THE BELL-ASTRAL DEAL 1
The Bell-Astral Deal
The idea of concentration and convergence in the Canadian media hasraised the feelings of different stakeholders with some opposing theidea while other believing that it would give the media a better edgeto address the issues in the society. For more than three decades,the country’s broadcasting regulator has been accepting millions ofdollars as corporate payments in exchange for permitting ever growinglevels of ownership concentration. The first public benefits paymentwere first accepted by the Canadian Radio-television andTelecommunication Commission (CRTC) in 1970, and it allowed for thetransfer of licenses (Bennett, 2011).
The media regulation works in compliance with the governmentregulations that outline the extent to which the media can report orinvestigate to avoid conflicting with the interests of thegovernment. Therefore, before the acceptance of the appropriatepayments from the members of the public, the benefits accruing to themedia house were only enjoyed by the buyers and the sellers withoutinvolving the public. The media houses had to accept offers from themembers of the public to trade in the public frequencies (Varon,2014). The size of the media corporation increased drasticallyespecially in the 21st century and the public benefits paymentsincreased to billions of dollars (Bennett, 2011).
Concentration in the Canadian media system intensified in the 21stcentury whereby a few media owners dominated the market (Demers,2003). The public benefits system continued to become self-serving,and its interest served the owners while turning a blind eye to thepublic. Bell Canada Enterprises emerge to take advantage of theshadowing public benefits system by offering 3.4 billion dollars topurchase Astral Media (Ellis, 2013). However, different stakeholdersprotested, and CRTC bowed to the protests citing that it would affectthe public interests of ownership concentration. BCE went ahead tooffer a benefits program of 241 million dollars, but the CRTC stoodits ground (Ellis, 2013). However, in 2013, the CRTC reviewed itsdecisions and allowed BCE to acquire Astral Media. In a democraticsociety, convergence and concentration should not be a domain of thegovernment and wealthy corporate owners but it should also includethe participation of the public (Ellis, 2013). This paper will lookat the appropriateness of the CRTC by accepting to permit BCE toAstral Media even after rejecting the bid in 2012.
The considerations made by the CRTC outlined the effects of allowingBell to acquire Astral Media. First, the move would catapult Bell tothe highest rate in radio ownership. The total number of radiostations under Bell would rise to 106 with revenue amounting to 500million dollars. The ownership would translate to 29% marketownership and control (Ellis, 2013). The company’s size wouldincrease to twice the size of its close competitors includingRodgers, CBC, and Shaw. Allowing the Bell’s idea to flourish wouldlead to concentration in Radio that had not been there for thepreceding 25 years (Ellis, 2013). The company’s share in thespecialty and pay television market would increase to 42% from itsinitial 28%. The threshold set by the CRTC restricted ownershipexceeding 35% from single individuals (Ellis, 2013). Although theresultant ownership was not extremely high for the body to reject itoutrightly, it was subject to further consideration to ensure that itdid not expose the other local companies to unfair competition andconvergence.
CRTC also provided information that the acquisition of Astral by Bellwould bring unnecessary competition. The body also outlined that itsexistence was not to make such motives impossible but then it had toconsider the thoughts of the various stakeholders. According to CRTC,BCE had a significant position in the Canada media industry ad it didnot need to expand further to compete with other internationalcompanies. Also, it suspected that other international and unlicensedcompanies were influencing Bell to seek the transfer of licenses. Toexhibit that it was an autonomous body working for the interests ofthe local citizens and the local industry, it rejected the Bell’soffer.
However, in 2013, CRTC reviewed its decision and gave Bell a greenlight to acquire Astral. In doing so, CRTC cited severalconsiderations that were for the interest of the owner, as well asthe third party and it did not err in allowing BCE to acquire Astral(Ellis, 2013). The regulatory has set of rules dubbed The Diversityof Voices. The rules became operational due to the rising concern ofthe media concentration in the country (Theckedath& Thomas 2012). The political systems believed thatregulating the number of houses controlled by one corporation wasnecessary to avoid undue dominance and competition. The regulationindicates that any media transaction that would result in a singlecorporate owner controlling more than 35 percent was not acceptable(Ellis, 2013).
Also, a transaction that fall within the range of 35-45% willincrease competition while an ownership above 45% would createconcentration (Ellis, 2013). Bell observed that CRTC did not clearlyoutline the methodological choices that establish the percentage ofownership since the Canadian media consists of television, print,radio, and internet media. According to Bell directors, theacquisition would not create unnecessary dominance in thebroadcasting industry.The biggest effect will be on the pay andthe specialty television market. A combination of BCE and Astralwould result in diversity in television broadcasts including 33.5%English and 24.4% of the French televisions (Ellis, 2013). Theconcentration, therefore, did not reach the threshold to cause alarm.Conversely, the huge amount of capital provided by BCE would injectresources in the Canadian media sector. The benefits would trickledown to the public through the delivery of efficient services.Although eh concentration threshold outlined by the CRTC was almostreached, the regulatory board was to review its decision consideringthat the acquisition would not result in heightened concentration.
Additionally, the Canadian media industry is very competitive withboth the local and international media competing for the audience(Attallah & Shade, 2002). However, some of the internationalmedia companies in Canada are not subject to strict regulations, andthey, therefore, have a better edge over the local companies(Meyrowitz, 1985). The acquisition of Astral by BCE would result in ajoint ownership, and this would give them a greater synergy andefficiency to compete with the international media companies. Thejoint ownership would benefit members of the public by offering themflexible programs on multiple platforms (Ellis, 2013). As mentioned,the convergence and concentration of media companies should not onlyserve the interests of the government but they should create abalance to accommodate the public interests. For example, some of themost competitive media including Apple TV’s iTunes, the GoogleYouTube movies, the Microsoft Zune, and crackle have the backing ofstrong companies with very little restrictions (Ellis, 2013). Theyentered the Canadian media without facing restrictions and heightenedthe competition. Therefore, it would be more appropriate if thecompetition rose from the local companies that operate on a similarplatform of rules and regulations rather than from internationalcompanies with autonomous regulations.
Allowing BCE to control about 38% of the total broadcasting platformswould only create local competition while simultaneously trying tomatch the services rendered by the international companies. Accordingto the CRTC threshold, a market dominance of 38% was not entirelyunacceptable but the body subjected it under review. Revoking itsinitial decision to deny BCE acquisition of Astral serves theinterests of the industry and the public. On the same note, as muchas Bell’s ownership of the radio stations was drawing towardsconcentration, the company had increased the number of publicbenefits by 20% (Ellis, 2013). Therefore, it interest would serve notonly its expansion but also the interests of the third party.
CRTC required a company to provide a minimum of 200 million dollarsin public benefits, and it acted as a restrictive barrier for somecompanies that would have opted for acquisitions. When BCE decided toacquire Astral, it had the requirement settled by increasing thepublic benefits to 241.3 million and it was 20% more than what theCRTC limit (Ellis, 2013). The company justified its inflated publicbenefits figure by cutting the economic benefit that it would reap ifthe deal went through. The company would be in a capacity to competeat the international level with other companies that had roots inother countries but operating in Canada. The stiff competition foraudience requires a company that has enough resources and asignificant level of dominance. Bell was working towards intensifyingits capacity and finding a competitive edge over it internationalcompetitors.
CRTC would not act in fairness if it held on to its initial decisionssince Bell satisfied most of its requirements. The company fulfilledthe common ownership provisions. Although the acquisition may nothave diverse effects on the television broadcast in the country,there is a likelihood of having significant effects on the specialtyand total television markets (Taylor, 2013). The CRTC standards showthat there is already high concentration in the specialty and totaltelevision broadcast. The increased ownership of Bell in thespecialty market from 26.6% to 42.2% is very high compared to that ofclose competitors like Shaw, Rodgers, CBC, and QMI. The shares ofthese companies in the specialty market are 32.3%, 10.7%, 4.1% and3.2% respectively (Ellis, 2013). Together, the five countries willcontrol 92.5% of the specialty television market. It makes Canada the12th country with the highest concentrated media market (Edge, 2013).
The consequences of these effects on the media industry were notdetrimental to warrant CRTC deny the Bell the right to acquireAstral. Although concentration is high in the country, the localmedia companies are facing competition from international companiesthat do not have to comply with the regulations of CRTC. Denyingcompanies the right to expand through acquisitions may not have beento the best interest of the public. The thresholds set by theregulatory body are standard, and every company that satisfies themdeserves to receive a license for operation except in cases whereCRTC points out other irregularities (Winseck & Federation,2013).
In conclusion, concentration and convergence are not the domain ofthe government and the media houses but they also involve theinterest of the public. An uncontrolled media expansion may result inthe dominance of a few corporate and unnecessary competitions(Theckedath & Thomas, 2012). The initial decision of the CRTC todeny Bell a chance to acquire Astral was in order since according tothe standards principles of CRT, an acquisition that would result ina dominance of more than 38% required further review. Dominance above38% translates to increased concentration and competition. In 2013,CRRTC revoked its decision and allowed Bell to continue with itsplans for expansion attaining an advantage over other internationalcompanies. The public interest has a place in the CRTC regulationthat requires companies with intentions such as Bell to contribute atleast 200 million dollars towards the public interties program(Theckedath & Thomas, 2012). Bell contributed 241.3 million thatwas 20% more than the minimum amount, and this indicated that thecompany also had the interests of the third part in check. Theintensifying competition in Canada resulting from the presence ofinternational companies may result in more mergers and acquisitionsfor companies to get the market advantage. However, the level ofconcentration may rise. Although the CRTC works for the interest ofboth the companies and the public, it might put the local companiesat a risk of unhealthy competition if it does not allow them toachieve the standards of the international competitors.
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