MONTREAL – It became clear through the line of questions from the panel of CRTC commissioners this week, especially from chairman Jean-Pierre Blais, that the Regulator is trying to see a way where it can approve the purchase of Astral Media by Bell Canada with conditions that will appease those who stand strongly opposed to the deal.
We’re mindful, of course, of the chair’s consistent admonition to the parties appearing before him not to attempt to read anything into his questions, however, the hearing really focused on two issues: If the Commission were to approve the deal, should there be additional divestiture conditions attached; or if approved, should there be some hard and fast conditions of license, gleaned from the Vertical Integration Framework’s code of conduct, applied to Bell Media’s negotiations with other Canadian video distributors.
Then the chair threw in a new idea, which we’ll recount a bit further down.
In its final appearance at the hearing into this acquisition Friday morning, Bell executives answered the divestiture question early on the only way it could – and the only way anyone expected them to. “If we were asked to divest any more, we would not move ahead with the transaction,” said BCE CEO George Cope.
(Later, however, the company did leave the door slightly ajar for divestiture when it came to radio. Chairman Blais asked Bell/Astral executives that if the CRTC granted the exemption order it seeks to hang onto TSN690 in Montreal, which stands against the Commission’s local radio ownership policy, would it accept being told to divest another station in a different large market. After thinking it over, Bell said it could accept that, so long as it could present a potential list of other AM stations for the Commission to choose from, in such a scenario.)
So, with Bell saying it won’t go ahead with buying Astral if it can’t retain all of TMN, HBO Canada, TMN Encore, Super Écran and the other TV assets in question – which is the primary reason Bell is buying the company – the Friday discussion turned to other regulatory safeguards which could be put in place to, as many have been wont to say this week, “provide some comfort” to those who must negotiate with Bell Media for content.
Having been asked by the chair on Monday, Bell (well, Astral really, because legally this is Astral’s application for transfer of control, so its logo is atop the pages of submissions) itself submitted an undertaking on Wednesday which more or less re-drew the Vertical Integration code of conduct from guidelines into “must-do” conditions of license the company would accept. Essentially, they changed some “shoulds” to “shalls”. The full undertaking can be found here.
But then the chair brought up something new. Since everyone from all sides agree that the length of time Commission arbitration proceedings take (initial complaint through to final offer arbitration last time took about 18 months) is detrimental to everyone, why not try to nip these stalemated negotiations in the bud and have CRTC staff approve any Bell wholesale affiliation agreement prior to signing, say six months before existing deals expire? That would mean another condition of license for Bell stating any such agreement would need the prior approval of the Commission.
At first, the Bell executives were wary, thinking this was just another question about rate regulation, which got them a little hot under the collar during the first Bell-Astral go-around.
“Knowing that a lot of the agreements are actually in place for still a number of years in many cases, what would you think if the Commission would require that, in your particular circumstances… your affiliation agreements would require prior CRTC approval?” asked Blais. “You’d have to come in either when the merged BCE-Astral entities are on the BDU side or on the programming side. It’s basically an ex ante oversight of the wholesale market.”
“From a point of regulatory policy, we do not believe it would be appropriate to have a rule like that… and it would get in the way of letting the market handle matters,” responded Bell’s EVP regulatory and government relations Mirko Bibic.
Cope then added that his company and the others who are complaining that Bell’s market power is too much are often able to hammer out commercial arrangements worth billions on other matters and they should be left to hammer these deals out on their own, too, without CRTC input. He told chairman Blais: “We would not move forward with the transaction with that kind of regulation.”
“So, if I understand you then, Mr. Cope, you’re telling me then ‘until we meet again,’” chairman Blais responded in French, seeming perturbed by the answer he got. “Every idea we’re putting forward, you’re saying ‘we would not go ahead with the transaction.’”
Responded Cope: “You said you have a new regulatory concept and the question was, would we be open to wholesale regulation of our rates ahead of time… I have no way to say that we would change our business that dramatically for the purpose of buying Mr. Greenberg’s business. You asked me a question and I tried to give you the answer.”
While Bell’s initial reaction was a swift no, further discussion fleshed out the idea much more and left this observer thinking this could be the compromise that wins. The TSN Turning Point, if you will…
Chairman Blais went on to explain he’s not looking to rate-regulate but that “if indeed you are in rate negotiations, either wearing a BDU hat or a programming undertaking hat, within the BCE-Astral context, if we would require, as a general rule, you would have to have prior approval of those affiliation agreements, after you have done your negotiations obviously. And if they have been successful, we would bless them, but if they have not been, then we would immediately deal with them, well ahead of any potential delays in any competitive disputes.”
This caused some confusion among the Bell/Astral panel for a bit before they finally warmed up to that idea.
“Delay inevitably advantages someone,” explained Blais, so under this new plan Bell would know full well the company must now get final Commission authority for a new affiliation agreement and would bring such a deal to it well in advance of the expiry of an old deal. “That’s the framework that I am proposing, rather than late in the day,” because the Regulator, as it stands now, is only brought in to mediate deals well after the old ones have expired.
“That’s what I’m trying to correct,” said the chair.
While Bell executives fretted about rate regulation as a possibility – and the chair did indicate it could come down to the Commission making that determination (which it does in final offer arbitration anyway) – what Blais is trying do is wring the delay out of the system by having CRTC staff examine all affiliation deals for prior approval, but only get involved in those which are stalemated – and before any existing agreement runs out.
“In those cases where there has not been an arrangement possible, instead of waiting several months after the collapse of commercial negotiations, we would be seized of it earlier,” said the chair who explained that placing such a new condition of license on Bell would provide “a means of focusing the mind between the two negotiating parties,” much earlier than in the past.
“If there will be a rule that will only apply to Bell that will make the system improve the dispute resolution model and… it says if you haven’t gotten it done X-months before the expiry you have to come to the Commission, that, too, Mr. Chairman, will focus the mind – and it’ll focus the minds of both parties to a negotiation because they’ll both know they’ll be in front of the Commission having to deal with the affiliation agreements – linear or non-linear – for Bell Media services,” said Bibic.
So, summarized the chair, if this new idea were an ex ante process designed to hammer out only disputed, stalemated, affiliate agreements, some months before the expiry of an existing deal, where the final option then is also baseball or final offer arbitration, would Bell accept that as a condition of license?
“It sounds like an enhancement… for everyone to the process – to use your term, focus the mind earlier – and getting these things done so we’re not dealing with them after the fact,” added Cope. “If that’s what we’re trying to achieve, I would be surprised if all of our competitors didn’t actually think that, too.”
We’ll see what those competitors say to that in their final written interventions due May 15th.
