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Decision
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Ottawa, 8 June 1987
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Decision CRTC 87-382
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J. & K. Enterprises Ltd. Hartland/Somerville, New Brunswick - 863027900
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Medical Air Services Incorporated Port Elgin, New Brunswick - 863512000
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John Kelly, representing a company to e incorporated River Bourgeois, Cannes and South Side Bourgeois River, Nova Scotia - 861651800
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Joseph Shannon Eskasoni, Whycocomagh and Mabou, Nova Scotia - 863269700
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N1 Cable TV Ltd. Seventy communities in Nova Scotia and New Brunswick (see list appended to this decision) - 863185500
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Introductory Statement
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At a Public Hearing in Halifax on 9 March 1987, the Commission considered competing applications for licences to carry on broadcasting receiving undertakings to serve approximately 70 small communities in New Brunswick and Nova Scotia. In some instances, the applications were for licences to operate broadcasting receiving undertakings to serve areas adjacent to existing cable systems. In the case of N1 Cable TV Ltd. (N1), the application was for licences to operate a total of sixty-two cable systems, organized in service clusters, following the regional model developed by the applicant in the province of Newfoundland.
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The N1 Application
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The N1 application proposed to provide service to a total of 70 small communities in Nova Scotia and New Brunswick, with an average household count of 140, comprising a total of approximately 10,000 potential subscribers. N1 indicated that it could not serve Nova Scotia on a standalone basis and that the positive contribution of the aggregate of the New Brunswick communities was required to make the proposal feasible.
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N1 proposed to provide service to all communities within 12 to 15 months of receiving Commission approval and based its financial projections on achieving an average penetration rate of 60% in the first year of operation.
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The applicant proposed to distribute all local programming services as well as CHCH-TV Hamilton, CITV-TV Edmonton, WTVS (PBS), WJBK-TV (CBS), WDIV (NBC) and WXYZ-TV (ABC) Detroit, Michigan, received via satellite from the CANCOM network, as well as the Atlantic Satellite Network (ASN), The Sports Network (TSN) and the MuchMusic Network.
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The applicant further proposed special provisions for francophone communities, by substituting the TCTV Montreal signal for that of CITV-TV in 3 communities in Nova Scotia, and by distributing both TCTV and French Television Programming (TVFQ-99) in 17 communities in New Brunswick.
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N1 proposed to charge a maximum monthly fee of $20.95 in year 1, rising to $21.79 in year 2 and to $22.66 in year 3. The applicant planned to divide the two provinces into four service areas (Cape Breton, northern New Brunswick, southwestern Nova Scotia and central and southeastern New Brunswick) and to provide a central office to be located in northern Nova Scotia or southeastern New Brunswick.
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The proposed ownership structure of N1 would consist of Eastern Cable Ltd. (37%), a cable operator licensed to serve a number of communities in Newfoundland, and CANCOM (15%) with the remaining 48% to be held by C1 Cablesystems Inc., a financing vehicle designed to raise $1.4 million through sales of shares to private investors. The financing proposal provides for a bank loan of $2.6 million, subject to certain conditions including the raising of required capital through the sale of 14 units of shares at $100,000 per unit.
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Mr. Pierre Morrissette, President of CANCOM, suggested at the hearing that the satellite network's role as "facilitator" presented many advantages, including significant cost savings in the construction phase due to volume purchasing and the assembly line approach of CANCOM's Turn Key Division, utilization of CANCOM's technical expertise, the credibility of the CANCOM name in raising equity capital and access to its data base on small Canadian communities.
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The applicant proposed that, subsequent to the first phase of service as indicated in the current application, it was planning to initiate a second phase of development that would extend service to communities with as few as 50 households. This would be possible due, in part, to research initiatives currently being undertaken by CANCOM in concert with a Canadian "hi-tech" company, which should result in a significant reduction in head end costs.
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During the hearing, in response to concerns raised about N1's mileage and household counts, a representative for the applicant acknowledged that there were some inaccuracies in the application.
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The Competing Applications
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Four other applicants submitted competing proposals. With certain variations between applicants, the proposed program distribution packages included the mandatory television programming services, certain optional over-the-air Canadian television services, two distant Canadian television signals from CANCOM, the 3+1 U.S. network signals from Detroit via CANCOM, the CBC Parliamentary Television Network and the discretionary specialty services of The Sports Network and the MuchMusic network on an unscrambled basis. Most applicants proposed to provide community programming.
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J. & K. Enterprises Ltd. (J. & K.) applied for a licence to serve Hartland and Somerville, New Brunswick. The applicant is the licensed operator of cable systems at Nackawic, Woodstock, Canterbury and Centreville, and the areas it applied for are located in close proximity to these licensed systems. The Commission notes that, relative to the N1 proposal for Hartland and Somerville, J. & K. proposed additional services at a monthly fee of $19.08, lower than N1's $20.95.
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Medical Air Services Incorporated (Medical Air) applied for a licence to serve Port Elgin, New Brunswick, projecting 207 potential subscribers, and proposing a completion date in the fall of 1987. The applicant is the licensed operator of the cable system at nearby River Hebert/ Joggins, Nova Scotia and the Commission notes the licensee's commendable record with respect to implementation of its construction timetable and the high penetration level of this undertaking. Relative to the N1 proposal for Port Elgin, the Commission notes that Medical Air's application proposed to serve a larger number of households, for a lower monthly subscriber fee of $19.00.
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John Kelly, representing a company to be incorporated, applied for a licence to serve River Bourgeois, Cannes and South Side Bourgeois River, Nova Scotia. Mr. Kelly is the licensed operator of the cable television undertaking serving Nictaux/ Nictaux Falls, Nova Scotia.
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The Commission notes that, relative to the N1 application for River Bourgeois, Mr. Kelly proposed additional services, a lower monthly fee of $20.00, a larger service area, a local service representative, and the availability of a community channel from the first day of operation.
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Joseph Shannon applied for a licence or licences to carry on broadcasting receiving undertakings to serve Eskasoni, Whycocomagh and Mabou, Nova Scotia. The applicant is the licensed operator of twelve cable systems located in Cape Breton and elsewhere in Nova Scotia. The Commission notes Mr. Shannon's extensive cable experience, and considers that although he has applied for a monthly subscriber fee of $24.00, he has proposed a better service package, larger service area and more extensive community programming plans than N1 has applied to provide to these areas.
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Interventions to the N1 Application
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More than 20 interventions were submitted in response to the N1 application, as well as 36 letters of support and two petitions containing a total of 239 signatures. All of the opposing interventions, nine of which were supported by oral presentations at the hearing, expressed concern that approval of the N1 proposal would effectively "cap" any future expansion plans of the local operators. In this regard, each one pointed out that applications to serve a number of the communities listed in the N1 proposal had already been filed or were in the process of being filed with the Commission by local cable operators.
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The N1 application was also opposed for excluding service in the immediate vicinity of areas being applied for, insufficient technical, administrative and community support at the local level, a lack of precise knowledge of the areas to be served due to inadequate research, high monthly fees, and the fact that N1 had applied for areas currently licensed to other operators.
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Fundy Cablevision Ltd., licensed operator of 21 cable systems in New Brunswick, in a joint presentation with Cable Service Ltd., licensee of the Moncton cable system, submitted, at the hearing, that due to a number of projects undertaken by New Brunswick operators to extend cable service on a continuing basis, an infrastructure exists which not only offers lower subscriber rates, but also retains revenue and profits within the province for re-investment. In addition, they indicated that they had filed applications with the Commission to establish a total of 42 cable systems in New Brunswick, for which they proposed to charge a lower monthly fee than that proposed by N1. If N1 were to be approved, Fundy Cablevision Ltd. argued, local cable operators, who had taken all of the risks in the early days of cable, would be denied the opportunity to introduce plans to expand their subscriber base within the province.
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A joint presentation was made at the hearing by Cape Breton Cablevision Ltd., Halifax Cablevision Limited and Seaside Cable TV (1984) Limited. In addition to expressing the concern shared by their New Brunswick colleagues including that the N1 proposal would thwart the ordered pattern of development undertaken by local Nova Scotia cable operators, these interveners made known their opposition to CANCOM, through its participation in the N1 proposal, acting as both a wholesaler and retailer of satellite signals. They further opposed the fact that N1 was not a Nova Scotia company and had not proposed to make an effort to employ staff from the province.
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The other appearing interveners opposed to the N1 application were Dartmouth Cable TV Limited, Edmund (Ned) Cook, Tancook Island Television System Ltd. (operator of an STV system), York Satellite T.V. Ltd. and North Victoria Satellite Ltd.
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All of the interveners representing licensees of cable systems were confident that, given the opportunity, they could provide service to these communities, as quickly or quicker than N1, at a lower cost to the subscriber, and with increased local representation. On this point, Mr. Charles B. Keating, representing Dartmouth Cable TV Limited, went so far as to state:
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I give you my word of honour that if you give us, the Nova Scotia and New Brunswick cable operators, an opportunity at those 66 communities, we will deliver all 66, all cabled, and we will do ... a lot better job than those people from afar, and in probably as short or a shorter timeframe.
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Moreover, the opposing interveners were generally of the opinion that in addition to the general calls issued on 27 August 1985 for specific communities in Nova Scotia and on 28 August 1985 for unserved areas of New Brunswick, a further call for applications specific to these locations should have been issued when the N1 application was received, to allow local operators and other interested parties an opportunity to apply for these communities.
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In the course of their presentations, many of the interveners questioned certain aspects of the N1 application, specifically variances in household and mileage counts.
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Appearing in support of the N1 application was Mayor Joseph Hodgins, representing the 700 residents of Belledune, New Brunswick.
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The Commission's Decision
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As noted in a number of previous decisions and as reiterated at the hearing, the Commission's primary goal in assessing applications of this sort is to arrive at a licensing approach that will ensure the establishment of viable operations for the provision of an attractive package of broadcasting services to the greatest number of underserved communities, at an affordable cost and at the earliest possible date.
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At issue in this particular instance is whether local cable operators or a regional model, as characterized in this case by N1, can best achieve this end. As summarized by the Chairman of the hearing:
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Fundamental to all of these discussions ... is, which is the route to go? Is it the existing cable infrastructure within Nova Scotia and within New Brunswick reaching out and extending their territories ... or is it a question of ... the larger regional model utilizing the efficiencies of larger economic units coming in and developing 70 communities ...
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Based on N1's application as filed and on its presentation at the hearing, as well as the interventions received in opposition to this application, as discussed above, the Commission is not convinced that the N1 proposal represents the most effective means of extending service to the communities applied for, whether it be from the standpoint of the proposed programming services, monthly subscriber fee or the degree to which the proposed service would cover any given area. Nor is the Commission convinced that the N1 proposal offers the best prospects for extending cable service to the largest number of potential subscribers in the first or in a further phase of implementation.
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Given all of the foregoing, the Commission denies the application by N1 Cable TV Limited for licences to carry on broadcasting receiving undertakings to serve the communities listed in the appendix to this decision.
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The competing applications by J. & K. Enterprises Ltd., Medical Air Services Incorporated, John Kelly, representing a company to be incorporated, and Joseph Shannon for licences to operate broadcasting receiving undertakings to serve the communities noted at the beginning of this decision are approved. In the Commission's view, these applications represent the most viable means of extending service to the communities applied for, due to the lower monthly fees, the more extensive commitments to community programming and for local involvement, the more proximate and therefore more responsive technical and administrative support, and more comprehensive programming packages.
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The operation of these undertakings will be regulated pursuant to Parts I and III of the Cable Television Regulations, 1986. The Commission will issue licences expiring 31 August 1990 to J. & K. Enterprises Ltd. and Medical Air Services Incorporated and expiring 31 August 1991 to John Kelly, representing a company to be incorporated, and Joseph Shannon, subject to the conditions specified in this decision and in the licences to be issued. These terms will enable the Commission to consider the renewal of these undertakings at the same time as that of other undertakings in their respective regions.
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With respect to the application by John Kelly, this authority will only be effective and the licence will only be issued at such time as the Commission receives documentation establishing that the company has been incorporated in accordance with the application in all material respects.
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The Commission acknowledges the plans of John Kelly and Joseph Shannon with respect to the development of community channels and encourages them to provide community interest in, and access to, these channels for the production of local programming services that reflect the needs of their respective communities.
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In regard to the intervention received from The Ontario Educational Communications Authority objecting to J. & K.'s proposal to distribute TVOntario programming received via satellite, the Commission notes that the applicant has withdrawn its proposal to distribute this signal.
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It is a condition of each licence that the authority granted herein be implemented within nine months of the date of this decision or such further period as the Commission may, upon receipt of a request for extension before the expiry of said nine months, deem appropriate under the circumstances.
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Call for Applications
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In conjunction with the release of this decision, the Commission is today issuing a call for applications to serve the areas contained in the N1 application which were considered at the March 1987 Halifax public hearing, excluding those communities which other parties have already been licensed to serve and those licensed by this decision (Public Notice CRTC 1987-149).
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This decision does not preclude N1 from submitting a new application or applications to serve the unlicensed communities. The call will also give other interested parties an opportunity to apply.
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Although it has denied the N1 application, the CRTC acknowledges the applicant's foresight in considering future extension of service to communities with as few as 50 households ("phase two"). Since the Commission is anxious that such communities also receive the range of broadcasting services now widely available in larger communities, it encourages all interested parties to include such long-range planning in their applications.
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Further, the Commission notes the inaccuracies and lack of precise information in the N1 application and reminds prospective applicants that accuracy and a thorough knowledge of the area to be served are significant factors considered by the Commission in assessing applications of this nature.
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Most importantly, while acknowledging that denial of the N1 application means that many small communities in the Atlantic region will remain underserved for the time being, the Commission is convinced that, in the long term, this decision is in the public interest in that the new call should generate a better assessment of the market, and possibly a variety of new concepts in the applications submitted to ensure that these underserved areas will finally receive an equitable level of service at a reasonable cost.
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The Commission reiterates its disappointment that so many communities in Atlantic Canada remain underserved, despite several calls for applications to provide service. It wishes to emphasize that, in light of significant cost reductions due to recent technological advances, coupled with prevailing market conditions such as a strong market demand and lower interest rates, the Commission is unwilling to tolerate any further delay in the provision of cable service to these underserved communities.
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While realizing that some of these areas are not viable to be served on a stand-alone basis, the Commission reminds potential applicants that its objective is to provide service to all of the communities involved, quickly and economically, and not just to those communities which may be more viable or easier to serve. This objective will be a primary consideration of the Commission when it hears the applications received in response to its call.
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Fernand Bélisle
Secretary General
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APPENDIX/ANNEXE
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1. Allardville/Allardville East, 2. Apohaqui, 3. Back Bay, 4. Barnesville, 5. Belledune, 6. Blanchard Settlement, 7. Blue Mountain Settlement, 8. Boiestown, 9. Browns Flat, 10. Burnt Church, 11. Port Elgin, 12. Gagetown, 13. Goodwin Mill, 14. Grande Anse, 15. Hartland/ Somerville, 16. Havelock, 17. Jupiter, 18. Kingsclear, 19. Lac Baker, 20. Moulin-Morneault, 21. Norton, 22. Paquetville/Haut Paquetville, 23. Pokesudie, 24. Pomquet, 25. Pontgrave, 26. Public Landing, 27. Richiucto Village, 28. Riverside-Albert, 29. Sainte-Marie-de-Kent, 30. Sainte- Marie-sur-Mer, 31. Saint-Raphaël-sur- mer, 32. Salmon Beach, 33. St. Martins/West Quaco, 34. St-Sauveur, 35. Stanley, New Brunswick; 37. Bear River, 38. Brighton/Marshalltown, 39. Catalone/Main-a-Dieu, 40. Dingwall, 41. Dutch Brook, 42. East Bay, 43. Eskasoni, 44. Freeport, 45. Head of Jeddore, 46. Hillsburn, 50. Mabou, 51. Margaree Forks, 52. Marion Bridge, 53. Meteghan Station, 54. Millcreek, 55. Millville Boularderie, 56. Neils Harbour, 57. New Ross, 58. North East Margaree, 59. Plympton Station/Plympton, 60. River Bourgeois, 61. Sherbrooke, 62. Sydney Forks, 63. Tiverton, 64. West Dover/Middle Village, 65. Westport and 66. Whycocomagh, Nova Scotia
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