ARCHIVED -  Decision CRTC 96-288

Decision

Ottawa, 29 July 1996

Decision CRTC 96-288

Radio One Vancouver Corporation

Vancouver, British Columbia - 951601400Vancouver, British Columbia - 952311900Vancouver, British Columbia - 952317600

 Application for a new ethnic FM radio programming undertaking - approved;
two other FM applications - denied

Following a Public Hearing in Vancouver beginning on 27 February 1996, the Commission approves the application by Thomas Fung and Roger Charest, representing a company to be incorporated (Newco), for a broadcasting licence for a Specialty FM (ethnic radio) programming undertaking at Vancouver on the frequency 96.1 MHz, channel 241C, with an effective radiated power of 40,000 watts.

The two remaining applications noted above are denied.

Subject to the requirements of this decision, the Commission will issue a licence to Newco expiring 31 August 2001. The licence will be subject to the conditions specified in this decision and in the licence to be issued.

The licence term specified above, while less than the maximum of seven years permitted under the Broadcasting Act, is two years more than the licence term that normally would have been dictated under the Commission's regional plan. The term of five years herein granted will permit the licensee to establish the proposed service, and enable the Commission to assess the licensee's performance within a reasonable period of time following implementation.

 This authority will only be effective and the licence will only be issued at such time as:

a) the Commission receives documentation establishing that an eligible Canadian corporation has been incorporated in accordance with the application in all material respects and that it may be issued a licence; and

b) construction of the undertaking is completed and it is prepared to commence operation. If the construction is not completed within twelve months of the date of this decision or, where the applicant applies to the Commission within this period and satisfies the Commission that it cannot complete construction and commence operation before the expiry of this period, and that an extension of time is in the public interest, within such further periods of time as are approved in writing by the Commission, the licence will not be issued. The applicant is required to advise the Commission (before the expiry of the twelve-month period or any extension thereof) in writing, once it has completed construction and is prepared to commence operation.

 The Department of Industry has advised the Commission that this application is conditionally technically acceptable, and that a Broadcasting Certificate will only be issued once it has been determined that the proposed technical parameters will not create any unacceptable interference with aeronautical NAV/COM services.

 In accordance with subsection 22(1) of the Broadcasting Act, the Commission will only issue the licence and the authority will only be granted at such time as written notification is received from the Department of Industry that its technical requirements have been met, and that a Broadcasting Certificate will be issued.

 Background - Call for applications

 On 30 June 1995, the Commission received an application from Newco for a licence to provide a new ethnic radio service in Vancouver on the frequency 96.1 MHz, one of two FM frequencies that remain available for use on the Lower Mainland of British Columbia. The applicant proposed to direct its service to a minimum of 20 cultural groups in a minimum of 15 languages each broadcast week, including a minimum of 100 hours of Types A and B ethnic programming. The Commission notes that, in both the Notice of Public Hearing and the Agenda for the Vancouver hearing, the proposed amount of Type A and B programming was incorrectly noted as 74 hours 30 minutes per week.

 Newco is to be owned 50% by Y.B.C. Holdings Limited (Y.B.C.). Y.B.C. also holds indirect ownership of 100% of Great Pacific Broadcasting Ltd. (Great Pacific), licensee of ethnic station CJVB Vancouver. The remaining 50% of Newco will be owned by O.K. Radio Group Limited (OKR). OKR is the licensee of several radio stations in Alberta and British Columbia, including CKXM (formerly CKDA) and CKKQ-FM Victoria, and an Edmonton ethnic station, CKER-FM. OKR is ultimately owned and effectively controlled by Mr. Roger Charest of Edmonton.

 In Public Notice CRTC 1995-126 dated 25 July 1995, and in keeping with its usual practice in such cases, the Commission issued a call for applications from other parties wishing to obtain a broadcasting licence to carry on an FM programming undertaking in Vancouver. Three such applications were subsequently filed with the Commission, each proposing use of 94.5 MHz, which is the other unused FM frequency assigned to the Vancouver area.

 Télémédia Communications Inc. (Télémédia) proposed to carry on a new FM undertaking with a modern rock and alternative music format. Radio One Vancouver Corporation (Radio One) proposed to offer an "adult pop/talk" Specialty FM service, more than 50% of which would be devoted to spoken word programming each broadcast week.

 Mainstream Broadcasting Corporation (Mainstream) also filed an application in response to the Commission's call. Like Newco, this applicant had proposed to carry on a Specialty FM (ethnic radio) programming undertaking at Vancouver. Mainstream, however, withdrew its application prior to the hearing.

 The Vancouver market and its ability to support a new entrant

 The Vancouver market is currently served by six commercial FM stations and nine commercial AM stations. The market's structure is not unlike that to be found in several other Canadian cities, in that many of its licensees own and operate both an AM and an FM station. In fact, of the 15 commercial stations, only three are stand-alone operations and these are all AM stations. Two of the three AM stations, CKST (public affairs/pop music) and CHMB (ethnic), are licensed to Radio One and Mainstream, respectively. The third AM station is CJVB, which, as noted above, is an ethnic station owned indirectly by Y.B.C., the proposed 50% shareholder in Newco.

 As the Commission stated in Public Notice CRTC 1991-74 entitled Radio Market Policy, "...the availability of varied and comprehensive programming...requires financially healthy licensees." Accordingly, in assessing applications proposing new radio services, the Commission closely examines the financial capacity of a radio market to absorb an additional player without impinging unduly on the financial abilities of existing radio stations to meet their programming obligations.

 The Commission's radio market policy prescribes the application of three tests to assess a market's capacity to support a new radio service. As one test, the Commission examines the five-year record of growth in the total advertising revenues earned by a market's commercial AM and FM stations; if there has been positive real growth over the period, the market is deemed to have passed the test. A second test concerns the average profitability of all commercial stations in a market, where profits are measured before deductions for interest expenses and taxes (PBIT). To pass this test, the average profitability of stations in the market must have been positive over the preceding five years. As the third test, the Commission examines the PBIT earnings of the market's individual commercial stations over the same five-year period; under this test, the number of profitable station-years must exceed the number of unprofitable station-years.

 The Commission notes that, for the 1991-1995 period, the Vancouver radio market passes the first two of the three tests set out in the radio market policy. The market, however, fails the third test in that the incidence of individual stations recording a positive PBIT over the period is marginally less than the number of unprofitable station-years.

 The Vancouver market's, albeit narrow, failure to meet the third test forms the basis of the Commission's decision to deny the applications by Télémédia and Radio One. In the Commission's view, a negative result on even one of the three prescribed tests calls into question the ability of the market to absorb the impact of a new entrant. Particularly in doubt would be the ability of the market's weaker stations to withstand the additional competition for advertising revenues brought to bear by a new, commercial radio station whose service is targeted, as the formats proposed by Télémédia and Radio One would be, to a broad component of the available English-language audience.

 In considering this matter, the Commission has examined the market studies submitted by the three applicants, each purporting to demonstrate that the service it has proposed would not have an undue financial impact on existing stations. In support of its claim in this regard, Télémédia projected that fully 58% of the audience for its proposed station would be accounted for either by increases in radio tuning or by repatriation of listeners from out-of-market stations. In the case of Radio One, the applicant claimed that a minimum of 45% of its advertising revenues would flow from increases in the radio budgets of advertisers and agencies or from media sources other than radio, while Newco stated that 30% of its revenues would be "new" revenue from mainstream advertisers.

 In the Commission's view, notwithstanding the growth forecast for the Vancouver economy and some indications of recovery in the radio market, the audience and revenue projections presented above may be unduly optimistic. With 15 commercial stations now operating in the market, the likelihood of there being any significant amount of untapped radio advertising revenues is questionable. Moreover, since 95% of all radio tuning by Vancouver residents is to local radio stations, the potential revenues that might be gained from the repatriation of listeners to out-of-market stations would not contribute significantly to revenue growth in the market. Should the applicants' projections prove to be overly optimistic, the resulting shortfall in either the audience or the advertising revenues of the proposed stations could only be made up at the expense of existing stations.

 The Commission notes that Vancouver's English-language AM stations would be particularly vulnerable to the impact of a new FM station operating in that language. While the financial picture of the market's FM stations is positive, its AM stations, as a group, have experienced a shrinkage in advertising revenues (-16.3%) and a negative average PBIT margin (-4.9%) in the 1991-1995 period. Accordingly, the Commission has denied the applications by Télémédia and Radio One.

 In the Commission's view, the concerns leading to denial of these applications are not raised by the Newco application. Indeed, although approval of the Newco proposal represents an exception to the radio market policy, the Commission considers that there are circumstances particular to this application and to the Vancouver market that justify such an exception. In this context, the Commission notes that the radio service proposed by Newco will be aimed at Vancouver's ethno-cultural community as distinct from the mainstream English-language audience, and can thus be expected to have only a minimal impact on existing English-language AM stations.

 The two existing ethnic AM radio stations in Vancouver, CHMB and CJVB, also offer programming that is directed predominantly to listeners in Vancouver's Chinese community, and are thus stations whose audiences and revenues are potentially affected by the niche radio service proposed by Newco. In the case of CJVB, however, the Commission considers that any concerns about the impact of the new station are effectively eliminated by the fact that the owners of CJVB will also own 50% of Newco.

 In the case of CHMB, the Commission notes the applicant's observation that there is currently very little daytime service on that station directed to ethnic groups other than the Chinese community. According to the applicant's estimate, approximately 80% of the advertising revenues earned by CHMB are generated by its morning programs. The Commission thus views as significant, Newco's commitment to restrict the hours during which Chinese-language programming will be broadcast on weekdays to after 3:00 p.m. Instead, the morning and early afternoon hours in Newco's weekday schedule will be devoted to programming directed to approximately 18 other ethno-cultural groups.

 Finally, the Commission notes that both of the existing ethnic AM stations earned a positive PBIT in 1995 by directing their respective services to the needs and interests of various ethnic groups in Vancouver, but most especially its Chinese-language community, a large and prosperous market that continues to be buoyed by an influx of population and investment from Asia. On balance, the Commission is satisfied that both of the existing ethnic AM stations, and CHMB in particular, will be able to adjust to the market impact of the proposed FM service. The Commission also considers that the proposed ethnic service on the FM band will contribute to the diversity of radio services available in the Vancouver area, and that approval of the application is in the public interest.

 Conditions of licence and expectations

 In keeping with Newco's commitment, it is a condition of licence that the licensee not broadcast any Type A, C or D ethnic programs directed to the Chinese community during the 6:00 a.m. to 3:00 p.m. period on weekdays.

 Consistent with the Commission's ethnic policy, it is a condition of licence that the licensee broadcast a minimum of 100 hours of Types A and B ethnic programs during each broadcast week. It is also a condition of licence that the licensee provide programming in each broadcast week directed to a minimum of 20 cultural groups in a minimum of 15 different languages.

 Among the 20 cultural groups to whom the licensee will direct its programming are seven ethno-cultural communities identified by the licensee as not currently served by Vancouver's radio stations. The licensee's programming plans, as clarified at the hearing, include the provision of approximately 12 hours per week of programs on the new station targeted to these seven groups. A commitment put forward by Newco in the context of this application on behalf of its sister station, CJVB, will alter the program schedule of CJVB in order to introduce a total of 9 hours per week of programming directed to seven currently-unserved ethnic groups. The Commission notes these commitments, and expects the licensees of CJVB and of the new FM station to ensure that service to a minimum of 14 currently unserved ethnic groups (seven in respect of each station) is maintained over the course of their respective licence terms.

 The applicant proposed to direct the sum of $65,000 per year to various initiatives in support of Canadian talent development. The Commission accepts this as a reasonable annual expenditure for this purpose. It notes, however, that $20,000 of this amount is to consist of the annual salary paid to a Canadian talent development co-ordinator. The co-ordinator's responsibilities would include overseeing the sponsorship of six ethnic music events each year and co-ordinating, with CJVB, an ethnic talent festival and the production of a compilation recording on compact disc. The Commission considers that the staff budget associated with these activities is excessive in the circumstances, and has disqualified it as a legitimate expenditure in support of Canadian talent development. Accordingly, the Commission expects Newco to redirect this portion of its annual Canadian talent expenditures to one or more other, acceptable initiatives. The Commission intends to review this matter at the time of licence renewal.

It is a condition of licence that the licensee adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) "Sex-Role Portrayal Code for Television and Radio Programming", as amended from time to time and accepted by the Commission. The application of the foregoing condition of licence will be suspended as long as the licensee remains a member in good standing of the Canadian Broadcast Standards Council.

 It is also a condition of licence that the licensee adhere to the provisions of the CAB's "Broadcast Code for Advertising to Children", as amended from time to time and approved by the Commission.

 In Public Notice CRTC 1992-59 dated 1 September 1992 and entitled "Imple-mentation of an Employment Equity Policy", the Commission announced that the employment equity practices of broadcasters would be subject to examination by the Commission. In this regard, the Commission encourages the licensee to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.

 This decision is to be appended to the licence.

 Allan J. Darling
 Secretary General