Analysis

On Bell-Astral merger, the CRTC should take its time

Special to The Globe and Mail

CRTC chairman Jean Pierre Blais, seen here on Oct. 18 commenting on his BCE-Astral ruling. (Dave Chan For The Globe and Mail)

A few weeks back, BCE indicated that it had hope the Canadian Radio-television and Telecommunications Commission might give its resurrected bid to take-over Astral Media special fast-track treatment, “abbreviated hearings” as it called them.

The CRTC should hold off for a while before doing anything at all, because the tools the regulator will rely on to assess the transaction are not up to the task.

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This second-kick-at-the-can strategy that BCE wheeled out after the CRTC first rejected the deal last October (see here, here and here), is highly unusual. To the best of my knowledge, nothing like this has ever been done before. There is nothing routine about this transaction and, thus, it is hardly worthy of being fast-tracked.

Not least because the thresholds set in the CRTC’s 2008 Diversity of Voices decision (see para 87) are fundamentally flawed, and should be scrapped and new ones put into place before any review of media ownership transactions on the scale of the Bell-Astral deal gets out of the gates.

The oft-repeated idea that any merger or acquisition should automatically be approved if it results in the combined entity having under 35 per cent of the total TV market creates more problems than it solves (see here, here and here).

The 35 per cent guideline was imported from the standards set by the Competition Bureau in 2003 for reviewing mergers and acquisitions in banking, and form a weak standard when it comes to media diversity. Rules for banks balance competition with the stability of the national economy. Media concentration rules are about fostering the maximum amount of diversity feasible and a free press fit for democracy.

Even worse, in adopting the ill-fitting 35 per cent guide the CRTC cherry-picked the weakest half of the Competition Bureau’s two-part rule for assessing bank mergers.

The second part of the Competition Bureau’s guidelines suggests that there is a problem of market power when any merger or acquisition results in the top four firms controlling more than 65 per cent of the market. The share of the big four – Bell, Shaw, CBC, Rogers – today is already roughly 81 per cent for the total TV programming market – well-over the Competition Bureau’s standards. If Bell does get the green light to acquire Astral Media, it would rise to just under 90 per cent. This reason alone is enough to pause and reflect.

As the Competition Bureau clearly stated:

“If the sum of the merging firms’s pre-merger market shares is below 35 per cent, there are likely to be sufficient products and suppliers to which consumers can turn in response to any attempt by the merged entity to exercise market power. If the four-firm concentration level is below 65 per cent, then co-ordination among firms in the market is likely to be too difficult to raise competition concerns (para 47).”

Conversely, when a single firm’s combined market share tops 35 per cent its ability to exercise dominant market power is just too great, while when the top four control more than 65 per cent of the market, the potential for them too collude and fly as a flock rather than competing vigorously in the marketplace becomes unacceptably high as well.

Also, the rules set out the Diversity of Voices hearings did not anticipate the extent to which vertical integration would come to reign supreme across the entire sweep of the telecoms, media and Internet in just a few years. When the new rules were created in 2008, Bell had sold down its controlling stake in CTV and was pretty much out of the TV programming business. The three vertically integrated conglomerates – Shaw, Rogers and Quebecor – at the time accounted for just 43 per cent of the total TV business (delivery and programming combined).

By 2011, Bell had returned to the fold by re-buying CTV; Shaw had bulked up by taking over Global from the bankrupt Canwest. Four vertically integrated telecom, media and Internet giants now account for more than three quarters of the TV market: Shaw, Bell, Rogers and QMI, in that order. Toss Astral Media into the mix – the ninth largest media firm in the country – and the number rises closer to 80 per cent.

I am quite sure that former CRTC head Konrad von Finckenstein never anticipated these conditions. A five-year-old 35 per cent threshold is no longer some kind of magic number upon which the Bell-Astral deal should turn come decision time.

We should also remember that not just the CRTC, but Canadians in general did not like the original Bell-Astral deal. In fact, 60 per cent opposed the deal.

Some may brush that aside as anti-capitalist populism, but the fact is, such a stance is the norm and when you probe the data further in such surveys, we find that the more educated the respondent is, the more likely they are to spurn any deal that appreciably changes the scales in favour of fewer choices and more concentration.

This is the impulse of a democratic culture. It should not be treated lightly, or dismissed with scorn.

It seems to me to be only prudent that the CRTC takes whatever time it needs to ensure that the tools it will use in Bell-Astral Round Two are up to the task. Until they are, Bell and Astral should step back and get in line rather than raising the possibility of fast-tracking this thing.

This isn’t just about Bell-Astral; it’s about the rules of the road and ensuring that the media ecology in this country comes as close to embodying democratic ideals as is humanly and politically possible.
 

Dwayne Winseck is a communications professor at the School of Journalism and Communication, Carleton University in Ottawa. Prof. Winseck been researching and writing about media, telecoms and the Internet in one way or another for nearly 20 years. He most recently edited The Political Economies of Media. You can read more comment on his blog, Mediamorphis.

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