Source : Globe & Mail

by Terry Weber

BCE Inc.'s landmark bid to buy CTV Inc. was approved Thursday by Canada's broadcast regulator, paving the way for the creation of a new media monolith.

The approval clears the way for the $2.3-billion deal that dramatically changes the country's telecommunications and broadcast landscape by creating a new media conglomerate with broadcast, print and new media holdings.

The transaction will lead to the combination of CTV, the country's largest private sector broadcaster; Bell's Sympatico-Lycos, Canada's biggest Internet service provider; and The Globe and Mail.

"A fundamental component of the rationale for the approval is BCE's firm commitment to ensure CTV's long-term stability and the high quality, conventional, general interest television service that Canadians have enjoyed for the last forty years," Françoise Bertrand, chair of the Canadian Radio-television and Telecommunications Commission, said in a statement.

In its decision, the CRTC said it recognized that a transaction of this size will have an impact on the broadcasting environment, viewers, program producers and content providers.

As part of the approval, the CRTC said BCE – under the commission's 1999 television policy – will invest 10 per cent of the transaction price in the Canadian broadcasting system. That would translate into a $230-million investment over the next seven years, as outlined by BCE in its proposed benefit package at the time of the CRTC hearings this fall.

Of that figure, $140-million will be devoted to the development and production of programs like dramas and documentaries, almost all of which will be aired on CTV. Ninty-five per cent of the amount must be directed to independent producers.

The BCE-CTV deal, which was announced earlier this year, marks the first time a telecommunications company in this country has tried to buy a conventional broadcaster.

"The CRTC's approval of our purchase of CTV paves the way for us to proceed with the launch of our new Canadian media company in January 2001," BCE chairman and chief executive Jean Monty said in a statement.

"The new entity will be the premiere content company in Canada, combining the best known and most respected media brands in the business – CTV, The Globe and Mail, Sympatico-Lycos and Globe Interactive."

Ivan Fecan, CTV's president and chief executive, also welcomed the ruling.

"With BCE, CTV is in good hands," Mr. Fecan said. "This ruling creates the best possible environment for CTV: a stable base from with to remain innovative and creative.

Mr. Fecan also said, with its ruling, the CRTC has acknowledged and endorsed a "daring approach to alter the business model for Canadian television."

"These funds will further improve the high quality of every area of programming – from drama to journalism," Mr. Fecan said. "Canadian writers and producers can be assured that their quality work will be properly financed, marketed, and showcased for the benefit of Canadians."

The transaction was the biggest broadcasting deal ever reviewed by the CRTC, which held two days of hearings on the deal in September.

The transaction was widely expected to gain approval from the federal regulator, with some conditions attached, including an order from the CRTC that BCE divest some of its specialty channels.

Since BCE also owns Bell Express Vu, which distributes direct-to-home satellite television, some broadcast industry players in the wake of the announcement of the deal also expressed fears that the satellite service would favour CTV stations, to the detriment of all the other programming delivered by satellite.

BCE had countered that it would be in Bell Express Vu's best interest to carry as many stations as possible.

The CRTC, however, didn't order BCE to divest any holdings. BCE will have to develop and implement a code of conduct prohibiting any practices that might hamper consumers or prevent healthy competition.

That code must be submitted to the CRTC within six months.

The commission also laid out a strict reporting system, aimed at ensuring that the financial contribution is "clearly incremental to the CTV network's existing and outstanding expenditures over the seven-year period."

It must report actual expenditures related to the weekly broadcasting of eight hours of priority programming; submit a series of reports indicating each incremental hour of priority programming broadcast on CTV and a detailed breakdown of expenditures; and report on the nature of its interactive television activities to demonstrate that related expenses are being directed toward increased production of so-called priority programming.

"These measures will allow the commission and the general public to evaluate how the company respects its own commitments and complies with the imposed requirements," the commission said.

"Also, they will enable BCE to demonstrate, in a transparent manner, that its contribution is actually incremental to the minimum requirements and that the Canadian broadcasting system as a whole derives tangible benefits from it."

The CRTC ruling – and BCE's approach – drew praise from Friends of Canadian Broadcasting, a volunteer group devoted to expanding the quality and quantity of the Canadian programming.

"All in all I think it's a pretty good decision," spokesman Ian Morrison said.

He said the ruling suggests BCE read the CRTC's rules "very carefully" and filed its application accordingly, especially in the way it included the $230-million benefits package.

For viewers, he said, the decision also appears to mean an extra weekly hour of Canadian programming on CTV, compared to requirements governing other private broadcasters in the country.

"By my reading of this, nine hours out of the 28 hours a week will be priority Canadian programming now," he said.

Thursday's CRTC decision marks the continuation of ongoing convergence in the Canadian market, which has seen a spate of takeovers and alliances in recent months that have linked broadcasters, telecommunication companies and publishers as the lines between the varying media blur.

Shortly after BCE announced plans to buy CTV, CanWest Global Communications Corp. – Canada's No. 2 private broadcaster behind CTV – made a bid to become the newest publisher on the national scene.

Under terms of the $3.2-billion transaction, CanWest bought most of Hollinger Inc.'s newspapers, including a 50-per-cent interest in the National Post, and a handful of Web sites.

In September, Groupe Vidéotron accepted Quebecor's multibillion-dollar cash bid for the cable company, ending a takeover battle with Rogers Communications Inc.

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