ARCHIVED -  Public Notice CRTC 1995-204

Public Notice

Ottawa, 30 November 1995

Public Notice CRTC 1995-204

Call for Comments on the Commission's Approach to Management Agreements Between Licensees of Radio Programming Undertakings

The Commission has received for consideration a copy of an agreement entered into by Newcap Inc. ("Newcap"), licensee of radio programming undertakings CFDR and CFRQ-FM Dartmouth, and Sun Radio Limited ("Sun"), licensee of CIEZ-FM Halifax, Nova Scotia. The purpose of the agreement is to enable the parties to achieve or maintain economic viability, while continuing to operate on a competitive basis. Under the agreement, the administrative and sales resources of the three radio stations would be combined. The agreement further provides that the programming and news departments of each licensee would remain independent and distinct.

1. Precedents:

Management agreements between licensees for the purpose of sharing the technical, administrative and sales operations of two or more radio stations under their separate ownership came to the Commission's attention in 1992. At that time, the Commission received applications from Radiomutuel Inc. (Radiomutuel) and Télémédia Communications Inc. (Télémédia) concerning their radio stations in Chicoutimi and Jonquière, Québec ("the Saguenay case"). Later that same year, the Commission received other applications from Pelmorex Broadcasting Inc. (Pelmorex) and Télémédia Communications Ontario Inc. (Télémédia Ontario) concerning their radio stations in Sault Ste.Marie, Ontario (The Sault Ste. Marie Case).

a) The Saguenay Case: Decision CRTC 92-607

In this case, Radiomutuel and Télémédia proposed a management agreement between themselves whereby the technical, sales, administrative, news and studio operations of two AM radio stations, CKRS Jonquière and CJMT Chicoutimi, would have been jointly managed following a series of transfers of assets affecting these and other local radio stations. The Commission ruled, however, that the proposed management model would have had an adverse impact on the quality of news coverage and the diversity of news sources in the area. Specifically, the Commission had concerns regarding programming standardization and the independence of news sources and, consequently, denied the application by the joint management group for authority to acquire the two stations. The rejected model involved control over the programming of two stations by one licensee.

b) The Sault Ste. Marie Case: Public Notice CRTC 1992-62

Later in 1992, the Commission received applications from Pelmorex and Télémédia Ontario for permission to implement a management agreement to jointly operate the technical, sales, and administrative functions of their Sault Ste. Marie radio stations. The proposed agreement conferred responsibility for the day-to-day operation of CHAS-FM, CJQM-FM and CJWA on one licensee - Pelmorex. According to the agreement, the news and programming functions of each FM station would continue to be under the responsibility of its owner.

Based on the written commitments of the applicants, the Commission accepted the Sault Ste. Marie management model, as both Pelmorex and Télémédia Ontario would retain control over the programming functions of their respective stations, and two distinct news and programming voices would be maintained.

c) Subsequent Cases

In 1994 and 1995, the Commission accepted five other agreements between licensees involving the joint management of their respective radio operations on an indeterminate basis. In each case, the proposed agreement was patterned on the Sault Ste. Marie model approved in 1992. These cases involved the following licensees:

Licensees Market Stations Date

Radio One Ltd. / Radio Atlantic Fredericton, CIHI, CKHJ-FM,
(CFNB) Ltd. N.B./(N.-B.) CFNB Feb./fév. 1994

Maritime Broadcasting Charlottetown, CFCY, CHLQ-FM
System Limited / Newcap Inc. P.E.I./(Î.P.-É.) CHTN Oct./oct. 1994

CJSD Incorporated / Newcap Inc. Thunder Bay, CJSD, CKPR-FM
Ont. CJLB March/Mars 1995

Télémédia Communications North Bay, Ont. CFCH, CKAT-FM
Inc. / Pelmorex Radio Inc. CHUR Aug./août 1995

Télémédia Communications Inc. / Sudbury, Ont. CIGM, CJRQ-FM
Pelmorex Radio Inc. CHYC, CHNO,
CJMX-FM Aug./août 1995

In each of the six cases where a management agreement has been accepted by the Commission in the past, at least one of the players participating in the agreement was experiencing financial difficulty.

In addition, the Commission stipulated that the following requirements be met in each case:

* Distinct and separate programming and news services and management were to be maintained;

* The ownership of all assets of each undertaking was to remain with each licensee involved; and

* Each licensee was to retain responsibility for the programming and news staff employed by its undertaking(s).

In examining these management agreements, the Commission's primary concern has been to ensure that control of each undertaking involved would remain with its respective licensee. Because all of the requirements stipulated above were met, the Commission was satisfied that control over each undertaking would remain, as authorized, in the hands of its licensee, and that the agreements therefore raised no concerns.

II. The Current Halifax Case

Unlike the other management agreements the Commission has examined to date, the proposed management arrangement between Newcap and Sun involves two licensees operating in a market where there are other radio licensees present. The proposed management model could enable Newcap and Sun to reduce their operating costs and give them a competitive advantage over the other licensees. Moreover, acceptance of this agreement would constitute a precedent that could encourage the two other licensees in the market to exercise the same option. Should this occur, all seven radio stations in this market would fall under the management of two groups.

The potential for competitive advantage present in the Halifax proposal raises a number of issues that the Commission was not obliged to consider in its deliberations with respect to previous management agreements. In addition, over the past three years, the Commission has received letters of complaint from members of the public served by the licensees in some of the six markets where such agreements have been implemented. Many of these letters raise concerns about the effects of the alleged radio monopoly created by the agreements, including the inability of certain advertisers and outside producers to access airtime, the lack of diversity of news sources and the introduction of artificially inflated advertising rates.

CALL FOR COMMENTS

In light of these concerns, the Commission calls for comments on the proposal by Newcap and Sun, as it affects the Halifax market. The Commission would also welcome comments on its approach to management agreements, as they impact on the operations of radio programming undertakings generally. The Commission notes in this regard the regulatory requirement that a change in effective control of an undertaking must receive the prior approval of the Commission. The Commission also notes the condition of licence that stipulates that a licensed undertaking must be operated by the licensee itself, at all times, except as authorized by the Commission. The Commission considers that, in order to satisfy this condition, licensees must obtain the Commission's approval before implementing management agreements of the type described herein.

Without limiting discussion on this matter, the Commission requests public comment on the following specific questions:

1. Should the Commission continue to consider that the criteria outlined earlier in this document, if met, are sufficient to ensure that the effective control remains unchanged? Should additional criteria apply and, if so, what should they be?

2. Should the Commission limit the implementation of management agreements to markets where there are only two radio licensees?

3. In a market served by three or more licensees, would it generally be preferable to accept closure of a radio station rather than allow it to enter into a management agreement with another licensed undertaking?If so, when should exceptions to such a rule be permitted?

Comments on the matters raised within this notice should be addressed to Allan J. Darling, Secretary General, CRTC, Ottawa, Ontario, K1A ON2 and should be received no later than 15 January 1996. While receipt of submissions will not be acknowledged, they will be considered by the Commission and will form part of the public record of the proceeding. Newcap and Sun will then have until 30 January 1996 to reply to the comments received.

The requests submitted by Newcap and Sun, and the public comments received in response to this notice, may be examined at the following Commission offices during normal office hours:

Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage, Room 201
Hull, Quebec K1A 0N2
Tel.: (819) 997-2429
TDD : (819) 994-0423
Telecopier (819) 994-0218

Bank of Commerce Building
Suite 1007
1809 Barrington Street
Halifax, Nova Scotia B3J 3K8
Tel.: (902) 426-7997
TDD : (902) 426-6997
Telecopier (902) 426-2721

Place Montréal Trust
1800 McGill College Avenue
Suite 1920
Montréal, Quebec H3A 3J6
Tel.: (514) 283-6607
TDD : (514) 283-8316
Telecopier (514) 283-3689

Kensington Building
Suite 1810
275 Portage Avenue
Winnipeg, Manitoba R3B 2B3
Tel.: (204) 983-6306
TDD : (204) 983-8274
Telecopier (204) 983-6317

Suite 1380
800 Burrard Street
Vancouver, British Columbia
V6Z 2G7
Tel.: (604) 666-2111
TDD : (604) 666-0778
Telecopier (604) 666-8322

Allan J. Darling
Secretary General