ARCHIVED -  Decision CRTC 87-570

Decision

Ottawa, 15 July 1987

Decision CRTC 87-570

Radio QX-FM Inc. Selkirk, Manitoba - 863261400 - 863260600 - 863300000

Rawlco Communications Ltd. Winnipeg, Manitoba - 863197000Ralph E. Warrington, on behalf of a company to be incorporated Winnipeg, Manitoba - 860652700

At a Public Hearing in Winnipeg on 28 April 1987, the Commission considered two competing applications for new licences for a radio station to serve Winnipeg and a third application seeking, among other things, to amend the technical parameters of an existing station in the area, thereby extending its coverage to the city of Winnipeg.

In response to an application submitted by Ralph E. Warrington, on behalf of a company to be incorporated (Warrington), for a broadcasting licence for an English-language AM radio station to serve Winnipeg on the 1,200 kHz frequency with a transmitter power of 10,000 watts, the Commission issued a call on 11 September 1986 (Public Notice CRTC 1986-241) inviting applications from other parties wishing to operate an

AM or FM radio broadcasting transmitting undertaking to serve the Winnipeg area.

In response to this call, the Commission received an application from Rawlco Communications Ltd. (Rawlco), for an English-language FM station in Winnipeg, on the 99.9 MHz frequency with an effective radiated power of 100,000 watts. An application was also submitted by Radio QX-FM Inc. (QX-FM), licensee of an independent, country-oriented FM station at Selkirk, CFQX-FM, seeking to change the frequency from 92.9 MHz to 104.1 MHz, to change the transmitter from the present site north of Selkirk to a location about 10 kilometres west of Selkirk, and to increase the effective radiated power from 35,000 to 100,000 watts.

Both the site change and power increase proposed for CFQX-FM would ensure that more than 75% of the city of Winnipeg would be covered by the urban 3000 uv/m contour. Consequently, the Commission considered this application to be competitive with the Rawlco and Warrington proposals.

The Applications

With radio stations in Regina, Saskatoon and Calgary, Rawlco is an established, experienced radio licensee controlled by Mr. Gordon Rawlinson of Regina. Rawlco proposed a country-oriented (Group III) FM station to be known as "Country Fresh FM".

Based on extensive research it had undertaken, Rawlco submitted that a contemporary country FM station designed to appeal to listeners principally between 25 and 34 years of age, such as proposed, would satisfy an unfulfilled demand in the Winnipeg market and generate greater interest in a broader range of contemporary country artists and groups than currently exists.

While the proposed programming would be strongly Winnipeg-oriented, Rawlco outlined its plans to promote Canadian country music and artists through its "E.A.R.S." program (education, airplay, recording and search for talent).

Maintaining that the Winnipeg market had sufficient natural growth to absorb another radio station and predicting that the proposed radio station would, in fact, provide additional stimulation to the market, Rawlco projected revenues of $900,000 in its first year of operation.

Mr. Ralph Warrington is a Winnipeg resident with many years of sales and management experience in radio, notably with CHED Edmonton, CKDA Victoria and CJOB Winnipeg. He proposed a contemporary middle-of-the-road stereo AM station, appealing principally to a 35 to 55 year-old age group. Mr. Warrington would control his incorporated company, "The Spirit of Winnipeg", (55%) with the other principal shareholder (30%) being Mr. Chris Stevens, an experienced Winnipeg broadcaster.

Submitting that market research undertaken for him indicated a lack of community-oriented radio in Winnipeg, Mr. Warrington stressed a local emphasis in his programming proposals, with ambitious spoken word and "enrichment" commitments.

Mr. Warrington claimed that the major media in Winnipeg have not kept up with growing retail sales and that $12 million of unrealized revenue potential exists in the Winnipeg market. Citing the radio community's "business as usual" approach, the applicant argued that the radio market has a very high revenue potential. Based on the foregoing assumptions, Mr. Warrington projected revenues of approximately $2.5 million in the first year of operation.

CFQX-FM was first licensed in March 1981 (Decision CRTC 81-201). Although Selkirk is situated only 18 miles northeast of Winnipeg, the Commission licensed this undertaking on the basis of a strong local orientation that would reflect the interests of listeners in the Interlake region and provide an outlet for community participation.

The station has had a history of financial problems in light of which it has had difficulty in complying with its Promise of Performance. A format change from Group I to Group III was approved in June 1986 (Decision CRTC 86-479).

The licensee has now applied to the Commission for approval to amend the broadcasting licence for CFQX-FM by changing the frequency, increasing the effective radiated power and changing the transmitter location; to transfer effective control of QX-FM; and to renew the broadcasting licence of CFQX-FM which expires 30 September 1987.

The proposed changes in the technical parameters of CFQX-FM's licence should eliminate the reception difficulties experienced in the communities of Teulon, Stonewall, Beausejour, Riverton, Lac du Bonnet and Arborg, where the signal quality has been assessed by the licensee as poor to non-existent. This assessment is consistent with complaints received by the regional office of the Department of Communications in Winnipeg from residents of these areas.

The applicant cited the need to provide improved service to the Interlake area and the frustration experienced by residents of the above-noted Interlake communities over the unreliability of its signal as the prime reason for applying for these amendments. In addition, the applicant stated that the expected increase in its audience should result in improved revenues and ensure the future viability of the station. Specifically, it submitted that revenues from the Winnipeg market are vital to the station's survival.

Speaking specifically to the Rawlco application, relative to its own, Mr. Gerry Johnston, General Manager of CFQX-FM, stated at the hearing that "if both applications were approved, the principals of CFQX would have to take a hard look as to whether or not they should go ahead with the extensive power increase costs". Mr. Johnston also stated that "if Rawlco was granted their licence and CFQX denied their power increase application, it would automatically spell the demise of CFQX-FM".

CFQX-FM further contended that besides denying the Interlake region a local radio service, the licensing of Rawlco would have a considerably more severe impact on the existing Winnipeg broadcasters than would CFQX-FM. Specifically, CFQX-FM projected $115,000 in additional revenue from the Winnipeg market in its first year of extended service, as opposed to Rawlco's projected $900,000 in revenues in its first year of operation.

With respect to the proposed transfer of control, the Commission notes that it would result in Mr. Robert Chipman obtaining 50% of the voting shares from Mr. J.G. Turner. The MegillStephenson Company Limited, indirectly controlled by Mr. Chipman, already holds 50% of the voting shares of the licensee. This transaction would therefore result in clear and effective control of the licensee being assumed by Mr. Chipman alone.

Mr. Turner, a "silent partner", has indicated that he wishes to retire from all involvement in the company and has asked Mr. Chipman to purchase his shares. Mr. Chipman is President of the licensee company and, consequently, the proposed transfer would provide for the retention of the present management of the station.

The application for the renewal of the broadcasting licence for CFQX-FM proposes no significant programming changes. Stressing that the orientation of the station would remain local and that it would continue to serve the needs of the Interlake region, the applicant outlined its intention to retain the regional orientation of its news coverage by providing the breakout of its news items among international, national and local as 10:30:60 respectively. In addition, the applicant would continue to provide programming such as traffic and agricultural reports, specifically of interest to residents of the Interlake area.

Interventions

The Commission acknowledges the numerous interventions that were submitted in response to the three competing applications. The interveners made up a varied group, consisting of licensees of existing radio stations in the Winnipeg market, members of the city's business and cultural communities and interested Winnipeg residents. Those in support generally attested to the admirable records of the applicants and/or to the need for their respective proposed services. Those in opposition generally cited the duplication of the programming proposed in light of what is currently provided in the Winnipeg market and the impact that a new radio service would have on the city's licensed broadcasters.

Portage Delta Broadcasting Co. Ltd., licensee of CFRY Portage La Prairie, opposed all three proposals. With respect to the Rawlco and Warrington applications, Portage argued that the Winnipeg and area market was already well served in the formats proposed by each. With respect to the QX-FM applications, it contended that the proposed power increase would further dilute CFRY's audience and revenue base, particularly in the communities of Gimli, Arborg, Lundar, Stonewall and Teulon.

Three of the above-noted interventions submitted with respect to the Rawlco and Warrington applications opposed both. These interveners were CHUM Limited, licensee of CFRW and CHIQ-FM Winnipeg, Armadale Communications Limited (CKRC/CKWG-FM Winnipeg) and Westcom Radio Group Ltd. (CJOB/CKIS-FM Winnipeg).

Representing CFRW and CHIQ-FM at the hearing, Mr. Bob Laine stated that there were a number of economic uncertainties in the Winnipeg market and that the projections in both the Rawlco and Warrington applications were based on extremely optimistic figures. Citing a decline of 7% in radio advertising purchases in Winnipeg over the first seven months of the 1987 broadcast year, Mr. Laine noted the number of new media outlets, such as the television station in Portage La Prairie and the all-news FM service CKO Winnipeg, not yet in operation, which would make the competition for advertising revenue much more intense for radio licensees.

Mr. Laine also questioned Mr. Warrington's figure of $12 million in untapped revenue potential, stating that this figure had no basis in the Winnipeg market and was in fact based on Canadian averages.

Mr. Michael Sifton, President of Armadale Communications Limited, also appeared at the hearing in opposition to both the Rawlco and Warrington applications.

Mr. Sifton summed up his company's concerns with the following statement:

One, Winnipeg is not a boomtown. Two, there is not a million or two of untapped new advertising revenue demanding a place on radio. Three, our FM station, together with others, is losing money as, in our opinion, the FM market has not reached maturity in Winnipeg. Four, revenues available for radio are declining as a percentage of total ad revenues. Five, our population is not expanding. Six, Winnipeg is more than adequately served ... Seven, neither applicant's

programming is distinctly different. Eight, both applicants' program formats are a duplication of services currently available in Winnipeg. Nine, the concepts for spoken word, in both cases, are already being done.

Also appearing in opposition to both the Rawlco and Warrington applications was Mr. John Cochrane, representing Winnipeg radio stations CJOB and CKIS-FM.

Outlining the difficulties that the country music radio stations already serving Winnipeg and surrounding areas have encountered, Mr. Cochrane submitted that these stations would be hurt by a new FM country music station such as that proposed by Rawlco. Mr. Cochrane also took issue with Rawlco's use of figures from the Calgary country music market to support its projections for the Winnipeg market, stating that the two markets are not comparable.

Regarding the Warrington application, Mr. Cochrane expressed surprise and concern that it professed to be the first complete, community-oriented service for Winnipeg when, as he submitted at the hearing, CJOB has, since 1946, operated in accordance with the theme "Working for Winnipeg" and has concentrated on local programming and involvement.

Mr. Cochrane also argued that there was diversity on the radio dial in Winnipeg, that radio market revenues had declined over the past seven months and that the increased number of media outlets in Winnipeg was making it progressively more difficult for radio operators to secure local advertising dollars.

Decision

As indicated in the September 1986 call for applications, the Commission assesses such applications in light of a variety of factors which, when taken together, are intended to assure the diversity and viability of broadcasting services in the given market.

Among the significant elements that it has taken into consideration, the Commission has evaluated the market's capacity to support new broadcasting services without threatening the existence of the services already offered. It has also examined the viability of the proposals submitted to it and has studied the three programming proposals in relation to the general objectives set out in its radio policies, particularly the extent to which the proposed services would add to the diversity and quality of the radio services available in Winnipeg.

The Commission's call for applications reminded potential applicants

...that in making this call the Commission has not reached any conclusion with respect to the viability of such a service. Nor should it necessarily be construed that the Commission will, by virtue of having called for applications, authorize such a service at this time.

The Winnipeg area enjoys a broad range of radio programming services. Currently there are 12 radio stations licensed to serve the city, nine of which are commercial stations, and there are three CBC services.

Consequently, and in consideration of the extensive range of broadcasting services available in Winnipeg, the Commission considered it incumbent on the applicants to demonstrate that their proposals would add important elements of programming diversity and to convince the Commission that the market is sufficiently able to support a new station without serious impact on existing licensees.

With specific reference to the Warrington application, the Commission has noted the particularly high projected revenue figure in the first year of operation, and was concerned that should the applicant not meet this figure the proposed programming commitments would be compromised.

In addition, the Commission is of the opinion that Mr. Warrington failed to demonstrate not only that the proposed music service would be different from that provided by a number of other Winnipeg stations, but also that sufficient staff would be assigned to fulfill several important programming commitments.

Regarding the Rawlco proposal, the Commission is not convinced that the proposed music service would add further diversity to the services provided by the country-oriented radio stations already in existence in the Winnipeg area. Further, the Commission has noted that should the Rawlco application be approved, the vital regional service provided by CFQX-FM would, in all probability and as argued by QX-FM at the hearing, cease to exist.

In addition, the Commission re-emphasizes that an integral consideration of this proceeding was whether the Winnipeg radio market could support the addition of a major new broadcasting outlet at this time without serious damage to or disruption for existing licensees. It was a fundamental responsibility of the applicants to satisfy the Commission that this would be possible. It is the Commission's conclusion that this has not been done.

Based on all of the available information, including the studies submitted by the applicants and the interveners, the Commission is not satisfied that it has been clearly demonstrated that the Winnipeg market can support the injection of a new major radio licensee at this time. It therefore denies the applications by Rawlco Communications Ltd. and Ralph E. Warrington, on behalf of a company to be incorporated.

In the interest of maintaining and, indeed, improving CFQX-FM's local service to residents of the Interlake region, the Commission approves the applications by Radio QX-FM Inc. as outlined below.

Licensing Action QX-FM

In its consideration of the applications submitted by QX-FM, the Commission noted the licensee's statement at the hearing that its primary obligation is service to the Selkirk-South Interlake region:

"We're here as a Selkirk station and an Interlake station....The spoken word and other service activities and so on will remain as they are, only done better...Our business plan is to be a viable Interlake station."

The Commission further noted the licensee's statements that it will continue to devote 60% of its news coverage to local events, specifically citing "the Selkirk, Beausejour, Stonewall, Gimli, Teulon and other Interlake areas within our broadcast area."

The Commission recognizes the need for CFQX-FM to obtain additional revenues from the Winnipeg market to ensure its future viability as an Interlake station and notes the relatively small amount those revenues represent relative to the total revenue derived by the Winnipeg-area radio licensees. Consequently, the Commission is satisfied that the revenue extracted by CFQX-FM from the Winnipeg market will have little impact on existing broadcasters.

Based on all of the foregoing, the Commission approves the application to amend the licence for CFQX-FM Selkirk by changing the frequency from 92.9 MHz to 104.1 MHz; by increasing the effective radiated power from 35,000 to 100,000 watts; and by changing the transmitter location from the present site north of Selkirk to a location 10 kilometres west of Selkirk.

The Commission is satisfied that these technical alterations are very much in the interests of those persons and communities in the Interlake region who look upon CFQX-FM as their radio station and who legitimately expect to be able to listen to it without the chronic handicap of poor-quality reception.

With respect to the proposed share transfer, the Commission is satisfied that this transaction is in the public interest, and notes the benefits that will accrue to the communities served as a result of Mr. Chipman's 100% direct and indirect ownership of QX-FM. The Commission is convinced that, as a result, future funding sources for CFQX-FM, to the extent required, are readily assured. This should enable the licensee to meet all of the conditions set out in its Promise of Performance and to provide improved service to the Interlake area.

Further, the Commission is of the view that the management of the company will be strengthened by reason of being responsible to a single shareholder. Similarly, the Commission notes that Mr. Chipman's shareholder interest currently provides the licensee with its management direction and that the continuance of this management is an additional benefit flowing from this transfer of control.

Accordingly, the Commission approves the application for authority to transfer effective control of Radio QX-FM Inc., licensee of CFQX-FM, through the transfer of 50% of the voting shares from Mr. J. G. Turner to Mr. Robert Chipman.

With respect to the application for licence renewal, the Commission renews the broadcasting licence for CFQX-FM Selkirk from 1 October 1987 to 31 August 1991, subject to the conditions specified in this decision and in the licence to be issued.

It is a condition of licence that the applicant adhere to the CAB self-regulatory guidelines on sex-role stereotyping, as amended from time to time and accepted by the Commission.

The Commission expects the licensee to maintain its Interlake orientation, and specifically to address the needs of listeners in the Selkirk/ Interlake region as it currently does with such programs as "Country Comment", "Animal Doctor", "Community Billboard" and the coverage of such community events as Selkirk's "Festival on the Red."

In this regard, the Commission requires the licensee to submit a yearly report, to be placed on the public file, outlining details of how its programming, particularly its news, local public affairs and community access programs, respect its Interlake orientation. Specifically, the licensee should explain how it is meeting the Commission's expectation in each of these programming areas.

An analysis of CFQX-FM's programming undertaken by the Commission in December 1986 indicated deficiencies with respect to the level of hits played (57%) and the quality of the logger tapes submitted. At the hearing the licensee was questioned on these shortcomings. In response, Mr. Gerry Johnston, General Manager of the station, indicated that CFQX-FM was "definitely now playing less than 50% hit material" and that "for the logger tape [problem] this recorder has been fully overhauled and we've purchased a large supply of new tapes. The logger tape problem has been cleared up".

The Commission is satisfied with the measures taken by the licensee with respect to the high level of hits and the poor-quality of its logger tapes. It wishes to remind the licensee, however, of the importance of complying with the requirements with the radio regulations with regard to logger tapes, as cited in Public Notice CRTC 1986-268 dated 29 September 1986. In this regard, the Commission requires the licensee to report within sixty days to confirm that equipment is in place, operating and capable of meeting the requirements of subsection 8(5) the Radio Regulations, 1986.

With respect to the development of Canadian talent, the Commission acknowledges the licensee's efforts to promote the music of local artists and local musical events and notes the licensee's statement at the hearing that, as revenues improve, it will endeavour to become more involved in this important area. CFQX-FM also stated that it would commence live broadcasts of Canadian talent as finances permit.

Fernand Bélisle
Secretary General