CCA Bulletin 3/11

January 24, 2011

Nothing like a CRTC submission to start the year off right!

Just the facts

On February 1, the CRTC will begin hearings on the application by Bell Canada Enterprises Inc. (BCE) to acquire full control of CTVglobemedia Inc. (CTVgm) and its licensed broadcasting subsidiaries. The Canadian Conference of the Arts (CCA) has filed a short brief in which it presents its position on the two fundamental issues raised by BCE’s application, namely: the necessary public benefits package to be included in this large transaction and the impacts of the ever increasing conglomeration of broadcasting and media platforms in Canada

There is little doubt that the transaction will be approved, as in late October, the Commission approved the takeover of Canwest properties by Shaw Communications. Interestingly enough, the same day it authorized the Shaw/Canwest deal, the Commission announced it would hold a hearing to examine the implications of such a mega-acquisition. Chairman Konrad von Finckenstein was quoted as saying, “The broadcasting industry is being significantly reshaped by a series of major transactions. As a regulator, it is only prudent that we study the implications to ensure we have the right tools to deal with competitive concerns as they arise."

The CRTC is apparently concerned that large, integrated broadcasting distributors could act in a manner that would be detrimental to the broadcasting industry. It is somewhat puzzling, not to say downright ironic, that after letting the horses out of the barn, the Commission is now preoccupied with discussing the latch on the door! The hearings on the effects of vertical integration on the Canadian broadcasting system are now scheduled to start on June 20.

Tell me more

Because broadcasting is the dominant cultural medium and since the Broadcasting Act contains the most complete expression of cultural policy ever adopted by the federal Parliament, the CCA has participated actively in CRTC processes for decades, including on several occasions in the past five years as the Commission’s agenda accelerated.  

The acquisition of CTVgm by BCE will alter Canada’s media landscape and increase vertical integration by combining the country’s largest telecommunications company with its leading private broadcaster. There is no doubt that Canadian broadcasting is undergoing massive restructuring. Over the past decade, there have been major consolidations of ownership with broadcasters buying independent specialty services only to be, in turn, taken over by multi-platform distributors. The private Canadian broadcasting system, which once was fragmented, is now at best an oligopoly with a near monopoly situation in French Canada.

New technologies have also revolutionized the environment. The Internet and portable wireless technologies are becoming a more important interactive vehicle for the delivery of audiovisual materials and advertising, while revenues of over the air (OTA) broadcasters have stalled. Unfortunately, policy and regulation have not kept pace with these fundamental changes in our society. In this acquisition, we see television broadcasting, radio, an internet provider, other media and a telecommunications giant all join together. Though we appreciate the nature of the market, we find it troubling that as large mergers occur, fewer and fewer Canadian voices will be heard. Canada relies on its dynamic cultural diversity, portrayed through a variety of media and voices. As we move into an era with fewer companies monopolizing the way Canadians interact with the world, there must be more regulations to ensure independent voices are seen, heard and read in our media outlets.

Beyond the matter of this changing media ecosystem, the CRTC should review its position regarding the regulation of so-called new media and ensure that its policies concerning the funding and exhibition of Canadian content are adapted in the appropriate fashion to all distribution platforms irrespective of the technology used. In this case, the regulator should require that BCE maintain separate management structures for its satellite, other distribution, broadcasting and telecommunications operations. Finally, a robust mechanism must be implemented to ensure that BCE’s distribution undertakings treat all programming undertakings equally and do not give preferential treatment to those owned by BCE.

In terms of the public package associated with this transaction, the CCA has problems with both the amount and the nature of the benefits package proposed by BCE. On the former, the CCA urged the Commission to clearly establish the value attached to the transaction in order to decide on the proper level of benefits to be set as a condition. On the latter, we asked the Commission to make sure that the package is of real public benefit and not to serve the private interests of BCE.  

BCE initially argued that its tangible package should be as low as zero dollars as it contributed $230 million in 2000 for a tangible benefits package when it first acquired control of CTV.  It held this controlling interest until it abandoned its convergence strategy in 2005 and reduced its stake to a nominal amount. It is the CCA’s position that contrary to BCE’s claims, benefits are payable. Despite the fact that BCE previously controlled CTV, they rescinded control at their own free will during a restructuring in 2005. This is a new transaction not related to the purchase in 2000, and it involves the acquisition of a controlling interest, so full benefits are payable and should be made a condition to authorizing the acquisition.

Based on CRTC policy, the tangible benefits should be no less than 10% of the value of the television assets, both conventional and specialty, and 6% of the value of the radio assets. In our submission, the CCA supported the positions of the Canadian Media Production Association and ACTRA, stipulating that the CRTC require at least 85% of the eventual benefits package goes to ‘on screen initiatives’ and at least 75% of that money should ‘directly benefit the independent production sector’.

What can I do?

Follow the CRTC hearing on the BCE/CTVgm transaction which starts on February 1, 2011. Comment on our blog and participate in the public process concerning the review of the regulatory framework relating to vertical integration. You have until April 27 to voice your opinion to the CRTC.