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Decision
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Ottawa, 8 April 1988
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Decision CRTC 88-276
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Sunwapta Broadcasting Ltd.
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Edmonton, Crimson Lake, Rocky Mountain House, Slave Lake, Grouard Mission, Grande Prairie, Peace River, Whitecourt, Ashmont, Lac La Biche, Red Deer and Lougheed, Alberta - 873595300 - 873596100 - 873594600 - 873644900 - 873642300 - 873643100
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Following a Public Hearing in Edmonton on 16 February 1988, the Commission approves applications for authority to transfer effective control of Sunwapta Broadcasting Ltd. (Sunwapta), licensee of CFRN, CKXM-FM, CFRN-TV Edmonton, Alberta, 11 rebroadcasters of CFRN-TV, and of a radio network for the purpose of broadcasting certain home hockey games of the Edmonton Oilers: (a) to 373896 Alberta Ltd., a wholly owned subsidiary of CAP Communications Limited (CAP), through the transfer of 27,375 Class "A" and 1,875 Class "B" common voting shares of Sunwapta (i.e., all of Sunwapta's shares) from 364664 Alberta Ltd. to 373896 Alberta Ltd.; and then (b) to CAP through the amalgamation of Sunwapta and 373896 Alberta Ltd.
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CAP advised the Commission that the amalgamation of Sunwapta and 373896 Alberta Ltd. is to occur immediately following the transfer of shares, and will result in cancellation of the shares of Sunwapta then owned by 373896 Alberta Ltd., and in the share(s) of 373896 Alberta Ltd. owned by CAP becoming the share(s) of Sunwapta. Accordingly, as a result of these transactions, Sunwapta will be a wholly owned subsidiary of and be controlled by CAP.
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The Commission notes that the licence for CFRN will expire 31 March 1989, the licences for CFRN-TV and its rebroadcasters will expire 31 August 1989, and the licence for CKXM-FM will expire 30 September 1990. The radio network licence will expire at the end of the 1987/88 hockey season.
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PARTIES TO THE TRANSACTION
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364664 Alberta Limited, which holds all the shares of Sunwapta, is controlled by Dr. G.R.A. Rice of Edmonton.
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Dr. Rice has had a distinguished history in Canada's broadcasting industry. He has been involved in broadcasting in Edmonton since 1922, placing him amongst the earliest pioneers in Canadian broadcasting. He has been an owner of CFRN radio since 1934, and of CKXM-FM since 1948. Sunwapta has provided television service to northern Alberta since 1954.
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Both Sunwapta and Dr. Rice have won a number of awards over the past 54 years, including several Gold Ribbon awards from the Canadian Association of Broadcasters (CAB) in radio and television categories. Under Dr. Rice's leadership, Sunwapta has established a reputation of public service and involvement in the local community.
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CAP is the licensee of CKKW, CFCA-FM CKCO-TV Kitchener, Ontario and 3 rebroadcasters of CKCO-TV. CAP is indirectly effectively controlled by Mr. J.A. Pollock.
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Sunwapta and CAP are both shareholders of the CTV Television Network Ltd. and both CFRN-TV and CKCO-TV are affiliates of the CTV Television Network.
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BENEFITS
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Over the years, the Commission has developed general policy guidelines for dealing with applications involving transfers of the ownership or effective control of broadcasting undertakings. Under these guidelines, the first test an applicant must meet is to demonstrate that the proposed transaction will yield significant and unequivocal benefits to the communities served by the broadcasting undertakings in question and to the Canadian broadcasting system as a whole. In considering an ownership transfer of this magnitude, the Commission carefully assesses not only those benefits that can be quantified in monetary terms, but also those that are not easily measurable in terms of their dollar value, in order to determine the overall significance of these benefits and to ensure that approval is in the public interest.
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At the hearing, CAP listed the following as significant unquantifiable benefits associated with its purchase of Sunwapta:
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... the opportunity for Edmonton talent to be exposed both here and in the east; the opportunity for a stronger position within the CTV Network; the opportunity for the management of [Sunwapta] to have the exposure to a larger corporation than has been the case; the opportunity for an interchange of programming between east and west or west and east, as you will, and it will be both ways.
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CAP's commitments in respect of the transactions approved in this decision, the non-quantifiable benefits listed above, as well as the quantifiable benefits arising from the transactions are addressed in greater detail below.
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Commitments and Benefits in Respect of CFRN and CKXM-FM
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CAP has pledged to provide each radio station with a computer and a related software program at a total cost of $20,000 to aid in programming music. An additional $20,000 will be spent on the acquisition of new compact disc equipment for both stations and there will be incremental budgets to expand a new compact disc library.
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News on CFRN will increase from 6 hours to 7.5 hours per week which will involve the lengthening of newscasts and additional weekend news coverage.
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CKXM-FM will take part in a new industry initiative in co-operation with CKUA (ACCESS Alberta) "to enable Alberta's musical talent to be recorded specifically for broadcast use in our province". The station has already had discussions with ACCESS Alberta and has agreed "to participate both in providing seed money and above all in broadcasting the music". CAP informed the Commission that this new program of encouragement for artists has the support of the Alberta recording industry and could lead to FACTOR grants for emerging talent. The Commission expects CKXM-FM to file a report within six months of the date of this decision outlining precise details of its participation in this project.
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CAP also intends to extend the coverage of the CKXM-FM service by constructing two new FM rebroadcasters at a total cost of half a million dollars. The Commission is not, however, in a position to consider CAP's plans in this respect as a quantifiable benefit in regard to the present applications since such rebroadcasters would require regulatory approval following a future public process.
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The Commission notes that plans are underway and money has already been allocated by Sunwapta for the construction of a new radio building for CFRN and CKXM-FM which will be built on the current property adjacent to CFRN-TV's television operation. However, since such construction had been planned by Sunwapta and the investment money earmarked and set aside by the present owner, the Commission is also unable to consider this initiative as a quantifiable benefit arising from these transactions.
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Commitments and Benefits in Respect of CFRN-TV
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CFRN-TV has extended its television service throughout a large portion of central and northern Alberta through rebroadcasting stations located in Grande Prairie, Peace River, Whitecourt, Ashmont, Lac La Biche, Red Deer, Lougheed, Crimson Lake, Rocky Mountain House, Grouard Mission and Slave Lake.
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In order to extend CFRN-TV's coverage to an additional 50,000 people in northern Alberta and to improve the reception of CFRN-TV's signal in a number of rural areas which now receive a less than satisfactory signal over-the-air, CAP has pledged to invest $1 million over the next five years for the construction of six additional television rebroadcasters. According to CAP's plan, these rebroadcasting transmitters will be located at Grande Centre, Plamondon, Edson, Hinton, Jasper, and Athabasca. While regulatory consideration of this plan would also require a separate public process with the result that it cannot be regarded as a quantifiable benefit in respect of the present transactions, the Commission has noted CAP's statement at the hearing that "the commitment is made financially" in terms of the proposed rebroadcasters, and that it would file applications with the Commission "in a most timely manner". According to CAP, if the Commission were to approve this extension of the service, approximately 60% of all Albertans would be able to receive the CFRN-TV signal.
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In addition to constructing new rebroadcasting transmitters, CAP intends to modify all of its Alberta television transmitters within the next five years in order that they may be capable of broadcasting a stereo audio signal, as is already the case with the main CFRN-TV transmitter. At the time of the hearing, however, CAP was unable to provide an estimate of the cost of this project. The Commission expects the licensee to submit to the Commission details of its plans to convert the television rebroadcasters to stereo audio, including cost and time estimates, y 1 August 1988.
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To link the new rebroadcasters, to enable separate news feeds as described below, and to improve the signal quality of existing transmitters, CAP intends to build new and extended microwave systems at a cost of at least $1.25 million over five years. In the first year, it will install systems linking Edmonton and Smoky Lake and Ashmont and Grande Centre, while systems along the following routes will be installed in subsequent years: Edmonton-Ponoka; Whitecourt-Hinton; Smoky Lake-Lac La Biche; Boyle-Athabasca-Slave Lake. Apart from the Ashmont-Grande Centre and Whitecourt-Hinton microwave systems which are dependent on the contemplated Edson, Hinton and Grande Centre rebroadcasters, CAP is committed to building these systems regardless of whether or not it receives regulatory approval for its planned rebroadcasters. Accordingly, the Commission considers that $950,000 out of the $1.25 million committed to be spent on these particular microwave systems, constitutes a quantifiable benefit of these transactions.
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A number of years ago, CAP took advantage of its microwave system which feeds its rebroadcasters in Ontario and began providing separate news feeds from its Kitchener television station, CKCO-TV, to specific portions of its service area in order to serve the regional requirements of its audience. At the hearing, CAP cited as a major benefit arising from these transactions its commitment to provide, in a similar manner, three separate daily local news reports to several of the Alberta communities served by CFRN-TV through its extended microwave facilities, its current and additional rebroadcasters and "our new on-site production capability". This initiative represents operational expenditures of $790,000 and capital expenditures of $215,000 for a total of about $1 million over five years. In 1988/89, CAP will apply a portion of these funds to develop a local news service for the communities to the north of Edmonton up to Peace River. In the following year it will introduce two further local news services: one for Ashmont, Lac La Biche and other areas to the northeast of Edmonton; the other for Red Deer and adjacent areas to the south.
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Initially, each region will be split-fed a daily five- to ten-minute report via one-way microwave, consisting of local news, weather and sports, for insertion in CFRN-TV's regular suppertime or late evening newscasts. At the hearing, CAP indicated that it was considering the eventual inclusion of such inserts in both those newscasts, as is presently the case at its Kitchener station, CKCO-TV. The local inserts will eventually be extended to 10 to 15 minutes in duration.
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CAP intends to hire five additional news correspondants in the first year in order to provide coverage of local events in the communities to be served with the initial split-feed newscast. More correspondents will be hired in subsequent years. Moreover, while its commitment at this time is to provide a one-way microwave link, CAP informed the Commission that it is considering installing a two-way system as it has done in Ontario, the purpose of which would be
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to bring...news back from Peace River, Bonnyville, wherever, so that timely up-to-date news can be provided back to that community that represents what's going on in that area on that day, as opposed to one or two days later, based on bus transportation, or whatever other transportation is required.
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The Commission considers that such a two-way microwave system would be a valuable development and, accordingly, expects the licensee to submit to the Commission a detailed report on its plans to install a two-way microwave capability to enhance the operation of its split-feed newscasts, including cost and time estimates, y 1 August 1988.
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Once this initiative is operational, CAP intends to sell local advertising within the news inserts. CAP stated, however, that "the only time that [local advertising] would be sold in the outlying areas would be the time surrounding the programming that was dedicated to those areas". CAP reaffirmed this point in response to an intervention submitted on behalf of CIZZ-FM Red Deer which expressed concern about the impact that CAP's plans to solicit local advertising would have on the advertising revenues of existing broadcasting services in central Alberta. Furthermore, CAP stated that it does not propose to offer separate commercials for two years, and that, even then, it would initially only be in a position to sell about two minutes of local advertising within each of its news inserts, rising to a maximum of four minutes when commercial sales are fully developed.
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Consistent with the Commission's longstanding policy with regard to the sale of local advertising in areas served by television rebroadcasters, the Commission expects that local advertising solicited within the areas to be served by CFRN-TV's proposed split-feed newscasts will be broadcast only within such newscasts, and not during the surrounding periods or at any other time. At the time of CFRN-TV's licence renewal, the Commission may wish to impose this expectation as a condition of the next licence.
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As another benefit arising from these transactions, CAP proposes to computerize its news department at a cost of $400,000. According to CAP, "our commitment to computerized news management and storage is essential to the implementation of our new regional news feeds, and will provide improved service to all television and radio audiences".
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An additional service that will be made possible by the new computerized system will be the closed captioning of local programming. Beginning in 1989, CAP is committed to providing a complete closed-captioned local newscast each day for the hearing-impaired, and has allocated an operating budget of $150,000 over five years for this purpose. Closed captioning has been restricted to network or acquired programs on most stations, and the Commission commends CAP for this important public service.
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In terms of program enhancement, CAP has pledged to spend over the next five years, in addition to the funds committed to the proposed split-feed newscasts and to closed captioning, a further $952,000 beyond CFRN-TV's existing programming budget. CAP identified three specific areas of programming to which this additional sum will be allocated between 1988 and 1993: $370,000 for the production of an additional annual Edmonton Symphony Holiday Parade of Pops Special, $372,000 for a new weekly program devoted to business matters, and $210,000 for a new children's program series.
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According to CAP, its Canadian productions on CFRN-TV will benefit from the sharing of costs and the exchange of program segments or entire programs with its Kitchener station, CKCO-TV. In particular, there will be an on-going two-way exchange of individual items between CFRN-TV's business program and a similar program on CKCO-TV, as well as an annual exchange of CFRN-TV's Edmonton Symphony holiday special and a seasonal special on CKCO-TV involving the Kitchener-Waterloo Symphony orchestra. CAP also pointed out that, by combining the resources of CFRN-TV and CKCO-TV, it will be in a position to develop new programs that "are going to be better financed and, therefore have a better opportunity to get themselves on the CTV network". The Commission considers the opportunity for the exposure of Alberta creative talent in Ontario, and vice versa, and the heightened opportunity for national exposure of such talent on the CTV network, to be clear benefits arising from these transactions.
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In total, according to CAP, the additional funds it has committed over the next five years for split-feed newscasts, closed captioning and new programs amount to $1.892 million in program benefits over and above any funds already committed in Sunwapta's existing operational budget. The Commision notes, however, that after taking into account the annual inflation factor which CAP had applied in preparing its five-year projections, and using 1987/88 as the base year for future projections, as was accepted by CAP at the hearing, the real value of these benefits amounts to a figure substantially less than $1.892 million.
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Since CAP was not aware of the exact level of Sunwapta's expenditures in programming, but still committed $1.892 million in additional funds, the Commission expects CAP to spend no less than $1.892 million in additional funds over five years on the programming initiatives outlined above, or on other new local programs, should it so choose, after the annual inflation factor is added to the actual expenditures made by Sunwapta in 1987/88. At the time of CFRN-TV's licence renewal, the Commission may wish to impose this expectation as a condition of licence.
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At that time the Commission will wish to review with the licensee its specific plans for these additional funds for each of the broadcast years from 1988/89 to 1992/93. At the same time, the Commission will also wish to review with the licensee its weekly commitments concerning the amount and nature of local production to be broadcast on CFRN-TV.
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On the basis that CFRN-TV's growth "in size and program commitments both through its current efforts and the additions outlined in this application ... dictates the need for additional space", CAP is committed to spending $1.6 million to renovate its television building. These renovations, which will be facilitated as a result of the relocation of CFRN/ CKXM-FM's radio operations to a new building, are intended to improve the quality of the working facilities at CFRN-TV and thus "improve the on-air product".
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Benefits to CAP
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In terms of benefits flowing to its own company out of this transaction, CAP stated that it "will become a larger unit better able to meet today's competitive pressures and to offer greater opportunities to the staff." CAP also offered that it will be able to develop and take advantage of a larger pool of qualified personnel and to share information and expertise in order to deal with the changing broadcasting environment. It will also try to take advantage of opportunities for joint buying.
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IMPACT ON THE CTV TELEVISION NETWORK
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Under the current CTV ownership arrangements, each of the eleven different owners has an equal share of the network and one vote on the Board of Directors. Approval of these transactions, together with today's approval of the application by Nation's Capital Television Incorporated to acquire the assets of CJOH-TV Ottawa (Decision CRTC 88-275), reduces the number of owners by two. In other words, approval of this transaction will not alter the existing ownership structure of the CTV Network, nor will it increase CAP's voting strength.
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According to CAP, the combination of CFRN-TV and CKCO-TV will serve to strengthen the CTV Network by permitting representation on the network's Board "which reflects a national view of decisions and which carries the weight of a larger entity". In this respect, CAP stated at the hearing that
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... the opportunity to have a more significant voice as a percentage of the total network is a positive thing, inasmuch as to be heard ... there has to be a level of equal clout, the stick one holds has to be somewhat the same.
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Noting that Sunwapta has been an active participant in CTV allows, CAP stated, that "the ongoing operations will continue to provide a vigourous western voice within the network."
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The Commission considers that a strong CTV Television Network is an essential element in the Canadian broadcasting system. The role that the CTV network should play in the broadcasting environment of the next five years is clearly set out in Decision CRTC 87-200 dated 24 March 1987 which renewed CTV's network licence.
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The Commission is confident that approval of these applications will not materially affect the present ownership structure of the CTV network or regional involvement, production and participation in the network. Any significant change in the ownership structure of CTV would, of course, require approval by the Commission.
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CONCLUSION
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In arriving at its decision, the Commission, in addition to assessing the benefits arising from these transactions, has taken into consideration the support for the transactions expressed in the interventions received, and has also considered the fact that five of the seven members on the new Board of Directors will be from Edmonton or elsewhere in northern Alberta, thereby ensuring a high degree of local, western participation in the direction of the stations. Because of the community involvement which has characterized Sunwapta's operation, the Commission has also taken note of the fact that Dr. Rice will continue to be involved with the Edmonton stations as Chairman of the new Board and that it is CAP's intention "to maintain the high level of commitment and service to this community that [Dr. Rice] has established during the past 54 years at Sunwapta". Moreover, continuity of direction will be assured by the retention of current management.
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Based on its assessment of these applications, and given the commitment by CAP to continue to operate under the community-oriented philosophy of Sunwapta and to improve the operations of Sunwapta's licensed undertakings, the Commission is satisfied that approval of these transactions will yield significant benefits to the broadcasting stations involved, the communities they serve and to the Canadian broadcasting system as a whole, and that it is in the public interest.
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The Commission has taken particular note of the fact that CAP's commitments, both with respect to capital investments and programming, are firm commitments that are not dependent upon the realization of the projections that were filed with the applications and that, if a lesser amount of money is required or any of its plans cannot be realized as expected, CAP has committed to spend the funds on other initiatives. The Commission expects the licensee to honour this important commitment.
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The Commission recognizes that because CAP's commitments will be executed over five years, most of the initiatives, particularly in respect of CFRN-TV, will be undertaken during the next term of licence. At the same time, however, the Commission wishes to point out that it expects any commitments offered by the licensees of the Edmonton and Kitchener broadcasting undertakings in support of future licence renewal applications to be in addition to the commitments by CAP which have formed the basis for the Commission's approval of these transactions.
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Fernand Bélisle
Secretary General
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