ARCHIVED -  Decision CRTC 98-489

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Decision
CRTC 98-489

Ottawa, 30 October 1998

C.K.O. Cablevision Limited
Yarmouth, Nova Scotia – 199707585

Public Hearing held on 20 July 1998 National Capital Region

Summary of Decision

The Commission denies the application by C.K.O. Cablevision Limited (C.K.O.) for a licence to operate a cable distribution undertaking to serve Yarmouth. According to the Commission's policy, a new entrant in a market should generally be regulated in accordance with the class of licence held by an incumbent operator (see Public Notice CRTC 1997-25). Although Yarmouth is currently served by a Class 1 licensee, C.K.O. asked the Commission to grant it a Class 3 licence. The Commission is not persuaded that the circumstances of C.K.O. warrant an exception to the policy. The Commission has serious concerns regarding the viability of C.K.O.'s proposed business plan and, consequently, is not convinced that C.K.O. could meet the obligations of a Class 1 licensee.

Interventions and reasons for decision

1. In its application, C.K.O. stated that it did not want a Class 1 licence to serve Yarmouth. It added that it was opposed to making mandatory contributions of 5% of its gross annual revenues from broadcasting activities to the development of Canadian programming, as required by the Broadcasting Distribution Regulations. Instead, C.K.O. proposed to reduce its monthly subscriber fee by 5% so that its subscribers could benefit directly. C.K.O. did indicate it would be willing to "upgrade to a Class 2 licence with more than 2,000 subscribers, if its penetration level increased from 41% to 59%."

2. When questioned at the hearing, C.K.O. initially stated that it did not "see why [it] should have to change [its] way of operation or class of licence in order to continue to compete." C.K.O. later stated that it would accept a Class 1 licence, if required to do so. Nevertheless, C.K.O. clearly indicated that, if it were made subject to the requirements of a Class 1 licence, it would have to change its plans significantly.

3. In its intervention, the Canadian Cable Television Association (CCTA) opposed C.K.O.’s request for an exception to the policy set out in Public Notice CRTC 1997-25. The CCTA supports the principle of allowing competition between licensed distributors only if the licensee’s regulatory obligations and privileges are equitably balanced. Halifax Cablevision Limited, which owns Viking Cable T.V. Limited (licensee of the Class 1 cable undertaking serving Yarmouth), and Bragg Communications Incorporated filed interventions supporting the CCTA's submission.

4. After having carefully considered the information provided by C.K.O. in its application and at the hearing, as well as the interveners' arguments and C.K.O.'s response to them, the Commission is not convinced that an exception to its policy is justified in this case.

5. The Commission has serious concerns regarding C.K.O.’s proposed business plan. In general, Commission policy is that, before it approves an application or issues a licence, it must first receive documentation from the applicant confirming the unequivocal availability of financing. C.K.O. was unable to provide such evidence.

6. Moreover, in response to questioning at the hearing, C.K.O. confirmed that it did not have market studies to demonstrate that its proposed $40 monthly subscriber fee could be marketed successfully.

7. Furthermore, C.K.O.'s fnancial projections were based on a number of assumptions which, upon close examination, do not, in the Commission's view, appear to be reasonable. The uncertainty surrounding C.K.O.'s financial projections further calls into question the validity of its business plan.

8. Having considered all of the available evidence, the Commission finds that C.K.O. has not made a convincing business case that its proposed undertaking would be financially viable, that it could meet the obligations of a Class 1 licensee, or that it would contribute to a sustainable competitive environment in the Yarmouth area.

Secretary General

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