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Decision
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Ottawa, 21 July 1989
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Decision CRTC 89-491
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Dalhousie Cable T.V. Ltd.
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Dalhousie and area, New Brunswick - 882646300
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Pursuant to Public Notice CRTC 1989-20 dated 16 March 1989, the Commission approves the application for authority to transfer effective control of Dalhousie Cable T.V. Ltd., licensee of the broadcasting receiving undertaking serving Dalhousie and area, through the transfer of 9,999 common voting shares from Gilles Beaudoin and from Raymond Dubé (50% each) to N1 Cable TV Ltd. (N1).
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In Decision CRTC 89-177 dated 24 April 1989, the Commission approved an application by C1 Cablesystems Inc. (C1), on behalf of N1, to modify its ownership structure through a corporate restructure. As a result, N1 is owned 50% by Eastern Cable Limited which is ultimately controlled by Philip J. Keeping and 50% by C1, a widely held public company. N1 is currently licensee of approximately 350 small cable systems in Newfoundland and New Brunswick.
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The purchase price for the shares is $2,200,000. Based on the evidence filed with the applications, the Commission has no concerns with respect to the availability or adequacy of the required financing.
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As stated in a number of decisions relating to applications for authority to transfer ownership or effective control of broadcasting undertakings and because the Commission does not solicit applications for such transfers, the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
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In assessing this application, the Commission has taken into consideration N1's experience in bringing cable service to a number of small and underserved New Brunswick communities. The licensee has indicated that the addition of these subscribers will permit N1 to realize certain economies of scale which will ensure a level of profitability that will enable it to provide cable service to even smaller communities.
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Specifically, N1 advised the Commission that if this application were approved, it would "be better positioned to provide service to remain ning unserved communities through a 'Phase 3' implementation plan". Its supplementary brief elaborated on the economies of scale to be realized: "While one small cable system can generate $30,000 in gross revenues and approximately $5,000 in operating cash flow, a single small cable system could not support the required management and service infrastructure. However, two hundred of these systems could provide economies of scale to justify the servicing of smaller communities in Atlantic Canada".
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The Commission has also noted N1's commitment to provide increased technical support by employing a second technician to service the Dalhousie area as well as to assist in the maintenance of other N1 systems in the area.
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With regard to benefits that can be quantified in terms of their dollar value, the Commission has accepted $275,000 in expenditures to be made within the first year of approval.
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Specifically, N1 has committed $35,000 to a major upgrade of the head end site including a new head end and complete realignment of the signal package in order to add a number of new services including TV5, The Sports Network and the MuchMusic network as part of the basic service. The Commission notes N1's commitment to add TV5 with no rate increase. N1 has also undertaken to "survey subscribers to determine if there is enough positive support to warrant the addition of French-language specialty services on the basic service". In view of the fact that the operating cost of the specialty services will be recoverable on a "pass-through" basis, the Commission does not consider such distribution to be a tangible benefit.
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N1 has also committed $25,000 for the immediate construction of a modern state-of-the-art studio for community programming as well as $15,000 for the studio to head end link.
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N1 also intends to provide cable service, at an estimated cost of $200,000, to approximately 645 potential subscribers whom N1 describes as being within the existing authorized service area. In this regard, the Commission expects the licensee to submit within three months a progress report detailing precise plans and a timetable for provision of service to these potential subscribers.
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The Commission has not accepted proposed expenditures totalling $27,120 in respect of the operating expenses for a mobile-equipped vehicle and the integration of this system onto N1's existing computer billing system since these are considered by the Commission to be necessary costs of doing business.
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The Commission considers N1's undertaking that the costs associated with the commitments outlined in this decision will not form part of any rate increase application under subsection 18(6) or 18(8) of the Cable Television Regulations, 1986 to be an important element of this application.
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The Commission acknowledges the interventions in support of N1's application which were received from the Mayors of the Villages of Charlo, Balmoral and Eel River Crossing, the Eel River Band Council and the Town of Dalhousie.
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The Commission also received an intervention from La Société des Acadiens et Acadiennes du N.-B. expressing concern regarding the amount of French-language programming provided by the licensee. The intervener requests that the licensee distribute Canal famille, MusiquePlus, the Proceedings of the House of Commons and Réseau des sports.
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In reply, the licensee indicated that it intends to carry French-language services: namely, TVA, Radio-Québec, TV5, Réseau des sports, MusiquePlus, MétéoMédia, Canal famille and, if requested, the pay television service. The licensee added that it will change the services distributed, so that its channel line-up consists of an equal number of French- and English-language services on the basic band (channels 2 to 13). It further undertook to [TRANSLATION] "improve community programming in order that all area Francophones have access to the community channel and are able to produce French-language programming."
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The Commission has concluded that the benefits, both intangible and tangible, are commensurate with the size of the transaction, the viability of the undertaking in question, the responsibilities involved and the resources available to the purchaser. In view of all of the foregoing, the Commission is satisfied that the proposed transfer of control will benefit subscribers in these communities and that approval of this application is in the public interest.
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In addition, the Commission expects N1 to fulfill all of the commitments set out in this decision during the current licence term expiring 30 September 1990, and will examine the manner in which N1 has met these obligations at the next renewal of this licence.
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Fernand Bélisle Secretary General
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