CRTC rejects Bell’s Astral takeover

CRTC rejects Bell’s Astral takeover

The Canadian Radio-television Telecommunications Commission (CRTC) denied Bell Canada Enterprises’ proposal to buy Quebec company Astral Media’s radio and television services last Thursday, costing Northwestel $40 million it had planned to use to expand services.

“We had really been hopeful that through the Astral deal, (the money) was going to allow us to make a step function change all across northern Canada, to bring next generation wireless broadband to every community,” said president and CEO of Northwestel, Paul Flaherty. “Unfortunately, with the deal not proceeding, we’re going to have to scale back those plans.”

In Canada, when a telecommunications company bids to take over another, decreasing competition in that sector, the federal government requires the company – in this case industry giant Bell – to pay a sort of tax back to the system. This fee is referred to as “tangible benefits” and is required by the CRTC to flow to third parties, like smaller competitors or Canadian broadcast content generators. The idea is to balance the harm done to the system as a result of less competition between companies.

As part of its acquisition of Astral Media, Bell proposed a tangible benefits package that included money for its subsidiary in the NWT, Northwestel, destined for system upgrades that would increase Internet accessibility in remote communities, but the CRTC found Bell’s proposal lacking and denied the merger.

Northwestel was ordered to come up with a modernization plan by the CRTC in Dec. 2011, before the Astral deal came before the commission. The company subsequently announced a $273 million investment in July 2012. That plan, minus the $40 million from the failed Astral deal, will be under review shortly when the CRTC begins a structural analysis of Northwestel later this fall.

“We’ll have to go back and look at the plan. The CRTC was talking about traditional telephone service, but many of our customers want next generation wireless service,” Flaherty said. “The predicament we face is that we won’t be able to get to every community if we don’t have that $40 million. The unfortunate thing is that the smallest ones, the ones that aren’t economically feasible to serve, are the ones that will likely get dropped.”

Dean Proctor, chief development officer at Northwestel’s competitor SSi Micro, was part of a delegation from the territories who protested the Astral deal at the CRTC hearings in September, claiming that Bell giving its NWT subsidiary $40 million for system upgrades did not meet the “tangible benefits” test whereby money must flow to third parties. SSi argued that Bell was paying itself.

“We’re relieved that the right decision was made,” Proctor said. “It means that we can focus on what matters here. This was sort of a sideshow and a major distraction taking away from what really concerns the North.”

Proctor cautioned that while Northwestel put a lot of emphasis on the $273 million figure (now $233 million) earlier this summer, it’s part of a plan that has yet to be approved by the CRTC and will be examined in the upcoming hearings.

SSi will be part of a group of companies and consumers’ rights advocates to speak to the CRTC again about the current state of telecommunications in the North, focusing on what Northwestel charges for use of its backbone infrastructure.

“We’ll be a very active participant,” Proctor said. “We believe there needs to be solutions for affordable backbone for all consumers and, for that matter, all service providers in remote communities. None of that, from what I see, is addressed in the modernization plan.”

The CRTC hearings will also be an opportunity for consumers to air their concerns about the current Northwestel system. Proctor believes there will be no shortage of complaints.

“We see a lot of problems with how communications have been offered in the North up to date,” he said.

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