Source: Cartt.ca

SO IT'S NOT JUST Quebecor, Cogeco and EastLink demanding the CRTC say no to Bell Canada's $3.38 billion purchase of Astral Media after all. Telus, Rogers, MTS Allstream, the Canadian Cable Systems Alliance, the Public Interest Advocacy Centre and others want this latest edition of the ongoing vertical integration story erased.

(An earlier version of this story said Friends of Canadian Broadcasting were also opposed to the merger. That is not the case and Cartt.ca regrets the error.)

Still, other groups such as ACTRA, the Writers Guild, the CMPA and Directors Guild, while not ultimately opposing the merger outright, want to see major changes to the terms of the benefits package and even see new regulations applied to Bell Media. If allowed to buy Astral, powerhouse Bell Media will put enormous distance, between itself as the largest media company in Canada, and everyone else. This is scary for lots of companies, many of whom have stories to tell about how they've been mistreated by Bell over the years.

While Bell's main competitors (except Shaw Communications) insist the merger must be scuttled or severely altered due to the unprecedented market control this one company will now own, if the deal is still to be completed, (and for the record, we still think it will, after a number of changes are made), more safeguards than those already in place must be installed to make sure Bell doesn't abuse its market power.

Even the Competition Bureau has weighed in on the matter, taking the rare step of publicly stating ahead of time it will be taking a close look at this deal. As well, the Parti Quebecois has told Quebec voters headed to the polls on September 4 that it will pull out all the stops to block the deal as it does not want to see Astral Media's head office in Montreal consolidated in Toronto with Bell Media. The party, in this story in the Montreal Gazette, calls it a takeover by Toronto of our broadcasting industry, even though Bell's head office is technically in Montreal and most of Astral Media's revenues come from outside Quebec. (Anglophone BCE CEO George Cope lives and works in Toronto, however, to the chagrin of some Quebeckers.)

The say no crowd object to the sheer size Bell Media will be after it assumes control of Astral. It will own too many pay and specialty channels, control far too much of the English language TV market share (in both audience and revenue), and the temptation it will feel to abuse its market power will be too great to resist. The benefits package Bell proposes is also too small, say the intervenors, because it does not include all Astral assets in the valuation and much of the money is misdirected. All of that must be addressed, say those pressing for the deal to be killed or altered.

Assuming the sale is approved and completed, Bell Media will fully own quite a list of Canadian television assets including the CTV and CTV Two broadcast networks plus, alphabetically: Animal Planet, BNN, Book Television, Bravo, Canal D (currently an Astral channel), Canal Vie (Astral), Cinepop (Astral), Comedy Gold, Comedy Network, CP24, CTV News Channel, Discovery, Discovery World, Disney Junior (Astral), Disney XD (Astral), E!, ESPN Classic Canada, Family (Astral), FashionTelevision, HBO Canada (Astral), Juicebox, Mpix (Astral), MTV, MTV2, MuchLoud, MuchMoreMusic, MuchMoreRetro, MuchMusic, MuchVibe, Musimax (Astral), MusiquePlus (Astral), RDS, RDS2, RIS Info Sports, Space, Super Écran (Astral), The Movie Network (Astral), TSN, TSN2, Vrak TV (Astral), and Ztélé (Astral)

It will also come to own 75% of Viewers Choice Pay-Per-View (Bell has 25% and Astral 50% with Rogers owning the rest), 50% of Teletoon/Télétoon/Cartoon Network Canada (co-owned with Corus Entertainment) and 50% of each of Historia and Series+ (with Shaw Media). The new Bell Media would also own over 100 radio stations and close to 10,000 outdoor advertising spaces.

Besides media, counting Bell's landline telephony, broadband, wireless and TV distribution, it is massive, and without safeguards, it will use that heft to crush competition and choice in Canada, according to the likes of the 'say no' crowd.

According to the Canadian Cable Systems Alliance, a combined Bell/Astral will take in 39% of all the English specialty and pay revenue in the country and 72% of the specialty and pay revenue when it comes to French specialty and pay channels.

Telus submits that Bell's acquisition of Astral is not in the public interest. If the transaction is approved, Bell could hold 49.51% of English-language television audience viewing share when calculated to include joint venture assets, reads the Telus submission to the CRTC. Telus submits that the bigger the behemoth, the greater the difficulties in getting it to behave, and in this case, the greater the difficulty in regulating it to conform to the public interest.

An important part of the disagreement between Bell and the other companies concerns which numbers to use and what to count. Bell maintains its combined English television audience share with Astral's channels will remain below the 35% limit the CRTC says triggers a very close look at a transaction, and well off the 45% audience share the Commission says it will always outright deny.

Bell's application says that the Commission should be counting all English language television stations available in the Canadian market, however, including American channels and that it should not fully count its channels which are joint ventures, such as Teletoon and Historia. Counting that way shows a 33.5% market share of English TV viewing and means the deal should pose no  problem for approval, according to Bell.

As Telus calculated above, the company believes counting only Canadian channels, which has been the Commission's past practice, and making sure its joint ventures are included, means Bell is well past the 45% danger zone for media concentration.

Rogers, on the other hand, doesn't want the whole deal scrapped. It told the CRTC that Bell should be forced to divest Astral's English language TV assets, noting the combined company would hold 41% of total discretionary viewing hours in English Canada. In comparison, Comcast, the largest vertically integrated distributor in the U.S., has a 14.4% share of discretionary viewing hours, reads the Rogers' intervention.

(Ed note: We're betting Rogers would be at the front of the line to buy those English-language TV assets  and we're frankly still surprised Rogers didn't beat Bell to the punch purchasing Astral in the first place.)

Rogers, Telus, Cogeco, EastLink and Quebecor all say that Bell's English TV market power will be well above the 35% threshold with Astral, and all add that the Commission has always counted only the Canadian TV channels available - never the American ones - to determine market share thresholds. BCE's interpretation of the 35% threshold for total television audience share is wrong. It has misinterpreted the Commission's Diversity of Voices policy for the common ownership of discretionary (pay and specialty) television services and over-the-air television stations by including in its calculation non-Canadian television services, reads the Rogers' submission.

The companies also claim that Bell is already not playing fair in negotiations and is currently damaging competition with carriage contracts for its specialty services and for rights to other non-linear programming. Its outrageous contract demands made from wireless companies for the mobile rights to Bell Media's Olympics programming led to two weeks where Bell boasted only it could offer the Games on-the-go.

Bell is currently benefitting from a de facto exclusive on mobile content in the market as a result of the unreasonable terms sought for carriage of the content on other platforms. Bell Mobility is the only wireless provider offering coverage of the 2012 London Olympic Games on mobile, reads the Telus submission. Why? While Bell technically made an offer to Telus (and presumably other carriers) for mobile content which would have included the Summer Olympics, the terms sought by Bell were completely outrageous and onerous, requiring a minimum subscription guarantee well above consumer demand (and well above complete insulation from risk for Bell).

Bell has no incentive to offer commercially reasonable terms and the refusal of other mobile carriers to accept Bell's terms merely provides a competitive advantage to Bell's own mobile carriage service. It is again a hallmark of dominance and control of a bottleneck content service. The fact that no other mobile carrier in the highly competitive mobile industry in Canada is offering the CTV network content to their subscribers speaks volumes to the commercial unreasonableness of Bell's offer to its competitors, added Telus.

Cartt.ca Copyright Notice: The above article was published in the August 14, 2012 issue of Cartt.ca. For subscription information, visit the Cartt.ca website.

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