ARCHIVED -  Public Notice CRTC 1990-20

Public Notice

Ottawa, 16 February 1990

Public Notice CRTC 1990-20

A REVIEW OF THE POLICY FOR FM RADIO

Related documents: Public Announcements dated 19 April 1973, "A Proposal for an FM Radio Policy in the Private Sector"; 20 January 1975, "FM Radio in Canada: A Policy to Ensure a Varied and Comprehensive Radio Service"; 19 July 1976, "Policy regarding the carriage on cable television of FM signals"; 20 April 1979, "Implementation of the FM Policy"; Public Notices CRTC 1983-43 dated 3 March 1983 "A Review of Radio"; CRTC 1986-248 dated 19 September 1986 "Regulations Respecting Radio Broadcasting"; CRTC 1989-30 dated 14 April 1989 "A Plan to Conduct an FM Policy Review".

I.INTRODUCTION

The Commission's FM policy has been in effect for 14 years. In that time it has not been subjected to a comprehensive review. The Commission now considers such a review appropriate in view of the changes that have taken place in the broadcasting and related industries since 1975, and in view of the Commission's goal of streamlining its policies, regulations and administrative practices to retain only those initiatives necessary to attain the objectives set out in the Broadcasting Act.

The purpose of this paper is to provide a context for this review. The first part provides an overview of the current FM policy, including the concerns and objectives that occasioned its development. The second part is a proposal for changes to take FM Radio into the nineties. The Commission intends this proposal to serve as a starting point for discussions at the public hearing which will deal with these issues scheduled for 26 June 1990 in the National Capital Region.

II.HISTORICAL CONTEXT

The Commission's policy initiatives with respect to FM radio began in 1973 with the publication of A Proposal for an FM Radio Policy in the Private Sector.

An extensive public process led to the publication of a comprehensive FM Policy entitled FM Radio in Canada in January 1975. In this document the Commission set out its "basic licensing and regulatory policies relating to FM in the private sector."

Certain revisions to the policy have taken place; at the beginning of Phase 2 of the policy's implementation in 1979, as a result of the 1983 Review of Radio, and in the context of the 1986 Review of the Radio Regulations.

The Commission's FM policy is based primarily on paragraph 3(d) of the Broadcasting Act which sets out a broadcasting policy for Canada. The paragraph states:  the programming provided by the Canadian broadcasting system should be varied and comprehensive and should provide reasonable balanced opportunity for the expression of differing views on matters of public concern, and the programming provided by each broadcaster should be of high standard using predominantly Canadian creative and other resources.

The FM Policy is designed to give effect to three principal objectives set out in the above paragraph: the development of a varied and comprehensive radio service for Canadians, the development of a radio service of high standard, and the development of a radio service that is predominantly Canadian. The policy also was designed to put into effect a rationale for the licensing of FM stations.

A.Varied and Comprehensive

The Commission in the early 70's thought of FM radio -- then still a relatively new medium -- as a means to expand the diversity of radio programming available to Canadians, providing a type of service that was complementary to rather than merely imitative of the programming already available from AM radio.

1.Spoken Word Content

The Commission in its 1979 policy document Implementation of the FM Policy stated: "it is the Commission's view that an improvement in the quality of broadcasting cannot occur without an increase and an improvement in certain categories of spoken word, particularly those categories which are in scarcity on AM radio." It subsequently stipulated that, depending on the resources available to the particular licensee, between 9% and 12% of the programming broadcast by joint FM stations and at least 6% of the programming broadcast by independent FM stations be from the Enrichment categories. Enrichment includes "research and documentation of current and past events, including sports, instruction and information concerning leisure interests, human interest information and creative uses of language".

Although the percentage guidelines for Enrichment material were removed in 1984, the Commission still expects significant Enrichment commitments from FM licensees.

2.Music Content

The Commission required FM stations to play a wider variety of music from both current and past repertoires of both popular and special interest music, and asked FM stations to make a number of commitments with respect to the weekly use of popular music in accordance with guidelines established by the Commission. These included the maximum number of times any musical selection would be repeated, the ratio of hits to non-hits, the ratio of vocal to instrumental selections, the number of distinct musical selections, the ratio of selections from current, recent and past repertoires, and the language of vocal music selections to be broadcast.

The Promise of Performance also makes provision for licensees to list their plans for programming Traditional and Special Interest music. 3.Station Formats

At the time the FM policy was being developed, AM licensees generally broadcast programming designed to meet the needs of broad general audiences. The Commission was of the view that FM stations should provide programming to audiences with more specific tastes. It therefore defined 13 formats for FM stations: two for spoken-word oriented stations, three for stations basing their programming on Traditional and Special Interest Music, and eight for stations basing their programming on popular music.

The eight popular music-based formats were reduced to four in 1984: Group I -- broadcasting predominantly Pop and Softer Rock music; Group II -- broadcasting predominantly harder rock music; Group III -- broadcasting predominantly Country music; and Group IV broadcasting a variety of popular music genres.

4.Talent

The Commission thought it desirable that FM stations make greater use of people from the community to assist in producing programming in their areas of expertise. The Commission therefore required FM stations to develop plans to use the expertise of local people who were not members of station staff in the production of some of their programming. As well, a policy was implemented requiring each FM station to make available to local community groups at least 30 minutes of commercial-free access time each week, and to advertise its availability. The Commission also wanted FM stations to make an effort to present music by local artists. Therefore, they were also asked to make financial commitments to produce programs of live music and to help develop local musicians and other creative talent.

B.High Standard

One of FM radio's strengths is the high technical quality of its signal. The Commission wished to see this high technical quality complemented by programming of the high standard required by the Broadcasting Act.

1.Form

At the time the FM policy was developed, most AM stations operated formats featuring recorded music that was generally interrupted only for the presentation of commercials, surveillance material or news, a programming form the Commission called the "rolling format". At the same time many FM stations were broadcasting what is often described as background music - a programming form the Commission called the "gramophone format". In its policy, the Commission decided that FM stations should provide an alternative by presenting some programming in more audience-engaging forms, specifically in the "foreground" and "mosaic" formats.

The Commission, having in its 1973 document proposed levels of 25% and 16% respectively for joint and independent FM stations, in 1976 enacted a regulation requiring that at least 20% of the programming of joint FM stations and a minimum of 15% of the programming of independent FM stations be in the foreground format. The minimum foreground levels have since been reduced to 15% for joint stations and 9% for independent FM stations. The 1975 policy stated that the foreground format "is characterized by the presentation of one particular theme, subject, or personality for at least 15 minutes without interruption by unrelated matter except station or program announcements or advertising material". Certain types of magazine programs and live or tape-delayed musical concerts produced by a Canadian now also qualify as foreground.

The Commission also defined the mosaic format for time segments that do not qualify as foreground but contain at least 30 seconds of material from the enrichment category. Commission policy stipulates that the combined weekly level of foreground and mosaic format programming not be less than 50% for joint FM stations and not less than 33% for independent FM stations.

To encourage the inclusion of more in-depth enrichment material in enrichment segments, the policy was amended in 1984 to allow a "double credit" to mosaic segments containing a package of enrichment at least 90 seconds in length or a total of 3 minutes of enrichment and/or spoken word actuality. In 1989 the policy was further amended so that only Canadian enrichment material could be used to qualify a mosaic segment for the double credit.

2.Advertising

The Commission considered that a lower level of commercial content, as well as different scheduling practices, would be appropriate for FM radio. Originally, hourly and six-hourly limits were placed on the number of commercial minutes broadcast by FM stations. The hourly and six-hourly limits have since been eliminated, and both joint and independent FM stations are now allowed to broadcast a maximum of 150 minutes of advertising material per day. As well, advertising material contained in certain high-quality foreground programs (known as Canadian feature segments) are not counted when the Commission assesses a station's compliance with the 150-minute-per-day limit.

C.Canadian Content

Since January 1971, AM stations have been required to ensure that at least 30% of all musical selections broadcast each day qualify as Canadian. Since the Commission expected FM stations to play a wider variety of music, and in some fields, such as jazz and broadway musicals, not many recordings by Canadians were available, it was decided that a weekly 7% Canadian content requirement for Traditional and Special Interest music would be more appropriate. The Canadian content level for popular (Category 5) music was decided in relation to the availability of Canadian music for the format in which each station operated. Currently, FM stations basing their programming on pop and rock music generally must program at least a 20% level of Canadian content each week with respect to the popular music they play. The exceptions to this are Easy Listening and Ethnic stations, which must program a weekly level of at least 10% and 7% Canadian content respectively for popular music. For country music stations, on the other hand, the minimum level is 30%.

D.Licensing Rationale

While most of the elements of the FM policy are based on the objectives outlined in the Broadcasting Act, certain elements derive from the licensing rationale.

1.Joint Ownership

At the time the FM policy was being developed, most FM stations were owned by companies that also controlled AM licences in the same community. The Commission considered that these joint licensees would be allowed the privilege of continuing to control two scarce public frequencies only if they ensured that their FM station added significantly to the diversity of programming available in the community. A number of related measures were therefore implemented.

Joint licensees, because of their additional resources, were required to program higher levels of foreground format programming and higher levels of combined Foreground and Mosaic programming than independent FMs.

Up until 1984, joint FM stations were allowed to broadcast 120 minutes of commercial messages per day; independent FM stations were allowed to broadcast an additional 30 minutes per day in view of the fewer resources available to them. However, this distinction was removed in 1984.

As well, a regulation was passed requiring joint FM stations to broadcast a daily announcement indicating their relationship to the AM station with which they were associated. This requirement was removed when the regulations were revised in 1986.

2.Simulcasting

Even at the time of the development of the FM policy, many FM stations were still simulcasting the programming of their sister AM stations for extended periods. The Commission considered this to be a wasteful use of scarce public frequencies and enacted regulations restricting this practice. Except under rare circumstances, simulcasting continues to be prohibited.

3.The Promise of Performance

To ensure quality, diversity and comprehensiveness, the Commission developed a Promise of Performance form to be used by FM stations to describe their programming plans. A condition of licence required FM licensees to fulfil substantially each section of their Promises of Performance. The Promise of Performance is part of a public document available to members of the public, although since 1986 stations are no longer required to broadcast a weekly announcement to this effect.

III.  CHANGES AFFECTING RADIO BROADCASTING

A.Radio

Since 1976, the number of originating radio stations in Canada has increased significantly (see Annex 1), with the increase reflected in both private commercial and private non-commercial FM, the latter including student, community, educational, institutional and native stations.

There has also been a marked increase in the potential audience for FM: since 1971, the percentage of homes with at least one FM receiver has grown from 58% to 96%.

Audience listening trends also demonstrate the increasing popularity of FM (see Annex 2). In some major centres, such as Montreal and Toronto, FM stations account for more than half of the total radio listening.

The FM sector has also shown strong financial growth since the 1970's, largely at the expense of AM radio (see Annex 3).

FM's strong financial performance relative to AM is also demonstrated by each sector's share of the radio industry's profit before tax (PBT) (see Annex 4).

In 1988, most of the commercial FM stations in Canada were joint FM licensees (see Annex 5). Although independent FM stations have shown a strong financial performance in recent years, joint FMs are largely responsible for the solid financial health of the radio industry. In 1988, joint FM stations generated 73.9% of FM's revenues and 93.6% of FM's profit before interest and tax (PBIT).

The AM industry has experienced a decline in PBIT from $34.2 million in 1982 to $21.2 million in 1988. Independent AM stations' PBIT declined during that time from $10.9 million to $6.3 million. Of the 229 AM stations in small markets, approximately one-third is not profitable.

B.Networking and Syndication

One of the major developments with respect to radio programming in recent years has been the increased availability and use of network and syndicated audio programming. Network and syndicated programming can provide high quality and diverse programming to audiences, while the cost-efficiency of such programming can help improve the financial viability of stations.

C.Music Industry

Canadian content regulations on radio have contributed to a strong interdependence of the domestic radio and recording industries. Prior to the enactment of the Canadian content regulation for AM radio in 1971, it was estimated that a mere three to seven percent of the musical selections broadcast over private radio could be considered Canadian. After the introduction of the regulation, 30% of the musical selections on AM radio were Canadian.

Since the seventies, some significant developments have taken place as a result of initiatives on the part of the broadcasting and recording industries, the Commission and federal and provincial government departments, such as FACTOR, MusicAction and the Department of Communications' Sound Recording Development Program.Furthermore, the Commission in the early 1980's began requiring broadcasters to increase their financial and other support for local and regional artists.

IV. POLICY PROPOSAL

A. The Direction of the Policy

  -- Fundamental Objectives and Key Considerations

The Commission has identified the objectives and key considerations to guide its FM review.

The overall policy enunciated in Section 3 of the Broadcasting Act has not changed and must remain the starting point for the Commission's policy initiatives. The three content-related objectives are:

1. To increase the emphasis on Canadian musical and other creative resources,

2. to maintain and develop diversity, and

3. to maintain and develop high standards.

The key considerations are process-related and indicate the manner in which the objectives should be implemented:

1. To rely on competitive forces rather than regulatory intervention where possible,

2. to effect no changes that would have an undue negative impact on AM radio, and

3. to simplify the regulatory process and to rely on the most efficient and effective regulatory tools to ensure compliance.

The Commission considers that the competitive pressures engendered by the growth in the number of radio stations as well as the audience and revenue of FM radio might encourage diversity in some areas of programming, particularly popular music, in a less detailed regulatory environment. In the Commission's view, both AM and FM radio should continue to provide complementary services, helping to ensure that music-based formats on AM radio remain viable in Canada at a time when they are in decline in the United States.

The Commission also notes, and wishes to stimulate, the growth that has taken place in the Canadian music and recording industries since the early seventies.

Therefore, the Commission is proposing to maintain the difference between AM and FM, and to maintain the principles of the FM policy, while adjusting some of its elements to respond to the evolution of the radio and related industries.

The Commission in this proposal is suggesting a more simplified regulatory approach entailing a reduction in the number and scope of commitments required in the Promise of Performance. At the same time, the Commission is asking for comments on the manner in which all or any of the parts of the Promise of Performance should be a condition of licence.

B.Specific Proposals

While not wishing to limit the range of comments invited in this review, the Commission hereby presents the following for discussion. 1.Station Formats

The Commission is of the view that station formats, which were established to ensure that each FM station provide a distinct service to the community it is licensed to serve, might be retained with some amendments.

The formats for stations basing their programming on Spoken Word and Traditional and Special Interest music, as well as the Ethnic format, could be maintained.

The formats for stations programming mainly popular music, however, could be combined into one subcategory called "Pop and Rock", to take into account the confluence of several popular music trends. The format distinctions based on sub-category 51 (Pop and Rock - Softer) and sub-category 52 (Pop and Rock - Harder) could be abolished.

New formats for stations basing their programming on popular music could then be defined as follows:

 Pop and Rock: At least 70% of the popular music selections are from the "Pop and Rock" subcategory.

 Easy Listening would be a sub-format for stations playing more instrumental than vocal selections.

 Country: At least 70% of the popular music selections are from the "Country and Country-oriented" subcategory.

 Variety: Popular music-based programming that does not fall into either of the above formats.

Although this initiative would allow stations to cross over freely from one type of popular music to another, competitive forces may be adequate in most areas to encourage diversity among stations specializing in Pop and Rock music. The Commission considers that sufficient musical diversity among FM stations and between AM and FM radio might be maintained by use of the music discriminators (such as a limitation on hits and maximum repeats) which are currently set out in Section D of the current Promise of Performance.

2. Traditional and Special Interest (Category 6) Music

The Commission considers that the type of diversity provided by Traditional and Special Interest music should be maintained.

Some stations, however, have found this music incompatible with the programming they usually provide and therefore relegate it to time periods when listening is low. Others have complained that the definition of Traditional and Special Interest Music is too narrow.

To allow the desired diversity and a reasonable flexibility, a weekly minimum guideline for "non-format" music -- music that would not usually be played by stations operating in any of the category 5-based formats -- might be considered. Stations might be allowed to meet this commitment using Category 6 music, such as classical music and jazz, as well as distinctive popular music such as reggae, New Age, popularmusic from other countries, or a host of other alternatives.

To ensure continued diversity in this area, commitments to Category 6 and non-format music in the Promise of Performance could specify the type of music, the scheduling and total hours per week. The Commission is interested in receiving comments concerning this initiative, particularly the definition of "non-format" music, the proportion of Category 6 music to "non-format" music to satisfy this commitment, as well as methods appropriate to use in measuring compliance with stations' commitments in this area.

3.Music Use Indicators

The Music Use Indicators are used to ensure that music programming styles of FM stations are different from those employed by music-oriented AM stations.

The Commission considers that added emphasis on the music usage discriminators as a means of ensuring diversity amongst music-oriented stations is desirable.

The current:recent:past ratio now in the Description of Programming could be placed in the Promise of Performance with the other music indicators in order to give the Commission and broadcasters an additional tool for ensuring diversity in those cases where it is a major differentiating characteristic in an application in a competitive situation. The Commission requests comments concerning appropriate definitions for "current", "recent" and "past" selections, as well as the possibility of applying the ratio of these selections only to hits or certain formats.

The FM policy currently requires FM stations to restrict their use of hits to less than 50% of all popular music selections played each week, and stipulates that no non-Canadian selection may be repeated more than 18 times per week.

The Commission has received requests from some broadcasters and record industry representatives that all Canadian records be considered non-hits because of a tendency of some programmers to drop Canadian selections from their playlists as soon as these recordings make the Top 40 charts so as to maximize the use of hits by non-Canadians. The Commission views this practice as detrimental to achieving an increased emphasis on Canadian music. All Canadian category 5 selections could be excluded from the calculation determining a station's compliance with the policy stating that hits comprise less than 50% of all popular music selections broadcast. The Commission is interested in receiving comments on the possible impact on AM radio of this proposal.

Since this change could lead stations to play more old Canadian hits and neglect newer Canadian music, a new music discriminator indicating percentage of new Canadian music could be included in the Promise of Performance. The Commission is interested in receiving comments concerning this initiative, an appropriate definition for a "new Canadian selection", the level of new Canadian music that would be appropriate and the feasibility of requiring compliance with the hit restrictions, on a daily basis.

4.Foreground and Mosaic Format

Requirements for foreground and mosaic programming were designed to help ensure that FM stations provided programming of high standard as well as a programming style that was different to the one on AM radio. However, in doing an analysis of foreground programming, the Commission has noted that many worthwhile programs which stations produce fail to meet the current definition and that many foreground programs are merely 15-minute segments featuring one particular artist with a minimal amount of enrichment material.

The Commission considers that an alternative approach be explored. The current requirements for foreground and mosaic format programming could be replaced with a mechanism that would give stations added flexibility in the development of creative programming.

Enrichment guidelines could be reintroduced in place of requirements for foreground and mosaic format programs. Licensees could be asked to broadcast an appropriate specified minimum level of material from category 3 - Enrichment. The Commission is asking for comments on this matter. In this regard, the Commission notes that, up until 1984, CRTC policy stipulated that at least 6% of all programming broadcast by independent FM stations be from the enrichment category. For joint FM stations, an enrichment level of 9-12% was expected, depending on the licensee's resources.

To ensure that enrichment material is used to provide in-depth treatment of various programming matter, a requirement might be considered that such enrichment material be of a minimum length, for example at least 30 seconds long to count toward fulfillment of a station's enrichment commitment, and be identified on the station's logs.

The Commission is requesting comments on whether the above proposal would help ensure that FM stations continue to provide a style of programming different from that on AM stations.

5.Canadian Music

In light of the growth that the music industry has experienced since 1975 as well as the considerable growth of FM radio, the Commission considers that FM stations should no longer have lower Canadian music requirements than AM stations particularly in the popular music categories. It is proposed that all popular music-based stations except those in the Easy Listening (predominantly instrumental) format be required to program a level of at least 30% Canadian music in Category 5 during each broadcast day. Easy Listening stations would be expected to program a level of at least 20% Canadian music daily.The Commission notes that requiring the category 5 Canadian music commitment to be met on a daily basis will put FM on an equal footing with AM radio in this respect.

Levels for Category 6 and Ethnic music would remain at 7%, measured on a weekly basis.

In pursuit of its objective to assist Canadian talent, the Commission has required broadcasters to develop initiatives regarding local talent over and above the regulatory requirements. Broadcasters have responded through such projects as local talent competition and the release of "homegrown" records. The Commission is asking for comments as to the efficacy of these initiatives and for suggestions as to how they may be assessed.

6.Other Matters

a.Levels of Advertising

Currently the radio regulations restrict joint and independent FM stations to a maximum of 150 commercial minutes each broadcast day.

Some broadcasters have urged that this regulation be repealed, arguing that competitive forces would ensure that advertising on commercial FM stations would not reach an unacceptable level. While the Commission is not inclined in this direction at this stage, it is interested in receiving comments in this regard.

b.Acquired Programming

In Public Notice CRTC 1989-135, the Commission published 3 recommendations of the Consultative Committee on Acquired Audio Programming and indicated that these recommendations would be considered in the context of the review of the FM Policy. The recommendations, which were designed to stimulate the development of the Canadian independent audio program production industry were as follows:

i. Commercials broadcast during a Canadian acquired program, whether foreground or mosaic, and commercials aired outside of the program that are part of a barter agreement, will not be included for purposes of calculating an FM station's commercial minutes.

ii. Category 5 musical selections broadcast during a Canadian acquired program will not be included in the calculation of an FM station's format commitment. This dispensation would apply to a maximum of 10 hours per week of Canadian acquired programming.

iii. Canadian acquired programs in the foreground format will receive 150% foreground credit.

The Commission invites comment on these recommendations, particularly in light of other changes being proposed by the Commission with respect to station formats as well as to foreground and mosaic programming.

c.Definition of a "market"

Some broadcasters have expressed concern about the fairness of the current definition for joint FM stations. The Radio Regulations define a joint FM station as follows:

 "A joint FM licence is an FM licence, other than a CBC FM licence, a special FM licence or an experimental FM licence where, at the time the licence was issued or renewed, the licensee or, if the licensee is a corporation, that corporation or any corporation associated with it, was licensed to operate an AM station in the same language in all or any part of the same market."

The current definition of a "market" is:

 "the geographical area

a) within the 5 millivolt per metre daytime official contour of an AM station, or

b) within the 500 microvolt per metre official contour of an FM station."

Some have expressed concern that the current definition of a market, which is based entirely on technical criteria, can lead to a situation where an FM station in one community would have to fulfil the more stringent requirements of a joint station because of a slight overlap between its contours and the contours of a commonly-owned AM station situated in a community a considerable distance away.

The Commission invites suggestions for a revised definition of a market that would respond to the difficulties that have been raised.

V.CALL FOR COMMENTS

The Commission invites comments on the initiatives set out in this paper as well as other matters related to the Commission's policy and regulation of FM radio. Comments should be addressed to Fernand Bélisle, Secretary General, CRTC, Ottawa, Ontario, K1A 0N2. The deadline for receipt of comments is 11 May 1990.

The Commission further announces that it will hold a public hearing on "Review of the Policy for FM Radio" at the Conference Centre, Phase 4, 140 Promenade du Portage, Hull, Quebec, starting at 09:00 on 26 June 1990.

The Commission wishes to stress that its existing policies and regulations, as well as the obligations assumed by licensees as conditions of licence, remain in effect. The policies will continue to be applied and the regulations and conditions will continue to be enforced until changes resulting from this review have been announced, or new regulations and conditions have been adopted.

Fernand Bélisle
Secretary General