Shock! Outrage! And other cool facts about the Bell fiasco

[Was supposed to continue from Oct 15 post on Ms Motzney…] 

What you’ll find in this post instead:

  1. The Bell/Astral decision is (virtually) unprecedented
  2. “Public” benefits now refers to “we the public” – not just dudes who make TV shows
  3. Cabinet won’t intervene
  4. Consumer-loving Bell shocked and outraged

CRTC watchers eat crow. Don’t you hate it when the world changes faster than you can write about it? Thursday’s triumph over Bell is wonderful for consumers; for the thesis I was developing here, not so much. The comments I’ve read – Geist (This Is Not Your Parent’s CRTC); Cartt (CRTC says “Non!”); the Globe (Ottawa says it can’t intervene in CRTC’s BCE-Astral decision); etc – all indicate the Astral decision shows Chairman Blais really does intend to build a consumer-oriented CRTC. I trust he will understand why industry watchers, present company included, had been pretty much unanimous in predicting he’d never, ever turn down Bell on this acquisition.

Before I proceed any further with general comments on the CRTC and consumer welfare, here are four items related to the decision worth considering…

1 → The Bell/Astral decision is (virtually) unprecedented. The Commission hasn’t turned down a licensee acquisition unconditionally since 1997. But that transfer of control was peanuts compared to Bell/Astral: Vidéotron applied for permission to acquire two Montreal-based TV services, CFCF and TQS, and was turned down (thanks to Greg and Co at Cartt for that factoid). I often tell my students the CRTC and FCC never turn down billion-dollar acquisitions; they put them through with conditions, like mandatory divestiture of certain holdings. Not any more – even in the US.

In case we start hearing from Bell or the other incumbents about how this kind of heavy regulatory hand discourages investment, check out Harold Feld’s post explaining how the FCC’s “heavy hand” – evident e.g. in denying another multi-billion-dollar merger this year (AT&T and T-Mobile) – has had the very opposite effect. Namely, it has spurred investment. Feld is writing about the very ideology that has regularly screwed the consumer in past CRTC decisions: the “market forces” mantra enshrined in the 2006 Cabinet Direction to the CRTC. See Feld’s post at Tales of the Sausage Factory: “How Antitrust Enforcement And Pro-Competitive Regulation Encourage Investment, Encourage Innovation, Enhance Spectrum Efficiency And All That Other Good Stuff Despite CW To Contrary.” Great minds think alike. (Feld is Senior Vice President of advocacy group Public Knowledge. And wickedly funny.)

Btw, the Bay St banking club has already let the cat out of the bag on the neo-con bullshit about how “heavy-handed” regulation that “interferes” with market forces kills investment. Au contraire. As part of the shock and outrage going around town, we hear from a Scotiabank analyst that this decision is terrible news for a couple of reasons. Here’s the interesting one, from Jeff Fan, via a Cartt story:

“The number two reason this is negative for BCE is that we believe Astral’s cash flow would have been an important source of funding for Bell’s Fibe roll-out. Without Astral FCF to support wireline capex, BCE may not be able to accelerate its fibre expansion and leave more of Bell’s territory vulnerable to cable competition. Otherwise, it may have to raise its capex intensity to accelerate the rollout” (my emphasis).

I assume “raise its capex intensity” is what they say in MBA school to mean “increase capital expenditures.” What Fan is saying is that by regulating Bell in such a way as to contain its already abundant market power, the CRTC is pretty much obliging Bell to spend its own money to improve performance on its retail Internet access networks. Yowza! And making it vulnerable to competition, oh, Jeff, say it ain’t so. Bell should tell these guys to shut the fuck up before they ruin everybody’s weekend. (I note in passing that under the CRTC’s ITMP régime, ISPs are required to solve network capacity problems by turning to investment first – before resorting to either so-called economic measures, like data caps, or technical measures, like throttling. I’ve written previously about the many serious problems with this régime… but that’s what it says in Telecom Regulatory Policy CRTC 2009-657.)

2 → “Public” benefits now refers to “we the public” – not just dudes who make TV shows. Not many people may have noticed this detail, even though it’s one of the boldest parts of the decision. As Geist put it in his post Thursday:

While demonstrating that the transaction is in the public interest is always the language used in these proceedings, the CRTC has in the past focused on the tangible benefits package (ie. the multi-million dollar payments to creator groups) as the primary proxy for public interest. No longer. The CRTC’s focus today is unequivocally on the broader public interest with consumer impact the leading concern.

I call this bold because creator groups like ACTRA, the CMPA and the Writers’ Guild are highly organized, vocal and very insistent they deserve all the loose change on the table, because they’re doing God’s work – making Canadian content. More kudos to the Chairman for not handing us the easy rationale: that BCE’s benefits package was defective for technical reasons, like not enough of their money would show up on the screen. The decision prompted an intriguing reaction from one of the usual recipients of the old-school public benefits. That would be Ferne Downey, ACTRA’s National President. In their press release she is quoted as follows:

Given the stakes of this proposed transaction and the impact it could have had on the Canadian media landscape we respect the Commission’s desire to see that the Canadian public’s best interests are being looked after. We trust their analysis of the transaction and defer to their decision to maintain the status quo, for now.

Evidently they just couldn’t resist the “for now” wisecrack. Not surprising. The press release confirms what I’ve long been saying about how the creator groups view the public benefits: they belong to them, not the public. ACTRA goes on to make this observation about BCE’s benefits package and why it was wanting:

Besides being underfunded, as a result of BCE’s decision to exempt Astral’s minority stake in a number of specialty channels, the benefits package failed to meet the standard of having 85% of benefits monies flow to onscreen initiatives.

Okay, maybe wrangling over the 85% threshold is not entirely out of line. But in the next breath, ACTRA offers an additional and really foolish criticism of BCE’s alleged benefits:

BCE proposed to spend benefits monies on initiatives that served their own corporate interests and not those of the Canadian public, such as earmarking $40 million to subsidize Northwestel’s “Modernization Plan” that would have seen the expansion of wireless broadband services throughout the North.

Oops. Leaving aside the question as to whether building out connectivy in the North would have been self-serving, ACTRA apparently believes spending money on getting more Canadians on broadband is not in the interests of the Canadian public. First of all, getting more access and more bandwidth out to more Canadians is absolutely in the public interest. To suggest that doing so is throwing money away – instead of spending it on making TV shows – is not a smart position to take on such an important policy issue. But saying so is also tantamount to shooting themselves in the foot. The millions of Canadians who aren’t on broadband will be less and less able to consume the very products ACTRA likes to promote, as more and more of them move to Web platforms and IP networks.

(In a pair of lengthy posts in June 2011 concerning the Netflix/OTT kerfuffle, I wrote about ACTRA’s role in trying to keep “unfair” video competition off the TV and computer screens of the nation. ACTRA and its sister organizations want the Internet regulated and treated like any another delivery platform, optimized for their members. Sorry, folks, but the Web is not just TV on downers and not yours to make part of the broadcasting system. Moreover, ACTRA then, as now, doesn’t seem to get when it’s undermining its own members’ interests. In that 2011 post, I noted how wrong-headed it was to slam simulcasting, since simulcasting is one of the key mechanisms that put big chunks of cash into the hands of broadcasters, which the CRTC then redistributes to Canada’s creative community through conditions of licence that require broadcasters to acquire independently produced TV programming. See postGet yer grimy paws off my Netflix: Ottawa’s big OTT scam – scroll down to Exhibit C: ACTRA).

3 → Cabinet won’t intervene. What now? Somebody at Bell must have really pissed off Harper, because they got the boot at PMO before the ink was dry on the decision. Only they forgot to tell Bell, which issued a really classy press release about the decision, headlined Bell shocked by CRTC rejection of Astral transaction, requests Cabinet intervention. Shocked, I tell you, shocked. Bell starts the release with three bullet points, the first of which is: “Bell will ask federal Cabinet to issue direction to CRTC to follow its own regulatory policy.” Clever litigator’s offence – tell the opponent they’re breaking their own rules. The problem, however, is that the door to the putative political court of appeal (Cabinet) has already been slammed shut in Bell’s shocked face.

I hate to depend on a newspaper report rife with typos, but here’s what the Globe says online:

A spokesman for Canadian Heritage Minister James Moore said the government doesn’t believe it has the margin of manoeuvre to override the CRTC’s decision. “CRTC decisions are made independent of the government of Canada,” said press secretary Sebastien Gariepy said. “Cabinet has no legal ability to overturn this decision.”

Baloney. Harper’s crew is hiding behind a pseudo-legal defence to protect itself politically on two fronts. First, Harper doesn’t want to be criticized again for “interfering” with the decisions of an arm’s-length agency, the way he and Tony Clement were over the CRTC’s absurd UBB decision – which, coincidentally, was going to hand Bell Canada everything it needed on a silver platter to expand its price-gouging of Internet access subscribers (see Usage-based billing for Gateway Access Services and third-party Internet access servicesTelecom Decision CRTC 2011-44, January 25, 2011). When that decision blew up in Chairman von Finckenstein’s face, I wrote a post not devoted to the failings of his position for using sheer volume to meter wholesale bandwidth, not to mention his specious beliefs about bandwidth hogs and network traffic congestion.

Instead, that post – Clement, arm’s length and really bad broadband policy – was devoted to my attack on the bleeding hearts who insisted Cabinet simply couldn’t over-rule the Commission. Not so. Moreover, there was a very compelling substantive reason for Clement’s tweets and the PM’s pronouncements about the Commission’s take on UBB: it was a terrible, anti-consumer policy, based on phony assumptions about the need for data caps. In other words, I’m alleging the PM doesn’t want that particular pile of doo-doo to hit any fans in his vicinity.

There’s a second and related motive at work here. The furor over UBB – starring our friends at and their half-million-signature petition – gave Harper and his cronies a free ride on the pro-consumer bandwagon, one that was and is entirely undeserved. If you look back e.g. at the original version of the Tory framework for a digital strategy (which we’re still waiting for), you see it’s all about serving the business constituency; consumers are competely ignored. Not that this kind of inconvenience would stop an ambitious neo-con like Harper. So my second theory is that the PMO smarties are advising behind closed doors not to stir up a hornet’s nest by intervening on this decision. By taking a pass, the government gets another free ride – in the negative sense that it’s not seen to be coming out against a decidedly pro-consumer decision that many Canadians are clearly happy about.

4 → Consumer-loving Bell shocked and outraged. George Cope has had to put on quite a show in response to Thursday’s corporate calamity. A collective conniption fit of the kind mounted by Bell is usually intended for shareholders and potential investors, along with the Bay St analysts, whose research notes can make life very uncomfortable for senior management at publicly traded companies, as we saw in connection with Scotiabank’s Jeff Fan (in section 1 above). One thing that’s got Cope riled up is the prospect his shareholders may, among other things, miss out on the 5% bump in their dividend next year (yes, my Cope cartoon is based on real life).

Life is too short to spend a lot of time on a textual exegesis of the kind of press release Bell issued Thursday evening. One thing I’d point out is that in this 1200-word document Bell uses the word “consumer” 11 times. Is that a lot? Well, if this were a contest, Bell would have beaten the CRTC at its own game: its much longer decision – already famous for its stunningly pro-consumer perspective – uses “consumer” a mere 10 times. That’s one of the remarkable things about contentious institutional discourse. The parties all know the consumer love-in is make-believe. Cope and Bibic know it, we know they know it, and they know we know they know it. Check out these six excerpts from the release:

Bell is appalled that the CRTC would come to a decision that so negatively impacts Canadian consumers. … Canadian consumers were told today by the CRTC that they don’t deserve more … The wide-ranging benefits to Canadians of the transaction are clear … Considering the dire impact the CRTC’s decision will have on consumers in communities small and large … French-language consumers have been robbed of a planned national French-language news service … Consumers across the country are denied a stronger homegrown voice able to compete with unregulated U.S. TV channels and Internet OTT broadcasters …

Holy moly, can you believe this shit? My favorite is the last blurt: Canadian consumers are going to be hurt because Bell will be less able to penalize them for watching too much competing video content from un-Canadian suppliers like Netflix. Long-suffering customers have been praying Bell will lower their data caps so as to push them back to consuming whatever Bell Media is peddling this week. That would be such a relief to the more than 10% of Canadian adults who, in a moment of moral weakness, have subscribed to Netflix (full disclosure: God yes, I’m one of them too). Please, Mr Cope, kill those unregulated US services before I lose my sense of decency, my Canadian soul and my passport.

“I’ve come to suck the soul out of your culture and take your money too”