BBCE Inc. BCE-T expects the review of its proposed acquisition of CTV Inc. by the federal telecom and broadcast regulator to be straightforward. But the deal does have regulatory implications. Here are some of the issues at play:
TANGIBLE BENEFITS
Normally, when broadcast assets change hands, the new owners have to set aside “tangible benefits,” a lump sum that will be dedicated to improving the broadcast system in Canada, according to Canadian Radio-television and Telecommunications Commission (CRTC) rules. The amount is generally worth 10 per cent of the deal. But it is not set in stone: it depends on what amount the CRTC chooses to use to calculate that 10 per cent. Why is this an issue?
BCE is planning to argue that it’s already paid the piper, when it bought these assets last time, and shouldn’t have to do it again. “You will recall that BCE, in fact, already paid benefits, liabilities to the CRTC on the original CTV transaction,” BCE’s chief financial officer Siim Vanaselja told analysts on Friday. “We don’t think that the current transaction would trigger any [further fees].”
Ivan Fecan, chief executive officer of CTV Inc., agrees. “It is hard to imagine that they would have to pay twice for something they have already owned for 10 years.”
BCE will get some help with its argument from one of its competitors. In less than two weeks, Shaw Communications Inc. goes before the regulator for hearings on its deal to buy the television assets of CanWest Global Communications Corp., and tangible benefits will be an issue there too: Shaw wants to deduct what it spends on converting its stations to digital transmitters from the pool set aside for benefits, among other discounts.
“Shaw and CanWest is a dress rehearsal of the issues for sure,” said Sheridan Scott, a lawyer and partner with Bennett Jones LLP in Ottawa, and an expert in competition law and regulatory matters.
FEE FOR CARRIAGE
Or value for signal, depending on which bit of jargon you prefer, is a debate that has raged between broadcasters and cable and satellite firms. With this deal, all of Canada’s private broadcasters are now owned by those distributors.
At issue is whether conventional over-the-air stations such as CITY-TV, Global and CTV deserve to receive a small share of what consumers pay for their cable and satellite subscriptions, the way specialty channels such as Food Network Canada and TSN do. Earlier this year, the regulator decided that networks could negotiate for such fees, a decision now before the courts for review. But the debate may now be moot. “This may well be the final nail in the coffin for that [debate],” said Alan Sawyer, a Toronto-based consultant who deals with regulatory issues. “I can’t see anyone wanting to pursue that now.”
That being said, ownership does not change the fact that conventional TV has suffered from declines in ad revenue. The challenge will be whether distributors such as Rogers, which owns City, as well as Shaw and Bell, which have bought Global and CTV respectively, will be able to use their content across the multiple platforms they have heralded, and make money from the push to mobile phones and tablets like the iPad.
“[The deal] allows us to differentiate our service offerings and really maximize the ways in which we monetize programming across all of our broadband and mobile platforms,” Mr. Cope told analysts Friday.
VERTICAL INTEGRATION
The CRTC has approved this type of sale before: cable giant Rogers owns content through CITY-TV, for example. And there are no conflicting businesses at play here, as there were in 2007 when CTVglobemedia was ordered to sell its CHUM stations (the deal that gave City to Rogers) because of worries it would own too many TV properties.
However, while there are strict rules governing how distributors carry certain channels, and preventing them from pushing out content owned by their competitors, the mobile and online space is a different beast, where the same regulations on video content don’t apply. “Generally speaking it’s not a heavy regulatory hand that is in place for new media,” Ms. Scott said. “… There are still debates about whether the CRTC has the right to regulate it.”
As the distributors look to more screens, the media world and its rules are changing. Mr. Cope emphasized on Friday the “deregulated environment” in which Bell can now provide video to users.
“Today’s regulatory and technology environment allows integrated players to leverage content ownership for differentiated offers across all three screens,” he said.
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