In a decision that could spark a new round of consolidation, the federal broadcast regulator has given Bell Media the green light to acquire Astral Media, clearing the way for the communications giant to build a larger footprint in Quebec.
Bell's first attempt to buy Astral was rejected last fall over competition concerns. Thursday's approval by the Canadian Radio-television and Telecommunications Commission gives Bell permission to buy Astral's 84 radio stations and 25 specialty TV services, including some of the country's most popular channels such as The Movie Network and Super Écran. To soothe fears of market dominance, Bell agreed in March to sell Astral's stakes in 11 specialty channels and 10 English-language radio stations.
But while the CRTC last month heard from critics concerned about the potential edge a bulked-up Bell would have, its rival Rogers Communications, which had urged the commission to force greater divestitures, acknowledged the decision will prompt it to look at building up its own media holdings.
Philip Lind, vice-chairman of Rogers, said more consolidation was likely, but declined to offer specifics. "I wouldn't say what [Rogers would buy] or if at the moment, but yeah, we're open."
Bell had argued it needed to increase its TV programming holdings in order to compete with new online global competitors such as Netflix, which currently has an estimated 2 million Canadian subscribers.
Bell and Astral said Friday that the deal will close July 5.
In its decision Thursday, the CRTC said it was satisfied that Bell's 22.6-per-cent share of the French-language TV market following the divestitures would create "a more competitive landscape," in a province where Quebecor Media Inc., has long been the dominant player.
The decision to allow Bell's share of the English-language TV market to climb to 35.8 per cent would be accompanied by conditions designed to prevent, in the words of CRTC chairman Jean-Pierre Blais, the "significant risk that BCE could exert its market power to limit choice and competition."
Bell Media is a division of BCE Inc., which also operates a satellite TV service and a burgeoning Internet-based TV service known as Fibe.
A number of conditions imposed by the CRTC are designed to ensure BCE does not deny TV programming to other distribution services such as those owned by Telus, Rogers, or Shaw. Bell may not "unduly withhold non-linear rights," such as TV shows delivered to mobile devices, from competitors.
To prevent the sort of damaging, high-stakes face-offs between media companies that sometimes result in channels being removed from TV lineups in the U.S. market, Bell must enter into a dispute resolution process supervised by the CRTC if a contract dispute between a programmer and a TV distributor has not been resolved 120 days before a TV signal is set to disappear.
The acquisition will also cost Bell more than it had hoped. The CRTC ordered the company to spend $246.9 million – $72 million more than Bell had proposed – over the next seven years on a slew of initiatives it labels "tangible benefits." These include funding to Canadian producers of feature films and TV programs, Canadian film festivals, consumer education, support for emerging artists, and local programming initiatives.
The increase in value reflects the fact that the regulator bases benefits payments on the value of the transaction, which it pegged at $4.154-billion. BCE and Astral said the deal was worth only $3-billion, but did not include the value of assumed debt and leases in that price tag, as the CRTC did.
The commission also said Bell, which owns the CTV and CTV Two broadcast television networks, must keep open all of its existing local TV stations, as well as the two it is acquiring from Astral, until at least 2017.
In response, Bell said it was "assessing the details of the CRTC's decision, and will issue a detailed statement before markets open tomorrow."
After denying the acquisition last fall because it would have a negative impact on consumers, the CRTC insisted Thursday's approval was not an about-face. "There are benefits to consolidation," Mr. Blais said. "We have around the world companies that are becoming larger and larger, media entities."
And he acknowledged that Bell had significantly altered its initial pitch. "Ultimately we're there for the benefit of Canadians, and it's their broadcasting system. So what the message is: applicants better do their homework and arrive well-prepared for the proposals they're putting up."
Still, the Public Interest Advocacy Centre, a non-profit pro-consumer group, decried the decision. "Canada will now have an unprecedented level of media concentration and vertical integration and a weaker diversity of voices with the loss of Astral, a strong independent broadcaster," said Janet Lo, legal counsel for PIAC. "Consumers should brace themselves for less competition for television services – and consumers will not only pay the price but they will face less choice and flexibility in the market."
A highly orchestrated public campaign led by Quebecor and other telecommunications and broadcasting companies last summer successfully marshalled forces against the original Bell-Astral deal. But the new application by Astral and BCE "put forward a different approach and responded to many of our concerns," Mr. Blais said in a press release.
Quebecor declined to comment on the decision.
BCE owns a 15-per-cent stake in The Globe and Mail.
List of services purchased
French-language pay and specialty television: Canal D, Canal Vie, CINÉPOP, Super Écran, VRAK.TV, Ztélé
English-language pay and specialty television: The Movie Network, TMN Encore, Viewer's Choice Canada (DTH), Viewer's Choice Canada (Terr.)
English-language conventional television: CFTK-TV Terrace, B.C.; CJDC-TV Dawson Creek, B.C.
French-language radio: 21 stations in 14 different municipalities
English-language radio: 56 stations in 33 municipalities
List of services to be sold
French-language television: Disney Junior, Historia, MusiquePlus, MusiMax, Séries+, Teletoon/Télétoon*, Télétoon Rétro
English-language television: Cartoon Network, Disney XD, Teletoon/Télétoon*, Teletoon Retro, The Family Channel
English-language radio: 10 stations in six municipalities
* Teletoon and Télétoon are feeds of the English- and French-language specialty service known as Teletoon/Télétoon.
List of television stations BCE must keep in operation until at least 2017
English-language conventional television: 30 local stations in 29 municipalities