Aussie rules eyed for media mergers

by Grant Robertson, Globe and Mail

In the aftermath of three major takeovers in the Canadian broadcasting sector, federal regulators appear poised to consider revamping the rules on media consolidation, using a system pioneered last year by the Australian government.

A proposal has been made to the Canadian Radio-television and Telecommunications Commission in advance of public hearings next month, asking the regulator to look specifically at the Australian process and whether it should be applied to Canada.

Details of that system, which was put in place in 2006 ahead of the Australian government's move to loosen ownership restrictions on media assets - while also maintaining diversity in the market - are contained in a report submitted to the CRTC, which is now being scrutinized by regulators.

Sources in Ottawa indicate the document has been received favourably and the CRTC is now considering whether to make Australia's reforms a key piece of the upcoming hearings into new rules on Canadian media consolidation.
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Those hearings, which will look at the diversity of voices in the broadcast sector, are set to begin Sept. 17 in Gatineau, Que.

The CRTC called those hearings after a trio of blockbuster media deals began reshaping the landscape of the broadcasting industry, starting last summer with CTVglobemedia Inc.'s $1.4-billion takeover of CHUM Ltd. That was followed in January by the buyout of Alliance Atlantis Communications Inc. by CanWest Global Communications Corp. and Goldman Sachs Group Inc. for $2.3-billion. Then in February, Astral Media Inc. announced it was acquiring radio giant Standard Broadcasting Corp. Ltd. for $1.1-billion.

CRTC chairman Konrad von Finckenstein acknowledged this year that each of those deals would have to be evaluated by the regulator under existing rules on media ownership. However, the upcoming hearings will debate whether a new regime is needed to guide the industry in the future.

In Australia, media concentration is now measured using a points system in geographic markets, which the government designed to be simple for companies and industry groups to calculate.

Each media operation in a given market - including newspapers, commercial TV stations and radio stations - is worth one point. If any company owns multiple outlets, however, its collection of media assets are only worth one point combined.

If a particular market in Australia is found to have less than five points in total, it is deemed to have an "unacceptable media diversity situation." In smaller, non-metropolitan markets, the threshold is set at four points.

As well, if any single person or company controls a TV station, a radio operation and a newspaper within a given market, that is considered an "unacceptable three-way control situation."

Australia's government reserves the right to prevent future media deals in any market it considers to have an unacceptable ownership situation.

The potential for applying that point system to Canada has been raised in documents submitted by the Canadian Film and Television Production Association (CFTPA). However, sources close to the CRTC suggest Mr. von Finckenstein has already spent recent months independently familiarizing himself with the process in Australia.

Sources say he has viewed the Australian market as a possible blueprint for Canada before, during his time at the helm of the federal Competition Bureau between 1997 and 2003.

Trade reforms in the 1970s that were designed to prohibit anticompetitive behaviour in Australia were scrutinized by Mr. von Finckenstein while at the Competition Bureau.

The CFTPA, which represents nearly 400 film and television production and distribution companies, commissioned Nordicity Group Ltd., a consulting firm, to study the Australian method. That report has also been sent to Mr. von Finckenstein.

When the Australian points system is applied to Canada, Nordicity determined several cities do not meet the acceptable threshold - including Vancouver, Montreal, Toronto and, potentially, Calgary. Future consolidation would be prevented in those cities if the process was adopted in Canada.

"The application of Australia's points system to seven Canadian media markets shows that the approved and proposed merger transactions should raise serious concerns about cross-media ownership and media diversity," Nordicity said.

During regulatory hearings to probe the takeover of CHUM, executives from CTVglobemedia said consolidation in the media sector is happening "out of necessity, not only in Canada but throughout the world." Broadcasters are under increasing pressure as audiences splinter amid competition from new media such as the Internet, they argue. (CTV is owned by CTVglobemedia Inc., which is also the parent company of The Globe and Mail.) Since 1999, the CRTC has been faced with 33 transactions of various sizes to transfer ownership or control of English television operations in Canada, representing $4.6-billion worth of deals. "Clearly this represents a significant level of ownership consolidation," CFTPA said.

"Following the closing of these transactions, there will be fewer doors to knock on for producers to license programs and the existing imbalance of power ... will tilt further in the already dominant broadcasters' favour."

article originally published at http://www.theglobeandmail.com/servlet/story/LAC.20070806.RCRTC06/TPStory/Busine....

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