ARCHIVED -  Decision CRTC 91-80

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Ottawa, 6 February 1991
Decision CRTC 91-80
WIC Western International Communications Ltd.
Edmonton, Red Deer and Coronation, Alberta - 901927400 - 901928200Allarcom Pay Television LimitedEdmonton, Alberta- 901929000
Following a Public Hearing beginning 21 November 1990 in Edmonton, the Commission approves the applications by WIC Western International Communications Ltd. (WIC), on behalf of its wholly-owned subsidiary, Westcom TV Group Ltd. (Westcom), for authority to acquire the assets and to continue the operation of the independent broadcasting transmitting undertakings CITV-TV Edmonton and CITV-TV-1 (CITA-TV) Red Deer, as well as of the CBC-affiliated broadcasting transmitting undertaking CKRD-TV Red Deer and its rebroadcaster CKRD-TV-1 Coronation.
The Commission will issue licences to Westcom in respect of the four television stations named above, upon surrender of the current licences issued to Allarcom Limited (Allarcom). The licences will expire 31 August 1994, and will be subject to the same terms and conditions as those specified in the current licences, as well as to any other condition that may be specified in the licences to be issued. In Decision CRTC 89-121, the Commission issued licences to Allarcom expiring 31 August 1993 in respect of CITV-TV-1, CKRD-TV and CKRD-TV-1. The Commission notes that the new term of licence herein accorded Westcom for these stations, expiring 31 August 1994, will enable the Commission to consider the renewal of these licences at the same time as that of CITV-TV and other television stations in the region.
The Commission also approves the application by Allarcom Pay Television Limited (Allarcom Pay) for authority to transfer effective control of Allarcom Pay and indirect negative control (50%) of The Family Channel Inc., through the transfer of the 75,000 common voting shares and the 749 preferred non-voting shares of Allarcom Pay, held by Cathton Holdings Ltd. (Cathton) and the 5,000 common voting shares of Allarcom Pay, held by Harking Investments to WIC. As a consequence of this transaction, WIC, which currently holds the remaining 15,000 issued common voting shares of Allarcom Pay, will own 100% of the issued voting and non-voting shares of that licensee company.
Allarcom and Allarcom Pay are currently effectively controlled by Dr. C. Allard of Edmonton, through his ownership of approximately 79% of Cathton. Dr. Allard has been involved in television broadcasting in Alberta for a period of almost 18 years, beginning with his establishment of the Edmonton independent television station CITV-TV. Dr. Allard, through Allarcom, acquired effective control of the Red Deer independent station CITV-TV-1, and of CKRD-TV Red Deer (CBC) and its rebroadcaster CKRD-TV-1 Coronation, in April 1989 (Decision CRTC 89-121).
Through his effective control of Allarcom Pay, licensee of the regional general interest pay television undertaking also known as Superchannel, Dr. Allard has also been active in Canada's pay television industry. As noted above, Allarcom Pay is the 50% shareholder of a second general interest pay television licensee, The Family Channel Inc. One year ago, Allarcom Pay was also licensed to operate an experimental pay-per-view service on a temporary basis at three locations in Saskatchewan.
At the hearing, Dr. Allard stated that the decision to divest of his interests in Allarcom and Allarcom Pay was taken, in part, for estate planning purposes, but indicated that his wish to sell was also based on his concern that Allarcom, as the operator of a stand-alone independent television station, was becoming vulnerable in an industry where ownership of independent stations has seen increasing concentration and audiences have become increasingly fragmented. It was noted at the hearing, however, that Dr. Allard will continue to be involved in broadcasting as a director of WIC and as Chairman of the Divisional Boards of the Alberta television stations. Under the terms of the transaction, Dr. Allard will also acquire approximately 22.4% of the issued non-voting Class B shares of WIC.
Westcom and its parent company WIC are indirectly controlled, through a voting trust agreement, by Mr. Frank A. Griffiths of Vancouver. Westcom is the licensee of the CTV-affiliated stations CHAN-TV Vancouver, CHEK-TV Victoria and their numerous rebroadcasters which, together, provide service virtuallly throughout British Columbia. Westcom is also the licensee of independent stations CKKX-TV Calgary, CISA-TV Lethbridge and their rebroadcasting stations serving much of southern Alberta.
WIC's other broadcasting interests include 100% ownership of Westcom Radio Group Ltd., the licensee of nine radio stations across Canada, and indirect ownership of 51.1% of Canadian Satellite Communications Inc. (CANCOM).
WIC's President and Chief Executive Officer, Mr. Douglas M. Holtby, was President of Allarcom for several years prior to his move to the WIC organization in 1989. At the hearing, Mr. Holtby stressed that approval of the current applications would accomplish a goal long-shared by the WIC and Allarcom organizations, that being the establishment of "a strong western broadcasting company to counterbalance eastern Canada's dominance of the Canadian broadcasting system." According to Mr. Holtby, the creation of strong regional broadcasters, such as WIC, will:
 ...(broaden) the opportunities for development of Canadian talent and production of higher quality Canadian programming. More attractive Canadian programming will enable us to capture and hold Canadian and, hopefully, world audiences.
The applications for the transfer of the assets of Allarcom to Westcom, and the application to transfer effective control of Allarcom Pay to WIC, were assessed by the Commission within the framework of its policies relating to transfers of ownership and control, as set out in previous decisions and public notices. In accordance with these policies, the onus was on WIC to satisfy the Commission that its applications represent the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
One such potential concern is concentration of ownership of licensed undertakings, the issue being raised in the current context by WIC's existing broadcast holdings. The Commission notes that approval of these applications will elevate WIC from its position as the country's sixth-largest private television operator to its fourth-largest, measured by viewing share. WIC's position as the country's fourth-largest private television operator, by revenues, will remain unchanged.
As a consequence of this transaction, WIC will obviously become a much more significant presence in Alberta, and its revenues will much more closely approach those of the top three revenue leaders in the country (Global Communications Ltd., Baton Broadcasting Incorporated and Vidéotron Ltée). The Commission, however, considers that concentration of ownership need not be of concern provided that, in any given market, there continues to exist a diversity of opinions, information and ideas from broadcasting and other media serving that market to ensure that residents continue to have access to differing views on matters of public concern. Following an examination of this issue, the Commission has concluded that neither the expansion of WIC's revenues nor its larger audience share resulting from this transaction will raise concentration of ownership to an unacceptable level.
Another potential concern sometimes raised by transactions of this size and nature is whether the purchase price and related debt service costs might come to affect adversely the ability of the purchaser to meet all of its existing and newly-assumed licence commitments and responsibilities.
Concerns in this regard were expressed in an intervention by Alberta Television Network Inc. (ATN) represented at the hearing by its President, Mr. Wendell Wilks, an independent producer. According to the intervener, the debt load to be assumed by WIC in connection with this transaction will take "too much money out of the Alberta system".
Based on the evidence filed with the application as well as that provided in response to the Commission's questions at the hearing, however, the Commission has no concerns with respect to the financial arrangements underlying the transaction. It accepts as reasonable the total valuation of approximately $140 million attached by the applicant to the shares of Allarcom Pay that are to be transferred to WIC, and to the broadcasting assets of Allarcom that are to be transferred to Westcom under this transaction.
Notwithstanding the intervener's concern, the Commission also considers that WIC's debt-to-equity ratio will stand at a reasonable level following this transaction, and that existing cash flows are sufficient to service the associated debt without relying upon the projected cash flows of CITV-TV. More specifically, the Commission considers that WIC has the necessary resources to assume the financial and other responsibilities associated with the operation of the broadcasting undertakings currently licensed to Allarcom and to Allarcom Pay, including adherence to all outstanding commitments of their present ownership, as well as fulfilment of WIC's own commitments with respect to the provision of new, incremental benefits.
In line with the Commission's policies, WIC was called upon to demonstrate that the benefits to be realized under the transaction are significant and unequivocal, commensurate with the size and nature of the transaction, taking into account the resources and responsibilities of the purchaser, and will yield measurable improvements to the communities served by the broadcasting undertakings concerned and to the Canadian broadcasting system as a whole.
According to WIC, approval of the transaction will bring about a number of significant intangible benefits, not the least of which will be the creation of a much stronger western-based broadcasting entity to counterbalance what WIC perceives as being the present over-concentration of industry influence and decision making in eastern Canada. WIC claimed that, as the owner of a composite of CBC- and CTV-affiliates and independent television stations, it will be able "to build bridges between the various broadcast groups", resulting in a stronger system overall. The Commission agrees that, as a larger entity, WIC will have a greater influence on the system as a whole and, on balance, considers that such impact will be positive, particularly with respect to the production of new Canadian programming.
WIC proposed a package of tangible benefits representing direct, incremental expenditures totalling a minimum of $25,158,500 over five years. A portion of this amount ($1,322,500) will be dedicated to an expansion of co-operative program production between CITV-TV, CITV-TV-1, CKRD-TV and WIC's existing stations. An additional amount of $712,000 will be directed towards providing a microwave link for the distribution of programming among CKKX-TV, CITV-TV, CITV-TV-1, CKRD-TV and CKRD-TV-1. WIC also claimed as a benefit the net sum of $374,000 over five years, to be contributed to the Independent Satellite News (ISN) service. All WIC stations will become subscribers of this service.
By far the largest single benefit is WIC's commitment to allocate the balance of the proposed incremental expenditures, or $22,750,000, for the establishment and administration of a funding mechanism to finance the production of new Canadian programming, with an emphasis on drama and drama serials. WIC proposes to contribute an average of $4,000,000 to the fund each year on behalf of Superchannel ($2,000,000), CITV-TV ($1,800,000) and CKRD-TV ($200,000). These amounts are incremental to the annual expenditures for Canadian programs required of Superchannel and CITV-TV by condition of licence, and by expectation in the case of CKRD-TV. These annual contributions by WIC will be administered by Westcom Entertainment, a unit to be established and operated by WIC separately from its individual broadcasting undertakings. Of the $22,750,000 to be contributed by WIC under this initiative, $2,750,000 will be allocated by WIC as Westcom Entertainment's estimated costs of administering the fund over a five-year period. According to WIC, Westcom Entertainment will have its own staff of production experts to "seek out projects, monitor projects under development and commission producers/directors to develop specific projects". WIC made a commitment to ensure that, of the $20 million to be devoted to production financing, at least $5 million will be invested in Canadian programming suitable for airing on The Family Channel.
The Commission raised with WIC its concern that the productions resulting from WIC's program funding initiative be made available to the widest possible Canadian audiences, especially those of Alberta independents CITV-TV, CITV-TV-1 and CKKX-TV, as well as those of the other independent television stations across the country. It therefore questioned WIC as to whether it could guarantee that at least a majority of such programs would be aired on independent stations.
In response, WIC noted that attaining this level of exposure for such programs on independent stations would depend upon the willingness of other independent licensees to participate with WIC. Although WIC also made it clear that some of the programs may well have their first exposure on the CBC and CTV networks, Mr. Holtby stated that "...we would do our best" to respond to the Commission's concern. The Commission places great importance upon this undertaking. It therefore expects WIC to ensure that, averaged over five years, the majority of all programs funded in whole or in part through WIC's program production fund be broadcast on an independent Canadian television station, with particular regard for the independent stations in Alberta.
With respect to the activities of Westcom Entertainment, Mr. Holtby agreed to file with the Commission "any documents or financial statements that the Commission might need to ensure that those benefits are being expended the way that they are being proposed". Mr. Holtby stated that WIC would also be willing to work with Commission staff to develop an appropriate reporting format.
In line with the above, the Commission requires WIC to file with the Commission, on an annual basis, a report detailing the activities of Westcom Entertainment with respect to the expenditure of the $20 million to be used to finance program production. This report, the precise contents of which are to be determined following discussions between WIC and CRTC staff, should contain sufficiently-detailed information regarding productions funded by the $20 million to enable the Commission to assure itself that its programming expectations and WIC's programming commitments are being met.
The annual report should therefore include certification by WIC's external auditors that monies allocated to the fund under this commitment are over and above any Canadian program expenditures required of WIC's licensed undertakings, either by condition of licence or expectation. At the hearing, Mr. Wilks of ATN expressed concern that the transfer of ownership of the Allarcom broadcasting holdings from interests based in Alberta to those based in Vancouver could have a negative impact, particularly upon Alberta's independent production sector.
The Commission notes in this regard WIC's assurance that "the absolute dollar amount of production activity previously generated by CITV-TV and Superchannel in Alberta will grow as a result of these applications", and that it intends to continue the operation of a creative development department in Edmonton with full control over development funding.
In another intervention presented at the hearing, the National Association of Broadcast Employees and Technicians (NABET) suggested, among other things, that WIC may be falling short of its commitments with regard to local production at two of its existing stations, CHAN-TV and CKKX-TV. In responding to the NABET intervention, WIC insisted that it was "exceeding all of our promises on all of our stations, and there has not been a reduction on local programming in any one of our stations". The Commission also notes in this regard the commitment by WIC on behalf of Westcom, as set out in the applications, to increase the quantity and quality of locally-relevant programming on CITV-TV and CKRD-TV.
The Commission, in noting these statements by WIC, wishes to emphasize the importance it places on the adherence by all of its licensees to their commitments with respect to the broadcast of programs that adequately reflect local needs and interests. Clearly, the Commission's proposed policy on local television program commitments must not be interpreted by licensees as sanctioning any relaxation of their efforts to provide locally-relevant programming.
Consistent with its proposed policy, the Commission fully expects Westcom to adhere to its commitments for the broadcast of a minimum of 11 hours per week of local news on CITV-TV and 5 hours 40 minutes per week of local news on CKRD-TV. In Decision CRTC 89-121, the Commission expected the licensee of CKRD-TV "... to provide a local news presence on weekends during the course of the licence term". The Commission notes in this regard the statement by the applicant at the hearing that: " is certainly within our plans during this licence term to implement some kind of news on the weekend". The Commission expects Westcom to introduce local weekend news programming to the schedule of CKRD-TV by 31 August 1993. This is the date by which the Commission, in Decision CRTC 89-121, expected Allarcom to have introduced such local weekend news. With respect to CITV-TV-1, according to the application and consistent with Allarcom's outstanding commitments, the level of local programming on CITV-TV-1 will consist of a minimum of 2 hours 30 minutes per week.
CanWest Global Communications Corporation (CGC) also intervened at the hearing, not to oppose the applications, but to express its concern regarding the impact of the transaction in a number of areas, including the pooling of production dollars for Canadian programs. The intervener, which is the parent company of a number of Canadian independent stations, was represented at the hearing by its President and Chief Executive Officer, Mr. Israel Asper. Mr. Asper suggested that WIC, rather than working with other independents to produce programs, may choose to concentrate on developing programs for broadcast by the CBC and CTV networks.
Mr. Asper also stated that, with the approval of the transaction, WIC would become a fourth major television program buying group in the country, after the CBC, CTV and CGC, and that this would have the effect of increasing the competition for and the cost of acquiring foreign programming by CGC and other independents.
The intervener expressed a further concern with respect to WIC's plans to provide financial support to ISN, and the impact this could have on CGC's own efforts to mount a national news service for independent stations.
In response to the CGC intervention, Mr. Holtby expressed a willingness to co-operate with the intervener, but only to the extent that such co-operation not threaten the independence of the WIC stations. Regarding the possibility of conflict between two developing national television news services, Mr. Holtby stated:  What we need is more news options across this country, and not less.... We can work with Global. But it can't be on just totally Global's terms. It has to be fair...
The Commission takes note of these statements by Mr. Holtby. It considers that, with regard to the production and exhibition of Canadian programming and the acquisition of foreign programming, WIC's independent stations should, wherever possible, co-operate with other independent stations across the country in order to ensure that viewers in Alberta continue to have opportunities to see programming that is available to most other Canadians.
In general, taking into account all of the above, including WIC's various commitments and assurances, the Commission is satisfied that the benefits proposed by WIC, both those that can be quantified in monetary terms and others that are not measurable in monetary value, are significant and unequivocal, and commensurate with the size and nature of the transaction. The Commission is also satisfied that approval of the application is in the public interest. The Commission expects WIC to ensure that all of the direct expenditures of a minimum of $25,158,500 over five years proposed as benefits are made in accordance with the schedule outlined in the application.
With respect to each of the licences to be issued to Westcom for CITV-TV, CITV-TV-1 and CKRD-TV, it is a condition of licence that the licensee adhere to the guidelines on sex-role stereotyping set out in the Canadian Association of Broadcasters' (CAB) Sex-Role Portrayal Code for Television and Radio Programming, as amended from time to time and approved by the Commission.
Similarly it is a condition of each of these licences that Westcom adhere to the CAB's Broadcast Code for Advertising to Children, as amended from time to time and approved by the Commission.
In Decision CRTC 89-122, which last renewed the licence of CITV-TV, the Commission expected the licensee to adhere to its commitments for the provision of closed captioned programming and, as a minimum, to caption the headlines and appropriate scripted portions of its early evening newscasts within the first year of its new licence term. A similar expectation for CKRD-TV was expressed by the Commission in Decision CRTC 89-121, although such captioning of local news was expected to be introduced only within the licence term. Both licensees were also expected to acquire a telephone device for the deaf (TDD).
Although the Commission is pleased to note that these expectations have been met in respect of CITV-TV, according to the application pertaining to CKRD-TV, such is not the case with the Red Deer station. The Commission therefore expects Westcom, in respect of CKRD-TV, to acquire and install a TDD in an appropriate location without any further delay, and to introduce closed captions for headlines and appropriate scripted portions of the station's early evening local newscasts by no later than 31 August 1993.
With respect to CITV-TV, and consistent with the requirement imposed in Decision CRTC 89-122, it is a condition of licence that Westcom adhere to the formula for expenditures on Canadian programming, as prescribed in Public Notice CRTC 1989-27.
In the case of CKRD-TV, noting that the revenues of this station are less than $10 million, adherence to the prescribed formula continues to be required by the Commission, but as an expectation only.
With respect to CKRD-TV, it is a condition of licence that the licensee shall operate this station as an affiliate of the English-language television network of the Canadian Broadcasting Corporation. On this subject, the Commission notes the following statement by WIC at the hearing: "We can confirm to the Commission that we have no intention of disaffiliating CKRD from the CBC, and that is a commitment".
In addition to the interventions noted earlier in this decision, the Commission wishes to acknowledge the views expressed in the many other interventions submitted with respect to these applications by individuals, community and cultural groups, elected officials, independent producers and others.
Allan J. Darling
Secretary General

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