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BCE's mobile strategy: CTV shows for all - at a price

BCE Inc. CEO George Cope

Kevin Van Paassen/Kevin Van Paassen/The Globe and Mail

In explaining its move to purchase CTV Inc. last summer, BCE Inc. BCE-T said the deal is all about content. Now, the company has revealed part of its plan for making the $1.3-billion acquisition pay off - by selling that content on new devices, but in a familiar way.

Canada's largest phone provider plans to charge other mobile companies a fee for providing video from CTV-owned stations such as TSN and Business News Network on their wireless devices, BCE chief executive officer George Cope said in an interview following hearings before the federal broadcast regulator Tuesday about the deal.

This model is a carbon copy of how the cable television and satellite business works. Specialty broadcasters charge those television distributors a monthly fee - from a couple of dimes to more than a dollar, depending on the agreement - for each customer on their service that subscribes to it. Mr. Cope envisions charging this type of per-subscriber fee to offer his company's TV channels on wireless phones, assuming the deal is approved.

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His comments are the strongest signal yet that BCE plans to try new approaches to gaining revenue as it prepares to take control of the country's biggest private broadcaster for the second time in 11 years. BCE bought CTV in 2000 with hopes that the marriage of TV distribution and broadcasting content would lead to new profit.

But the results were disappointing, and it sold down to a minority stake in 2005, only to reverse course last year.

"We're going to have people who are subscribing to wireless TV, and you have to get that content from somewhere. And so we'll be paying for that content, similar to what they do in specialty (television)," Mr. Cope said. "We think that's the start of a model to deal with, how do we all get content on wireless devices that people can access, and make sure that content providers are paid appropriately for it."

Mr. Cope's comments also provide an answer to a question that has been pushed by its competitors in the lead-up to these hearings: Will mobile TV content from CTV be exclusive to Bell phones?

In the fall, during the hearings to approve the purchase of the CanWest TV assets by Shaw Communications Inc., Shaw agreed that it would make its broadcast content available to all its competitors. Mr. Cope said CTV shows would not be exclusive but would be offered "on a commercial basis" to Bell's competitors.

For example, BNN, which is currently offered exclusively on Bell phones, could be offered on a subscription basis to other wireless carriers, he said. Bell would be prepared to pay other content owners for video on Bell phones as well, he added - a per-subscriber fee for access to Rogers Sportsnet, for example.

But it remains a question how much new revenue such a model could produce. Mr. Cope said subscriber fees he would charge for wireless video content would also be scaled down compared to what CTV-owned specialty channels charge to be carried on TV.

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Competitors such as Telus Corp. and Cogeco have expressed concerns with the creation of the new BCE media conglomerate and the control it would have over both content and a business that distributes that content.

BCE also dealt with another contentious issue at the hearings Tuesday: how much more it will pay for the privilege of acquiring the CTV broadcast assets. The company announced it would pay between $143-million and $221-million in benefits to the broadcast system. Under federal broadcast regulations, these "tangible benefits" are usually worth 10 per cent of the value of a deal.

This represents a reversal for BCE, which before now has argued it should not have to pay any benefits. It has maintained that since it owned CTV in the past and always kept a minority stake in CTVglobemedia Inc., BCE should not have to pay the benefits required when a broadcast license changes hands.

When Bell acquired CTV in 2000, it paid $230-million in benefits.

The $143-million package asks for a similar discount on benefits that was granted to Shaw Communications Inc. last year when it purchased the CanWest TV assets. Including debt, the total value of the BCE deal is $3.2-billion, making the proposed benefits package much slimmer than it would be if valued at the full 10 per cent, under the tangible benefits policy. If the proposed discount is not allowed, BCE has offered to pay $221-million.

Shaw was allowed to pay a smaller amount of benefits because of the financial stress of the TV stations it was buying - CanWest was, of course, in creditor protection at the time of the deal.

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"A discount was given … and of course, the CTV assets, CTV and A, have undergone the same financial challenges, and we're simply asking for competitive equality," Mirko Bibic, Bell's senior vice-president of regulatory and government affairs, said at the hearing on Tuesday.

CRTC chairman Konrad von Finckenstein questioned this position, saying that Shaw was given a break on the deal because it was buying distressed asset, and the situation differs here.

"You're buying Canada's most successful broadcaster," he said. "If you bought CTV out of [creditor protection] I think 100 per cent, there should be [a discount] But you're not."

The package includes 100 more hours per week of news programming. It also includes a commitment to carry more local stations on Bell's satellite service. And BCE has committed to invest in other Canadian programming as well.

Hearings into the deal resume on Wednesday. The CRTC will issue its decision on the deal 35 days from now.

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