GATINEAU – The CRTC heard how the approval of Rogers Communications to acquire Shaw Communications’ broadcast assets will impact other organizations in Canada’s broadcast system on Tuesday during the second day of the Commission’s hearing into the matter.
“While the merger makes sense for Rogers and Shaw for their future, it has the unintended consequence of potentially all but destroying the independent broadcasting sector,” said Brad Danks, CEO of OUTtv and OMG Media Group, who participated virtually at the hearing as part of a panel (pictured above) representing Independent Broadcasters Group (IBG).
Danks argued if the deal goes through, Rogers will define the market and “will make or break every non-9(1)(h), independent English and Ethnic service in Canada.”
The IBG panel told the Commission the commitments Rogers made to help independents are appreciated. “The problem is these commitments unfortunately don’t sufficiently address independent’s concerns or meet the onus on Rogers to prove that this transaction will significantly and unequivocally benefit the broadcasting system,” said Peter Miller, who is acting as counsel for IBG during this hearing.
For example, while Rogers committed to providing a minimum of 40 independent discretionary services on each of its broadcasting distribution undertakings (BDUs) for three years, IBG proposed it carry 50 for five to seven years.
Rogers and Shaw already exceed the commitment to 40 independent services, Miller said. “Rogers said it carries 46 independent services, Shaw Direct, 47; Shaw does not exceed the commitment – it carries 38.” This is without counting Corus, Miller explained.
“At absolute minimum, this transaction should not make things worse than they were before,” he said.
The proposal is for five to seven years in part because that is the length of a typical licensing period. When asked by Commissioner Claire Anderson what happens at the end of the five years, Miller explained there would be an opportunity for the CRTC to review it.
Telus, during a separate presentation Tuesday, addressed the impact of the proposed transaction on the broadcasting system in Canada more generally, arguing Rogers has not sufficiently addressed the benefits of the deal or its potential harms.
The benefits of the deal as expressed by Rogers “are vague, unspecified, not legally binding, and are what any company would do in the normal course of business – indeed they will happen regardless of whether the merger proceeds or not,” said Stephen Schmidt, vice-president of telecom policy, and chief regulatory legal counsel at Telus.
He argued there “are structural defects of the application that existing regulatory safeguards cannot adequately address. Moreover, the assurances Rogers has given to the Commission are wholly insufficient and incapable of outweighing the harms the merger would cause to the broadcasting system overall, if approved.”
Of particular concern to Telus is if the deal is approved, Rogers would gain “the scale to secure exclusivity from foreign streaming services across Canada, at a time when foreign broadcasters are rapidly embracing online distribution in the Canadian market,” said Zainul Mawji (right), executive vice-president of home solutions at Telus.
She argued Rogers could leverage its pre-existing relationship with Comcast and “could buy the national rights to a foreign streaming service such as NBC Universal Peacock, which has 54 million US subscribers, is owned by Comcast, and is already integrated into the XFinity platform. They could make it available to their BDU customers, and only their customers.”
In this case, no other BDU could offer that content, and it would not be available for direct purchase. The rights would be expensive, but “would make economic sense when you use those rights to serve nearly half of the English-language market and use exclusivity to grow to 80% of the market,” said Mawji.
In response to questions from the CRTC panel members, Mawji explained another aspect of exclusivity is not based on contracts but on “practical, defacto outcomes in the market.”
The example she used was Disney+. Telus has been negotiating with Disney for access to the streamer, Mawji explained. When the merger between Rogers and Shaw was initially announced, “Rogers made a deal with Disney and Disney pulled out of our negotiations,” she said.
“This merger, if approved, will become the blueprint for further consolidation in the broadcasting and broadband industries.” – Zainul Mawji, executive vice-president, home solutions, Telus
They later said they would “do a deal with us but we have to step up to a very, very significant guarantee of revenue to them and we don’t have the subscriber base to do that. And so, they don’t want to incur the costs of coming onto our platform if they have access to a broader market and they don’t really need to have a second partner in the market if they have access to 80% of English-speaking subscribers in Canada.”
Telus also argued because of the scale Rogers will gain from the approval of the transaction, the company will “become a gatekeeper for Canadian programming services that operate in the English-language market,” Mawji said.
“If a programming service cannot secure carriage and reasonable packaging on the Rogers network, it will not be viable.” Rogers will be able “to dictate rates and terms of carriage for independent programming services, which will inevitably weaken those services. This is a structural problem to which there is no viable solution,” Mawji said.
“This merger, if approved, will become the blueprint for further consolidation in the broadcasting and broadband industries.”
Other intervenors including IBG and the Canadian Communication Systems Alliance (CCSA) expressed similar concerns as Telus on this.
“Now Rogers says not to worry because its programming services are subject to the CRTC’s safeguards… but we do worry, because those safeguards are not working now” – Jay Thomson, CEO, CCSA
The written interventions made it clear before the hearings began many organizations want more safeguards in place. This was reiterated in the presentations Tuesday to the CRTC.
“Without clear enforceable safeguards, this transaction will make things much worse – if it can be – for independents,” Danks said. “A combined Rogers/Shaw entity will set the market and, based on their current approach to independent services, it is going to be a choppy ride. The situation for many, if not most of us, is dire.”
Interveners indicated the current safeguards the Commission has in place including the wholesale code and dispute resolution provisions, are inadequate.
“Now Rogers says not to worry because its programming services are subject to the CRTC’s safeguards, namely the dispute resolution provisions and the wholesale code, but we do worry, because those safeguards are not working now. And since they’re not working now, they’ll be of even less help when Rogers is more than twice its current size,” said Jay Thomson, CEO of CCSA.
Several interveners indicated the Commission’s dispute resolution process is too slow.
“Time and again, CCSA has found ourselves across the table from the large, vertically-integrated programmers (and sometimes even the smaller ones), engaged in Commission dispute resolution processes that both the programmers and the Commission allow to run for months, even years – years in which the less powerful independent BDUs are forced to negotiate against themselves to conclude a deal so as to limit their retroactive liability or to launch new services in a timely and competitive way,” said Thomson.
“During those protracted processes, independent BDUs suffer real financial harm because they cannot recoup retroactive rate increases from their customers, but must eat the increases themselves,” he said.
Another issue brought up by the intervenors Tuesday was funding for Global TV.
While Rogers has made it clear funding previously allocated by Shaw for Corus’s Global TV will be redirected to the company’s own Citytv stations, Telus indicated it wants Rogers to be compelled to continue to provide funding to Global TV.
“The problem here is that while it’s the same $13 million, what happens when… Corus becomes independent, is they will then turn to the Independent Local News Fund to seek the same $13 million,” said Lecia Simpson, director of broadcasting policy and regulatory affairs at Telus.
This is more than half of the fund today, she told the Commission.
Chris Fuoco, vice-president of marketing and sales at Channel Zero, who appeared as part of the IBG panel, spoke about this from the perspective of a broadcaster that benefits from the ILNF. He told the Commission they are watching closely to understand the implications of an influx of new recipients of the fund on CHCH.
The fund “has been an important plank in the sustainability of that local news station,” he said.
The hearings resume Wednesday morning with a presentation by TLN/ECG at 8:30 a.m. MT/10:30 a.m. ET.
Screenshots taken from CPAC’s online feed.
