ARCHIVED -  Decision CRTC 96-140

Decision

Ottawa, 10 May 1996

Decision CRTC 96-140

Mr. John Bragg, on behalf of a company to be incorporated

MacGregor, and Portage La Prairie/ Southport, Manitoba - 952066900- 952049500New Glasgow and surrounding areas, Nova Scotia - 952018000

Acquisition of assets

Following a Public Hearing in Vancouver beginning on 27 February 1996, the Commission approves the applications by Shaw Cablesystems Inc. (Shaw) for authority to acquire the assets of the cable distribution undertakings serving MacGregor and Portage La Prairie/Southport from Portage Community Cablevision Ltd. (Portage Cable) and for broadcasting licences to continue the operation of these undertakings.

The Commission also approves the application by Mr. John Bragg, on behalf of a company to be incorporated (Bragg), for authority to acquire the assets of the cable distribution undertaking serving New Glasgow and surrounding areas from Shaw and for a broadcasting licence to continue the operation of this undertaking.

The above-noted applications involve an exchange of cable undertakings between Shaw and Bragg. Approval will result in Shaw selling the assets of its cable system serving New Glasgow to Bragg, and Portage Cable, a company that is indirectly controlled by John Bragg through various holding companies and a family trust, will sell the assets of its cable systems serving the communities of MacGregor and Portage La Prairie/ Southport to Shaw.

The Shaw applications

The Commission will issue licences to Shaw, expiring 31 August 2002, upon surrender of the current licences. The operation of the Portage La Prairie/ Southport undertaking will be regulated pursuant to Parts I, II and IV of the Cable Television Regulations, 1986 (the regulations). The operation of the MacGregor undertaking, with the exception of the requirements stipulated in section 23 of the regulations, will be regulated pursuant to Parts I, III and IV of the regulations. The authority granted herein is subject to the same conditions as those in effect under the current licences, with the exception of the amendments set out below, as well as to any other condition that may be specified in this decision and in the licences to be issued.

The purchase price relating to this transaction is $6,407,300. 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.

The Commission also approves Shaw's request to delete the condition of licence regarding ownership of facilities. It is, however, a condition of each licence that both undertakings share in the joint use of a distant head end located at Tolstoi, Manitoba.

With respect to the Portage La Prairie/ Southport undertaking, the Commission approves the proposal to delete the condition of licence regarding the obligation to distribute community programming on an unrestricted channel and the authority to distribute the special programming service of the Manitoba Jockey Club Inc.

In addition to the services required or authorized to be distributed pursuant to the applicable sections of the regulations, Shaw is authorized to distribute, at its option, KGFE (PBS) Grand Forks and WDAZ-TV (ABC) Devils Lake, North Dakota, received via microwave, as part of the basic service of each undertaking.

With respect to the undertaking serving Portage La Prairie and Southport, the licensee is authorized by condition of licence, to distribute, at its option, WTOL-TV (CBS) Toledo, Ohio, and WDIV-TV (NBC) Detroit, Michigan, received via satellite from CANCOM, as part of the basic service.

With respect to the MacGregor undertaking, it is a condition of licence that Shaw be relieved of the requirement of paragraph 22(1)(b) of the regulations that it distribute the regional signal of CKND-TV-2 Minnedosa. Shaw will distribute instead the signal of the mother station, CKND-TV Winnipeg, which is an extra-regional station.

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 community served by the broadcasting undertaking and to the Canadian broadcasting system as a whole, and that it is in the public interest.

The Commission notes that this transaction involves an exchange of cable systems with Bragg. In view of this, Shaw has not proposed any tangible benefits but has argued that its acquisition of the MacGregor and Portage La Prairie/ Southport systems is in itself a benefit. In support of its claim, Shaw also noted that in Public Notice CRTC 1993-68, entitled "Application of the Benefits Test at the Time of Transfers of Ownership of Control of Broadcasting Undertakings", the Commission determined that "Intangible benefits such as the experience and resources of the purchaser, local ownership, entry of new players and the promise to maintain or improve a struggling service may be as significant as tangible benefits and in some cases, of primary importance, in the approval of transactions".

In this regard, the Commission agrees with Shaw that the improved consumer service and community programming, better technical facilities and the introduction of new programming as set out in the application, are acceptable as intangible benefits. Accordingly, the Commission is satisfied that the application meets the criteria set out in Public Notice CRTC 1993-68, and that approval is in the public interest.

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 the applicant to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.

The Bragg application

In addition to approving the acquisition of assets, the Commission approves Bragg's application to change the licensed area of the New Glasgow undertaking, by including Caribou, Three Brooks, Mount William, Woodburn, and surrounding areas.

The Commission will issue a licence to Bragg expiring 31 August 2002, the current expiry date, upon surrender of the current licence. The operation of this undertaking will be regulated pursuant to Parts I, II and IV of the regulations. The authority granted herein is subject to the same conditions as those in effect under the current licence, as well as to any other condition that may be specified in this decision and in the licence to be issued.

The purchase price relating to the acquisition of assets referred to above is $16,885,000. Based on the evidence filed with the application, the Commission has no concerns with respect to the availability or the adequacy of the required financing.

The Commission has assessed the benefits package identified by Bragg as flowing from this transaction and, in general, is satisfied that it is significant and unequivocal and that approval of the transaction is in the public interest.

According to Bragg, the intangible benefits that would result from this application include the addition of 12,300 subscribers to the overall critical mass of the Bragg cable group which will further strengthen the company and enhance its competitive ability. Bragg indicated that the New Glasgow system will benefit from inherent synergies and operating efficiencies of the overall Bragg organization. The New Glasgow undertaking will also benefit from the programming expertise available within the Bragg cable group and use of the program exchange network will further enhance the number of operating hours of its community channel. Local program production will be increased by 3 hours per week and subscribers will benefit from extended business hours.

The Commission notes that the proposed tangible benefits include various technical and programming initiatives, with a total proposed cost of $1,675,000. Among the proposed tangible benefits, the Commission notes in particular the rebuilding of the New Glasgow system with interactive optical fibre; the interconnection of the New Glasgow system with the Truro system and seven high schools in the Pictou area; the acquisition of a mobile satellite uplink; the extension of service area; the grant to aid the development of high tech information facilities at St. Francis Xavier University; and, a grant to the Canadian National Institute for the Blind.

The Commission considers Bragg's undertaking that the costs associated with the commitments outlined in this decision will not form part of any fee filing under subsections 18(6) and 18(8) of the regulations, to be an important element of this application.

In addition to the services required or authorized to be distributed pursuant to the applicable sections of the regulations, Bragg is authorized, by condition of licence, to distribute, at its option, WXYZ-TV (ABC), Detroit, Michigan, and WTOL-TV (CBS), Toledo, Ohio, received via satellite from CANCOM, as part of the basic service.

Bragg is also authorized, by condition of licence, to distribute the programming service of the Atlantic Satellite Network (ASN), received via satellite, provided that it is distributed on an unrestricted channel of the basic service.

In addition, Bragg is authorized to distribute WLBZ-TV (NBC) Bangor, and WMED-TV (PBS) Calais, Maine, received via microwave, as part of the basic service.

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 examination by the Commission. In its application, Bragg indicated that it will move to formalize and fund an employment equity plan for its group of cable companies. The Commission requires Bragg to develop and implement an effective plan of action to ensure that adequate employment equity practices are followed throughout its organization. The Commission will revisit these matters at the time of the next licence renewal.

The approval to extend the licensed area of the New Glasgow system is subject to the requirement that construction in the extended area be completed and the extended system be in operation within twelve months of the date of this decision or, where the licensee applies to the Commission within this period, and satisfies the Commission that it cannot complete the construction and commence operations throughout the extended system before the expiry of this period and that an extension of time is in the public interest, within such further periods of time as are approved in writing by the Commission.

Should construction not be completed within the twelve-month period stipulated in this decision or, should the Commission refuse to approve an extension of time requested by the licensee, the authority granted shall lapse and become null and void upon expiry of the period of time granted herein or upon the termination of the last approved extension period.

This decision is to be appended to each licence.

 Allan J. Darling
 Secretary General