ARCHIVED -  Decision CRTC 93-579

Decision

Ottawa, 3 September 1993

Decision CRTC 93-579

Télécâble Laurentien Inc.

Hull, Aylmer, Gatineau; Buckingham, Masson, Angers, Quebec; Rockland, Clarence Point, Ontario - 930187000 - 930188800 - 930189600

Transfer of control

Following a Public Hearing in the National Capital Region beginning on 6 July 1993, the Commission approves the applications for authority to transfer effective control of Télécâble Laurentien Inc. (Laurentien), licensee of the cable distribution undertakings serving the above-mentioned communities, through the transfer of 100% of all the issued and outstanding common shares from Functional Music SSS Limited to CFCF Inc.

Parties to the Transaction

Functional Music SSS Limited is a wholly-owned subsidiary of Standard Broadcasting Corporation Limited (Standard), which is ultimately controlled by J. Allen Slaight through Slaight Communications Inc. Through wholly-owned subsidiaries, Standard controls several radio stations in Canada and three cable distribution undertakings, one in Ontario and two, operated by Laurentien, in Quebec.

At the public hearing, the vendor indicated that several factors had lead to its decision to divest of its only holdings in the cable industry, including the approaching requirement for considerable new financial investment and the need to make a number of important business decisions. According to the vendor, to proceed could only be justified if, (1) it planned to remain in the cable industry over the long term, and (2) its holdings were sufficiently large to allow implementation of an effective business plan. As the vendor's cable interests represent a very small portion of the Canadian cable market, it determined that it lacked the critical mass to play a long-term role.

The purchaser, CFCF Inc., is a diversified Canadian communications firm controlled by Jevlam Inc., a holding company effectively controlled by the J. A. Pouliot family of Montréal. CFCF Inc. is the licensee of the English-language television station CFCF-TV Montréal. It also operates the French-language television network Quatre-Saisons (TQS), which covers the province of Quebec through its stations CFJP-TV Montréal, CFAP-TV Quebec City, CJPC-TV Rimouski, and several affiliates. A wholly-owned subsidiary of CFCF Inc., CF Cable TV Inc. is the licensee of a cable undertaking serving part of Montréal and part of Laval. CFCF Inc. also owns two subsidiaries involved in production: Productions Champlain Inc., which operates the Montréal post-production firm Supersuite, and Conseillers Vidéo R.S. Ltée, a company specializing in the direct rebroadcasting of sports events.

CF Cable TV Inc. now has 213,000 subscribers. The bilingual profile of its service area is similar to that of the area served by Laurentien. Although the proposed transaction would expand CF Cable TV Inc.'s subscriber base to about 270,000, the firm would remain the second largest cable operation in Quebec and the seventh largest in Canada. The Commission is thus satisfied that this transaction will have little impact in terms of ownership concentration.

The transfer

The purchase price for the shares is $63,537,500. Given the previous financial difficulties of CFCF Inc., the Commission sought to determine at the hearing to what extent Laurentien subscribers would be protected in case of similar problems in the future. Based on the evidence provided by CFCF Inc., the Commission is now satisfied that the company has the financial resources to complete this transaction and weather any unforeseen circumstances in both the short or long term, without any impact on Laurentien subscribers.

Because the Commission does not solicit competing applications for authority to transfer effective control of broadcasting undertakings, the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature. As a first test, the applicant must demonstrate that the proposed transfer will yield significant and unequivocal benefits to the communities served by the broadcasting undertakings and to the Canadian broadcasting system as a whole, and that it is in the public interest.

In particular, the Commission must be satisfied that the benefits, both those that can be quantified in monetary terms and others that may not easily be measured in terms of dollar value, are commensurate with the size of this transaction and take into account the responsibilities to be assumed, the characteristics and viability of the broadcasting undertakings in question, and the scale of the programming, management, financial and technical resources available to the purchaser.

The Commission has assessed the benefits package identified by the applicant as flowing from this transaction and, in general, is satisfied that it is significant and unequivocal, and that approval of these applications is in the public interest.

At the public hearing, CFCF Inc. stated that approval of these applications would yield significant intangible benefits, including a larger subscriber base, and thus access to additional financial and human resources to [TRANSLATION] "enable it to face competitive pressure from other distribution systems and non-Canadian programming services". Other proposed benefits include exchanges of programs and program concepts; access to CFCF training programs and opportunities for advancement and professional development for Laurentien employees; cost reductions resulting from consolidation of computer services and other processes; and the better positioning of the larger cable group to obtain favourable financing terms.

The purchaser also stated that it would bolster local management at Laurentien with additional human and financial resources, while respecting the autonomy of the undertaking and leaving Laurentien managers in charge of day-to-day operations.

CFCF Inc. claimed that the transaction will also yield measurable tangible benefits in the form of $6,700,000 in direct expenditures. Technical improvements to the Hull, Buckingham and Rockland networks will account for $5,414,466 of this amount, and $1,285,534 will be earmarked for community programming.

With regard to technical improvements, CFCF Inc. proposed to upgrade the capacity, quality and reliability of the three systems. It plans to expand the capacity of the Hull and Buckingham systems to 450 MHz, and rebuild and increase the capacity of the Rockland network to 550 MHz. Responding to inquiries at the hearing regarding the introduction of digital video compression (DVC), the licensee indicated that, when these applications were filed (prior to the release of Public Notice CRTC 1993-74 dated 3 June 1993 dealing with the structure of the broadcasting industry) it had not made any financial forecasts regarding this technical innovation. At the hearing the purchaser submitted financial projections that make provision for the introduction of expanded basic service on 1 September 1994, the phase-in of DVC starting in 1996, and the introduction of universal addressability by 2000.

As for tangible benefits to community programming, the proposed expenditures include two components: $666,919 to modernize plant and equipment at the Hull community studio, and $618,615 to decentralize community production. The latter component will include a regional press room for staging tele-conferences through a two-way link to Laurentien's head end in Hull, and equipment and facilities for covering city council meetings and other events in Hull, Aylmer, Gatineau and Rockland.

The Commission has evaluated these benefits and is satisfied that they meet the criteria for initiatives generally accepted as tangible benefits set out in Public Notice CRTC 1993-68 entitled "Application of the Benefits Test at the Time of Transfers of Ownership or Control of Broadcasting Undertakings".

The Commission expects CFCF Inc. to ensure that all of the $6,700,000 in proposed expenditures included in the benefits package are made in accordance with the schedule outlined in the applications. The Commission considers the purchaser's undertaking that the costs associated with the commitments outlined in this decision will not form part of any fee filing under subsections 18(6) and 18(8) of the Cable Television Regulations, 1986 to be an important element of these applications.

In Public Notice CRTC 1992-59 the Commission announced implementation of its employment equity policy. It advised licensees that, at the time of licence renewal or upon considering applications for authority to transfer ownership or control, it would review with applicants their practices and plans to ensure equitable employment. In keeping with the Commission's policy, it encourages the licensee to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.

The Commission acknowledges the intervention presented at the hearing by Radio Nord Inc., as well as the licensee's reply thereto. The Commission also took into consideration the 36 supporting interventions submitted by various groups and organizations.

Allan J. Darling
Secretary General