PERHAPS WE’RE DIGGING too hard but we wonder if, in approving the sale of Leafs TV, Gol TV and NBA TV on Thursday, the CRTC is sending a message to Bell Canada that its stated benefits package for the purchase of Astral Media won’t make it out of next month’s hearing intact.
The Commission took a vigorous look at the valuation the new owners of Maple Leafs Sports & Entertainment (Bell Canada, Rogers Media and existing minority shareholder Lawrence Tanenbaum) put on the regulated broadcast assets of the company which also owns The Toronto Maple Leafs, Toronto Raptors, Toronto FC, the Air Canada Centre and many other assets.
In the original application, the buyers pitched a valuation of the three sports channels that was far lower than the one the CRTC came up with. While the proposed benefits package in the application was $3.8 million, the Commission’s decision set the package instead at $7.5 million. If you really want to read how the Commission arrived at the value of the three channels and set the new benefits number, click here and read from paragraphs 28 to 65.
The money will be administered by both Bell and Rogers under a new Sports Production Initiative which will develop new sports-related programming for the three channels (sports documentaries, for example), incremental to what they already spend on programming.
However, in Thursday’s decision, there are two rather strong paragraphs where the Commission describes its current thoughts on the benefits policy. Those seem to us a foreshadowing of just what commissioners will be thinking come September 10th when Bell and Astral face the panel in Montreal.
Those paragraphs read: “54. As set out in Public Notice 1999-97 and Broadcasting Public Notice 2007-53, applicants are generally expected by the Commission to direct tangible benefits to the communities served and to the broadcasting system as a whole. Further, in order to be accepted as a benefit, the proposed expenditure must be incremental to expenditures that would generally be considered ongoing normal responsibilities of the existing licensee.
“55. The Commission, in applying its benefits test, has been consistent and rigorous in requiring that (1) expenditures proposed as tangible benefits be truly incremental; (2) such expenditures be directed to projects and initiatives that would not be undertaken or realized in the absence of the transaction; and (3) applicants demonstrate that expenditures proposed as tangible benefits flow predominantly to third parties, such as independent producers.”
After reading that passage it makes one think Bell’s idea to direct $40 million worth of its benefits package towards its division Northwestel to help it upgrade broadband and wireless in the far north will face quite a rough ride. First, the policy says in order to be accepted as a benefit, expenditures must be considered incremental to normal expenses. Since the Commission has already told Northwestel that it must upgrade its northern networks – and it is already doing so as competition is finally under way up north – it may be difficult for the Regulator to see that $40 million as incremental to normal operations.
The 55th paragraph re-iterates that benefits expenditures must be directed to projects that would not normally be done without the transaction going through. Again, given the CRTC has demanded Northwestel upgrade, it might be fair to say that project is happening and will happen no matter what, disqualifying it from being a benefit.
Finally, the MLSE decision says that the applicants must show the expenditures proposed as tangible benefits “flow predominantly to third parties, such as independent producers.” Northwestel, as a wholly owned division of Bell Canada, is anything but a third party.
As readers are no doubt aware, Bell believes a spend on infrastructure up north does fall within the Commission’s benefits policy, given that it has approved spending benefits money on hardware upgrades in the past, while many others who object say it would be a misuse of such public benefits dollars.
We’ll see what the commissioners think come September 10th.
Are we reading too deeply between the lines? Please let us know what you think at editorial@cartt.ca.
