-
Decision
|
-
Ottawa, 26 January 1993
|
-
Decision CRTC 93-33
|
-
South Western Ontario Broadcasting Incorporated
London; Wingham; and Chatham and Windsor and area, Ontario - 920622800 - 920623600 - 920624400
|
-
Following a Public Hearing commencing 5 October 1992 in the National Capital Region, the Commission approves the applications by South Western Ontario Broadcasting Incorporated (South Western) for authority to acquire the assets and for broadcasting licences to continue the operation of independent television programming undertakings CFPL-TV London and CKNX-TV Wingham, upon surrender of the current licences issued to CFPL Broadcasting Limited and CKNX Broadcasting Limited, respectively.
|
-
The Commission also approves the application by South Western for a broadcasting licence to carry on a new independent television programming undertaking at Wheatley, Ontario, operating on channel 16 with an effective radiated power of 183,000 watts, to broadcast a minimum of six hours per week of programming specifically produced for, and directed to, residents of Chatham, Windsor and area, as well as programming originating from CFPL-TV London.
|
-
The Commission will issue licences for the three undertakings, each expiring 31 August 1994, upon surrender of the current licences for CFPL-TV and CKNX-TV. This is the same expiry date as that attached to the current licences. The Wheatley licence will be subject to the conditions specified in this decision and in the licence to be issued. In the case of CFPL-TV and CKNX-TV, the licences will be subject to the same conditions as those specified in the current licences, to the conditions set out below, as well as to any other condition specified in the licences to be issued.
|
-
It is a condition of each licence that the applicant adhere to the guidelines on gender portrayal 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.
|
-
It is also a condition of each licence that the applicant adhere to the provisions of the CAB's Broadcast Code for Advertising to Children, as amended from time to time and approved by the Commission.
|
-
With respect to the Wheatley undertaking, it is a condition of licence that construction of this undertaking be completed and that it be in operation within 12 months of the date of this decision or, where the applicant applies to the Commission within this period and satisfies the Commission that it cannot complete implementation before the expiry of this period and that an extension is in the public interest, within such further period of time as is approved in writing by the Commission.
|
-
PARTIES TO THE TRANSACTION
|
-
The vendors of the London and Wingham stations are wholly-owned subsidiaries of The Blackburn Group Inc., itself indirectly controlled by the estate of Martha Grace Blackburn. The Blackburn family of London, long involved in media ownership in southwestern Ontario, will continue as owners of The London Free Press, as well as of joint AM and FM radio operations in each of London and Wingham.
|
-
The purchaser, South Western, is a wholly-owned subsidiary of Baton Broadcasting Incorporated (Baton), which company is effectively controlled by the Eaton family of Toronto. Baton currently holds licences for CFTO-TV Toronto and 16 other television programming undertakings in Ontario and Saskatchewan. By revenues, Baton is the country's third-largest private television broadcaster and the largest CTV network affiliate. The combined revenues of CFPL-TV and CKNX-TV represent 2% of the total revenues earned by Canada's private television broadcasters. This transaction will increase Baton's share of total private television station revenues from 12% to 14%.
|
-
The purchase price attached to this transaction is approximately $28.6 million, subject to adjustments. Based on the evidence filed with the applications, the Commission has no concerns with respect to the availability or the adequacy of the required financing.
|
-
THE BENEFITS PACKAGE
|
-
The Commission does not solicit competing applications for authority to transfer effective control of broadcasting undertakings. Thus, the onus is on the applicant in each case 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.
|
-
As a first test, the applicant must demonstrate that the proposed transfer will yield significant and unequivocal benefits to the community served by the broadcasting undertaking and to the Canadian broadcasting system as a whole, and that it is in the public interest. In particular, the Commission must be satisfied that the benefits, both those that can be quantified in monetary terms and others that may not easily be measured in terms of dollar value, are commensurate with the size of the transaction and take into account the responsibilities to be assumed, the characteristics and viability of the broadcasting undertakings in question, and the scale of the programming, management, financial and technical resources available to the purchaser. At the hearing, the applicant presented a list of tangible and intangible benefits it claimed would flow from the Commission's approval of this transaction. Among other things, South Western stated that approval would ensure the vitality and long-term financial stability of CFPL-TV and CKNX-TV, and enhance the diversity of ownership and programming in the markets of London, Wingham and Windsor/Chatham. The Commission notes in this regard Baton's commitment to "strong local television stations serving their communities by providing relevant, compelling and distinctive programming, with an emphasis on news and public affairs".
|
-
The Commission also notes the following statement made by Baton at the hearing:
|
-
We consider the local activities, all the local programming activities, to be the sole purview of the local stations. We do not get involved in terms of their mandate...and they have full authority to make sure that [they are] relevant to the community -- that is their responsibility. We can't do it out of Toronto, nor do we attempt to do it at Toronto.
|
-
According to the applicant, the tangible benefits associated with the current applications represent incremental expenditures of $23,818,000 over a seven-year period, including $15,802,000 earmarked for a variety of programming initiatives, and $8,016,000 for new capital improvements.
|
-
Some $3.2 million of the proposed capital expenditures are tied to establishment of the new Wheatley facility, while approximately $4.8 million of the programming benefits are allocated to the production of a minimum of six hours per week of original local programming directed specifically to viewers in the Chatham/Windsor area, distinct from the programming broadcast on CFPL-TV.
|
-
The Commission notes the historical impediments to the provision of local television service to the greater Windsor market area, including the strong competition from nearby Detroit stations for local and national advertising revenues and the difficulties in obtaining rights to U.S. programs encountered by any Canadian station whose signal reaches into Detroit. In light of these factors, given as well the CBC's decision in December 1990 to cease providing local programming on CBET Windsor, the Commission considers the applicant's proposal to be a particularly significant, tangible benefit of this transaction. It notes in this regard the applicant's statement at the hearing that the amount of local service could well be expanded in the future:
|
-
In essence, what we have told the Office of the Mayor, as well as the community-at-large, is that that is how we wish to start. We will expand that area of activity if the community supports it from a commercial sense.
|
-
Consistent with the Commission's policy linking the authority to solicit local advertising with the provision of local programming, in line with the permission accorded Electrohome Limited (Electrohome) in Decision CRTC 89-98 with respect to its Oil Springs transmitter, and as agreed to by South Western at the hearing, the licensee, by condition of licence, may broadcast a maximum of 40% of the commercial availabilities on the Wheatley transmitter separately from those on CFPL-TV London, and shall provide a minimum of six hours of original local programming per week on the Wheatley transmitter distinct from the programming broadcast on CFPL-TV London. Another matter considered at the October 1992 hearing was an application by the present licensee of CKNX-TV to reduce the amount of local programming broadcast on the Wingham station from 16 to 2.75 hours per week. This reduction was implemented at the end of August 1992. CKNX Broadcasting Limited justified the reduction largely on the grounds of the significant financial losses incurred by CKNX-TV and CFPL-TV following their disaffiliation from the CBC in 1988. Among the benefits claimed by South Western in connection with its present applications, however, are various capital and operating expenses representing the costs of restoring local programming on CKNX-TV to a minimum level of 6.5 hours per week.
|
-
Although mindful of the financial difficulties encountered by CKNX-TV and CFPL-TV in the years immediately following their disaffiliation from the CBC network, the Commission notes that the licensee of CKNX-TV was able to declare a small profit (before income tax and interest charges) in 1991. In the circumstances, although the present decision renders unnecessary any formal decision in respect of the licence amendment application by CKNX Broadcasting Limited (920404100), the Commission has determined that the amount of 6.5 hours per week would represent an acceptable minimum level of local programming on CKNX-TV, an amount comparable to that which the Commission would otherwise have required CKNX Broadcasting Limited to provide in the absence of this approval of the present applications by South Western.
|
-
Accordingly, and as discussed with South Western at the hearing, the Commission will expect the applicant to broadcast a minimum of 6.5 hours per week of local programming on CKNX-TV, and has disqualified as a benefit of this transaction the amount of $2,729,439 identified by South Western at the hearing as representing the capital and operating costs of providing this level of programming. As in the case of the proposed Windsor/Chatham service, the Commission notes South Western's assertion that the proposed amount of local Wingham programming is a minimum commitment that may be increased beyond the 6.5 hours per week contemplated in the application, depending upon the station's performance.
|
-
The Commission has assessed the remaining projects and initiatives put forward by the applicant as being the benefits associated with this transaction. In general, the Commission is satisfied that the benefits package is clear and unequivocal, and that approval of these applications is in the public interest.
|
-
Notwithstanding the Commission's disqualification of a portion of that package as a benefit, the Commission expects the applicant to ensure that the expenditures totalling $23,818,000 over seven years, as proposed in these applications, are made in accordance with the timetable outlined by South Western, and to file annual reports on its progress in this regard.
|
-
EMPLOYMENT EQUITY
|
-
In Public Notice CRTC 1992-59 dated 1 September 1992, the Commission announced implementation of its employment equity policy. It advised licensees that, at the time of licence renewal or upon considering applications for authority to transfer ownership or control, it would review with applicants their practices and plans to ensure equitable employment.
|
-
Based on the public record, including the reports prepared by Employment and Immigration Canada and the discussion with the applicant at the hearing, the Commission considers that there is considerable room for improvement in the general approach now being followed within the Baton organization towards achieving employment equity. According to Baton, guidelines on employment equity remain "...the responsibility of the individual licensees which develop their plan specific to their area". The Commission notes in this regard Baton's acknowledgment that, although a formalized plan is in place at CJOH-TV Ottawa, such plans are just being prepared for Baton's stations in northern Ontario and Saskatchewan, while no plan has yet been developed for CFTO-TV. Nor has Baton developed a corporate policy on employment equity.
|
-
In light of the above, the Commission expects Baton to develop and implement, without delay, an effective plan of action to ensure that adequate employment equity practices are followed on a corporate-wide basis. The Commission also encourages Baton to promote equitable representation in on-air staff positions and in voice-overs of station-produced commercial messages. The Commission will review these matters at the time of licence renewal.
|
-
INTERVENTION BY ELECTROHOME
|
-
An intervention opposing the applications was presented at the hearing by Electrohome, Baton's fellow CTV affiliate, licensee of CKCO-TV Kitchener, CKCO-TV-3 Oil Springs, CFRN-TV Edmonton, as well as of an AM and an FM radio undertaking in Kitchener.
|
-
During 1991/92, Electrohome's television undertakings in Ontario participated with those owned by Baton in "ONT", an association of television licensees that Baton characterized at the hearing as "...a marketing vehicle that allowed advertisers to buy commercial time on a more efficient basis, through the scheduling of common programming on stations across Ontario".
|
-
According to Baton, it and Electrohome were unable to negotiate mutually-acceptable terms for the latter's participation in ONT beyond the first year. Subsequently, an agreement was reached between Baton and the present licensees of the London and Wingham stations for CFPL-TV and CKNX-TV to join ONT in place of Electrohome. According to the intervener, Baton's acquisition of the London and Wingham stations and its introduction of a new service in the Windsor/Chatham area, will harm Electrohome's competitive position. Among other things, Electrohome also alleged in its intervention that, because of Baton's activities in acquiring national rights to popular sports and first-run programs, and the participation within ONT of independent stations CFPL-TV and CKNX-TV, a conflict of interest exists between Baton's activities in ONT and its responsibilities with respect to CTV. Electrohome also suggested that ONT is effectively operating as an unlicensed network undertaking in Ontario, in competition with the CTV network and CTV affiliates such as CKCO-TV, and without the obligations of a network licensee.
|
-
In responding to Electrohome's intervention, Baton reiterated its position that ONT was simply a marketing vehicle and not a network. Baton also submitted that ONT meets none of the criteria identified by the Commission in Public Notice CRTC 1989-2 entitled "Policy Respecting Television Networks" as those it would use in determining whether a network exists.
|
-
Further, Baton dismissed Electrohome's charge that it was in a position of conflict of interest and that approval of the transactions would be to the detriment of CTV. Baton emphasized in this regard its record as a responsible broadcaster and the considerable contribution it has made to the CTV network over the years.
|
-
South Western argued that the addition of these independent stations to the economic base of its parent company will "enhance Baton's support and commitment to CTV initiatives". Speaking at the hearing, the President and Chief Executive Officer of the applicant and Baton advised the Commission that evolutionary changes within the broadcasting industry may well necessitate changes in the way the CTV network and its affiliates operate in relation to each other. Nevertheless, Mr. Douglas Bassett confirmed that "Baton remains fully committed to the CTV network and its ongoing success as one of the foundation blocks in Canada's television broadcasting system".
|
-
The Commission has examined carefully the arguments of the applicant and intervener respecting these matters. Based on the record of this proceeding, the Commission has determined that the evidence does not support a conclusion either that ONT is a network within the meaning of the Broadcasting Act, or that Baton's activities within ONT place it in a position of conflict of interest vis-à-vis CTV.
|
-
In light of the Commission's longstanding concern regarding the failure of CTV's shareholders, including Baton, to resolve the issue of the network's future ownership structure, and given Baton's position as owner of the largest number of CTV affiliates, the Commission regards Baton's confirmation of its ongoing commitment to the network as being of particular importance. The Commission does not consider Baton's acquisition of these independent Ontario television stations to be inconsistent with its commitment to the CTV network.
|
-
Notwithstanding the fact that approval of these applications may have some impact on this intervener, in the Commission's view, the benefits associated with this transaction outweigh the intervener's concerns in this regard.
|
-
As for Electrohome's suggestion that ONT deprives CKCO-TV of programming it could otherwise use to earn revenues in support of its own local service, the Commission notes that participation by the London and Wingham stations within ONT, and the impact experienced by the intervener as a consequence of ONT's activities in program acquisition, are factors the intervener would have to contend with in any case, regardless of the Commission's decision with respect to Baton's acquisition of CFPL-TV and CKNX-TV. The Commission notes further in this regard that CKCO-TV, as a CTV affiliate, will continue to have access to some 40 hours per week of network sales time programming and an additional number of hours of station sales time programming acquired by CTV on CKCO-TV's behalf.
|
-
The Commission notes the comments expressed in the other interventions presented at the hearing by the City of Windsor, the Honourable Herb Gray, WIC Western International Communications Limited and Image Projections Ltd., and the applicant's replies thereto. Further, the Commission acknowledges the views contained in the many written interventions submitted with respect to these applications.
|
-
Allan J. Darling
Secretary General
|