President and CEO of Bell Canada Enterprises (BCE) George Cope looks on before the annual general meeting in Toronto on Thursday, May 7, 2009.
BCE Inc. wasted no time sending a message to the industry about the TV shows and sports broadcasting rights it now owns: Its content has value, and the telecommunications giant expects its competitors to pay for it.
BCE closed its $1.3-billion deal on Friday to buy the CTV network and its portfolio of radio stations, websites and specialty television channels such as TSN. Within hours of getting its hands on those assets, the company's new Bell Media division launched a paid subscription service of television shows for mobile devices. It also signalled that it will ask competing cable and satellite providers to pay for access to the flagship CTV network - a reversal of the company's position on the subject.
Broadcasters such as CTV have battled for years with television distribution companies over whether the latter should pay fees to carry channels that are available free over the airwaves. A year ago, the CRTC decided that broadcasters could negotiate with providers for those so-called "value-for-signal" fees. At the time, Bell joined Rogers Communications Inc. and others in opposing such payments, raising fears that the result would be higher cable bills for Canadians.
But buying a broadcaster has changed BCE's tune in the debate. "The conventional TV model is better served through value-for-signal, and now that we own the business there's clearly no doubt about that," BCE chief executive officer George Cope said in an interview. He said Bell will not pass to consumers the cost of the extra fees it will pay to carry other companies' conventional networks on its own TV distribution service.
The moves provide the clearest indication yet of how the country's largest telecommunications firm plans to make its deal for CTV pay off. It is the second time in 11 years that BCE has bought control of the network, but this time, the company's bet is that the proliferation of smart phones and other mobile devices that can show video will provide extra revenue opportunities to justify the purchase.
The new Mobile TV package offers video content for smart phones and tablet devices, and includes the company's newly owned specialty stations: Business News Network, CTV News Channel, MTV, TSN and TSN2 and the French-language sports channel RDS, and The Comedy Network. Mr. Cope suggested on Friday that Bell will soon expand the mobile TV options that already exist on its phones to include the new package. Competing wireless providers who are willing to pay for the package will be able to offer it on their mobile devices.
"We think it's going to be really positive for that business, and positive for the wireless business - Bell's, but also for the [wireless]industry," he said. "I would imagine other competitors to Bell Media will start to launch other channels, and hopefully the carriers will all be part of how we think the industry will evolve."
Last month, when the federal broadcast regulator approved the BCE-CTV acquisition, it also shackled Canadian telecommunications companies by ordering a moratorium on exclusive deals for TV content on mobile devices. At least for now, that means Bell cannot offer the TV shows it owns on its mobile phones without offering it to competitors. It also cannot approach other content owners to buy exclusive rights to video for its mobile network, as it has done in the past with the National Football League, for example.
The Canadian Radio-television and Telecommunications Commission will hold a set of hearings in June to discuss the fact that all of the country's private broadcaster networks are now owned by Internet and TV providers. The commission will discuss how it should approach programming on new platforms such as phones, tablets and other mobile devices, and will not lift the ban on exclusive mobile deals before those hearings are finished.
Mr. Cope said he was taking that decision in stride. "I believe everyone in Canada will ultimately watch mobile TV on their tablet or device. It may not be in 2011, '12, '13 - but … in five years, everyone will have a mobile TV subscription. And our BCE shareholders … will be the benefactors of that, through the media ownership, and through our leadership position in wireless. It's a long-term win."
Desjardins Securities analyst Maher Yaghi believes that at the time of the deal, BCE was hoping it would be able to make its content exclusive for its own mobile devices. However, he said the CTV acquisition was not motivated by mobile content alone. The larger its satellite TV and Internet protocol television (IPTV) service grows, Mr. Yaghi said, the more valuable it will be for BCE to control some of the specialty channel content such as TSN that it would otherwise have to pay to include in its TV packages.
"By controlling the biggest content available, you're keeping more of that cash inside the company," he said.