The proposed Bell-Astral deal, its opposition, and what it means for media concentration

What is the status of Bell's proposed acquisition of Astral Media after its week-long CRTC hearing? Steve Faguy breaks it down for us in this explainer: What the deal is worth, who is opposed and why, and the controversial tangible benefits package that would bring about a new all-news French-language channel.

By Steve Faguy

What is the status of Bell's proposed acquisition of Astral Media after its week-long CRTC hearing? Steve Faguy breaks it down for us in this explainer: What the deal is worth, who is opposed and why, and the controversial tangible benefits package that would bring about a new all-news French-language channel.

By Steve Faguy

It's a $3.38-billion transaction — one that affects dozens of radio stations across the country, 25 television services and thousands of employees. It's such a huge transaction that some of Canada's largest telecommunications providers worry about a potential abuse of market power that could result.

And yet most Canadians have no idea how they might be affected by the proposed purchase of Astral Media by Bell Canada's parent company BCE. Whether the corporate parent of their Virgin Radio station is called Astral Media or Bell Media is of no concern for them, so long as it plays the same music and keeps the same on-air personalities.  For Bell, any noticeable differences for the television-viewing and radio-listening Canadian public are only good ones: more spending on original Canadian programming, more choice for consumers, and a strong Canadian media company that can go up against unregulated American content providers like Netflix.

For many of Bell's competitors, including Rogers, Quebecor, Cogeco, EastLink and Telus, the megamerger would create a near-monopoly in Canadian English-language television, resulting in a company controlling so many services it could simply dictate prices and terms to television distributors and they would have no choice but to accept. In fact, these companies say, Bell is already acting this way even without the added power of Astral's assets.

The purchase needs to clear two Canadian regulatory bodies before it can be made official: the Competition Bureau, which looks at large corporate mergers to ensure they don't create anticompetitive environments, and the Canadian Radio-television and Telecommunications Commission, which must approve any change of control in broadcasting services and has limits on how many can be owned by one company.

The Competition Bureau has said that it is looking into the Bell-Astral merger. Such investigations are conducted in secret until a decision is made, and in fact even acknowledging that they are concerned about this transaction is an unusually public act.

The CRTC conducts itself more openly. Bell applied to the commission to take over Astral's 84 radio stations and 25 television services, which represents about two thirds of the purchase price (the rest includes outdoor advertising, which the CRTC doesn't regulate). Last week in Montreal, Bell, as well as supporters and opponents to this transaction, made oral presentations in front of the commission to comment on this deal.

Opposition typically businesses, not individuals — except for TSN 690

Among the dozens of interventions delivered orally in relation to Bell-Astral, not a single one was from an individual Canadian who wasn't representing a business, association or other group with a stake in this merger. Individual presentations are fairly rare at the CRTC, because most of the cases in front of them don't affect individuals directly enough for them to take time out of their workday to make a presentation.

There were individuals presenting for a related application that had more direct implications for media consumers. Because the Astral acquisitions would give Bell one radio station above the CRTC's ownership limit in the English Montreal market, Bell applied to the CRTC to switch TSN Radio 690 (CKGM) from English to French to get around that. This decision angered the station's fans, and prompted 774 formal comments filed with the commission, most from angry listeners who didn't want their radio station taken away from them because of some bureaucracy's policy that they didn't understand very well.

In this case, a more direct impact on consumers meant much more engagement from ordinary people, even if only six interveners were scheduled to present at the hearing, and of them only three showed up to do so.

The larger Bell-Astral deal does have major implications for Canadian media and its consumers. Some are positive, others could be cause for worry.

The tangible benefits package and why CBC opposes it

CRTC policy dictates that when broadcast assets are purchased, a percentage of that purchase price (six per cent for radio, 10 per cent for television) be added on to create a "tangible benefits" package, a plan of spending on funds or projects that benefit the broadcasting system as a whole. Much of that money would be spent on new Canadian programming, which pleases independent producers.

But Bell's proposal also included some more controversial plans for its benefits package. The largest is a $40-million investment into the Northwestel network to allow it to bring broadband service to Canada's north. But Northwestel is a Bell subsidiary, and the CRTC has already mandated it to improve its network, so Bell's competitors blasted this plan as self-serving.

The plan also includes $3.5 million in spending for the Bell Let's Talk campaign for mental illness. Though no one can complain about a charity program, competitors said this was an inappropriate use of benefits funds because it's not a broadcasting venture.

Finally, there's a plan to create a new French-language all-news channel. This plan, which was not part of Bell's original proposal and was announced at the beginning of the hearing, would see an additional $20 million of this tangible benefits package used to help fund the creation of this channel, which would compete with Radio-Canada's RDI and Quebecor's LCN. This too was criticized as self-serving, particularly by the CBC, which didn't comment on the acquisition before the hearing but objected strongly to this surprise plan to use public benefits money to give an edge to a startup news channel.

In all, Bell's plan would put $240 million in projects and funds that help community radio stations, Canadian musicians and Canadian television programming, up from $200 million before the hearing.

Bell’s proposed market power

On the flip side of all that cash are worries from Bell's competitors about the power Bell would have if it gobbled up yet more broadcasting assets. They complain that Bell is already leveraging the popularity of sports channels TSN and RDS to impose carriage contracts that would force some distributors to impose those channels on all their customers, whether they want those channels or not. They say the acquisition would not only give Bell control of almost half of Canadian television viewing hours, but by giving Bell control over what it admits is its largest single content expense (mainly because of pay TV movie channels The Movie Network and Super Écran), its financial advantage would be too big to overcome.

Telus, Cogeco, Quebecor and others paint a picture in which Bell hikes the prices of its services, forcing them to either pay Bell more (passing those costs onto consumers) or refuse to carry its channels, which would cause subscribers to abandon those services and switch to Bell TV. It's a win-win for Bell, they say. This worry led to the creation of the Say No To Bell campaign by Cogeco, Quebecor and EastLink, which resulted in tens of thousands of signatures on a petition against the deal.

CRTC rules on market share

The CRTC has rules that govern how big companies can expand horizontally. They say that a single owner cannot have more than two FM and two AM radio stations in each market in each language. This means Bell would have to sell 10 radio stations to meet those limits (11 if the CKGM application is denied), and Bell has listed which stations (mostly lower-rated ones) it plans to sell.

In television, the CRTC rules say that an acquisition that results in one company having control of less than 35 per cent of television viewing in each language (as measured by audience share) would normally not be cause for concern, while a share above 45 per cent would normally not be allowed. Anything in between would be carefully scrutinized.

Bell contends that its combined share in English television would be 33.5 per cent, below that threshold. But Bell includes U.S. channels in its its calculations. Excluding those services, Bell's share goes up to about 40 per cent. Adding in minority and non-controlling interests in channels like Teletoon and Historia brings that number up even further, though the CRTC historically has not included minority interests in its calculations.

In French-language television, the combined share of Bell and Astral would be less than that of rival Quebecor. Bell's only French-language television assets are RDS and its related channels, while Quebecor dominates thanks to its TVA network. Bell has made increased competition with Quebecor one of the main arguments in favour of a Bell-Astral merger.

The decision before the CRTC

It's up to the commission to decide whether this acquisition is a good or bad thing for the broadcasting and telecom industries. If they're unconvinced it is, they could deny the application. That would leave most things where they are, except for a $150-million cheque Bell would have to give to Astral as a breakup fee. Bell has argued that Astral would then likely be sold to other players in pieces, probably resulting in job losses.

A ruling on the Bell-Astral merger and related application related to CKGM could take weeks or months, though CRTC chair Jean-Pierre Blais said they would work to get it done as quickly as possible. The commission could accept the purchase, deny it or accept it with certain conditions.


Steve Faguy is a Montreal editor and freelance writer who specializes in media. His blog can be found here.