BCE DEAL APPROVED WITH STRINGS
CRTC imposes strict conditions on media merger
Canada’s broadcast regulator cleared the way Thursday for BCE Inc. to finally lay claim to Astral Media Inc.’s radio and television properties. But the approval comes with unprecedented conditions the Canadian Radio-television and Telecommunications Commission (CRTC) said the newly created media behemoth must heed to demonstrate it is not abusing its market power.
The CRTC approved BCE’s friendly $3-billion takeover bid for Astral largely in the form the companies had proposed, after taking a second shot at winning regulatory sanction for a deal that was first announced in March 2012.
But the increasingly consumer-oriented commission also imposed measures it said would address the potential for anti-competitive behaviour with a view to ensuring BCE plays nicely in its negotiations with competitors and smaller players to whom it sells its media content.
Commission chairman Jean-Pierre Blais, who dealt BCE a blow in October when he rejected its first bid for Astral, said he would not have approved the current deal without these conditions.
For instance, BCE must follow the terms of the CRTC’s code of conduct that relates to negotiations with broadcast distributors. It is a code that all vertically integrated players — firms who both own and distribute media — are expected to follow, but it will be included as a specific and mandatory term for all the licences BCE acquires from Astral.
The Montreal-based company, which owns CTV as well as the country’s biggest sports broadcaster TSN, will also be barred from unduly withholding the rights to nonlinear content (such as online or mobile streaming rights, not distributed through traditional television or radio channels) from competing distributors.
BCe will also have to file its distribution agreements with the commission and if it cannot work out terms to renew an agreement within four months before a deal expires, it will have to enter into CrTC-led dispute resolution.
Kevin Shea, a Toronto-based broadcast consultant, called imposing the requirement for content sharing with competitors “a bit onerous” in an age in which consumers enjoy more entertainment choice than ever. It is not a requirement for BCe’s broadcast rivals such as rogers Communications Inc., he pointed out.
“exclusivity [ of content] is what makes companies competitive. I think it’s wrong,” he said.
Meanwhile, the Public Interest Advocacy Centre, which opposed the takeover, claiming it would exacerbate concentration in media ownership, expressed “reservations about the effectiveness of safeguards imposed on the transaction,” maintaining that the CrTC did not go far enough in creating checks that would limit BCe’s market power.
George Burger, advisor to VMedia Inc., a Toronto-based IPTV and Internet provider, said the safeguard measures would be only as strong as the CrTC’s commitment to enforcing them. He said the importance of consumers and healthy competition has become a key theme for the regulator since Mr. Blais took over in June 2012.
“A lot of the outcome of all of this will depend on what is driving the policy objectives of the CrTC, and that’s becoming more and more apparent with every decision,” Mr. Burger said.
Apart from rejecting the first BCeAstral bid, Mr. Blais has garnered attention for his consultation on the wireless industry and recent code of conduct that effectively killed unpopular three-year cellphone contracts.
during public hearings in May, representatives from BCe addressed the prospect of measures like those the commission included in its ruling Thursday, indicating that the company was comfortable with accepting some level of increased regulation to get the deal done. BCe said it was reviewing the decision and would issue a detailed statement Friday morning.
Telecom analyst dvai Ghose said he assumes BCe will accept the conditions and look to close the deal by the end of July.
BCe and Astral first announced the deal in March 2012, but after a heated media campaign by opponents and public hearings last fall, the CrTC rejected the transaction and the federal cabinet declined to intervene in the regulator’s decisions. After initially reacting angrily, the companies filed a revised proposal in November.
In early March the Competition Bureau announced a consent agreement approving the revised deal on condition that BCe divest 11 of Astral’s television services — including specialty channels such as Teletoon, MusiquePlus, disney Junior, the Cartoon Network and the Family Channel — and 10 english-language radio stations, including three of its own.
Corus entertainment Inc. agreed to buy Astral’s share of six television joint ventures and two Ottawa radio stations, as well as BCe’s own interest in two French-language specialty channels. BCe was also ordered to keep 30 local TV stations operational until at least 2017.
The CrTC did not order further divestments as a condition of approval, but did order BCe to increase its investment in tangible benefits to $246.9-million during the next seven years. The category includes funding for Canadian programming, film festivals and support for local programming and new artists.
That is $72-million more than the company had proposed to pay, reflecting the commission’s revised value of the transaction, which the CrTC said was $4.1-billion, once assumed debt and leases were accounted for.