By Greg O’Brien
MY FIRST MEETING WITH SHAW Communications president Peter Bissonnette in the winter of 1998 seems like a lifetime ago. It was in Richmond Hill, then the home base of Shaw’s substantial Ontario cable operations. I think it was February.
This was before Bissonnette was even president of the company. Before Shaw and Rogers traded their Ontario and British Columbia cable systems to each other. Before Izzy Asper and JR Shaw split up WIC (Western International Communications). Before the Shaw family spun its media assets into Corus Entertainment. Before a Jean Monty-led BCE bought CTV the first time, claiming – a decade too early as it turned out – that convergence was the winning strategy. Before Ted Rogers tried and failed to buy Vidéotron and Pierre Karl Péladeau bought it instead, fuelling Quebecor’s move into digital media and wireless and away from printing. Maybe 100,000 Canadians subscribed to satellite TV. Canwest Global was a strong traditional broadcaster. Nearly all cable was still analog. My medium then was print and my deadlines, much more leisurely…
At the time of my lunch with Bissonnette, Shaw Communications was awaiting CRTC approval on its purchase of 47.85% of Sportscope Television Network, then the parent company of a brand new Tier III analog sports news channel, Headline Sports (which would eventually be re-named The Score and sold in 2012 for $167 million, pending Commission approval). Shaw wasn’t even trying to buy control of the channel, but later in 1998, the Regulator turned the company down flat and the deal was nullified.
The CRTC (which at the time employed a senior lawyer on the broadcasting side named Jean-Pierre Blais) reasoned: “In examining the current broadcasting distribution environment, the Commission finds that market conditions with respect to channel capacity and competition have not materialized to the extent previously anticipated. The Commission considers that the current channel capacity and the level of competitiveness are not sufficient to effectively mitigate any potential undue preference that may be conferred by cable operators on undertakings in which they hold an interest.
“Having considered all of the arguments presented on this issue, the Commission considers that, given Shaw's extensive vertical and horizontal holdings in the Canadian broadcasting industry, its dominant market position could lead to gatekeeping and other anti-competitive practices. Consequently, the Commission considers that approval of this application would not be in the public interest at this time.”
That little, 14-year-old decision was on my mind during the regulatory process of Bell Canada buying Astral Media. Of course, so many things have grown and changed since then, especially the network capacity which has led to the massive growth in the number of TV channels and the explosion of choice online, but the fact that the Commission thought Shaw, in 1998, was so extensively vertically and horizontally integrated then seems rather quaint when viewed through a 2012 lens.
What I find interesting, however, is much of the same language used in the two paragraphs I pulled from that July 1998 decision, like “undue preference”, “dominant market position”, “gate-keeping” and “anti-competitive” are the exact same words used now by those opposed to the purchase of Astral by Bell.
Is this a case of the more things change, the more they stay the same? Does it mean anything at all? Likely, it only means I’ve been observing this industry for a long time… But to me, it’s a part of the industry’s whole historical arc, recent and past, which the Commission must navigate as it makes its decision, which some good sources are now saying might come before the end of October.
So as our final word on the regulatory process into Bell/Astral, there are a number of other observations we had during and since the public hearing last month.
1. As consumers, our cable/satellite/telco TV subscription bills will go up, no matter what happens. There was much time and energy spent justifying how Bell buying Astral is good for Canadians. Whether the combined company will provide more or less or the same choice for Canadians is for the Commission to decide. Whether it will make Bell big enough to compete for content with the likes of Apple, Google and Amazon, we will see in the future. At least no one claimed it will be good for Canadians wallets. Rates have gone up for years. That will continue regardless of who owns The Movie Network or Super Écran.
2. We found it telling that the final question of the public hearing, from chairman Jean-Pierre Blais, was to ask Bell CEO George Cope: “Why is this transaction good for Canadians?” That would frighten me a little if I was a Bell executive (especially coming, as it did, right after a Commission question about re-regulating the wholesale rates of specialty services). The whole process, on paper and in public, was to prove to the Commission why the transaction was good for Canadians – and if the chair felt he still didn’t have a good enough answer and needed to ask that question again, at the end of a very long week and many months of submissions, I would find that little disconcerting, if I were on Bell’s side of the table.
3. Astral Media is sold, no matter what. Even if the most surprising thing happens and the deal is denied by the CRTC or the Competition Bureau (whose processes are not public, they either decide to challenge such deals in the court, or not, and while they examine the file for signs of economic dominance, no public hearings are held), Astral will not be an independent company. CEO and controlling shareholder Ian Greenberg made the decision to sell. Most everyone knew it. Most everyone had a chance to bid on it.
We have heard from very well placed sources that Rogers Communications would not budge from a $47/share offer for Astral and that Cogeco Inc. and Corus Entertainment had put together a partnership which ultimately would not pay the price Mr. Greenberg wanted. Bell won what was a bidding war, albeit one that was behind the scenes.
4. Some questions wouldn’t be answered, no matter what. Cogeco CEO Louis Audet was asked by CRTC vice-chair broadcasting, Tom Pentefountas whether or not he had tried to buy Astral. I asked him the very same thing after his appearance in front of the panel. Mr. Pentefountas and I both got similar non-answers: “We are a public company, so we manage ourselves according to stock exchange rules… we have made no such announcement. Therefore I have nothing more to add,” said Audet. Twenty-seven words that was neither yes, nor no.
Speaking of non-answers, Bell didn’t specifically address one issue both Telus, Rogers and others claimed, that Bell Media will not offer specialty channel content for carriage on video on demand, online or mobile platforms. Bell replied many times that both Rogers and Telus have access to 2400 hours of Bell Media content for VOD, but virtually all of that content is from CTV and none from TSN, RDS, Comedy, BNN and so forth. Then again, Bell executives said Rogers and Telus have declined to negotiate just to make hay in front of the Commission. And of course, Bell rightly complained that it has not gotten VOD content from Quebecor’s TVA, despite a CRTC order on the matter. Quebecor had no answer for that, either. So much He said vs. He said… How does the Commission decide?
5. a) Does Shaw GO prove Bell’s point, or the interveners’? In final written replies, some of the interveners say the fact that Shaw can launch an authenticated TV Everywhere product like Shaw Go on its own puts the lie to Bell’s claim that it needs Astral as part of its company in order to launch this service. Bell, of course, points out that Shaw Communications and Corus share the same owner, the Shaw family, and that it absolutely proves that Bell and Astral must be together for that type of service to work.
b) According to numerous sources, however, it was a bit of an open secret that Corus and Astral had been working for many months towards on an HBO GO-like product on their own and had plans to launch an authenticated, TV Everywhere product this fall. Corus CEO John Cassaday said as much in 2011. But, those plans were set aside when Bell offered to buy Astral.
6. The absolute wild card in all of this? The new Quebec government. Premier Pauline Marois, when she was in opposition, vowed to do anything in her power to block this deal. Since winning a minority government in September, the PQ government has been silent on the issue. What might they do? Can they do anything? Governments can change laws, so we’ll see. We’ve asked the provincial cultural minister Maka Kotto, but he has not yet responded.
7. This decision is hard to predict. There are as many opinions these days as there are people to ask (and we’ve asked a lot of them). No matter what anyone says though, CRTC chairman Blais has been busy putting his stamp on the place as best he can and he has been as vociferous as possible in pointing out to everyone inside and outside of the industry that the Commission will look out for the Canadian consumer and Canadian citizen like never before (and we were told he was quite angry at seeing many of the bus shelters outside CRTC HQ in Gatineau festooned in Say No ads, right, after the public part of the hearing wrapped up). A new man in charge and the new focus has some on the Bell/Astral side a little nervous. As are those on the “Say No” side.
All of this leads us to believe that the ultimate decision will be more creative than simply restructuring the benefits package.
Perhaps the Commission will decide that since Bell will count its co-owned assets towards valuation, they should also count towards viewership, too? While the Commission can’t re-set policy with a merger hearing, it can set a precedent. Maybe it takes that 35% market share guideline in the 2008 Diversity of Voices policy decision and makes it a hard guide. If then, it follows prior precedent into counting only Canadian channels when calculating audience share, the Commission may force Bell to divest some assets to get below that threshold.
Then again, maybe the decision sails through with minor alterations and new license requirements directly applying the Vertical Integration Policy’s Code of Conduct towards Bell Media.
We’re all just guessing at this point but even after the reams of paper and hundreds of thousands of words spoken, many questions remain. It’s been quite some time since the industry has been so uncertain of a hearing outcome.