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Decision
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Ottawa, 28 September 1989
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Decision CRTC 89-770
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MH Acquisition Inc. on behalf of a company to be incorporated
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(NEWCO CJCA)Edmonton, Alberta - 890223100 - 890224900
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Following a Public Hearing commencing 29 May 1989 in the National Capital Region, the Commission denies the applications for authority to transfer effective control of NEWCO CJCA from MH Acquisition Inc. (MHA) to Westcom Radio Group Ltd. (Westcom Radio).
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NEWCO CJCA, a company to be incorporated, is the prospective licensee of CJCA and CIRK-FM Edmonton pursuant to Decision CRTC 89-766 of today's date which approved the transfer of effective control of various broadcasting undertakings previously owned by Selkirk Communications Limited (Selkirk), and their reorganization under the indirect ownership of MHA. The proposed transfer of control of NEWCO CJCA was to have been effected through the transfer of 100% of its voting shares to Westcom Radio, a wholly-owned subsidiary of WIC Western International Communications Ltd.
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As stated in a number of decisions relating to applications for authority to transfer ownership or effective control of broadcasting undertakings, because the Commission does not solicit such applications, and because there is thus only one proposal presented to the Commission, the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
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In particular, the Commission must be satisfied that the benefits identified by the applicant as flowing from the proposed transaction, both quantifiable and non-quantifiable, are commensurate with the size and nature of the transaction and take into account the responsibilities to be assumed by the applicant, the characteristics and viability of the broadcasting undertakings concerned, and the scale of the programming, management, financial and technical resources available to the applicant.
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According to Westcom Radio, approval of its applications for authority to acquire effective control of the Edmonton radio stations would result in the realization of a number of benefits, including "significant and unequivocal" benefits having a value of $5,383,000 over five years.
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In Public Notice CRTC 1989-109 of today's date, the Commission has issued a policy statement summarizing the types of benefits that, for one reason or another, it has not generally been prepared to accept. The Commission has examined the benefits proposed by Westcom Radio and finds that many of them involve proposed capital expenditures of a type generally considered by the Commission as being part of the normal cost of doing business. Falling into this category would be the applicant's proposals to upgrade the stations' newsroom and control room facilities, to acquire automated switching capacity and to purchase new transmitter and studio transmitter link (STL) facilities.
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In the case of certain other initiatives, specifically Westcom Radio's proposal to establish a news bureau to cover the Alberta Legislature, its plans to improve the technical quality of the signal of CIRK-FM distributed via satellite to cable systems across Canada by Canadian Satellite Communications Inc., and its proposal to rent land lines linking Westcom Radio's existing AM station in Calgary, CHQR, with the Edmonton stations, the Commission is not convinced that these initiatives represent benefits that would be truly incremental, significant or of benefit to any party other than the applicant. For example, coverage of the Alberta Legislature is already provided to listeners of these Edmonton stations through programming produced by Seltech Systems, an operating division of Selkirk.
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After discounting the direct capital and operating costs attached to the initiatives mentioned above, the value of the acceptable quantifiable benefits is only $2,742,000 over five years. The Commission notes that indirect expenditures were also proposed in respect of on-air promotion to be provided to local performing arts organizations, and an undertaking to permit the Alberta Educational Communications Authority to install transmission facilities for its educational radio service on the CIRK-FM broadcast tower at no cost. While acceptable as benefits, these particular items would not involve any cash outlay on the part of the applicant, and are thus considered by the Commission to be unquantifiable benefits.
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Although the remaining quantifiable benefits accepted by the Commission have a relatively large dollar value attached to them, the Commission has consistently emphasized that, in examining transactions of this nature, the quantifiable benefits proposed by an applicant are not assessed with reference to any benchmark or formula. In this case, the Commission is not satisfied that these remaining benefits, taken as a whole, would yield measurable improvements either to the community served by the stations or to the Canadian broadcasting system that are of a magnitude the Commission considers it reasonable to expect in the circumstances, given the important position the applicant occupies in Canada's radio industry, and consequently, the leadership role it should provide.
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In deciding to deny these applications, the Commission has placed particular importance on Westcom Radio's responsibilities as a major radio broadcaster and on its performance in fulfilling these responsibilities. In this regard, the Commission has on more than one occasion expressed serious concern with Westcom Radio's failure to ensure the full compliance of certain of its FM radio stations, in particular CKIS-FM Winnipeg. Although the Commission questioned the applicant at the 29 May 1989 public hearing regarding the specific measures and mechanisms it would put in place to safeguard against future non-compliance, either by the Edmonton stations or by the existing stations under its ownership, the Commission found the applicant's response to be inadequate.
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For all of these reasons, the Commission concluded that it would not be in the best interest of the Canadian broadcasting system to approve these applications by Westcom Radio.
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Fernand Bélisle
Secretary General
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