Five things we learned from CRTC denying BCE’s Astral takeover

The CRTC in its decision Thursday said that it is serious about undue competition in Canadian media, and hasn't changed it's mind that OTT services are not a threat to the Canadian broadcast system.
Photo: OrinZebest, Flickr Creative Commons

The CRTC yesterday issued a surprise ruling Thursday denying BCE’s proposed $3.4 billion takeover of Astral Media. Herewith, five things we learned from the decision.

1.   It’s not about Bell Canada being stingy with its benefits package.

While the CRTC in its decision said that the BCE’s proposed $241 million tangible benefits package would undoubtedly result in significant investment in the Canadian broadcasting system, it argued that certain initiatives fell outside commission policy and practice.

“In particular, BCE did not demonstrate that the Northwestel broadband proposal would benefit the broadcasting system,” the regulator said in its decision.

“In addition, the benefits package did not satisfy the Commission’s general expectation that 85% of benefits should be directed to on-screen initiatives. Finally, the Commission notes that for several radio initiatives, BCE failed to provide adequate explanation of the initiatives and how they would be consistent with Commission policy.”

2.   The CRTC has suddenly got serious about undue competition in Canadian media

After the regulator, under Konrad von Finckenstein, blessed earlier blockbuster deals like Shaw Communications’ takeover of Canwest Global Communications Corp., his successor Jean-Pierre Blais has put the brakes on industry consolidation, at least when it comes to Astral Media.

“While BCE submitted that it would be in its own best interest to make content available as widely as possible, the Commission shares the concerns of many interveners about the ability of a distributor with the content properties of a combined BCE/Astral to exert market power in an anti-competitive manner,” the CRTC said Thursday when supporting its decision on the Astral Media deal.

The regulator in recent years time and again voiced concerns about consolidation in Canadian broadcasting, but never moved so swiftly as with this week’s ruling to set the table for more, rather than less, diversity of voices for consumers and doors to knock on for indie producers and broadcasters.

“These concerns are based on the business incentive of a vertically integrated entity to give an undue preference to its own distribution facilities by restricting access to its programming services or offering them at above market rates to its competitors. The market power of a combined BCE/Astral could threaten the availability of diverse programming for Canadians and endanger the ability of distribution undertakings to deliver programming at affordable rates and on reasonable terms on multiple platforms,” the regulator said in its decision.

3.   The CRTC hasn’t changed its mind on Netflix Canada, or regulating the internet.

The regulator rejected outright, yet again, the idea that so-called over-the-top digital platforms pose a mortal danger to the Canadian broadcast system. Bell Canada argued during the hearings into the Astral Media deal that it needed scale to compete against Netflix Canada and other recent foreign market entrants. The regulator, in handing down its decision, repeated that the OTT services do not pose a competitive threat, and remain complementary to traditional media sources for Canadians.

“With respect to intangible benefits to the television broadcasting system, while BCE’s proposal for a new multi-platform on-demand service generated significant discussion, BCE did not adequately demonstrate that the acquisition of Astral is a necessary prerequisite to the creation of such a service,” the CRTC stated.

If anything, the regulator said Bell Canada is already big enough to face down rivals in Canada or needs to be bigger to fend off foreign competition.

“While the Commission is generally supportive of consolidation and scale, BCE already holds a significant position in the Canadian broadcasting system. Further, BCE did not demonstrate that it needs to be bigger to compete with foreign services,” the regulator said.

4.   The CRTC doesn’t take kindly to media behemoths that roll the dice.

In an echo of then CTVglobemedia boss Ivan Fecan securing approval of his $1.4 billion purchase of CHUM Ltd., only to be forced to sell five prized Citytv stations, the regulator has once again stifled media execs that seek control of major markets against the dictates of the federal Broadcasting Act.

“The Commission considers that convergence, integration and scale may lead to a point at which the size of an entity on a national level becomes so large that it hinders effective and healthy competition among Canadian broadcasters,” the CRTC said in its ruling.

Bel Canada insists that the Astral Media deal post-merger would not have surpassed the 35% threshold for TV shares in the English- and French-speaking Canada, but the CRTC wasn’t buying that.

“The Commission…considers that a transaction of this magnitude would adversely affect competition and diversity in the Canadian broadcasting system and thereby threaten its ability to achieve the policy objectives set out in the Act,” the regulator stated.

5.  Interventions by industry players during the Bell-Astral hearings didn’t fall on deaf ears.

The regulator listened to the slew of interveners who argued they would be disadvantaged by the level of market power that Bell Canada was asking for.

Citing competition grounds, the CRTC said a combined Bell-Astral entity would exert undue market power.

“These concerns are based on the business incentive of a vertically-integrated entity to give an undue preference to its own distribution facilities by restricting access to its programming services, or offering them at above market rates to its competitors,” the CRTC said in its decision.

The regulator’s objections on competition grounds were wide-ranging, and hardly narrow.

“The commission considers that the broad participation of the combined BCE/Astral in popular genres and services, in must-carry discretionary services, its access to popular conventional programming and national distribution networks would give it the incentive and the ability to unduly exert market power to the disadvantage of its competitors,” the CRTC stated.

Etan Vlessing and Dani Ng-See-Quan contributed to this report.

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