MAKE NO MISTAKE, it was a long road, but BCE Inc. finally won the right to purchase the most coveted licensed assets owned by Astral Media. However, CRTC decisions are so much more nuanced than a simple “yes” or “no”.
So below we give you our first impression of the decision broken down by the number of points Bell won with the Regulator – and lost.
WIN: No additional divestitures. Bell executives said repeatedly through the whole process that it could live with certain conditions – even some unprecedented, stringent ones, but it would not proceed with the deal if the CRTC forced it to sell more assets than what it already committed to part with. While others called for still more assets to be sold off, the Commission heeded Bell’s warning on this one and didn’t ask for more. Bell Media will now be a much more formidable competitor to the dominant Quebecor in La Belle Province and own the rights to coveted movie and HBO content in Eastern Canada through TMN.
LOSS: The CRTC valued Astral at quite a bit higher than Bell did in its application. For a number of reasons (such as the value of various leases), the CRTC placed a value on Astral of $4.15 billion, where Bell had pegged the company as a $3.2 billion package of equity and debt. That meant the CRTC boosted the benefits package by $72 million, to $246.9 million.
WIN: Bell got the regulatory exemption it needed to keep Montreal radio station CKGM AM (TSN Radio 690), as it had asked. The bulk of the public’s input in both CRTC hearings into this purchase came from Montrealers desperate to keep their English language sports radio station. “Given the strong support expressed by Montreal's English-language minority community for this station, BCE will have to maintain its current sports format for at least seven years. This decision constitutes a positive measure that will ensure the needs of the community are well served,” said the Commission. “The Commission finds that Astral and BCE’s requested exception to the Common Ownership Policy is warranted under the circumstances, as long as CKGM is operated as a sports station.”
LOSS: Bell’s new conditions of license, based on the Vertical Integration Policy’s Code of Conduct, apply only to Bell – and further, have been extended to encompass its subscription TV arm, Bell TV. Company executives told commissioners repeatedly that it would be unfair for it to be the only vertically integrated company subject to these conditions of license, but the decision is silent on extending the same CoLs to the likes of Rogers, Shaw or Quebecor. “In the Commission’s view, additional oversight is required given the concerns expressed over BCE’s increased ability to act in an anti-competitive manner as a result of the present transaction,” says the decision.
WIN: CRTC chairman Jean-Pierre Blais publicly acknowledged that having media companies with size and scale can offer Canadians real positives. This is a win for all vertically integrated media companies as they look to grow. “There are benefits to consolidation,” he told reporters in Gatineau after the decision was released. His message to other big firms is that if they want to get bigger, they had better do their homework and be prepared to show why it’s good for Canadians. And while he didn’t say this part, we assume that other VI companies who come before him to expand might also have to accept the same conditions of license to which Bell will now be subject.
LOSS: The new conditions of licence will encompass the soon-to-be much larger Bell Media’s dealings with all broadcast distribution undertakings, not just ones with 500,000 subscribers or fewer. While Bell sought to have the new stringent CoLs applied only to its dealings with smaller distributors, the CRTC thought otherwise. “The Commission also considers that it would be inappropriate to limit the applicability of the VI code of conduct conditions of licence to BCE’s commercial interactions with licensed or exempt BDUs having fewer than 500,000 total subscribers, as proposed by BCE,” reads paragraph 67 of the decision. “The Commission notes that this threshold would exclude those BDUs that serve the vast majority of Canadian subscribers. It further notes that these larger BDUs opposed the transaction due to BCE’s position in the market and their experiences in negotiations with BCE. Given BCE’s position as the largest broadcaster in Canada, the Commission considers that the safeguards should apply to all BDUs, regardless of their size, to ensure that their subscribers benefit from service choice and package flexibility,” says paragraph 68.
* Plus, Bell must file with the CRTC all of its affiliation agreements signed with all programming services and television distributors, by Bell Media on the programming side and by Bell TV on the distribution side, including its own intra-corporate deals. The company agreed to this stipulation on the final day of the hearing (which we said then, and believe now, was the turning point for this deal to gain approval). CRTC staff told us in the lockup Thursday that the Commission has not yet determined whether or not it will make these agreements public or hold them in confidence. Also, if a new affiliation agreement is not reached within 120 days of the one expiring, both Bell and the company it can’t come to an agreement with must enter CRTC-supervised dispute resolution (but not necessarily final offer arbitration). The Commission will decide how that goes on a case-by-case basis, reads the decision. Bell hoped for a shorter window than 120 days.
WIN: The CRTC is satisfied that the diversity of editorial voices will not be harmed with this transaction. Along with the divestitures already mentioned, Bell agreed during the hearing to keep all of its local TV stations open until at least 2017 and the Commission made that part of the conditions of the deal’s approval. “The Commission finds that Astral’s proposed divestitures would bring the combined BCE/Astral to an acceptable level of concentration from a diversity of voices standpoint,” says the decision. Later in the document, when it discussed radio, it adds: “The Commission also finds that the proposed divestiture plan provides assurance that there is a diversity of voices at the local level. Accordingly, the Commission is satisfied with the divestiture plan as proposed.”
LOSS: The Commission inverted the percentages of benefits that have to be spent on English language TV content versus French language TV content. Bell proposed spending 37% of the benefits package aimed at making TV on French content and the bulk on English programs of national interest and the like. The CRTC turned that on its ear. “The Commission considers that the percentage of expenditures to be allocated to each language market should be revised so that the social benefits reflect the value of the assets to be acquired in each language market (i.e., 69% French-language market, 31% English-language market),” says paragraph 193. That means on-screen benefits of $73.1 million will be spent on French TV content and other initiatives, while $32.8 million will be spend on English projects and funds. As well, Bell has to spend these benefits spread out over seven years starting now and not beginning in 2017, as it had requested, since there is already a glut of benefits money in the marketplace.
Every big decision has its pros and cons for all involved and this one is no different but our snap judgement shows that while Bell will have to operate under a CRTC microscope in many ways, the company should now be able to make this work.
