ARCHIVED -  Decision CRTC 97-484

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Ottawa, 22 August 1997
Decision CRTC 97-484
3321118 Canada Inc., on behalf of Le Groupe Vidéotron ltée and CF-12 inc.
Montréal, Quebec - 199703541
Transfer of control
1. Following a Public Hearing in Montréal beginning on 7 July 1997, the Commission approves the application by 3321118 Canada Inc. (3321118), on behalf of Le Groupe Vidéotron ltée (GVL) and CF-12 inc. (CF-12), for authority to transfer effective control of CF-12, through the transfer of CF-12's shares to 3321118.
2. CF-12 is the licensee of CFCF-TV Montréal and holds 14.24% of the shares of the CTV Television Network Ltd. CF-12 is a corporation resulting from the privatization of the corporation formerly known as CFCF Inc. 3321118's shareholders subsequently intend to merge their company with CF-12.
3. The applicant is owned by WIC Television Ltd. (70%) (WIC) and by Capital Communications CDPQ inc. (30%) (CCCI). WIC, which is ultimately controlled by the Griffiths Family Trust, has extensive holdings in Canada's broadcasting industry. CCCI is a wholly owned subsidiary of Caisse de dépôt et de placement du Québec.
4. With the introduction of CKMI-TV Québec as a new English-language television service in the province of Quebec, (see Decision CRTC 97-85 dated 27 February 1997), CFCF-TV will be facing competition and expects revenues and profit margins to decrease. Nevertheless, the Commission notes the applicant's commitment to operate the station under the same terms and conditions as those of the current licence.
5. Because the Commission does not solicit competing applications for authority to transfer effective control of broadcasting undertakings, the onus is on the applicant 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.
6. 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.
7. The base purchase price for the shares is $70 million, subject to adjustments. Based on a revenue formula including results from each of the first three fiscal years, the potential purchase price may amount to as much as $100 million.
8. According to the applicant, one of the significant intangible benefits that would result from approval of this application would be the financial stability and the substantial resources that WIC, a strong player in the Canadian broadcasting system, will bring to CFCF-TV. It noted that the strength of WIC's western stations "can help support the newer and less profitable stations in the east" and stated that CFCF-TV might not be able to survive as a stand-alone station.
9. The applicant noted that approval of this application, which will introduce a new voice to the Quebec market, will also increase WIC's television coverage to 74% of English-language Canada, will contribute to balance among the major players in English-language television and foster continued competition. The CanWest Global System currently covers 77% of this market, while Baton Broadcasting Incorporated covers 75%.
10. The applicant also pointed out that there will be increased opportunities for CFCF-TV and Quebec independent producers to have their programming broadcast on WIC stations in other parts of Canada.
11. The applicant proposed tangible benefits totalling $7 million. Of these, the Commission accepts the proposal to maintain a local development office in Montréal which will provide a $4 million fund for access by Quebec independent producers to create English-language programs in under-represented programming categories. This benefit will be incremental to CFCF-TV's required expenditures on Canadian programming, including the existing program development commitment.
12. The Commission has noted the $3 million benefit claimed in respect of the applicant's plans to purchase and equip a fully-digital mobile production truck. In the Commission's view, this expenditure is a normal cost of doing business and, thus, falls within the categories of proposed benefits that have generally been rejected as such for the reasons outlined in Public Notice CRTC 1993-68. Consistent with this policy, the Commission expects the applicant to ensure that the expenditures totalling $7 million over the remainder of the licence term, as proposed in this application, are made in accordance with the timetable outlined at the public hearing.
13. Notwithstanding the disqualification of this amount, the Commission is generally satisfied that the remaining tangible and intangible benefits, taken as a whole, are commensurate with the size and nature of the transaction and that approval of this application is in the public interest.
Local reflection
14. In its application, 3321118 described plans whereby some of the programming previously produced in-house by CFCF-TV will now be acquired from local independent producers. The applicant, however, made a commitment not to reduce the level of local reflection currently provided by CFCF-TV. It also committed to maintain the minimum weekly average of 14 hours 50 minutes of original, local news and to continue to produce in-house "Montréal AM Live", a one-hour phone-in program broadcast Monday to Friday.
Programming directed to children and youth
15. 3321118 asked to be relieved of the commitments to broadcast children's and youth programming in order to focus on providing Canadian programs in under-served programming categories for broadcast during prime time. In support of this proposal, the applicant reiterated that CFCF-TV's financial position is expected to decline.
16. Following discussions at the hearing, the applicant made a commitment to continue broadcasting a weekly news program directed to youth and to abide by CFCF-TV's commitment to produce an annual special devoted to the musical talents of local children (see Decision CRTC 95-105 dated 24 March 1995). The Commission expects the applicant to adhere to these commitments.
Employment equity
17. The Commission notes that this applicant is subject to the Employment Equity Act that came into effect on 24 October 1996 (1996 EEA), and therefore files reports concerning employment equity with Human Resources Development Canada. As a result of a consequential amendment to the Broadcasting Act, the Commission no longer has the authority to apply its employment equity policy to any undertaking that is subject to the 1996 EEA.
18. In its intervention, the Canadian Film and Television Production Association (CFTPA), a national association representing independent producers involved in English-language television and feature film production, expressed conditional support for 3321118's application. The intervener requested that the applicant be required to demonstrate commitments to Canadian programming in under-served categories that are comparable with WIC's overall resources, that it provide new opportunities to Quebec independent producers, and that it maintain a program development and acquisition office in Montréal. CFTPA opposed the applicant's request to reduce CFCF-TV's commitment to children's programming. The Commission has noted the applicant's response to the CFTPA and is satisfied that the intervener's concerns have been addressed in this decision.
19. The Commission acknowledges the intervention submitted by Allegro Films expressing the same concerns as those raised in CFTPA's intervention. The Commission also acknowledges the eight other interventions submitted in support of this application.
This decision is to be appended to the licence.
Laura M. Talbot-Allan
Secretary General
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