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ARCHIVED - Broadcasting Decision CRTC 2011-765

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Additional reference: 2011-765-1

Ottawa, 12 December 2011

Complaint by TELUS Communications Company against BCE Inc., Bell Canada or Bell Mobility Inc. alleging undue preference and disadvantage, contrary to the provisions of the New Media Exemption Order

In this decision, the Commission finds that BCE Inc., Bell Canada or Bell Mobility Inc. gave itself an undue preference and subjected TELUS Communications Company to an undue disadvantage, contrary to Broadcasting Order 2009-660 (the New Media Exemption Order), when it secured exclusive programming rights of popular National Hockey League and National Football League content for its mobile platform.

The parties

1.      TELUS Communications Company (TELUS) is a national provider of a wide range of communications products and services including wireline and wireless voice, data and video services.

2.      Bell Mobility Inc. (Bell Mobility), a subsidiary of Bell Canada, is a wireless service provider.

The complaint

3.      In a complaint dated 26 January 2011, TELUS alleged that BCE Inc., Bell Canada or Bell Mobility (collectively, Bell), whichever is the licensor of the rights for the content on Bell’s Mobile TV service, holds exclusive rights to popular National Hockey League (NHL) and National Football League (NFL) content. TELUS indicated that it attempted several times, without success, to obtain rights for mobile carriage to the content in question from the NHL and NFL as well as through Bell. According to TELUS, the exclusive distribution on a mobile platform of selected NHL and NFL content by Bell represents an undue preference for Bell and subjects TELUS’ mobile service to an undue disadvantage contrary to Broadcasting Order 2009-660 (the New Media Exemption Order).

4.      In support of its position, TELUS submitted that the content in question offered exclusively to Bell’s mobile subscribers includes prime time NFL games, the Pro Bowl game and all playoff games, including Super Bowl XLV, as well as access to NFL Network programming, NHL games and video highlights, to the exclusion of TELUS’ mobile platform.

5.      TELUS argued that, given the popularity of the content under dispute, the exclusivity granted to Bell has, and will continue to have, a material adverse impact on TELUS as video content, and particularly sports, becomes more prevalent on mobile devices and tablets. In this regard, TELUS submitted that sports will be a primary driver of demand in the mobile video market and the NFL and NHL are the most attractive sports properties.

6.      In addition, TELUS argued that “to the extent that bundling of services plays an important role in delivering value to consumers, the effect of ‘carriage of content’ (Bell’s content) exclusives on mobile platforms may affect TELUS’ nascent entry into the broadcasting distribution market” and that this will negatively impact its ability to compete in the wireless market as consumers increasingly consider video applications in making their decision regarding a wireless carrier. TELUS further argued that the adverse effects of Bell’s mobile carriage exclusives could be exacerbated by the fact that consumers are generally incented to enter into multi-year contracts for mobile services.

7.      TELUS also noted that the Commission has long prohibited exclusives on content by carriers, as distinct from programming content exclusives and that, on traditional platforms, the Commission has taken various measures to ensure that no broadcasting distribution undertaking (BDU) can hold an exclusive on a licensed programming service. TELUS further submitted that the Commission has extended the above-noted prohibition to video-on-demand services.

8.      TELUS added that exclusive carriage of content is inconsistent with the objectives of the Broadcasting Act (the Act) and Canadian broadcasting policy.

Bell’s reply

9.      Bell submitted that TELUS’ complaint was without merit and should be dismissed. Among other things, Bell argued that TELUS is not prevented from making content from the NFL and NHL available to its own mobile subscribers and thus no undue preference has been shown. Bell also submitted that in terms of the NFL, the content exclusivity granted to Bell Mobility in terms of mobile distribution of live NFL games applies only to a small subset of NFL regular season games. Bell further added that TELUS’ complaint lacked any discussion regarding the availability of the Canadian distribution and marketing rights for other high profile sports programming drawing significant Canadian viewership. Bell argued that comparable mobile content is available by means other than sub-licensing.

10.  Bell also argued that TELUS had opportunities to acquire the exclusive rights to the content at issue as part of a competitive process but failed to secure these.

11.  Bell further submitted that TELUS should be required to exhaust market remedies, such as acquiring mobile rights to comparable content, rather than seek regulatory intervention. Bell submitted that this approach would be consistent with the Commission’s intent, as was set out in Broadcasting Public Notice 2008-100, to regulate the broadcasting system in a manner that relies on market forces where feasible.

12.  Bell noted that TELUS provided no evidence indicating that the lack of access by the latter to Bell’s licensed NHL and NFL content packages would negatively impact its ability to compete, particularly given the absence of evidence regarding the availability of rights, nor of TELUS’ attempts to secure such rights, for the mobile carriage of other popular programming content. Bell further argued that TELUS provided no market evidence relating to the extent that Canadian consumers’ choice of wireless carrier is influenced by the availability of mobile programming content.

13.  Bell submitted that TELUS itself claimed success in its fourth quarter 2010 wireless results, as presented in TELUS’ news release, indicating a considerable (36%) increase in data revenue growth over the same period in 2009. Bell further submitted that only a very small percentage of its total subscriber base is equipped with handsets capable of receiving mobile video content and that Bell’s stand alone video revenues represented a minimal amount of its overall wireless revenues.

14.  Bell argued that the past Commission decisions referenced by TELUS are not relevant to this complaint and rejected any reference that TELUS made to Broadcasting Decision 2010-782 and Broadcasting Decision 2011-48.

Issue

15.  The Commission notes that the complaint under consideration in this proceeding relates to rights for programs that are made available for offering by mobile services. The Commission considers that the issue it must address is the following:  did Bell give Bell Mobility an undue preference and subject TELUS’ mobile service to an undue disadvantage within the meaning of the Commission’s New Media Exemption Order?

Commission’s analysis and decisions

16.  When examining a complaint alleging undue preference or disadvantage, the Commission must first determine whether an undertaking has given a preference or subjected another person to a disadvantage. If the Commission finds that a preference has been granted or a person has been subjected to a disadvantage, it must then determine whether, under the circumstances, that preference or disadvantage is undue.

17.  In order to determine whether a preference or disadvantage is undue, the Commission examines whether the preference or disadvantage had, or could have, a significant adverse effect on the complainant or any other person and the effect that the preference or disadvantage had, or will have, on the achievement of the Canadian broadcasting policy objectives set out in the Act.

18.  Under the New Media Exemption Order, once a complainant has demonstrated that a preference has been granted or that a person has been subjected to a disadvantage, the burden of demonstrating that such preference or disadvantage was not undue rests with the undertaking having granted the preference or subjected another person to a disadvantage.

19.  The Commission notes that the application of the New Media Exemption Order to the facts of this dispute was not contested. In this regard, the Commission considers that in making the content at issue available to its mobile subscribers, Bell is acting as a new media broadcasting undertaking subject to the New Media Exemption Order.

Preference or disadvantage

20.  The Commission finds as fact that Bell entered into arrangements for the exclusive mobile rights to certain NHL and NFL programming content. In light of these exclusivity arrangements, the Commission considers that Bell has granted itself a preference. The Commission further considers that by precluding TELUS from making this content available to its mobile subscribers, Bell has subjected TELUS to a disadvantage. Furthermore, the Commission considers that data provided by Bell demonstrate that the Canadian mobile content distribution market continues to be nascent and that mobile television broadcasting services “are unlikely to compete significantly with traditional broadcasting services.”

Undue preference or disadvantage

21.  As to whether the preference and disadvantage are undue, the Commission considers that, while Bell provided evidence showing growth in TELUS’ mobile revenue results and further provided evidence as to the relative weight of Bell’s stand-alone video revenues in 2010 in relation to both data revenues and overall mobile wireless revenues, Bell did not provide evidence regarding near-term forecast demand for video content over mobile devices. Therefore, the Commission considers that the information provided by Bell is not conclusive with respect to whether the actions of Bell should be seen as undue preference within the mobile content market.

22.  Furthermore, the Commission considers that while Bell admitted to the popularity of the content under dispute, it provided no evidence that this content was not of significant value to mobile service subscribers.

23.  The Commission considers that although the Canadian mobile content distribution market is an emerging market, it is likely that sports will be a primary driver in the mobile video market and there will continue to be an increase in consumers’ desire to have access to popular premium sports programming over mobile devices in Canada. This serves to increase the likelihood that the arrangements between Bell and the NFL and NHL would have a significant adverse impact on TELUS’ ability to attract mobile subscribers for its broadcasting content. In this regard, the Commission is of the view that healthy and viable competition between BDUs is an effective and appropriate means of promoting greater choice for subscribers and spurring innovation with a view to achieving a number of the policy objectives set out in section 3 of the Act. One of the objectives of the Act, as set out in section 3(1)(t)(ii), is that BDUs “should provide efficient delivery of programming at affordable rates, using the most effective technologies available at reasonable cost.”

24.  Notwithstanding the fact that TELUS had access to other professional Canadian, North American and international sports content, the Commission considers that such content is not comparable to the content forming the subject of the present complaint, given the popularity of the NFL and NHL. The Commission also notes that although TELUS had access to NFL programming not captured by Bell’s agreement with the NFL, these were regular season games and not prime time or playoff games—which would be more likely to generate greater consumer demand on the mobile platform. Thus, the Commission considers that Bell’s securing of exclusive programming rights for its mobile platform could impair TELUS’ ability to provide a competitive offering since TELUS would not have access to this content, thereby interfering with the attainment of the objective of the Act mentioned above.

25.  As noted earlier, a reverse onus clause applies to complaints filed under the New Media Exemption Order. In this case, the Commission finds that Bell has not successfully demonstrated that its exclusive content arrangements for the mobile platform would not likely hinder near-term competition in this market and the attainment of the policy objectives set out in the Act. Consequently, the Commission considers that Bell has not demonstrated that the preference and disadvantage given within the meaning of the New Media Exemption Order are not undue.

26.  The Commission therefore finds that Bell gave itself an undue preference and subjected TELUS to an undue disadvantage, contrary to the New Media Exemption Order.

Actions required to remedy the violations

27.  The Commission directs Bell to file a report with the Commission, by 30 January 2012, outlining the steps it will take to ensure TELUS access to the programming at issue at reasonable terms and to provide a copy of this report to TELUS.

Secretary General

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