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Decision
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Ottawa, 9 July 1990
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Decision CRTC 90-631
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Pathonic Network Inc.
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Pathonic Communications Inc.Télé-Métropole Inc.Montréal, Québec, Rimouski, Gaspé-Nord, Sherbrooke and Trois-Rivières, Quebec - 900066200 - 900065400 - 900067000 - 900068800 - 900069600 - 900070400
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Following a Public Hearing in the National Capital Region beginning on 24 April 1990, the Commission approves, by majority decision, the applications for authority to transfer effective control of Pathonic Network Inc. (Pathonic), licensee of CFCM-TV and CKMI-TV Québec, CFER-TV Rimouski, CFER-TV-2 Gaspé-Nord and the Pathonic Network, and of its wholly-owned subsidiary, Pathonic Communications Inc., licensee of CHLT-TV Sherbrooke and CHEM-TV Trois-Rivières, through the transfer to Télé-Métropole Inc. (Télé-Métropole) of all outstanding Class B multiple voting shares held by Placements Pathonic Inc. (previously known as 171374 Canada Inc.).
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As a result of a transaction authorized by the Commission on 26 July 1989 (Decision CRTC 89-499), Télé-Métropole held all of the Class A single voting shares in Pathonic, representing 93.4% of the equity, but only 41.5% of the voting rights attached to all issued shares. As a result of the present transaction, Télé-Métropole will hold all outstanding Pathonic Class A and B shares, representing 100% of the voting rights. Since Pathonic holds a 45% interest in Télé-Inter Rives Ltée, which directly or indirectly controls the licensees of the three television stations in Rivière-du-Loup, namely CIMT-TV, CKRT-TV and CFTF-TV, Télé-Métropole will also have an indirect interest in these three stations.
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The purchase price for this transaction is $12 million dollars. Based on the evidence filed with the applications, the Commission has no concerns with regard to the availability or the adequacy of the required financing.
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In Decision CRTC 89-499, the Commission thoroughly analyzed the circumstances and impact of the establishment of closer ties between Pathonic and Télé-Métropole, both in the particular context of the links between the stations affiliated with the TVA network and in the broader context of the French-language broadcasting industry in Quebec. The Commission considered the dominant role played by Télé-Métropole's station CFTM-TV Montreal within the TVA network in the areas of program production and revenue; the significant contribution made by stations controlled by Pathonic with respect to viewing hours and revenue; and the intense competition and limited resources in the Quebec television market. Further, since Télé-Métropole is owned by Le Groupe Vidéotron Ltée (Vidéotron), the Commission also noted the guarantees given by Télé-Métropole and Vidéotron with respect to increased concentration of ownership of broadcasting undertakings in the province of Quebec and the implications of cross-media ownership in the television and cable industries. In approving the first transaction, the Commission reserved the right to reassess all of these issues if it received an application to transfer effective control of Pathonic at some future date, and, in accordance with its normal practice, to assess the proposed benefits relating to the transaction.
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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, and 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 proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
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While pointing out that the foundations for its takeover of Pathonic were laid in the previous transaction, if not with respect to timing, at least with respect to terms and conditions, Télé-Métropole indicated that it was primarily brought on by the operational problems that suddenly developed as a result of its minority shareholder position in the company. In addition to resolving these problems, Télé-Métropole maintained that the present transaction would allow it to achieve its primary goal of placing the second-largest French-language television service on a broader base, similar to those of its three competitors - Radio-Canada, Quatre Saisons and Radio-Québec. In this regard, the company noted: [TRANSLATION] "The calibre of programming broadcast by Télé-Métropole and by the other stations can no longer be supported exclusively by the financial and human resources of the Montreal market." The Commission notes that, as a consequence of today's approval, the proportion of revenues earned by stations controlled by Télé-Métropole within the TVA network will rise from approximately 55% to over 90% of the revenues earned by all TVA network stations, based on 1989 figures.
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Télé-Métropole gave its undertaking that the transaction will not adversely affect the commitments made in respect of its own licences or the conditions of licence of the Pathonic stations, including the commitment that 50 hours of local programming per week from these stations be available to the other stations under the same terms and conditions as currently apply.
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With regard to the Commission's concerns relating to concentration of ownership, Télé-Métropole pointed out that through this transaction it was not acquiring control of a competitor, but rather an affiliated company that already shares the same TVA network news source, and a substantial block of programming. Under the TVA network structure, Télé-Métropole makes its programming available to the nine other stations; this programming currently accounts for between 74% and 90% of their broadcast schedule. In this regard, Télé-Métropole stated at the hearing:
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"We already have complete control over the rest of the schedule. I am excluding there the 50 hours... and local production requirements of each station... so this transaction will not alter that at all."
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With regard to the Commission's concerns about cross-ownership in the broadcast media, Vidéotron reiterated the commitments noted in Decision CRTC 89-499 concerning the distribution by its cable companies of all French-language services authorized by the Commission and the addition of a representative from the cities of Québec and Sherbrooke to the equity and control committee established pursuant to Decision CRTC 87-62, in which the transfer of control of Télé-Métropole to Vidéotron was authorized.
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As part of the present transaction, Télé-Métropole has proposed a number of tangible benefits that are quantifiable in terms of dollar value. These benefits, representing an investment of $6,007,000 over five years, are for various initiatives, some of which were noted in Decision CRTC 89-499, while others reflect new commitments. These benefits focus on news and public affairs programming, and are designed primarily to accomplish the following: improve the local and regional news service of each of the Pathonic stations, provide them with access to Télé-Métropole's computerized reference facilities, take advantage of the potential for interaction to create a province-wide television news system, and significantly enhance the role of CFCM-TV Québec, serving the provincial capital, the second-largest French-language market after Montréal.
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The Commission notes in particular that computer equipment will be installed in the newsrooms of the Pathonic stations to enable each to build up its own data bank of print and video material and to access the other stations' data banks, and that of Télé-Métropole's. The data bank of Télé-Métropole will also be improved through the hiring of additional documentation specialists. This interconnection of the stations will form the basis of a proposed province-wide news and information system, which will provide more regional content in provincial news, following the establishment of a news committee consisting of the stations' news directors and a co-ordinator to be hired to provide daily contact between Télé-Métropole and each of the participating stations.
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Télé-Métropole further stated at the hearing that it would aim to [TRANSLATION] "make Québec a major production centre". In order to accomplish this, it committed to add to CFCM-TV's current production schedule a daily one-hour magazine program to be broadcast province-wide Monday to Friday, focussing on the activities, talent and resources available in Québec and the surrounding area. With regard to news, Télé-Métropole has also proposed that CFCM-TV play a more active role, particularly in the area of provincial news and government affairs, while Télé-Métropole would concentrate on national and international news. The positions of four journalists in Québec will be reassigned to provide this service and one additional journalist will be hired to report on evening and weekend events in Québec.
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The Commission has assessed the benefits package identified by the applicants as flowing from this transaction and, in general, is satisfied that it is significant and unequivocal, commensurate with the size and nature of the transaction, and that it takes into account the responsibilities to be assumed by the purchaser, the characteristics and viability of the broadcasting undertakings concerned, and the scale of the programming, management, financial and technical resources available to Télé-Métropole.
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The Commission has also re-examined the impact of the transaction in the context of recent developments in the Quebec television market. The latest figures indicate that Quebec television undertakings have seen a recent levelling off in their advertising revenues. This is also true for Télé-Métropole, which at the same time has come to face much greater competition and substantially higher programming costs. In the circumstances, the Commission considers that authorizing Télé-Métropole to acquire full control of the Pathonic stations will enable the company to establish the base it needs to fully assume its responsibilities in competition with other French-language television networks, and to have access to sufficient resources to improve the programming of the TVA stations at the local and provincial level.
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The Commission has also taken into consideration the increased concentration of ownership in broadcasting which will result from the approval of this transaction. A majority of the Commission considers that the benefits of the transaction, as outlined in the preceding paragraphs, and the guarantees provided through the control mechanisms that have been put in place, outweigh any potential disadvantage that might result from the increased concentration of ownership of broadcasting undertakings in Quebec. Having considered all of the above, the Commission has determined that approval of these applications is in the public interest.
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The Commission expects Télé-Métropole to ensure that all of the proposed expenditures of $6,007,000 included in the benefits package are made in accordance with the schedule outlined in the applications.
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The Commission has taken into consideration the ten interventions filed in respect of the applications, five of which were in support; five others raised concerns, although they did not formally oppose the applications. The Commission considers that the commitments contained in the applications and the statements by Télé-Métropole at the hearing have satisfactorily addressed these concerns.
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Alain-F. Desfossés
Secretary General
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