ORAL PRESENTATION OF COGECO CABLE INC. AT THE PUBLIC HEARING OF THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION (CRTC) ON THE PROPOSED ACQUISITION OF ASTRAL MEDIA INC. (ASTRAL) BY BCE INC. (BELL)
1
ORAL PRESENTATION OF COGECO CABLE INC.
AT THE PUBLIC HEARING OF
THE CANADIAN RADIO-TELEVISION AND
TELECOMMUNICATIONS COMMISSION (CRTC)
ON THE PROPOSED ACQUISITION OF
ASTRAL MEDIA INC. (ASTRAL) BY BCE INC. (BELL)
12 September 2012
Check against delivery
LOUIS AUDET
1. Mr. Chairman, Madam and gentlemen Commissioners, we thank
you for giving us the opportunity to present orally our point of
view during this public hearing, which is so critically important
for the future not only of the Canadian broadcasting system but
also the entire communications industry in Canada. I am Louis
Audet, President and Chief Executive Officer of Cogeco Cable.
Also appearing today on behalf of Cogeco Cable are, to my
right, Yves Mayrand, Vice-President, Corporate Affairs, to his
right, Professor Roger Ware of Queen’s University, who
authored expert studies attached as schedules to our intervention,
and to my left, Suzanne Blackwell, President of Giganomics
Consulting, who assisted us in the preparation of our
intervention and the other schedules attached to our inte rvention.
2. Allow me to put things back into their proper perspective. First,
the applicant presents this megatransaction of 3.4 billion dollars
as an ordinary business transaction that should be determined,
from a regulatory perspective, entirely and only on the basis of a
measure of television audience share, and mainly in the French-
language television market of Canada. Let’s face it : this
proposed transaction is in fact the largest transaction in the
history of the Canadian broadcasting system, a transaction that
involves an unprecedented level of concentration of ownership
across over-the-air television, specialty television, pay
television, radio and new media throughout Canada, and a
2
transaction that involves also an unprecedented level of vertical
integration between production, aggregation and distribution of
all types of audiovisual content in both official languages across
all fixed and mobile electronic communications platforms across
Canada, including the province of Quebec. These levels of
concentration and vertical integration would be largely
unmatched among the G8 countries. We have all witnessed
during Bell’s appearance a few general statements of good
intentions and some last minute technical adjustments to the
application for approval. But more significantly, Bell has
deliberately elected not to deal with the crux of the matter during
its appearance. On the contrary, Bell has steadfastly dismissed
any possible avenue to address the fundamental issue of market
dominance raised by this megatransaction. The applicant’s
burden of proof has simply not been met.
3. Second, the applicant wants us to believe that this
megatransaction is good for Canadian consumers and in the
public interest because it would allow Bell to better compete
with Québecor in the province of Quebec. In fact, Canadian
consumers would simply witness the disappearance of the most
important independent producer and programmer of audiovisual
content in the province of Quebec and in Canada, of the main
competitor of Bell and Québecor in the supply
of specialty and
pay television services in the French-language market, and of the
head office of an independent open capital company in the key
sector of communications and culture in Montreal and the
province of Quebec. Quebec and Canadian consumers are not
fooled : they understand very well that there would actually be
less competition if this megatransaction were to be approved,
and that it would cost them down the line. They are now more
than 60,000 to have already expressed their concerns in writing
and asked for this megatransaction to be denied. A recent survey
conducted by an independent firm, Forum Research Inc.,
concludes that a clear majority of Canadians, whether in English
or French Canada, are opposed to this megatransaction. The
organizations representing Quebec and Canadian consumers are
categorically opposed to it. I would add that, on the face of it,
3
ensuring the domination of the Canadian broadcasting system
and the communications industry by Bell throughout the country
can simply not be a desirable outcome for competition and
Canadian consumers in general, or for Quebec consumers who
would find themselves caught in a vise between two vertically
integrated groups, and with one less source of independent
programming.
4. Third, the applicant parades what has just become at this hearing
a package of 241 million dollars in tangible benefits in order to
justify this megatransaction. The focus is unfortunately diverted
towards these one-shot « benefits » while the fundamental issue
in this proceeding, which is the structural problem caused by a
greatly increased concentration and vertical integration and the
lasting prejudice to competition and diversity that it entails
within the Canadian broadasting system and the communications
industry across Canada, is being completely sidestepped. Let’s
be frank : the whole debate around the valuation between the
various assets involved, the spreading out of the « benefits »
over five, seven or even ten years, or whether 0%, 17% or 20%
of the total amount of these « benefits » should go from one
pocket to the other between a broadcasting subsidiary and a
telecommunications subsidiary of the Bell group are just a
diversionary tactic designed to allow Bell to exchange a fistful
of dollars in last minute « concessions » for the approval of a
transaction that is contrary to the public interest. The first and
only true test is not the payment of benefits in accordance with
the Commission’s standardized formula, which any purchaser of
Astral will necessarily have to pay, but rather the public interest
test. Otherwise, this would mean that an already dominant
company such as Bell can purchase at leisure more market
power by simply paying a prescribed standard fare. To my
knowledge, this would be the most blatant example of devious
implementation of a public policy affecting competition,
whether in any industry in Canada, or i n any industry elsewhere
in developped countries.
4
5. Fourth, Bell represents to you that this megatransaction does not
pose any problem because you have a regulatory framework on
vertical integration and measures in place to intervene as needed.
From the outset, this is a highly dubious statement coming not
only from the largest vertically integrated commmunications
company in Canada, but also a company that has unabashedly
attacked this very same regulatory framework less than a year
ago and has since stated publicly that the Commission should let
the market free to decide in the end. But more fundamentally,
this position hides the anticompetitive behaviour of Bell who,
thoughout its history, and in a blatant way since its acquisition of
CTV, has taken advantage of ambiguities, delays and costs
arising from regulatory proceedings while profiting from its
dominant position. It is not a mere coincidence that all the
independent distributors in Canada have gone through the same
frustrating and costly experience in renewing their programming
service supply agreements with Bell Media following the
acquisition of CTV by Bell, or that they have all hit a brick wall
while trying to acquire from Bell Media the right to distribute
the same content on their own on-demand and internet
distribution platforms. Nor is it just a mere coincidence that
Cogeco Cable was, on the contrary, able to conclude contract
renewals just recently with Astral for French-language specialty
and pay television programming services and to obtain
multiplatform distribution rights in the normal course of
business without any need for regulatory proceedings, since
Astral is still, for the time being, an independent programmer.
Whether in the United States or in Europe, fully and workably
competitive markets are clearly the preferred outcome. Why
should it be any different in Canada? Why should we be seeking
here to win the championship of concentration and vertical
integration in electronic communications, all lines of businesss
combined? There is no advantage for the public interest in
causing a conglomerate to grow even bigger and subsequently
trying to control it through regulation. Past experience,
particularly in telecommunications, has clearly demonstrated
that once the monster is created, it is no longer possible to
control it, and that regulation is bound to fail. Excessive
5
concentration and vertical integration in an industry causes
severe and lasting damage, and its detrimental effects are
invariably felt by generations of consumers.
6. Finally, the applicant wants you to believe that this
megatransaction is not only unavoidable but that it is also the
only one that can be concluded in the circumstances. This is
evidently not the case. There was, and there still is, a public
market for the shares of Astral, and the management information
circular issued to all the shareholders of the company
demonstrates that, despite the knowledge of offers from parties
other than Bell, the management and the controlling shareholder
of Astral chose to deal exclusively with Bell and to cause their
preferred purchaser to bear entirely the financial risk of
obtaining the required regulatory approvals. The Commission
must fulfil its duty to examine this megatransaction based on its
consequences not only for the diversity of voices in television
but also for the entire communications industry in Canada, and
in light of the public interest, without feeling at all constrained
by this exclusive arrangement concluded between Bell and the
management and controlling shareholder of Astral.
7. Mr. Chairman and members of the Commission, if you want to
exercise in a credible way your jurisdiction respecting ownership
changes in the communications sector, you must fulfil your role
in upholding the public interest and you must be prepared to say
no when a transaction is contrary to the public interest. The
Commission did precisely that, under the chairmanship of Mr.
André Bureau, as he then was, when Power Corporation tried to
acquire TVA.
8. For all these reasons, we submit to you that the Commission
must simply refuse to approve this megatransaction for the better
interest of the Canadian broadcasting system, of the entire
communications industry, of competition within that industry,
and of Canadian consumers, including Quebec consumers.
9. We will now be pleased to answer your questions.