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ARCHIVED - Decision CRTC 2000-221

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Decision CRTC 2000-221
Ottawa, 6 July 2000
WIC Western International Communications Ltd.
CW Shareholdings Inc.

Vancouver, Prince George, Kelowna, Kamloops and Victoria, British Columbia; Calgary, Lethbridge, Edmonton and Red Deer, Alberta; Montréal, Quebec; Hamilton, Ontario; and Across Canada
25 April 2000 Public Hearing
in Vancouver
Acquisition by CanWest Global Communications Corp., through its wholly-owned subsidiary CW Shareholdings Inc., of the ownership interests held previously by WIC Western International Communications Ltd. in various conventional television stations and in certain other broadcasting undertakings
Subject to certain non-suspensive conditions of approval discussed in detail below, the Commission approves all but two of a group of applications on the agenda of the Vancouver hearing pertaining to the transfer to CW Shareholdings Inc. of ownership interests in various broadcasting properties previously held either directly or indirectly by WIC. The approved applications include the transfer of WIC’s indirect ownership of 100% of the voting shares of the licensees of the following: CHAN-TV Vancouver, CHEK-TV Victoria and other television stations in British Columbia; CITV-TV Edmonton, CICT-TV Calgary and other television stations in Alberta; and CHCH-TV Hamilton, Ontario. Also approved are applications to transfer WIC’s ownership of the assets of a national video-on-demand (VOD) programming undertaking and WIC’s partnership interest (26%) in the licensee of the national specialty television programming service known as Report on Business Television or ROBTv. New licences will be issued in respect of both the VOD undertaking and ROBTv.
By letter dated 14 June 2000, CanWest Global withdrew its application to acquire from WIC an indirect ownership interest in CTEQ Télévision inc., licensee of CJNT-TV Montréal. Accordingly, no further Commission action is required with respect to this application.
The application for authority to transfer, to CanWest Global, indirect ownership of 70% of the voting shares of CFCF Television Inc., the licensee of CFCF-TV Montréal, Quebec is denied. The applicant had planned to conduct the sale itself, in light of the existing indirect 51% interest held by CanWest Global in Global Television Network Quebec, a partnership and licensee of CKMI-TV Quebec City and its rebroadcasting facilities at Montréal and Sherbrooke. As noted later in this decision, the 70% voting interest in CFCF-TV, and all of the other broadcasting interests previously owned by WIC that are the subject of this decision, are currently in trust following a Commission decision issued in February of this year. In the circumstances, the Commission considers that the public interest is best served by leaving responsibility in the hands of the trustee for the sale of the shares in CFCF Television Inc. to a third party.
Approval of the other applications mentioned above will alter significantly the landscape of the Canadian broadcasting system, particularly in British Columbia and Alberta, where most of the broadcasting assets now being acquired by CanWest Global are located. It gives CanWest Global ownership of television stations that provide service over the air to viewers in every province except Newfoundland. Based on 1999 financial data, the combined revenues of the regulated pay, specialty and conventional television undertakings now coming under the control of CanWest Global will stand at approximately 26% of total English-language television revenues earned in Canada. This percentage excludes the revenues earned by CFCF-TV. It also excludes those earned by CKVU-TV, thereby reflecting the Commission’s requirement, imposed as a non-suspensive condition of approval, that CanWest Global sell its indirect ownership of this undertaking. The percentage falls not far behind the revenue share of approximately 29% that CTV Inc. is estimated to earn through its ownership interests in the same classes of television undertakings, excluding earnings attributable to its holdings in SportsNet.
CanWest Global, among other things, holds indirect ownership of Global Communications Limited, licensee of CIII-TV Paris. This television station and its rebroadcasting facilities provide a regional service throughout much of Ontario. The service contours of CIII-TV and CHCH-TV Hamilton overlap. Approval of the application authorizing CW Shareholdings’ ownership of CHCH-TV thus constitutes an exception to the Commission’s policy that generally limits a person to the ownership of one television station operating in a given language, and serving a particular market. Approval of CW Shareholdings’ ownership of both CHAN-TV and CHEK-TV represents a similar exception, albeit one that has been present in the Vancouver-Victoria market for many years under WIC and other, previous owners.
The Commission is satisfied that the tangible and intangible benefits attached to this major consolidation of ownership within the broadcasting industry are significant, unequivocal and commensurate with the transaction’s size. It is convinced that the greater efficiencies and synergies that approval of this transaction brings to the Winnipeg-based CanWest Global organization gives it a strength that the Commission can call upon to provide support for the Canadian broadcasting system. Specifically, they will generate a substantially increased investment by this broadcaster in the development of Canadian talent and in the production of quality Canadian programming, particularly in western Canada. These synergies and efficiencies will also  enable CanWest Global to implement its commitments to restore and maintain a strong local focus in the programming offered by CHEK-TV Victoria and CHCH-TV Hamilton.
On balance, the Commission is satisfied that these outcomes, coupled with the application of certain conditions, safeguards and expectations intended to minimize the potential for undue competitive advantage and increase diversity, outweigh the Commission’s policy concerns associated with the common ownership of like undertakings in the same market.
The Commission’s approval of the applications by CanWest Global to acquire ownership of CHCH-TV Hamilton and CHEK-TV Victoria is, in each case, conditional upon the submission of an application forthwith to incorporate, as conditions of licence, the commitments made in respect of minimum levels of local news and non-news programming; and in respect of the non-duplicative nature of the priority programming.
The Commission’s approval of the applications involving CHAN-TV Vancouver and CHEK-TV Victoria is further conditional upon the submission of an application to the Commission, within four months of today’s date, for the divestiture by CanWest Global’s subsidiary, CanWest Television Inc., of its ownership of CKVU-TV Vancouver and its rebroadcasting facilities at Courtenay. If an application is not filed within the four months for the sale of this station to an independent third party, then CanWest Global must place CKVU-TV in trust pending consideration of an application by the Commission.
Background

1.

The Vancouver public hearing in April of this year marked the final stages of a complex transaction that had its beginnings two years earlier. Details concerning the events leading up to the 25 April hearing are set out in Notice of Public Hearing CRTC 2002-1 and are summarized below.

2.

In March 1998, without the Commission’s prior approval, beneficial ownership of the voting shares of WIC held by members of the Griffiths family of Vancouver was transferred to Cathton Holdings Ltd. and, either directly or indirectly, to Shaw or to other companies coming under Shaw’s control. This sale left the Shaw group with approximately 49.96% (just short of 50%) of WIC’s Class A voting shares, and Cathton with 49.99% of those shares. Through a subsequent public offer, Shaw obtained approximately 52% of WIC’s Class B non-voting shares. Meanwhile, through a public offer made in a separate bid to gain control of WIC, CanWest Global acquired approximately 46% of the company’s Class B shares.

3.

In January 1999, WIC filed a set of applications whose approval would have authorized Shaw or its affiliate to hold, either directly or indirectly, the shares noted above, representing a 49.96 % voting interest and a non-voting interest of approximately 52% in WIC. These applications were first scheduled for consideration at a public hearing in May of 1999, but were withdrawn in light of ongoing negotiations between Shaw and CanWest Global concerning ownership of the WIC assets. The Commission subsequently rescheduled the applications to a public hearing in October of 1999, but further adjourned them pending the execution of a definitive agreement by the parties.

4.

On 28 October 1999, CanWest Global, Shaw, Corus and Cathton jointly informed the Commission that they had entered into definitive agreements (the Master Agreement and the Cathton Agreement), the completion of which would result in the division of WIC’s various broadcasting undertakings and unregulated assets between CanWest Global, Shaw and Corus. Copies of the Master Agreement and the Cathton Agreement were submitted to the Commission on 9 November 1999.

5.

Under the Master Agreement, WIC was to execute a multi-step intracorporate reorganization. The reorganization involved, among other things, the creation of new subsidiary companies and the transfer by WIC, either to the new subsidiaries or to itself, of assets or of shares then held indirectly by WIC in various regulated businesses. WIC filed with the Commission a set of applications for authority to affect the intracorporate reorganization.

6.

Because the Master Agreement between CanWest Global, Corus and Shaw was expected to close on 29 February 2000, that is to say before the Commission's consideration of these applications, the parties requested authority to create separate trust arrangements. On 17 December 1999, the Commission approved three such trust agreements: the CanWest Global Trust Agreement with Mr. L.R. Sherman as trustee; the Corus Trust Agreement with Mr. John D. Hylton, Q.C. as trustee; and the Shaw Trust Agreement with Mr. Gowan T. Guest Q.C. as trustee.

7.

The applications pertaining to the intracorporate reorganization were considered at a public hearing in Toronto in January 2000, and were subsequently approved by the Commission in Decision CRTC 2000-70 dated 29 February 2000. The Commission noted that its approval of the intracorporate reorganization was not to be interpreted as an indication that it was predisposed to approve any of the further applications contemplated under the Master Agreement. The applications include those that are the subject of this decision dealing with the transfer of certain of WIC’s other broadcasting interests to CanWest Global, as well as others dealing with the transfer of various of WIC’s other broadcasting holdings to Shaw and Corus (see Decisions CRTC 2000-213 dated 30 June 2000 and 2000-222 of today’s date).

8.

Details concerning the CanWest Global group of applications, including the application numbers and the names of the licensee companies involved, and the call signs or names of the licensed undertakings they operate, are provided in Appendix 1 to this decision.

9.

The Commission notes that the acquisition by CW Shareholdings of the assets of the national VOD undertaking and of the 26% partnership interest in ROBTv necessitate, in each case, the issuance of a new licence. Details regarding the terms and conditions of these new licences are set out in Appendices 2 and 3. In the case of ROBTv, the Commission notes that, as a consequence of a letter decision dated 19 May 2000, a further partnership interest of 24% in this specialty service previously owned by Canadian Satellite Communications Corp. now resides within the same CanWest Global Trust as that noted above. The Commission reminds CanWest Global that the present decision authorizes release from the trust only of the 26% partnership interest previously held by WIC. The other 24% partnership interest must remain in the trust pending a decision by the Commission on a separate application it has recently received for authority to transfer that interest to CanWest Global.

10.

In the following sections of this decision, the Commission sets forth its reasons for the policy exceptions made in the context of Southern Ontario, and permitted to continue of in the Vancouver-Victoria area, with respect to the common ownership of like programming undertakings in the same market. It also outlines the conditions, safeguards and expectations regarding the implementation of the various programming plans and commitments by these and the other individual stations concerned. Finally, as in other decisions on applications involving the transfer of ownership of programming undertakings, the Commission assesses the expenditures and initiatives proposed by the purchaser as the tangible and intangible benefits of the transaction. The Commission’s decision, and the various individual determinations it encompasses, has been reached against the background of its common ownership policy, as well as its policy framework for Canadian television.
Exceptions to the Commission’s common ownership policy

11.

CanWest Global’s ownership of both CHEK-TV and CHAN-TV in British Columbia, and of both CHCH-TV and CIII-TV in southern Ontario, represent exceptions to the Commission’s general policy against the ownership of more than one television station serving a given market in a given language. This policy is intended principally to ensure the presence of diversity in a given market, particularly among editorial voices, and to guard against the creation of undue competitive advantage.

12.

Over the years, the Commission’s decisions have consistently affirmed the importance of preserving this policy. At the same time, these decisions have acknowledged that the concerns associated with this policy are often mitigated in large markets by the presence of a large number of broadcast outlets, newspapers, magazines and other sources. The Commission notes that few if any other Canadian markets would have the level of diversity present in Toronto and southern Ontario, and in the Vancouver-Victoria market.

13.

In weighing concerns about the diversity of voices in the particular communities that CHCH-TV and CHEK-TV are licensed to serve, the Commission is further mindful of the fact that there is relatively little by way of programming on either station that is currently oriented to those communities. This is despite the needs and wishes for strong, locally-focused television services that have been clearly expressed in supporting interventions filed by residents of Hamilton and Victoria. The Commission must also acknowledge the costs of providing such local service in the communities concerned and, in this context, has taken into account CanWest Global’s ability to deliver on its commitments to increase substantially the amount of local programming aired on these two stations. Further, it has considered CanWest Global’s commitment, through adherence to a Code of Conduct and other measures, to provide diversity by ensuring that the services offered by CHCH-TV and CHEK-TV remain distinctive and clearly distinguishable from the services provided by CIII-TV in Ontario and CHAN-TV in the Vancouver area.

14.

In the past, where the Commission has permitted the purchase of an undertaking as an exception to its common ownership policy, the rationale has often been tied to concerns about the continued viability of the undertaking in question in the absence of the financial rescue promised by the purchaser. Another decision issued today, namely that approving an application by CHUM Limited for a licence to establish and operate a new television station in Victoria, is relevant to the state of the Vancouver/Victoria market (see Decision CRTC 2000-219).

15.

CHUM’s application was one of a number considered at the Vancouver Public Hearing held earlier in February of this year. As reflected in the CHUM decision, the Commission, in approving the application, was satisfied that the Vancouver/Victoria television market is sufficiently robust to support a new entrant.

16.

However, introduction by CHUM of the new television service will have an inevitable impact on the market that will only be absorbed with the passage of some time. In this regard, the Commission has been mindful, not only of the enhanced and distinctive local programming service to be introduced on CHEK-TV, but of the dependence of CHEK-TV on CHAN-TV as a consequence of the closely interconnected financial and operational links that have been established between the Victoria and Vancouver stations over many years of common ownership.

17.

Given these considerations, the Commission has concluded that approval of CanWest Global’s application to purchase CHEK-TV effectively ensures that the station is placed in the hands of an owner having the financial capacity to operate the station as a stand-alone facility, while providing eight hours per week of priority programming and the high level of distinctively-local programming that CanWest Global is committed to provide.

18.

In the case of CHCH-TV, this television station has attempted to achieve economic stability over recent the years without any consistent or conspicuous success. Initially, it sought to survive as an independent operation on the basis of a service having a strong local identity with the Hamilton, Halton and Niagara area. During the 1980s and much of the 1990s, it appeared to stake its survival on establishing a niche for itself among Toronto audiences, at the expense of its local orientation. In recent years, it has established rebroadcasting facilities and has branded itself as a broad, general interest, regional service in southern and eastern Ontario.

19.

As in the case of CHEK-TV, CanWest Global’s commitments are to recreate CHCH-TV as an intensely-local programming service, one that will be strengthened through the provision of 8 hours of distinctive priority programming each week. In the case of both the Hamilton and Victoria stations, the applicant’s commitments, and the safeguards imposed by the Commission, guarantee that the services will be clearly distinguishable from those provided by their respective sister stations. As in the case of CHEK-TV, the Commission has concluded that approval of CanWest Global as the new owner of CHCH-TV ensures its continued operation as a stand-alone independent station providing a high level of local programming complemented by a full eight hours per week of unduplicated priority programming.

20.

Interventions opposed to certain of the applications by CanWest Global, namely those that would give it ownership of CHCH-TV and CIII-TV in Ontario and of CHAN-TV and CHEK-TV in Vancouver/Victoria, were presented at the hearing by Craig Broadcast Systems Inc. and CTV Television Inc. (CTV). In a third intervention, CHUM Limited offered only conditional support of these applications.

21.

Among its other broadcasting interests, CHUM owns CITY-TV Toronto and various other television stations in Ontario that compete with both CanWest Global and CTV for audiences and revenues. As noted above, in a separate decision issued today, the Commission has approved an application by CHUM to operate a new television station in Victoria. Craig is the licensee of a number of radio stations in Manitoba and Saskatchewan. It holds controlling interests in other licensee companies, one being the operator of television stations in Edmonton and Calgary, Alberta, and Brandon and Portage la Prairie, Manitoba; and the another that operates a multipoint distribution system (MDS) in Manitoba. Craig will also hold a controlling interest in a company not yet incorporated, whose application to provide an MDS service in Vancouver, Victoria and other communities in British Columbia has been approved today in Decision CRTC 2000-220. CTV Television Inc. holds licences for television stations operating across Canada. CTV and its parent, CTV Inc., also hold controlling or minority interests in a large number of other licensed undertakings, primarily those operating specialty television services.

22.

CHUM expressed concern for the negative impact that common ownership of CHEK-TV and CHCH-TV would have on the revenue and profitability of its stations, and hence its ability to sustain its "distinctive contribution to Canadian programming". CHUM indicated, however, that its concern would essentially be eliminated through adherence by CanWest Global to various safeguards, in particular its commitment not to broadcast any non-Canadian feature films and syndicated weekly series, or any non-Canadian programming broadcast on the so-called US mini-nets.

23.

In their interventions, both Craig and CTV argued that allowing the policy exceptions would give CanWest Global an undue competitive advantage in the Canadian television industry. Both indicated that they had expressed an interest in buying certain WIC properties from CanWest Global (CHCH-TV in the case of Craig, and CHEK-TV and CHAN-TV in the case of CTV).

24.

The interveners’ concerns about undue competitive advantage in the over-the-air television industry have been considered by the Commission against the background of its common ownership policy as well as its policy framework for Canadian television. In the Commission’s view, in this broad context, the interveners’ concerns appear to be limited in perspective. In the face of a rapidly changing and highly competitive broadcasting environment, both within Canada and abroad, several conventional television broadcasters have perceived expansion of their businesses as key to their future growth and survival. They have thus sought to acquire such vehicles as pay and specialty programming services as additional platforms and windows for their programming. In any assessment of the economic strength (and hence the responsibilities and obligations to the Canadian broadcasting system) of one broadcasting group relative to another, all of the various broadcast platforms, program windows and voices available to each must be taken into account.

25.

The Commission’s further view is that there is a clear need for strong healthy industry groups in Canada’s broadcasting industry. In examining the new dynamics and shape that approval of these applications imposes on the landscape of the Canadian broadcasting system, and on the Canadian television industry in particular, the Commission notes that CanWest Global and CTV Inc. emerge as roughly equivalent in stature.

26.

Based on 1999 financial data, the combined revenues of the regulated pay, specialty and conventional television undertakings now coming under the control of CanWest Global will stand at approximately 26% of total English-language television revenues earned in Canada, including those of the CBC and CTV television networks. This percentage excludes revenues attributable to CFCF-TV. It also excludes the revenues earned by CKVU-TV, thereby reflecting the Commission’s requirement, imposed below as a non-suspensive condition of approval, that CanWest Global sell its indirect ownership of this undertaking. The percentage falls not far behind the revenue share of approximately 29% that CTV Inc. is estimated to earn through its ownership interests in the same classes of television undertakings, excluding earnings attributable to its holdings in SportsNet.SportsNet is a regional sports specialty service; CTV Inc. has been directed by the Commission to divest itself of its holdings in SportsNet by Decision CRTC 2000-86>, through which it acquired, among other things, an indirect controlling interest in the licensees of the sports specialty services TSN and RDS.

27.

Further, it is CanWest Global and other large Canadian broadcasters who, capitalizing on the synergies and efficiencies made possible by their size, are best able to invest in attractive Canadian programming. It is also these groups who have the greatest capacity to market that programming successfully at home and abroad – to the benefit of the Canadian broadcasting system and the audiences it serves.

28.

As stated above, the Commission is satisfied that CanWest Global’s proposals for both CHEK-TV and CHCH-TV, and the conditions, safeguards and expectations set out below, offer the best guarantees of re-establishing these two undertakings as viable, attractive, distinct and distinctively-local television stations, that they are thus the best possible proposals in the circumstances, and that the exceptions to the Commission’s common ownership policy are justified.
Conditions, safeguards and expectations regarding the implementation by the individual television stations of programming plans and related commitments

29.

The Commission’s approval of the applications involving CHAN-TV Vancouver and CHEK-TV Victoria is conditional upon the submission of an application to the Commission, within four months of today’s date, for the divestiture by CanWest Global’s subsidiary, CanWest Television Inc., of its ownership of CKVU-TV Vancouver and its rebroadcasting facilities at Courtenay. If an application is not filed within the four months for the sale of this station to an independent third party, then CanWest Global must place CKVU-TV in trust pending consideration of an application by the Commission.

30.

At the hearing, CanWest Global had proposed that it be given a period of 18 months to complete the sale of its indirect ownership interests in CKVU-TV before being obliged to place these holdings in trust. In the Commission’s view, the four-month period specified above is reasonable, especially given the potential for unfair competitive advantage that would arise from CanWest Global’s control over the operations of three television stations in the same market for any prolonged period.

31.

As a general matter, the Commission notes that all of the conventional television stations coming under the effective control of CanWest Global (including the WIC properties it is now acquiring as a consequence of this decision), will adhere to the Commission’s policy framework for television (PN 1999-97). This includes the requirement, effective 1 September 2000, for the broadcast of at least eight hours per week of priority Canadian programs during the 7:00 p.m. to 11:00 p.m. viewing period. Conditions of licence to this effect, with respect to all of CanWest Global’s conventional television stations as well as those owned by CTV Television Inc. and TVA Group Inc., are the subject of other decisions issued today.
32. There are other individual conditions and expectations that the Commission will apply regarding adherence to the programming plans and related commitments proposed by CanWest Global in the context of the current applications. These are set out below.
CHCH-TV Hamilton and CHEK-TV Victoria

33.

CanWest Global’s strategic plans for CHCH-TV are focused on the reintroduction of a strong local orientation long absent from the station’s programming. It will also take steps to ensure that the service offered by CHCH-TV is clearly distinct and distinguishable from that provided by CIII-TV. CanWest Global intends to take essentially the same approach in the case of CHEK-TV Victoria and CHAN-TV Vancouver. These plans found solid support in interventions from both the residents of the Hamilton and of the Victoria areas. The volume of this support, and the strength of the applicant’s commitments to such a strategy at both stations, figure prominently in the Commission’s decision to permit exceptions to its common ownership policy.

34.

CanWest Global has committed to broadcast the following levels of local news and other local programming, commencing 1 January 2001 on CHCH-TV, and 1 September 2001 on CHEK-TV:
  • CHCH-TV Hamilton: 36 hours 30 minutes of local programming, 29 hours 30 minutes of which is news (this represents an increase of 20 hours of local programming over the amount currently aired); and
  • CHEK-TV Victoria: 23 hours of local programming, 17 hours of which is news (this represents an increase of 2 hours 15 minutes of local programming over the amount currently aired, but it also encompasses an increase of 4 hours 15 minutes each week in original programming).

35.

The above figures and comparisons, and those set out in paragraph 43 below, are based on the numbers of hours of local news and other local programming contained in the current applications and the corresponding numbers set out in the 1999-2000 block schedules for the individual stations concerned.

36.

CanWest Global committed to ensure that, commencing 1 September 2000, all of the stations (including CHEK-TV, CHCH-TV and CHAN-TV) will introduce the broadcast of eight hours per week of priority programming.

37.

CanWest Global also committed to ensure that, on a weekly basis, the eight hours of Canadian priority programming that are to be aired on CHEK-TV will be, commencing 1 September 2001, wholly separate and distinct from the eight hours to be broadcast on CHAN-TV. The applicant made an identical commitment concerning the distinctiveness that shall be maintained between the priority programming to be aired on CHCH-TV and that broadcast on CIII-TV in Ontario, as of 1 September 2001, and which will be delivered to viewers elsewhere in Ontario via their existing rebroadcasting facilities at various locations.

38.

As non-suspensive conditions of approval of the applications pertaining to CHCH-TV and CHEK-TV, the Commission requires the licensee of each station to file forthwith an application for amendments to its conditions of licence to incorporate the commitments noted in the preceding paragraphs regarding: a) the proposed minimum levels of local news and local non-news programming (commencing 1 January 2001 for CHCH-TV, and 1 September 2001 for CHEK-TV), and b) the non-duplicative nature of the priority programming as of 1 September 2001.

39.

In addition, and as proposed in CanWest Global’s Code of Conduct as further safeguards of this distinctiveness, the licensees of each of CHEK-TV and CHCH-TV shall ensure that the following commitments are met:
  • no more than 10% of the overall programming aired on the station in any broadcast week shall duplicate that aired on its sister station (CHAN-TV in the case of the Victoria station and CIII-TV in the case of the Hamilton station);
  • management of programming and of news at the station shall be kept separate from that of its sister station;
  • no non-Canadian feature films or syndicated weekly series programs, and no non-Canadian programs that are broadcast on UPN or other so-called "mini-nets" in the United States shall be broadcast;
  • the licensee shall make available for sub-license to other broadcasters serving markets outside of British Columbia and Ontario, all programming for which it holds national rights; and
  • the licensee shall file annual reports on its performance in applying each of the above safeguards; each report shall include certification by an officer of the company attesting to the fact that, on a weekly basis, the eight hours of Canadian priority programming to be aired on the station commencing 1 September 2000 has been wholly separate and distinct from the eight hours broadcast on its sister station, as of 1 September 2001.

40.

The Commission notes that CanWest Global holds an indirect controlling interest in the general partnership licensed to operate Prime TV. This is a specialty service directed towards men and women 50 years of age and over, and featuring programming that offers a mix of new information programs of interest to the target audience and "entertainment programs from the past". The Commission expects CanWest Global to ensure that the eight hours of priority programming to be broadcast by CHCH-TV, CHEK-TV and their sister stations each week also remains markedly different from that offered by Prime TV.

41.

The Commission is satisfied that the cumulative effect of these conditions, safeguards and expectations will be to ensure that the focus of the programming services offered by CHCH-TV and CHEK-TV remains firmly fixed on the communities they serve and will be clearly distinguishable from the services provided by their respective sister stations and by Prime TV. The Commission will be assisted in monitoring the performance of CHCH-TV and CHEK-TV by reports separate from those noted above, which are to be prepared and filed by the members of independent advisory boards that will be established for each station.
CHAN-TV Vancouver and the other television stations in British Columbia and Alberta

42.

The applications filed in respect of CHAN-TV and the other television stations in British Columbia and Alberta indicate that, in most cases, there will be increases in the amount of local production aired each week (whether in the category of news or non-news programming), in comparison either to a station’s actual performance or to its existing licence expectations or obligations. In the case of the stations at Calgary, Red Deer and Lethbridge, however, the amounts of local programming proposed fall short of present performance or existing obligations. For example, in the case of CISA-TV Lethbridge, the proposed amount of local news is 8 hours 30 minutes each week, whereas the station is currently expected to broadcast 11 hours 30 minutes of such programming. At the hearing, however, CanWest Global stated that it would correct these shortfalls between the amounts of local programming proposed and the amounts currently either expected of, or provided by, the stations.

43.

Accordingly, the Commission expects the licensees of the stations identified below to broadcast, as a minimum, the levels of weekly local news and/or non-news programming specified. These levels shall be introduced as of 1 September 2000 on the Alberta television stations and on CHBC-TV Kelowna, and as of 1 September 2001 on CHAN-TV Vancouver. The levels equate either to those proposed in the applications or, where they are greater, to the levels either currently being broadcast or currently expected of the licensee concerned.
  • CHAN-TV Vancouver: 42 hours 30 minutes of local news (increase of 5 hours);
  • CHBC-TV Kelowna: 16 hours 30 minutes of local news and 2 hours of local non-news programming (increase of 2 hours of news);
  • CICT-TV Calgary: 24 hours 30 minutes of local news and 9 hours of local non-news (increase of 30 minutes of local non-news);
  • CISA-TV Lethbridge: 11 hours 30 minutes of local news and 3 hours 30 minutes of local non-news programming (increase of 1 hour 30 minutes of local non-news);
  • CITV-TV Edmonton: 26 hours of local news and 2 hours 30 minutes of local non-news programming; and
  • CKRD-TV Red Deer: 6 hours of local news and 3 hours 45 minutes of local non-news.

44.

One of the benefits proposed by CanWest Global in its applications to purchase the television stations in Western Canada was its commitment to establish a new fund to assist independent producers in that region (the WIP Fund). This initiative is described further in a later section of this decision.

45.

The Commission notes that, as is the case with other Canadian broadcast funds, only producers having broadcast licensing agreements in place are eligible to receive financial assistance from the WIP Fund. At the hearing, it discussed with CanWest Global the perennial difficulties that independent producers in Western Canada face in obtaining commitments from broadcasters in the form of adequate licensing arrangements, particularly for high-end priority programming. Notwithstanding its plans to create the WIP Fund, CanWest Global acknowledged at the hearing that; "…we have to improve our record of deriving more dramatic content from western Canada … You have our commitment that we want to change our track record". The Commission notes in this regard the applicant’s plans, confirmed at the hearing, to open program development offices in each of Vancouver, Calgary and Edmonton. It expects CanWest Global to report annually on its progress towards increasing the amount of drama programming that it licenses from producers in Western Canada. It reminds the applicant that this matter will be reviewed at the time of the group television licence renewals in 2001.
Network affiliation

46.

The Commission notes that, although there will be the addition of the proposed western-based newscast and other new national programming promised by CanWest Global, approval of this transaction will not alter substantially the type of programming fare currently received by viewers of CHBC-TV Kelowna and of WIC’s other former television stations in Alberta. In the case of the Kelowna station and CKRD-TV Red Deer, agreements are in place to ensure that both will remain affiliates of the CBC for at least another five years. All of the remaining stations that CanWest Global is purchasing in Alberta are independent stations and, under WIC’s ownership, have obtained much of their programming under sub-license from CanWest Global for some time.

47.

Under the terms of an agreement signed in April of this year, CHAN-TV, CHEK-TV and their associated stations and rebroadcasting facilities will continue to operate as affiliates of the CTV television network, and will obtain from CTV four of the required eight weekly hours of priority programming until 31 August 2001. After that date, these stations in British Columbia will drop the CTV national news package and other CTV network programming in favour of the proposed western-based national news service and CanWest Global programming. In this regard, CanWest Global stated that, should CTV be authorized to extend to British Columbia’s Central Interior the service of its Vancouver station CIVT-TV, CanWest Global would consider the sharing of transmitter sites and operating costs associated with the existing system of transmission facilities currently used by CHAN-TV and its rebroadcasters.
The benefits test

48.

Because the Commission does not solicit competing applications for authority to transfer the ownership or control of television and other programming undertakings, the onus is on the applicant to demonstrate that the benefits proposed in the application are commensurate with the size and nature of the transaction. As stipulated by the Commission in its policy framework for Canadian television (Public Notice CRTC 1999-97), it generally expects applicants to make clear and unequivocal commitments representing 10% of the dollar value of the transaction (as accepted by the Commission), and that these be directed to the community in question and to the broadcasting system as a whole.

49.

CanWest Global filed with its applications an independent estimate of $692 million as representing the fair market value of the ownership interests in the various regulated broadcasting operations it seeks to acquire. The amount excludes the value of the 70% voting interest in CF Television Inc. that CanWest Global had applied to acquire for a period of time, but which, as a consequence of the Commission’s denial herein, will now remain in trust pending a sale to a third party. Against this valuation of $692 million, CanWest Global proposed a benefits package representing incremental expenditures, by or on behalf of the various licensed broadcasting undertakings involved, totalling some $84.29 million over five years, or more than 12% of the transaction’s value. Based on the evidence filed with the applications, the Commission has no concern with respect to the financial arrangements underlying the transaction, and accepts the valuation of $692 million as reasonable. On balance, and subject to the matters raised in the discussion that follows, the Commission is also satisfied that the tangible benefits are clear, unequivocal and commensurate with the size of the transaction.

50.

Among the most significant of the tangible benefits proposed by CanWest Global will be its allocation of $23.9 million to a fund known as the Western Independent Producers (WIP) Fund. The fund will be administered by a board whose members are resident in western Canada, and who will remain totally independent of and without ties to CanWest Global. The purpose of the fund is to provide independent producers with grants, licence fee top up funding and equity investment. Funding will be directed largely to the type of programming destined for broadcast during peak viewing hours, specifically television drama and programming in other categories identified in the Commission’s policy framework for Canadian television as priority program categories. Approximately 30% of all funding will be dedicated to children’s programming, new media and documentaries.

51.

The Commission notes the statement by a spokesperson for CanWest Global that the approach of the fund’s board will be to "…look most favourably on applications from western-based production companies with head offices [based] in Alberta, British Columbia, Saskatchewan or Manitoba".

52.

A second important "on-screen" benefit proposed by CanWest Global is the expenditure of $18.2 million over five years on new or enhanced local programming to be aired on CHEK-TV Victoria, CHBC-TV Kelowna and CHCH-TV Hamilton. As discussed above, the incremental expenditures in respect of the Victoria and Hamilton stations ($8 million and $9 million, respectively) are part of CanWest Global’s overall plans to introduce, in each case, a service having a distinctive and strongly-local program orientation.

53.

CanWest Global’s tangible on-screen benefits include expenditures of $19.3 million on a Vancouver-based early national news broadcast, a series of wellness documentaries, public affairs and other new programs intended for broadcast on its stations across Canada. It also committed to make contributions of $1.2 million annually over five years to the Canadian Television Fund to assist Canadian producers promote their programs through the purchase of third-party advertising that will supplement the promotional expenditures of broadcasters (the POPS Fund).

54.

Expenditures of $13.4 million have been proposed by CanWest Global in the form of grants, scholarships and endowments to assist studies in communications, new media and other such related fields at various Canadian colleges and universities. Although this type of expenditure generally yields little by way of immediate incremental value to the Canadian broadcasting system, such educational initiatives do have the potential to eventually translate themselves into benefits to the system. For this reason, the Commission has generally viewed such expenditures as constituting acceptable benefits in the past, and is prepared to continue to do so. Nevertheless, the Commission’s strong preference is for expenditures that will lead, with minimum delay, to clear, unequivocal and tangible on-screen benefits, to the enhancement of the Canadian broadcasting system. That being said, the Commission notes that the dollar value of the educational grants, scholarships and other like expenditures proposed by CanWest Global represents less than 16% of its total benefits package.

55.

CanWest Global made the following commitments for further expenditures of $3.5 million on grants to various community and other organisations. As a benefit offered in the context of the CHAN-TV application, CanWest Global proposed expenditures of $1.25 million for an arts endowment fund and for other local arts support. It promised two additional grants of $250,000 in support of local arts, one tied to the CHEK-TV application and the other offered in the context of the group of applications involving the four television stations in Alberta. As part of the CHCH-TV application, CanWest Global proposed to contribute $500,000 to assist in the production of audio-visual materials for use by the City of Hamilton in promoting that community; it proposed to contribute a further $500,000 to endow a proposed new "Heritage Stabilization Program", the purpose of which would be to provide assistance to local arts and cultural groups. Finally, as supplementary benefits offered by CanWest Global (conditional upon approval of both the CHCH-TV and CHEK-TV applications), it committed to donate $250,000 to the Boys and Girls Club of Canada, and the additional sum of $500,000 to the Heritage Stabilization Fund mentioned above.
56. In the case of the proposed contributions to the Boys and Girls Club of Canada and to the City of Hamilton Production Fund, based on the evidence before it, the Commission finds no clear link that can be drawn between these expenditures and the Canadian broadcasting system. In the case of the other proposed funding in support of local arts and cultural groups, the applicant failed to provide sufficient budgetary details, identify potential funding participants or file other such information that might have enabled the Commission to qualify these expenditures as unequivocal benefits.

57.

For these reasons, the proposed expenditures of $3.5 million noted above are disqualified as benefits under the Commission’s policy. Nevertheless, the Commission wishes to ensure that the value of the package of acceptable, tangible benefits that will be realized as a consequence of its approval of this transaction remains at least at the level proposed in the applications. Accordingly, the Commission expects CanWest Global, within three months of the date of this decision, to advise the Commission how it proposes to direct the various amounts noted above to acceptable benefits within the respective communities, preferably in the form of on-screen benefits.

58.

As a general matter, the Commission reminds CanWest Global that expenditures on benefits must be incremental to those it is required to make in accordance with existing licence conditions or commitments. They must also be over and above the financial expenditures that are tied to fulfilment of programming obligations that may be imposed in any future decision. Accordingly, in determining the incremental nature of expenditures on benefits by an individual broadcasting undertaking, the Commission will only accept those that are over and above the costs related to the undertaking’s existing programming obligations. For example, expenditures on any of the new programs proposed as benefits of this transaction, such as the series on wellness to be produced out of CHCH-TV, may not be applied by the licensee of that station against its existing or new obligations for the production of priority programming imposed in other contexts.

59.

The Commission intends to monitor the incremental spending associated with the implementation of the programming benefits proposed by CanWest Global on behalf of the various television stations whose ownership it is acquiring. In order to do so, the Commission will calculate the annual average of the total expenditures on Canadian programming telecast, as set out in each of the stations’ 1997, 1998 and 1999 annual financial returns. It will be against this average, or "base amount", that the Commission will assess a licensee’s performance in making the incremental expenditures proposed as programming benefits.

60.

In this regard, the Commission notes the applicant’s undertaking to file annual reports on its progress and performance in implementing the proposed benefits and in adhering to the many programming commitments offered in the context of these applications. This is one of several commitments made by CanWest Global in the context of a Code of Conduct that it filed with the Commission. The Commission expects CanWest Global to adhere to these commitments, including those relating to the filing of annual reports, each accompanied by an officer’s certificate attesting to the accuracy of the report’s contents. The Commission also notes the applicant’s willingness, expressed at the hearing, to meet with Commission staff to ensure that the format and accounting methodology to be used in the preparation of these annual reports is acceptable, appropriate and clearly understood.
Other matters

61.

The Commission approves the non-appearing applications considered at the Vancouver public hearing relating to the acquisition by Shaw Communications Inc. (Shaw), or an affiliate, of shares representing 49.96% of WIC’s Class A voting shares and approximately 52% of WIC’s Class B non-voting shares.

62.

The application for authority to transfer, to CanWest Global, indirect ownership of 70% of the voting shares of CFCF Television Inc., the licensee of CFCF-TV Montréal is denied. The applicant had planned to conduct the sale itself, in light of the existing indirect 51% interest held by CanWest Global in Global Television Network Quebec, a partnership and licensee of CKMI-TV Québec and its rebroadcasting facilities at Montréal and Sherbrooke. As noted in the background section of this decision, the 70% voting interest in CFCF-TV, and all of the other broadcasting interests previously owned by WIC that are the subject of this decision, are currently in trust following a Commission decision issued in February of this year. In the circumstances, the Commission considers that the public interest is best served by leaving responsibility in the hands of the trustee for the sale of the shares in CFCF Television Inc. to a third party.

63.

The Commission thanks all of those who participated in the process leading to this decision, whether through their interventions or through their attendance at the public hearing.
Secretary General
This decision is to be appended to the licences.  It is available in alternative format upon request, and may also be examined at the following Internet site: www.crtc.gc.ca

 

Applications approved or otherwise dispensed with by this decision
The Commission approves the following applications by WIC for authority to affect a change in its ownership:
a) Application (199900923) - Shaw or an affiliate to hold directly or indirectly 372,902.5 of WIC’s class A voting shares. These shares, together with the shares already acquired from Daphne Holdings Ltd. (approximately 8%), represent 49.96% of WIC’s voting interest; and
b) Application (199902250) - Shaw or an affiliate to hold directly or indirectly 9,877,840 of WIC’s class B non-voting shares, representing approximately 52% of these shares.
The Commission approves the applications by CW Shareholdings for authority to acquire WIC’s ownership interests in the various conventional television and other broadcasting undertakings specified below:
a) Application (200000696) for authority to acquire all of the issued and outstanding shares of 3669769 Canada Inc., licensee of CHAN-TV Vancouver and its rebroadcasting facilities, CIFG-TV Prince George, CHKL-TV Kelowna and CHKM-TV Kamloops, collectively known as BCTV (subject to a non-suspensive condition of approval);
b) Application (199917168) for authority to acquire all of the issued and outstanding shares of 3669777 Canada Inc., licensee of CHEK-TV Victoria and its rebroadcasting facilities (subject to a non-suspensive condition of approval);
c) Application (199917176) for authority to acquire all of the issued and outstanding shares of 3669785 Canada Inc., licensee of CHBC-TV Kelowna and its rebroadcasting facilities;
d) Application (199917192) for authority to acquire all of the issued and outstanding shares of 3669793 Canada Inc., licensee of CICT-TV Calgary and its rebroadcasting facilities;
e) Application (199917200) for authority to acquire all of the issued and outstanding shares of 3669807 Canada Inc., licensee of CISA-TV Lethbridge and its rebroadcasting facilities;
f) Application (199917184) for authority to acquire all of the issued and outstanding shares of 3669815 Canada Inc., licensee of CITV-TV Edmonton and its rebroadcasting facilities;
g) Application (199917217) for authority to acquire all of the issued and outstanding shares of 3669823 Canada Inc., licensee of CKRD-TV Red Deer and its rebroadcasting facilities;
h) Application (199917837) for authority to acquire all of the issued and outstanding shares of Ontv Limited, licensee of CHCH-TV Hamilton and its rebroadcasting facilities (subject to a non-suspensive condition of approval);
i) Application (200002543) for authority to acquire WIC’s 26% partnership interest in ROBTv. Approval of this application necessitates the issuance of a new licence (see Appendix 2 for licence terms and conditions); and
j) Application (200002569) for authority to acquire the assets of the national, English- and French-language VOD undertaking held by WIC Premium Television Ltd. prior to the intracorporate reorganization, and to obtain a new licence on the same terms and conditions as the current licence (see Appendix 3 for licence terms and conditions).
The Commission has denied the following application - the shares of the licensee company shall remain in trust pending their sale to a third party:
Application (200002551) for authority to acquire WIC’s 70% voting interest (representing effective control) in CF Television Inc. (licensee of CFCF-TV Montréal).
No further Commission action is required with respect to the following application, which has been withdrawn by the applicant:
Application (200004614) by WIC, on behalf of CanWest Global and CTEQ Television Inc. (licensee of CJNT-TV Montréal), for authority to transfer WIC’s indirect interests in the licensee to CW Shareholdings.
The following applications were initially scheduled for consideration at the 25 April 2000 Vancouver hearing, but have been superseded by completion of the intracorporate reorganization approved in Decision CRTC 2000-70 and by the other applications approved herein:
a) Application (200000654) by CanWest Global, on behalf of WIC, for authority to acquire, through a subsidiary (CanWest Newco, a wholly-owned subsidiary of CW Shareholdings), all of Shaw Acquireco's (an amalgamated entity comprised of Shaw Acquisitions Inc. and SC Interactive Video Inc.) issued and outstanding shares. Shaw Acquireco’s only assets would be the 49.96% voting shares and approximately 52% non-voting shares of WIC;
b) Application (200000670) by CanWest Global, on behalf of WIC, for authority to acquire the effective control of WIC, through the acquisition by a subsidiary (CanWest Newco) of all the outstanding shares of WIC held by 782639 Alberta Ltd., a wholly-owned subsidiary of Cathton Holdings Ltd., representing 49.99% of WIC’s voting shares;
c) Application (200002527) by CanWest Global, on behalf of WIC, for authority to acquire, through a subsidiary (CanWest Newco), WIC Television Ltd.’s 26% partnership interest in ROBTv, a specialty programming undertaking under a general partnership between Cancom, G and M Business News Limited and WIC Television Ltd.; and
d) Application (200002535) by CanWest Global, on behalf of WIC, for authority to acquire, through a subsidiary (CanWest Newco), WIC Premium Television Ltd.'s VOD assets and to obtain a new licence on the same terms and conditions as the current licence.

 

Conditions of licence for the national, digital, English- and French-language video-on-demand programming undertaking owned by CW Shareholdings
Upon surrender of the current licence, the Commission will issue a licence to CW Shareholdings, expiring 31 August 2003 (the current expiry date). The licence will be subject to the following conditions and to any other condition specified in the licence to be issued.
1. The licensee shall adhere to the Pay Television Regulations, 1990, with the exception of section 4 (logs and records).
2. The licensee shall maintain for a period of one year, and submit to the Commission upon request, a detailed list of the inventory available on each file server, identifying each program by programming category and by country of origin, and indicating the period of time that each program was on the server and available to subscribers.
3. Except as authorised by the Commission, the broadcasting undertaking licensed herein shall be operated in fact by the licensee itself.
4. The licensee shall ensure that the inventory available to subscribers contains at all times:

a) a minimum 1:20 ratio of Canadian to non-Canadian feature film titles, including all available new Canadian feature films in both French and English, that are suitable for VOD exhibition, and which meet the Pay Television Programming Standards and Practices Code; and

b) a minimum 1:10 ratio of Canadian to non-Canadian titles for all other program categories.

5. The licensee shall contribute to the Canadian production fund administered by WIC Entertainment Ltd. for equity investment in Canadian films, a minimum of 5% of the gross annual revenues earned by its VOD programming undertaking. The licensee is required to remit its first contribution no later than 45 days following the end of the month in which it commences operations. Contributions made thereafter shall take the form of monthly instalments to be remitted within 45 days of month's end and representing a minimum of 5% of that month's gross revenues.
6. The licensee shall ensure that not less than 25% of the titles promoted each month on its barker channel are Canadian titles.
7. The licensee shall not enter into an affiliation agreement with the licensee of a distribution undertaking unless the agreement incorporates a prohibition against linkage of the licensee's service with any non-Canadian discretionary service.
8. The licensee shall not acquire exclusive or other preferential rights to any programming exhibited as part of its service.
9. The licensee shall remit to the rights holders of all Canadian films 100% of revenues earned from the exhibition of these films.
10. The licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' Sex-Role Portrayal Code for Television and Radio Programming, as amended from time to time and approved by the Commission.
11. The licensee shall adhere to the Pay Television Programming Standards and Practices Code, as amended from time to time and approved by the Commission.
12. The licensee shall adhere to the Pay Television and Pay-Per-View Programming Code Regarding Violence, as amended from time to time and approved by the Commission.

 

Conditions of licence for the national English-language programming undertaking (specialty television service) known as Report on Business Television (ROBTv)
Upon surrender of the current licence, the Commission will issue a licence to the partners of the Report on Business Television, expiring 31 August 2003 (the current expiry date). The licence will be subject to the following conditions and to any other condition specified in the licence to be issued.
1. The licensee shall provide a national English-language specialty service consisting of business and financial news and information, and shall draw programs exclusively from Category 1 (News), Category 2 (Analysis and Interpretation), Category 3 (Reporting and Actualities) and Category 5(b) (Education, Informal) as set out in item 6 of Schedule I of the Specialty Services Regulations, 1990.
2. The licensee shall devote to the distribution of Canadian programs not less than 75% of each broadcast day and not less than 75% of the evening broadcast period.
3. In accordance with the Commission’s position on Canadian programming expenditures as set out in Public Notices CRTC 1992-28, 1993-93 and 1993-174:
a) In the broadcast year following the first year of operation, and in each subsequent broadcast year, the licensee shall expend on Canadian programs not less than 50% of the previous broadcast year’s gross revenues derived from the operation of this service.
b) In the broadcast year following the first year of operation, and in each subsequent broadcast year, excluding the final year, the licensee may expend an amount on Canadian programs that is up to five percent (5%) less than the minimum required expenditure for that year calculated in accordance with this condition; in such case, the licensee shall expend in the next broadcast year of the licence term, in addition to the minimum required expenditure for that year, the full amount of the previous year’s underexpenditure.
c) In the broadcast year following the first year of operation, and in each subsequent broadcast year where the licensee expends an amount on Canadian programs that is greater than the minimum required expenditure for that year calculated in accordance with this condition, the licensee may deduct:
(i) from the minimum required expenditure for the next broadcast year of the licence term, an amount not exceeding the amount of the previous broadcast year’s overexpenditure; and
(ii) from the minimum required expenditure for any subsequent broadcast year of the licence term, an amount not exceeding the difference between the overexpenditure and any amount deducted under (i) above.
d) Notwithstanding the above, during the licence term, the licensee shall expend on Canadian programs, at a minimum, the total of the minimum required expenditures calculated in accordance with the licensee’s condition of licence.
4. a) Subject to subsection (b), the licensee shall not distribute more than twelve (12) minutes of advertising material during each clock hour.
b) In addition to the twelve minutes of advertising material referred to in subsection (a) the licensee may distribute during each clock hour, a maximum of 30 seconds of additional advertising material that consists of unpaid public service announcements.
c) The licensee shall not distribute any paid advertising material other than national paid advertising.
5. From the commencement of service, the licensee shall charge each exhibitor of this service a maximum wholesale rate of $0.25 per subscriber per month, where the service is distributed as part of the basic service.
6. The licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters’ (CAB’s) Sex-Role Portrayal Code for Television and Radio Programming, as amended from time to time and approved by the Commission.
7. The licensee shall adhere to the provisions of the CAB’s Broadcast Code for Advertising to Children, as amended from time to time and approved by the Commission.
8. 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 approved by the Commission.
For the purpose of these conditions of licence, the terms "broadcast day", "broadcast year", "evening broadcast period" and "clock hour" shall have the same meaning as those set out in the Television Broadcasting Regulations, 1987; "first year of operation" shall mean the first broadcast year in which the licensee is in operation for a period exceeding 90 days, excluding any free trial period; and "paid national advertising" shall mean advertising material as defined in the Specialty Services Regulations, 1990 and that is purchased at a national rate and receives national distribution on the service.
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