CRTC denies BCE's bid to acquire Astral - Transaction not in the interest of Canadians and Canada's broadcasting system

OTTAWA-GATINEAU, Oct. 18, 2012 /CNW/ - Today, the Canadian Radio-television and Telecommunications Commission (CRTC) denied BCE's application to acquire control of Astral Media's television and radio services because it is not in the public interest. Astral Media operates 84 radio stations and 20 pay and specialty television channels in both official languages.

"BCE failed to persuade us that the deal would benefit Canadians," said Jean-Pierre Blais, Chairman of the CRTC. "It would have placed significant market power in the hands of one of the country's largest media companies. We could not have ensured a robust Canadian broadcasting system without imposing extensive and intrusive safeguards, which would have been to the detriment of the entire industry."

The proposed transaction raised substantial concerns related to healthy competition, the concentration of ownership in the television and radio markets, vertical integration and the exercise of market power in an anti-competitive manner. The CRTC was not persuaded that the transaction would have provided significant and unequivocal benefits to the Canadian broadcasting system and to Canadians sufficient to outweigh its concerns.

BCE already controls numerous television and radio services, as well as a national broadcasting distribution service. It is the largest Internet service provider in Canada, the second largest wireless service provider and the third largest television distributor. The acquisition of Astral Media's services would have created a situation where a company of BCE's size and scale would be able to exert its market power unfairly and hinder healthy competition.

The CRTC also denied BCE's application to convert CKGM Montréal from an English- to a French-language station. BCE indicated that it was only interested in changing the station's language format if its acquisition of Astral Media were approved.

Today's decision follows a public proceeding, which included a public hearing held from September 10 to 14, 2012.

Broadcasting Decision CRTC 2012-574
http://www.crtc.gc.ca/eng/com100/2012/r121018.htm

Reference document:

Notice of Consultation CRTC 2012-370
http://crtc.gc.ca/eng/archive/2012/2012-370.htm

The CRTC
The CRTC is an administrative tribunal that regulates and supervises broadcasting and telecommunications in Canada.

Background information on the public interest test

The Canadian Radio-television and Telecommunications Commission's (CRTC) mandate is to regulate and supervise the Canadian broadcasting system in the public interest. This includes granting television and radio licences, and authorizing the transfer of those licences.

There is no single definition of the "public interest" test. To determine if an ownership transaction is in the public interest, the CRTC relies on the various policy objectives set out in the Broadcasting Act. The provisions relevant to the examination of a transaction include:

• the Canadian broadcasting system, operating primarily in the English and French languages and comprising public, private and community elements, makes use of radio frequencies that are public property and provides, through its programming, a public service essential to the maintenance and enhancement of national identity and cultural sovereignty [section 3(1)(b)]
  
  
• English and French-language broadcasting, while sharing common aspects, operate under different conditions and may have different requirements [section 3(1)(c)]
  
  
• the Canadian broadcasting system should:
• …serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada [section 3(1)(d)(i)], and
  
  
• …encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity, by displaying Canadian talent in entertainment programming and by offering information and analysis concerning Canada and other countries from a Canadian point of view [section 3(1)(d)(ii)]
• the programming provided by the Canadian broadcasting system should…(i) be varied and comprehensive…(ii) be drawn from local, regional, national and international sources…(iv) provide a reasonable opportunity for the public to be exposed to the expression of differing views on matters of public concern, and (v) include a significant contribution from the independent production sector [section 3(1)(i)]

Where a transaction raises concerns regarding access to programming services by television distributors, the CRTC applies two other sections of the Act. These provisions stipulate that television distributors should:

• provide efficient delivery of programming at affordable rates, using the most effective technologies available at reasonable cost [section 3(t)(ii)]
  
  
• where programming services are supplied to them by broadcasting undertakings pursuant to contractual arrangements, provide reasonable terms for the carriage, packaging and retailing of those programming services [section 3(t)(iii)]

The public interest is also defined by the policies and regulations the CRTC has established to support the Act's objectives.

Broadcasters do not own their television and radio licences. They must obtain the CRTC's approval for any change of ownership. Given that competing applications are not solicited, the applicant has the duty to demonstrate that its proposal would provide significant benefits to the Canadian broadcasting system.

This approach was first expressed by the CRTC in a working paper published in 1978, Proposed CRTC Procedures and Practices Relating to a Broadcasting Matter. At the time, the CRTC expressed that the duty to demonstrate that a transaction is in the public interest "becomes of extra importance in the case of a transaction which by its very magnitude is likely to have a major impact on the broadcasting system."

In 1986, the CRTC further elaborated on its approach in its decision to deny Power Corp.'s application to acquire Télé-Métropole (Broadcasting Decision CRTC 1986-367, http://www.crtc.gc.ca/eng/archive/1986/DB86-367.HTM). The CRTC stated that the onus was on the applicant to demonstrate that its proposal was the best one under the circumstances, given the potentially negative consequences of ownership concentration.

In 1989, the CRTC set out its approach to ownership transactions in a public notice (Public Notice CRTC 1989-109, http://www.crtc.gc.ca/eng/archive/1989/pb89-109.htm). In this notice, the CRTC explicitly stated that:

• the applicant must demonstrate that the proposed transaction is in the public interest
  
  
• it is the applicant's responsibility to demonstrate that its application is the best possible proposal, and
  
  
• the applicant must propose a package of "significant and unequivocal benefits that will yield measurable improvements to the communities served by the broadcasting service and to the Canadian broadcasting system.
  
  

SOURCE: Canadian Radio-television and Telecommunications Commission

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