ARCHIVED -  Decision CRTC 97-149

Decision

Ottawa, 15 April 1997

Decision CRTC 97-149

ExpressVu Inc.

Across Canada - 199618063

Change of control

Following Public Notice CRTC 1997-10 dated 22 January 1997, the Commission approves, by majority vote, the application for authority to change control of ExpressVu Inc. (ExpressVu), licensee of a national direct-to-home (DTH) satellite distribution undertaking, through the transfer of 31.173% of the voting interest of ExpressVu from Chantal Corriveau, trustee on behalf of BCE Inc. (BCE), to BCE.

BCE is one of Canada's largest companies. It has significant interests in telecommunications, including ownership of Bell Canada, the largest Canadian telecommunications company, and a 58.5% interest in Telesat Canada Inc. (Telesat), Canada's sole domestic supplier of satellite transponder space.

This application for a change in effective control results from the acquisition by BCE of the ownership interest in ExpressVu previously held by Tee-Comm Electronics Inc. (Tee-Comm), an initial shareholder, and from the issuance of additional equity to BCE resulting from capital injection. It should be noted that these shares were held in trust by Chantal Corriveau in accordance with a Voting Trust Agreement previously approved by the Commission. Tee-Comm now owns AlphaStar Canada Inc., whose application for a DTH satellite distribution undertaking was approved in Decision CRTC 97-87 dated 27 February 1997.

With approval of this transaction, BCE will hold 70.67% of the voting interest in ExpressVu. Accordingly, ExpressVu will go from a situation of no clear-cut control to a situation where BCE will have legal and effective control.

In assessing this application, the Commission has considered the opposing interventions submitted by HomeStar Services Inc. (HomeStar), the Canadian Cable Television Association, Rogers Cablesystems Limited and Star Choice Television Network Inc. The Commission has also taken into account the intervention submitted by the Canadian Satellite Users Association.

Several interveners suggested that approval of this application would effectively give BCE, and indirectly its telephone company, Bell Canada, a head start in the broadcasting distribution business, before the removal of barriers to the ability of cable companies to compete in the local telephone business. In the view of these interveners, approval would therefore be contrary to the "head start" policy set out in the Commission's 19 May 1995 report "Competition and Culture on Canada's Information Highway: Managing the Realities of Transition" (the Convergence Report), and in the 6 August 1996 Convergence Policy Statement of the Government of Canada.

In the Convergence Report, the Commission indicated that certain fundamental issues related to local telephone competition should be resolved before telephone companies or their affiliates should be permitted to own or control certain broadcasting undertakings, including distribution undertakings. The Government noted in its Convergence Policy Statement that neither cable nor telephone companies should have a head start over the other, but that competition should not be unduly delayed. The Commission will be making public in the near future its determinations with respect to the various issues related to local telephone competition.

The Commission has carefully considered the "head start" policy in relation to this application. While DTH satellite distribution is a form of competition to cable distribution, it is not expected, at least at the outset, to have a significant impact on the cable industry. Its impact in the provision of communications services will likely be limited because it is expected that DTH service will initially be attractive to consumers in areas not presently served by cable distribution undertakings. Furthermore, it is expected that ExpressVu will not launch full commercial service before 1 September 1997.

In addition, in the Directions to the CRTC (Direct-to-Home (DTH) Satellite Distribution Undertakings) Order, the Government required the Commission to promote a dynamically competitive market for DTH.

Taking into consideration the expected limited initial impact of DTH service on cable distribution undertakings, the status of the proceedings related to local telephone competition and the public policy goal of promoting a competitive DTH market, the Commission is satisfied that approval of this change of control is warranted in the circumstances, and is in the public interest.

Interveners also argued that, should the Commission decide to approve this application, such approval should be subject to certain safeguards in order to ensure that there would be no possibility of anti-competitive practices resulting from BCE acquiring effective control of ExpressVu. In particular, a number of interveners proposed that, in order to address this concern, any approval of this application should be subject to conditions similar to the conditions of licence imposed by the Commission in approving the application by Shaw Communications Inc. (Shaw), on behalf of a company to be incorporated (HomeStar) for a broadcasting licence to carry on a national DTH satellite distribution undertaking (Decision CRTC 97-38 dated 31 January 1997).

In assessing this matter, the Commission has considered the specific concerns that led to the imposition of certain conditions of licence on HomeStar, and has reviewed their relevance in light of the circumstances prevailing in the present application. Two central issues related to competition had been raised in the context of the HomeStar application.

First of all, some interveners to the HomeStar application expressed concern that a DTH undertaking owned by a cable operator would not have any incentive to compete vigorously for subscribers, thus reducing competition and choice in the DTH market. Clearly, in the case of the present application, given that neither BCE nor ExpressVu has any interest in other broadcasting distribution undertakings, this concern does not arise.

Secondly, certain interveners had argued that a cable-owned DTH service would have opportunities for cross-subsidization and preferential treatment stemming from Shaw's cable operations, for example, in negotiations with third parties regarding the provision and cost of programming, choices of technology and arrangements regarding satellite space. As a result of these concerns, the Commission attached conditions of licence to the HomeStar decision to ensure structural separation between HomeStar and Shaw's cable operations, and to prevent undue preference to HomeStar that might otherwise arise from Shaw's ownership. Interveners to the present application argued that similar concerns about potential cross-subsidization and preferential treatment would exist in the case of ExpressVu should BCE acquire effective control, and that similar conditions were therefore necessary.

In this regard, the Commission considers that, in the context of its jurisdiction under the Telecommunications Act, appropriate mechanisms already exist to prevent cross-subsidization of ExpressVu's operations by Bell Canada. As for potential preferential treatment stemming from BCE acquiring effective control of ExpressVu, the Commission notes that, in the HomeStar situation, the concern primarily related to the fact that Shaw is one of the largest cable licensees in Canada, and could be in a position to influence negotiations between HomeStar and third party programming licensees for access to programming in a manner that would tend to confer an undue preference on HomeStar in relation to its DTH competitors. In the Commission's view, however, such a situation does not arise in the context of the current application since, as noted above, neither BCE nor ExpressVu has interests in other broadcasting distribution undertakings.

Finally, interveners also argued that approval of this application would give ExpressVu an undue advantage over competing DTH distribution undertakings in view of BCE's ownership position in Telesat. The Commission notes that this issue has been raised in the context of an application filed pursuant to Part VII of the CRTC Telecommunications Rules of Procedure. The Commission has considered that application and will issue its decision in this matter in the near future.

In light of these considerations, a majority of the Commission has concluded that it is not necessary to impose specific conditions, as proposed by interveners, in approving this application whereby BCE will acquire effective control of ExpressVu.

This decision is to be appended to the licence.

Allan J. Darling
Secretary General

Dissenting opinion of Commissioner Sally Warren

I have no objection to this transfer and the resultant change of control. I do, however, disagree with the majority decision that attaches no conditions to the transaction. Firstly, in relation to the "head start" policy, it is not clear that DTH will attract, as the decision states, "... consumers in areas not presently served by cable...". No one knows what the actual buying pattern will be.

My second concern centres on the marketing advantages that BCE will have over the other DTH licensees. While BCE cannot subsidize its DTH with other regulated BCE services, it can, conceivably, package its DTH (at an unprofitable price) with other BCE offerings in an effort to obtain the entire DTH market. Lastly, in my view, it seems unlikely that ExpressVu will not receive some form of favoured treatment in relation to the other DTH licensees, given that it will be operated by BCE, Canada's largest corporation, and a 58.5% shareholder of Telesat, Canada's sole DTH supplier.