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

CCA Bul­letin 3/11

Jan­u­ary 24, 2011

 

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.