ARCHIVED -  Decision CRTC 87-873

Decision

Ottawa, 2 November 1987

Decision CRTC 87-873

Amendments to the Broadcasting Licence Fee Regulations

Cablestrie Inc. and Télécâble B.S.L. Inc.
Acton Vale, Roxton Falls, Ayer's Cliff, Drummondville, Saint-Cyrille, Saint-Germain-de-Grantham, Saint- Nicéphore, Wickham, Magog, Omerville, North Hatley, Richmond, Melbourne, Bromptonville, Windsor, Greenlay, Saint-Hyacinthe, La Présentation, Sainte-Madeleine, Saint-Pie-de-Bagot, Saint-Damase, Saint-Dominique-de-Bagot, Saint-Simon, Saint-Liboire, Upton, Saint-Barnabé, Valcourt, Rimouski, Matane, Mont-Joli, Amqui, Sainte-Anne-des-Monts and surrounding areas, Quebec - 871094900 - 871093100 - 871095600 - 871097200 - 871098000
- 871099800 - 871096400 - 871100400 - 871091500

Câblovision Inc.
Asbestos and Trois-Lacs, Quebec - 871090700

Beauce Vidéo Limitée
Saint-Georges, Saint-Georges-Est, Saint-Georges-Ouest, Jersey Mills, Notre-Dame-des-Pins, Saint-Simon-les-Mines, Saint-Gédéon and Saint-Martin, Quebec - 871102000 - 871103800
- 871104600

Thetford Vidéo Inc., Claire-Vue Inc. and Transvision (Disraeli) Inc.
Thetford Mines, Plessisville, Disraeli and Coleraine, Quebec - 871101200 - 871195400
- 871092300

La Belle Vision Inc. and J. Bergeron et Frère Ltée
Annaville, Baie-du-Febvre, Charette, Deschaillons, Fortierville, Hérouxville, Les Becquets, Louiseville, Manseau, Montmagny, Notre-Dame-de-Pierreville, Notre-Dame-du-Bon-Conseil, Saint-Alexis-des-Monts, Saint-Barnabé-Nord,Saint-Barthélémy, Saint-Cuthbert, Saint-Elie, Saint-Etienne-des-Grès, Sainte-Geneviève-de-Batiscan, Sainte-Gertrude, Shawinigan, Saint-Paulin, Saint-Narcisse, Saint-Prosper, Saint-Stanislas, Saint-Séverin (Proulxville), Sainte-Ursule, Trois-Rivières, Yamaska and Saint-Tite, Quebec - 871105300 - 871106100 - 871107900
- 871108700 - 871109500 - 871110300 - 871111100 - 871112900 - 871113700 - 871114500
- 871115200 - 871116000 - 871117800 - 871118600 - 871119400 - 871120200 - 871121000
- 871122800 - 871123600 - 871124400 - 871125100 - 871126900 - 871127700 - 871128500
- 871129300 - 871130100 - 871131900 - 871132700 - 871133500 - 871089900

Following a Public Hearing in the National Capital Region on 9 July 1987, the Commission approves the applications to transfer effective control of the broadcast receiving undertakings serving the communities listed above to Telecom CGO Inc., a wholly-owned subsidiary of Cogeco Inc., through the transfer of shares and assets as set out in detail in Notice of Public Hearing CRTC 1987-46 dated 11 May 1987.

The applications included, in particular, a series of related transactions which are also approved, including the following:

 -  the transfer of effective control of Câblovision Inc. to Cablestrie Inc., and the subsequent amalgamation of the two firms under the name Cablestrie Inc.;

 -  the transfer of the assets of the broadcast receiving undertakingserving Disraeli and Coleraine, from Transvision (Disraeli) Inc. to Thetford Vidéo Inc. and the amalgamation of Thetford Vidéo Inc. and its wholly-owned subsidiary Claire-Vue Inc. under the name Thetford Vidéo Inc.;

 -  the transfer of effective control of the broadcasting receiving undertaking serving Saint-Tite, from J. Bergeron et Frère Ltée to La Belle Vision Inc. and the subsequent amalgamation of the two firms under the name La Belle Vision Inc.

Following the approval of these transactions, it is proposed that all the undertakings involved be grouped into seven distinct geographic zones, as indicated in the appendix to this decision, and that each zone be consolidated under one licence.

The Commission approves the proposed consolidations and amends the licences as outlined hereafter, except for zones 2, 3 and 7 where a single licence has been issued in each case.

Zone 1: the licence for the undertaking serving Trois-Rivières will be amended to include the communities of Shawinigan, Louiseville and Saint-Tite in its authorized service area,upon surrender of the current licences;

Zone 4: the licence for the undertaking serving Magog will be amended to include the communities of Richmond, Bromptonville, Windsor, Asbestos, Ayer's Cliff, North Hatley, Valcourt, Acton Vale and Roxton Falls in its authorized service area, upon surrender of the current licences;

Zone 5: the licence of the undertaking serving Thetford Mines will be amended to include the communities of Plessisville and Disraeli/Coleraine in its authorized service area, upon surrender of the current licences;

Zone 6: the licence of the undertaking serving Saint-Georges will be amended to include the communities of Saint-Gédéon and of Saint-Martin in its authorized service area, upon surrender of the current licences.

With regard to zones 1 and 4, however, the Commission points out that the licensees currently serving the communities of Louiseville, Saint-Tite, Valcourt and Acton Vale are regulated pursuant to Part III of the Cable Television Regulations, 1986 (the regulations). Under theexisting circumstances, the territories in which these undertakings operate cannot be consolidated if the distinct regulatory status of these cable systems is to be maintained.

Consequently, the proposed consolidation of the territories in zones 1 and 4 is approved, subject
to the licensees in the four communities noted above consenting to a change in regulatory status. The licensees must notify the Commission of their intentions with respect to this matter within 30 days of the date of this decision.

The Commission also notes that, in light of the approvals herein authorized, the current basic monthly fee in each of the communities will remain the same. It further notes that La Belle Vision Inc.'s current licences for Montmagny and some 25 other small communities in Mauricie and central Quebec are not included in any of the proposed zones and therefore remain autonomous.

The Parties to the Transaction

As stated above, Telecom CGO Inc. (Telecom CGO) is a wholly-owned subsidiary of Cogeco Inc., a public company involved in the communications field and controlled indirectly by Mr. Henri Audet of Trois-Rivières and members of his family. Cogeco Inc. controls Télévision Saint-Maurice Inc., licensee of television stations CKTM-TV (Radio-Canada) and CFKM-TV (TQS) Trois-Rivières; Télévision Saint-Francois Inc., licensee of CKSH-TV (Radio-Canada) and CFKS-TV (TQS) Sherbrooke; as well as 2439-9198 Quebec Inc., licensee of radio station CFGL-FM Laval, and CJMF-FM Ltée, licensee of CJMF-FMQuebec City. In addition to its radio and television holdings, Cogeco Inc. also controls broadcasting receiving undertakings through La Belle Vision Inc. which, as a result of this decision, will be brought under the control of Telecom CGO, a holding company, which will not be a licensee as such. Cogeco Inc. also indirectly holds a minority interest in Premier Choix: TVEC Inc., licensee of a French-language general interest pay television network serving eastern Canada, as well as in a television production company, Les Productions SDA Ltd.

As of 31 August 1986, the cable companies involved in these transactions served over 80,000 subscribers. If these are added to La Belle Vision Inc.'s approximately 45,000 subscribers, the total number of subscribers would be nearly 130,000. Accordingly Telecom CGO will thus control the third-largest cable operation in Quebec, after Vidéotron Ltée and CF Cable TV Inc., and be one of the ten largest companies of its kind in Canada.

The purchase price negotiated with the vendors is $34 million which, when the purchaser's assumption of the vendors' $8 million debt is added in, makes a total of $42 million. Payment will be made in the form of a cash remittance to the vendors of $25.6 million and the issue of restricted voting shares in Cogeco Inc. worth $8.4 million. The Commission notes the statement made at the hearing that [TRANSLATION] the Cogeco Group and its shareholders guarantee the financial aspects of the transaction. TheCommission also notes that it has received a bank letter certifying that the sum of $44.6 million is available for the purpose of these transactions. The Commission is therefore satisfied that the required funds are available.

At the hearing, the vendors gave various reasons for selling their cable interests. In particular, vendors have indicated that their shareholders were no longer either willing or financially able to invest further in the modernization of these undertakings and in the extension of service to those sectors of their currently authorized service areas which are not yet served. Some vendors also mentioned that their undertakings lacked personnel with management potential, and stated that Telecom CGO has the necessary resources, drive and energy to continue the operations and to improve the services for the benefit of present and future subscribers. Some of the vendors also pointed out that their extensive experience in the cable industry would continue to be utilized through their involvement on the board of directors of Telecom CGO and in the management of the individual companies.

Benefits of the Transactions

As stated in a number of decisions relating to applications for authority to transfer effective control of licensee companies, and because the Commission does not solicit applications for such transfers, the burden is on theapplicant 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.

The Commission emphasizes that the first test any applicant must meet is that the proposed transfers of ownership or effective control yield significant and unequivocal benefits to the communities served by the broadcasting undertakings and the Canadian broadcasting system as a whole, and that it is in the Public interest.

In particular, the Commission must be satisfied that these benefits, both those that can be quantified in monetary terms and others which may not easily be measurable in terms of their dollar value, are commensurate with the size of the transaction and that they take into account the responsibilities to be assumed, the characteristics and viability of the broadcasting undertakings involved, and the scale of the programming, management, financial and technical resources available to the purchaser. The benefits outlined in the applications and at the hearing are described below.

Among the major benefits of these transactions, Telecom CGO mentioned the formation of another large cable television group in Quebec, the credibility, drive and financial stability of the Cogeco group and the expertise it has acquired in this domain, as well as its present and future commitments to research and development. It cited Cogeco's current participation in fibre optics and integrated interactive communications projects.

At the hearing, Telecom CGO added that the objective of these transactions is to consolidate and develop broadcasting receiving services in some 80 communities in central and eastern Quebec. To this end, it proposed a series of short-medium-and long-term commitments designed to ensure that the subscribers of these undertakings will be provided with service comparable in quality and quantity to those available in large urban centres. Telecom CGO pointed out, however, that this application concerns only the first and second phases of its development plan which is described hereafter, and that applications concerning the third phase, which may extend into 1991, will be submitted later.

a) Short-Term Benefits

In the framework of the first phase, Telecom CGO is committed to proceed with the following initiatives which represent a total value of $3,291,000 over five years, including $430,000 in capital expenditures, within 60 days of a favourable decision by the Commision:

 a 24-hour telephone answering service available to subscribers for reporting service breakdowns or outages;

-  the dispatch of a repair person to the site within one hour of notification of an outage affecting more than one subscriber;

-  the introduction of a reading service for the blind and the visually impaired on the FM band of the cable undertakings;

-  the introduction of a classical music service as background music on an alphanumeric channel;

 an increase in the number of hours of community broadcasting through an inter-zone exchange program and an increase by 1 hour per week of original production in zones 6 (the Beauce) and 7 (Bas Saint-Laurent), 1.5 hours in zone 5 (Amiante) and 2 hours in zones 1 (Mauricie), 2 (Maskoutaine), 3 (Drummond) and 4 (Estrie) - (see the appendix for a list of the particular locations);

-  the appointment of a community television co-ordinator and provision for at least one news van in zones where there are none at present;

-  improvements to 5 of the 9 existing community programming studios.

Telecom CGO is further committed to establishing a community programming advisory committee in each zone, within 90 days of a favourable decision, to facilitate access to and to ensure an equitable distribution of the resources among interested groups. In this regard, the Commission hopes that the existing relationships with community production groups will be maintained to the extent possible.

Further, and in addition to the quantifiable benefits outlined above, Telecom CGO has also undertaken to begin extending cable service, within nine months of a favourable decision, to those unserved sectors within the vendors' licensed service areas which the vendors have indicated that either they did not expect to be able to serve in the near future or had delayed serving. These sectors include the communities of Sainte-Madeleine, Saint-Damase, Saint-Pie, Saint-Simon, Saint-Liboire, Saint-Dominique, Upton and La Présentation in zone 2 (Maskoutaine), the community of Wickham in zone 3 (Drummond), the communities of Acton Vale and Roxton Falls in zone 4 (Estrie), as well as sectors in the Rimouski area in zone 7 (Bas Saint-Laurent). In all, some 8,500 potential new subscribers will thereby be served, and this commitment will require an investment of $3,400,000. The Commission notes in this regard that Telecom CGO made a commitment at the hearing not to apply for a fee increase under subsection 18(6) of the regulations in order to amortize this $3,400,000 investment. The Commission further expects a study to be undertaken regarding the implementation of service to the other communities within the existing licensed service areas which will remain unserved after the above-mentioned extensions are completed. A report on this matter must be submitted within six months of the date of this decision.

b) Other Benefits

As part of the second phase of its development plan, and as indicated above, Telecom CGO proposed to group all of the undertakings involved into 7 geographic zones and consolidate all of the territories under 7 corresponding licences (see appendix).

At the hearing, Telecom CGO pointed out that this phase of the reorganization plan will allow for the orderly development of the undertakings in accordance with the Particular circumstances of each zone to the benefit of subscribers within the same socio-economic base and geographic area in terms of the number of channels available, while preserving the local character of each service.

Consequently, until a standardized distribution of services has been completed in the zones where the distribution of priority signals is not uniform, the Commission authorizes, by condition of licence, by virtue of paragraph 9(1) of the regulations, the continued distribution of different priority signals within these zones.

Conclusion

Having examined carefully all of the information it has received, and in light of the short- and medium-term development plans with respect to the undertakings involved, the Commission concludes that the proposed applications meet the criteria mentioned above, according to which applicants must demonstrate that a proposed transfers of ownership or control will result in significant and unequivocal benefits to the communities served and to the Canadian broadcasting system as a whole, and that approval of theapplications is in the public interest. In its deliberations, the Commission also considered the question of concentration of ownership, and it is convinced that the proposed transactions do not pose any problems in this regard.

The Commission expects that all of the commitments made in the applications and at the hearing will be fully honoured. With regard to the implementation of the short-term commitments mentioned above, a report must be submitted to the Commission within three months of the date of this decision and thereafter, by 1 October of each year, on the progress of projected extensions of service and any other measures undertaken to improve service, including a description of the situation with respect to each community production centre.

The Commission acknowledges the written lntervention submitted by Télévision communautaire de Plessisville regarding the production of community programming.

Fernand Bélisle
Secretary General

APPENDIX/ANNEXE

PROPOSED ZONES FOR THE TERRITORIAL CONSOLIDATION PLAN/
ZONES PREVUES DANS LE PROJET DE REGROUPEMENT DES TERRITOIRES

LICENCE EXPIRY DATE/
NAME/ COMMUNITY/ DATE D'EXPIRATION
APPELLATION VILLE DES LICENCES

1 Mauricie Trois-Rivières 30-9-91
Shawinigan 30-9-91
* Louiseville 30-9-91
* Saint-Tite 30-9-90

2 Maskoutaine Saint-Hyacinthe 30-9-89

3 Drummond Drummondville 30-9-89

4 Estrie Richmond 30-9-89
Bromptonville 30-9-89
Windsor 30-9-89
Asbestos 30-9-89
Ayer's Cliff 30-9-89
North Hatley 30-9-89
Magog 30-9-89
* Valcourt 30-9-89
* Acton Vale 30-9-89
Roxton Falls 30-9-89

5 Amiante Thetford Mines 30-9-89
Plessisville 30-9-89
Disraeli-Coleraine 30-9-89

6 Beauce Saint-Georges 30-9-89
Saint-Gédéon 30-9-89
Saint-Martin 30-9-89

7 Bas Saint-Laurent Amqui, Matane, 30-9-91
Mont-Joli, Rimouski,
Sainte-Anne-des-Monts

* Consolidation to be confirmed/Regroupement à confirmer