ARCHIVED -  Decision CRTC 96-763

Decision

Ottawa, 19 November 1996

Decision CRTC 96-763

3224503 Canada inc.

Drummondville, Quebec - 199606571 - 199606589

Acquisition of assets and conversion of CHRD to FM - Applications approved

Following a Public Hearing in Québec beginning on 9 July 1996, the Commission approves the application for authority to acquire the assets of the radio programming undertaking CHRD Drummondville from Communications Robert Lauzon inc., and for a broadcasting licence to continue the operation of this undertaking.

The price of the transaction is $150,000. Based on the evidence filed with the application, the Commission has no concerns with respect to the availability or the adequacy of the required financing.

CHRD has served the Drummondville area for more than forty years. Until 1988, the station was in excellent financial health. From 1989 to 1995, however, the station's financial circumstances deteriorated, and it went into bankruptcy three times. In 1995, the station was placed under the receivership of Yves Guay. The station's facilities were subsequently acquired by 3224503 Canada inc., which continued to operate it in accordance with a management agreement between the receiver and the purchaser which had received the Commission's prior approval. The applicant indicated that it had rationalized the station's expenditures and assets and, as it stated at the hearing, had reached the point where the station [TRANSLATION] "was making enough to cover expenses by the month of June, that is, after only a few months". The applicant went on to say: [TRANSLATION] "So we are very confident that we can provide the CRTC with all the guarantees it requires to grant us a licence so this station will survive."

The Commission notes that, although the applicant did not propose any tangible benefits, CHRD has been unprofitable over the three years preceding the filing of this application. Accordingly, the Commission is satisfied that the application meets the criteria set out in Public Notice CRTC 1993-68 entitled "Application of the Benefits Test at the Time of Transfers of Ownership or Control of Broadcasting Undertakings". The Commission notes the important benefit associated with this transaction, that being the maintenance of the station as a viable, local radio service to Drummondville. Accordingly, the Commission is of the view that approval of this application is in the public interest.

Conversion of CHRD to FM

The Commission also approves the application for a licence to carry on a French-language FM radio programming undertaking at Drummondville on the frequency 105.3 MHz, channel 287A, with an effective radiated power of 3,000 watts.

The Commission will issue a licence to 3224503 Canada inc., expiring 31 August 1999, upon surrender of the licence for CHRD Drummondville. The licence will be subject to the conditions specified in this decision and in the licence to be issued.

The licence term granted herein, while less than the maximum of seven years permitted under the Broadcasting Act, will enable the Commission to consider the renewal of this licence in accordance with the Commission's regional plan and to better distribute the workload within the Commission.

The applicant indicated in its Promise of Performance that it will produce 126 hours per week of local programming, and will establish a community news service at the station to concentrate on local news.

The station will operate in the country rock musical format. The Commission also notes the applicant's commitment to devote 50 per cent or more of its category 2 musical selections to Canadian musical selections during the broadcast week. The applicant is required by condition of licence to adhere to this commitment.

It is a condition of licence that the station not operate in the specialty format, as defined in Public Notice CRTC 1995-60 or as modified from time to time by the Commission.

With regard to the development of Canadian talent, $2,000 a year has been budgeted for direct expenditures. This amount will include an annual contribution of $1,000 to MusicAction and two grants of $500 to encourage local creative musical talent.

At the hearing the applicant indicated that, in addition to its ability to broadcast a signal of clearly higher quality, the conversion of the CHRD signal from AM to FM will reduce the station's operating costs. The applicant also suggested that, with its musical format, the new station should be able to repatriate some of the listeners who now tune to stations in Sherbrooke and Montréal, as well as some of the advertising revenues associated with such tuning.

The Drummondville market is also served by another local station, CJDM-FM, owned by Power Broadcasting Inc. Power Broadcasting Inc. intervened at the hearing to oppose the application to convert CHRD to FM. The intervener submitted that the Drummondville market lacks the commercial potential to support two independent radio stations and that its advertising revenues [TRANSLATION] "are barely sufficient now to keep it profitable".

In reply, the applicant indicated that it plans to increase its revenues by recovering the share of the Drummondville advertising market that has been taken over by stations outside the market. It added that it will also draw additional revenues [TRANSLATION] "from the television and print media in Drummondville", and that the market's potential would easily accomodate this.

The applicant's shareholders also hold shares in a related company, 3145069 Canada inc., which owns CFEI-FM Saint-Hyacinthe. At the hearing, the applicant indicated that [TRANSLATION] "we could achieve economies of scale, as we are also owners of CFEI in Saint-Hyacinthe, and we can, and will continue to be able to, share certain administrative costs with CFEI".

The applicant further advised the Commission that it already has the technical facilities and computer equipment required to convert the station to FM. The applicant added that: [TRANSLATION] "a sizable proportion of the equipment that is now used to operate CFEI will also be available to operate CHRD on the FM band". It went on to state:

 [TRANSLATION] Since the time we purchased the CHRD facilities, we have made a series of technical and computer modifications to enable us to commence operations on FM very quickly, without having to invest as heavily as we had forecast.

In the view of the Commission, the applicant's acquisition of CHRD's assets and conversion of the station to FM will enable the station to continue operating and will preserve a second local voice for Drummondville. The Commission further considers that the musical complementarity of CJDM-FM, with its musical format targeted at younger listeners, and the new FM station, with its musical sound targeted to a more mature audience, will give the population of Drummondville an alternative to the radio stations outside this market. Finally, the Commission notes that, since 3145069 Canada inc. acquired CFEI-FM, it has eliminated the deficit accumulated by the station over the previous eight years. The management style of the applicant's shareholders appears to be producing results.

In Public Notice CRTC 1992-59, the Commission announced implementation of its employment equity policy. It advised licensees that, at the time of
licence renewal or upon considering applications for authority to transfer ownership or control, it would review with applicants their practices and plans to ensure equitable employment. In keeping with the Commission's policy, it encourages the licensee to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.

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.

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 accepted by the Commission.

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

The Commission acknowledges the intervention filed in support of these applications.

This decision is to be appended to the licence.

Allan J. Darling
Secretary General