market rates are being set as,” she said. “It’s obviously a good deal for Rogers and Bell.” As a condition of the commission's approval of the $3.38-billion Bell-Astral deal last month, the CRTC said it will require Bell to file all of its content sharing agreements within five days so commissioners can "monitor BCE’s commercial arrangements with its programmers and distributors." Mirko Bibic, BCE’s senior vice-president of regulatory affairs, said in an interview with The Wire Report Thursday that Bell's content is available to all carriers, including Eastlink, that want to offer it on platforms like mobile TV. Bibic said he had hoped many of BCE's competitors and critics would stop using the company's acquisition of more content through the Astral deal as a "regulatory lever" to win more concessions from Bell. He said Bell wants to move beyond the Astral merger and "get to down to business" and negotiate deals with other distributors. "Bell Media has made its content available to wireless companies for over two years now," Bibic said, adding that it's available to Eastlink. Quebecor Media Inc.'s Videotron subsidiary also has an agreement in place for Bell Media mobile TV content at market-based rates, Bibic said. "Videotron has had our mobile content, RDS and TSN, for a long time, over a year," he said. "And now Rogers mobile has it." He noted Rogers and Bell did not have mobile TV agreements for each others' content before the deal announced last week. Gord Hendren, president of Charlton Strategic Research, said in an interview that he believes the deal will be a win for consumers, who can now access the content from both Rogers and Bell on a single mobile device. He said the deal may be even better for sports fans who hope to one day receive sports channels packaged together on mobile distribution—separate from the companies’ main mobile TV offerings—depending on how much those packages cost. “I think it’s a win-win for consumers, although we’ll have to see what the packages look like in terms of cost,” he said. Bell spokesman Jason Laszlo said in an emailed statement Wednesday that Bell offers mobile subscribers a single mobile TV package containing more than 30 channels, including sports, news, entertainment and children’s channels, at a cost of $5 per month for 10 hours of viewing, plus additional charges beyond that. “We haven’t announced any plans to change this model,” he said. Laszlo said Bell’s mobile TV service offers subscribers access to channels owned by a variety of broadcasters, including CBC/Radio-Canada, Corus Entertainment Inc. and Quebecor. “We’re committed to delivering the best content to smartphones and tablets, and we’re working with a broad range of providers to make it happen,” he said. Rogers did not respond to a request to comment for this story. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and files from and editing by Anja Karadeglija at akarad@thewirereport.ca

Bell-Rogers mobile TV deal raises ‘horse trading’ concerns, consumer group says

Broadcast | July 25, 2013

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