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Decision
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Ottawa, 8 June 1987
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Decision CRTC 87-383
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N1 Cable TV Ltd. One hundred and sixty-eight communities in Newfoundland (see list appended to this decision) - 863085700
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BMC Cablevision Company Limited Bunyan's Cove; Lethbridge, Newfoundland - 862661600 - 862660800Viola Gillam, representing a company to be incorporated Forresters Point and surrounding area, Newfoundland - 861312700
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At a Public Hearing in St. John's, Newfoundland, on 12 March 1987, the Commission considered three competing applications for licences to carry on broadcasting receiving undertakings to serve approximately 168 small communities in Newfoundland. In the case of BMC Cablevision Company Limited (BMC), a local operator applied to provide service to 317 households in Bunyan's Cove and Lethbridge, while Viola Gillam applied to provide service to 517 households at Forresters Point and the surrounding area by means of subscription television. In the case of N1 Cable TV Ltd. (N1), the application was for licences to operate a total of 121 cable systems, as phase two of its regional service concept.
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Background
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At an earlier 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. The applications were submitted in response to a call issued by the Commission for the provision of cable service to a number of underserved communities in Atlantic Canada, applications which had previously been considered by the Commission at a Public Hearing in Gander, Newfoundland on 26 June 1985 and subsequently denied in Decision CRTC 1985-703 dated 27 August 1985.
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In its assessment of the seven proposals, the Commission approved the application by N1 Cable TV Limited for 73 licences to carry on broadcasting receiving undertakings to serve 151 communities in Newfoundland (Decision CRTC 86-444 dated 13 May 1986).
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Although N1 was licensed just over a year ago, the regional concept has already proven to be a significant achievement in terms of extending programming services to underserved areas. In this brief period, Newfoundland has become one of the most cabled provinces, despite its scattered population in non-urban areas, which is clustered in hundreds of small communities.
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A second regional proposal has since been impemented in a number of small communities in Ontario. From a national perspective, the Commission views these accomplishments as historicaly significant in the evolution of the Canadian broadcasting system.
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The Commission commends N1, in particular, for the innovative marketing strategy it has implemented, including the enlistment of a full-time community relations officer, community meetings and the hiring of local sales representatives, which has enabled N1 to achieve an average subscriber penetration of 74%. Its enlistment of 65 full-time experienced construction employees ensured a rapid rate of construction, such that, within twelve months of the date of licensing, service to each of these communities, averaging 140 households, was complete.
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As part of N1's initial proposal, it had indicated that, subsequent to completing the 151 communities applied for, it was committed to initiate a second phase of development whereby "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". N1 had further indicated, at that time, that this would mean the extension of service to an estimated 150 additional communities. The application presently before the Commission is a direct result of N1's commitment to initiate a second phase of cable service to the residents of Newfoundland.
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The Applications
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N1's current application proposes to provide service to a total of 168 small, core market communities in Newfoundland, each with an average household count of 77, comprising a total of an estimated 13,000 potential subscribers. N1 indicated that the system would be implemented within 15 months of receiving the licences and based its financial projections on achieving an average penetration rate of 75% in the first year of operation.
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The applicant proposed to distribute all local programming services, as well as CHCH-TV Hamilton, CITV-TV Edmonton, WTVS (PBS), WJBK-TV (CBS), WDIV (NBC) and WXYZ-TV (ABC), Detroit, Michigan, received via satellite from the CANCOM network, the Atlantic Satellite Network (ASN), The Sports Network and the MuchMusic network. For those francophone communities requesting a French-language service, N1 proposed to provide the TCTV signal from Montreal.
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With respect to community programming, the applicant stated its intention to provide, where requested, channel spacing, head-end equipment, access to the head-end, training and technical support. The applicant further indicated that it had been examining ways in which community service could be improved, through such initiatives as the placement of special equipment at the head-ends for the purpose of accessing provincial programming and the use of a mobile van unit that could visit the communities on an as-required basis.
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N1 proposed to charge a maximum monthly fee of $20.95 in the first year of operation, $21.79 in year 2 and $22.66 in year 3. It intended to establish three regional service areas (The Northern Peninsula, the Burin Peninsula and the west/ southwest coast) with a service office centrally located in each region to provide technical support. N1 also indicated that by grouping the communities into smaller geographic service areas relative to those applied for in Phase I, levels of service would be increased and the existing infrastructure strengthened.
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The ownership structure of N1 is as authorized in Decision CRTC 86-444, and consists of Eastern Cable Ltd., a licensed cable operator in Newfoundland (37%) and CANCOM (15%) with the remaining 48% to be owned by C1 Cablesystems Inc., a financing vehicle designed to raise an additional $1.8 million through sales of shares to private investors for this project. The financing proposal provides for a bank loan of $3.5 million, subject to certain conditions, including the raising of capital through the sale of 18 units of shares at $100,000 per unit.
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Citing the success of the first phase of cable development in Newfoundland, particularly in terms of penetration levels and meeting budget projections and construction schedules, Mr. Phil Keeping, President of N1, indicated how this success had made the current application possible:
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One year ago, we said that we would be back with a phase two application to extend service to even smaller communities. Our ability to fulfill this commitment is possible because of the concept of a regional company, a concept which we continue to refine and improve.
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Mr. Pierre Morrissette, President of CANCOM, expanded on Mr. Keeping's comments by outlining N1's focus on the economies of scale and specialization accruing through the realization of phase one and how such a focus made further extension viable. Mr. Morrissette outlined a number of critical variables intrinsic to this regional approach such as the ability to readily access large sums of debt and equity financing; capital cost reduction through centralized purchasing and research and development initiatives; marketing optimization; construction efficiency by way of an "assembly-line" approach; an expert regional operating partner; government co-operation; a motivational structure allowing for a "win-win scenario" amongst partners; an infrastructure that increases cash flow by lowering incremental operating costs per subscriber; and lastly, the synthesis of all of the above-noted components.
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The applicant indicated that subsequent to this second phase, it was examining ways in which a third phase could be implemented which would provide service to an additional 2,500 to 3,000 households. The applicant further stated that a regional application for a number of communities in Labrador is still under study and that because of the high capital cost required, it is foreseen that some financial assistance from the government will be required to make this project possible.
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The Competing Applications
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Two other applicants submitted competing proposals. BMC applied for a licence to serve Bunyan's Cove and Lethbridge, proposing essentially the same services as those of N1, with the exception of PBS and MuchMusic. The applicant is the licensed operator of a cable television undertaking serving Musgravetown, Bloomfield and Cannings Cove and has determined that it is technically and economically feasible to serve the areas applied for with its existing head-end located at Musgravetown.
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The applicant noted that the strength of its application was in its community programming proposals and that since the commencement of the Musgravetown cable system one yearago, approximately 200 hours of community programming had been produced and distributed for broadcast.
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Viola Gillam, representing a company to be incorporated, applied for a licence for a broadcasting receiving undertaking (subscription television) to serve Forresters Point and surrounding area with a service package consisting of CHCH-TV Hamilton andWJBK-TV (CBS) and WXYZ-TV (ABC) Detroit, Michigan, at a monthly subscriber fee of $16.00. N1 had proposed to serve the same area with a package of 11 programming services at a monthly subscriber fee of $20.95.
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The applicant pointed out that it proposed to provide service to 52 households over and above the number proposed by N1.
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Interventions
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As evidenced by the 48 interventions and 13 petitions submitted by local towns and community councils in support of the N1 proposal, there is a high degree of interest in and a strong demand for a wider range ofbroadcasting services on the part of the residents of these smallNewfoundland communities.
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Three interventions opposing the N1 application were submitted to the Commission, one of which was supported by an oral presentation. Mr. Roger John, representing the Council of the Conne River MicMacs at the hearing, indicated that the Conne River MicMac Band had filed an application to establish their own cable system, which would feature a community channel devoted solely to the Band's interests. Mr. Richard Leblanc, legal counsel for the Band contended that:
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There are distinct social, educational and cultural needs of the people in Conne River that cannot be met by such a system as is proposed here today by N1 Cable.
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N1's proposal for Conne River included service to the neighbouring community of Morrisville and at the hearing Mr. John indicated that the Band would not be making provision to service Morrisville, if licensed for Conne River. In its rebuttal to this intervention, N1 indicated that it was prepared to withdraw the Conne River system from its application, but that Morrisville would have to be withdrawn as well.
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The Commission acknowledges the interventions to the application by Viola Gillam, submitted by the Atlantic Television System (ASN) and CBS Inc., regarding respectively, the carriage of the ASN network signal and the importation by Canadian satellite of distant U.S. signals.
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The Commission's Decision
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As noted in a number of previous decisions, the Commission's primary goal in assessing applications of this sort is to arrive at a licensing approach that will ensure the establishment of viable operations for the provision of an attractive package of broadcasting services to the greatest number of underserved communities, at an affordable cost and at the earliest possible date.
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In reviewing the dramatic development of cable service in the province of Newfoundland, the Commission commends the initiative and effort undertaken by N1 to achieve just such an approach in providing cable service to the residents of this province. The Commission acknowledges that it is precisely because of these efforts that Newfoundland is fast becoming the most cabled province in Canada. As submitted by Mr. Keeping at the hearing:
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Prior to the licensing of N1 approximately one in four households in Newfoundland or 27.4% were not passed by cable. This number drop[ped] to 13.9% at the conclusion of our first phase of development. Should the Commission approve this application, only 4.4% of households on our island will remain unserved by cable.
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As stated in previous notices and decisions, the Commission is concerned about providing an equitable range of broadcasting services to underserved communities by the most approriate means. The Commission is convinced that cable technology represents the preferred method of extending service, due to its ability to distribute a large number of services economically, and because of its potential to meet future needs for additional services. It recognizes that in certain circumstances, however, for reasons of very limited population size or low density, over-the-air transmitters represent a viable means of providing service to particular areas.
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With respect to the application by Viola Gillam, the Commission notes that N1 has proposed to provide a better service package at a lower monthly subscriber fee than would be provided by the subscription television proposal. In response to the contention by Mrs. Gillam's representative that approximately 43 homes in Pigeon Cove, St. Barbe and points beyond would not be serviced by N1 if it were licensed for that area, N1 indicated that it intended to serve these homes in its phase three project.
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With respect to the BMC application, the Commission acknowledges the shared community of interest between Musgravetown and the areas being applied for and the applicant's commendable efforts in the establishment of a responsive community service as part of the Musgravetown system.The Commission is convinced that the residents of Bunyan's Cove and Lethbridge will benefit from those efforts undertaken at Musgravetown and therefore regards these new undertakings as natural extensions to BMC's existing system.
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The Commission is similarly convinced that the N1 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 communities are adequately served.
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Based on all of the foregoing, the Commission approves, in part, the application by N1 Cable TV Ltd. for licences to carry on broadcasting receiving undertakings and will issue licences for all of the communities applied for, with the exception of Bunyan's Cove, Lethbridge and Sandy Cove/St. Barbe North.
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Accordingly, the applications by BMC Cablevision Company Limited to serve Bunyan's Cove and Lethbridge are approved and the application by Viola Gillam, representing a company to be incorporated, to serve Forresters Point and surrounding area is denied. With respect to the system proposed by N1 at Sandy Cove/St. Barbe North, the Commission notes that this area was licensed to H. Tucker in Decision CRTC 86-1134 dated 13 May 1986.
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With respect to the Conne River system, the Commission was advised by Mr. Roger John, subsequent to the hearing, that the Conne River Mic Mac Band has undertaken to include Morrisville as part of its current application to serve Conne River. N1 has accordingly advised the Commission that it is withdrawing its application to serve Conne River and Morrisville. The Commission notes that this cable system represented a negative contribution of $7,098 to N1's application.
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The Commission further notes that N1 has withdrawn Rodgers Cove/Victoria Cove, which together with Sandy Cove/St.arbe North amounted to a negative contribution of $9,574 to the regional application. Accordingly, the Commission wishes to point out that the denial of the communities of Lethbridge and Bunyan's Cove to N1 will have no impact on the viability of extending service to the other communities herein approved, in that the withdrawal of the above-mentioned areas will more than off-set the positive contribution of $9,193 that Bunyan's Cove and Lethbridge would have provided.
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The operation of the undertakings herein approved will be regulated pursuant to Parts I and III of the Cable Television Regulations, 1986. The Commission will issue licences expiring 31 August 1990, subject to the conditions specified in this decision and in the licences to be issued.
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The Commission acknowledges the plans of BMC and N1 with respect to the development of community channels and encourages them to promote community interest in, and access to, these channels for the production of local programming services that reflect the needs of the respective communities.
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It is a condition of each licence that the authority granted herein be implemented within fifteen 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 fifteen months, deem appropriate under the circumstances.
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Fernand Bélisle
Secretary General
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APPENDIX/ANNEXE
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1. Adeytown/Deep Bight 2. Admiral's Beach 3. Alderburn 4. Anchor Point/ Deadman's Cove/Bear Cove 5. Baine Harbour 6. Bayview/Gillard's Cove/ Manuel's Cove 7. Baytona 8. Beach Side 9. Belleoram 10. Bellevue 11. Bide Arm 12. Boat Harbour 13. Boyd's Cove/Boyds Harbour North and South 14. Branch 15. Brent's Cove 16. Bridgeport & Whale's Gulch/ Moreton's Harbour 17. Brighton 18. Brown's Arm/Porterville/ Laurenceton 19. Bunyan's Cove 20. Burlington 21. Burnt Cove 22. Cape Ray 23. Champney's Arm/ Champney's West 24. Charlottetown 25. Codroy/Woodville/Cape Anguille 26. Come-by- Chance 27. Conche 28. Conne River/Morrisville 29. Cook's Harbour 30. Cottle's Island 31. Cottrell's Cove 32. Dunfield 33. Elliston 34. English Harbour East 35. English Harbour/Champney's East 36. Epworth 37. Fairbanks/Hillgrade 38. Flat Bay 39. Flower's Cove/Nameless Cove 40. Forresters Point/Black Duck Cove 41. Gaultois 42. Goose Cove East 43. Grand Le Pierre 44. Grates Cove 45. Green Island Brook 46. Green Island Cove/Payne's Cove 47. Harbour Le Cou 48. Harbour Mille 49. Harbour Round 50. Harris Point/ Gander Bay S./Georges Point 51. Heatherton 52. Hillview 53. Hopeall 54. Horwood 55. Howley 56. Jeffrey's 57. King's Cove 58. Ladle Cove 59. Lady Cove/ Weybridge 60. Lethbridge 61. Little Bay East 62. Little Harbour 63. Little St. Lawrence 64. Loon Bay Camp 65. Lord's Cove 66. Mainland 67. Mann Point/Main Point/Davidsville 68. Margaree/ Fox Roost 69. McKay's 70. Millertown 71. Ming's Bight 72. Mount Carmel 73. New Burnt Cove/Burgoynes Cove/Clifton 74. New Chelsea 75. New Melbourne/Brownsdale/Sibley's Cove/Lead Cove 76. Newman's Cove/ Birchy Cove 77. North Harbour 78. North West Brook/Ivany's Cove 79. Northern Arm-Exploits 80. Old Bonaventure 81. Pacquet 82. Parker's Cove 83. Parson's Pond 84. Petley/Lower Lance Cove/Brittania 85. Phillips Head/Point of Bay 86. Piccadilly 87. Plate Cove East/ Plate Cove West 88. Point May 89. Pollards Point 90. Pool's Cove 91. Portugal Cove South 92. Queen's Cove/Long Beach 93. Raleigh 94. Red Harbour 95. Reidville 96. River of Ponds 97. Robinsons/Cartyville 99. Rushoon 100. Salvage 101. Sandy Cove/St. Barbe North 102. Seal Cove - White Bay (Fortune Bay) 103. Seldom 104. Ship Cove 105. Ship Cove/ St. Lunaire/Griquet 106. Shoecove 107. Sop's Arm 108. South Branch 109. St. Davids/Winterhouse/Maidstone 110. St. Paul's 111. Stag Harbour 112. Stanhope 113. Stoneville 114. Summerville/Princeton 115. Swift Current 116. Tors Cove 117. Traytown 118. Trepassey, Daniels Point, Shoal Point, Riverhead 119. Trouty 120. West Bay Centre 121. Woodstock 122. Main Brook, Newfoundland
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