CRTC Approves Bell/Astral Merger, Acknowledges High Concentration Problems Moving Forward

| June 27, 2013

The CRTC issued Broadcasting Decision CRTC 2013-310 today, in which it approved the merger of Canada's largest and most heavily integrated communications company (Bell) and Canada's last significant independent (and non-integrated) broadcaster (Astral). In its submissions to this proceeding, CIPPIC called on the Commission to refuse the merger a second time, pointing to a number of flaws in the current regulatory framework that a merged Bell/Astral could exploit in order to harm competition and innovation in Canadian services. Specifically, CIPPIC was concerned post-merger Bell will drive up costs, limit online innovation by centralizing online distribution and restrict customer choice by constraining program packaging. Averting these harms and preserving the public interest in the face of a highly concentrated Bell/Astral will require a more invasive regulatory approach than provided by the Commission's current vertical integration toolset, which relies heavily on flawed dispute resolution mechanisms.

While disappointingly approving the merger, the Commission acknowledges the need for some form of "additional oversight" in light of "BCE's increased ability to act in an anti-competitive manner." Further, it expressly states concerns over online innovation:

that BCE’s market position relating to multiplatform rights could permit it to act as a “gatekeeper,” effectively preventing other distributors from offering services to their customers until BCE has decided to offer such services on its own platforms. The Commission is concerned that this could stifle innovation and limit the growth of digital media in Canada.

However, the Commission appears to adopt a 'wait and see' approach to many of the challenges in question, noting, for example, that it will explore new dispute resolution mechanisms on a 'case by case' basis and in other instances expressing 'expectations' that Bell will not act in an anti-competitive manner, without specifying how it will monitor or enforce these expectations.

A particular queston left open is how the Commission will secure the public interest in future transactions. The current mechanism relies on a form of dispute resolution -- final offer arbitration -- which allows the Commission to choose between two offers provided by negotiating parties. This method prevents the Commission from imposing any of its own terms or conditions, even if such conditions are necessary to secure the public interest. As CIPPIC submitted in the proceeding, this method does not allow for proper resolution of the numerous and nuanced issues inherent in such negotiations, as it forces 'all or nothing' choices between one party's offer and another. As noted above, the Commission signalled its willingness to move to other forms of dispute resolution, where necessary, but did not make clear what alternative forms of dispute resolution might adequately represent the full spectrum of public interest concerns in such negotiations.

In addition, while the Commission signals an intention to preserve online innovation and customer choice, there are ongoing questions as to how this will happen. The Commission expresses 'expectations' that Bell will not abuse its market power in ways that hinder competitors from creating innovative online distribution platforms. It also obligates Bell not to impose terms that will "force distribution of a service on the basic tier or in a package that is inconsistent with the service's theme or price point", signalling its concern over reports that Bell's distribution offers force compatitors to choose between excessively high prices or excessively restrictive packaging arrangements. However, it is not clear how these conditions will be enforced. Indeed, with Astral (the last major non-integrated programming entity) gone, it is not even clear how the CRTC will monitor for anti-competitive activity, as the Commission will have no frame of reference for what 'fair' market offers should look like when provided by programming distributors who are not acting under vertically integrated incentives.

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Tamir Israel, Staff Lawyer, CIPPIC