ARCHIVED -  Decision CRTC 96-72

Decision

Ottawa, 29 February 1996

Decision CRTC 96-72

Global Communications Limited

Paris, Toronto, Ottawa, Stevenson, Oil Springs, Midland, Owen Sound, Bancroft, Peterborough, North Bay, Sudbury, Timmins, Sault Ste. Marie and Fort Erie, Ontario - 951251800

 Licence renewal for CIII-TV

Following a Public Hearing held in the National Capital Region beginning on 18 September 1995, the Commission renews the broadcasting licence issued to Global Communications Limited (Global) to carry on the television programming undertaking consisting of CIII-TV and its transmitters CIII-TV-41 Toronto, CIII-TV-6 Ottawa, CIII-TV-22 Stevenson, CIII-TV-29 Oil Springs, CIII-TV-7 Midland, CIII-TV-4 Owen Sound, CIII-TV-2 Bancroft, CIII-TV-27 Peterborough, CFGC-TV-2 North Bay, CFGC-TV Sudbury, CIII-TV-13 Timmins, CIII-TV-12 Sault Ste. Marie and CIII-TV-55 Fort Erie, from 1 September 1996 to 31 August 2003. The licence will be subject to the conditions specified in the appendix to this decision and in the licence to be issued.

The licensee is effectively controlled by CanWest Global Communications Corp. (CanWest), a corporation indirectly controlled by Mr. I. H. Asper of Winnipeg. CanWest currently controls six television stations, namely CIII-TV, CKND-TV Winnipeg, CFRE-TV Regina, CFSK-TV Saskatoon, CKVU-TV Vancouver and CIHF-TV Halifax.

 Global's Past Performance

 During the current four-year licence term, Global fulfilled and, at times, exceeded, the Commission's requirements and expectations regarding programming set out in CIII-TV's most recent licence renewal decision (Decision CRTC 92-220 and 92-220-1).

 In 1993-1994, Global fulfilled its commitment noted in Decision CRTC 92-220 to broadcast 19 hours 25 minutes of news each week. Global exceeded this commitment in 1991-1992 and in 1992-1993, broadcasting more than 21 hours of news each week in those years.

 Global also fulfilled and, at times, exceeded the requirement set out in Decision CRTC 92-220 that the licensee broadcast an average of 3 clock hours of Canadian drama each week between 8 p.m. and 11 p.m. during the first two years of the current licence term, increasing the amount of Canadian drama broadcast in this time period to an average of 3.5 clock hours each week during the last two years.

 In Decision CRTC 92-220, the Commission stated that, during the upcoming licence term, it would review Global's progress in implementing the "new Global" programming philosophy and strategy described by the licensee at the 1991 Public Hearing at which the Commission considered Global's last licence renewal. The licensee's vision and strategy for a "new Global" arose from the transfer of control from Global to CanWest, approved in Decision CRTC 90-1073. As part of the benefits package associated with this ownership transaction, Global promised to make expenditures on Canadian programming totalling $10 million over five years, including $9 million to develop a high-quality, alternative, national and international news service, and $1 million for licence fees for new Canadian drama programming to be produced by "untried creative Canadians". In its licence renewal application, Global reported to the Commission on completion, during the current licence term, of implementation of the benefits associated with the 1990 transfer of control.

 The Commission is also pleased to note that, during the current licence term, the licensee exceeded, in each year, the minimum expenditure on Canadian programming required by the conditions of Global's licence.

 During the current licence term, Global fulfilled, as well, the expectation contained in Decision CRTC 92-220-1 that it invest $9.1 million each year in its proposed Canadian Program Investment Fund. This $9.1 million annual investment was over and above Global's required minimum expenditure on Canadian programming of over $30 million each year. The Commission commends Global on its significant contribution to the development of Canadian programming through this investment fund.

 In its current licence renewal application, Global did not propose to maintain the Canadian Program Investment Fund during the new licence term. Instead, Global noted that such investments are a key part in developing Canadian entertainment programming. Global further stated that it is committed to making investments in Canadian programming to meet its broadcast requirements. The Commission encourages Global to continue, during the upcoming licence term, levels of investment in Canadian productions similar to those which the licensee achieved during the current licence term.

 Global's Role and Mandate

 Since it first licenced CIII-TV in 1972 and in each subsequent licence renewal, the Commission has recognized Global's unique role and mandate within Ontario and within the Canadian broadcasting system as a regional television service with national influence and responsibilities for independently-produced television entertainment programming. While Global was originally licensed to provide a regional service to southern Ontario, the Commission, in Decision CRTC 92-220, acknowledged that Global's service had been extended throughout the province. The Commission, therefore, expanded Global's mandate "to encompass responsibility to meet the needs and to reflect the concerns of residents of Ontario".

 In its present licence renewal application, the licensee took the position that the Commission should consider Global in the same manner that it does other conventional English-language private television broadcasters. With regard, in particular, to Canadian programming obligations, Global argued that its unique mandate as a regional service to Ontario no longer gives it significant advantages over local television broadcasters, particularly those who, through transmitters or common ownership, are able to reach Ontario's major population centres. Moreover, Global contended that its advantages as an Ontario regional service are offset by the fact that it is prohibited from selling local advertising and by the requirement that its news programming reflect all of Ontario rather than focusing on the more profitable Toronto market.

 The Commission notes, however, that Global, unlike its competitors in Ontario, is not required to provide local news programming in all the major communities where it has transmitters. Consequently, Global's spending on Canadian programming is less than that of its primary competitors. At the same time, the restriction on Global's licence prohibiting it from selling local advertising has not significantly disadvantaged the licensee in relation to its primary competitors with respect to CIII-TV's ability to earn advertising revenues.

 With regard to its national influence in the Canadian broadcasting system, the licensee argued that, although much of its programming is currently able to reach 77% of English-language audiences in Canada through the CanWest/Global system, Global's position does not differ significantly from that of station groups who also purchase national programming rights, such as Baton Broadcasting Limited (Baton), WIC Western International Communications Ltd. or CHUM Limited. Global further claimed that the benefits of operating as part of the CanWest/Global system are offset by the fact that CIII-TV and CKVU-TV Vancouver, the system's two profitable stations, subsidize CanWest stations in Manitoba and Saskatchewan by charging the less profitable stations lower than proportional costs for programs for which CIII-TV and CKVU-TV have acquired national rights.

 The Commission notes, however, that being part of the CanWest/Global system allows Global to reach markets, not only in Ontario, but also in British Columbia, Saskatchewan, Manitoba, New Brunswick and Nova Scotia, thus affording Global the enviable opportunity of buying national rights for both Canadian and foreign programs with a reasonable assurance that it will be able to sell the regional rights outside Ontario.

 Having considered Global's arguments, the Commission is not convinced that it should deal with Global in the same manner that it does other conventional, English-language television broadcasters. The Commission continues to consider that Global has a unique mandate and role within Ontario and within the Canadian broadcasting system and that it should continue to use its privileged position as an Ontario regional service to provide high-quality Canadian entertainment programming and to make that programming available throughout Canada.

 The Commission's Requirements for Canadian Programming

(a)  Condition of Licence Requiring Expenditures on Canadian Entertainment Programming

 In submitting its licence renewal application, Global assumed that the policy set out in Public Notice CRTC 1995-48 for conventional English-language television stations with respect to the Commission's requirements for investment in Canadian programming would apply to CIII-TV. Under this policy, licensees of most private English-language television stations earning over $10 million in total annual advertising revenues and network payments are offered the option of either adhering to a condition of licence on Canadian programming expenditures similar to their existing condition (option A), or of adhering to a condition requiring the licensee to exhibit a specific number of hours of Canadian drama (category 7), music (category 8) and variety programming (category 9) during the evening broadcast period for each year of the licence term (option B). In its licence renewal application, Global advised the Commission that, during the upcoming licence term, it wished to follow option B.

 At the hearing, the Commission questioned Global as to whether a regional station licensed to serve all of Ontario should be subject to requirements for Canadian programming similar to those imposed on other conventional, English-language television stations which are licensed to serve local communities. Following discussion of this issue, Global stated that, if the Commission did not consider that option B should apply to CIII-TV, it would agree to conditions of licence requiring the licensee to make expenditures in accordance with a formula targeted to Canadian entertainment programming (categories 7, 8 and 9) and requiring it to broadcast a weekly average of 4 hours of drama programming between 7:00 p.m. and 11:00 p.m. Global indicated that at least 50% of those 4 hours would be original, first-run programming.

 At the hearing, the Commission discussed with Global the application of an alternative formula respecting expenditures on Canadian programming in categories 7, 8 and 9, using as a base the amount projected in the licensee's application for the first year of the new licence term ($9,339,000). In response, Global stated that the $9,339,000 base amount projected in its application included overspending made during the current licence term under CIII-TV's present condition of licence for expenditures on Canadian programming. Global proposed a lower base amount for the formula. At the Commission's request, Global submitted the details of its proposal in writing following the hearing.

 In its submission dated 25 September 1995, Global proposed that, in the first year of the new licence term, it be required to spend $8,431,000 on Canadian entertainment programming (categories, 7, 8 and 9) calculated in accordance with the Canadian program expenditure definitions included in Public Notices CRTC 1993-93 and 1993-174. The licensee also proposed that, in each subsequent year, the amount be increased or decreased by the percentage change in the previous year's revenues, and that the spending requirement be subject to the annual spending flexibility accorded in Public Notice CRTC 1992-28.

 Global's calculations revealed that the $8,431,000 figure proposed was derived using a base amount of $7,013,000, that being the base amount of the first year of the current licence term (1992-1993). The Commission notes that $7,013,000 is the actual amount that Global spent on Canadian entertainment programming (categories, 7, 8 and 9) in 1991-1992, the year prior to the beginning of the current licence term. Further, the Commission notes that the amount Global projected in its last licence renewal application for expenditures on Canadian entertainment programming (categories 7, 8 and 9) for 1992-1993, as well as the actual amount that the licensee did spend on these categories of programming in 1992-1993, were both higher than $7,013,000.

 Global stated that, in using the formula, it did not wish to use the base amount of $9,339,000 projected in its application, because this amount included over-expenditures on Canadian programming made under its present condition of licence during the current licence term. The Commission notes, however, that Global's overexpenditures during the current licence term were made entirely on news programming and not on entertainment programming.

 The Commission considers that the most appropriate methodology is to use, as the base amount, the amount projected in the first year of the new licence term. Global has failed to convince the Commission that it should change its method for establishing a base amount.

 In view of Global's unique mandate and role within Ontario and within the Canadian broadcasting system, the Commission does not accept Global's proposal that it follow option B during the new licence term. The Commission has decided to impose on Global a condition of licence which requires that the licensee expend a minimum of $9,339,000 on Canadian entertainment programming (categories 7, 8 and 9) in the year ending August 1997, and to adjust this amount in each subsequent year in accordance with the prescribed formula linking program expenditures with station advertising revenues. The policies pertaining to the formula, as set out in Public Notices CRTC 1989-27, 1992-28, 1992-89, 1993-93 and 1993-174 will apply, with the clarification that the licensee will not be permitted to credit any overexpenditure made in the previous licence term towards Canadian programming expenditures in any year or years of the upcoming licence term. The condition of licence is set out in the appendix to this decision.

 The Commission reminds Global that expenses related to master control operations are not eligible as Canadian programming expenditures and that it should continue to report master control expenditures as "Other" expenses.

 The Commission notes that Global has elected to increase or decrease its annual expenditures on Canadian programming by the percentage change in the previous year's revenues. The Commission expects Global to adhere to this mechanism throughout the new licence term.

 The Commission expects that, during the new licence term, CanWest will allocate expenditures on Canadian programming among stations in the CanWest/Global system in a manner that is consistent with the practices it has followed during the current licence term.

b)  Condition of Licence Requiring Exhibition of Canadian Drama

 The Commission considers that Global's proposal made at the hearing to broadcast an average of 4 hours of Canadian drama programming each week during peak viewing hours would be an appropriate contribution. In its 25 September submission, Global requested that the peak viewing hours be defined as the period between 7:00 p.m. and 11:00 p.m. during the weekdays as well as on Saturday and Sunday. The Commission agrees that it is reasonable for Global to schedule Canadian drama between 7:00 p.m. and 11:00 p.m. on Saturdays and Sundays (as approved in Decision CRTC 96-46 dated 9 February 1996), but considers that the licensee should schedule its Canadian drama after 8:00 p.m. and before 11:00 p.m. on all other evenings, when the largest audiences are available. Accordingly, by a further condition of licence, set out in the appendix to this decision, the Commission requires Global to broadcast, at a minimum, an average of 4 hours each week of Canadian drama programming between 8:00 p.m. and 11 p.m. Monday through Friday, and between 7:00 p.m. and 11:00 p.m. on Saturday and Sunday. The Commission notes Global's commitment to maintain a percentage of at least 50% of original, first-run hours of Canadian drama.

c) C ondition of Licence Requiring Exhibition of Canadian Documentaries

 In the past, Global has played a leading role among Canadian broadcasters in acquiring and broadcasting Canadian documentary programs. However, in its present licence renewal application, Global stated that it did not plan to develop or acquire Canadian documentary programs during the new licence term. Global explained that, in preparing its licence renewal application, it had focused its commitments on entertainment programming (categories 7, 8 and 9) included under option B. Nevertheless, when questioned at the hearing, Global stated that it would accept a requirement to broadcast a minimum of four documentary programs each year. Global noted that most documentary specials are at least one hour in length.

 The Commission requires Global, by condition of licence, to broadcast, between 8:00 p.m. and 11:00 p.m. Monday to Friday and between 7:00 p.m. and 11:00 p.m. on Saturday and Sunday (peak viewing hours), a minimum of 6 hours each year of original, first-run Canadian documentary programs during the first three years of the licence term, and a minimum of 9 hours each year of original, first-run Canadian documentary programs in peak viewing hours during the last four years of the licence term.

 Regional News Programming

 The Commission expects Global to adhere to its commitment to broadcast, at a minimum, an average of 17 hours 30 minutes each week of original, first-run regional news. In its licence renewal application, Global stated that it would broadcast an average of 21 hours each week of original, regional news. The Commission notes, however, that the proposed 21 hours included 3 hours 30 minutes of the program, Sportsline, which is more properly categorized as Sports (Category 6). In keeping with Global's regional mandate to serve the province of Ontario, the Commission expects the licensee to continue to provide news programming that is relevant to viewers throughout Ontario.

 Children's Programming

 During the current licence term, Global broadcast children's programming, Monday to Friday mornings from 6 a.m. until approximately 8:30 a.m. Global also offered children's programming on Saturday mornings from 8:30 a.m. until noon, and until 9:30 a.m. on Sunday mornings. For the upcoming licence term, Global made a commitment to broadcast approximately 30 hours of children's programming each week, of which 18 hours (60%) will be Canadian.

 The Commission commends Global on the high level of children's programming broadcast on its station during the current licence term. The Commission encourages Global to maintain the same level in quality and quantity of children's programming offered by CIII-TV during the new licence term. In this regard, the Commission encourages Global to broadcast the maximum amount possible of original, first-run Canadian children's programming.

 Program Development

 As part of its licence renewal application, Global made a commitment to spend $3 million on program development over a seven-year licence term. According to the schedule contained in its application, Global intends to spend approximately $400,000 on program development in each of the first three years of the licence term, and $450,000 in each of the remaining four years. Global will allocate these funds to drama, children's programs, variety programs and documentaries.

 Advertising

 As part of its licence renewal application, Global requested that the Commission amend CIII-TV's current condition of licence which prohibits the licensee from selling local advertising. Global proposed that it be allowed to sell national airtime to any client, whether local or national, so long as the client pays the national rate for the advertising to be broadcast by CIII-TV.

 Global noted that its major competitor, Baton, offers a regional service by means of its rebroadcasting transmitters and has access to local advertising. When questioned on this issue, however, the licensee acknowledged that Baton's obligations to provide local programming on each of its transmitters engender higher expenses than those incurred by Global for its regional station. Global does not provide any local programming.

 Global further contended that it should be regulated by the same condition of licence on advertising as that imposed on specialty services such as The Sports Network and Newsworld. Specialty services are authorised to sell national advertising to any advertiser, including local advertisers.

 In the Commission's view, Global's programming, unlike that offered by a specialty service, could compete directly with the programming provided by local broadcasters, and could result in the displacement of local advertising revenues if Global were allowed to sell airtime to local advertisers.

 Global also argued that it needs increased advertising revenues because its Ontario operations, along with its sister station, CKVU-TV Vancouver, subsidize CanWest/Global's less profitable stations in Saskatchewan, Manitoba and the Atlantic provinces.

 The Commission notes that in 1994 Global's margin of profit before interest and taxes (PBIT) was 25.4%, significantly higher than the PBIT of Baton, its major competitor. Accordingly, despite the fact that CIII-TV may subsidize less profitable stations within the CanWest/Global system, the Commission does not consider that Global has demonstrated economic need or financial hardship which would justify permitting it access to local advertising revenues.

 In light of the above considerations, the Commission denies Global's request. The Commission, in denying this request, has also taken into consideration the opposing interventions submitted by CHUM Limited, licensee of CITY-TV Toronto, Niagara Television Limited, licensee of CHCH-TV Hamilton, Power Broadcasting Inc., licensee of CKWS-TV Kingston and CHEX-TV Peterborough as well as CAP Communications, a division of Electrohome Limited, licensee of CKCO Kitchener. The interveners maintained that granting Global access to local advertising revenues would result in significant losses in advertising revenues for their own stations and for other local broadcasters. According to the interveners, Global already offers advertisers discounts on its published "national" rate card. The interveners claimed that, if Global were allowed to solicit local advertisers, it would increase this practice and that "local advertising would be substantially discounted from the national rate card".

 Furthermore, the interveners expressed concern that Global's large coverage area would make it attractive to larger local advertisers.

 The Commission has noted Global's responses to these opposing interventions. In the Commission's view, however, approval of Global's request could result in a decrease in local advertising revenues for local broadcasters and could, consequently, compromise their ability to fulfill their obligations for local programming. Accordingly, by condition of licence, Global is required not to broadcast any local advertising during the new licence term.

 Service to the Deaf and Hard of Hearing

 At the hearing, Global stated that "in prime time 90% of our programs are already captioned". Global also indicated that, during the upcoming licence term, "by September the 1st 1998, live display should take over in news presentation". The Commission commends Global on its progress during the current licence term in providing closed captioning of its programming.

 For the new licence term, the Commission requires Global to caption, by 1 September 1998, all regional news programming, including live segments, using real-time captioning or another method capable of captioning live programming. The Commission also requires Global to close caption, by the end of the new licence term, at least 90% of all programming during the broadcast day.

 Employment Equity

 In Public Notice CRTC 1992-59 dated 1 September 1992 and entitled "Implementation of an Employment Equity Policy", the Commission announced that the employment equity practices of broadcasters would be subject to examination by the Commission. The Commission recognizes Global's involvement in various employment equity initiatives, including its support of women in broadcasting. Nevertheless, the Commission considers that the licensee could increase its efforts in relation to visible minorities, people with disabilities and aboriginal people.

 At the time of Global's next licence renewal, the Commission will review the licensee's performance in implementing adequate employment equity practices.

 Interventions

 The Commission acknowledges the many interventions submitted in support of Global's licence renewal. The Commission also acknowledges three other interventions filed in opposition to this application and is satisfied with Global's replies thereto.

 This decision is to be appended to the licence.

 Allan J. Darling
 Secretary General

APPENDIX

 Conditions of licence for CIII-TV and its transmitters

1.  Subject to conditions of licence 2, 3 and 4, the licensee shall expend on Canadian entertainment programming (categories 7, 8 and 9) , at a minimum,

(i)  In the year ending 31 August 1997, the amount of $9,339,000; and

(ii)  In each subsequent year of the licence term, an amount calculated in accordance with the following formula: the amount of the previous year's required expenditures (before consideration of any overexpenditures or underexpenditures from prior years), increased (or decreased) by the year-over-year percentage change in the total of the station's annual advertising revenues, as reported in the relevant Annual Return for the years ending 31 August.

2.  Notwithstanding condition 1, in any year of the licence term, excluding the final year, the licensee may expend an amount on Canadian entertainment programming (categories 7, 8 and 9) that is up to five percent (5%) less than the minimum required expenditure for that year as set out or calculated in accordance with condition 1 above; in such case, the licensee shall expend in the next year of the licence term, in addition to the minimum required expenditure for that year, the full amount of the previous year's underexpenditure.

3.  Where in any year of the licence term, excluding the final year, the licensee expends an amount on Canadian entertainment programming (categories 7, 8 and 9) that is greater than the minimum required expenditure for that year, as set out or calculated in accordance with condition 1 above, the licensee may deduct:

a)  from the minimum required expenditure for the next year of the licence term, an amount not exceeding the amount of the previous year's overexpenditures; and

b)  from the minimum required expenditure for any subsequent year of the licence term, an amount not exceeding the difference between the overexpenditure and any amount deducted under a) above.

4.  Notwithstanding conditions 2 and 3 above, during the licence term, the licensee shall expend on Canadian entertainment programming (categories 7, 8 and 9), at a minimum, the total of the minimum required expenditures as set out in or calculated in accordance with condition 1 above.

 5. For the purpose of the above conditions 1, 2, 3 and 4, "expend on Canadian programming" shall have the same meaning as that set out in Public Notices CRTC 1993-93 and 1993-174 dated 22 June 1993 and 10 December 1993, respectively. For the purpose of the said conditions, the licensee is not permitted to credit any overexpenditure made in the previous licence term towards expenditures on Canadian entertainment programming (categories 7, 8 and 9) in any year or years of this licence term.

6.  The licensee shall broadcast, at a minimum, in each broadcast year, an average of 4 hours each week of Canadian drama between 8 p.m. and 11 p.m. Monday through Friday, and between 7:00 p.m. and 11:00 p.m. on Saturday and Sunday.

7.  The licensee shall broadcast between 8:00 p.m. and 11:00 p.m. Monday to Friday, and between 7:00 p.m. and 11:00 p.m. on Saturday and Sunday (peak viewing hours), a minimum of 6 hours in each broadcast year of original, first-run Canadian documentary programs during the first three years of the licence term, and a minimum of 9 hours in each broadcast year of original, first-run Canadian documentary programs in peak viewing hours during the last four years of the licence term.

8.  The licensee shall not broadcast any local advertising.

9. The licensee is permitted to use satellite technology to deliver its signal or its programming only to its television transmitters in Ontario and to other Canadian television stations that hold rights to Global programming, provided that the signal is delivered in an encrypted form.

10.  The licensee shall 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 accepted by the Commission. The application of the foregoing condition of licence will be suspended as long as the licensee remains a member in good standing of the Canadian Broadcast Standards Council (CBSC).

11.  The licensee shall adhere to the guidelines on the depiction of violence in television programming set out in the CAB's "Voluntary Code Regarding Violence in Television Programming", as amended from time to time and accepted by the Commission. The application of the foregoing condition of licence will be suspended as long as the licensee remains a member in good standing of the CBSC.

12.  The licensee shall adhere to the provisions of the CAB's "Broadcast Code for Advertising to Children", as amended from time to time and accepted by the Commission.