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Decision CRTC 2000-73
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Ottawa, 13 March 2000
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Elmer Hildebrand, on behalf of a company to be incorporated
Saskatoon, Saskatchewan – 199906880
Forvest Broadcasting Corporation
Saskatoon, Saskatchewan – 199807682
Rawlco Communications (Sask.) Ltd.
Saskatoon, Saskatchewan – 199906955
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16 November 1999 Public Hearing
in Saskatoon
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New classic rock FM radio station in Saskatoon
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At a public hearing in Saskatoon, the Commission considered three competing applications for FM stations to serve Saskatoon. All of the applicants currently own radio stations in that market. The Commission has approved the application by Elmer Hildebrand (OBCI), subject to the use of a frequency other than that originally proposed. The new station will offer a "classic rock" musical format.
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1.
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The Commission approves in part the application by Elmer Hildebrand, on behalf of a company to be incorporated (Hildebrand), for a broadcasting licence for an English-language FM radio programming undertaking at Saskatoon. It denies the remaining two applications.
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2.
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While the Commission has approved the Hildebrand application, it has not approved the technical parameters proposed for the new undertaking. Requirements related to technical concerns are set out later in this decision.
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3.
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Subject to the requirements of this decision, the Commission will issue a licence expiring 31 August 2006. This licence will be subject to the conditions specified in this decision and in the licence to be issued.
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The public process - call for applications
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4.
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In 1998, Forvest Broadcasting Corporation (Forvest) submitted an application for a licence to operate a new FM radio station to serve Saskatoon. Consistent with its policies in such cases, on 4 March 1999, the Commission issued Public Notice CRTC 1999-40, announcing the receipt of an application for an FM radio station to serve Saskatoon, and calling for applications from other parties wishing to obtain such a licence.
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5.
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In response to the call, Rawlco Communications (Sask.) Ltd. (Rawlco) and Hildebrand also filed applications for new FM radio stations in Saskatoon, and the three competing applications were considered together at the 16 November 1999 public hearing in Saskatoon. Each of the applicants is also the licensee of either one or two existing Saskatoon radio stations.
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Background
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6.
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In April 1998, the Commission adopted its new Commercial Radio Policy 1998 (Public Notice CRTC 1998-41). Under that policy, in markets with fewer than eight commercial stations operating in the same language, one party may own up to three stations operating in the same language. Two of those stations can be on the same frequency band (AM or FM). In markets with eight or more stations in the same language, one party may own a maximum of two AM stations and two FM stations operating in the same language.
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7.
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Public hearings in May and June of 1999 were among the first at which the Commission considered competing applications for new radio licences under the new commercial radio policy. At those hearings, the Commission discussed with applicants various factors relating to the implementation of the policy, especially those that the Commission should consider when assessing competitive applications, in light of the new policy and the public interest.
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8.
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The Commission considers that, while their importance will vary depending on the specific circumstances of the market concerned, there are four main factors that are usually relevant to the evaluation of competing applications.
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- The quality of the applications,
- The impact on the market of a new entrant,
- The competitive state of the market, and
- The diversity of news voices in the community.
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The Commission discussed these factors with the three applicants at the public hearing in Saskatoon.
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Evaluation of the competing applications
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Quality of the applications
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9.
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The evaluation of the quality of an application takes into account the business plan and contributions to programming format diversity, Canadian content commitments, plans for the reflection of the community and commitments for the development of Canadian talent.
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10.
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A variety of programming formats is currently available in the Saskatoon market. The Rawlco stations CINT and CFMC-FM are operated as "news and talk" and "contemporary hit radio" (CHR) respectively. The Forvest AM station CJWW operates in a "country favourites & information" format, while the Forvest FM station CFQC-FM plays "new country". The Hildebrand station CKOM-FM concentrates on a "gold/oldies" musical format.
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11.
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All three applications for new FM stations were designed to appeal to a younger audience. The Hildebrand application was for a "classic rock" format targeted to an audience 18-54, and Rawlco proposed a "rock" format for those 18-44. Both Rawlco and Hildebrand noted that Saskatoon is one of a very few radio markets in Canada without a rock-music based radio station format. Forvest planned a CHR station similar to Rawlco's current format on CFMC-FM, to attract the age group 12-19. Forvest explained at the hearing that Rawlco had made modifications to that format since Forvest filed its application. Forvest added that it might change the CHR format of the proposed station, to respond to market conditions at the time the station was launched. The Commission considers that either the Rawlco or the Hildebrand proposal would add diversity to the formats currently offered in Saskatoon and the business plans of these applicants are well developed in that regard.
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12.
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Forvest proposed a level of 35% Canadian content, which is the minimum level required under the Radio Regulations, 1986 (the regulations). Both the Rawlco and Hildebrand proposals were based on 40% Canadian content, both throughout the broadcast day and between 6 a.m. and 6 p.m. daily. The Commission considered that the Rawlco and Hildebrand proposals for Canadian content were equally noteworthy.
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13.
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With respect to Canadian talent development initiatives, all three applicants made commitments to participate in the Canadian Association of Broadcasters' (CAB) plan, at the level of $3,000 annually, the amount identified for the Saskatoon market.
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14.
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In addition to this commitment, Forvest stated that 3% of the profit margin before interest and taxes (PBIT) earned by its proposed new station would be expended the following year on direct payments for Canadian talent development. At the hearing, Forvest offered that 3% of the combined PBIT of all of its stations in Saskatoon would be directed toward Canadian talent development.
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15.
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In their applications, in addition to their commitments to participation in the CAB plan, both Hildebrand and Rawlco proposed to allocate specific amounts to assist rising Canadian rock talent in Saskatoon. Rawlco committed to donate $1,250,000 to the Foundation to Assist Canadian Talent on Record (FACTOR) over the licence term, and Hildebrand proposed to administer its own fund of $1,000,000 in direct expenditures over the licence term.
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16.
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In assessing the three applications, the Commission notes that the quantitative value of Forvest's proposal to link its support for Canadian talent with station profitability is inherently uncertain. The Hildebrand and Rawlco proposals, however, have a similar purpose and are based on firm and significant commitments.
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Impact on the market
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17.
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With respect to market impact, the Commission is convinced that the Saskatoon market is able to accommodate one new station. In reaching this determination, the Commission considered, among other things, that the collective average PBIT for the stations operating in the market over the past five years has been above the Canadian average, and that these same stations' collective revenue growth in the market has averaged over 5% per year over the same period. In addition, the Commission notes that the Conference Board's real Gross Domestic Product (GDP) forecasts for the province of Saskatchewan for 2000 and 2001 are positive, and that each of the incumbents in the market (the three applicants) agreed that Saskatoon could absorb one additional service.
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18.
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While the Commission is satisfied that one new station will not have an undue negative impact in the market, it does not believe that the Saskatoon market is capable of supporting more than one new entrant at this time. In reaching this conclusion the Commission has considered, among other factors, that out-of-market tuning in Saskatoon is very low, and that the opportunity to repatriate audiences is thus very limited. The Commission also considers that the profitability of the current stations in the market and the projected economic growth in the market are not at the levels that would be necessary to support two new entrants to the marketplace. To license more than one new station in Saskatoon at this time could create an undue negative impact on the existing radio stations.
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Competitive state of the market
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19.
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The new radio policy permits one party to own more stations in a market than was previously the case. The Commission is mindful that this, in turn, increases the potential for competitive imbalance. As noted earlier, the Saskatoon commercial radio market is currently made up of two Rawlco stations (CINT and CFMC-FM), two owned by Forvest (CJWW and CFQC-FM) and one owned by Hildebrand (CKOM-FM). Rawlco currently manages the Hildebrand station under a local management agreement (LMA).
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20.
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Hildebrand stated at the hearing, and Rawlco confirmed, that the required one-year notice of intention needed to terminate the LMA was filed in May 1999 and that the agreement will thus end in May 2000. The Commission also notes that, even if the LMA were not to be terminated in May 2000, under the Commission's policy related to LMAs (PN 1999-176 dated 1 November 1999) and associated changes to the regulations, the Hildebrand-Rawlco LMA would not be permitted by the Commission to remain in effect beyond 31 December 2001 unless a condition of licence issued before that time were to provide otherwise.
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21.
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In these circumstances, the Commission is satisfied that approval of the Hildebrand application will create a greater competitive balance in the Saskatoon radio market, with the three incumbents each having ownership of two stations.
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Diversity of news voices
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22.
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The diversity of news voices was not at issue in this proceeding, since all three applicants are currently operating in the community. While there will thus be no net gain in the diversity of news voices resulting from this decision, the Commission notes Hildebrand's statements at the hearing that the new station's newsroom will be separate from the newsroom of CKOM-FM, and that the two stations will have different styles of news presentation.
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23.
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Based on the evaluation of the four major factors discussed above, the Commission has concluded that the Saskatoon market will be able to sustain a sixth radio station, and considers that, of the three considered, the Hildebrand application represents the best proposal to serve that market.
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The new station
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24.
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The Commission is satisfied that the Hildebrand business plan is sound and that its programming proposals will increase the diversity of radio programming available in Saskatoon by offering a classic rock musical format, targetted to an audience aged 18-54.
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25.
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The licence will be subject to conditions related to levels of local programming, the general nature of the musical programming, Canadian content, financial support for Canadian talent, and the use of hit material on the new station. These conditions are either set out below or in the licence to be issued. As noted in PN 1999-137, standard conditions of licence are now set out only on the licence form.
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Canadian content
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26.
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As noted above, Hildebrand made a commitment to broadcast a weekly minimum of 40% Canadian content in category 2 (general popular) music, as well as a minimum of 40% Canadian content between 6:00 a.m. and 6:00 p.m. each day.
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27.
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This commitment, which exceeds the regulatory minimum, is an important factor in the granting of the licence to Hildebrand. It is therefore a condition of licence that the licensee, as an exception to the percentages of Canadian musical selections required under sections 2.2(8) and 2.2(9) of the regulations, devote 40% or more of its musical selections from content category 2 in any broadcast week, to Canadian selections broadcast in their entirety, and between 6:00 a.m. and 6:00 p.m. in any broadcast day, devote 40% or more of its musical selections from content category 2 to Canadian selections broadcast in their entirety.
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Canadian talent development
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28.
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As noted above, Hildebrand agreed to abide by the CAB's Canadian talent development funding plan for the Saskatoon market. That plan prescribes a payment of $3,000 annually, to be distributed to eligible third parties. Adherence to this commitment shall be by condition of licence, as set out in the licence to be issued.
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29.
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Further to its participation in the CAB funding plan, the applicant stated that it would be willing to adhere to a condition of licence to provide additional assistance for rising Canadian rock talent in Saskatoon. Hildebrand proposed to devote a minimum of $1,000,000 over the licence term to direct expenditures for the development of Canadian talent. In addition to the direct expenditures, the applicant intends to promote local talent on-air.
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30.
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The applicant specified that the $1,000,000 would be distributed as cash grants to local musical groups, with final decisions on the awards to be made by a committee. Hildebrand proposed that the main criteria for an award would be that the recipients come from the Saskatoon area, and that the money be used to further their musical careers. Grants could be used to pay for such items as studio time, travel costs, professional producer and musician fees, production costs and the manufacturing and distribution of CDs.
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31.
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The Commission accepts this additional commitment. Accordingly, it is a condition of licence that, in addition to the requirements for Canadian talent development set out in the licence to be issued, the licensee shall expend a minimum of $1,000,000 over the licence term, on cash grants to further the musical careers of the grant recipients, namely local Saskatoon musical talent.
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32.
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The Commission reminds the licensee that, consistent with its commitment, all funds expended must meet the Commission's criteria for generally accepted, direct Canadian talent development, as set out in PN 1990-111, An FM Policy for the Nineties.
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Technical matters
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33.
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The applicant proposed the use of frequency 106.7 MHz, channel 294C1, with an effective radiated power of 100,000 watts. Industry Canada found, however, that these technical parameters could not be given technical certification. As noted above, although the Commission has approved Hildebrand's application for a new licence, it does not approve the proposed technical parameters.
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34.
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In light of the apparent availability of other frequencies, the Commission directs the applicant to file, within three months of this decision, an amendment to the proposed technical parameters predicated on the use of another frequency.
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35.
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The applicant is required to construct the undertaking and to begin operation within 12 months of the date of Commission authorization of acceptable technical parameters as well as furnish documentation establishing that an eligible Canadian corporation has been incorporated in accordance with the application in all material respects and that this corporation may be issued a licence. The licence will only be issued and effective when these requirements have been met.
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36.
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When the applicant has completed construction and is prepared to commence operation, it must advise the Commission in writing. If the undertaking is not constructed and ready to operate within 12 months of the date of authorization of acceptable technical parameters, as referred to in the preceding paragraph, extensions to this time frame may be granted if the applicant applies in writing to the Commission before the 12-month period or any extension of that period expires.
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Other matters
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37.
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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. In this regard, the Commission encourages the licensee to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.
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38.
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The Commission acknowledges and has considered the interventions received in support of all these applications. It has also considered the views expressed in one intervention to the Hildebrand application that the applicant's programming should reflect the diversity of the multicultural and multiracial nature of Saskatoon. The Commission is satisfied with the applicant's response to the views expressed.
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Related CRTC documents
• Public Notice CRTC 1999-176 – Local Management Agreements
• Public Notice CRTC 1999-137 – New licence form for commercial radio stations
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• Public Notice CRTC 1998-41 – Commercial Radio Policy
• Public Notice CRTC 1990-111 – An FM Policy for the Nineties
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Secretary General
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This decision is to be appended to the licence.
It is available in alternative format upon request, and may also be viewed at the following Internet site: www.crtc.gc.ca
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