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Ottawa, 13 May 1986
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Decision CRTC 86-444
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N1 Cable TV Ltd.
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151 small core market communities in Newfoundland (see list appended to this decision) - 852977800
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Shellbird Cable Limited Corner Brook and surrounding area; Lark Harbour, York Harbour and Little Port; Summerside, Hughes Brook, Irishtown, Christophers Cove, Gillams and Meadows; McIvers; Cox's Cove, Newfoundland - 853026300 - 853027100 - 853028900
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Central Cable System Ltd. Norris Arms South; Badger, Newfoundland - 851421800 - 851420000
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Avalon Cablevision Limited St. John's, Mount Pearl and surrounding areas, Newfoundland - 851809400
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The Community of Daniel's Harbour Daniel's Harbour, Newfoundland - 852209600
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I. Introductory Statement
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At a Public Hearing in St. John's, on 18 February 1986, the Commission considered seven competing applications for licences to carry on broadcasting receiving undertakings to serve a total of 151 small, core market communities in eastern, central and western Newfoundland, which receive Canadian television signals over-the-air from no more than two different sources. The applications were submitted in response to a call issued by the Commission in Public Notice CRTC 1985-195 dated 27 August 1985. The call was to provide cable service to a number of underserved communities in Atlantic Canada for which applications had previously been considered by the Commission at a Public Hearing in Gander, Newfoundland on 26 June 1985 and denied by the Commission in Decision CRTC 85-703 dated 27 August 1985.
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In Decision CRTC 85-703, the Commission explained at length its reasons for denying the applications by M1 Rural Television Cablesystems Inc. (M1), Omni Cablevision Limited and Eastern Cable Limited (Eastern) to provide cable service to 87 communities, of which 71 were located in Newfoundland, 9 in Prince Edward Island and 7 in Nova Scotia.
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While regretting that its denial would delay the provision of additional broadcasting services to many small and underserved communities in the Atlantic region, the Commission determined that it would be in the public interest to issue a new call for applications, which "should generate a better assessment of the market, and ensure that these underserved areas will finally receive an equitable level of service at an affordable cost".
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In its decision the Commission also encouraged applicants to submit proposals for extension of cable service to as many communities as possible on an individual, regional or provincial basis at reasonable cost, and requested them to provide clear evidence of their financial and technical capability.
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Five of the applications filed in response to this call were by three existing cable licensees proposing to extend their authorized service areas.
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In the case of N1 Cable TV Limited (N1), the application was for a regional licence, in accordance with Recommendation #31 of the Report of The Task Force on Access to Television in Underserved Communities (the Klingle Report), adopted by the Commission in Public Notice CRTC 1985-60 dated 22 March 1985.
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As evidenced by the numerous interventions and petitions submitted in support of the proposals, there is a high degree of interest and a strong demand on the part of the residents of these small Newfoundland communities for a wider range of broadcasting services such as has been available for years to Canadians living in large urban centres. The Commission notes, in particular, 72 letters of support for the N1 proposal from local towns and community councils.
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In assessing these applications the Commission's primary goal has been to attempt to arrive at a licensing approach that will provide an attractive package of services to the greatest number of communities at a reasonable price and at the earliest possible date. The Commission has also been mindful of the difficulties inherent in establishing and maintaining economically viable cable television undertakings in small communities such as those proposed.
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II. The Applications
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In its application, N1 proposed to provide service to 151 small communities with an estimated total of 21,129 households by means of 73 cable systems ranging in size from 102 to 1,546 potential subscribers. N1 was competing with other applicants for 17 of these locations and was the sole applicant in the remaining 134 communities. N1 organized its application according to three regional groupings: just under half of the potential subscribers are located in the eastern region, approximately 6,400 in the central area and a further 4,600 in the western region.
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At the hearing N1 indicated that it considered that only 30 of the 73 systems for which it had applied were large enough to be economically viable on a "stand-alone" basis and that the remaining 43 smaller systems would only be viable as a result of certain economies of scale that could be achieved if they were to be licensed in conjunction with the larger communities.
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The present application differs in a number of respects from that filed by M1 in the spring of 1985. The previous regional concept application proposed to provide cable service to 71 Newfoundland communities, while the present N1 proposal is for more than twice that number.
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At the Gander hearing, a number of interveners had expressed concern about the lack of participation by Newfoundland cable licensees in the ownership structure of M1. In this application, Eastern, a cable operator based in Placentia, Newfoundland, which had previously been in competition with M1, agreed to become a major owner of the licensee company and to assume managerial responsibility for its operation.
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The proposed share structure of N1 consists of 156,250 common voting shares, of which 57,813 (37%) have been issued to Eastern, and 24,437 (15%) to CANCOM. The remaining 48% will be owned by the purchasers of up to 25 units of blocks of 3,000 shares to be made available through private placement at $100,000 per unit.
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The purpose of CANCOM's involvement in N1 is to facilitate the required financing and to contribute its resources and expertise in the start-up years of the company. The shareholder agreement contains a provision whereby Eastern has the option to purchase CANCOM's interest in the company after six years.
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In accordance with the Commission's policy, the proposed service distribution for these core market communities includes all local and regional priority television signals, distant Canadian and U.S. television signals to be received from CANCOM, and a number of optional Canadian television services, including the Atlantic Satellite Network, The Sports Network and the MuchMusic network.
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A total of four other applicants have submitted competing proposals. Central Cable System Ltd. (Central) of Grand Falls, Newfoundland has applied for licences to serve Badger and Norris Arm South; the community of Daniel's Harbour applied to provide cable service to its inhabitants through a non-profit organization; Avalon Cablevision Limited (Avalon), St. John's applied to change its authorized service area to include the community of Holyrood and surrounding area; and Shellbird Cable Limited (Shellbird) of Corner Brook applied to extend its authorized service area and to operate new cable systems in eleven communities.
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The Shellbird, Avalon and Central applications all involve extensions of their existing service authorities to adjacent areas and each has proposed a lower subscriber rate than that proposed by N1. In the case of Daniel's Harbour, the application contained no monthly subscriber fee and proposed to make use of a TVRO facility owned by Newfoundland Zinc Mines Ltd.
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In assessing these proposals, the Commission noted that N1 proposed to serve by far the greatest number of communities, and gave close attention to the two viability criteria that would have to be met in order for N1 to proceed with its proposal. These were outlined at the hearing as follows:
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One of the two criteria ... is that the average capital cost per potential subscriber of all the communities licensed to N1 must be equal to or less than approximately $300.00. At that level a return on investment to investors is adequate to attract the funds.
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The second ... is that we require a minimum of 2,500 subscribers in each of the regional groupings, the eastern, central and western grouping ... to support the service centre that we will be putting into each of those groupings.
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The Commission notes N1's contention that if all the competing applications were successful:
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N1 would be able to serve 50 ... systems comprising approximately 13,000 potential subscribers, competing applicants would serve ... approximately 3,200 potential subscribers in nine systems and 43 communities in Newfoundland, with about 5,000 potential subscribers (or 25% of what we have applied for) ... would not receive service.
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The Commission acknowledges the intervention from Mr. Peter Fenwick, M.H.A. for the Menihek District who endorsed the concept of providing cable service to as many communities as possible in rural Newfoundland. In his submission, Mr. Fenwick stated that:
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... to obtain close to 100% service the concession must be given to one large operator who can afford to cross-subsidize the smaller areas with revenue from the larger ones. It's only in this way that economies of scale, both in purchasing, administration and [service] can be obtained.
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He urged the Commission to "approve a system that will, in the quickest possible time, provide this important communication link to all parts of the province".
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III. Decision of the Commission
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Given all of the foregoing, the Commission is convinced that N1's proposal represents the most appropriate means of extending service to the maximum number of communities at the earliest date and will best ensure that the overall needs of the residents of the various small communities in eastern, central and western Newfoundland are adequately served.
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The Commission is satisfied that the N1 application has responded to the issues and concerns raised in Decision CRTC 85-703 and to guidelines set out for this call. It notes that the new proposal is the result of extensive consultation between CANCOM and Newfoundland cable operators.
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Accordingly, the Commission approves the application by N1 Cable TV Limited for 73 licences to carry on broadcasting receiving undertakings to serve the 151 communities listed in the appendix to this decision.
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The competing applications by Shellbird, Central, Avalon and the community of Daniel's Harbour are denied. The related application by Shellbird (853027100) to increase the authorized maximum monthly subscriber fee for its existing Corner Brook cable system will be dealt with in a separate decision.
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With respect to the Avalon application, the Commission notes the licensee's commitment, made at the hearing, to provide cable service to the community of Bauline this year. In response to the intervention from six residents of the Long Pond/Manuels subdivision, the Commission reminds the licensee that this community is within Avalon's currently authorized service area and it expects the licensee to investigate the best means of providing service to Long Pond/Manuels and to report back within two months of the date of this decision as to when such service will be provided.
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The Commission notes that in its testimony at the hearing the community of Daniel's Harbour stated that 150 households had each contributed the $150.00 proposed installation fee, a small portion of which had already been spent on cable equipment. In view of the fact that this community of 160 households will now receive cable service from N1, the Commission suggests that the licensee negotiate with the community of Daniel's Harbour with a view to compensating the residents for the expenditures.
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In line with the applicant's request and in accordance with the provisions set out in Public Notice CRTC 1985-72 dated 4 April 1985, N1 is authorized to distribute a variety of optional broadcasting services without further prior approval from the Commission. The services to be carried are set out in CRTC - Notice of Public Hearing 1985-121 dated 16 December 1985.
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In accordance with the provisions set out for core market communities in Public Notice CRTC 1985-60, the applicant is required, by condition of licence, to carry all local and regional priority television signals, excluding duplicate network signals.
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The Commission notes that N1 has "allocated capital funds for community programming equipment", and it has made a commitment to "help each and every community out if they take the initiative... We will put the head-end equipment in place; we will provide training; and we will help get it off the ground".
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The Commission approves the proposed ownership structure of N1, noted earlier in the decision, but wishes to be provided with the final list of shareholders in N1 within one month of its completed capitalization.
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The licensee proposes to charge a maximum monthly subscriber fee of $20.95 during the first and second years of operation, and $21.79 during the third year, and also a maximum installation fee of $50.00.
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The Commission approves, as a condition of each licence, a maximum monthly subscriber fee of $20.95, and the proposed maximum installation fee of $50.00. In line with the Commission's current practices for new broadcasting receiving undertakings, it denies the proposed subsequent increases in the monthly fee at this time. The applicant has indicated that, in the case of each system, those who subscribe within the first year of operation will not be charged fees for installation nor for the first month of service.
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The Commission notes that the authorized maximum monthly subscriber fee includes a pass-through fee of $4.90 to be paid by the applicant to CANCOM for the delivery of six television signals. Authority to charge the pass-through fee is only effective at such time as the CANCOM signals are provided to subscribers and is further subject to the requirement that only the actual pass-through fees paid to CANCOM are charged to subscribers.
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The licences are subject to the condition that the licensee own and operate, as a minimum, the local head-end, the amplifiers and the subscriber service drops.
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N1 stated in its application that the current proposal could be described as "phase two" of CANCOM's plan to extend service to small communities. In this phase, the efficiency and viability level of the communities to be served is at a threshold of approximately 100 households, whereas in phase one the threshold level had been 500 households. In selecting the 151 communities included in this application, N1 indicated that it had chosen them based on detailed market information on some 220 small communities in the province. It added that "with technological advances and refinements in the cable industry ... down the road we can develop a system to make [the] 35 homes-to-100 homes range feasible".
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The applicant also indicated that another approximately 150 communities would receive service in phase three of its service plan which would be undertaken in the future.
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Mr. Philip Keeping, General Manager of N1, further stated with regard to future service possibilities for even smaller numbers of households:
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... over and above that we're looking at clustervision and [Direct Broadcast Satellite] ... We could use clustervision to provide a variety of television services to anywhere from 2 to 15 houses in a cluster, and beyond that, DBS.
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N1 will have regional offices located in the Corner Brook area, at Lewisporte and Placentia, with the head office in St. John's. Installation and maintenance will be organized through the regional offices, under the supervision of the maintenance manager. N1 expects to institute a scheduled maintenance program in each area and to hire part-time technicians to handle local service calls.
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The Commission has noted the applicant's statement that "with the build program we are proposing on a west, central and eastern basis, we will have three crews on the go at one time in each of the areas, comprising site preparation people, cable installers and electronic installers... those people will be local subcontractors from Newfoundland entirely ... Our objective is to complete construction of all systems within 12 months from May 1st 1986 to April 30th 1987".
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It is a condition of these licences that the authorities granted herein be implemented within twelve months of the date of this decision or such further period as the Commission may, upon receipt of a request for extension before the expiry of the said twelve months, deem appropriate under the circumstances.
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The Commission requires the licensee to submit quarterly reports on its progress in implementing these authorities.
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Fernand Bélisle
Secretary General
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APPENDIX/ANNEXE
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1. Aspen Cove, 2. Badger, 3. Bay de Verde, 4. Bay L'Argent, 5. Birchy Bay, 6. Blaketown, Old Shop, Dildo, New Harbour and South Dildo, 7. Calvert and Ferryland, 8. Campbellton, 9. Cape Broyle, 10. Centreville and Wareham, 11. Chance Cove, 12. Change Islands, 13. Clarke's Head, Wings Point and Victoria Cove, 14. Comfort Cove and Newstead, 15. Cow Head, 16. Cox's Cove, 17. Daniel's Harbour, 18. Eastport, Happy Adventure and Sandy Cove, 19. Fermeuse, 20. Fleur de Lys, 21. Fox Harbour, 22. Frederickton, 23. Gaskiers, Point La Haye, St. Mary's and Path End, 24. Glenburnie, Birchy Head, Silverton, Shoal Harbour, Silver Point, Winter House, Woody Point, Curzon and Bonne Bay, 25. Gooseberry Cove, Southport, Little Heart's Ease, Caplin Cove and Hodges Cove, 26. Green's Harbour, Whiteway, Cavendish, Islington and Heart's Delight, 27. Greenspond Island, 28. Halfway Point, Benoit's Cove, John's Beach and Frenchman's Cove, 29. Hampden and Bayside, 30. Hant's Harbour, 31. Heart's Desire, 32. Hickman's Harbour, 33. Holyrood, Chapel Cove, Harbour Main, Avondale, Conception Harbour, Colliers and Marysvale, 34. Irishtown, Summerside, Meadows and Gillams, 35. Jackson's Arm, 36. King's Point, 37. Lamaline, 38. Lawn, 39. Leading Tickles South, 40. Little Burnt Bay, Masons Cove and Embree, 41. Long Harbour and Mt. Arlington Heights, 42. Lower Island Cove, Job's Cove, Burnt Point, Gull Island, Northern Bay, Long Beach, Ochre Pit Cove, Western Bay, Adams Cove, Blackhead, Small Point, Broad Cove and Kingston, 43. Lumsden, 44. Marches Point and Red, 45. Brook, De Grau, Cape St. Georges and McIvers, 46. Middle Arm, 47. Norris Arm, 48. Norris Point and Neddy Harour, 49. Old Perlican, 50. Pilley's Island, 51. Point Leamington, 52. Port de Grave, Hibb's Cove, Bareneed, Ship Cove and Blow Me Down, 53. Port Blandford, 54. Renews, 55. Roberts Arm, 56. Rocky Harbour, Bear Cove and Woody Cove, 57. Seal Cove (White Bay), 58. South Brook, 59. Southern Harbour, 60. St. Bernard's and Jacques Fontaine, 61. St. Bride's, 62. St. Vincent's, 63. Summerford, 64. Sunnyside, 65. Terrenceville, 66. Trinity, 67. Trinity East and Port Rexton, 68. Triton, Card's Harbour, Jim's Cove and Triton West, 69. Trout River, 70. Virgin Arm and Carters Cove, 71. West Bay and Lourdes, 72. West Port and Pound Cove, 73. York Harbour, Lark Harbour and Little Port, Newfoundland
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