ARCHIVED -  Decision CRTC 94-923

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Ottawa, 19 December 1994
Decision CRTC 94-923
Rogers Communications Inc.
Locations Across Canada

Approval of applications by Rogers Communications Inc.(RCI) for authority to acquire effective control of Maclean Hunter Limited (MHL) - subject to the condition that further applications be filed, within twelve months, for authority to transfer effective control of CFCN-TV Calgary and CFCN-TV-5 Lethbridge to a third party, and that RCI likewise divest of MHL's indirect shareholdings within CTV Television Network Ltd.

I The Transaction and its Related Applications
RCI is one of the largest corporate groups in Canada's communications industry, with extensive involvement in both broadcasting and telecommunications. In broadcasting, it currently holds indirect ownership or control of 15 cable television undertakings in Ontario, Alberta and British Columbia that provide service to approximately 24% of all subscribers in Canada. It also owns ethnic television station CFMT-TV Toronto, with transmitters in Ottawa and London, and 16 radio stations in British Columbia, Alberta, Manitoba and Ontario. Further, RCI holds interests in the national youth specialty programming undertaking, YTV Canada Inc., and the regional pay-per-view service, "Viewers Choice Canada". The company is effectively controlled by Mr. E.S. Rogers of Toronto.
Until earlier this year, MHL was a widely-held public company controlled by its Board of Directors. In addition to its extensive involvement in broadcasting, MHL is a major presence in Canada's newspaper and magazine publishing industries. The company's broadcast holdings include the indirect ownership or control of 35 cable distribution undertakings in Ontario, representing approximately 9% of all subscribers nationwide. MHL also owns 21 radio stations in Ontario and the Maritimes, CFCN-TV Calgary and CFCN-TV-5 Lethbridge. It is also a 60% participant in the partnership recently licensed for the new national specialty programming undertaking known as "The Country Network" (TCN). Further, MHL holds approximately 14.3% of the issued voting shares of CTV Television Network Ltd.
In March 1994, RCI was successful in its public offer to purchase a majority of MHL's issued common shares; through subsequent events, RCI acquired 100% of these shares at a total cost of approximately $3.1 billion. RCI placed the MHL shares in trust pending decisions by the Commission on applications filed for authority to acquire effective ownership or control of the MHL broadcasting properties referred to above. These applications are listed in Appendix I to this decision, and were considered at a public hearing that began on 20 September 1994 in the National Capital Region.
Considered at that hearing were further applications, contingent upon approval of the above, for authority to effect an intra-corporate reorganization through share transfers affecting the broadcasting undertakings listed in Appendix II. It was proposed in these applications that RCI's subsidiary, Rogers Broadcasting Limited (RBL), would become the parent of the licensee companies for CFCN-TV Calgary, CFCN-TV-5 Lethbridge, CKBY-FM and CIWW Ottawa, and CKGL-FM and CHYM-FM Kitchener; while a second RCI subsidiary, Rogers Cable TV Limited (Rogers Cable), would become the parent of the licensee companies for all of the MHL cable television properties except those at Thunder Bay, Sault Ste. Marie, Niagara Falls and St. Catharines.
Included with this group of applications were those proposing the licence renewal of CFCN-TV Calgary, CFCN-TV-5 Lethbridge and CIWW Ottawa. In further applications, RCI sought authority, on behalf of itself or its designate company, and on behalf of a partnership under its control, to acquire the assets and for broadcasting licences to continue the operation of the cable distribution undertakings at Sault Ste. Marie, Thunder Bay, Niagara Falls and St. Catharines.
The entire group of applications noted above is the subject of the present decision. All are approved, with the exception of the licence renewal applications in respect of CFCN-TV Calgary and CFCN-TV-5 Lethbridge, which are denied. Approval of this larger transaction involving the transfer of control of MHL to RCI includes the authority for RCI to acquire ownership of the Calgary and Lethbridge television stations. However, as noted above, such approval is subject to the condition that further applications be filed, within twelve months of today's date, for authority to transfer effective control of CFCN-TV Calgary and CFCN-TV-5 Lethbridge to a third party, and that RCI likewise divest of MHL's indirect 14.3% shareholding in CTV Television Network Ltd. (CTV).
In the case of CIWW Ottawa, the Commission hereby renews the licence for this AM radio station from 28 February 1995 to 31 August 1999, subject to the same conditions as those in effect under the current licence, as well as to any other condition specified in the licence to be issued. The licence term granted herein, while less than the maximum of seven years permitted under the Broadcasting Act, will enable the Commission to consider the renewal of this licence in accordance with the Commission's regional plan.
Upon surrender of the current licences issued in respect of the Thunder Bay and Sault Ste. Marie cable television undertakings, the Commission will issue new licences to RCI or its designate company. The licences will expire 31 August 2000, which is the same expiry date as for those currently issued. Similarly, upon surrender of the current licences issued in respect of Niagara Falls and St. Catharines, the Commission will issue new licences to the partners of the Maclean-Hunter Cable TV Niagara Partnership. The licences will expire 31 August 1996, which is the same expiry date as for those currently issued.
The operation of these four undertakings will be regulated pursuant to Parts I and II of the Cable Television Regulations, 1986 (the regulations), and will be subject to the same conditions as those in effect under the current licences, as well as to any other condition specified in the licences to be issued.
In separate decisions issued today, the Commission has disposed of a number of other applications on the agenda of the September 1994 hearing, all flowing from the larger RCI/MHL transaction described above.
These decisions include the Commission's acceptance of a joint proposal by RCI and Shaw Communications Inc. (Shaw) to rationalize the ownership of their subsidiaries' cable television undertakings in Ontario, Alberta and British Columbia. Specifically, the Commission has approved applications by subsidiaries of Shaw to acquire the assets of the undertakings at Calgary and Victoria from Rogers Cable, as well as of the above-noted systems serving Sault Ste. Marie and Thunder Bay from RCI or its designate company. In exchange, RCI will receive a cash payment, and Rogers Cable will acquire the assets of the cable undertaking serving part of Toronto, and of cable systems serving four other communities in Southwestern Ontario, all currently licensed to Shaw's Ontario subsidiary (see Decision CRTC 94-924).
In other decisions, the Commission approves applications for authority to transfer effective control from RCI of two MHL properties, Key Radio CFNY Limited (licensee of CFNY-FM Brampton), and Key Radio CKYC Limited (licensee of CKYC Toronto), to Shaw Communications Inc. (a subsidiary of Shaw), and to Telemedia Communications Ontario Inc. (Telemedia), respectively (see Decisions CRTC 94-925 and 94-928). In a separate application, it was proposed that Telemedia would, in turn, transfer the assets of its existing Toronto AM station CJCL to Angelo Cremesio, on behalf of a company to be incorporated. This application has been denied by the Commission in Decision CRTC 94-929, for the reasons cited therein.
Today's decisions also include approval of non-appearing applications proposing the divestiture by RCI of another MHL licensee companie, Bluewater Broadcasting Limited (Bluewater), through the transfer of effective control to Blackburn Radio Inc. (see Decision CRTC 94-927). Bluewater is the licensee of four radio stations in southwestern Ontario; its new owner is the licensee of radio stations in London and Wingham and is controlled by members of the Blackburn family of London.
In Decision CRTC 94-926, the Commission approves other non-appearing applications for authority to transfer effective control of MHL's subsidiary, Maritime Broadcasting System Limited (Maritime), to a numbered company. Maritime is the licensee of eleven radio stations in Nova Scotia, New Brunswick and Prince Edward Island; its new owner, the numbered company, is controlled by Mr. Robert Pace of Halifax, who is a new voice within Canada's broadcasting industry.
In the following pages, the Commission assesses the quantifiable and the non-quantifiable public benefits identified by RCI as flowing from its purchase of MHL. The Commission also states its findings with respect to a number of issues, including those normally associated with applications for the transfer of ownership or control of broadcasting undertakings, whose real or apparent significance is magnified by the unprecedented size of the transaction and, in some cases, by the specific nature of the undertakings involved.
Chief among these issues are concerns arising from the increased potential for power and influence that approval would confer upon RCI in the absence of certain conditions, such as that requiring its divestiture of CFCN-TV Calgary, CFCN-TV-5 Lethbridge and its shareholdings in CTV, or without the other specific expectations placed on RCI later in this decision. These expectations relate to safeguards intended, among other things, to clarify RCI's responsibilities for providing third parties with fair and equitable access to its cable television facilities, and to establish a clear separation between editorial voices in markets where RCI will now operate both newspaper and over-the-air broadcasting outlets.
Taking into account the rapidly evolving and increasingly competitive communications environment, and based upon the evidence provided by the applicant and those who intervened to this proceeding, the Commission is convinced that these applications constitute a timely restructuring within the broadcasting industry that will have positive consequences for cable subscribers and for the Canadian broadcasting system as a whole.

II Benefits

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 concerned 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 the 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.
Based on its assessment of the benefits associated with these applications, the Commission is satisfied that, with certain exceptions, they are clear and unequivocal, and commensurate with the size of the transaction.

a) Quantifiable Benefits

The applications filed by RCI included an independent estimate prepared by KPMG Peat Marwick Thorne of the fair market value of MHL's various business units. The operations of MHL that are regulated by the Commission, and that RCI sought to retain, were valued at $933.5 million. Included in this total was an amount of $72.5 million representing the estimated fair
market value of the Alberta television stations and MHL's shares in CTV.
Based on this evaluation, RCI proposed a package of tangible benefits representing incremental expenditures amounting to approximately $101.9 million, all to be made within a period of five years. This includes the sum of $7.5 million which RCI proposed to contribute to the creation of an Alberta Television Production Fund as a benefit of its applications to acquire control of CFCN-TV and CFCN-TV-5. Although these two applications have been approved, such approval is conditional upon RCI subsequently filing applications for authority to transfer effective control of the two stations to a third party. Accordingly, the Commission considers that responsibility for the formulation and implementation of a benefits package associated with the sale of these broadcasting undertakings should rest with whomever the Commission ultimately approves as their new owner. This reduces the size of the benefits package attached to this transaction to the sum of $94.4 million.
Approximately $54.5 million of the benefits package is earmarked for improvements to the local plant of the cable undertakings the applicant is acquiring from MHL and Shaw. The Commission notes RCI's commitment to ensure that none of the costs of these improvements, or of any other aspect of the transaction, is passed along to subscribers. The Commission notes the applicant's further commitment that, should the cost of completing any of the proposed system improvements exceed the amount allocated to that project as a benefit, RCI will absorb the cost overrun; alternatively, should a project cost less to complete than projected, that the savings realized will be directed to other benefits.
Another important benefit, particularly for the licensees of smaller cable systems and their subscribers, is RCI's contribution of $8 million to an initiative known as the "Head End in the Sky", or HITS. This project will receive additional funding of $7.5 million from Shaw as part of the benefits package submitted with its applications approved today. HITS will operate as a not-for-profit consortium of members of the cable, pay and specialty television industries. It is intended primarily to assist smaller Canadian cable operators by providing them with access to digitally compressed pay-per-view services and to a cost-effective ordering and transaction management system.
RCI will also expend approximately $3.9 million over five years on enhanced community programming and on grants to local groups in the communities served by the cable systems it is acquiring from Shaw and MHL. The grants are generally designed to furnish local groups with equipment, facilities and other support for the production of their own programming for broadcast on the community channel.
At the hearing, the Commission discussed with the applicant these and other aspects of its plans for community programming, including RCI's proposal to reorganize its Ontario community channel operations into a number of regions. RCI assured the Commission that this proposal, and its related plans for interconnec- tion between cable systems, will not lead to decreased autonomy or undermine the local flavour of the community channel of individual systems:
 ... it is strictly an organizational process, and not a direction or philosophy for the actual programming.
Moreover, in response to concerns raised in interventions, RCI provided its categorical commitment to a philosophy that community programming should be "... free and open access programming. Sponsorship is not a criteria for access to the community channel."
The applicant also stated that it would halt immediately the practice, apparently followed uniquely in the community channel operations of a Toronto cable system, of requiring payment of a fee by volunteers for their participation in the community channel training program. It added that any fees that have been paid will be rebated to volunteers.
The applicant acknowledged that it expects to eliminate duplication of certain functions and achieve other efficiencies in its community programming operations, particularly where the service areas of its newly-acquired cable systems happen to abut those of its existing systems. For example, RCI plans to close the community programming facilities of the MHL system serving the Parkdale/Trinity area of Toronto and shift activities to existing studios in the Lakeshore area. RCI stated, however, that it has advised community groups in Parkdale/Trinity "...that they will not lose any programming hours, they won't lose any access." The applicant also confirmed that it will maintain a separate community access feed for that area.
A further benefit claimed by the applicant is in respect of grants amounting to $3 million over five years which, according to RCI, are to be directed primarily to educational institutions for the purpose of funding studies and research in broadcasting-related fields. In the Commission's view, however, two of the grants appear to have no clear connection to broadcasting: $50,000 is for a one-time grant to the Chair in Black Canadian Studies at Dalhousie University, and $25,000 over five years is reserved for a fellowship in Communications Law at the University of Toronto.
Although the Commission notes the applicant's plans in these two specific areas, it considers the grants to fall within the categories of proposed benefits that have been generally rejected as such for reasons outlined in Public Notice CRTC 1993-68 dated 26 May 1993.
Nevertheless, the Commission expects the applicant to ensure that all of the $94.4 million in proposed incremental expenditures included in the benefits package are made in accordance with the schedule outlined in the applications.
b) Non-quantifiable Benefits
At the hearing, RCI stated that the rationale for its purchase of MHL consists of two basic elements, both of which it claimed as non-quantifiable benefits of the transaction. One relates to the need for Canada's cable television industry to ensure a place for itself in the new communications environment. RCI noted the considerable financial investment of large non-Canadian companies in emerging forms of programming, including interactive programming, multimedia programming combining text, video and audio elements, and other services destined for the broad public infrastructure otherwise known as the information highway. RCI claimed that all of these will have "immense implications for Canadian broadcasting policy objectives and for the Canadian cultural industry as a whole..."
RCI then argued as follows:
 If you approve these applications, we will create a company which can assure that there is a place for Canadian stories, Canadian ideas and Canadian values on the information highway. We will create a company which will strengthen each and every element of the Canadian broadcasting system in a new, multimedia communications environment.
The second part of RCI's rationale is tied to the impact of new and powerful challenges to the Canadian cable television industry in the form of competition coming, it claimed, from non-Canadian direct broadcast satellite (DBS) services, "who do not share our commitment to the objectives of the Broadcasting Act", but whose ability to provide a broad range of services far outstrips the present channel capacity of cable television. RCI also expressed concern regarding the prospect of competition from Canadian telephone companies which, according to RCI, are keenly interested in developing and distributing services on "... what will essentially be a duplicate cable television system throughout Canada."
RCI stated that, in the face of these challenges, there is a need for a strong cable industry leader willing and able to bear the risks inherent in innovation and making improvements to the quality of service to subscribers. RCI added:
 To meet the competitive challenge which it faces, the cable industry must gain access to increased efficiencies, through the consolidation or clustering of resources, to support investments in new technology, and to provide subscribers with increased choice, control and new services.
RCI acknowledged that its own future competitiveness would, in no small measure, hinge upon its ability to offer subscribers attractive rates for basic service, for customized packages of discretionary services, and for such other items as second cable outlets in private dwellings. The applicant argued that the increased efficiencies made possible by this transaction will ensure that rates for these services remain at lower levels than would otherwise be the case.
Although it accepts these intangible benefits claimed by the applicant, the Commission's view is that the cable industry's future will also be largely dependent upon the roll-out of digital video compression (DVC) technology and addressable decoders. The vast expansion in the number and type of services that these developments will enable the industry to distribute, and the capability they will bestow upon cable companies to tailor service offerings to individual subscribers, will greatly enhance the industry's competitiveness. Provided these technologies are introduced in a timely manner, and at a reasonable cost to subscribers, the Commission considers that RCI's concerns regarding the extent of the possible impact of non-Canadian direct broadcast satellites may prove to be overstated.
Nevertheless, the Commission agrees with RCI's conclusion that greater competition for Canada's cable television industry is on the horizon, whether from these non-Canadian services, or from those offering alternative, domestic means of delivering services to Canadians.
In recent years, the Commission has recognized the need for larger corporate entities possessing the resources and entrepreneurial skills necessary to lead the cable industry in such areas as research and development, enhancement of choice, service quality improvements, and in the extension of cable service to more Canadians, and has accordingly permitted the emergence of a number of large multi-system cable operators across Canada. As stated in Decision CRTC 90-84 approving RCI's acquisition of control of certain cable systems in British Columbia's lower mainland, "...any concerns with respect to the increased size of a cable company are tempered by an appreciation of a licensee's ability, given the current technological and financial circumstances facing the industry, to ensure the provision of high quality cable service to its subscribers."
The rise of new, competitive forces, and their impact on the Canadian broadcasting system, were two matters addressed more recently by the Commission in Public Notice CRTC 1993-74 (the Structural notice):
 ...traditional delivery technologies of over-the-air broadcasting services and cable will face increasing competitive challenges from new and emerging distribution systems, including MDS, satellite services, telephone carriers and other communications services.... The Commission recognizes, however, the potential of these other distribution technologies to contribute to achievement of the objectives of the Act.
 With respect to the delivery of broadband video services by telephone carriers, the Commission acknowledges that new distribution technologies provide a basis for such services to be delivered over their local distribution networks. Accordingly, the Commission encourages the cable and telephone carriers to explore opportunities for cooperative ventures for the shared use of network infrastructures...
Just prior to the hearing of RCI's applications, in Telecom Decision CRTC 94-19 entitled Review of Regulatory Framework, the Commission reiterated the view that telephone companies can play a useful role in the provision of new information services, including content-based services. While it stopped short of any determination as to whether telephone companies should be permitted to hold broadcasting licences, the Commission affirmed that, "subject to the licensing of service providers where required, broadcasting or content-based services may be distributed on a common carrier basis over telephone company facilities..."
The competition resulting from convergence of the traditional roles of the common carrier and cable television industries should generate incentives for innovation, foster efficiencies, and spur the development of new consumer services at competitive prices. If cable subscribers, and the system as a whole, are to enjoy these and the other widely-recognized benefits of competition over the long term, however, it is essential that the competition be fair and sustainable. The Commission is convinced that the enhanced size and strength that RCI now assumes will assist in ensuring that such fair and sustainable competition is realized, and that RCI's ability to make a valuable contribution to the Canadian broadcasting system is maintained.
Rogers Communications Inc.
Locations Across Canada

III Issues of Concentration and Media Cross-Ownership

The Commission has determined that the quantifiable and non-quantifiable benefits, when viewed together with certain safeguards and conditions, outweigh the concerns of interveners regarding the increased concentration of ownership and media cross-ownership resulting from this decision. These concerns were fully canvassed at the hearing and are discussed below.
 a) Diversity of Voices
One traditional concern of the Commission wherever the issue of media cross-ownership arises has been for the preservation of diversity among the media voices available in the area affected. In the present case, however, the Commission notes that this transaction simply places RCI in the position of ownership formerly occupied by MHL, with no consequent reduction in the number of broadcast voices other than temporarily, in the markets of Calgary and Lethbridge, where RCI has existing indirect ownership of radio stations and, for a period of time, will also own CFCN-TV and CFCN-TV-5.
To the extent that the community channel represents a voice, it could also be argued that there will be a reduction in the number of broadcast voices in Kitchener, where RCI holds indirect control of the local cable system and is now acquiring indirect ownership of two radio stations; and in each of Toronto, Ottawa, Hamilton and London, where RCI has existing over-the-air broadcasting properties and will now be assuming ownership of MHL's cable television undertakings.
The Commission believes the community channel to be a legitimate and important voice, and notes that individual cablecasters retain responsibility for the programming aired on the channel. However, the Commission's policies direct cablecasters to make extensive use of the ideas and other resources of individual volunteers and community groups in the production of community programming, and to ensure that such programming is of relevance and interest to the community concerned. For these reasons, the Commission has permitted the introduction of RCI as owner of the two radio stations in Kitchener, and as steward of the community channel in the four other communities noted above.
Some interveners expressed concern about the national presence and consequent influence RCI will acquire in its new role as publisher of such national magazines as "Macleans" and of the Sun chain of daily newspapers in Toronto, Ottawa, Calgary and Vancouver.
The Commission agrees that RCI will acquire a national editorial voice through its purchase of these MHL properties. The Commission also acknowledges that the replacement of MHL by RCI as owner of the Sun daily newspapers will bring about a net reduction in the number of distinct media voices available in Toronto, Ottawa and, for a period of time, in Calgary. In the Commission's view, however, RCI has presented convincing arguments in support of its wish to retain MHL's publishing arm. Specifically, the Commission notes the applicant's plans to position RCI as an industry leader in the push to compete with non-Canadian companies by developing electronic information and multimedia services for the new communications environment, and accepts RCI's arguments that its ownership of MHL's magazines and newspapers are an important aspect of these plans.
At the same time, to preserve diversity in the Toronto, Ottawa and Calgary markets where RCI will now own both daily newspapers and over-the-air broadcasting outlets, the Commission must be assured that a clear separation is struck between the news and editorial voice of the newspaper on the one hand, and those of the local radio or television stations on the other.
Responding to this concern at the hearing, in specific relation to the Toronto market, RCI made a commitment to implement the following safeguards:
 The news departments in the radio and television undertakings will continue to be separate and distinct from those of the Toronto Sun and each will develop its own editorial policies;
 each undertaking will be competing for its own audience and revenues and the financial requirements of one undertaking will not affect the independent operation of the other entities;
 the general managers or editors of each undertaking will be empowered with day-to-day decision-making powers and there will be no sharing of management personnel between entities, other than television and radio, the licences of which are held by RBL; and
 neither E.S. Rogers nor any other officer of Rogers, Rogers Cablesystems Limited or Rogers Broadcasting will sit on the editorial Board of the Toronto Sun or the Financial Post.
RCI also committed to implement the same safeguards in respect of its newspaper and radio broadcasting operations in Calgary and Ottawa. The Commission expects the applicant to adhere to these commitments in each of the three communities concerned.
 b) MHL's Television Holdings and the Commission's Conditional Approval
Turning to the question of ownership of CFCN-TV, its sister-station CFCN-TV-5 and MHL's shareholdings in CTV, the Commission notes that unconditional approval of this transaction would have resulted in the loss of one broadcasting voice in the Calgary and Lethbridge markets, where RCI has an existing presence as owner of both AM and FM radio stations. It is primarily for other reasons, however, that the Commission has required RCI to divest of MHL's television interests.
In the past, where the Commission permitted RCI an ownership role in televised programming services, it was RCI acting in the capacity of rescuer of a financially-troubled undertaking, as in the case of CFMT-TV Toronto, or as nurturer of the fledgling specialty service YTV. CFCN-TV and CFCN-TV-5, however, are mature and profitable undertakings in need of neither nurture nor financial rescue.
At this particular juncture in the evolution of Canada's cable television industry, the Commission is satisfied that the public interest is served by allowing a significant expansion in the size of the applicant's cable operations, so that RCI, along with Shaw and other large players, may lead the industry more effectively towards meeting the challenges of the emerging competitive communications environment. The Commission has also noted RCI's arguments that its ownership of MHL's publishing interests will form an important part of that overall competitive strategy. The Commission, however, has determined that RCI's proposed ownership of MHL's television interests has no similar place within the rationale offered by the applicant in support of this transaction.
In light of the degree of ownership concentration created by this decision in one major component of the Canadian broadcasting system, and given the national voice RCI assumes as publisher of "Macleans", the "Financial Post" and the various Sun newspapers, the Commission is unwilling to permit RCI to retain effective control of the two Alberta television stations, or an ownership position within CTV. In the Commission's view, to extend RCI's influence in this manner, and thus to effectively allow the applicant a position of influence in a further national voice, would not be of benefit to the Canadian broadcasting system or serve the broader public interest.
For all of these reasons, the Commission has required the applicant, as a condition of its approval of the transaction, to divest itself of MHL's television interests.
With regard to ownership of the new country music specialty television service TCN, effective indirect control of the licensed partnership currently resides with MHL (60%), through its control of the licensee of CFCN-TV, CFCN Communications Limited (CFCN). It is the Commission's understanding of an agreement between MHL's subsidiary and TCN's minority partner, Rawlco Communications Ltd. (Rawlco), that should control of MHL change hands before August 1995, Rawlco is required to purchase a portion of MHL's partnership interest sufficient to result in Rawlco owning 51% and MHL 49% of the partnership, subject to CRTC approval. The Commission further understands that, under the arrangements discussed at the hearing of TCN's application for a broadcasting licence in February 1994, the new specialty service is to operate out of CFCN-TV's production facilities.
The Commission has not required RCI to divest itself of an ownership position in the new specialty service. However, in light of CFCN's involvement in the operation of TCN, the Commission expects RCI to assess the impact, if any, that the required divestiture of CFCN to a third party will have on TCN, and to act accordingly, in the best interests of TCN. The Commission would also expect to receive shortly, an application for authority to transfer control of TCN to Rawlco.
Standard Broadcasting Corporation Limited (Standard) intervened, not in opposition to any application, but to request that the Commission modify its procedure with regard to the hearing of the application by RCI to acquire MHL's interest in TCN (940962400). Standard argued that interested parties had not been provided with the facts and circumstances surrounding control of TCN so as to be in a position to make a meaningful intervention. Standard pointed out that the application, if approved, would give RCI a majority interest in TCN, while the application, as filed, envisaged a minority position pursuant to the agreement between MHL and Rawlco, which agreement was not on the public file. Standard stated that the Commission should therefore re-open the licensing of a country music format specialty service or, at the very least, that this decision should be conditional upon RCI divesting itself of its interest in TCN.
The Commission considers that the application on the public file, the written reply to interventions and the statements made at the public hearing, all made it clear to those who appeared at the intervention stage of the hearing that, if the application were approved, RCI would initially acquire control of TCN, but that Rawlco would then be under a contractual obligation to seek the Commission's approval to acquire control of TCN from RCI, which acquisition RCI would support. Standard was thus in a position to make its views known to the Commission. Standard's request is therefore denied.
 c) Access and Interconnection Issues
It became clear at the hearing that the salient concern of most interveners regarding the issue of concentration centred upon the increased power and influence RCI will acquire through ownership of MHL's cable holdings, RCI's declared interest in mounting new services for distribution on cable, and the question of whether these factors could serve as an impediment to other parties seeking access to RCI's cable facilities for the distribution of their own services.
The Commission notes in this regard the views expressed by such interveners as Western International Communications Ltd., Stentor Telecom Policy Inc., Telesat Canada, the Canadian Daily Newspaper Association and Southam Inc./Torstar Corporation, that RCI be required to offer fair and equitable access for existing programming services, as well as for the many new programming and non-programming services expected to emerge in the near future.
With its applications, RCI filed a proposed Access Policy in which it committed, among other things, to distribute on its cable systems all programming services licensed by the Commission, without qualification, except in the case of ethnic and minority language services, whose carriage would fall under the existing Canadian Cable Television Association (CCTA) Access Commitment. RCI did not request approval of its proposed policy, but only asked the Commission to take note of its provisions. It indicated that it would implement the policy within 30 days of a positive decision on the present applications.
As for concerns about the proposed policy expressed by certain interveners, notably Southam and Torstar, RCI indicated that it would continue discussions with these parties with a view to resolving their concerns. It also stated that it would participate, along with others, in a public process on the issue of cable access. This process is one expected to be initiated by the CCTA in the near future, in accordance with a request made by the Commission in its Structural notice. As an interim measure, it is RCI's intention to apply the provisions of its proposed policy, subject to such possible revisions as it may determine are necessary. This would continue until such time as the policy is replaced, in whole or in part, by access guidelines developed by the CCTA and accepted by the Commission.
The Commission expects RCI to participate in the CCTA's public process and, as a minimum, to adhere to the access guidelines resulting from that process. In the meantime, there are some elements of RCI's proposed access policy that must be addressed.
Certain aspects of the policy do not raise any concerns. Specifically, the Commission views as essential the fact that the policy presupposes adherence to the priority carriage requirements set out in the cable television regulations. As noted above, RCI's proposed policy also states that all licensed programming services will be distributed by its cable television undertakings, including services whose distribution is optional to cable television licensees, other than minority language and ethnic services. In the Commission's view, this represents a departure from and improvement on the CCTA's existing access guidelines for licensed programming services, which make the distribution of such services contingent upon the availability of channel capacity. Under this policy, RCI will distribute all of the new specialty services soon to commence operations, as well as others that may be licensed in the future. The Commission notes, with particular satisfaction, RCI's commitment to carry the new French-language news and information specialty service "Réseau de l'information" (RDI) on the basic service, "subject to commercial negotiations."
The policy also provides that, once the above obligations are met, RCI's cable undertakings will distribute any programming services that are exempted from licensing requirements by the Commission, but that the Commission may designate as having a carriage priority. The applicant identified as falling into this category, coverage of the proceedings of provincial legislative assemblies. The Commission supports this aspect of the policy.
The Commission also accepts as positive that part of RCI's access policy which extends to service providers a third option of binding arbitration, in addition to the existing CCTA mediation and resolution process and the mediation provisions of the cable regulations, should an access dispute arise.
In the Commission's view, however, RCI's proposed access policy, as drafted, contains a number of flaws. The first is that it fails to draw the clear and necessary distinction between programming and non-programming services, or to ensure that priority is always given to the former, as required under paragraph 3(1)t of the Broadcasting Act. Secondly, the Commission notes that the proposed policy does not ensure fair and equitable access among exempt programming services that have not been assigned a carriage priority by the Commission, but that are nonetheless "broadcasting" within the meaning of the Broadcasting Act. For example, the proposed policy appears to discriminate between exempt programming services on the basis of whether or not they earn advertising revenues, and if they do, on the basis of their content. For these exempt services, the Commission considers that RCI, and the licensees of all cable television undertakings, must offer program suppliers access to their distribution facilities on a fair and equitable basis, and without discrimination on any basis whatsoever.
The Commission requires RCI to take the above concerns into account in drafting a new proposed policy for the provision of fair and equitable access, and to file the revised policy with the Commission without any undue delay.
As for non-programming services, the Commission considers that disagreements regarding access to cable distribution facilities by providers of such services cannot be adequately dealt with under the Broadcasting Act.
With regard to the remaining issue of interconnection between cable and telephone companies, the Commission, in its public notice dealing with the structure of the broadcasting industry, has already encouraged both groups to cooperate in exploring opportunities for the shared use of network infrastructures.
Further, in Telecom Decision CRTC 94-19, the Commission stated that a system of open and interoperable networks for the provision of telecommunications services, including new interactive information services, is essential to achieve the vision of the information highway; the Commission thus determined that telephone companies must provide interconnection at any point within their networks. The Commission emphasized, however, that the same principles of open entry are not necessarily appropriate when considering those cultural policy matters covered under the Broadcasting Act.
The Commission considers that it is vital for the development of a public Canadian communications infrastructure that the issues related to interconnection, as between cable and other networks, be fully addressed. Clearly, however, the matters cannot be properly disposed of in this decision concerning the transfer of control of MHL to RCI.
IV Other Matters
 a) Introduction of Digital Video Compression Technology
As noted earlier in this decision, the cable industry's ability to compete in the new communications environment will be largely dependent on the speedy roll-out to subscribers of set-top boxes combining DVC technology and addressable decoding capability. Based on evidence given at the hearing, however, there has yet to emerge any industry-wide agreement, either in Canada or in the United States, as to a common standard for DVC technology.
Some major industry players, including Shaw in this country, are leaning towards the introduction of a "simple profile box" having minimal functionality, but sufficient memory to support near-on-demand pay-per-view programming services, at a cost of less than $400 per unit. According to Shaw, this option would allow a roll-out of the technology early enough to minimize the impact of non-Canadian DBS services. With this approach, Shaw expects to achieve 80% penetration by the year 2000. Shaw also stated that the boxes could be upgraded at a later date to provide greater functionality.
RCI, on the other hand, indicated a preference to await the manufacture of boxes that might cost in the range of $500, but would incorporate greater functionality and full compatibility with the MPEG-2 compression standard. The Commission notes, for example, RCI's statement at the hearing that it is working with U.S. interests with a view to having V-chips, devices that would allow television viewers to screen out violent programming, incorporated in the DVC boxes. RCI projects that it will achieve 27% penetration by 1999.
The Commission notes that, despite the discrepancy between their respective projections on penetration, both Shaw and RCI are committed to placing addressable DVC boxes in the homes of their subscribers as quickly as possible. While the Commission understands the differing philosophies underlying the two approaches discussed above, it emphasizes the importance of resolving the issue of DVC standards without delay. Given the size and influence of RCI and Shaw within the cable industry, it is essential that they be part of this solution. The Commission expects Shaw and RCI to assume their responsibilities and move forward together to resolve this problem in the public's best interest.
Despite the urgency attached to the introduction of this new technology, a potential concern surrounds the capability that addressability will place in the hands of cable operators to gather marketable information on the viewing habits and other preferences of their subscribers. As stated by the Commission in its Structural notice, "addressable technology should not be used to collect, use or disclose viewing, or any other information, in a manner that infringes on the privacy of subscribers."
At the hearing, RCI stated its commitment not to use or collect such information. It also noted the efforts of the CCTA, together with the Cable Television Standards Council and the Canadian Standards Association, to draft a model code for the protection of personal information:
 The principles would be: accountability, consent, limited usage only for the purpose for which it was intended, consent required for the collection or disclosure of information, and individual access by the subscriber to have his or her information available to them.
The Commission expects RCI to comply fully with its commitment to ensure the privacy of its subscribers. Moreover, given RCI's expanded influence and parallel responsibilities, the Commission expects the applicant to play a leadership role within the CCTA to ensure that preparation of the Association's privacy standards is completed in short order.
 b) Employment Equity
In Public Notice CRTC 1992-59 dated 1 September 1992 and entitled Implementation of an Employment Equity Policy, the Commission announced that the employment equity practices of broadcasters would be subject to its examination. The Commission has assessed the performances in this area both of RCI's cable subsidiary, Rogers Cable, and of its broadcasting subsidiary, RBL.
On the cable side, the Commission considers the active involvement of Rogers Cable in various initiatives as indicative of a generally positive commitment to employment equity.
On the broadcasting side, the Commission takes note of the statements made at the hearing on behalf of RBL regarding the difficulties the company is experiencing with respect to the recruitment and training of staff who are native Canadians. Nevertheless, it expects RBL to continue to make efforts in this area. The Commission also expects RBL to increase its efforts in relation to the equitable employment of staff who are disabled, and encourages RBL to promote the equitable representation of all four designated groups in on-air staff positions and in voice-overs of station-produced commercial messages. Further, the Commission expects RBL to develop and implement an effective plan of action to ensure that adequate employment equity practices are followed in all parts of its organization. The Commission will revisit these matters at the time RBL next appears before it as an applicant at a public hearing.
 c) Interventions
Well over 700 interventions were submitted with respect to one or more of the applications that are the subject of this decision, and some 20 of these interveners appeared at the hearing. The Commission acknowledges the contribution made by interveners to its deliberations regarding the various issues arising from this large and important transaction.
One intervention raised matters not dealt with above, and which, in the Commission's view, warrant special attention. Television Northern Canada (TVNC) is the provider of television services in northern Canada directed to aboriginal communities. In its intervention at the hearing, TVNC requested the Commission's support in requiring RCI to provide funding and other assistance designed to extend the reach of TVNC, via cable, to aboriginal communities throughout the country. Although the Commission recognizes the importance of native broadcasting across Canada, it is reluctant to impose a requirement uniquely on RCI to sponsor the specific initiatives identified by the intervener. Instead, it encourages TVNC, along with native groups in southern Canada and other interested parties, to explore the support within the Canadian cable industry as a whole for conducting a study of the demand for, and the feasibility of bringing about, a broader availability of aboriginal television programming across Canada.
Allan J. Darling
Secretary General
Appendix I
The following applications by MHL are on behalf of its subsidiary licensee companies operating broadcasting undertakings in Canada, and request authority to transfer shareholdings or partnership interests involving, in all but one instance, the effective control of the licensee companies listed below, through the transfer of 179,735,102 common shares (100%) of MHL to RCI.
Cable television undertakings wholly owned by MHL in Ontario
Thunder Bay (940494800); Sault Ste. Marie (940495500); North Bay (940496300); Huntsville (940497100); Collingwood (940498900); Midland (940499700); Owen Sound (940500200); Sarnia (940501000); Wallaceburg (940502800); Ajax (940503600); Guelph (940504400); Hamilton (940505100); London (940506900); Peterborough (940507700); Toronto (940508500); St. Catharines (940961600); Pembroke (940555600); Deep River (940509300); Chalk River (940510100); Cobden (940511900); Beachburg (940512700); Alexandria (940513500); Alfred (940514300); Arnprior (940515000); Bourget (940516800); Carp (940517600); Hawkesbury (940518400); Lancaster (940519200); Limoges (940520000); Maxville (940521800); Ottawa (940522600); Pakenham (940523400); Renfrew (940524200); St. Isidore de Prescott (940525900); and/et Niagara Falls (940526700).
Radio and television stations wholly owned by MHL across Canada
CFCN-TV Calgary (940527500), and/et CFCN-TV-5 Lethbridge (940528300), Alberta; CFNY-FM Brampton (940529100), CKCY Toronto (940530900), CKBY-FM (940531700) and/et CIWW (940532500) Ottawa, CKGL (940533300) and/et CHYM-FM (940534100) Kitchener, CFCO (940538200) Chatham, CKTY (940535800) and/et CFGX-FM Sarnia (940536600), and/et CHYR-FM Leamington (940537400), Ontario; CHFX-FM (940544000) and/et CHNS/CHNX Halifax (940543200), and/et CKDH Amherst (940539000), Nova Scotia/(Nouvelle-Écosse); CKNB Campbellton (940540800), CKCW (940545700) and/et CFQM-FM Moncton (940546500), CFAN Newcastle (940547300), CIOK-FM Saint John (940548100), and/et CJCW Sussex (940549900), New Brunswick/(Nouveau-Brunswick); CFCY (940541600) and/et CHLQ-FM Charlottetown (940542400), Prince Edward Island/(Ile-du-Prince-Édouard).

Other MHL broadcasting holdings

Indirectly, MHL owns 14.3% of the voting shares of CTV Television Network Limited (940550700), and a 60% partnership interest in The Partners of MH Radio/Rawlco Partnership (940962400), licensee of the country music video specialty undertaking "The Country Network".

Appendix II

The applications listed below are contingent upon approval of the transfer of effective control of MHL to RCI, and are for authority to effect an intra-corporate reorganization whereby:
* Rogers Broadcasting Limited would become the parent subsidiary of the licensee companies for CFCN-TV Calgary, CFCN-TV-5 Lethbridge, Alberta; CKBY-FM and CIWW Ottawa, CKGL-FM and CHYM-FM Kitchener, Ontario.
* Rogers Cable TV Limited would become the parent subsidiary of the licensee companies for all of MHL's Ontario cable undertakings except the cable undertakings at Thunder Bay, Sault Ste. Marie, Niagara Falls and St. Catharines.
* the licence renewal is requested in respect of CFCN-TV Calgary, CFCN-TV-5 Lethbridge and CIWW Ottawa.
* RCI, or its designate company, would acquire the assets of the cable distribution undertakings at Sault Ste. Marie and at Thunder Bay, Ontario from the present MHL licensee companies under the same terms and conditions as the current licences.
* the partners of the Maclean-Hunter Cable TV Niagara Partnership, being Rogers Cable TV Limited and its wholly owned subsidiary Maclean Hunter Cable TV (Niagara) Limited, would acquire the assets of the cable distribution undertakings at Niagara Falls and St. Catharines, Ontario from the present licensees under the same terms and conditions as the current licences.


North Bay (940583800); Owen Sound (940584600); Midland (940963200); Collingwood (940964000); Huntsville (940585300); Toronto (940586100); Ajax (940587900); Guelph (940588700); London (940589500); Hamilton (940590300); Wallaceburg (940591100); Sarnia (940592900); Peterborough (940593700); Niagara Falls (940594500); St. Catharines (940595200); Ottawa (940596000); Arnprior (940597800); Renfrew (940598600); Carp (940599400); Bourget (940600000); Lancaster (940965700); Limoges (940966500); Maxville (940967300); St. Isidore de Prescott (940601800); Hawkesbury (940602600); Alexandria (940603400); Alfred (940604200); Pembroke (940605900); Chalk River (940606700); Beachburg (940607500); Deep River (940608300); Cobden (940609100); Pakenham; Sault Ste. Marie (940617400) and/et Thunder Bay (940616600).

Radio and Television

CIWW and/et CKBY-FM Ottawa (940610900, 940611700); CKGL and/et CHYM-FM Kitchener (940612500, 940613300); CFCN-TV Calgary (940614100, 941015000); and/et CFCN-TV-5 Lethbridge (940615800, 941016800).
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