ARCHIVED -  Decision CRTC 97-282

Decision

Ottawa, 30 June 1997

Decision CRTC 97-282

Viking Cable T.V. Limited

St-Alphonse, Mavillette, Salmon River, Beaver River and Lake Doucette, Nova Scotia - 952409100Yarmouth and surrounding area, Nova Scotia - 199605771

Reconsideration of Decisions CRTC 96-630 and CRTC 96-631 dated 11 September 1996

1.  Further to the public process described in Public Notice CRTC 1997-18 dated 19 February 1997, the Commission has reconsidered and heard the matters set out in Order in Council P.C. 1996-1896 dated 10 December 1996 (the Order). Upon reconsideration of these matters pursuant to section 28 of the Broadcasting Act, and for the reasons set out herein, the Commission confirms Decisions CRTC 96-630 and 96-631.

2.  By the Order, the Governor in Council referred back to the Commission, for reconsideration and hearing, the following two decisions in which the Commission approved the following applications, granting both applicants the right to provide distribution services to substantially the same area.

·  Licence to carry on a new cable distribution undertaking - C.K.O. Cablevision Limited (C.K.O.) - St-Alphonse, Mavillette, Salmon River, Beaver River and Lake Doucette, Nova Scotia - 952409100 (Decision CRTC 96-630);

·  Change to authorized service area - Viking Cable T.V. Limited (Viking) - Yarmouth and surrounding area, Nova Scotia -199605771 (Decision CRTC 96-631).

7.  The Order states:

 The Governor in Council is of the opinion that it is material to the reconsideration and hearing that the Commission fully assess the issue of whether in certain circumstances, such as an extremely small market with a low population density, the possible negative impacts of licensing more than one distribution undertaking to serve an area would outweigh the benefits.

8.  The Commission undertook its reconsideration and hearing of these applications. It employed a three-stage written process wherein the licensees affected by this Order were first invited to file written comments restricted to the matter raised in the Order. The Commission next invited all interested parties to submit written comments on the matter set out in the Order. Finally, the Commission afforded the two licensees an opportunity to reply to all written comments received by the Commission during the proceeding.

9.  Both licensees filed written comments during the first stage of this proceeding. In its submission, C.K.O. requested the Commission to rescind its 11 September 1996 decisions authorizing both C.K.O. and Viking to serve the Mavillette district. It further requested the Commission to issue a licence exclusively to C.K.O. for that district. For its part, Viking requested the Commission to confirm its original decisions.

10.  In the second stage, the Commission received eight comments, all from existing or prospective licensees of broadcasting distribution undertakings or from their associations. The comments generally focused on the approach the Commission should take with respect to the licensing of competitive broadcasting distribution undertakings (BDUs) to serve small markets with a low population density.

11.  During the third stage, both C.K.O. and Viking filed written replies to the comments of interested parties. In its reply, C.K.O. reiterated the arguments contained in its first-stage submission and indicated its position on the various comments. In its reply, Viking addressed the comments of C.K.O. and certain of the comments that had been filed.

12.  The Commission is satisfied that the three- stage written public process gave the licensees a full and complete opportunity to explain their respective positions on the matter raised in the Order and to reply to the views of interested parties. The Commission has therefore determined that an oral phase to this process is not warranted and, accordingly, denies the request made by C.K.O. for an opportunity to make further oral submissions.

13.  The Commission has closely examined the submissions of the licensees and interested parties in the context of the issue set out in the Order. The Commission has concluded that a case has not been made to warrant the Commission changing its original decisions. Accordingly, it confirms Decisions CRTC 96-630 and CRTC 96-631 dated 11 September 1996 without change. The Commission's reasons for doing so are discussed below.

Factors for consideration of competitive applications for areas currently served by very small broadcasting distribution undertakings

14.  The appropriate framework to use in assessing entry by competitive distribution undertakings in areas currently served by small BDUs has been considered by the Commission on several recent occasions. For example, many of the issues concerning smaller cable systems and competitive entry were raised in the written and oral submissions of a number of parties to the 1996 policy hearing on new broadcasting distribution regulations (Public Notice CRTC 1996-69). Some of these parties also filed comments as part of the current reconsideration process. In Public Notice CRTC 1997-25 dated 11 March 1997 and entitled New Regulatory Framework for Broadcasting Distribution Undertakings, the Commission made the following statement:

 Generally, the Commission agrees that the advent of competing distributors has implications for smaller, rural markets that are not present in larger urban markets. The Commission is cognizant of the possibility that new entrants may target only the larger communities in the rural areas of Canada, and that this could imperil over time, the continued provision by incumbents in those larger communities of their existing cable services in other smaller communities nearby. Nevertheless, the Commission considers that this risk would be largely offset by the availability of service from licensed DTH and wireless distributors.

15.  The Commission also included, in Public Notice CRTC 1997-25, the following statement of its broad policy on the matter:

 ...in considering a licence application by a new entrant, overall service to the public should have a higher priority than the economic viability of any incumbents against whom the new entrant would compete.

16.  It is the Commission's view that this policy statement directly addresses the issue identified in the Order and contemplates that the Commission, in making its assessment of the particular circumstances relating to an application, will seek to assure itself that overall service to the public will not be adversely affected. Such assessment would also encompass an examination of whether the possible negative impacts of licensing more than one distribution undertaking to serve an area outweigh the benefits.

17.  A number of parties who filed written comments as part of the current reconsideration process suggested that the Commission should depart from its current case-by-case approach in conducting its assessment. The Canadian Cable Television Association, for example, argued that exceptions to the Commission's policy of generally favouring competition should be made based upon certain specific cost and other characteristics that, it suggested, were generally shared by cable distribution undertakings of small size with low subscriber densities. In the Commission's view, it cannot be concluded in advance whether predetermined characteristics such as the size and density of a cable system would serve as reliable indicators of the system's ability to withstand competition.

18.  The Canadian Cable Systems Alliance proposed evaluation criteria that would look beyond viability as such, and would give consideration to such matters as subscriber choice, opportunities for access to the information highway, and the potential to further the cultural, political, social and economic objectives of the Broadcasting Act.

19.  The Commission notes that many, if not all, of these factors are already taken into account in its case-by-case assessment of applications, and will undoubtedly continue to be. Therefore, the Commission considers that its policy generally to approve applications for new broadcasting distribution undertakings to compete with existing broadcasting distribution undertakings, both large and small, remains appropriate. It emphasizes, however, that it will continue to consider, on a case-by-case basis as appropriate, whether exceptions to that broad policy may be warranted.

Particular circumstances of the C.K.O. and Viking reconsideration

20.  During the public process that led to the Commission's original decisions and, later, in C.K.O.'s submissions for the purpose of the reconsideration, C.K.O. raised a number of matters that, it believed, warranted denial of the Viking application. These include, among other things, concerns that, as a small independent operator, C.K.O. would have to cease operating its existing radiocommunication distribution undertaking (RDU) and would not be able to implement its proposed cable system, if it were to face competition from Viking, the operator of a number of larger BDUs in the area. Factors identified by C.K.O. as possibly contributing to its demise included (i) an inability on the part of C.K.O. to take advantage of economies of scale, relative to Viking; and (ii) the higher costs of capital incurred by C.K.O. relative to Viking's costs of capital.

21.  A new matter identified as an issue as part of the reconsideration process relates to the proposed distribution of the French-language service known as Télé-Clare. The Commission has noted the number of signatures obtained by C.K.O. from local residents indicating that this service would be of particular interest to many within the community. C.K.O. suggested that while it would distribute Télé-Clare, this service would not be distributed by Viking. This allegation was refuted by Viking in its reply. Viking also noted that C.K.O. was not distributing the Télé-Clare service on its existing RDU and did not propose to distribute the signal on its new BDU. It also stated that C.K.O. had not proposed to make any expenditures in order to acquire the equipment necessary to distribute this service. Viking indicated that it distributes the service in its adjacent system and will, in fact, distribute the service on its proposed BDU, thus extending its reach.

22.  Having considered all of the above, the Commission is satisfied that the potential quality, variety and value of the services to be provided by C.K.O. and Viking are essentially equivalent. While about 60 homes currently served by C.K.O.'s RDU fall outside Viking's proposed cable service area, one or more direct-to-home services are, or soon will be, available as alternative sources of programming. Regarding distribution of the Télé-Clare service, the Commission is satisfied by Viking's reply that it will, in fact, make this service available to subscribers.

23.  In conclusion, the Commission has determined that overall service to the public will not be adversely affected by the issuance of competing cable broadcasting distribution licences to both C.K.O. and Viking.

24.  The Commission wishes to express its appreciation to the licensees and to all interested parties for their cogent and constructive submissions. These have assisted the Commission greatly in its deliberations on this important matter.

This decision is to be appended to the licences.

Laura M. Talbot-Allan
Secretary General

This document is available in alternative format upon request.

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