ARCHIVED -  Decision CRTC 85-756

Decision

Ottawa, 12 September 1985

Decision CRTC 85-756

Trillium Cable Communications Limited

Saskwest Television Inc. Regina and Saskatoon, Saskatchewan - 841690100 - 841691900

Harvard Developments Limited and Allarcom Limited, doing business under the name and style of Regina Independent Television Regina, Saskatchewan - 841692700

Allarcom Limited, doing business under the name and style of Saskatoon Independent Television Saskatoon, Saskatchewan - 841701600

Table of Contents

Pages

Background 3

Third Service and Market Viability 7

Over-the-air Versus Cable Distribution 11

Ownership and Financial Background 15

Programming 18

Following a Public Hearing in Regina on 18 June 1985, the Commission approves the applications by Saskwest Television Inc. (Saskwest) for licences to carry on English-language television broadcasting transmitting undertakings to serve Regina and Saskatoon.

At the hearing, the Commission also considered a joint application by Harvard Developments Limited (Harvard) and Allarcom Limited (Allarcom), doing business under the name and style of Regina Independent Television, and another application by Allarcom alone, doing business under the name and style of Saskatoon Independent Television, for broadcasting licences to carry on network operations for the cable distribution of third television services in Regina and Saskatoon, respectively. These applications were competing with those by Saskwest and are denied.

Based on the Commission's assessment of a broad range of factors, including the size of the market represented by the cities of Regina and Saskatoon, the rate of economic growth generally projected for these communities and for Saskatchewan as a whole, the evidence presented at the hearing with respect to the potential impact of third service on other broadcasters, and the widespread support for the type of full-time, alternative, over-the-air television services proposed by Saskwest expressed in the many positive interventions submitted with respect to its applications, the Commission is convinced that there is a clear demand for a third over-the-air television service in Saskatchewan and that the existing market is sufficient to support the ongoing viability of such a service without causing undue harm to existing broadcasting services.

Moreover, based on the business experience and financial resources of Saskwest's principals, their performance in the operation of other broadcasting undertakings, and the high quality of Saskwest's local programming proposals, the Commission is satisfied that this applicant will establish and operate services that are responsive to the particular needs and interests of Regina and Saskatoon residents, as well as those of viewers living in other Saskatchewan communities able to receive third service via cable television.

Accordingly, the Commission will issue licences to Saskwest, expiring 31 March 1990, subject to the conditions of licence specified in this decision and in the licences to be issued. The Regina station will operate on channel 11 with an effective radiated power of 159,000 watts. The Saskatoon station will operate on channel 4 with an effective radiated power of 57,000 watts.

It is a condition of each licence that construction of the station be completed and that it be in operation within twelve months of the date of this decision or such further period as the Commission may, upon receipt of a request for extension before the expiry of the said twelve months, deem appropriate under the circumstances.

Background

In March 1984, the Commission received an application by Saskwest for a broadcasting licence to provide third English-language television service to Regina. In light of interest expressed by other parties in establishing third television service in Saskatoon, and consistent with its usual procedure in such cases, the Commission issued a call for similar applications for licences to carry on broadcasting transmitting undertakings serving either city (Public Notice CRTC 1984-147 dated 15 June 1984).

The Commission emphasized in its notice that it had not reached any conclusion with respect to the viability of third television service in Saskatchewan, and that its call should thus not be taken as an indication that it would authorize such service at that time. In this context, the Commission reminded prospective applicants that they would be "required to provide firm evidence of continued financial commitment and to demonstrate that there is a clear demand and market for their services".

In response to this notice, Saskwest submitted a further application to serve Saskatoon. Applications for licences to carry on broadcasting transmitting undertakings at each of Regina and Saskatoon were also submitted by two other parties, one being a division of Allarcom, and the other involving participation by Harvard and various other Saskatchewan broadcasters. This second group also proposed to establish a network whereby its programming would be distributed to cable systems throughout Saskatchewan via the provincially-owned broadband network.

All three of the applications for Regina were predicated on the approval by the Commission of a CBC proposal to relocate the transmitters used for the broadcast of its French and English-language television services from existing sites at Regia and Moose Jaw to a new site at Belle Plaine. Under this proposal, VHF channel 13 would have been relinquished for potential use by one of the applicants for third service at Regina. In January 1985, however, the CBC informed the Commission that, for financial reasons, it was unable to proceed with its Belle Plaine proposal at this time and, accordingly, it wished to withdraw its application. The Commission therefore invited the applicants to revise their applications, taking into account the fact that channel 13 would not be available for their use.

Saskwest subsequently resubmitted its proposal to serve Saskatoon, but revised the technical aspects of its Regina proposal by applying to broadcast on channel 11 instead of channel 13. In all other respects, the changes to the Regina application were relatively minor.

The two other applicants withdrew their applications for Regina and Saskatoon. In the case of Regina, the over-the-air proposals were replaced by a joint application by Harvard and Allarcom, in which it was proposed that the signal of Allarcom's Edmonton television station, CITV-TV be provided to Harvard via satellite from the CANCOM network.

The signal would be modified through the inclusion of some locally-produced programs, some acquired programming and commercial inserts, and delivered without charge to the Regina cable system for distribution on an unimpaired channel of the basic service. Local programs would be produced using Harvard's CTV-affiliated station CKCK-TV Regina, with staff and facilities expanded for the purpose of accommodating the increased production. A new application was submitted by Allarcom for Saskatoon; this application was based essentially on the same wrap-around cable-delivered model proposed for Regina, except that Allarcom would have established its own staff and studio facilities in Saskatoon for the production of the local program component.

These third service applications were considered at a three day hearing in Regina commencing on 18 June 1985. They were the subject of 736 interventions, 21 of which were presented orally at the hearing. The interventions reflected a wide spectrum of opinion, including the views of numerous individuals, municipal councils, the provincial government, community associations, various Saskatchewan broadcasters and cable operators, unions of broadcast employees, chambers of commerce, the owners of small and large businesses, advertising agencies, representatives of the arts community, independent producers, and other interested parties. The Commission thanks all of the interveners for their interest and important contribution to the public hearing process.

Support for the over-the-air services proposed by Saskwest was expressed in a vast majority of the interventions. Others addressed a variety of concerns, including the question of whether the Saskatchewan market is sufficiently strong to support a third over-the-air service without affecting the financial health of existing over-the-air services; the competing merits of over-the-air versus cable distribution and the relative implications of these methods of delivery for cable television operators; the ownership and financial background of the applicants; and, ultimately, the quality of the programming services proposed and the benefits they would bring to viewers in Saskatchewan. These and other issues were discussed in depth at the hearing and are examined further in this decision.

Third Service and Market Viability

It is Saskwest's position, based on certain economic indicators and marketing assumptions, that the market can support the new over-the-air services it proposes. Allarcom and Harvard referred to other indicators and assumptions to support their contention that the market is too small and fragile at this time to accommodate the full-scale over-the-air services proposed by Saskwest without causing undue harm to existing services. Certain television broadcasters in Regina, Saskatoon and elsewhere in the province also argued that denial of the Saskwest applications was necessary in order to protect the integrity of their services against the impact of further competition for audiences and advertising revenues. According to Allarcom and Harvard, the only viable means of introducing third service at this time would be through implementation of their proposals for limited wrap-around services, distributed on cable television, with local production gradually increased as financial resources permit.

Although the Allarcom and Harvard-Allarcom applications were based on the premise that over-the-air distribution of a third service is not viable at this time, at the hearing they expressed a willingness and intention to switch to over-the-air transmission in the near future. While they indicated that the precise timing of the switch would depend on the economic performance of their proposed services, they stated specifically that they would be prepared, "to commit to putting those transmitters in place in both Regina and Saskatoon within the term of the first licence, (as) a condition of licence". The Commission notes that such proposals would have necessitated applications for the issue of new broadcasting licences.

At the hearing, Saskwest suggested that this commitment by Allarcom and Harvard lent substantial support to its conclusion that its proposed over-the-air services are economically viable. Saskwest also noted that the original applications involving Allarcom and Harvard for licences to serve Regina and Saskatoon had been predicated on the use of VHF channels and their conclusions, at that time, that the market was of a sufficient size and strength to support their proposals for the over-the-air distribution of third service in those communities.

In addressing this second point, Harvard emphasized that its original applications had not assumed the presence of any significant source of untapped advertising revenue and that, accordingly, it had proposed only "a very marginal way of introducing third service for the benefit of Saskatchewan people by using the resources of the existing broadcasters, and at the same time try to protect the base". For its part, Allarcom stated that it had overestimated the potential of the market in its original set of applications, and that the current proposals reflected a more realistic assessment of this potential.

The Commission has considered these opposing viewpoints, and has also examined the financial situation of the existing private broadcasters in Regina and Saskatoon in order to gauge the potential impact of Saskwest's proposals. In this regard, the Commission notes that CKCK-TV Regina and CFQC-TV Saskatoon are among the most profitable of all privately-owned television stations in Canada. In the Commission's view, they are capable of withstanding the increased competition for advertising revenues to be offered by a third service in their communities.

The Commission also examined the potential impact of third service on other private television stations in Saskatchewan and is satisfied that the ratio of local to national advertising carried by these stations is such that the new services proposed by Saskwest should have no undue impact. There was considerable discussion at the hearing by marketing experts appearing on behalf of the competing applicants as to the changes that might occur in the strategies of national advertisers, and the consequences for existing licensees of any shift in established patterns. The Commission considers that, even if some changes were to occur in these patterns, the market has sufficient capacity and strength to accommodate a third service without unduly affecting the viability of existing broadcasters.

In its assessment, the Commission has taken into consideration the fact that, while Saskwest will manage the Regina and Saskatoon stations as independent and autonomous units from a programming standpoint, it will be able to achieve significant economies of scale in the operation of the two stations, particularly in the production of local programs. It will be able to derive significant revenues through simultaneous signal substitution procedures on cable. To a large extent, it will also be able to package the two stations for the sale of advertising time.

For the purposes of determining whether the financial and cultural resources of the two cities are capable of supporting the services proposed by Saskwest, the Commission considers that it is reasonable for the applicant to view Regina and Saskatoon as constituting a single extended market. From this perspective it is seen that the two parties rank, after Winnipeg, as the ninth largest market in Canada in terms of their combined population.

Various forecasts and opinions were presented at the hearing regarding the economic prospects of Regina, Saskatoon, and the province as a whole. Although there was no unanimity as to how to estimate future growth or when it would occur, there was general agreement that the province's future is bright. Saskwest made the following statement on this subject:

 Our province of Saskatchewan has a great many things going for it; it has the lowest inflation, the lowest unemployment, the lowest family taxation, the lowest bankruptcy rate, a higher than Manitoba and Canada rate of population growth, higher disposable income than Manitoba, the highest rate of new job creation in Canada, one of the highest growth in GNP in Canada expected to lead all four western provinces until 1993... So let's start believing in the province and give its public the same television opportunities that are available in both neighbouring prairie provinces.

The Commission also notes that in all Canadian communities where third over-the-air television services have been authorized, the stations have been able to establish themselves as viable undertakings, without causing any insurmountable financial hardship for the existing stations in those markets. In the present case, and based on all of the foregoing, the Commission is satisfied that the market is sufficient to support the introduction and continued operation of the third over-the-air television services proposed by Saskwest for Regina and Saskatoon, without creating undue harm for existing broadcasting services.

Over-the-air Versus Cable Distribution

In the Commission's view, one of the most important aspects of its mandate is to oversee the orderly introduction of viable new sources of high-quality local Canadian programming to viewers across the country, without undermining the integrity of existing services. Local, over-the-air, commercial television services offering a competitive alternative to the programming of the CBC and CTV networks and stations are now available to English-speaking residents of most major Canadian cities through such stations as CKVU-TV Vancouver, CITV-TV Edmonton, CFAC-TV Calgary, CKND-TV Winnipeg, CITY-TV Toronto and CHCH-TV Hamilton. Recently, in Decision CRTC 85-733 dated 6 September 1985, the Commission licensed Four Seasons Television Network Inc. to provide a third, over-the-air French-language television service in Montreal, while denying applications to provide a similar service in Quebec City. In its denial, the Commission expressed concern that the Quebec City market could not support third service with-out creating undue harm to existing services.

Generally, the Commission has favoured the use of over-the-air transmission for the delivery of locally-oriented third services. Approval of the Saskwest application is consistent with this approach. Although the Commission continues to favour over-the-air transmission for the delivery of third service in major metropolitan areas, it recognizes that given the size of the markets which remain unserved by their own third service, the Canadian broadcasting system may be approaching the stage in its development where the use of over-the-air transmission to introduce new, locally-oriented third services may not be feasible.

In the present case, the advantage of over-the-air transmission is clear from the fact that the services proposed by Saskwest will be available to all households within the coverage areas of the proposed stations, including non-cable subscribers and rural residents. Over-the-air reach will be further extended by cable reception and delivery in communities within 20 miles of the Grade B contours of the proposed stations, representing a total reach of approximately 500,000 people.

In contrast, the services proposed by the other applicants would only have been available, initially, to cable subscribers in Regina and Saskatoon representing a total reach of only 249,000 people. At the hearing, Allarcom and Harvard did state that they intended to take further steps to make their services available to cable subscribers elsewhere in the province.

The Commission has considered the concerns expressed by cable television licensees serving Regina, Saskatoon and other Saskatchewan communities. The cable operators opposed the Saskwest applications, arguing that over-the-air transmission would impair a cable-delivered signal or displace an existing service from the basic service, and that this would result in increased costs and subscriber dissatisfaction.

The Commission is satisfied that the benefits to be derived by the large number of Saskatchewan viewers who will have access to the new Canadian programming services proposed by Saskwest far outweigh the specific concerns of these interveners. Moreover, the Commission considers that the impairment problems will be less extensive than described by the cable licensees, particularly in the case of the Regina cable system and a number of those serving rural communities. The Commission also notes that there are various means, such as the use of phaselocking techniques and the realignment or combination of existing optional services on basic channels, whereby problems resulting from the introduction of the new services can be minimized.

With respect to the concerns raised by the licensee of CFSS-TV Warmley, whose signal is currently distributed on cable channel 11 in Regina, the Commission encourages the cable television licensee serving Regina to take all reasonable steps, in consultation with the Commission, to ensure that the signal of this station continues to be distributed on the basic service.

The Commission has also considered the concerns expressed by Canadian Satellite Communications Inc. (CANCOM) regarding the impact of Saskwest's new services on the status of Saskatchewan cable television licensees affiliated with the CANCOM network. The Commission has determined that for cable television undertakings currently licensed to operate in core markets in Saskatchewan, the introduction of the new services authorized in this decision will not alter that core market status.

Ownership and Financial Background

All of the applicants demonstrated access to sufficient funding to fulfill their commitments and to cover any unexpected capital expense, operating cost or revenue shortfall. In each case, the proposed financial investment was well supported by the resources of a successful Canadian broadcasting group.

Saskwest is a wholly owned subsdiary of Canwest Broadcasting Ltd. (Canwest), which company is the licensee of CKND-TV Winnipeg and CKND-TV-2 Minnedosa. Canwest also holds an indirect position of negative control in Global Communications Ltd., the licensee of six television stations serving Southern Ontario. Canwest is ultimately controlled by Mr. I.H. Asper of Winnipeg, who also has an indirect minority share interest in, and loan arrangements with, Western Approaches Limited, the licensee of CKVU-TV Vancouver.

Allarcom is the licensee of CITV-TV Edmonton and is ultimately controlled by Dr. C. Allard of Edmonton. Allarcom also holds a 73% interest in Allarcom Pay Television Ltd., 8% of CANCOM, and 9% of Western Approaches Limited. Harvard is the licensee of Regina broadcasting undertakings CKCK-TV, CKRM and CFMQFM, as well as CKMJ-TV Marquis and CKMC-TV Swift Current, Saskatchewan; Harvard is ultimately controlled by Mr. F.W. Hill of Regina.

In the view of several interveners, the above-described relationships between the applicants and other Canadian broadcasting enterprises raises a number of issues. Some concern was expressed about the expanded media influence that approval of either the Allarcom or Saskwest applications would give their principals. Other interveners were particularly concerned by the degree of media concentration that would result in Regina should the application involving Harvard's participation be approved.

With respect to Saskwest, various interveners and the competing applicants expressed concern that, given certain loan arrangements between Canwest and Western Approaches Limited and Canwest's association with Global Communications Ltd., approval of Saskwest's applications might constitute a major step towards the creation of a third national network which would have an unfair competitive advantage over existing services across the country.

Saskwest addressed this concern by stressing the fact that Canwest does not control Global. With respect to CKVU-TV and the loan arrangements referred to above, the applicant argued that it would be "entirely hypothetical" to assume that the Vancouver station, an essential link in any third national network, would ever come under Canwest ownership. Saskwest also emphasized that its proposals are for two autonomous and independent stations at Regina and Saskatoon:

 There really is, beyond that, no further connection with any network proposals... I can assure you that we will be as autonomous in these two stations here as we are, and have been for ten years, at CKND in Winnipeg. Even though there are associations and financial associations as well, between ourselves and Global, there is no formal affiliation, no control ... we retain very jealously our autonomy at CKND. We are truly an independent station.

The Commission notes, and expects Saskwest to fulfill its important commitment to operate the Regina and Saskatoon stations as fully independent undertakings.

At the hearing, the Commission questioned Saskwest concerning the steps it would take to provide for local participation in its ownership and management. In this regard, the Commission notes the applicant's commitment to name a minimum of four individuals, two from the Regina area and two from Saskatoon, to sit on the company's board of directors. The applicant indicated that these individuals would be selected, not necessarily on the basis of their business or broadcasting experience, but from among representatives of the community as a whole and the diverse elements within it, and that they would be encouraged to provide advice and an important local perspective on the operation of the two stations.

Saskwest also stated its intention to invite equity participation in its ownership by Saskatchewan residents through future offerings of voting shares representing up to 49% of the company, depending on factors such as the extent of investor interest:

 We regard, and will comply with the principle that third service is essentially local service and a component of quality local service means local ownership involvement. And we intend to live by that.

The applicant stated that it would make the proposed share offerings as attractive as possible to Saskatchewan residents and expressed confidence, based on expressions of interest already received, that no difficulty would be encountered in attracting local equity participation. The Commission will follow the applicant's implementation of these plans with interest.

Programming

All three applicants presented plans for a complementary and unduplicated mix of Canadian and foreign programming. The Commission considers, however, that in terms of the quality and quantity of the proposed local programming, the financial resources to be allocated to its production, and the overall relevance of the proposed programming services to Saskatchewan viewers, Saskwest's applications are clearly superior to the proposals submitted by the other applicants and that they will offer a truly alternative program schedule to viewers.

Saskwest will provide 23 hours 30 minutes per week of local programs consisting of 15 hours of stand-alone production by each station, 3 hours of programs co-produced by the two stations, and 5 hours 30 minutes of tri-productions financed and produced by the stations in association with CKND-TV Winnipeg. In addition, each of the new stations will offer 51 hours 30 minutes per week of other new Canadian programming and 91 hours per week of foreign programs not currently broadcast by other licensees in Regina and Saskatoon.

Although the number of hours of local programming proposed by Saskwest, exclusive of repeats, is substantially greater than that proposed by the other applicants, the Commission considers the 23 hours 30 minutes to be an appropriate level, fully consistent with the role and mandate of a third service to provide adequate amounts of relevant alternative local programming. It is also a competitive and realistic level, well within the resources and abilities of the applicant to achieve, and comparable with the levels of local production maintained by other independent stations across Canada.

Saskwest will establish separate studio and production facilities in Regina and Saskatoon, each of which will be staffed and equipped to accommodate the local production proposed for each centre. Further, Saskwest will purchase a fully-equipped mobile facility which will be allocated to the Saskatoon station; the applicant indicated that this would be used to provide the same degree of production mobility and responsiveness achieved by CKND-TV Winnipeg within its Manitoba television productions.

The Commission expects Saskwest to adhere to its commitment to ensure that its proposals with respect to program staff levels, the amount and quality of its Canadian programs, and its financial investment in such production, are fully implemented and maintained, regardless of the financial performance of the two stations.

The Commission also notes the assurance given by the applicant with respect to its proposed involvement in tri-productions, that programs such as "Country Rhythms", "Sounds West", "Arts Unlimited", "Man Sask Report", "Rural Route" and "Size Small" will be produced by the Regina, Saskatoon and Winnipeg stations on an equal basis, and that the new stations will not be permitted to develop as mere extensions of CKND-TV with only a minimal involvement in program production.

Consistent with Saskwest's specific program commitments in this regard, and as agreed to by the applicant at the hearing, it is a condition of Saskwest's licences that each of the Regina and Saskatoon stations produce and broadcast a minimum of four specials each year covering such areas as music, the performing arts, ethnic festivals and public affairs, at a minimum direct cost of $30,000 per program.

Similarly, it is a condition of Saskwest's licences that two basic variety series be produced and broadcast during each program season. Each series shall consist of a minimum of 26 programs of 30 minutes duration, produced as tri-productions evenly divided between the Regina, Saskatoon and Winnipeg stations, using the available pool of professional musicians in the provinces of Saskatchewan and Manitoba.

It is a further condition of each licence that a half-hour children's program be broadcast each week, with episodes produced as tri-productions evenly divided between the Regina, Saskatoon and Winnipeg stations.

With regard to the production of new Canadian drama, Saskwest stated that it would continue the "Drama Project" concept developed by CKND-TV Winnipeg, making use of the facilities of the Regina and Saskatoon stations for the production of Saskatchewan-based drama.

In light of the difficulties in anticipating exact production schedules and financing, the Commission considers that it would be inappropriate to impose any quantitative requirements on the applicant with respect to drama production. It takes note, however, of Saskwest's undertaking to adopt the same approach to this important facet of Canadian production as that taken by Canwest at CKND-TV Winnipeg. The Commission also notes the past success achieved by Canwest, despite the difficulty economic climate, in the production of Canadian content programs and of award-winning drama specials in particular.

In the Commission's view, this success has been largely due to the significant efforts and contributions made by Canwest's ownership and management, led by Messrs. I.H. Asper, Don Brinton and Stan Thomas. Given the involvement by Canwest in the operation of the new stations at Regina and Saskatoon, and its commitments to ensure adherence by Saskwest to each of its program proposals and the conditions noted above, the Commission is satisfied that the new stations will provide attractive, viable and alternative programming services to Saskatchewan viewers, as well as substantial, new and direct benefits to the province's creative community.

Fernand Bélisle Secretary General