Cogeco 2013 Annual Report Download - page 24

Management's discussion and analysis (“MD&A”) COGECO CABLE INC. 2013 23
relating to communications, intellectual property, data protection, privacy of personal information, spam, e-commerce, direct marketing and digital
advertising and the use of public records have become more prevalent in recent years. Existing and proposed Canadian legislation and regulations,
including changes in the manner in which such legislation and regulations are interpreted by courts in Canada, the United States and other
jurisdictions may impose limits on our collection and use of certain kinds of information.
Changes to the Canadian regulatory framework, specifically the laws, regulations and policies governing our lines of business or operations,
foreign ownership restrictions, terms of license, the issuance of new licenses, including additional spectrum licenses to our competitors, the
packaging of services or changes in the treatment of the tax deductibility of advertising expenditures, could have a material adverse effect on
our businesses (including who we compete with and how we provide products and services), financial condition, prospects and results of operations.
In addition, we may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure
to comply. It is difficult to predict in what form Canadian laws, regulations, policies and rulings will be adopted when they will be implemented or
how they will be construed by the relevant courts or the extent to which any changes might adversely affect us.
Our United States business is subject to extensive governmental legislation and regulation. The applicable legislation and regulations,
and changes to them, could adversely affect our business by increasing our expenses.
United States federal, state and local governments extensively regulate the television services industry and may increase the regulation of the
Internet services and VoIP industries. Regulation of the cable industry has increased the administrative and operational expenses and limited
the revenue of cable systems. Cable operators are subject to, among other things:
• Subscriber privacy regulations;
• Limited rate regulation;
• Requirements that, under specified circumstances, a cable system carry a local broadcast station or obtain consent to carry a
local or distant broadcast station;
• Rules for franchise renewals and transfers;
• Regulations concerning the content of programming offered to customers;
• The manner in which program packages are marketed to customers;
• The use of cable system facilities by local franchising authorities, the public and unrelated entities;
• Cable system ownership limitations and program access requirements;
• Payment of franchise fees to local franchising authorities;
• Payment of federal universal service assessments for any end user revenue from interstate and international telecommunications
services and telecommunications provided to a third party for a fee, and other state and federal telecommunications fees; and
• Regulations governing other requirements covering a variety of operational areas such as equal employment opportunity, technical
standards and customer service requirements.
The Federal Communications Commission (“FCC”) and the United States Congress continue to be concerned that cable rate increases are
exceeding inflation and as a result it is possible that either the FCC or the United States Congress will restrict the ability of cable system operators
to implement rate increases. If we are unable to raise our rates in response to increasing costs, our financial conditions and results of operations
could be materially adversely affected.
In addition, we could be materially disadvantaged if we remain subject to legal and regulatory constraints that do not apply equally to our
competitors. The FCC recently adopted rules to ensure that the local franchising process does not unreasonably interfere with competitive entry,
and several states have enacted legislation to ease the franchising obligations of new entrants. These changes in regulation by the FCC and
several states will benefit our competitors. In addition, both the Congress and the FCC are considering various forms of “network neutrality”
regulation which may have the impact of restricting our ability to manage our network efficiently.
The larger cable systems operated by us in Canada are subject to license renewals and licensed cable service areas in Canada are not
exclusive.
The larger cable systems operated by us in Canada are subject to periodic license renewals by the CRTC. The maximum license term is seven
years. While CRTC licenses are usually renewed in the normal course upon application by the licensee, except in case of substantial and repeated
breach of conditions or regulations by the licensee, there can be no assurance that the maximum renewal term will be granted or that new or
modified conditions of license or expectations will not apply to the renewal term. Cable service areas in Canada are non-exclusive. The existence
of more than one cable system operating in the same territory could adversely affect our growth, financial condition and results of operations by
increasing competition or creating competition.
The cable systems that Atlantic Broadband operates are under franchise agreements that may be subject to non-renewal or termination
and that are not exclusive to Atlantic Broadband.
The failure to renew a franchise agreement could adversely affect Atlantic Broadband’s business in a key market. The cable systems generally
operate pursuant to franchise agreements in the United States. Many of the franchise agreements establish comprehensive facilities and service
requirements, as well as specific customer service standards and monetary penalties for non-compliance. In many cases, the franchise may be
terminable if the franchisee fails to comply with significant provisions set forth in the franchise agreement governing the system operations.
Franchises are generally granted for fixed terms and must be periodically renewed. Local franchising authorities may resist granting a renewal
if either past performance or the prospective operating proposal is considered inadequate. Franchise authorities often demand concessions or
other commitments as a condition to renewal. In some instances, franchises have not been renewed at expiration, and Atlantic Broadband has