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ARCHIVED - Decision CRTC 2001-45

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Decision CRTC 2001-45

Ottawa, 6 February 2001
Télébec ltée
Angliers; Béarn; Cadillac; Duparquet; Fabre; La Sarre; Macamic; Malartic; Normétal; Notre-Dame-du-Nord and surrounding area; Poularies (La Sarre) and surrounding area; Rouyn-Noranda and area; St-Bruno-de-Guigues; Ste-Germaine-Boulé; Taschereau; Temiscaming; Val d'Or; Vassan (Val d'Or) and surrounding area; Ville-Marie, Quebec; Larder Lake and Virginiatown, Ontario 2000-1767-5
Application processed by Public Notice CRTC 2000-135 dated 27 September 2000

Summary

The Commission approves, by majority vote, the application by Télébec ltée to acquire the effective control of Câblevision du Nord de Québec inc. (CVNQ) by transferring all of the issued and outstanding shares from CVNQ to Télébec inc.
Approval of this application is based on the benefits that will flow from this transaction to the communities served, and from the commitments made by Télébec to address the Commission's concerns raised by this application and by some interveners. The Commission also notes that Télébec is a purchaser who, as maintained by CVNQ, has the capacity to proceed with the development of service in this region as a long-term investment following this acquisition of control.
The parties

1.

Câblevision du Nord de Québec inc., a family business, holds one Class 1 cable distribution undertaking licence, (at Rouyn-Noranda), 18 Class 3 (fewer than 2,000 subscribers) cable distribution undertaking licences and four licences for analog multipoint distribution (MDS) radiocommunication distribution undertakings. All undertakings are located in the Abitibi-Témiscamingue region. They serve approximately 32,000 subscribers over an area of approximately 2,400 square kilometres. A little more than half of the subscribers (20,062) are served by the Val d'Or and Rouyn-Noranda systems. The remaining subscribers are served by 16 undertakings. This represents about 28 subscribers per square kilometre over the entire service area.

2.

Télébec is the third-largest telephone company in Quebec, serving mainly areas of northern Quebec. It is a wholly-owned subsidiary of BCE Inc. (Bell Canada), and an affiliate of Bell ExpressVu Inc., the general partner in the limited partnership Bell ExpressVu. The partners in the limited partnership are licensees of a direct-to-home (DTH) satellite distribution undertaking, a satellite relay distribution undertaking (SRDU), and a DTH pay-per-view television undertaking.

3.

Télébec indicated it already has a large telephone service distribution network that covers all of the territory served by CVNQ. It also indicated that CVNQ could take full advantage of the synergies resulting from this transaction where the networks of the two companies (cable and telephone) are interconnected and the existing plant is compatible.

4.

Télébec stated that the present transaction will result in a number of benefits to the communities served because it will:

· accelerate interconnection and modernization of the transport and distribution networks and enhance their capacity and reliability;

· diversify the offering of Canadian programming services available to subscribers;

· provide isolated populations with greater access to the information highway;

· preserve regional jobs and contribute to distribute local and regional content in addition to national services, and specifically digital services in general;

· provide opportunities to develop regional content (traditional broadcasting or Internet content);

· give all content providers access to its customers through open architecture.

Concerns

5.

This application raised some concern that BCE Inc., through Télébec, Bell ExpressVu and CVNQ, could be in a dominant position with respect to distribution of programming services in the above localities. The Commission also examined:

· the potential for cross-subsidization of services, that are not necessarily telecommunications services, by Télébec's Utility segment telecommunications services subscribers;

· the need to set up a separate structure to protect cable customers.

6.

In addition, some interveners were concerned about:

· the head start that Télébec would have in the cable distribution market before a regulatory framework is established for local telephone competition in its territory;

· the possibility of a monopoly in information highway services;

· the survival of currently available community television.

7.

In response to the concerns raised by the Commission and some interveners regarding cross-ownership and cross-subsidization between its operations in two sectors, the licensee made a commitment that CVNQ will continue to operate independently of Télébec. The Commission expects the licensee to abide by this commitment.

8.

With regard to the other concerns raised by interveners, Télébec made several commitments. It will:

· adopt an "open network" policy allowing third parties to have access and offer their own distribution services for programming, Internet or telephone in competition or in cooperation with CVNQ and Télébec;

· maintain the diversity of national, regional and community services provided by CVNQ, and possibly to distribute all existing and future digital signals, using cost-effective technology, through an alliance with Bell ExpressVu;

· ensure that the cost of upgrading transmission and distribution networks will not be borne directly or indirectly by its cable or telephone subscribers, as appropriate;

· include information on this transaction in its quarterly report on inter-company transactions;

· ensure that the community channel remains strong;

· augment CVNQ staff through offers of service in areas where it can take advantage of available systems and expertise, including informatics and billing systems;

· offer, where technically and economically feasible, a variety of integrated Internet-based services and applications, not limited to data and video, but which could include voice, such as access to Internet Protocol telephone.

9.

The Commission expects the licensee to honour the above commitments.
The Commission's determination

10.

In approving this application, the Commission considered the benefits that will flow from this transaction, particularly the fact that Télébec has the resources needed to offer quality distribution services to residents of less densely-populated areas. The Commission has also taken into account Télébec's commitments in response to the concerns raised by the Commission and by interveners. In addition, the Commission notes that section 9 of the Broadcasting distribution regulations offers a guarantee that CVNQ will not benefit from or confer undue advantage.

11.

The Commission has considered the many interventions submitted in support of this application, particularly those presented by the Regional Development Council of Abitibi-Témiscamingue as well as by regional cities and counties of Témiscamingue, Abitibi and Rouyn-Noranda.
Secretary General
This decision is to be appended to the licence. It is available in alternative format upon request, and may also be examined at the following Internet site: http://www.crtc.gc.ca
  Dissenting opinion of Commissioner Stuart Langford
  For more than 100,000 Canadians, the vision of benefiting from a competitive communications industry in this so-called Information Age, has faded to black. To prevent that happening, I would have denied this application. To approve it is to embrace a short term solution at the risk of creating a long term problem, to consign the residents of Câblevision du Nord de Québec's (CVNQ) territory to a virtually monopolistic environment at a time when the stated intention both of Parliament and this Commission's communications policies is to achieve precisely the opposite goal.
  The application giving rise to this dissent was made under the broadcasting regulations. However, the majority decision may profoundly and negatively affect the status quo of both broadcasting and telecommunications in Canada. To appreciate the unprecedented policy reversal the majority decision represents and the sweeping changes it may portend, it is appropriate to examine it in the context of the competitive agenda developed by the Government and this Commission for the entire communications portfolio, broadcasting and telecommunications alike.
  Canadian telecommunications legislation has long envisaged a telecommunications system in this country that is reliable, affordable and efficient. The Telecommunications Act, passed in 1993, expanded these basic goals by adding to them the objective that the system also be competitive and increasingly reliant on market forces. Parliament's preference for a competitive approach to the delivery and purchase of telecommunications products in Canada has repeatedly been embraced and enforced since then in statements of CRTC policy. Consider, for example this excerpt from the General Conclusions section of Telecom Decision CRTC 94-19 (94-19), a Review of Regulatory Framework:
 

"In this Decision, the Commission has developed a regulatory framework that will assist in the development of a telecommunications infrastructure that will allow all Canadians, not just a select few, ubiquitous and affordable access to an increasing range of competitively provided basic and advanced information and communications products and services to serve increasingly diverse user requirements. In this environment, users should have the opportunity to choose whatever package of services and whichever suppliers best fit their particular needs."

  In Telecom Decision CRTC 97-8 (97-8), entitled the Local Competition decision, the Commission reiterated by direct reference to 94-19 its continued adherence to the principles of competitiveness and established "a set of competitive safeguards ¼ needed to protect against anti-competitive practices." The Commission's clear intention was, for the benefit of Canadians, to accelerate the movement already initiated from a monopolistic to a competitive environment:
 

"As noted above, in Decision 94-19, the Commission concluded that increased local competition is in the public interest." (paragraph 4) "In this Decision, the Commission establishes a framework for local exchange competition that balances the interests and needs of consumers, local competitive entrants, toll competitors and incumbent telephone companies while at the same time maintaining universal access to affordable telecommunications services in high cost areas."(paragraph 6)

  The Broadcasting Act, while silent on the benefits of industrial competition, does make clear reference to the need for a system that facilitates the inclusion of as many of the voices and the faces of Canada as possible and, by inference therefore, cautions against the concentration of ownership. With regard to the role of distribution undertakings like CVNQ, for example, section 3(1)(f) of the Act reflects Parliament's determination that cable companies and other distributors not abuse their position as "gatekeepers" between programmers and consumers. Market dominance and monopoly or near-monopoly situations are not referred to directly but over the years the Commission appears to have had little difficulty reading between the lines.
  A number of risks have been identified by the Commission as associated with market dominance: the potential for preferential or discriminatory treatment, the potential for controlling the dissemination of news and information, the potential to exclude some producers while favouring others. Since its very inception, the Commission has sounded warning signals about such possibilities. By 1989, it included its concerns in Public Notice CRTC 1989-109 (1989-109) entitled, Elements Assessed by the Commission in Considering Applications for the Transfer of Ownership or Control of Broadcasting Undertakings.
  In that public notice, the Commission began by reminding Canadians that because it does not solicit applications for authority to transfer ownership or control, "¼ the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible proposal under the circumstances¼ " It then went on to elucidate the sort of concerns transfer applications raise. The following passage is instructive:
 

"The applicant must also demonstrate that the proposed transaction is in the public interest. As well as considering such matters as concentration of ownership, cross-media ownership and local participation in ownership, the Commission in its deliberations as to how the public interest would best be served, must be satisfied that the strength of the applicant's human and financial resources are sufficient to give it the capability to improve the undertaking in question and to make a contribution to the enhancement of the Canadian broadcasting system."1

  There can be little doubt that Télébec, as an arm of Bell Canada, meets this last condition regarding human and financial resources. There are no deeper pockets in the Canadian communications system. The majority decision puts emphasis on the resources available to Télébec (paragraph 10). To that it is fair to add that the Bell family of enterprises, if I may so call it, has a recognized and commendable record of promoting Canadian ownership, job creation, community well-being and cultural development. The applicant has agreed to abide by certain conditions and the Commission has added others. These are comforting but, in my view, not sufficiently so.
  The stumbling block, in a word, is dominance. Approval of this application, safeguards notwithstanding, is tantamount to relegating the consumers affected to dependence on one provider for virtually all their communications needs. Télébec, together with Bell, will provide wired telephone access, wired cable television access, direct-to-home satellite television through Bell's ExpressVu, MDS or "wireless cable" distribution in the area and the sole avenues of wired access to the Internet. One stop shopping will become a reality for these subscribers, so will life in a tightly controlled communications monopoly. The availability of service from one other DTH provider, Star Choice, can hardly be said to mitigate the dominance created by the majority decision.
  The consumer benefits inherent in such a situation could be significant. For example, should it choose to invest its resources on captive customers, Bell, through Télébec, possesses the wherewithal to ensure high quality service complete with the latest technological advancements. Unfortunately, the benefits are by no means guaranteed and even if they do accrue to subscribers the price tag attached to losing the advantages of competition will be enormous.
  The competitive environment so long encouraged and nurtured by both Government and Commission policies will be lost to these subscribers. Eventually, they could be lost to all Canadians should this precedent start a trend. Should that happen, the healthy turbulence of market forces will be stilled, possibly forever. Why the majority would risk such a trade-off, particularly in light of the Commission's often-stated competitive agenda for the communications industry is not obvious to me. Reference to just one joint Government/Commission policy initiative over the past decade provides a flavour for how large a shift in direction this is.
  In its 1995 report to Government called, Competition and Culture on Canada's Information Highway, the Commission distilled seven months of intensive research, public consultation and deliberation into 48 pages of assessment, analysis and prognostication. The following quotations taken from the report's introductory chapter are representative of Canadian policy, until now, on the fundamental issues underlying the Télébec/CVNQ application:
 

"The Commission shares the Government's view that competition in facilities and service is key to the creation of wealth and ideas in the information economy."(p. 5)

 

"Canadians want and deserve more choice. In the Commission's view, a more competitive model for both distribution and programming services will allow this to occur."(p. 6)

 

"Government policy supports fair, effective and sustainable competition among facilities and service. To achieve these policy goals, it is essential that barriers to competition arising as a result of the monopoly power or dominant position of telephone and cable companies be removed. As regulators and legislators in the United States and other countries have recognized, if competition is to be sustainable, rules must be in place that allow effective competition in the local telephone and cable markets, and allow service providers equitable access to both cable and telephone subscribers."(p. 6)

  The majority decision in this matter could be interpreted as a wholesale rejection of the philosophy underpinning the Commission's 1995 report and the governmental Order-in-Council that initiated it. The majority decision does not appear to embrace the view that "competition in facilities and services is key." The majority decision appears to turn a blind eye to the conclusion that, "Canadians want and deserve choice." The majority decision has the potential to create "barriers to competition arising as a result of the monopoly power or dominant position" of Bell through Télébec. Most alarming of all is the possibility of the majority's decision being used as a precedent for powerful industrial forces seeking market dominance across Canada.
  An argument could be made that this application is merely authority for the proposition that where no other option exists, the Commission will approve applications such as this. Had not Télébec offered to buy this isolated family-owned cable distribution enterprise, it might have languished and eventually failed as its aging owners became increasingly less interested in or able to maintain and improve it. Perhaps, but nothing on the record supports such a contention. CVNQ has been and continues to be a profitable operation. There is no evidence on the record that its owners are desperate to sell or that its subscribers have been poorly served.
  The record does not reveal that this is a situation - the case in an earlier acquisition application (Decision CRTC 99-752) involving two tiny and remotely located cable distribution undertakings - where the owners, having made best efforts to attract a purchaser, are left with but two options: wind the business up and leave customers with no cable service or sell to the local telephone company. In fact, the record contains no evidence whatsoever that CVNQ's owners have made any efforts to attract another buyer. Télébec made an offer and it was accepted.
  In light of the downside of monopoly situations, the risks inherent in setting a precedent approving one and the complete absence on the record of a diligent effort on the part of CVNQ's owners to attract alternate purchasers, I would have denied this application and advised CVNQ's shareholders to pursue other sales options should they desire to sell.
  __________________________________________________
1 Seven years after making this pronouncement, the Commission, in Public Notice 1996-69, substantially amended the way it assessed applications to purchase broadcast distribution undertakings like CVNQ by dropping the so-called "benefits test". In that public notice, however, it reiterated its long-established position that competition is in the public interest: "The Commission will continue to assess these applications to ensure that the prospective purchaser is qualified and that approval is in the public interest, taking into account any concerns related to service to subscribers, media cross-ownership, concentration of ownership to the extent that it lessens competition in a market, or other issues that may be raised in the context of a particular application."
  2 In approving the sales of Télécâble Blouin and Électro-Vision to Télébec, the Commission in paragraph 2 of its unanimous decision emphasized the exceptional circumstances underpinning its approval and the fact that the owners of the companies had, essentially, run out of options: "The principal shareholders of both companies wish to retire. They stated that they have been trying to sell their respective companies for several years and that Télébec's proposal is the first serious offer they have received."

 

  Dissenting opinion of Commissioners Andrew Cardozo, Barbara Cram, David McKendry and Martha Wilson
  We would deny the application by Télébec ltée (Télébec) to acquire effective control of Câblevision du Nord de Québec inc. (Câblevision).
  Télébec's application raises significant concentration of ownership issues in the provision of entertainment, information, and telecommunications services to about 102,000 people, including the citizens of Rouyn-Noranda and Val-d'Or. The population of Rouyn-Noranda is 39,096; the population of Val-d'Or is 32,648.1
  Since there are many other cities in Canada with similar populations, we would not want this decision to be seen as a precedent.
  Commissioner Stuart Langford has set out the concentration of ownership issues in his dissenting opinion. We concur with Commissioner Langford with respect to these issues.
  While not wishing to prejudge any application, and subject to the specific facts and circumstances of each case, we would have considered approving Télébec's application if adequate evidence existed on the record of this proceeding that Télébec was the only viable purchaser of Câblevision at a fair price and on reasonable terms. However, the record contains no evidence that Câblevision sought offers to purchase the company from parties other than Télébec. In light of the concentration of ownership issues, the Commission should have sought and taken into account this evidence as it has on at least one previous occasion. Decision CRTC 98-57 approved the acquisition of CJCY Medicine Hat from Medicine Hat Broadcasting Ltd. by Monarch Broadcasting Ltd. (Monarch). As the Commission noted in its decision, Monarch's application raised concentration of ownership issues in Medicine Hat.2 The Commission stated:
 

"In approving these applications, the Commission has taken into consideration the fact that the vendor has been seeking a purchaser for CJCY for the last two years and that there were no other bona fide parties interested in purchasing the station.3"

  Is it reasonable to assume that other acceptable offers might have come forward? Yes. Rouyn-Noranda and Val-d'Or are not small communities. Other communities of a similar size exist in Canada where the telephone company does not own the cable company. The table provides some examples of these communities.
 
City Population
Stratford, Ont 28,987
Campbell River, BC 35,183
Sept-Îles, Que 28,005
Corner Brook, Nfld 21,893
Yorkton, Sask. 17,713
Whitehorse, Yukon 19,157
  In addition, we note that Câblevision is a profitable company, a matter that would lead one to believe that offers other than Télébec's offer could have surfaced. We also note one cannot assume that small cable television systems do not offer viable business opportunities. For example, Regional Cablesystems Inc. provides cable television services "to approximately 250,000 customers in close to 1100 non-metropolitan communities in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec and Newfoundland."4 Last year Regional announced it had entered into agreements with Internet service providers to provide high-speed Internet access in five non-metropolitan communities in eastern Ontario, including Chesterville, population 1,497.5
  _________________________________________________________
1 The population data is from Statistics Canada's census data for the communities served by Câblevision. The most recent data is for 1996. The population data for Rouyn-Noranda and Val-d'Or is for the Census Agglomeration.
  2 Decision CRTC 98-57, Monarch Broadcasting Ltd. Medicine Hat, Alberta - 199707733 - 199707858, February 24, 1998, at paragraph 8.
  3 Id., at paragraph 10.
  4 www.regionalcable.com
  5 Id. The population of Chesterville is from Statistics Canada's census data.

Date Modified: 2001-07-23

Date modified: