THE CRTC MUST ENSURE that independent broadcasters have sufficient access to distribution in the wake of the BCE Inc. proposed acquisition of CTVglobemedia, say those ‘casters.
As well, the Commission has to force BCE to pay the full benefits to producers in the form of 10% of the transaction’s entire $3.2-billion value, say some of those producers. These are two of the critical issues that the CRTC will have to stickhandle once it begins hearing arguments on the proposed transaction on February 1st.
Generally, Bell’s fellow distributors are in favour of the transaction. But they say that safeguards need to be put in place to ensure programming has its place on CTV airwaves and that changes need to be made to the benefits package proposed by BCE.
Telus tells the Commission that it should be wary of vertical integration and its impact on both independent broadcasters and distributors without programming assets. “While vertical integration causes concern over inputs and outputs in all industries, the concerns are more critical in a market environment where access to alternatives is restricted, like in the Canadian broadcasting system where access to alternative foreign broadcast channels is restricted for cultural policy reasons,” Telus states in its comments.
The western telco and IPTV provider says because the CRTC’s vertical integration study won’t take place until this summer, it must ensure that content exclusivity doesn’t take hold. In this vein, Telus wants a moratorium on exclusivity for content carriage. The company notes that exclusive content for programming undertakings is okay because the programming is still widely available on multiple platforms and from multiple providers. That doesn’t hold true for carrier content exclusivity.
“Exclusives on content by carriers… restrict consumer choice by potentially tying access to the content to subscriptions to new platforms, like a wireless contract. Vertically integrated companies have incentives to reduce audience reach and the potential for monetization of the content in order to give themselves a competitive advantage to leverage in the carriage or distribution markets,” Telus says.
In an interview with Cartt.ca, Michael Hennessey, senior VP of regulatory and government affairs says BCE appears to be thinking that it can lose revenue on the broadcasting side but make it up in other areas of its business such as giving people who subscribe to wireless services access to exclusive NHL or NFL content on their mobiles or tablet devices.
“When you’re fully integrated, you look not just at the interests at CTV and the money it can make by maximizing audience, but you also look at whether by withholding content from your competitors, which causes a loss to your broadcast side, you can make up that loss and increase revenues on the carriage side say by locking consumers into cell phone [contracts],” he states.
Telus is asking the Commission to adopt safeguards that would protect against the use of exclusivities such as what the Federal Communications Commission did in approving Comcast’s acquisition of NBCU. Hennessey also points to a U.S. Department of Justice document that details the types of safeguards it would be involved in approving a transaction of this kind.
“Even where you have existing exclusivity arrangements, you can’t use those arrangements to block somebody else from doing business with the party you have the exclusivity with,” he says of the U.S. DOJ ruling.
Telus acknowledges that exclusivity will be hotly debated at the vertical integration hearing in June, but says the Commission must not allow such a thing to happen prior to studying it further.
“The optimal and speedy development of new content platforms and their exploitation to maximize the reach of the Canadian broadcasting system is an important goal for our digital economy strategy and while the issue of exclusivity will be debated at length in the vertical integration hearing, it would be preferable to enter that debate with a status quo where all distributors or carriers are prohibited from offering exclusive content to their subscribers,” says Telus.
The Canadian Cable Systems Alliance (CCSA) is concerned that the small BDUs may have no choice but to pay higher prices for some specialty channels as a result of greater vertical integration of broadcasters and distributors. Bell and Rogers could strike a deal where each pays the other’s inflated rate for TSN and Sportsnet in each exchange of other services. The result is that independent BDUs are forced to pay the (potentially much) higher rate because they lack the horse trading power.
“In that scenario, so long as the major enterprises charge each other and themselves the same ‘sticker price’ that they charge the independents for the individual programming services, then the concept of undue preference is unlikely to provide any protection to the smaller players,” states the CCSA.
BCE’s proposed benefits package was panned by many interveners, describing it as inadequate and self-serving. The company proposed two options. Under the first, $70.3 million, no benefits would be paid. The second, $220.8 million, only $40.4 million would go to on-screen and multi-platform related initiatives. The rest would be diverted to internal operations such as satellite carriage capacity upgrades, production of news in HD, A-Channel market sustainability and digital OTA distribution.
The Canadian Media Production Association (CMPA) criticized BCE for trying to use social benefits money for what it considers to normal course of business expenditures such as the $84.4 million for satellite capacity upgrades. The CMPA says 85% of the television benefits must go to on-screen programming initiatives and 75% of the on-screen programming benefits must go to independent producers.
Norm Bolen, president and CEO of the CMPA, tells Cartt.ca that the CRTC must ensure that a full 10% value of the transaction must be paid to social benefits and that 80% to 85% of those benefits should go to independent production, industry organizations, training and other social benefits.
“Social benefits are extremely important to the Canadian broadcasting system. They are leverage. If you spend a couple hundred million dollars of social benefits in programming, you’re probably going to see a multiplying factor of three to four, so that $200 million becomes an $800 million of production,” Bolen explains. “That’s huge and that’s all content that ends up on the screen. We believe that social benefits policy was established to put content on the screen and that’s what we’re going to argue.”
Hennessey agrees that the CRTC needs to ensure that the benefits monies aren’t diverted to support capital spending. “Otherwise you’ve really just made the benefits policy an opportunity to cross subsidize the dominant player in the market in terms of their capex to the disadvantage of the competitors and you’re giving them in effect money or benefit to do something they would have done in any event because that’s part of the business,” he says.
Shaw Communications Inc. is also opposed to BCE’s proposed benefits package, particularly the $84 million that would go to satellite capacity upgrades, describing it as contemptuous of the commission’s DTH policy review hearing and, if approved, would “allow Bell to use a public interest benefits contribution to derive a competitive advantage over other BDUs that is both significant and disproportionate to any public benefit proposed.”
Rather than the $40.4 million proposed by BCE for its television benefits, the CMPA says the commission must require BCE to direct $215 million to television related initiatives with $183 million for on-screen initiatives and $137 million to third-party-administered programs supporting independent production.
“This transaction creates a unique and one-time opportunity to inject new funding into Canadian program production as an important and necessary supplement to what Canadian broadcasters will be required to invest during their next licence terms as a result of the upcoming group licence renewal process,” states CMPA.
