09/11/2012 09:44 EDT | Updated 11/11/2012 05:12 EST

Bell-Astral Merger: Quebecor Takes Aim At Deal, Tells CRTC It Can't Be Allowed

MONTREAL - If Bell succeeds in its $3.4-billion takeover of Astral Media it will mark a "point of no return" for Canada, one of the telecom giant's chief rivals told a regulatory hearing Tuesday.

Accusing Bell of "arrogance" and "domination," Quebecor president and CEO Pierre Karl Peladeau said Canada will have one of the highest levels of media concentration if the deal goes ahead, changing the landscape for all other players.

"If it were to be accepted, it will mark a point of no return for the future of telecommunications and broadcasting in Canada," Peladeau told a CRTC hearing into the deal.

"We're going to create a marketplace that's going to be driven by a monopoly mindset and this is going to be bad for consumers and bad for all Canadian citizens," he told reporters after his remarks.

The deal, announced in March, aims to create a media powerhouse that's poised to take on rivals in providing digital content to consumers through online services and mobile devices like smartphones and tablet computers.

Astral is Canada's largest pay and specialty TV broadcaster and owns 84 radio stations in 50 Canadian markets and 24 television services, including pay TV.

CTV — which Bell owns — operates more than 25 TV stations across the country, 30 specialty channels including sports networks TSN and RDS and more than 30 radio stations throughout Canada.

Bell (TSX:BCE) has told the hearing that with the acquisition of Astral (TSX:ACM.A), it will own 33.5 per cent of the English language television viewing market and 24.4 per cent of the French-language market.

That's under the 35 per cent threshold set by the CRTC for approval, but BCE's competitors dispute that figure and say it is higher.

However, Calgary-based Shaw Communications (TSX:SJR.B) came out in favour of the deal on Tuesday.

Shaw president Peter Bissonnette said the real threat is online services like Netflix and Apple TV, not bigger Canadian players.

"There is no doubt that the proposed acquisition will make Bell bigger than it is today," Bissonnette told the CRTC.

"We urge the commission to support our efforts to respond to the real competitive threat to the system — unregulated, foreign (over the top services) like Apple, Google, Amazon and Netflix."

Shaw has already launched an all-you-can eat movie "club'' to combat the popularity of online competitor Netflix, an effort to keep its TV subscribers from cutting the cord.

Peladeau kept his sights focused on Bell. He said Bell's pan-Canadian media ownership would be well above the accepted level of 35 per cent of the English-language television viewing market.

"This proposed transaction has an alarming number of precedents that no other western country, concerned with diversity, competition and democracy will have ever have faced," Peladeau, speaking in French, told the hearing.

"The impacts of such a domination would be multiple and would allow the suppression of all competition. It would be felt notably on the ability to acquire programming because no other Canadian enterprise would be able to compete against the power of Bell."

Even if the CRTC were to impose conditions, Bell would try to find ways to get around them, Peladeau charged. Bell has already effectively taken control of Montreal-based Astral, he said.

"Arrogance has no limits for Bell's leaders."

Quebecor — one of Bell's chief rivals which dominates the Quebec French TV market — owns 8.4 per cent of the Canadian viewing market, he said.

Peladeau said its Groupe TVA has more than 23 per cent of the Quebec market, while its specialty TV channels have a bit more than seven per cent.

Quebecor (TSX:QBR.B) has joined Cogeco Cable Inc. (TSX:CCA) and Eastlink to launch a campaign to oppose the deal, which they say would give Bell too much control over the country's broadcasting landscape.

Internet, phone and TV services company Eastlink said the threat of Netflix and others like it isn't the issue. Negotiating with Bell for content is the chief concern, said Natalie MacDonald, vice-president of regulatory matters at Halifax-based Eastlink.

"What we're here to voice is our serious concerns about them growing bigger in the content industry when we need to negotiate directly with them as a supplier."

Bissonnette told the CRTC that Shaw, Bell and others will ensure that Canadians are watching Canadian content on multiple platforms. He said Shaw wants the deal approved without additional rules or safeguards imposed by the CRTC.

"Shaw is concerned that more regulations at this time would stifle innovations, chill investment and reduce consumer choice."

He said even though Bell will get bigger if the transaction goes ahead, Shaw will "meet this domestic competition head on."

Shaw has 31 per cent of the Canadian TV market, including U.S. channels, he said.

The Bell-Astral deal would bolster Bell's French language content in Quebec and will see an all new French language news service launched in Montreal.

On Wednesday, major telecom players Rogers (TSX:RCI.B) and Telus (TSX:T) are scheduled to appear before the CRTC as well as major cable provider Cogeco (TSX:CGA).

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