ARCHIVED -  Decision CRTC 88-436

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Ottawa, 28 June 1988
Decision CRTC 88-436
Quebec City, Quebec -872251400
Following public hearings in Quebec City on 30 November 1987 and 7 March 1988, the Commission approves the application by CFCF Inc. to amend the broadcasting licence of CFAP-TV Quebec City by authorizing it to broadcast local programs and by deleting the existing condition of licence prohibiting CFAP-TV from broadcasting local advertising, the deletion to take effect at such time as the station begins to broadcast local programs as set out below.
The Commission authorized the operation of CFAP-TV on 4 March 1986 (Decision CRTC 86-163) as a full rebroadcaster of CFJP-TV Montreal, which is the mother station of the Réseau de télévision Quatre Saisons. This decision was made subsequent to Decision CRTC 85-733 dated 6 September 1985, in which the Commission, after considering competing applications and analysing in detail the markets involved, authorized the operation of a new French-language television station in Montreal, CFJP-TV, while denying an application for a new television station in Quebec City. The Commission expressed concern about the effects of establishing such a service in Quebec City in view of the significance of the projected local and national advertising revenues. It indicated, however, that it would be prepared to consider an application for a Quebec City rebroadcaster of the Montreal station so long as local advertising was not solicited.
There are five television stations in the greater Quebec City area: CFCM-TV, which is the flagship station of the Réseau Pathonic Inc. and an affiliate of the TVA network; CKMI-TV, an affiliate of the CBC's English-language television network and owned by Réseau Pathonic Inc.; CBVT, a French-language CBC owned and operated station; CIVQ-TV, a Radio-Québec station; and CFAP-TV, the rebroadcaster of CFJP-TV Montreal. Only two of these stations, CFCM-TV and CBVT, currently derive substantial advertising revenues from this market.
Commission policy stipulates that a broadcaster that wishes to benefit from the financial support of a community must be prepared to offer certain services in return, including programs that are locally produced and locally oriented. This policy was reiterated recently in Public Notice CRTC 1988-59 dated 13 April 1988. The Commission assesses this type of application primarily on the basis of two fundamental criteria: the capacity of the market to support an additional drain on local advertising revenues without creating undue hardship for existing broadcasting undertakings, and the relevance of the proposed local programming in relation to the revenues forecast and the range of services available in the particular market.
Capacity of the Market
a) The Applicant's Arguments
The licensee, CFCF Inc., indicated at the hearing that, after a detailed re-assessment of the Quebec City market, it was convinced that the present circumstances were favourable for filing this application. It reported on the conclusions of an impact study it had commissioned from Econotec which attest to the vitality of the Quebec City market in relation to the provincial average on the basis of certain economic indicators that show a more rapid rate of growth between 1973 and 1986 in this region in terms of population and the amount of disposable income and in the growth of retail sales, in comparison with other Canadian markets of similar size such as Winnipeg, Regina, Saskatoon and the National Capital Region.
The Econotec study that was submitted by the applicant also showed that the Quebec City market has untapped television advertising revenues estimated to be worth between $4.9 and $6.7 million. Since the licensee anticipates generating $4.4 million in total advertising revenues in the Quebec City market, over and above what CFAP-TV currently earns as a rebroadcaster, it has concluded (TRANSLATION): "that the arrival of CFAP in the Quebec City market will not unduly affect existing broadcasting services".
The licensee also pointed out that the advertising base in other Canadian markets, notably Toronto and Winnipeg, had expanded with the introduction of new television services, and referred to its own experience with the implementation of CFJP-TV Montreal. It stated that (TRANSLATION): "the arrival of CFAP in Quebec City will help repatriate certain advertising revenues to this market and will also generate new revenues". It further stated that in Montreal during the previous year, (TRANSLATION): "31% of CFJP's local advertisers had never before advertised on French-language television".
Citing another factor that had influenced its decision to apply at this time, the licensee mentioned that a comparative study of total viewing hours in the Quebec City market between the fall of 1986 and the fall of 1987 indicated that after the introduction of CFAP-TV, while the largest impact was felt by the distant Canadian and American stations that are distributed by cable, the four local French-language stations, including the private station CFCM-TV, had increased their overall share of viewing hours from 72% to 82%.
b) The Interveners' Position
At the hearings in November 1987 and March 1988, Réseau Pathonic Inc., (Pathonic) intervened in opposition to this application. It stated that approval of this application could jeopardize the survival of [TRANSLATION]: "regional television production, which the Pathonic network considers important and which characterizes its operation", through an excessive centralization of production in Montreal by the major networks, leaving only a minimal amount of production in the regions, consisting mainly of news and information programming. In terms of the Quebec City market in particular, Pathonic claimed that approval of this application would create unfair competition for CFCM-TV since [TRANSLATION]: "a further six and one-half hours a week of programming in the Quebec City market ... would not offer anything new or essential to the public; ... on the contrary, the insidious result would be to reduce Pathonic's capacity to maintain the highly demanding pace of its local production". The intervener also stated that its national and network advertising revenues had decreased since CFAP-TV went on the air in Quebec City, but that this decrease was offset to some degree by an appreciable increase in its local advertising revenues. Moreover, in a written intervention submitted in opposition to this application, the National Association of Broadcast Employees and Technicians (NABET) also expressed concern with regard to the impact on the equilibrium of the market and of the amount of available advertising revenue.
c) CFCF Inc.'s Response
In its response to the interventions, the licensee stated that the commercials that are broadcast in Montreal are also carried in Quebec City since at present CFAP-TV rebroadcasts the programming of CFJP-TV in its entirety. The licensee described the effect of this situation on Quebec City television broadcasters, particularly in terms of selective national advertising sales (TRANSLATION):
The advertising messages broadcast in Montreal are also broadcast in Quebec City. This can sometimes be annoying for our Quebec City viewers but it is even more annoying for Montreal and Quebec City broadcasters when the effect on the advertising market is taken into consideration....
When we agree ... to charge only for the Montreal market, our Quebec City competitors suffer since the advertiser's message is broadcast in that city in any case and, in this way, the advertiser achieves rating points in this market for free...
Under these circumstances, the other television stations in Quebec City don't even have the opportunity to make a presentation to obtain this advertising revenue because the advertisers automatically receive it as a bonus when they buy advertising time in Montreal.
Emphasizing that Pathonic had advanced this argument in its interventions at the November 1987 and March 1988 hearings and that it claimed to have suffered its greatest losses in selective national advertising, CFCF Inc. added (TRANSLATION): "One could therefore conclude that while the presence of a rebroadcaster in Quebec City has had a negative impact on Pathonic's revenues in this market, the establishment of our local station in Quebec City would offset this". In conclusion, CFCF Inc. stated that, having heard all of the information presented at the hearing, it believed that it had demonstrated that Pathonic would not be seriously affected by the establishment of a local station in Quebec City and that Pathonic ought to be able to honour its programming commitments.
a) The Applicant's Proposal
CFCF Inc. initially proposed to increase gradually each year its weekly level of local production in Quebec City over a five year period, starting with 6 hours 30 minutes in 1988/89 and increasing to 11 hours 50 minutes in 1992/93. Following discussions at the hearing in March 1988 as to the adequacy of this application given the revenues CFCF Inc. projected to derive from the market, the licensee improved upon its proposal. It now intends to broadcast 6 hours 30 minutes of local production each week starting in the spring of 1989, increasing that figure to 8 hours 50 minutes by September 1989, and to a minimum of 12 hours per week the next year, specifically in September 1990.
The licensee's new commitments indicate that the local productions to be broadcast by CFAP-TV in the spring of 1989 will consist of a daily ten-minute late-afternoon newscast, to be extended to 30 minutes in September 1989; a ten-minute weekday evening newscast; a one-hour weekly public affairs program on the National Assembly to be produced in Quebec City and broadcast on the Quatre Saisons network; a 30-minute weekly program promoting young talent; a weekday half-hour magazine program, which is to increase to one hour in length in September 1990, consisting of local news items and practical advice; a weekly half-hour program on local artistic and cultural activities; and, finally, a weekly half-hour sports magazine beginning in September 1990.
b) The Interveners' Position
Pathonic estimated that the applicant's programming proposals would not bring anything new or essential to Quebec City, while NABET sought assurances that the proposed programming would be complementary and comparable in quality to that presently available in the market. The Association des réalisateurs de Télé-Capitale et al, while not objecting to the introduction of a new station in Quebec City, expressed concern in its intervention about the degree of complementarity of the proposed programming and stressed the importance of assessing its relevance to regional needs and interests.
For its part, the Union des artistes submitted a written intervention in support of the application, in view of the stimulating effect it would have on local production capacity in Quebec City and on the participation of the local artistic community, while the Quebec City chapter of the Association féminine d'éducation et d'action sociale (AFEAS) also appeared at the public hearing to voice its observations and concerns about the local content of the programming and about sex-role stereotyping and violence on television.
c) CFCF Inc.'s Response
In order to demonstrate the degree of complementarity of CFAP-TV's local programming in relation to the range of television services currently available in the Quebec City market, the licensee emphasized that at the present time there are no programs devoted to practical advice or to cultural activities in the Quebec City region, and that the youth talent program which will be targeted specifically to people between the ages of seven and seventeen will not be limited exclusively to musical talent. As for its news and public affairs programs, they will not be broadcast at the same times as similar programs on existing stations and they will reflect the distinctive philosophy and style of Quatre Saisons which has a policy of being on the scene as much as possible, being present as events unfold and focusing on news of a very local nature and on human interest stories.
In summarizing at the March 1988 public hearing the benefits of its proposal as indicated in its initial five-year forecasts, the licensee stressed its substantial contribution to the economic development of Quebec City through its proposed investment of $52 million over five years, including $20 million for local programming, the establishment of a new production team in Quebec City which will result in the creation of 114 permanent jobs over the five-year period including 70 jobs in the first year, and the new opportunities that will open up for local performers and support staff. Among other benefits mentioned by the applicant are an increase in the sources of information and a diversification of local programming in Quebec City, complete closed captioning of the late-afternoon newscast from the outset, new opportunities for network productions in co-operation with affiliated stations such as the proposed program for young performers which is to include a province-wide contest and, finally, the possibility of extending the Quatre Saisons network into the eastern part of the province.
With regard to the possibility of the independent production sector participating in CFAP-TV's programming, the licensee stated that it was not in a position to make specific commitments at the present time, but that it intends to follow the same basic process as it does in Montreal and that it would do all it could to promote this type of collaboration as facilities are developed in the Quebec City area.
In assessing this application, the Commission's primary concern has been to examine the development of the television advertising market since 1985 and to attempt to discern the trends. During the fall of 1987, the Commission discussed this issue with a number of licensees in Canada's anglophone markets. Despite the fact that a significant number of new private television stations have been granted licences in recent years, the licensees of these stations stated unanimously that there has been a very substantial increase in both local and national advertising revenues during the fall of 1987. In the province of Quebec, despite the arrival of Quatre Saisons, overall local and national advertising revenues among all private television stations have increased by 8% during the year ending 31 August 1987, while the advertising revenues of the CBC have also increased substantially over the same period.
When asked at the hearing about the growth of CFJP-TV's revenues during the first quarter of 1987/88, and that of CFCF-TV Montreal, CFCF Inc. indicated that trends were favourable and similar to those in anglophone markets.
However, despite certain positive economic indicators, as mentioned by CFCF Inc., the trend in the Quebec City market appears to be different than in other areas, in that there was no overall increase in advertising revenues in the electronic media measured in constant dollars during the 1984 to 1987 period. However, when expressed in terms of current dollars, this situation would seem to be attributable mainly to the performance of CFCM-TV. Indeed, according to the information available to the Commission, while the total advertising revenues of Quebec City's radio stations and of the CBC television station CBVT increased over the same period when measured in current dollars by more than 30%, CFCM-TV's advertising revenues declined by 7%.
In its discussions with Pathonic at the March 1988 hearing, the Commission sought to ascertain all of the factors that could have contributed to the present situation and to assess CFCM-TV's ability to withstand increased competition for the foreseeable future. As mentioned by Pathonic at the hearing, when it acquired CFCM-TV in 1984 the station's finances were very precarious and its audience ratings were in rapid decline. For this reason, since 1985 it has had to expend considerable efforts to get the station back on its feet. These efforts appear to have been successful as, according to Pathonic, its audience ratings increased by 34% between 1984 and 1987. Further, contrary to Pathonic's projections in respect of local advertising revenue which indicated that there was no possibility of an increase in this area, a gain of 22% was realized between 1985 and 1986. According to the information provided by the intervener for 1987 and its statements at the hearing concerning the first quarter of 1987/88, this stability in the local market seems to have been maintained.
This strong competitive showing by Pathonic at the local level was borne out in the BBM ratings for the fall of 1987 as compared with the fall of 1986. While CFAP-TV's audience share rose from 5% to 17%, CFCM-TV succeeded in increasing its share of the Quebec City audience from 37% to 39%. Further, the Commission notes that, in terms of audience share, CFCM-TV is among the most successful television stations in the ten largest Canadian markets.
The Commission also notes Pathonic's statement that there are other factors that could explain the decline in its national selective advertising revenues in recent years and that it had taken concrete measures to counter this trend, particularly by opening its own national advertising sales office in Toronto.
In view of all of the economic indicators that have been described in this decision on the one hand and, on the other, the quantity, nature and complementarity in terms of scheduling of the proposed local programming, which represent significant improvements over what was initially proposed, the Commission has decided to approve the application to amend the licence for CFAP-TV by authorizing it to broadcast local productions in Quebec City. The existing condition of licence prohibiting the broadcasting of local advertising by CFAP-TV will remain in effect until such time as the station commences broadcasting the 6 hours 30 minutes of original local production to which it is committed.
The Commission points out that there are at present only two local television services in Quebec City and it considers that the addition of this new source of local programming will significantly increase the availability of programs reflecting local interests, contribute to program diversity, permit the development of local, particularly musical, talent and offer an important forum for the discussion of matters of public interest to residents of the city and the region, to the great benefit of Quebec City viewers.
The Commission intends to review the licensee's efforts in this regard at the time of the renewal of CFAP-TV's licence which expires 31 March 1990, and it expects that the licensee will by then be in a position to propose further increases in its local programming. The Commission also notes that the licence of CFCM-TV expires 30 September 1990, which will permit it to assess the situation of the entire market at the same time.
Fernand Bélisle
Secretary General

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