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Ottawa, 26 May 1986
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Decision CRTC 86-473
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QCTV Ltd.
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Barrhead, Bowden, Cardston, Claresholm, Didsbury, Drayton Valley, Drumheller, Edson, Fort Macleod, Granum, High River, Innisfail, Lacombe, Lloydminster, Okotoks, Olds, Ponoka, Raymond, Stettler, Vegreville, Vermilion and Westlock, Alberta - 860074400 - 860075100 - 860076900 - 860077700 - 860078500 - 860079300 - 860080100 - 860081900 - 860082700 - 860083500 - 860084300 - 860085000 - 860086800 - 860087600 - 860088400 - 860089200 - 860090000 - 860091800 - 860092600 - 860093400 - 860094200 - 860095900
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For related documents: see Public Announcement and Decisions CRTC 78-623, 78-629, 78-631 and 78-635 dated 26 September 1978, Decision CRTC 81-783 dated 22 October 1981 and Public Notice CRTC 1986-32 dated 13 February 1986.
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The Commission has considered applications by QCTV Ltd. to amend the licences for the rural broadcasting receiving undertakings serving the communities noted above by increasing the maximum monthly subscriber fee from $13.25 for Barrhead, $13.89 for Bowden/Didsbury/Olds/Innisfail and High River, $16.81 for Drayton Valley, $15.68 for Drumheller, $16.51 for Edson, $15.82 for Lloydminster, $14.75 for Okotoks/Granum/Claresholm and Fort Macleod, $11.25 for Ponoka and Lacombe, $17.07 for Raymond and Cardston, $12.28 for Stettler, $16.31 for Vegreville, $16.04 for Vermilion and $13.16 for Westlock to a uniform fee of $18.75 for all systems.
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The licensee was first authorized to provide cable service to these rural Alberta communities in 1978 (Decisions CRTC 78-623, 78-629, 78-631 and 78-635). Its applications were predicated on operating these rural systems on a "regional basis" whereby there would be cross-subsidization and the sharing of community programming, technical and administrative facilities between systems in a particular region in order to provide all subscribers with maximum cable services at the lowest possible cost.
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In the Public Announcement which accompanied the decisions, the Commission noted the economic, social and technical implications of serving a number of small and widelydispersed communities and agreed with QCTV Ltd. that "the public interest would be best served by consolidating the licensing of these smaller communities into regional groupings". In awarding the licences to QCTV Ltd., the Commission noted that it had "the necessary revenue base, experience and resources to ensure the development and maintenance of viable regional cable television services of the highest possible uniform quality".
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As originally licensed, the regional groupings consisted of a Northeastern Region: Lloydminster, Vegreville and Vermilion with a maximum monthly subscriber fee of $9.25; a Northwestern Region: Barrhead, Drayton Valley, Edson and Westlock at $9.75; a Central Region: Bowden, Didsbury, Drumheller, Innisfail, Lacombe, Olds, Ponoka and Stettler at $9.00; and a Southern Region: Cardston, Claresholm, Fort Macleod, Granum, High River, Okotoks and Raymond at $9.75.
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In 1981 QCTV Ltd. requested a fee increase for its undertaking serving the Edmonton area, based in part on the need to recover some of the high interest charges incurred in financing the capital costs of its rural Alberta cable systems. Consistent with its original licensing approach, the Commission rejected the cross-subsidization of rural systems by Edmonton subscribers and asked the licensee "to take appropriate measures to segregate the costs for the operation of the rural cable systems from those of this system to ensure that the subscribers in the Edmonton area do not subsidize the services provided by the licensee's cable television undertakings in other regions of Alberta" (Decision CRTC 81-783).
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The licensee has now proposed to alter the original regional concept by establishing a single monthly fee applicable to these 22 rural systems. It has requested a uniform maximum monthly subscriber fee of $18.75 in order to decrease the costs of varied billings for each community and region, to recover operational losses in excess of $7 million over the past four years in addition to initial construction costs of approximately $18.5 million, and to avoid more substantial fee increases in less profitable locations, particularly certain communities in the Southern Region. According to the licensee, such increases would have been inevitable based on the very low rate of return on investment of certain systems. QCTV Ltd. has also indicated that these fee increases would enable it to meet its original licensing commitments by making improvements in a number of areas including customer service, staffing, regional offices, maintenance, community programming, marketing and promotion.
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The Commission has received a total of 37 interventions pertaining to 6 communities (Barrhead, Drayton Valley, Drumheller, High River, Lacombe and Stettler) including two petitions from High River representing a total of 197 signatories and a detailed submission from the City of Drumheller. The interveners oppose the magnitude of the fee increases, directly or indirectly raise the cross-subsidization issue and, in some cases, address quality of service concerns and other related matters.
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The Commission notes that the licensee has responded in detail to each of the interventions, attaching a copy of a general overview which it had prepared. The overview indicates that previous rate increases have not kept pace with the rise in provincial income nor with the national rate of inflation and notes that the interventions represent only 0.47% of the subscribers served by these rural systems.
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After careful consideration of the many factors involved, including the concerns raised by the interveners and the licensee's response thereto, the Commission has concluded that the regional approach to the provision of cable service to these small and underserved communities, which was predicated in part on cross-subsidization between the systems within a given rural region, should be maintained consistent with the original licensing decisions. The Commission is convinced that this approach is the most efficient means of providing all subscribers within a particular region with adequate cable services at the lowest possible cost.
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In assessing these applications, the Commission has conducted a detailed analysis of the historical and projected financial performance of these systems individually, the performance of each region as a whole, and the performance of all of the systems on a consolidated basis. While it is a fact that a few of these small systems are profitable, the Commission's findings clearly demonstrate that the vast majority historically have had low or negative levels of profitability which have hindered the licensee's ability to fulfill its original licensing commitments and threatened the financial viability of certain of the systems.
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Based on the information submitted by the licensee and on the Commission's current criteria for assessing rate applications, the Commission approves an amendment to the licences for these rural undertakings by increasing the maximum monthly subscriber fee to $18.75. It considers that these increases are justified on a "stand-alone" basis in each of the four regions both on the criterion of economic need and that of the desirability of reasonable cost-sharing to finance the expansion of cable television services within the regions in which the licensee's systems are located.
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The Commission expects that these increases will enable the licensee to improve the level of service offered to subscribers in the areas of customer service, staffing, regional offices, maintenance, community programming, marketing and promotion, in line with the commitments outlined in the applications. It further expects the licensee to implement these improvements in service at the earliest possible date.
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In light of the increases granted herein, which for certain systems are substantial, the Commission expects the licensee to exercise particular restraint in the next twelve months and would not expect subscribers to be charged any further fee increases during that period.
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Fernand Bélisle
Secretary General
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