Rogers 2009 Annual Report Download - page 48

52 ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OFF-BALANCE SHEET ARRANGEMENTS
Guarantees
As a regular part of our business, we enter into agreements that
provide for indemnification and guarantees to counterparties
in transactions involving business sale and business combination
agreements, sales of services and purchases and development of
assets. Due to the nature of these indemnifications, we are unable
to make a reasonable estimate of the maximum potential amount
we could be required to pay counterparties. Historically, we have
not made any significant payment under these indemnifications or
guarantees. Refer to Note 15(e)(ii) to the 2009 Audited Consolidated
Financial Statements.
Derivative Instruments
As previously discussed, we use derivative instruments to manage
our exposure to interest rate and foreign currency risks. We do not
use derivative instruments for speculative purposes.
Operating Leases
We have entered into operating leases for the rental of premises,
distribution facilities, equipment and microwave towers and other
contracts. The effect of terminating any one lease agreement would
not have an adverse effect on us as a whole. Refer to “Contractual
Obligations” above and Note 23 to the 2009 Audited Consolidated
Financial Statements.
4. OPERATING ENVIRONMENT
Additional discussion of regulatory mat ters and recent
developments specific to the Wireless, Cable and Media segments
follows.
GOVERNMENT REGULATION AND REGUL ATORY
DEVELOPMENTS
Substantially all of our business activities, except for Cable’s Rogers
Retail segment and the non-broadcasting operations of Media,
are subject to regulation by one or more of: the Canadian Federal
Department of Industry, on behalf of the Minister of Industry
(Canada) (collectively, “Industry Canada”), the CRTC under the
Telecommunications Act (Canada) (the “Telecommunications
Act”) and the CRTC under the Broadcasting Act (Canada)
(the “Broadcasting Act”), and, accordingly, our results of operations
are affected by changes in regulations and by the decisions
of these regulators.
Canadian Radio-Television and Telecommunications
Commission
Canadian broadcasting operations, including our cable television
systems, radio and television stations, and specialty services
are licenced (or operated pursuant to an exemption order) and
regulated by the CRTC pursuant to the Broadcasting Act. Under
the Broadcasting Act, the CRTC is responsible for regulating and
supervising all aspects of the Canadian broadcasting system with
a view to implementing certain broadcasting policy objectives
enunciated in that Act.
The CRTC is also responsible under the Telecommunications Act
for the regulation of telecommunications carriers, which
includes the regulation of Wireless’ mobile voice and data
operations and Cable’s Internet and telephone services. Under
the Telecommunications Act, the CRTC has the power to forbear
from regulating certain services or classes of services provided by
individual carriers. If the CRTC finds that a service or class of services
provided by a carrier is subject to a degree of competition that is
sufficient to protect the interests of users, the CRTC is required
to forbear from regulating those services unless such an order
would be likely to unduly impair the establishment or continuance
of a competitive market for those services. All of our Cable and
telecommunications retail services have been deregulated and
are not subject to price regulation. However, regulations can
and do affect the terms and conditions under which we offer
these services. Accordingly, any change in policy, regulations or
interpretations could have a material adverse effect on Cable’s
operations and financial condition and operating results.
Copyright Board of Canada
The Copyright Board of Canada (“Copyright Board”) is a regulatory
body established pursuant to the Copyright Act (Canada) (the
“Copyright Act”) to oversee the collective administration of
copyright royalties in Canada and to establish the royalties payable
for the use of certain copyrighted works. The Copyright Board is
responsible for the review, consideration and approval of copyright
tariff royalties payable to copyright collectives by Canadian
broadcasting undertakings, including cable, radio, television and
specialty services.
Industry Canada
The technical aspects of the operation of radio and television
stations, the frequency-related operations of the cable television
networks and the awarding and regulatory supervision of spectrum
for cellular, messaging and other radio-telecommunications
systems in Canada are subject to the licencing requirements and
oversight of Industry Canada. Industry Canada may set technical
standards for telecommunications under the Radiocommunication
Act (Canada) (the “Radiocommunication Act”) and the
Telecommunications Act.
Restrictions on Non-Canadian Ownership and Control
Non-Canadians are permitted to own and control directly or
indirectly up to 33.3% of the voting shares and 33.3% of the votes
of a holding company that has a subsidiary operating company
licenced under the Broadcasting Act. In addition, up to 20% of
the voting shares and 20% of the votes of the operating licencee
company may be owned and controlled directly or indirectly
by non-Canadians. The chief executive officer and 80% of the
members of the Board of Directors of the operating licencee must
be resident Canadians. There are no restrictions on the number of
non-voting shares that may be held by non-Canadians at either the
holding-company or licencee-company level. Neither the Canadian
carrier nor its parent may be otherwise controlled in fact by non-
Canadians. Subject to appeal to the federal Cabinet, the CRTC has
the jurisdiction to determine as a question of fact whether a given
licencee is controlled by non-Canadians.