Ottawa, 28 October 1999
Decision CRTC 99-481
Kelowna Broadcasting Ltd.
Kelowna, British Columbia - 199805321
Okanagan Radio Limited
Kelowna, British Columbia - 199811617
4 May 1999 Public Hearing
Introductory statement -Licensing new radio stations
The Commission held public hearings on 4 May 1999 in Vancouver and 28 June 1999 in the National Capital Region. These were among the first hearings at which the Commission considered competing applications for new radio licences after it adopted its new commercial radio policy in April 1998 (Public Notice CRTC 1998-41).
At each of these public hearings, the respective panels discussed with applicants general questions relating to the implementation of the commercial radio policy. The discussions focused on the factors that the Commission ought to consider when assessing competitive radio applications to serve a particular market, in light of the new commercial radio policy and the public interest.
In the context of the consultation with the full Commission required by the Broadcasting Act before decisions on applications are made, the Commission has found that the factors set out below will generally be among those relevant to the evaluation of competitive applications under the new policy. The relative weight and significance of the various factors will vary depending on the specific circumstances of the market concerned. The Commission will continue to consider whether the proposed use of the frequency is optimal in all the circumstances.
Factors relevant to the evaluation of applications
Quality of the application
In assessing this factor, the Commission will evaluate commitments in a number of areas. For example, the Commission will assess the overall business plan provided by the applicant, which includes the proposed format. Further, depending on the circumstances, it may be relevant to assess Canadian content commitments and, if applicable, commitments related to the level of French-language vocal music.
The manner in which applicants intend to reflect their local community, including the community's diversity and distinctiveness, remains important. The Commission will therefore examine local programming proposals and the benefits that the applicant will bring to the community.
The new policy places emphasis on Canadian talent development (CTD). The Commission considers that the applicant's CTD proposals are important elements when the quality of the application is assessed.
Diversity of news voices in the market
This factor relates to concerns regarding concentration of ownership and cross media ownership. The Commission has stated in this regard that it seeks to strike a balance between its concerns for preserving a diversity of news voices in a market, and the benefits of permitting increased consolidation of ownership within the radio industry.
The possibility that licensing too many stations in a market could lead to a reduction in the quality of service to the local community remains of concern to the Commission. The economic condition of the market and the likely financial impact of the proposed station upon existing stations in the market will therefore be relevant.
Competitive state of the market
Since the new radio policy permits one party to own more radio stations in a market than was the case under the previous policy, the new ownership limits increase the possibility of competitive imbalance in a radio market. This factor will be relevant when evaluating applications for new commercial radio stations under the policy.
Importance of factors
As indicated above, the relative importance of each of these factors will vary in each case depending on the specific circumstances of the market concerned.
Summary of decision
The Commission denies the application by Kelowna Broadcasting Ltd. (Kelowna Broadcasting) for a licence to operate an English-language FM radio programming undertaking at Kelowna. The Commission also denies the application by Okanagan Radio Limited (Okanagan) to replace AM station, CKBL Kelowna, with an English-language FM station.
The Commission is not convinced that the Kelowna radio market could sustain in a financially viable manner six local commercial stations. In addition, the Commission is concerned that licensing too many stations in the market could lead to a reduction in the quality of service to the local community. Moreover, the Commission considers that conversion of CKBL to the FM band would exacerbate the current competitive imbalance in the Kelowna radio market. The Commission considers that any change in the Kelowna radio market at this time could lead to a further decline in the overall economic situation of the market.
Background - Call for applications
1. Kelowna Broadcasting applied for a licence to operate an English-language FM station at Kelowna. It proposed to operate in the "Country" format. In keeping with its usual practice in such cases, the Commission issued a call for applications from other parties wishing to obtain a broadcasting licence to carry on an FM broadcasting station at Kelowna (Public Notice CRTC 1998-100). In response to this call, Okanagan applied to replace AM station, CKBL, with an English-language FM station. It also proposed to operate in the "Country" format.
2. Kelowna Broadcasting, licensee of CILK-FM, Kelowna's only stand-alone station, stated that it needs two stations to compete with the other radio broadcasters in the market who each own combined AM/FM operations.
3. Okanagan argued that the Kelowna radio market cannot support an additional station. It claimed that moving CKBL to the FM band would provide a high-quality country music service to Kelowna without harming existing stations.
4. Initially, when filing this application, Okanagan was a wholly owned subsidiary of Okanagan Skeena Group Limited (Okanagan Skeena). On 1 March 1999, however, Okanagan Skeena and Okanagan amalgamated. Subsequently, the Commission in Decision CRTC 99-458 approved an inter-corporate reorganization of Okanagan Skeena. Okanagan Skeena transferred the assets of its television and radio programming undertakings in British Columbia and Alberta to 3537412 Canada Ltd. As a result of this transaction, 3537412 Canada Ltd. is the licensee of CKBL.
The Kelowna radio market
5. Kelowna's central market has a population of approximately 142,640 persons aged 12 years or more. It is served by five local commercial radio stations. The Commission notes that many other radio markets of a similar size in Canada are served by less than five radio stations.
6. As noted earlier, Kelowna Broadcasting owns CILK-FM. 3537412 Canada Ltd. is the licensee of CKBL and CHSU-FM. Jim Pattison Industries Ltd. (Jim Pattison) owns the remaining stations, CKOV and CKLZ-FM.
7. The aggregate profit before interest and taxes (PBIT) margin for the Kelowna market has been negative for the past three years. This period corresponds with the introduction of the fifth radio station in the market in 1996.
8. Out-of-market tuning in the Kelowna central market accounts for about only 15% of total tuning. This level of out-of-market tuning provides a new entrant with little opportunity to repatriate tuning from out-of-market stations. A significant portion of the audience of a new station in Kelowna would likely come from existing players.
9. In its intervention opposing Kelowna Broadcasting's application, Jim Pattison stated:
... we at CKOV and CKLZ-FM believe that the Kelowna market is neither large nor profitable enough to support the addition of a sixth radio station. ... The fact of the matter is the Kelowna radio market is in a very serious financial plight. Licensing a sixth commercial radio station is not in the public interest ... and will only exacerbate the already perilous losses taking place in the Kelowna radio market.
10. The Kelowna Rockets Hockey Club also opposed Kelowna Broadcasting's application. It considered that Kelowna cannot absorb a sixth commercial radio station at this time and that duplication of the proposed "Country" music format would seriously harm the existing AM country radio station, CKBL. In opposing interventions to this application, two advertisers, Mark's Work Warehouse and Team Yamaha-Honda Kelowna, maintained that increased audience fragmentation in the Kelowna radio market would diminish the efficiency of radio as an advertising vehicle in the market.
11. Jim Pattison also opposed Okanagan's application to convert its AM station to FM. The intervener stated that the Kelowna radio market is "already unstable"and argued that more changes to the arrangement of radio stations would aggravate the situation and alienate potential advertisers from radio.
12. The Commission has noted the applicants' responses to these interventions.
The Commission's decision
13. The Commission has evaluated these applications in the context of the factors described in the introductory statement to this decision. In particular, the Commission has taken into consideration the economic condition of the market and the financial impact of the proposed stations upon existing stations in the market. The Commission has also considered the current competitive state of the market.
14. Based on a comparison with other markets of comparable size and given the particular circumstances of the Kelowna radio market, the Commission is not convinced that the market could sustain in a financially viable manner six local commercial radio stations. The Commission is concerned that licensing too many stations in the market could lead to a reduction in the quality of service to the local community. For these reasons, the Commission has denied Kelowna Broadcasting's application for a broadcasting licence for an FM station at Kelowna.
15. Moreover, the Commission considers that the conversion of CKBL to the FM band would place CILK-FM, Kelowna's only stand-alone station, at a greater competitive disadvantage. If Okanagan's application were to be approved, CILK-FM would have to compete against a jointly-owned AM/FM operation and a jointly owned FM/FM combination. The Commission also agrees with the interveners that any change to the Kelowna radio market would only worsen the situation. Accordingly, the Commission has denied Okanagan's application.
16. The Commission notes that, in response to questioning at the hearing, Okanagan acknowledged that denying both applications would be best for the Kelowna market because it would "maintain the most stability."
17. The Commission has considered all of the supporting and opposing interventions submitted with respect to these applications.
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