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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
Secretary General
CRTC
Ottawa, ON
K1A 0N2

Dear Mr. Traversy:

  1. 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 hearing.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. Our principal concerns are the issues of valuation and proposed public benefits.
  8. 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.
  9. Several items in the proposed benefits package raise similar concerns:
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. We appreciate the opportunity to submit these comments on the above applications.

Yours sincerely,

Ian Morrison
Spokesperson

cc: BCE (bell.regulatory@bell.ca), Bell Media david.spodek@bellmedia.ca)