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ARCHIVED -  Decision CRTC 94-924

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Decision

Ottawa, 19 December 1994
Decision CRTC 94-924
Rogers Cable TV Limited
St. Thomas; Strathroy; Tillsonburg; Toronto (part of); and Woodstock, Ontario - 940620800 - 940622400 - 940621600 - 940618200 - 940619000Calgary and Crossfield, Alberta; Victoria, British Columbia; Sault Ste. Marie and Thunder Bay, Ontario - 940554900 - 940553100 - 940557200 - 940556400

Exchange of Cable Distribution Undertakings between Rogers Cable TV Limited and Shaw Cablesystems (B.C.) Ltd./Shaw Cablesystems (Ontario) Ltd. - Approved

Following a Public Hearing in the National Capital Region beginning on 20 September 1994, the Commission approves the applications by Rogers Cable TV Limited (Rogers Cable) for authority to acquire the assets of the cable distribution undertakings serving St. Thomas, Strathroy, Tillsonburg, part of Toronto and Woodstock from Shaw Cablesystems (Ontario) Ltd. (Shaw Ontario), and for broadcasting licences to continue the operation of these undertakings.
The Commission will issue licences to Rogers Cable, expiring 31 August 1996, the current expiry date, upon surrender of the current licences. The operation of these undertakings will be regulated pursuant to Parts I and II of the Cable Television Regulations, 1986 (the regulations). The authority granted herein is subject to the same conditions as those in effect under the current licences, as well as to the conditions set out in Appendix I to this decision and to any other condition that may be specified in the licences to be issued.
The Commission also approves the applications by Shaw Cablesystems (B.C.) Ltd. (Shaw B.C.) for authority to acquire the assets of the cable distribution undertaking serving Calgary and Crossfield, and that serving Victoria from Rogers Cable, and by Shaw Ontario to acquire the assets of the cable distribution undertakings serving Sault Ste. Marie and Thunder Bay from Rogers Communications Inc. (RCI) or its designate company, and for broadcasting licences to continue the operation of these undertakings.
Upon surrender of the current licences, the Commission will issue licences to Shaw B.C. for the cable undertakings serving Calgary and Crossfield and Victoria, and to Shaw Ontario for those serving Sault Ste. Marie and Thunder Bay. The licence for the cable distribution undertaking serving Calgary and Crossfield will expire on 31 August 1999. The licences for the cable distribution undertakings serving Victoria, Sault Ste. Marie and Thunder Bay will expire on 31 August 2000. These expiry dates are the same as those for the current licences. The operation of these undertakings will be regulated pursuant to Parts I and II of the regulations. The authority granted herein is subject to the same conditions as those in effect under the current licences, as well as to the conditions set out in Appendix II to this decision and to any other condition that may be specified in the licences to be issued.
Rogers Cable and RCI are indirectly controlled by Mr. Edward S. Rogers of Toronto. Through these and other companies, Mr. Rogers holds indirect control of a number of other cable undertakings in Ontario. In Decision CRTC 94-923 issued today, the Commission approves a transaction involving the transfer of all of Maclean Hunter Limited's (MHL) issued and outstanding shares to RCI. Under this transaction, RCI acquired the assets of MHL's cable distribution undertakings serving Sault Ste. Marie and Thunder Bay. These assets are now, in turn, being transferred to Shaw Ontario. RCI also acquired indirect control of MHL's numerous other cable distribution undertakings in Ontario and has gained a much strengthened position in the cable market in southern Ontario, including ownership of adjacent systems in Toronto, Ottawa, London and Hamilton.
Shaw B.C. and Shaw Ontario are wholly owned and controlled by Shaw Communications Inc. (Shaw) which, in turn, is controlled by James R. Shaw by virtue of a voting trust agreement. Currently, Shaw operates cable distribution undertakings in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Nova Scotia. Shaw's cable holdings include five Part III systems serving small communities between Thunder Bay and Sault Ste. Marie, as well as the cable undertakings currently serving parts of Calgary and Victoria. As a result of the approvals granted herein, Shaw's cable holdings in Ontario's cable market will include a larger, more concentrated grouping of systems in northwestern Ontario and, in western Canada, will include adjacent cable systems in Calgary and Victoria.
Because the Commission does not solicit competing applications for authority to transfer effective control of broadcasting undertakings, the onus is on the applicants to demonstrate to the Commission that the applications filed are the best possible proposals 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 transfers will yield significant and unequivocal benefits to the communities served by the broadcasting undertakings and to the Canadian broadcasting system as a whole, and that they are 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 management, financial and technical resources available to the purchasers.
The Rogers Cable and RCI systems being transferred to Shaw serve some 259,000 subscribers, whereas the Shaw systems being transferred to Rogers Cable and RCI serve approximately 123,500 subscribers. Shaw is therefore acquiring systems serving approximately 135,000 subscribers more than those served by the systems it is selling to Rogers Cable. Under the terms of their agreement which established a common purchase price of $1,350 per subscriber for each of the cable undertakings being exchanged, Shaw will pay Rogers Cable and RCI $182,495,700.
Based on the evidence filed with the applications, the Commission has no concerns with respect to the availability or the adequacy of the required financing.
Shaw proposed quantifiable benefits commensurate with the net cost of the transaction. Specifically, Shaw proposed tangible benefits totalling $19,823,500.
The Commission accepts Shaw's "netting" approach and has assessed the benefits package identified by Shaw as flowing from this transaction accordingly. In general, the Commission is satisfied that the benefits are significant and unequivocal, and that approval of the transaction is in the public interest.
The Commission considers the undertaking made by Shaw that the costs associated with the commitments outlined in this decision not form part of any fee filing under subsections 18(6) and 18(8) of the regulations to be an important element of these applications.
The Commission has assessed the benefits proposed by Rogers Cable and RCI for the cable systems they are acquiring from Shaw as part of the benefits package put forward in the related transaction involving RCI's acquisition of MHL's assets (Decision CRTC 94-923). In this regard, the Commission notes that RCI will assume responsibility for completing the benefits proposed by Shaw when it purchased from Cablecasting Limited the cable systems serving St. Thomas and part of Toronto (Decision CRTC 92-829 dated 23 December 1992).
Among the tangible benefits proposed by Shaw, the Commission notes in particular the applicant's commitment to contribute $7.5 million over five years to the "head end in the sky" (HITS) project, an initiative aimed at facilitating access for small cable systems to digitally-compressed pay-per-view services and to a cost-effective ordering and transaction management system. The Commission notes that RCI will contribute an additional $8 million in support of the HITS initiative as part of the benefits attached to its application to acquire MHL's assets.
Of its total commitment of $7.5 million to the HITS initiative, Shaw will allocate $1 million to fund the initial capital and operating costs of a pay-per-view call centre based in western Canada. In its intervention to these applications, Western International Communications Ltd. (WIC), among other points, claimed that Shaw's commitment to contribute $1 million to the pay-per-view call centre is an inappropriate allocation of public benefit monies. According to WIC, the "only reason such a customer-unfriendly solution is required" is because Shaw has chosen "an inexpensive basic DVC box that does not include true impulse-ordering capability".
In its applications, Shaw indicated that it plans a rapid roll-out of digital video compression (DVC) by introducing a "simple profile box" as soon as it is available with sufficient memory to support near-on-demand pay-per-view programming services. According to Shaw, the simple profile box could be upgraded later to provide greater function- ality. Shaw projected that the simple profile box would achieve 80% penetration by the year 2000.
In response to WIC's intervention, Shaw stated that, regardless of the technology used to deliver pay-per-view services, cable operators need a call centre to maintain and manage their subscriber base and to respond personally to calls from customers. Shaw further contended that it had consulted with licensees of small cable systems and claimed that these licensees support the proposed call centre since they do not have the staff or technology to handle pay-per-view orders directly.
Having considered the arguments presented by WIC and Shaw, the Commission is satisfied that the establishment of a call centre for delivery of pay-per-view services in western Canada does offer a benefit to smaller cable systems.
For its part, RCI stated that it will introduce a DVC-based box that will incorporate more than the basic functions contained in the simple profile box envisaged by Shaw. According to RCI, its box would achieve a penetration of 27% by 1999.
The Commission attaches the utmost importance to the deployment of DVC-based boxes to the Canadian broadcasting system. In this regard, the Commission considers that Shaw and RCI have significant responsibilities attached to their respective roles as leaders in Canada's cable industry. Accordingly, the Commission expects Shaw and RCI, along with other players in the cable sector to play a key role in the development of a common industry standard for the introduction of DVC in the public's best interest.

Access to Cable Distribution Undertakings by Canadian Programming Services

At the hearing, there was considerable discussion regarding rapidly evolving technology in the communications industry, the expanding role of larger cable distribution companies such as RCI and Shaw as both providers and distributors of programming as well as the issue of access to their facilities by other parties. Accordingly, the Commission has, in its evaluation of these transactions, taken into consideration their potential impact on access to cable distribution by all Canadian programming services. In this regard, the Commission notes the concerns expressed in the interventions submitted by WIC, Stentor Telecom Policy Inc., Telesat Canada, the Canadian Daily Newspaper Association and Southam Inc./Torstar Corporation that RCI and Shaw be required to offer fair and equitable access for existing programming services as well as for the many new programming and non-programming services anticipated in the near future.
In its applications, RCI made a commitment to carry all licensed programming services without qualification, except in the case of ethnic and minority language services, whose carriage would fall under the existing Canadian Cable Television Association's (CCTA) Access Commitment. RCI requested the Commission to take note of the proposed Access Policy filed with its applications. Shaw made no similar commitment, nor did it address the issue of access in its applications. At the hearing, however, Shaw stated that it is participating in the CCTA's initiative to develop an industry-wide policy on access in a public process.
The Commission emphasizes that cable licensees are responsible to ensure, to the greatest extent possible, that access to their cable distribution systems is available to all Canadian programming services on a fair and equitable basis. In Decision CRTC 94-923, the Commission notes various concerns regarding its proposed Access Policy and expects RCI to take these concerns into account in finalizing its Access Guidelines. The Commission draws Shaw's attention to the concerns regarding access outlined in that decision. The Commission expects Shaw to be guided by the same expectations set out for RCI in that decision regarding matters of access until such time as the access guidelines initiated by the CCTA are submitted to and accepted by the Commission.

Other Matters

In Public Notice CRTC 1992-59, the Commission announced implementation of its employment equity policy. It advised licensees that, at the time of licence renewal or upon considering applications for authority to transfer ownership or control, it would review with applicants their practices and plans to ensure equitable employment. In keeping with the Commission's policy, it encourages Shaw to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.
The Commission has noted the numerous interventions submitted regarding these applications.
Allan J. Darling
Secretary General
Rogers Cable TV Limited
St. Thomas; Strathroy; Tillsonburg; Toronto (part of); and Woodstock, Ontario - 940620800 - 940622400 - 940621600 - 940618200 - 940619000
Shaw Cablesystems (B.C.) Ltd. and Shaw Cablesystems (Ontario) Ltd.
Calgary and Crossfield, Alberta; Victoria, British Columbia; Sault Ste. Marie and Thunder Bay, Ontario - 940554900 - 940553100 - 940557200 - 940556400
APPENDIX I
Conditions of Licence

Rogers Cable TV Limited

St. Thomas
Consistent with Decision CRTC 91-714 dated 4 September 1991 and pursuant to paragraph 10(1)(l) of the regulations, the licensee is authorized to continue to distribute, at its option, the programming services of WJKW (CBS) and WKYC (NBC) Cleveland, Ohio, received over the air, as part of the basic service. The licensee is also authorized, by condition of licence, to distribute, at its option, WDIV (NBC) Detroit, Michigan, received via satellite from the CANCOM network, as part of the basic service. The Commission notes that these signals have been distributed on the St. Thomas cable undertaking for many years.

Strathroy

In addition to the services required or authorized to be distributed pursuant to the applicable sections of the regulations, the licensee is authorized, by condition of licence, to continue to distribute, at its option, CHCH-TV Hamilton, WJBK-TV (CBS), WTVS (PBS), WDIV (NBC) and WXYZ-TV (ABC) Detroit, received via satellite from the CANCOM network, as part of the basic service.

Tillsonburg

In addition to the services required or authorized to be distributed pursuant to the applicable sections of the regulations, the licensee is authorized, by condition of licence, to continue to distribute, at its option, CFMT-TV Toronto, received over the air, as part of the basic service.
Consistent with Decision CRTC 91-715 dated 4 September 1991 and pursuant to section 12 of the regulations, the licensee is relieved, by condition of licence, of the requirement that it distribute the signals of CKCO-TV Kitchener and CBLN London on unrestricted channels. Should the quality of the signals deteriorate significantly, the Commission expects the licensee to undertake immediate corrective action including, if necessary, the distribution of the services on other channels.
Consistent with Decision CRTC 91-715 and pursuant to paragraph 10(1)(l) of the regulations, the licensee is authorized to continue to distribute, at its option, the programming service of WKBW-TV (ABC) Buffalo, New York, received over the air, as part of the basic service. The Commission notes that this service has been distributed on the Tillsonburg cable undertaking for many years.

Toronto (part of)

Consistent with Decision CRTC 91-415 dated 26 June 1991 and pursuant to section 12 of the regulations, the licensee is relieved, by condition of licence, of the requirement that it distribute the signal of CHCH-TV Hamilton on an unrestricted channel. Should the quality of the signal deteriorate significantly, the Commission expects the licensee to undertake immediate corrective action including, if necessary, the distribution of the service on another channel.

Woodstock

In addition to the services required or authorized to be distributed pursuant to the applicable sections of the regulations, the licensee is authorized, by condition of licence, to continue to distribute, at its option, CFMT-TV Toronto, received over the air, as part of the basic service.
Consistent with Decision CRTC 91-718 dated 4 September 1991 and pursuant to paragraph 10(1)(l) of the regulations, the licensee is authorized to continue to distribute, at its option, the programming services of WGRZ-TV (NBC) and WIVB-TV (CBS) Buffalo, New York and WJET-TV (ABC) Erie, Pennsylvania, received over the air, as part of the basic service. The Commission notes that these services have been distributed on the Woodstock cable system for many years.

St. Thomas, Strathroy, Tillsonburg and Woodstock

The licensee is relieved, by condition of licence, of the requirement of section 9 of the regulations that it distribute the French-language educational television programming service operated by TVOntario, "La Chaîne", on the basic band (channels 2 to 13) of each of the cable distribution undertakings noted above, so long as the service is distributed as part of the basic service.
APPENDIX II
Conditions of Licence

Shaw Cablesystems (B.C.) Ltd.

Calgary (part of) and Crossfield
In addition to the services required or authorized to be distributed pursuant to the applicable sections of the regulations, the licensee is authorized, by condition of licence, to continue to distribute, on the Crossfield portion of the system, at its option, CFRN-TV-6 Red Deer, received over the air, as part of the basic service.
The licensee is authorized to continue to distribute, at its option, as part of the basic service, KSPS-TV (PBS), KHQ-TV (NBC), KXLY-TV (ABC) and KREM-TV (CBS) Spokane, Washington, received via microwave. The licensee is further authorized to continue to distribute, at its option, on audio channels of the undertaking, KMBI-FM, KXLY-FM, KISC-FM, KDRK-FM, KEZE-FM and KZZU Spokane, received via microwave, and the audio signals of The Arts and Entertainment Network and The Nashville Network, received via microwave, as part of the basic service.
The licensee is authorized to continue to distribute, at its option, without advertising material,
except that contained in programs which are being rebroadcast, replays of Canadian programs broadcast by CICT-TV (formerly CKKX-TV) Calgary.
The Commission authorizes the licensee to continue to distribute, at its option, and without advertising material, special programming services consisting of pay television promotional material, children's programming, City of Calgary Information Guide and religious programs.
It is a condition of licence that the licensee delete commercial messages from television signals received from broadcasting stations not licensed to serve Canada, and substitute suitable replacement material therefor.
The licensee is authorized to continue the level and scope of the current deletion and substitution activities. The licensee is not authorized to increase the scope of such activities in any way.
Consistent with Decision CRTC 93-554 dated 31 August 1993, the licensee is relieved, by condition of licence, from the requirement to distribute priority signal CITV-TV-1 Red Deer as part of the basic service on that part of its cable system serving part of Calgary.
Consistent with Decision CRTC 93-553, the licensee is authorized, by condition of licence, to continue to distribute, at its option, the special programming service consisting of ethnic and multicultural programs, which do not include any commercial messages other than sponsorship credits. Such sponsorship credits may include the sponsor's name, address and nature of business or profession, but may not include a telephone number, company logo or trademark, picture or representation of an establishment, display of goods or any qualifying words or statements which might promote the sponsor's business, service or product.

Victoria

In addition to the services required or authorized to be distributed pursuant to the applicable sections of the regulations, the licensee is authorized, by condition of licence, to continue to distribute, at its option, KVOS-TV (IND) Bellingham, KIRO-TV (CBS), KOMO-TV (ABC), KING-TV (NBC) and KCTS-TV (PBS) Seattle, KSTW-TV (IND) and KCPQ-TV (FOX) Tacoma, Washington, received via microwave, as part of the basic service, as well as the audio services of The Nashville Network and The Arts and Entertainment Network, received via satellite, on audio channels of the undertaking.
Consistent with Decision CRTC 93-462 dated 20 August 1993 and pursuant to section 12 of the regulations, the licensee is relieved, by condition of licence, of the requirement that it distribute the signal of CHEK-TV Victoria on an unrestricted channel. Should the quality of the signal deteriorate significantly, the Commission expects the licensee to undertake immediate corrective action including, if necessary, the distribution of the service on another channel.

Shaw Cableystems (Ontario) Ltd.

Sault Ste. Marie
In addition to the services required or authorized to be distributed pursuant to the applicable sections of the regulations, the licensee is authorized, by condition of licence, to continue to distribute, at its option, WNEM-TV (NBC) Bay City, WKBD-TV (IND) Detroit, WNMU-TV (PBS) Marquette and WJRT-TV (ABC) Flint, Michigan, received via microwave, as part of the basic service.

Thunder Bay

In addition to the services required or authorized to be distributed pursuant to the applicable sections of the regulations, the licensee is authorized, by condition of licence, to continue to distribute, at its option, WXYZ-TV (ABC), WJBK-TV (CBS), WTVS (PBS) and WDIV (NBC) Detroit, Michigan, received via satellite from the CANCOM network, as part of the basic service.

Sault Ste. Marie and Thunder Bay

The licensee is relieved, by condition of licence, of the requirement of section 9 of the regulations that it distribute the French-language educational television programming service operated by TVOntario, "La Chaîne", on the basic band (channels 2 to 13) of each of the cable distribution undertakings serving the communities noted above, so long as the service is distributed as part of the basic service.
Consistent with Decisions CRTC 93-333 for the Thunder Bay undertaking and CRTC 93-334 for the Sault Ste. Marie undertaking, the licensee is prohibited, by condition of licence, from distributing the distant signal of CHCH-TV Hamilton.
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