ARCHIVED -  Decision CRTC 94-288

Decision

Ottawa, 6 June 1994

Decision CRTC 94-288

Altawest Television Ltd.

Calgary and Lethbridge, Alberta- 930210000Edmonton and Red Deer, Alberta- 930211800Calgary, Lethbridge and Drumheller, Alberta - 931463400Edmonton and Red Deer, Alberta - 931464200

Denial of competing applications proposing new, independent, English-language television services in Alberta

Following a Public Hearing commencing 25 January 1994 in Calgary, the Commission, by majority vote, denies the competing applications noted above for authority to establish new, independent (fourth service), English-language, television undertakings in Alberta.

Background

In Public Notice CRTC 1993-79 dated 3 June 1993, the Commission announced its receipt of applications proposing to offer a new independent television service in Alberta. Consistent with its procedures, the Commission called for applications from other parties who might also be interested in providing such a service.

The applications prompting the call were submitted by Altawest Television Ltd. (Altawest), a wholly-owned subsidiary of CanWest Global Communications Corp. (CanWest Global) ultimately controlled by Mr. I.A. Asper of Winnipeg. Mr. Asper holds an indirect controlling interest in CIII-TV-4 Toronto and its various rebroadcasters in Ontario, and in other independent television undertakings serving Vancouver, Regina, Saskatoon, Winnipeg, Saint John and Halifax.

In response to its call, the Commission received applications by The Alberta Channel Inc. (A-Channel), a company indirectly controlled by Mr. Stuart A. Craig of Brandon. Mr. Craig also holds indirect control of Craig Broadcast Systems Ltd., licensee of independent station CHMI-TV Portage la Prairie, CBC affiliate CKX-TV Brandon, an FM station in Selkirk and of an AM and an FM station serving Brandon.

Altawest and A-Channel both proposed to establish new programming undertakings: one at Edmonton, with a rebroadcaster at Red Deer, and one at Calgary, with a rebroadcaster at Lethbridge. A-Channel also proposed to construct a second rebroadcaster of its Calgary station at Drumheller.

A third applicant, Alberta Interactive Multimedia Inc. also responded to the call, but subsequently withdrew its applications.

In its call, the Commission stated that it had not reached any conclusion with respect to the viability of a new independent television service in Alberta, and that issuance of the call should thus not be construed as indication that it would authorize such a service at this time. Without restricting the scope of issues to be considered, the Commission stated that applicants would be required to provide evidence giving clear indication that there is a market and demand for the proposed programming service; and to address, among other things, the contribution that the proposed service would make to achieving the objectives established in the Broadcasting Act (the Act), and the expected impact of the proposed service on the audiences of existing programming undertakings.

Market Impact

One of the Commission's tasks in evaluating any application proposing the introduction of a new commercial service to a market is to gauge the extent to which the service is likely to attract audiences and revenues away from services already licensed in that market. Consideration of other factors aside, the Commission would generally be prepared to license a new service only where it is satisfied that this competitive impact will not unduly affect the ability of existing services to meet their individual programming responsibilities.

In assessing market impact, the Commission must be careful to consider a broad range of financial, economic and other factors. In general, despite suggestions that an end to the recession has been reached and that economic growth lies ahead, the extent and the timing of this growth is proving difficult to predict accurately. Factors such as the protacted nature of the current recession and lagging rates of growth in recent periods point out the uncertainty attached to any forecasts generated in the present economic climate. The uncertainty such factors engender in assessing the present applications increases when viewed alongside recent statistics measuring the performance of Alberta's broadcasting industry in particular.

One indicator of a market's ability to absorb the impact of a new competitor is the average profitability margin of its incumbent broadcasters, as measured before interest and taxes (PBIT). In the case of radio, the average PBIT margin in 1993 for all commercial stations in Canada stood at the level of minus 0.13%. The corresponding figure for Alberta's commercial radio stations last year was an even larger negative figure (minus 3.8%).

As for television, it is a fact that, historically, the average PBIT margin of Alberta's private television broadcasters has been above the national average. The Commission notes, however, that while television advertising revenues in Alberta grew by 3.1% in 1993, this growth fell short of the average for the preceding 5 years. The financial results for 1993 also reflected a drop of approximately 13% in the average PBIT margins of Alberta's private television licensees. This 1993 decline in average PBIT margin was even greater for television stations in the smaller Alberta markets whose profitability, historically, has been much lower than that of stations in Calgary and Edmonton, and has generally declined over the 1988-93 period.

Nevertheless, each applicant pointed to the Alberta television industry's apparently healthy average PBIT margin as backing for its argument that the market can support the additional competition its service would represent. Both also suggested that the Alberta market is about to begin a phase of growth, thus further easing the entry of a new service. The applicants, however, seemed ready to acknowledge that their arguments regarding market impact weakened when applied to those television stations serving Alberta's smaller markets. In fact, both applicants offered commitments which, they stated, would be effective in preserving the local advertising revenues of the smaller broadcasters.

Initially, Altawest stated that it would not solicit local advertising in the communities served by its proposed rebroadcasters at Red Deer and Lethbridge. At the hearing, it volunteered to accept a condition of licence not to put these rebroadcasters into operation until 1 January 1997. For its part, A-Channel also committed not to solicit local advertising in the three smaller communities it proposed to serve with rebroadcasting transmitters. Further, A-Channel stated that it would provide commercial availabilities for insertion of local advertising by the existing local television broadcasters.

While the small market licensees did not have an opportunity to respond to Altawest's offer to delay introduction of service in Lethbridge and Red Deer, the Commission considers that the interveners have a justifiable concern that either applicant could have a substantial negative impact on the financial viability of their stations, and that this impact would be due principally to the erosion of their national and regional, as opposed to their local, airtime revenues.

The Commission notes a trend among national advertisers to concentrate their airtime purchases in larger markets, and to direct correspondingly smaller portions of their budgets to small market broadcasters. With respect to Altawest, it is likely that the addition of this applicant's proposed stations in Calgary and Edmonton to the list of those now owned elsewhere across Canada by CanWest Global would enhance the attractiveness of this group of stations to national advertisers, thus intensifying this trend at the expense of smaller broadcasters across the country, but particularly in Alberta.

In the case of A-Channel, the applicant's willingness to provide local availabilities on its rebroadcasters to existing local broadcasters was viewed by one of the interveners as offering little meaningful advantage in light of the current surplus of advertising inventory on its station.

Turning to radio, according to the Alberta Broadcasters' Association (ABA), a factor contributing to the financial difficulties of radio stations in Alberta has been the increasing direct competition for broadcast advertising dollars between radio and television, and the erosion over time of radio's share of these available advertising revenues. The ABA claimed in its intervention that the introduction of a new television service in Alberta would exacerbate this situation.

The Commission has weighed the evidence before it, including the present economy and its future outlook, measurements taken of the overall financial performance of Alberta's existing television and radio broadcasters, and the implications these factors have for the future direction of the industry in this province. Although the Commission recognizes the uncertainties attached to the process of economic forecasting, it considers that the introduction to the market of a fourth commercial television service would have a significant impact on the audiences and revenues of existing television and radio broadcasters.

Clearly, in considering whether to license a new, commercial, over-the-air television service in these circumstances, the Commission must be convinced that the demand for the service, and the programming contributions it will make to the Canadian broadcasting system, outweigh the risks inherent in licensing such a service.

The Applicants' Programming Plans

a)Altawest

As proposed, Altawest's station- produced programming was to consist of 14 hours per week of regional news produced largely at the service's main production centre in Calgary, including a one-hour broadcast scheduled each weeknight at 7:00 p.m. There was also to have been a separate news bureau in Edmonton capable of contributing regular news items and originating occasional special programs for the service. Virtually no regularly-scheduled, station-produced programming in any other category was proposed. Much of the remaining, regularly-scheduled programming on the service was to consist of Canadian and foreign programming acquired on the applicant's behalf by CanWest Global.

At the hearing, the applicant acknowledged that all 21 hours of prime time foreign programming to which CanWest Global holds national rights are currently sub-licensed to existing Alberta television stations. Of CanWest Global's Canadian programming, it appears that much of this also finds its way onto Alberta television screens, and that very little of the remainder would fall into the category of prime time quality programming. Further, the Commission notes that the existing Alberta broadcasters have expressed a willingness to sign a long-term program purchase contract with CanWest Global which would effectively ensure that Alberta audiences continue to have access to the best of CanWest Global's foreign programming, as well as to virtually all of its prime time Canadian production.

Altawest identified the hours between 7:00 p.m. and 10:00 p.m. as being the highest viewing audience period for its proposed service and committed to schedule between 35% and 45% of Canadian content in that period. Although the proposed hour-long newscast at 7:00 p.m. may be seen as providing diversity for viewers, the applicant did not present convincing arguments that there is a demand, or even a particular desire among Alberta audiences, for the additional news programming proposed. Moreover, an examination of the proposed program schedule during the hours of 8:00 p.m to 11:00 p.m. reveals that Canadian entertainment programming would amount to only three hours per week, or less than 17%.

In the Commission's view, the service proposed by Altawest would add little by way of local reflection, apart from its news programming, and only minimal diversity to the mix of Canadian and foreign programming currently provided by the existing conventional and specialty services available in this market.

b) A-Channel

This applicant's service was to have included 16 hours per week of programming in a variety of categories produced co-operatively between, and aired simultaneously on, its Calgary and Edmonton stations, together with a further 19.5 hours per week of news programming produced by, and aired separately, on each of its Calgary and Edmonton stations.

A significant feature of the applicant's proposed block program schedule is the broadcast of as many as eight foreign feature films per week, six of them commencing between the hours of 8:00 p.m. and 11:00 p.m. A-Channel identified these hours as the period having the highest viewing audience. Further, there was to have been one Canadian feature film scheduled each week in prime time and approximately two other Canadian movies per month aired during other time periods.

A-Channel also proposed to offer a substantial amount of other Canadian entertainment programming in prime time, most of which would be locally-produced. Such programming, together with the proposed weekly Canadian movie, was to make up approximately 36% of the schedule between the hours of 8:00 p.m. and 11:00 p.m.

The Commission notes that the amounts of local production and of prime time Canadian programming proposed by A-Channel exceed substantially the levels proposed by Altawest in these two areas. However, as in the case of Altawest, A-Channel failed to provide the Commission with convincing evidence that its proposed news programming responded to a significant need or desire among Alberta viewers. Moreover, none of A-Channel's proposed prime time schedule includes any regularly-scheduled Canadian drama series acquired by the applicant, other than reruns of series previously aired in Alberta.

A further Commission concern is the applicant's heavy reliance on foreign films scheduled during prime time viewing hours. Although this proposal would expand quantitatively the foreign movies available to television viewers in Alberta, it is doubtful that this foreign alternative would add significantly to the overall quality of foreign films that are currently available on existing Alberta stations.

Regarding A-Channel's commitment to complement the foreign movies in its prime time schedule by one Canadian feature film each week, the Commission notes that most Canadian features suitable for television are already acquired by the CBC and CTV networks. It is unlikely that the applicant, even in co-operation with others, would be able to compete successfully for national rights to these same films, and would thus have to rely on less popular, lower budget features and on "made-for-television" productions to meet this commitment.

In general, the Commission considers that the effect of the service proposed by A-Channel, and of its prime time schedule in particular, would be to fragment existing audiences while adding little to what is already available in the market and without contributing in any significant manner to achieving one of the Commission's major priorities, that being an increase in the amount of high quality Canadian drama in peak viewing periods.

Conclusion

The Commission has estimated the negative impact that either proposal could have on the existing broadcasters serving the larger centres of Calgary and Edmonton, as well as on those serving the smaller cities of Red Deer and Lethbridge where rebroadcasting transmitters were proposed. As indicated earlier, the Commission has determined that this impact would be significant.

Having examined the programming plans and commitments put forward by both applicants, the Commission has concluded that neither would offer a service that would respond to any demonstrated demand particularly with regard to local news and information programming. More importantly, neither service would possess the overall quality, distinctiveness or diversity necessary to offset the risk that its impact might unduly affect the ability of existing broadcasters to make their expected contributions to the Canadian broadcasting system and fulfil their obligations under the Act.

The Commission acknowledges all of the interventions submitted with respect to these applications including the many expressing support for one or other of them by independent producers, community groups, elected representatives and other interested members of the public.

Allan J. Darling
Secretary General

Dissenting opinion by Mr. Garth Dawley, Manitoba Regional Commissioner, to Decision CRTC 94-288

I dissent from the majority finding with respect to market impact, and am satisfied that the market is sufficiently buoyant to support a new television service. I further consider that the applications by Altawest and A-Channel, though differing in substance, would have provided an opportunity to bring an alternative television service to the people of Alberta.