MONTREAL – In a lengthy appearance before the CRTC commissioners on Wednesday (more than twice as long as either Rogers or Telus the day prior) Cogeco Cable left no doubt where it stood on the question of Bell Canada buying Astral Media: There can be no compromises, no new regulatory caveats that make this deal palatable, and so the merger must be denied. Again.
Cogeco’s argument was similar to the one EastLink made earlier on Wednesday, but the Montreal-based cable and radio firm offered up more detail. CRTC chairman Jean-Pierre Blais has asked the opposing interveners Tuesday and Wednesday for what they could accept, should the Regulator decide in favour, but with added conditions. His questions are on two fronts: further mandated divestitures; or new rules governing Bell Media’s conduct in content negotiations and contracts – essentially making some or all of the vertical integration code of conduct mandatory.
While others have spoken to such potential “plan Bs” they might acquiesce to, both Cogeco CEO Louis Audet (pictured below scrumming reporters) and EastLink CEO Lee Bragg said the same thing. To paraphrase: If the only way to get the deal to pass regulatory muster is to attach a bunch of new conditions, that should mean Bell/Astral II should not be approved at all.
Because of the way Bell Media has dealt with, and is dealing with, Cogeco Cable and other independent, non-vertically integrated distributors, Audet insisted Bell can not be allowed to consume any more media assets. “We have reached a point where if you don’t act,” he told the panel, “we will be evolving in a very dangerous environment… Bell is already too large as it is… The Commission must draw the line here and now, deny any further incremental acquisition of broadcasting properties by Bell in the most unequivocal terms and ensure that Bell and Astral will make no further attempt to combine any of their respective properties,” he added.
The English and French media owned by Bell are too important not to have, at an affordable price and on all platforms, if a distributor hopes to compete in the marketplace – and Bell Media’s behaviour has led the independents to state they will lose content battles with the country’s largest programming supplier who is also their biggest BDU competitor.
EastLink called TMN its “anchor tenant” for its VOD and EastLink To Go services and the Halifax-based cableco is very worried if the Astral brands are owned by Bell, they will suddenly be as difficult and expensive to gain access to as the existing content owned by Bell Media. “There is a reason independent distributors who rely on Bell’s content are not supporting this transaction,” said EastLink VP regulatory, Natalie MacDonald. “It is solely because Bell’s current dominance affects our access to content, our flexibility, our costs, and our ability to develop new, innovative services and ultimately, our survival.”
Despite chairman Blais’ best attempts to get Audet or his VP corporate affairs Yves Mayrand to budge during the Q&A portion of the company’s appearance and speak to a “B, C or D position in your analysis,” said the chair, the Cogeco executives did not budge. The chairman asked what the company thought of the Rogers solution, which was to force divestiture of Astral’s English pay TV assets TMN and the brands under that like TMN Encore and HBO Canada, or perhaps even Super Écran, the French pay TV service.
“It would be very, very tough sledding for the Commission to try to extract further divestitures… It would be extremely difficult to remove these crown jewels from the transaction and have that decision enforced without the possibility of litigation,” said Mayrand. “In our view, told you what they were prepared to divest and what they were not prepared to divest.”
Of course, the latest Bell deal does have a divestiture plan, as outlined here, where the first did not. It has said will sell – or already has agreements to sell – all or its interests in, Family Channel, Teletoon, Teletoon Retro, Disney XD, the Cartoon Network, Disney Jr. (English and French), Historia, Séries+, Télétoon, Télétoon Rétro, MusiquePlus and Musimax. Bell is buying Astral primarily for its lucrative pay content and popular French specialty channels and it would seem highly unlikely the company would accept being ordered to divest TMN or Super Écran.
“I would submit to you that you have to look at the application as it is… and what is the most reasonable thing under the circumstances to do. We have to tell you any incremental addition to the broadcasting portfolio of Bell at this juncture is clearly not in the public interest and trying to segregate and extract some properties that Bell clearly wants to keep for itself will not work. Hence, all you have to say, and indeed the most simple solution to this very big problem, is ‘no’,” added Mayrand.
Blais pressed on, hoping the Cogeco executives would provide something they might give as an alternative to a flat no to the deal, noting “we shouldn’t be intimidated by the risk of litigation if we feel (a decision) is in the public interest,” but Mayrand and Audet were firm.
The conversation later turned to the 2012 affiliation deal for Bell Media’s 29 specialty services which went all the way to final offer arbitration (or baseball arbitration, as it is often known). While saying he did not want to re-argue the “extremely difficult” negotiations and CRTC process, Audet called the outcome “less than satisfactory,” adding he only recounted it for the panel as a harbinger of what might be when having to come to new affiliate agreements with the Astral channels.
“If that is the picture of renewing linear rights with Astral under the aegis of Bell, then I beg you, don’t throw any of us into that because eventually you will have one Canadian monopoly and it won’t be us.”
Audet also disparaged Bell for depicting its TV Everywhere solution as an intangible benefit to the transaction since that service is something it is doing anyway, regardless of whether it buys Astral. TVE is required simply to be competitive in the market now by any BDU so, “it is particularly odious and troublesome to hear Bell come here and tell you ‘we have this great idea and we’re going to package all this together… and we’ll make it available to everyone.’ That’s preposterous. That’s an insult to our intelligence.
“Not only are the non-linear rights offered at unreasonable prices, but they’re now going to be sold as package. I submit to you this is further evidence that this transaction is very dangerous and, in fact, I very much regret we didn’t intervene when they bought CTV, or we wouldn’t be in this mess.”
Audet even put a number on just what that new affiliate agreement has done to Cogeco Cable, its rates and packaging and its customers in comparison to Bell Media’s parent, BCE.
“The result of the arbitration was that our program rights paid to Bell were 37% higher than they were before. In the same time interval, the chief financial officer of Bell reports in his third quarter results that Bell’s TV properties have brought in 32% more revenue. That would suggest that it came from a lot of people, not just ourselves,” he said.
“Now, what happened for that 32% to materialize? Was there a revolutionary new product that overwhelmed the weighted average of everything and brought it up 32%? Nope. Was there a consumer rush to buy something really unexpected that was going to make a difference in the world? Nope. Is it that programming costs rose so much that this was absolutely necessary? Nope, that’s not the reason.
“So, what’s the reason? Unbridled market power,” said Audet.
Expect more such stories from distributors on Thursday when Quebecor and the Canadian Cable Systems Alliance face the Commission. Bell gets its chance to reply to everyone on Friday.
