CRTC denies BCE acquisition of Astral Media

Blog, Information Technology, Regulation, Roland Renner (historic), Uncategorized

…the Commission must evaluate applications for a change in effective control against the objectives set out in the (Broadcasting) Act, as well as its own policies and regulations. The Commission considers that the concerns related to competition, ownership concentration in television and radio, vertical integration and the exercise of market power are very substantial and fatal to the application. Broadcasting Decision CRTC 2012-574, paragraph 67.

That is pretty clear.  Rarely does a government body of any kind make such a clear and concise statement explaining its decisions.  What is there to add or interpret?

Almost everyone knows something about BCE but Astral Media is much less well known outside the industry.  Inside the industry, Astral is known as a large powerful, successful and influential business.

Starting with some camera stores in Montreal it has grown into one of the largest companies in Canadian media.  In the Commission’s words,

Astral is Canada’s largest radio broadcaster, with 84 stations in eight provinces. It is also a major provider of premium content and specialty television in Canada, with significant ownership interests in 20 popular English- and French-language discretionary services. Astral also operates two conventional English-language television stations, both of which are affiliates of the Canadian Broadcasting Corporation.

Broadcasting Decision CRTC 2012-574, paragraph 4.

Astral also owns a large amount of the outdoor advertising billboards in the country.

The concern over ownership concentration, vertical integration and the exercise of market power arises because BCE already holds substantial broadcasting properties such as CTV, radio stations and specialty channels.  It isn’t just a phone company anymore.  While BCE and its predecessors have gone through several cycles of acquiring and divesting subsidiaries, the latest management team led by George Cope has been in acquisition mode again.

BCE argued that a bigger company is required to operate in the North American and global contexts in order to compete with US media giants.  As an example, BCE argued that Astral had been outbid by Netflix for Canadian distribution rights to some programming.   This is reminiscent of older “national champion” arguments.  On review of the evidence, the Commission didn’t buy it.

Instead, the CRTC was concerned that concentration of ownership would result in a significant fall in diversity of voices.  Also, vertical integration is an issue because BCE also owns Bell TV and the Fibe IPTV video distribution services.  Here is the problem.  When Rogers, Shaw or Cogeco  go to BCE to get renew their contracts for specialty services, BCE would have a great deal of market power to extract terms and conditions that make it difficult for them to compete.

At FCPP, we support policies in favour of competitive markets and consumer choice.  Some commentators will argue that this decision is anti-market and an unjustified intrusion into the affairs of two businesses that agreed to a deal.  By avoiding excess concentration, however, the decision will result in a more competitive market in broadcasting and telecom.

The decision (18 pages) is available at http://www.crtc.gc.ca/eng/archive/2012/2012-574.pdf

N.B. I worked on this proceeding for clients who opposed the component of the proposed tangible benefits that would provided a $40 million subsidy to Northwestel.