ARCHIVED - Decision CRTC 2001-283

Decision CRTC 2001-283

Ottawa, 23 May 2001

Quebecor Média Inc., on behalf of Vidéotron ltée
2000-2310-2, 2000-2337-5, 2000-2338-3

26 March 2001 Public Hearing
Montréal, Quebec

Transfer of effective control of Vidéotron ltée to Quebecor Média Inc.

This decision approves the applications for authority to transfer control of the cable distribution interests held indirectly by Le Groupe Vidéotron ltée (GVL). The transfer is part of a larger transaction in which Quebecor Inc. (Quebecor), through its subsidiary Quebecor Média Inc. (QMI), acquired all outstanding shares of GVL following a takeover bid launched in the fall of 2000. In a further application (2000-2309-4), QMI, on behalf of Groupe TVA inc., has applied for authority to acquire control of the television broadcasting undertaking TVA and its regulated subsidiaries. The Commission will issue a decision on this application shortly, following completion of its deliberations on the matter.

The Commission approves the application (2000-2310-2) by QMI on behalf of Vidéotron ltée (Vidéotron) for authority to acquire control of Vidéotron and its regulated cable subsidiaries through the acquisition of all of the shares of Vidéotron. The Commission also approves the applications (2000-2337-5 and 2000-2338-3) for authority to transfer to QMI the interests currently held by Vidéotron, directly and indirectly, in Cable Public Affairs Channel Inc. (CPAC).

Parties to the transaction

Vidéotron is one of the largest operators of cable distribution undertakings in Canada, and is by far the largest in Quebec. It serves a market of approximately 2.3 million potential subscribers in Quebec and has a penetration rate of 67%. In fact, Vidéotron's 1.5 million basic service subscribers represent some 78% of Quebec's cable distribution market.

Quebecor is an international company, having operations on three continents (North America, Europe and Asia). With sales of more than $10 billion, it is one of Canada's largest media companies. Quebecor is involved principally in printing, newspaper publishing and distribution, book and magazine publishing, music distribution, and new media.

All of Quebecor's media properties are held through QMI, including Sun Media Corporation, whose eight metropolitan dailies, 181 local newspapers and other publications make it Canada's second largest newspaper group. Quebecor's media interests also include the Internet portal Canoe; a majority interest in the web agency Nurun; and the 12 Archambault stores, which comprise the largest chain of "big box" music stores in Eastern Canada. Among the non-regulated assets acquired by QMI as a result of the current transaction are, notably, the Internet portal Netgraphe, and the 160 retail outlets that make up the SuperClub Vidéotron chain, a leader in video product rentals and sales in Quebec. Quebecor also holds an 80% interest in the French-language television network TQS.

Ownership of QMI

QMI has two shareholders, namely Quebecor, which holds a 54.72% interest, and Capital Communications CDPQ (Capcom), with the remaining 45.28%. Capcom is a wholly-owned subsidiary of the Caisse de dépôt et placement du Québec (the Caisse), an agency created by the Government of Quebec in 1965 to manage the funds of the Quebec Pension Plan. As such, Capcom is a Crown corporation and agent of Her Majesty in right of Quebec, within the meaning of the Direction to the CRTC (Ineligibility to hold Broadcasting Licences).

The Commission has reviewed the Shareholders Agreement Amended and Consolidated to 31 December 2000 in the light of the Direction to determine the extent of Capcom's influence over QMI and its regulated subsidiaries. It has concluded that, in this case, Capcom is not in a position to control the operation of QMI. Based on various clauses in the Shareholders Agreement, the Commission is of the view that Quebecor will exercise effective control of the companies operated by QMI.

Impact of the transaction

The Commission questioned Quebecor at the public hearing about the strategy it was pursuing through its acquisition of Vidéotron. In reply, Quebecor noted that it is a highly integrated company with operations in two principal areas, these being commercial printing, which currently represents the greatest portion of its sales, and the media. Quebecor noted that it first became involved in the integration of new information technologies in the 1990s, and began to position itself as a multimedia company through the acquisition of TQS, and Sun Media Corporation and its Internet portal Canoe.

Quebecor added that its acquisition of Vidéotron does not signal any shift in strategy, but rather a consolidation of its media holdings. With the emergence of major communication groups able to distribute their own content and services virtually anywhere, Quebecor believes that it must secure access to a range of distribution platforms if it is to ensure QMI's success as an entreprise, both domestically and internationally. According to Quebecor, the intensification of convergence also demands that content providers be able to reach consumers through various means of transmission.

Quebecor emphasized that, from its beginnings, Vidéotron distinguished itself through the pioneering spirit and vision of its founder, André Chagnon. Quebecor added that the company has become a symbol throughout Quebec, one that today is synonymous with leadership and quality. The applicant stated that it will rely on that spirit of innovation to speed the introduction of new digital and interactive services such as video-on-demand.

With respect to the issue of access, the applicant stated that the interactive television platform deployed by Vidéotron is freely accessible and is based on the use of Internet protocols. This will allow all programming undertakings, including those owned by QMI, to benefit equally from the platform.

Except for certain matters involving the operation of the community channel (addressed below), the Commission notes that interveners raised no specific concerns regarding these applications. After reviewing all of the information on file, the Commission is confident that approval of the applications will benefit the Canadian broadcasting system and serve the public interest. Bringing Vidéotron into the Quebecor family ensures the emergence in Canada of a major player with the resources to make a valuable contribution to the broadcasting system, and able to ensure fair and sustainable competition in this rapidly expanding universe.

Community channel

The Fédération des télévisions communautaires autonomes du Québec intervened at the public hearing in opposition to the transaction. The intervener's opposition is directed in particular to the manner in which Vidéotron's community channel has been managed for several years, and to QMI's plans to maintain the existing approach. The intervener indicated that it was especially concerned by Vidéotron's carriage on its cable systems of Canal VOX. It claimed that the introduction of this service has resulted in the disappearance in recent years of several independent community television groups who had formerly been involved in community program production. It further claimed that the Canal VOX service had significantly diminished local expression by restricting access to the community channel. In this regard, the intervener asked the Commission to specify a number of measures that QMI should take regarding the provision of access to, and the operation of, Vidéotron's community channel.

At the public hearing, Vidéotron explained its approach to the community channel and the efforts it has made in recent years to revitalize the operation of that channel, particularly in the Montréal area. The licensee noted that Canal VOX provides community programming from 37 different communities located in the areas served by Vidéotron. It stated that, in each of the regions, it ensures that programming for Canal VOX is, first and foremost, local. It also assured the Commission that it complies fully with the current community channel policy.

In Public Notice CRTC 2001-19 of 5 February 2001, the Commission initiated a review of its community channel policy. Following discussions at the hearing, QMI and Vidéotron agreed to the Commission's request for a moratorium on the status of the current relationship between the licensee and the independent community television groups now operating in the territories served by Vidéotron, until the community channel policy review is completed and the Commission's findings are released.

Accordingly, the Commission expects QMI and Vidéotron to respect the spirit of the moratorium, and refrain from any action that could directly or indirectly force the independent community television groups to restrict or cease their programming activities as a result of administrative decisions by the licensee. This moratorium became effective on the date of the commitment made by the licensee, i.e., 27 March 2001, and will terminate when the Commission releases its new community channel policy. The Commission reminds the licensee that, in accordance with the existing policy, the community channel must continue to operate as a public service, and as a vehicle for free and open access and community expression.

Secretary General

This document is available in alternate format upon request and may also be examined at the following Internet site: www.crtc.gc.ca