CRTC Rejects Billion Dollar BCE-Astral Deal on Anti-Competitive Grounds

In a recent controversial ruling, the Canadian Radio-Television and Communications Commission (CRTC) rejected Bell Canada Enterprises Inc’s (BCE’s) proposed acquisition of Astral Media Inc. (Astral), valued at $3.38 billion. The ruling came as a surprise to many in the Canadian telecommunications industry, which has undergone significant consolidation in recent years. BCE is Canada’s largest telecommunications company and is active both as a programmer and distributor of content across television, Internet and wireless platforms. BCE operates two English-language television networks, 29 discretionary television services including pay-tv and specialty channels, and 33 radio stations. Astral is a leading Québec-based media company and Canada’s largest radio broadcaster, with 84 radio stations in eight provinces. Astral operates two conventional English-language television stations and owns a significant share of 20 specialized television services. Last May, BCE made a series of applications seeking approval from the CRTC to acquire Astral’s broadcasting undertakings (Application). BCE was required to demonstrate that the acquisition was in the public interest, that the benefits of the acquisition to the Canadian broadcasting system were commensurate with the size of the transaction, and that the acquisition represented the best possible proposal under the circumstances. BCE proposed $241.3 million in tangible benefits, including supporting Canadian programming and increasing high speed Internet access to northern Canada. BCE also underscored the benefits of enhanced competition against Quebecor in Canada’s French-speaking market and against integrated global players in the Canadian market. The CRTC rejected BCE’s Application, finding that the acquisition would reduce competition in the Canadian broadcast system as a whole and would therefore not serve the public interest. The CRTC’s Diversity of Voices Policy (DoV Policy) states that the CRTC will generally approve a transaction resulting in the control of less than 35% of the total audience share. BCE determined that it met this threshold, finding that it would own 33.5% of the English-language television market and 24.4% of the French-language television market. Despite the DoV Policy, the CRTC determined BCE’s proposed market share on the basis of revenue, finding that BCE would control more than 45% of the English-language television market and 35% of the French-language television market. The CRTC also excluded US television services from its analysis on the basis that such services were provided equally by all Canadian broadcasters and therefore did not significantly factor into any calculation of market share. BCE has asked the Canadian federal cabinet to issue a policy direction to compel the CRTC to conduct a second review of the Application. For a link to the CRTC decision, visit: http://tinyurl.com/9bksdm6 For a link to Bell’s commentary on the decision, visit: http://tinyurl.com/9n57ggy Summary by: Darren Hall