Mr. R. A. Morin
Secretary-General
CRTC
Ottawa, ON
K1A 0N2

Dear Mr. Morin:

Friends of Canadian Broadcasting does not wish to appear at the forthcoming public hearing.

FRIENDS supports the proposed change of effective control of CTVgm's broadcasting assets to BCE, subject to the following comments regarding the question of applicable public benefits.

We believe approval of the acquisition will benefit CTV through the creation of a controlling shareholder, with the consequent benefits of greater direction and the generation of operating synergies. Retrospectively, we consider that in its former role of controlling shareholder, and subsequently in a broader partnership, BCE and later its partners brought financial stability to Canada's largest privately owned over-the-air network, as well as to its stable of pay and specialty properties.

We note, through the prism of TORSTAR's quarterly public financial reporting, that stability was significant considering that CTV recently held a virtual choke-hold on the top-rated shows in the English-language television system, yet continued to lose very substantial amounts of money during the recent recession.

Our reason for intervening is to underline our profound concern over BCE's 'nice try' sophistry to the effect that the Commission's public benefits policy should not apply to this transaction. As the Commission's notice makes clear, notwithstanding this gambit, the applicant subsequently submitted, at your Commission's request, a $70 million benefits proposal in November, and subsequently increased that proposal to $221 million in December.

Still, the December 3^rd benefits proposal is quantitatively deficient in that it seeks to reduce the public benefit attributable to the conventional television component to 5% through a reference to the recent decision of the Commission on the Shaw/CanWest transaction - which took place under a completely different set of circumstances.

To be consistent with the policy, the package should approximate $247 million, including 10% of the value of the conventional television assets, for the 85% of the broadcasting assets that BCE does not already own.

Our other comment relates to the self-serving nature of most of the proposed benefits. The Commission's public benefits policy is intended to create benefits for the viewing and listening public, not to subsidize normal course of business investments that all broadcasting entities must undertake in order to advance their interests and discharge their regulatory responsibilities.

Examples of self-serving proposals include:

Satellite delivery of local stations in non-mandatory digital markets: what BCE is proposing here is to increase the number of CTV channels that their satellite distribution system carries that in any other case would be an undue preference.

Support local television stations through satellite carriage: what we see here is an attempt to divert benefits payments into the upgrade of boxes under the guise of carrying all LPIF eligible stations. There are three questions we urge the Commission to ask: First, are the proposed box upgrades not something that would be done in the normal course to increase capacity? Second, how many of these local markets have CTV stations, and to what would this bring the total number of CTV channels carried by Bell TV? Third, what assurance can be given to the Commission that these LPIF eligible stations will continue to be carried after the expiry of the benefits period?

Enhanced local news production in HD and HD conversion of specialty services: the cost of digital conversion and HD production is a cost of doing business in a digital world. The thought that major market stations such as Calgary and Edmonton would not be fully HD is absurd.

Sustain local programming in A Channel markets: there is no basis for public benefits funds to be allocated to complete technical upgrades that should, in the normal course be upgraded as a cost of doing business. Further, it would be possible that these expenditures could benefit BCE in future were it to divest these properties to another entity.

Therefore, we propose that the Commission require BCE to revise the content of its public benefits proposal to bring it into line with the intention of the policy. Among the alternative benefits the Commission might require BCE to invest in would be a Canadian Broadcasting Participation Fund, under the auspices of the Public Policy Forum or a similar arms-length entity, as proposed by the Public Interest Advocacy Centre, and investments in incremental high production value Canadian drama programming.

Yours sincerely,

Ian Morrison
Spokesperson

cc:            BCE Inc.