Cogeco 2014 Annual Report Download - page 45

44 COGECO CABLE INC. 2014 MD&A
The larger cable systems operated by us in Canada are subject to licence renewals and licensed cable service areas in Canada are not
exclusive.
The larger cable systems operated by us in Canada are subject to periodic licence renewals by the CRTC. The maximum licence term is seven
years. While CRTC licences 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 new competition from terrestrial facilities-based and non-facilities based service providers.
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
terminated 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
operated under either temporary operating agreements or de facto extensions of the expired agreements while negotiating renewal terms with
the local franchising authorities. Atlantic Broadband may be unable to comply with all significant provisions of its franchise agreements. Additionally,
although historically Atlantic Broadband has renewed its franchises without incurring significant costs, Atlantic Broadband may be unable to renew,
or to renew as favorably, its franchises in the future. A termination of and/or a sustained failure to renew a franchise could adversely affect Atlantic
Broadband’s business in the affected geographic area.
Atlantic Broadband’s cable systems operate under non-exclusive franchises granted by local franchising authorities. Some states, including South
Carolina and Florida, regulate franchises on a state level. Franchising authorities are required to grant additional franchises to competitors in
the same geographic area. In some cases municipal utilities may legally compete with Atlantic Broadband.
Our digital television, HSI and telephony services network may be vulnerable to widespread disruption.
In Canada, we provide our digital television, HSI and telephony services through a network of four major headends and several minor headends
in our cable network. Although we have a backup system for retransmission through another headend or a mobile headend if one of our headends
fails, there may be a delay in transferring to another headend, which could be potentially significant.
In the United States, we provide our digital television, HSI and telephony services through five major headends and several minor ones, and
there is no retransmission system in place. Despite several available emergency backup or replacement sites, including several interconnects
with adjacent cable operators to be able to use their signals as a backup, a failure in our headends could prevent us from delivering some of our
services through a portion of our network until we have implemented backup solutions or resolved the failure, which may result in significant
customer dissatisfaction, loss of revenue and potential civil litigation, depending on the severity of the outage condition. This risk is being slowly
mitigated as we complete our fibre rings and headend interconnects, providing for a more robust redundant architecture.
We may need to support increasing costs in securing access to support structures needed for our cable network.
We require access to the support structures of and telephone utilities and to municipal rights of way to deploy our cable network.
Where access to the structures of telephone utilities in our Canadian footprint cannot be secured, we may apply to the CRTC to obtain a right of
access under the Telecommunications Act. Access to the structures of provincial or municipal electric utilities is subject to provincial and municipal
requirements, and the terms for access to these structures may need to be obtained through provincial and municipal authorities. We have entered
into comprehensive support structure access agreements with all of the major companies and all of the major telecommunications
companies in our service territory. If we are unable to generate sufficient funds or obtain additional financing on acceptable terms in order to
support the costs associated with securing such access, we may not be able to implement our business strategies and our businesses, financial
condition, results of operations, reputation and prospects could be materially adversely affected.
We could be adversely impacted by our customers’ switch from landline telephony to mobile telephony.
The recent trend towards mobile substitution or “cord-cutting” (when users cancel their landline telephony services and opt for mobile telephony
services only) is largely the result of the increasing mobile penetration rate in North America and the various unlimited offers launched by mobile
operators. We do not currently offer mobile services and, therefore, further migration towards mobile solutions could have a material adverse
effect on our businesses, financial condition, prospects and results of operations due to that migration.
We could be adversely impacted by our customers’ switch from cable television services to programming content available over the
Internet through fixed and mobile broadband connections.
The growing trend towards the use of programming content available over the Internet through fixed and mobile broadband connections causes
substitution with our cable television services or “cord-shaving” (when users cancel certain pay television and other discretionary linear or on-
demand television services). This trend is accelerating as Canadian consumers increasingly subscribe to OTT services such as Netflix, which
are not currently regulated under the Broadcasting Act in Canada and do not pay consumer and other taxes in Canada for their Internet-delivered
programming services. In the United States, we expect the trend of increasing viewership of Internet delivered programming to continue.