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Circular No. 427
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Ottawa, 22 December 1997
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TO THE LICENSEES OF CLASS 1 CABLE DISTRIBUTION UNDERTAKINGS
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Filing guidelines respecting proposed rate deregulation and rate increases, pending such deregulation, for rate-regulated Class 1 cable distribution undertakings
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The Broadcasting Distribution Regulations (the regulations) issued today in Public Notice CRTC 1997-150 (PN 1997-150) set out the criteria that a rate-regulated Class 1 cable distribution undertaking must meet in order to have its basic monthly fee deregulated. This circular describes the guidelines that will govern this rate deregulation process, as well as the rate increase mechanisms that will be available for those rate-regulated Class 1 undertakings that do not meet the criteria for rate deregulation.
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Rate deregulation
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In order to become rate deregulated, a Class 1 cable licensee must send to each of its subscribers, at least 60 days in advance of the date when it intends to have its basic monthly fee deregulated, a notice containing all of the information set out in Schedule 1 to the regulations. The licensee must also send a copy of the notice to the Commission with a declaration verifying the date on which it was sent to subscribers. The licensee must also provide the Commission with:
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a) evidence demonstrating that the basic service of one or more other licensed broadcasting distribution undertakings (BDUs) is available to 30% or more of the total of single-unit dwellings, units in multiple-unit dwellings, hotels, hospitals, nursing homes and other commercial or institutional premises in its licensed area; and,
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b) an opinion provided by its auditor, in accordance with section 5815 of the Canadian Institute of Chartered Accountants Handbook (the CICA handbook), confirming that, on a specified date, the licensee was no longer providing its basic service to 5% or more of the total of single-unit dwellings, units in multiple-unit dwellings, hotels, hospitals, nursing homes and other commercial or institutional premises that it served on a date also specified in the opinion, on condition that the date of determination of that total and the date of determination of the percentage lost are on or after the date when the basic service of another licensed BDU first became available in its licensed area.
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As noted in PN 1997-150, in the absence of evidence to the contrary, the Commission is prepared to accept 31 August 1997 as the date on which the 30% availability test in criterion (a) was satisfied for any cable undertaking. As such, licensees need only cite this date in their filing with the Commission as evidence that it is this date they are using for criterion (a). A licensee that was subject to competition from another licensed BDU prior to 31 August 1997, and that wishes to use that earlier date in criterion (a), will have to submit evidence supporting its case when filing for rate deregulation.
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For the purpose of the audit opinion required in criterion (b) above, the auditor must be a person qualified to render such an opinion in accordance with the CICA handbook.
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The 5% calculation in criterion (b) is to be based on the percentage difference between the number of individual addresses to which the incumbent cable licensee provided basic service on or after the date that the basic service of another licensed BDU first became available in the licensee’s service area and the number of individual addresses to which the incumbent cable licensee was providing basic service on a later date that is also on or after the date that the basic service of that other licensed BDU first became available in the licensee’s service area.
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For the purposes of this calculation, where the basic service of the incumbent cable licensee to a particular address is terminated for any reason, and then reconnected within the following month as, for example, happens with the normal monthly turn-over experienced in rental units, the licensee should not include that address as a lost address.
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An address is defined as a single-unit dwelling, a unit in a multiple-unit dwelling, a hotel, a hospital, a nursing home or other commercial or institutional premises to which the basic service is provided directly or indirectly by the licensee. Hotels, hospitals, nursing homes and other commercial or institutional premises shall each be counted as one address.
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The loss of addresses must equal at least 5% and is not to be rounded up, for example from 4.7% to 5%.
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Rate increase mechanisms
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Until a rate-regulated Class 1 cable distribution undertaking provides the Commission with evidence demonstrating that it satisfies the two criteria for rate deregulation, and fulfils the other requirements set out in section 47 of the regulations, its basic monthly fee will continue to be regulated by the Commission.
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Therefore, subject to the provision of proper notice to subscribers as set out in Schedule 2 of the regulations, and the provision of appropriate documentation as set out in the regulations, a rate-regulated Class 1 cable licensee may increase its basic monthly fee as follows:
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- an increase to the base portion, as set out in sections 50 and 51 of the regulations, equal to the amount accepted by the Commission as justified, based on economic need. The Commission will assess such proposed rate increases in accordance with the guidelines set out in Public Notice CRTC 1993-146 dated 12 October 1993, the cost separation guidelines set out in Public Notice CRTC 1990-53 dated 15 May 1990 and Circular No. 416 dated 9 November 1995;
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- an increase to the base portion, as set out in section 52 of the regulations, equal to the authorized mark-up for specialty services distributed as part of the basic service; and,
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- an increase to the pass-through portion, as set out in section 53 of the regulations, equal to the authorized wholesale fees of certain Commission-approved programming services distributed as part of the basic service.
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Subscriber notification
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Licensees are reminded that, in order to maintain the integrity of the notification process, the notice provided to subscribers and the documentation submitted to the Commission must be received by subscribers and by the Commission, not merely mailed, the required 60 or 90 days prior to the proposed date for rate deregulation or the rate increase, as applicable.
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If the required documentation is not received in the Commission the specified number of days prior to the proposed date for rate deregulation or the rate increase, the Commission may suspend the implementation of rate deregulation or rate increase, as applicable.
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Laura M. Talbot-Allan
Secretary General
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This document is available in alternative format upon request.
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