Re: Broadcasting Notice of Consultation CRTC 2012-370: Applications 2012-0516-2, 2012-0573-2, 2012-0710-9, 2012-0736-6 and 2012-0735-8 (BCE Acquisition of Astral Media)
Aug 9, 2012
Mr. John Traversy
Dear Mr. Traversy:
- Friends of Canadian
Broadcasting is an independent broadcast watchdog supported by 175,000
Canadians. FRIENDS does not seek to appear at the September 10, 2012 public
- As the Commission has noted, the
size and scope of the proposed transaction raise a number of substantive policy
considerations, among them: impact on the market, diversity of television
programming available to Canadian audiences, common ownership in major markets,
valuation and public benefits.
- Provided the Commission can
verify the principal contentions in the applicants' submissions, FRIENDS is
satisfied that the proposed transaction adheres to the Commission's Diversity
of Voices and Common Ownership policies.
- However, we note that increased
concentration of ownership and the consequent competitive advantage BCE will
acquire raise legitimate questions about the continuing salience of existing Commission
policies, hastening a day when these should be reviewed in a policy hearing
process. Further, the size and scope advantage BCE would acquire will test the
Commission's undue preference policies on a continuing basis going forward, in
particular because of BCE's consequent inherent advantage over other
broadcasters and distributors, should these applications be approved.
- Therefore, the Commission
should consider adopting timely dispute resolution mechanisms and
meaningful penalties to ensure that BCE cannot take undue advantage of
behaviour that would subsequently be judged in contravention of the rules.
- Also, Bell's projected size
will further increase the impact of its corporate behaviour in the audio-visual
system. Hence Bell's recent pattern of behaviour: reducing investments and
commitment to Canadian programming while profits and reach increase; abdicating
the position of leadership in Canadian culture that it has long held on the
corporate philanthropy side; failing to assume the mantle of leadership which
accompanies its position as the industry's largest player in the face of
benefits it has gained from the Canadian public in a regulated industry - all
this suggests that Bell's market position and heft create a corresponding
obligation to adhere to a higher standard that the new Bell has failed to
assume. The recent format change to Bravo is a specific example. In this context,
Bell does not deserve the benefit of any doubt on the part of the Commission as
its predecessor CTV Globemedia might have been entitled to.
- Our principal concerns are the
issues of valuation and proposed public benefits.
- We urge the Commission to satisfy
itself as to the respective valuations of Astral's regulated and un-regulated
assets. We are aware of widespread concerns on the part of many industry
players that the applicant has low-balled the regulated assets and exaggerated
the value of the un-regulated assets, such as Astral's outdoor advertising
business, which appears t have generated only 10% of Astral's 2011 revenues,
but is presented as some 30% of the assets. The ongoing credibility of the
public benefits policy requires a careful evaluation of the real value of the
regulated assets for purposes of the calculation of public benefits.
- Several items in the proposed
benefits package raise similar concerns:
- The term of the television benefits should be reduced from ten to
seven, or five years. The applicant's 'feast/famine' argument is without merit.
- The proposal to allocate $40 million to support NorthwesTel's plan
to improve telecom switches and to roll out an expansive wireless network
across some of the North's most remote communities appears to Friends as an
attempt on the applicant's part to subsidize investments that, though
meritorious in principle, have no direct link to the broadcasting system, are
doubtfully incremental to investments Bell's subsidiary would, or should,
consider in the normal course of business, and would hugely disadvantage NorthwesTel's
present and future competitors, such as Ice Wireless, a subsidiary of Iristel,
thereby inhibiting competition in the North.
- Another highly questionable proposal is to invest $3.5 million in
Mental Health Awareness initiatives. Though a worthy corporate sponsorship
undertaking by Bell, such an investment is not directly related to the
broadcasting system and should not be permitted or subsidized
under the public benefits policy.
- The former CityTV stations have abandoned their longstanding
practice of supporting Canadian films. Licence fees from pay services are in
decline despite both revenue and subscriber growth. Specialties such as
History, Bravo and Showcase have cut back their purchase of Canadian movies. We
note that the proposed investment in the Harold Greenberg Fund would go
predominantly to development investment rather than equity in film. Hence, the
Commission should look favourably on CAFDE's proposals to divert some of the
questionable public benefits advanced in this application toward investments in
Canadian feature film.
- We appreciate the opportunity to submit these comments on the above