ARCHIVED -  Decision CRTC 97-157

Decision

Ottawa, 24 April 1997

Decision CRTC 97-157

Cogeco Cable Inc. on behalf of 3305911 Canada Inc.

Alexandria; Alfred/Plantagenet; Arnprior; Beachburg; Bourget/Clarence Creek; Chalk River; Cobden; Cornwall and area; Deep River; Hamilton (part of) and Stoney Creek; Hamilton (part of); Hawkesbury/L'Orignal/Carillon Gardens and area; Lancaster; Limoges; Maxville; Niagara Falls, Welland, Port Colborne, Fonthill and surrounding area; Pakenham; Pembroke/Petawawa and area; Peterborough; Renfrew; Sarnia, Brights Grove, Petrolia, Wyoming and area; St. Catharines; St. Isidore-de-Prescott; and Wallaceburg, Ontario 199617461 - 199617479 - 199617487 199617495 -199617503 - 199617510 199617528 - 199617172 - 199617536 199617388 -199617404 - 199617544 199617552 - 199617560 -199617578 199617445 - 199617586 - 199617594 199617411 - 199617602 - 199617429 199617453 - 199617619 - 199617437Hamilton, Ontario - 199617180North Bay, Ontario - 199617164Various locations, Ontario - 199617396

Cogeco acquisition of Rogers' undertakings - Approved

Introduction

1.  In October 1996, representatives of Cogeco Cable Inc. (Cogeco) informed the Commission of their intention to enter into a comprehensive Purchase and Sale Agreement (PSA) with Rogers Cablesystems Limited (Rogers), relating to, among other things, Cogeco's acquisition of 25 cable distribution undertakings owned by various Rogers subsidiaries, serving communities in the province of Ontario. During discussions, Cogeco stated that the PSA could be executed as early as 15 November 1996.

2.  Such an expedited execution of the PSA would result in the transfer of ownership and effective control of the affected undertakings prior to the reception of Commission approval, as is required by the Broadcasting Act. It was therefore proposed that the undertakings subject to the agreement be placed in trust, pending Commission approval of applications to be filed by Cogeco.

3.  The Commission subsequently received a Voting Trust Agreement (VTA) and a Management Agreement (MA), in which Rogers agreed to manage and operate the regulated properties until Commission approval was received. In the event that the applications were denied, Rogers was to provide management services for up to 60 days following the release of the Commission's decision.

4.  Following its initial review of the VTA, the Commission communicated its concerns regarding the potential for the premature transfer of both the "beneficial ownership" and the "legal ownership" of the regulated properties, should the VTA be implemented as proposed. Based on certain commitments received from the parties to address the Commission's concerns as part of the applications to be filed at a later date, the Commission approved both the VTA and the appointment of the Honourable Pierre Juneau P.C., O.C. as Trustee, on 14 November 1996.

5.  The PSA was executed on 26 November 1996, to be effective 21 November 1996, with the VTA executed on 22 November 1996 and the MA executed on 25 November 1996. On 28 November, the Commission received a series of applications filed by Cogeco, on behalf of itself, Rogers, certain of each of their subsidiaries, and 3305911 Canada Inc., a corporation controlled by the Trustee. These applications are the subject of this decision.

6.  In separate steps, the applications contemplate changes in ownership of several undertakings from Rogers or its subsidiaries to 3305911 Canada Inc. These changes include the acquisition of the assets of 24 Ontario cable distribution undertakings, the transfer of control of the cable distribution undertaking serving North Bay; and the transfer of Rogers' interest in a Hamilton consortium producing community programming. To complete the transactions, a final application proposes to transfer control of 3305911 Canada Inc. from the Trustee to Cogeco.

7.  The transactions, which are herein approved, involve cable distribution undertakings serving approximately 300,000 subscribers in Ontario. As a result of these approvals, Cogeco will become the fourth largest operator of multiple cable systems in Canada, serving approximately 750,000 subscribers in British Columbia, Alberta, Saskatchewan, Ontario and Quebec.

8.  Notwithstanding the changes in ownership of the 25 systems currently controlled by Rogers, it will continue to be Canada's largest cable operator, serving over two million subscribers nationally.

 Acquisition of assets

9.  Following a Public Hearing in the National Capital Region beginning on 17 March 1997, the Commission approves the applications for authority to acquire the assets of the cable distribution undertakings serving Alexandria, Alfred/Plantagenet, Arnprior, Beachburg, Bourget/Clarence Creek, Chalk River, Cobden, Cornwall and area, Deep River, part of Hamilton and Stoney Creek, part of Hamilton, Hawkesbury, L'Orignal, Carillon Gardens and area, Lancaster, Limoges, Maxville, Niagara Falls, Welland, Port Colborne, Fonthill and surrounding area, Pakenham, Pembroke, Petawawa and area, Peterborough, Renfrew, Sarnia, Brights Grove, Petrolia, Wyoming and area, St. Catharines, St. Isidore-de-Prescott, and Wallaceburg, Ontario from Rogers Cablesystems Limited, Rogers Cablesystems Ontario Limited, the Partners of Rogers Cablesystems Niagara, a partnership, and Rogers Ottawa Limited/Limitée, and for broadcasting licences to continue the operation of these undertakings.

10.  The Commission will issue licences to 3305911 Canada Inc. upon surrender of the current licences. The expiry dates of the new licences are set out in Appendix A and B, attached to this decision, and correspond to the current expiry dates of these licences. The operation of the undertakings listed in Appendix A will be regulated pursuant to Parts I, III and IV of the Cable Television Regulations, 1986 (the regulations), and the undertakings listed in Appendix B 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 licences held by the various Rogers corporations, as well as to any other condition that may be specified in the licences to be issued.

 North Bay - Transfer of Control

11.  Also following the 17 March 1997 public hearing, the Commission approves the application by Cogeco, on behalf of itself, its subsidiary Cogeco Cable Canada Inc. (Cogeco Cable) and Rogers Cablesystems North Bay Limited (RCNBL), for authority to transfer effective control of RCNBL, licensee of the cable distribution undertaking serving North Bay, through a series of "same day" transfers of all of the issued and outstanding shares of RCNBL from Rogers to Cogeco, subsequently to Cogeco Cable, and finally to 3305911 Canada Inc.

 TV Hamilton - Change of ownership

12.  As a part of this transaction, the applicant also sought Commission approval of an application on behalf of TV Hamilton Limited (TV Hamilton), a consortium of Hamilton area cable distributors which includes Rogers in its role as licensee of two cable distribution undertakings serving the Hamilton area. TV Hamilton produces community programming for distribution on the consortium members' cable systems. In line with its approval of Cogeco's acquisition of the assets of the Rogers undertakings in Hamilton and area, the Commission approves the application to transfer the 33.3% interest in TV Hamilton that is currently held by Rogers, to 3305911 Canada Inc.

13.  The purchase price relating to this series of transactions is estimated to be $360.1 million. Payment of the purchase price is to be satisfied by the payment of $305.3 million in cash to Rogers, the issuance of a $36.5 million note payable to Rogers; and an $18.2 million subordinate voting share issuance to Rogers (Cogeco's subordinate voting shares) at an issuing price of $9.50 per share. This will result in Rogers holding approximately 1.9 million of Cogeco's subordinate voting shares, or a 1.2% voting interest in Cogeco. 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.

 Benefits

14.  In Public Notice CRTC 1996-69 dated 17 May 1996 and titled "Call for Comments on a Proposed Approach for the Regulation of Broadcasting Distribution Undertakings", the Commission stated that, in assessing an application for authority to transfer the ownership or effective control of a broadcasting distribution undertaking, it will no longer require prospective purchasers to identify the significant and unequivocal benefits that will result if the transaction is approved. The public notice also noted that this approach would apply to all such applications published after the date of that notice. As noted above, the applications herein approved were received in November of 1996, and are therefore not subject to any discussion of benefits.

15.  The applicant, however, has indicated that both the purchaser and the vendor in this series of transactions have specifically provided for the assumption by the purchaser of all of the unfulfilled tangible capital investment benefits committed to by Rogers as part of the Maclean Hunter acquisition approved in Decision CRTC 94-923. The applicant further advises that Rogers will continue to be responsible for the fulfilment of the other tangible operating benefit commitments made in respect of these systems as part of the Maclean Hunter acquisition. The Commission also notes the assurances that Rogers will continue to be responsible for any unfulfilled commitments related to its share of the "Head End in the Sky" initiative.

 Transfer of control of 3305911 Canada Inc. to Cogeco Cable Canada Inc.

16.  As the final step in this series of transactions, the Commission approves the application by Cogeco on behalf of 3305911 Canada Inc., for authority to transfer effective control of 3305911 Canada Inc., licensee of the 24 cable distribution undertakings herein acquired from Rogers and its subsidiaries, through the transfer of all of the issued and outstanding shares in the capital of 3305911 Canada Inc. from the Trustee to Cogeco Cable.

 Other matters

17.  With respect to the systems listed in Appendix A, the Commission reminds the purchaser of its long-standing policy that subscribers should not be required to pay higher fees merely because the ownership or control of a cable television system has changed hands.

18.  With respect to the systems listed in Appendix B, the Commission considers an important element of this application to be Cogeco's undertaking that the costs associated with improvements for the acquired Rogers systems previously committed as significant benefits noted in Decision CRTC 94-923, and assumed by the applicant, will not form part of any fee filing under subsections 18(6) and 18(8) of the regulations.

 Employment Equity

19.  The Commission notes that this licensee is subject to the Employment Equity Act that came into effect on 24 October 1996 (1996 EEA), and therefore files reports concerning employment equity with Human Resources Development Canada. As a result of a consequential amendment to the Broadcasting Act, the Commission no longer has the authority to apply its employment equity policy to any undertaking that is subject to the 1996 EEA.

 Violence in programming

20.  On 4 October 1996, the Commission released Public Notice CRTC 1996-135, titled "Application of the Canadian Association of Broadcasters' Voluntary Code Regarding Violence in Television Programming to the Programming Originated by Distribution Undertakings". In that public notice, the Commission announced that it would require the licensees of cable television and other distribution undertakings to adhere to the CAB's code with respect to the programming they originate. In the notice, the Commission also set out proposed wording for a condition of licence, to be discussed and possibly applied at the time of licence renewal.

21.  In the case of Cogeco, the Commission notes the applicant's statements that it supports the Commission's objectives with respect to the implementation of guidelines on the depiction of violence, and that it agrees with the proposed condition of licence. The Commission will wish to discuss with Cogeco the application of such a condition of licence at the time of individual licence renewals.

 Interventions

22.  The Commission acknowledges and has considered the intervention submitted in support of this series of applications.

 This decision is to be appended to each licence.

 Allan J. Darling
Secretary General

This document is available in alternative format upon request.

APPENDIX A / ANNEXE A

 Part III Licences/Licences assujetties à la partie III :

 Community/Localité Current Expiry Date/Présente date d'expiration

 Alexandria 31 August/août 1998
 Alfred/Plantagenet 31 August/août 1998
 Bourget/Clarence Creek 31 August/août 1998
 Chalk River 31 August/août 1998
 Lancaster 31 August/août 1998
 Limoges 31 August/août 1998
 Maxville 31 August/août 1998
 St. Isidore-de-Prescott 31 August/août 1998

 APPENDIX B / ANNEXE B

 Class 1 Licences/Licences de classe 1 :

 Community/Localité Current Expiry Date/Présente date d'expiration

 Cornwall and area 31 August/août 2000
 Hamilton (part of) and Stoney Creek 31 August/août 2002
 Hamilton (part of) 31 August/août 2002
 Niagara Falls, Welland and Port Colborne 31 August/août 2002
 Pembroke/Petawawa 31 August/août 2000
 Peterborough 31 August/août 2002
 Sarnia, Brights Grove, Petrolia, Wyoming and area 31 August/août 2002
 St. Catharines 31 August/août 2002

 Class 2 Licences/Licences de classe 2 :

 Community/Localité Current Expiry Date/Présente date d'expiration

 Arnprior 31 August/août 2000
 Beachburg 31 August/août 2000
 Cobden 31 August/août 2000
 Deep River 31 August/août 2000
 Hawkesbury, L'Orignal, Carillon Gardens and area 31 August/août 2000
 Pakenham 31 August/août 1998
 Renfrew 31 August/août 2000
 Wallaceburg 31 August/août 2002