Rogers Communications Inc.'s future as a cable provider is threatened by BCE Inc.'s planned takeover of Astral Media Inc., the company told Canada's broadcast regulator Wednesday, because the combined entity would make it difficult for Rogers to offer its customers access to programming on anything other than televisions.
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Roger's executives said in order to keep its cable subscribers over the next five years, it needs to offer content on mobile phones, tablets and computers in addition to televisions. But if BCE owns Astral and its specialty channels such as HBO Canada and the Movie Network, Rogers told the Canadian Radio-television and Telecommunications Commission, Bell Media's "temptation to misbehave badly is just too great."
That means Bell would not allow Rogers to offer its subscribers any Astral programming on anything other than televisions, making it impossible for Rogers to launch new services and making it easier for Bell to lure customers away from the cable giant.
"It seems Bell wants us to guarantee the old model based on subscribers and advertising revenue while they start new businesses online and in mobile," said David Purdy, senior vice-president of content at Rogers. "Subscribers want content that follows across all of their devices. Roger is a linear television provider, but we could be in big trouble by 2017 if that's the business we stay in. We need to secure other rights."
Earlier in the week Bell said current regulations prevent this from happening, and that it wouldn't make any sense for the company to hoard content it spent billions to acquire for the sole purpose of redistributing.
"Despite our best efforts, content costs are going up," chief executive officer George Cope said Monday. "Global players are bidding for content. The ability to combine our buying capital is strategically important to keep costs lower in Canada. Having enough scale to buy that content is one of the many reasons [Astral and Bell] came together on this transaction."
The CRTC is holding a week-long hearing into the deal, which BCE outlined in detail Monday. The transaction would leave the company's Bell Media division with control of more than 100 radio stations and almost 90 television channels. The commission could approve the deal, amend it or kill it outright.
Competitors are concerned that because Bell both owns content and a network, it will use its heft to negotiate higher prices from its competitors and make it difficult for them to take Bell content and offer them to their customers on other devices. Rogers used the example of mobile video, saying Bell asked Rogers to pay a number in the "double digit millions" for access to CTV programming at a time when Rogers hadn't yet secured a single customer for its service.
"That was for some specialty channel content and the main CTV network," Mr. Purdy said, adding the price has been lowered to $3-million recently in a verbal offer. "The upfront guarantee and fee was prohibitive to us a year ago."
Mr. Cope said competitors simply don't want to pay for mobile content, and that his company "couldn't be more excited to sell to Rogers and Telus."
"If access to that content isn't worth $3-million then we don't have a mobile business," Mr. Cope said.
Mr. Purdy said Bell, which also launched a mobile service that allows its customers to watch television on their phones, "used the oldest trick in the book" by starting with a high price and gradually whittling down its demand once its own business was established.
"By this point they have 18 months of exclusivity to exploit their access to content and suck up all of the customers who care about this and their competitors are left to pick up the crumbs on the table," Mr. Purdy said.
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