ARCHIVED - Decision CRTC 2001-172

Decision CRTC 2001-172

Ottawa, 12 March 2001

Standard Radio Inc.
Calgary, Alberta 2000-1525-7

Telemedia Radio (West) Inc., on behalf of a company to be incorporated
Calgary, Alberta 2000-1516-6

Gary Farmer, on behalf of a company to be incorporated (Aboriginal Voices Radio; AVR)
Calgary, Alberta 2000-1530-7

CHUM Limited
Calgary, Alberta 2000-1522-3

NewCap Inc.
Calgary, Alberta 2000-0120-7

Craig Broadcast Systems Inc.
Calgary, Alberta 2000-1520-8

Golden West Broadcasting Ltd.
High River/Okotoks, Alberta 2000-1505-9

30 October 2000 Public Hearing
in Calgary

Three new radio stations to serve Calgary

At the Calgary hearing in October 2000, the Commission heard six applications competing for licences to carry on new FM radio broadcasting undertakings in that city. The Commission also heard an application proposing a new FM radio station to serve Okotoks and High River, communities located south of Calgary by some 16 km and 25 km, respectively.

Five of the Calgary applications, namely those by Standard, Telemedia, CHUM, NewCap and Craig, propose mainstream commercial services. All are predicated on use of the frequency 98.5 MHz, and are thus technically mutually exclusive.

The Commission has evaluated these five proposals against the various criteria that it generally uses for such purposes. Based on its evaluation, the Commission has concluded that, overall, Standard's application rates most highly and is the most worthy of licensing. Accordingly, the Commission approves the application by Standard for a broadcasting licence to carry on a new English-language FM station at Calgary. The applicant proposes a service featuring an Urban Rhythm musical format.

The Commission, by majority vote, also approves the application by Telemedia, on behalf of a company to be incorporated, for a new English-language radio station at Calgary. As discussed below, the Commission is satisfied that the Calgary market can support the operations of two, new commercial FM stations. It has further concluded that Telemedia is the applicant that most strongly merits receiving this second new licence. The Telemedia station will offer a service falling into a new Specialty music format most commonly referred to as New Adult Contemporary (NAC)/ Smooth Jazz. As proposed, a minimum of 70% of all musical selections broadcast will come from Subcategory 34 (Jazz and Blues).

As noted, however, Telemedia proposed to operate on the same frequency of 98.5 MHz herein authorized for use by Standard. Accordingly, the Commission will only issue a licence to Telemedia provided it submits, within twelve months of the date of this decision, an amendment to its application proposing the use of another FM frequency, one that is acceptable to both the Commission and Industry Canada.

Further, by majority vote, the Commission approves the application by Gary Farmer, on behalf of a company to be incorporated (Aboriginal Voices Radio; AVR), for a new, Aboriginal-language radio undertaking at Calgary operating on the frequency 88.1 MHz. This not-for-profit service will, for the most part, broadcast programming originating with the FM radio station licensed to AVR in Toronto (Decision CRTC 2000-204).

The Commission notes that approval of this application is consistent with the objectives of the Broadcasting Act, in particular its call for the provision of programming reflective of Canada's Aboriginal cultures. The Commission further notes that, according to Statistics Canada, Calgary's Aboriginal population numbers in excess of 15,000 persons. Based on the evidence presented at the hearing, the Commission is convinced that there is strong support for the delivery of the proposed AVR service to this urban market and broad support, as well, for the applicant's philosophy and objectives.

Licence terms and conditions pertaining to each of these three applicants are set out in separate appendices to this decision.

With respect to the application by Golden West for a new FM station at High River/Okotoks, this proposal is predicated on use of the frequency 88.1 MHz and is thus technically mutually exclusive with the application by AVR. In the Commission's view, the AVR application for a Calgary station represents the more appropriate use of the frequency. Accordingly, the Commission denies the Golden West application.

Nevertheless, the Commission finds merit in the Golden West proposal for a new FM service directed to High River/Okotoks. It thus encourages the applicant to investigate the availability for its use of a frequency better suited to providing a local radio service to these smaller communities south of Calgary.

The Commission denies the three remaining applications noted above, namely those by CHUM, NewCap and Craig.

Evaluating the Calgary applications

In recent decisions involving competing radio applications, the Commission has noted that there are four main factors generally relevant to its evaluation of such applications. While their relative importance can vary according to the specific circumstances of the market, these factors are: the likely impact of a new entrant or entrants; the competitive state of a market; the quality of the applications; and their implications with respect to the diversity of editorial voices in the market. The Commission presents its observations regarding these factors below.

Impact of a new entrant

The Commission generally seeks to assure itself that the competitive impact of a new entrant to a radio market will not impinge unduly on the ability of incumbent stations to meet their programming responsibilities under the Broadcasting Act. Otherwise, the Commission's predisposition lies clearly in favour of increased competition and diversity, and the improvements in the overall quality of available services that these promote.

The Commission, for the reasons that follow, has no concerns about the impact on existing stations of the three new services approved by this decision.

Currently in Calgary, nine mainstream commercial stations (five FM and four AM) compete for listeners. Ownership of these nine stations resides with three of Canada's largest radio operators. Four of the stations (two FM and two AM) are owned by Rogers Broadcasting Limited. Two more Calgary FM stations and one of its AM stations are owned by Corus Entertainment Inc., while Standard owns the remaining two stations (one AM and one FM). Together, these stations attract 81% of the total radio audience. The CBC's non-commercial radio services, out-of-market radio tuning, and two, small, independent Calgary stations share the remaining radio audience.

Of the two small Calgary stations mentioned above (i.e. those not owned by any of the three large commercial operators or the CBC), one provides an ethnic (predominantly third-language) service and the other, a largely non-commercial gospel music service. Due to the audiences they target and the services they provide, these stations stand least to be effected by the increase in the number of commercial radio stations in the market resulting from this decision. The Commission notes that neither station intervened in this proceeding.

The likely impact of the three radio stations authorized herein is further limited by the fact that one of them, namely the Aboriginal-language station proposed by Gary Farmer, will not be extracting any local advertising from the market. While the new AVR station expects to win listeners away from incumbent commercial stations, the applicant confirmed at the hearing that:

In the Commission's view, AVR's plans in this regard are consistent with the Commission's long-standing position that radio stations should generally provide local programming in return for access to revenues from local advertising.

With respect to Standard, the potential effect of its proposed FM station on the Calgary market is tempered by the fact that the company already owns two of the ten mainstream commercial stations against which the new station will vie for revenues.

In the case of Telemedia, the impact of its proposed FM undertaking on existing Calgary stations should be of approximately the same magnitude as, or perhaps somewhat less than, the impact that would have resulted from approval of any one of the applications by CHUM, NewCap or Craig. In the Commission's view, possible concerns about such impact are essentially eliminated in any event by the large size of the three ownership groups standing behind Calgary's existing mainstream stations and their ability to cope with additional competition.

In this context, the Commission notes that the average profit margin (before interest expenses and taxes, or PBIT) of the Calgary stations in each of the three ownership groups (Rogers, Corus and Standard) is positive, and that the average PBIT margin of all nine mainstream stations is almost double the industry norm.

The Commission also notes that neither Rogers nor Corus filed interventions to any of the applications before the Commission at the Calgary hearing. Moreover, none of the applicants expressed concern regarding the possible approval by the Commission of as many as two new mainstream commercial radio stations to serve Calgary.

Competitive state of the market

As with the first factor discussed above, the Commission is satisfied that its approval of three new Calgary radio services has no negative implications with respect to the competitive state of Calgary's radio market.

The competitive state of a market, as a factor in the Commission's consideration of applications proposing new commercial radio stations, is generally most relevant where the applicant is the licensee of an existing station in that market. In such cases, the Commission's concern is that its licensing actions not create an undue competitive imbalance in the market.

In large markets, the Commission's policy permits a person to own as many as two AM and two FM radio stations operating in the same language and market. The Calgary market, where Rogers owns four stations, and where Corus, and now Standard, own three, is an example of the increased consolidation of ownership permitted under the policy, and is indicative of a pattern that has now established itself in most of Canada's larger radio markets. The policy has enabled the industry to strengthen its overall performance and attract new investment. This, in turn, has allowed the industry to compete more effectively with other forms of media and to enhance its contribution to the support of Canadian cultural expression.

In the case of the current decision, the Commission notes that the stations proposed by Standard and Telemedia will effectively increase the level of competition in the market, while the the impact of the proposed AVR station will be minimal.

The Commission notes that Standard's proposed station should place the company on a more equitable footing with its principal competitors in the Calgary market, namely Corus and Rogers. This, however, forms but one component of the overall rationale for the Commission's approval of Standard's application. As discussed further below, the Commission's decision to grant Standard its third Calgary licence rests on the merits of its application, which also include the applicant's commitments with respect to Canadian content and Canadian talent development.

As in the case of Standard, the Commission has approved Telemedia's FM application on its merits. Among other things, the proposed station will increase diversity and add a new editorial voice to the market. Telemedia, however, will find itself sharing the available radio advertising market in Calgary with ten other commercial stations owned by three large, experienced broadcasting companies. This raises questions about how well Telemedia's stand-alone station will be able to compete against the combinations of radio stations in Calgary owned by Rogers, Corus and Standard.

On balance, the Commission is satisfied by the applicant's assurances in this regard. Among other things, Telemedia stated that its proposed Calgary station would serve as a hub for the company's fifteen existing radio stations in other, smaller Alberta communities. According to the applicant, this will result in efficiencies that would not otherwise be realized, and heighten the quality of programming provided both by the new station and by those already in operation. Further, Telemedia expressed confidence that its proposed musical format, not now available in the market, offers a diversity that Calgary listeners will find attractive in sufficient numbers to assure the station's viability. In considering these matters, it is worth noting that Telemedia, like each of its three potential, principal competitors in Calgary, is a large and successful broadcasting company with access to considerable financial resources and experience.

Based on all of the foregoing, the Commission is satisfied that the Calgary radio market is able to sustain the operations of the three new FM radio stations authorized herein, and to absorb the additional competition they will generate, without bringing undue economic harm or hardship to existing stations.

Quality of the applications

As indicated earlier in this decision, of the five applications proposing new, mainstream, commercial FM stations in Calgary, the Commission is satisfied that the proposals of Standard and Telemedia rank higher overall than the other three, as measured against the Commission's stated evaluation criteria.

The Commission generally considers four main criteria when assessing the quality of a new radio application. These are: the applicant's local programming proposals and plans for providing reflection of the local community; its Canadian content commitments; the quality of its business plan (including the proposed format); and commitments in support of the development of Canadian talent.

All five applicants provided adequate plans for local programming and local reflection in their applications. At the hearing, all five also offered acceptable commitments for Canadian content in musical selections. The Commission notes in this regard that the Radio Regulation, 1986 generally require that at least 35% of all Category 2 (Popular Music) musical selections be Canadian. In their applications, both CHUM and Craig committed to adhere to this level at a minimum. Standard and NewCap, however, each proposed a minimum Canadian content level of 40%, or 5% more than the regulatory requirement.

For its part, and as noted above, Telemedia will operate in a specialty format in which no more than 30% of all musical selections will derive from Category 2. The remainder, a minimum of 70% of all musical selections, will come from Subcategory 34 (Jazz and Blues). Under the regulations, the minimum Canadian content requirements for musical selections from Category 3 is 10%.

Telemedia proposed in its written application to provide a "blended" Canadian content level of 25% for its Category 2 and Category 3 musical selections. The applicant at the hearing stated that this, its original proposal, included its undertaking to ensure that no less than 25% of the total number of all Category 3 selections would be Canadian (15% more than the level required by regulation for music in this category). At the hearing, however, the applicant made a commitment to provide a minimum level of 35% Canadian content in each of Category 3 and Category 2, both over the broadcast week and during the period between 6:00 a.m. and 6:00 p.m. on weekdays. It requested the Commission to accept this amendment to its application. In explaining its request, Telemedia stated:

We started with the fact that in the CRTC's regulation for the specialty format, the minimum requirement is 10% [for Canadian content in Category 3].. Our first investigation and music supply analysis indicated that the 25% commitment would be sustainable.. Following [further] investigation, we really came to the conclusion that we should take this commitment of going as high as 35% based on the fact that in this country we can support 35% Canadian content [in] a smooth jazz format.

The Commission accepts Telemedia's finding that its proposed specialty format (Smooth Jazz) can accommodate a Canadian content requirement of 35% for Category 3 selections. In the circumstances, the Commission has decided to grant Telemedia's request to amend its application, and accepts its commitment to provide a minimum level of 35% Canadian content for musical selections in both Category 2 and Category 3.

In considering the business plans of the five mainstream, commercial FM applicants, the Commission is satisfied that each possesses the broadcasting experience and financial resources to implement its proposal and fulfil its commitments. It notes, however, that the Modern Adult Contemporary (AC), Hot AC, and AC/Modern Rock formats proposed by CHUM, Craig and NewCap, respectively, would each have resulted in some overlap with the format of one or more existing Calgary stations.

This is in contrast to the significant diversity that Telemedia's proposed NAC/Smooth Jazz format promises to bring to the market. Of all the proposed formats, Telemedia's offers the greatest diversity and would have the least amount of overlap with existing stations. Moreover, as one operating in a specialty format, Telemedia would not be able to move the station out of this format without the Commission's prior approval. Standard's proposed format will also add diversity to the market. The Commission notes, however, that because Standard will operate in other than a specialty format, it will be free to change that format without Commission approval.

As for the applicants' commitments to Canadian talent development, these varied in focus, as well as in the amount of financial expenditures proposed for this purpose. Standard's commitment of $4.9 million is marginally less than Craig's $5.0 million commitment and is over a longer period (seven-years as opposed to five). In addition, the Commission has determined that certain of the initiatives proposed by Standard, representing expenditures of $85,000 per year, do not constitute acceptable Canadian talent development initiatives. As explained in Appendix 1, the Commission has disqualified these elements of Standard's overall Canadian talent development proposals. It has, however, required the applicant, by condition of licence, to redirect the associated expenditures to eligible initiatives.

Of the remaining three applicants, CHUM proposed expenditures of $4.3 million on Canadian talent development over seven years, while NewCap planned to spend $3 million over the same period. Telemedia's commitment was the lowest of the five applicants ($1.5 million over seven-years).

The largest portion of NewCap's proposed expenditures on Canadian talent development (almost $2.36 million) were to have been directed to AVR to assist that organization in meeting the establishment and the ongoing operating costs of its proposed Calgary station. The Commission notes that such funding would not have directly contributed to the development of Canadian talent. It would, however, have contributed to achievement of the objective contained in section 3(1)(o) of the Broadcasting Act which states that: "programming that reflects the aboriginal cultures of Canada should be provided within the Canadian broadcasting system as resources become available for the purpose".

Although the Commission has denied Newcap's proposal, it commends the applicant on its proposed initiative. In the Commission's view, the development of native broadcasting services across Canada is an endeavour particularly deserving of financial and other assistance, and it encourages all commercial broadcasters to provide such support.

As for the quantitative gap between Telemedia's proposed contributions to Canadian talent development and those of the other competing applicants, the Commission considers that the difference is sufficiently offset by the application's other strengths. These include, in particular, the role that the proposed station will play in providing exposure to developing Canadian jazz artists, who receive little or no airplay on most other Canadian commercial radio stations.

Diversity of editorial voices

While approval of Standard's application will not alter the diversity of editorial voices in Calgary, the stations to be operated by Telemedia and AVR will increase by two the number of editorial voices available in that market.

Conclusion

The Commission, following its assessment of the various applications and for the reasons set out above, has approved the applications by Standard, Telemedia and AVR. It is satisfied that the three new stations will be attractive additions to the radio services available to listeners in the Calgary area.

The Commission wishes to thank all those who participated in the public process that has led to this decision, either through their written interventions or through their presentations at the oral public hearing.

Subject to the requirements set out herein, the Commission will issue licences to Standard and to Telemedia expiring 31 August 2007. The licence to be issued to AVR will expire 31 August 2006. This will coincide with the expiry of the licence issued to AVR in Decision CRTC 2000-204 for a new Type B Native FM radio programming undertaking at Toronto, from which the proposed Calgary station will receive its programming.

The licences will be subject to various conditions. These are either presented in the three appendices to this decision or will be specified in the licences to be issued. As noted in Public Notice CRTC 1999-137, standard conditions of licence governing commercial stations, such as those proposed by Standard and Telemedia, are now set out only on the licence form and are not repeated in decisions.

Secretary General

This decision is to be appended to the licence. This decision is in alternative format upon request, and may also be examined at the following Internet site: www.crtc.gc.ca 

Appendix 1 to Decision CRTC 2001-172

Terms, conditions of licence and notations pertaining to the licence to be issued to Standard Radio Inc. for a new FM station to serve Calgary.

The Commission will only issue the licence, and it will only be effective at such time as:

· the licensee confirms in writing that it is ready to begin operation. This must take place within 12 months of today's date. Any request for an extension to that deadline requires Commission approval and must be made in writing within that period; and

The licence, when issued, will expire 31 August 2007.

The station will broadcast on the FM band, on the frequency 98.5 MHz, channel 253C, with an effective radiated power of 100,000 watts.

The Commission notes that this licensee is subject to the Employment Equity Act that came into effect on 24 October 1996 and therefore files reports concerning employment equity with Human Resources Development Canada.

Conditions of licence

The licence will be subject to the conditions specified in the licence to be issued, as also set out in Public Notice CRTC 1999-137. The licence will also be subject to the following conditions:

Standard has not proposed to participate in the Canadian talent development plan formulated by the Canadian Association of Broadcasters. The licensee did, however, offer its "unequivocal" commitment to spend $4.9 million over the licence term, or $700,000 per year, on Canadian talent development.

2. Consistent with that commitment, the Commission requires the licensee, by condition of licence, to make direct expenditures of a minimum of $615,000 per year on the following Canadian talent development initiatives, as set out in its application:

· Developing Urban Stars ($390,000);

· Urbanet.com website ($25,000);

· Carifest Festival ($25,000);

· Prairie Music Week ($25,000);

· FACTOR ($100,000); and

· Designated Group Fund ($50,000).

With respect to the Developing Urban Stars initiative noted above, the Commission expects Standard to adhere to its commitment to file an annual report containing detailed financial statements regarding its expenditures on each of the sub-initiatives it proposed as contributing to this larger Canadian talent development project.

3. Regarding the Designated Group Fund, it is a condition of licence that funding be devoted exclusively to the development of musical or other artistic talent. Expenditures on station internships or for courses on broadcasting do not qualify as acceptable under the Commission's policy respecting Canadian talent development.

4. By condition of licence, Standard shall devote an additional $85,000 per year either to the above or to other eligible Canadian talent development initiatives. The Commission requires Standard to file, within three months of today's date, information detailing where these annual expenditures of $85,000 will be directed.

The above amount of $85,000 is in respect of annual expenditures proposed by the applicant as Canadian talent development, but not accepted as such by the Commission under its existing guidelines. These rejected initiatives included plans to spend $50,000 on Internet streaming. A further $25,000 was proposed as an annual contribution to Canadian Women in Communications, and $10,000 per year had been allocated to fund the activities of an advisory group that was to monitor Urban Music and trends in various cities such as Toronto and Calgary.

Appendix 2 to Decision CRTC 2001-172

Terms, conditions of licence and notations pertaining to the licence to be issued to to Telemedia Radio (West) Inc. on behalf of a company to be incorporated, for a new FM radio station at Calgary

The Commission will only issue the licence, and it will only be effective at such time as:

· the applicant submits, within twelve months of the date of this decision, an amendment to its application proposing the use of an FM frequency that is acceptable to both the Commission and Industry Canada;

· the Commission receives 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; and

· the licensee confirms in writing that it is ready to begin operation. This confirmation must take place within 12 months of the licensee having received Commission approval for the use of a new frequency and obtained the necessary authorities from Industry Canada. Any request for an extension to that deadline requires Commission approval and must be made in writing within that period.

The licence, when issued, will expire 31 August 2007.

The Commission notes that this licensee is subject to the Employment Equity Act that came into effect on 24 October 1996 and therefore files reports concerning employment equity with Human Resources Development Canada.

Conditions of licence

The licence will be subject to the conditions specified in the licence to be issued, as also set out in Public Notice CRTC 1999-137. The licence will also be subject to the following conditions:

3. The licensee shall, in any broadcast week, devote 35% or more of its musical selections from content Category 3 to Canadian selections broadcast in their entirety, and scheduled in a reasonable manner throughout the broadcast day.

4. The licensee shall, between 6:00 a.m. and 6:00 p.m., in any period beginning on Monday of a week and ending on Friday of the same week, devote 35% or more of its Category 3 musical selections to Canadian selections broadcast in their entirety.

The licensee will participate in the Canadian talent development plan formulated by the Canadian Association of Broadcasters and, as a large market participant, shall devote at least $8,000 per year to an eligible third party or parties.

· Calgary Jazz Festival ($50,000);

· Jazz in the Schools initiative ($100,000);

· University of Calgary music scholarship ($25,000);

· University of Calgary Jazz Big Band (touring costs ($10,000); and

· Mount Royal College Summer Jazz Workshop ($25,000).

Appendix 3 to Decision CRTC 2001-172

Terms, conditions of licence and notations pertaining to the licence to be issued to Gary Farmer, on behalf of a company to be incorporated (Aboriginal Voices Radio), for a new FM station to serve Calgary

The Commission will only issue the licence, and it will only be effective at such time as:

· the Commission receives 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 licensee confirms in writing that it is ready to begin operation. This must take place within 12 months of today's date. Any request for an extension to that deadline requires Commission approval and must be made in writing within that period; and

Consistent with its Native Broadcasting Policy (the policy), the Commission will issue a licence for a Type B Native FM radio undertaking. The licence, when issued, will expire 31 August 2006.

The station will broadcast on the FM band, on the frequency 88.1 MHz, channel 201C1, with an effective radiated power of 33,000 watts.

The new station is exempted from the policy's limitation respecting advertising, which generally limits Type B stations to an average of 4 minutes of advertising per hour per day.

Conditions of licence

This licence will be subject to the conditions specified in this decision and in the licence to be issued. By conditions of licence, the licensee must:

· ensure that a minimum of 35% of all musical selections from Category 2 - Popular music, played in each broadcast week are Canadian selections, played in their entirety;