ARCHIVED -  Decision CRTC 98-57

Following a Public Hearing in the National Capital Region on 15 December 1997, the Commission, by majority vote, approves the application by Monarch Broadcasting Ltd. (Monarch) for authority to acquire the assets of CJCY Medicine Hat from Medicine Hat Broadcasting Ltd., and for a broadcasting licence to continue the operation of this undertaking.

The Commission, by majority vote, approves the further application by Monarch for a broadcasting licence to carry on an English-language FM radio programming undertaking at Medicine Hat, operating on the frequency 96.1 MHz (channel 241C1) with an effective radiated power of 100,000 watts.

The Commission will issue a licence to Monarch for authority to continue the operation of the existing AM undertaking, upon surrender of the current licence. The new licence will expire 31 August 2003 (the expiry date of the current CJCY licence) and will be subject to the same conditions as those in effect under the current licence, as well as to any other condition specified in this decision and in the licence to be issued.

The Commission will also issue a licence to Monarch for authority to carry on its proposed new FM undertaking. This licence will expire 31 August 2003 and will be subject to the conditions specified in this decision and in the licence to be issued.

The Commission will not issue a licence for authority to carry on the proposed new FM undertaking until the licensee surrenders the AM licence for cancellation by the Commission.

The authority in respect of the proposed FM undertaking will only be effective and the licence will only be issued at such time as the 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.

Medicine Hat Broadcasting Ltd. currently wholly owns and operates CJCY as a stand-alone, independent station. For its part, Monarch owns a number of television and radio stations in Alberta and British Columbia, including radio station CHAT, and CBC affiliate CHAT-TV Medicine Hat. It also operates CFCN-TV-8 Medicine Hat, the CTV network affiliate that rebroadcasts the programming of CFCN-TV Calgary. As well, Monarch owns the cable distribution undertaking serving Medicine Hat.

As a result of the approvals granted herein, Monarch will own and operate the only two radio stations in Medicine Hat, one on each band. Monarch’s ownership of a single AM station and a single FM station in the same market does not raise concerns in relation to the Commission’s common ownership policies. However, given that Monarch also owns and operates the local television station, the Commission gave consideration to the possible impact that this concentration of ownership might have on the diversity of editorial voices available at Medicine Hat.

In support of its applications, Monarch argued that it will be able to use the resources of its other broadcast holdings and the economies of scale associated with the operation of the two local radio stations to ensure that both survive. According to Monarch, the availability of local radio services will contribute to diversity because they will offer an alternative to non-local sources of information. With an FM frequency, Monarch will have a tool to compete effectively in the evolving multi-media market. Monarch further noted that the specialty television services, as well as print and electronic media available in Medicine Hat, will continue to ensure ample editorial diversity in that market.

In approving these applications, the Commission has taken into consideration the fact that the vendor has been seeking a purchaser for CJCY for the last two years and that there were no other bona fide parties interested in purchasing the station. Furthermore, the Commission has noted the strong support from the Medicine Hat community for the conversion of CJCY to the FM band, as expressed in the thirty-seven interventions submitted in support of these applications. Moreover, the Commission notes that there were no opposing interventions. Based on the above, and given the size of the market, the Commission is satisfied that approval of these applications is in the public interest.

The purchase price relating to the ownership transaction is $1,275,000. 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.

Because the Commission does not solicit competing applications for authority to transfer effective control of broadcasting undertakings, the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature. As a first test, the applicant must demonstrate that the proposed transfer will yield significant and unequivocal benefits to the community served by the broadcasting undertaking and to the Canadian broadcasting system as a whole, and that it is in the public interest.

In particular, the Commission must be satisfied that the benefits, both those that can be quantified in monetary terms and others that may not easily be measured in terms of dollar value, are commensurate with the size of the transaction and take into account the responsibilities to be assumed, the characteristics and viability of the broadcasting undertakings in question, and the scale of the programming, management, financial and technical resources available to the purchaser.

The Commission has assessed the benefits package identified by the applicant as flowing from this transaction and, in general, is satisfied that it is significant and unequivocal, and that approval of the transaction is in the public interest.

As a tangible benefit of this transaction, Monarch made a commitment, over and above its current expenditures on Canadian talent development, to spend $125,000 over five years on an annual outdoor festival featuring live Canadian talent. The live performances at the festival will be recorded on compact discs (CD) and made available to local residents. Profits from ticket and CD sales will be donated to local charities. As well, Monarch will hold an art competition, open to local artists enrolled at Medicine Hat College, for the design of the CD covers.

The licensee is required, by condition of licence, to make payments to third parties involved in Canadian talent development at the level identified for it in the Canadian Association of Broadcasters' (CAB) Distribution Guidelines For Canadian Talent Development, as set out in Public Notice CRTC 1995-196 or as amended from time to time and approved by the Commission, and to report the names of the third parties associated with Canadian talent development, together with the amounts paid to each, on its annual return. The payments required under this condition of licence are over and above the commitments to Canadian talent development offered as benefits in the application to acquire ownership of the undertaking.

It is a condition of licence that the proposed FM station not be operated within the Specialty format as defined in Public Notice CRTC 1995-60, as amended from time to time by the Commission.

It is a condition of each 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 each 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.

Dissenting opinion of Commissionner David McKendry

I dissent from the decision to approve the applications by Monarch Broadcasting Ltd. (Monarch):

for authority to acquire the assets of radio station CJCY Medicine Hat, and

for a broadcasting licence to continue the operation of CJCY.

I dissent because:

excessive concentration of ownership will exist. Monarch will have programming and editorial control over all the radio and television stations and the cable television undertaking providing local information and entertainment in Medicine Hat, Alberta, and

the public notice of Monarch’s applications was not adequate. The notice, Notice of Public Hearing CRTC 1997-11-2 dated 3 December 1997, did not disclose in any way the concentration of ownership arising from approval of Monarch’s applications. As a result, a reasonable opportunity was not given to interested persons to make representations to the Commission because they had no notice of the significant concentration of ownership that was at hand.

Radio frequencies are public property. According to the Broadcasting Act (the Act), the broadcasting system should use the frequencies to provide programs drawn from local, regional, national, and international sources. The Act states that programming should be varied and comprehensive, providing a balance of information, enlightenment, and entertainment. The Act also states that programming should provide a reasonable opportunity for the public to be exposed to the expression of different views on matters of public concern.

Approval of Monarch’s applications places these facets of Canadian broadcasting policy at undue risk with respect to local programming in Medicine Hat. One person will have ultimate programming and editorial control over the radio and television stations and the cable undertaking’s community channel in Medicine Hat. In addition, individuals and organizations that wish to advertise on local broadcasting undertakings will face a monopoly supplier of advertising time, unduly exposing advertisers to the risk of unreasonable rates.

Medicine Hat will be the only city

Medicine Hat, Alberta, is a city of 53,000 people; the population increased by 7.4 per cent between 1991 and 1996. Medicine Hat apparently will be the only city in Canada with a population in excess of 50,000 where one person will control all the broadcasting undertakings that provide local programming. Cities the size of Medicine Hat can generally support more than one owner of the radio and television stations and the cable television undertaking.

Market can support more than one owner

More specifically, I have examined the Commission’s Radio Market Report 1992-1996 for Medicine Hat and CJCY’s financial statements for the three years ended 31 August 1997, in order to assess the ability of Medicine Hat to provide a reasonable profit to more than one owner of the city’s radio stations. My examination indicates that the Medicine Hat radio market can support more than one owner of the city’s radio stations. For example:

both the stations have a positive profit before interest and income taxes;

taken together, the stations’ average profit margin before interest and income taxes was 15 per cent during the period from 1992 to 1996; and

CJCY’s income from operations increased by 17 per cent during the three years ended 31 August 1997.

On the other hand, I note that, taken together, the average annual real advertising revenues for the stations declined by one-half of one per cent during this period. I also note that CJCY’s revenues decreased by nine per cent during the three years ended 31 August 1997. However, CJCY’s financial statements clearly indicate that the station can continue to operate as a viable business for the foreseeable future under an owner other than Monarch.

Not adequately substantiated

I also note that Monarch states that CJCY’s owner has informed Monarch that he has been unable to sell CJCY to another party in spite of efforts to do so. I am not satisfied that Monarch’s assertion has been adequately substantiated in light of the significant concentration of ownership at stake in this proceeding. The only evidence to support the view that CJCY’s owner cannot attract a buyer is hearsay evidence: an assertion by Monarch that the company was informed by CJCY’s owner that this is the case. I give little weight to this evidence.

Thirty-seven interventions supported Monarch’s applications; no interventions opposed the applications. Thirty-five interventions supported Monarch’s applications because the interveners wanted an FM station in Medicine Hat. Two interveners did not refer to an FM station. They expressed support for the applications because of Monarch’s contributions to the Medicine Hat community.

I acknowledge the support for an FM station in Medicine Hat, a matter that was disclosed in the public notice of Monarch’s applications. However, the primary question at hand is not the existence of an FM station in Medicine Hat. The primary question at hand is whether or not one person should have ultimate programming and editorial control over the radio and television stations and the cable undertaking’s community channel in Medicine Hat, a matter that was not disclosed in the public notice of Monarch’s applications. I give little weight to the interventions because the public notice of Monarch’s applications did not disclose in any way the concentration of ownership arising from approval of Monarch’s applications.

The Commission said in 1988, "… concentration of ownership is not, in and of itself, a concern provided there continues to be an effective degree of diversity of ownership and of programming sources to ensure that the objectives of the Broadcasting Act are met." (Decision CRTC 88-275.) One owner of the broadcasting undertakings that provide local information and entertainment in Medicine Hat is not an effective degree of diversity of ownership and of programming sources. As a result, the Act’s objectives will not be met in Medicine Hat with respect to local programming.