ARCHIVED - Decision CRTC 2001-384

Decision CRTC 2001-384

Ottawa, 5 July 2001

Quebecor Média inc, on behalf of Groupe TVA inc.
Across Canada 2000-2309-4

26 March 2001 Public Hearing
in Montréal

Transfer of effective control of TVA to Quebecor Média inc.

This decision covers approval in respect of the television broadcasting segment of a larger transaction by which Quebecor inc. (Quebecor) acquired all outstanding shares of Le Groupe Vidéotron ltée (GVL) in a takeover bid by its subsidiary Quebecor Média inc. (QMI), in the fall of 2000. In Decision CRTC 2001-283 issued on 23 May 2000, the Commission approved the other part of the transaction, which involved the cable segments, by transferring control of Vidéotron ltée to QMI. This approval with respect to Groupe TVA inc. (TVA) is subject to a condition precedent requiring QMI to transfer TQS inc. to a third party within a specific timeframe (Appendix I).

QMI proposed a financial package valued at $35 million as being the tangible benefits of the transaction (Appendix II). Following a review of all elements on file regarding the value of the transaction involving TVA's regulated activities, the Commission has decided, by majority vote and as a condition of approval that a financial package of $48.9 million would be commensurate with the size of the transaction. The Commission also requires the applicant, as a condition of approval to submit a proposal to establish independent committees to evaluate proposals to receive funding for priority and youth programming, as well as development funds for interactive content (Appendix III). The Commission further requires the applicant to file a detailed annual report demonstrating that the benefits, especially those associated with the creation of new priority programming and other on-screen projects, are incremental to all existing TVA commitments (Appendix IV).

The transaction also raises important issues regarding media cross-ownership and diversity of voices. The Commission has accepted the safeguards that were proposed by the applicant and revised at the public hearing, such as adherence to a code of professional conduct applicable to TVA, LCN and LCN Affaires, and the establishment of a monitoring committee to deal with possible complaints. The various requirements specified in Appendix V with respect to cross-ownership are also imposed as conditions of licence in Decision CRTC 2001-385 published today, which renews the licences held by the TVA network and CFTM-TV Montréal. The Commission notes that it would be prepared to consider suspending the application of the conditions of licence dealing with the code of professional conduct and the monitoring committee if the Canadian Broadcast Standards Council (CBSC) adopts a code of conduct concerning cross-media ownership applicable to the industry as a whole, and if the code is approved by the Commission. The CBSC code of conduct would include an appropriate monitoring mechanism to be administrated by the CBSC.

As QMI pointed out at the hearing, TVA has made its mark by exhibiting quality Canadian programs in both information and entertainment categories. TVA has played a leading role in instituting the "star system" that is a distinctive aspect of Canadian French-language television programming and gives it its vitality. QMI is counting on the leverage it will gain by integrating TVA into its media family to develop and feature new and attractive Canadian services that reflect the language and the culture of viewers. The Commission is convinced that this approval will ensure the ongoing growth and improvement of TVA's national French-language television network and its other regulated activities.

1.

The Commission approves the application filed by QMI on behalf of Groupe TVA inc. (TVA) for authority to acquire all of the shares of 9076-1883 Québec inc, TVA's parent company, and consequently obtain control of TVA and its regulated subsidiaries. However, in view of QMI's commitment to divest itself of TQS inc. should this application be approved, this approval is subject to a condition precedent, as set out in Appendix I of this decision. In essence, under this condition precedent, this approval shall only take effect when a third party not associated with Quebecor or any of its affiliates files a complete application for authority to acquire TQS inc., and TQS is placed in trust. The terms of the condition precedent must be fulfilled in accordance with the schedule set out in Appendix I and completed by 21 September 2001. The Commission notes that an approval that is subject to a condition precedent becomes null and void if the terms of that condition are not met.

The Commission notes that, in Public Notice CRTC 2001-75 published today, it has announced that, as a matter of policy, it intends henceforth to grant approvals subject to conditions precedent in cases where it imposes requirements concerning the transfer of assets or shares of other undertakings. The Commission's objective is to maintain a healthy and dynamic competitive environment, and ensure that applications for transfer of ownership are treated equitably and in a timely manner.

Parties

3.

TVA is a leading Canadian company, whose activities include television broadcasting, production and distribution of televisual products and films, as well as publishing and marketing of related products. TVA operates the general interest French-language television network with the largest share of viewers in Quebec. In addition to the network, TVA owns six television stations, including CFTM-TV Montréal and CFCM-TV Québec. The distribution of the TVA service, which has been licensed nationally since 1998, enables it to reach Francophones and Francophiles across Canada.

4.

TVA also holds, directly and indirectly, majority and minority interests in Category 1 and 2 specialty digital television services and analog specialty services such as LCN and Canal Évasion, as well as the Canal Indigo pay-per-view service. TVA also holds an interest in a limited partnership that operates CKMI-TV Québec, which is affiliated with the Global network and whose signal is retransmitted to Montréal and Sherbrooke. TVA is sole owner of the private production company JPL Production inc. and holds a 70% interest in TVA International inc., a large distributor of television programs in Canada and one of the principal Canadian producers and distributors of television programs for the international market. In the publishing sector, TVA is sole owner of Les Publications TVA inc., which publishes French-language specialty arts and entertainment magazines. TVA also holds an interest in the Internet portals InfiniT and Netgraphe.

5.

Quebecor is an international company whose activities span three continents (North America, Europe and Asia). With sales in excess of $10 billion, Quebecor is one of Canada's largest media companies. Quebecor is involved principally in printing, newspaper publishing and distribution, book and magazine publishing, music distribution, and new media.

6.

All of Quebecor's media assets are held through QMI. These include, Vidéotron ltée, the largest operator of cable distribution undertakings in Quebec, with approximately 1.5 million subscribers (Decision CRTC 2001-238, dated 23 May 2001); Sun Media Corporation, Canada's second largest newspaper group, with eight major French-language and English-language dailies and 181 local newspapers and other publications; the Canoë Internet portal; a majority interest in the Nurun web agency, as well as the 12 Archambault music stores. Among the unregulated assets QMI has acquired under the current transaction are the Netgraphe Internet portal and the 160 video retail and rental outlets that make up the SuperClub Vidéotron chain in Quebec. Quebecor also holds an 80% interest in the French-language TQS television network, which is referred to in the condition precedent mentioned at the beginning of this decision.

Impact of the transaction

This approval transforms QMI into the largest media group in Quebec. In fact, QMI will control more than 40% of conventional television revenues (excluding TQS) in Quebec, close to 40% of the daily newspaper circulation and 4% of specialty television revenues. In addition, further to Decision 2001-283, QMI now controls 79% of Quebec cable distribution revenues. With its various portals, QMI is now one of the main Canadian Internet players.

In order to put the above figures into perspective, it should be noted that CanWest Global Communications Corp. (CanWest Global) leads Canada's conventional television industry with a 30% market share, followed by Bell Globemedia with 23% of the Canadian market. Regionally, CanWest Global's share is 47% in Ontario, 45% in the Prairies and 81% in British Columbia, whereas Bell Globemedia's share is 57% in the Atlantic region. As for English-language newspapers, CanWest Global also is the leader, with approximately 37% of the market, followed by Torstar with 17%.

As stated in the Commission's 7 December 2000 Decision CRTC 2000-747 approving the transfer of control of CTV Inc. to BCE Inc., a number of major transactions in Canada have recently raised the issue of a potential decrease in the diversity of editorial voices as a result of media cross-ownership. In this context, the Commission stated that, when it considered CTV's, CanWest Global's and TVA's licence renewals in the spring of 2001, it intended to take advantage of this opportunity to impose in a coherent way any safeguards it considered appropriate to ensure that diversity of voices would be protected. In its Decision CRTC 2001-385, also published today, the Commission renews the licences held by the TVA network and CFTM-TV Montréal. To ensure that diversity of voices is protected, the Commission has attached to the renewed licences a number of conditions relating to safeguards that flow from the commitments QMI made in the context of this transaction. QMI's commitments to protect diversity of voices are discussed below.

Diversity of voices

The application to transfer control of TVA raised certain concerns regarding ownership, especially media cross-ownership, and its potential impact on TVA's editorial independence and the diversity of voices in Quebec. In the context of complex transactions with wide ramifications, such as in the current case, the Commission must ensure that its regulation of broadcasting undertakings complies with the Canadian broadcasting policy objectives set out in section 3 of the Broadcasting Act (the Act), most notably sections 3(1)(d)(i) , 3(1)(d)(ii) and 3(1)(i)(iv) which deal with the strengthening of the Canadian fabric, development of Canadian expression, as well as the broadcast of a wide diversity of opinion.

The Commission notes that, in the context of the 1997 transaction transferring TQS to Quebecor, the applicant proposed a number of safeguards in response to concerns related to media cross-ownership raised by its application. In its Decision CRTC 97-482, the Commission decided to impose some of the proposed safeguards as conditions of licence. These included submission of a code of professional conduct to ensure the independence and autonomy of TQS newsrooms and setting up a monitoring committee to review any complaints in this regard. In its recent decision renewing TQS's licence (Decision CRTC 2000-418), the Commission required, as a condition of licence, that TQS comply with a code of professional conduct and retain the monitoring committee.

With a view to maintaining diversity in the French-language market, QMI submitted with its current application, for the Commission's approval, a number of safeguards to ensure the independence and autonomy of the TVA, LCN and LCN Affaires newsrooms, as well as a code of professional conduct and a commitment to set up a monitoring committee. Further to discussion at the public hearing and in the light of concerns expressed by certain interveners, the applicant submitted revised documents that clarified the scope of the proposed safeguards and made their implementation more efficient. More specifically, QMI proposed the following safeguards it was prepared to accept as conditions of licence:

· TVA, LCN and LCN Affaires operations shall be independent of the other QMI entities;

· TVA management shall be separate and independent of the management of QMI's newspapers and shall have the authority to make independent decisions on day-to-day matters;

· No more than 40% of TVA's Board of Directors shall consist of individuals who are already members of the boards of directors of Quebecor, QMI or any undertaking directly or indirectly controlled by Quebecor or QMI;

· QMI will respect the proposed code of professional conduct. Any amendments to the code of professional conduct shall be submitted to the Commission for approval;

· A monitoring committee shall be established to review any complaints concerning matters covered by the code of professional conduct. Any changes to the mandate or the operating procedures of this committee shall be submitted to the Commission for approval.

Interveners' concerns

The recent wave of acquisitions in the media world has generated public debate about the possible repercussions of these transactions on the diversity of information provided to the public. Journalism is the focus of this debate and several representatives appeared at the public hearing to share their concerns in this regard. Among them were the Fédération nationale des communications (FNC), the Fédération professionnelle des journalistes du Québec (FPJQ), the Regroupement des syndicats SCFP of the TVA network and the Syndicat des travailleurs de l'information du Journal de Montréal (STIJM), who opposed the transaction.

FNC, FPJQ and STIJM argued that the circumstances surrounding the TQS and the TVA transactions are not the same. In their opinion, media cross-ownership constitutes an exceptional measure that may sometimes be acceptable in a particular situation, especially when it is a question of ensuring survival in a market. STIJM argued that media cross-ownership jeopardizes the diversity of information sources and the free circulation of this information, especially when it involves, as in this case, cross-ownership between the leader in print media and the leader in television in a market of Quebec's size. According to the interveners, the code of professional conduct and the monitoring committee proposed in QMI's application would not effectively ensure diversity of voices.

The Commission is aware that safeguards such as a code of professional conduct and a monitoring committee are a compromise between the ownership rights of the licensees and their responsibilities as operators of regulated broadcasting undertakings. These safeguards will be effective only to the extent that the parties concerned consider that applying them is crucial to maintaining diversity of voices in the market.

In the context of its application, QMI submitted an analysis of media cross-ownership prepared by Mr. Pierre Trudel, professor and member of the Public Law Research Centre of the University of Montréal Law Faculty. In considering safeguards, such as the code of professional conduct, Mr. Trudel stated, among other things:

[TRANSLATION] When a single undertaking controls several broadcasting undertakings as well as other media undertakings, the issue of maintaining diversity arises in terms of maintaining the editorial independence of the various undertakings held by the same interests. Diversity, usually presumed to result from a multiplicity of owners, must be ensured by guaranteeing the editorial independence of the undertakings, when ownership is concentrated. This would mean dissociating property rights from control over the editorial decisions made by the undertakings.

At the hearing, in light of concerns raised and with a view to reassuring journalists about its plans, QMI filed revisions to its code of professional conduct and to the document setting out the operating procedures of the monitoring committee. The applicant stated that it intended to [TRANSLATION] "more or less maintain status quo and create a situation or a framework where TVA's newsroom would continue to operate as it did before." On the other hand, the Commission notes that the safeguards for ensuring the independence and autonomy of the newsrooms of TVA, LCN and LCN Affaires will enable the applicant to pursue projected synergies in all other areas, such as in advertising and media management.

After considering all the evidence on file, the Commission has decided to accept the code of professional conduct and the operating procedures for the monitoring committee, as revised by QMI. Nevertheless, the Commission notes that it is not clear in the revised code of professional conduct that the definition of "QMI's newspapers" refers only to the newspapers in Quebec. The Commission has thus accepted the revised code, with the following amendment to section 1a):

[TRANSLATION] The expression "QMI's newspapers" used in the code signifies existing newspapers such as: Journal de Montréal, Journal de Québec, The Record and the regional weeklies operated by QMI, and any other newspaper that QMI may operate in Quebec in the future;

As indicated above, the safeguards relating to common ownership proposed by the applicant and imposed as conditions of licence are found in Decision 2001-385 of today's date which renews the licences of TVA and CFTM-TV. The Commission notes that it would be prepared to consider suspending the application of the conditions of licence dealing with the code of professional conduct and the monitoring committee if the Canadian Broadcast Standards Council (CBSC) adopts a code of conduct concerning cross-media ownership applicable to the industry as a whole, and if the code is approved by the Commission. The CBSC code of conduct would include an appropriate monitoring mechanism to be administered by the CBSC. Any application by the licensee to suspend these conditions of licence should include confirmation that the licensee supports the CBSC code of conduct, including the monitoring mechanism, and that the licensee is a member in good standing of the CBSC.

This approval will make QMI a major player in the French-language television market in Canada. In permitting this degree of concentration and media cross-ownership, the Commission also took into account the balance that exists in broadcasting in this market through the interaction of public and private sector forces (CBC, TVA, TQS, Télé-Québec, specialty and pay services, and independent production). For example, CBC's French-language television network has always contributed in large measure to the distinctiveness of this market, through its sizeable share of the market - more than 25.6% in the evenings in 2000. CBC will therefore continue to offer another significant viewing choice, contributing through both its general interest network and its specialty networks to diversity of content and to a balance between the public sector (CBC and Télé-Québec), the private sector (TVA and TQS) and the other specialty services serving the French-language market, especially those of Astral Télé-Réseaux inc.

Value of the transaction

When considering applications to transfer ownership or control of a television broadcasting undertaking, the Commission generally requires significant benefits to flow from the transaction, both to the communities in question and to the Canadian broadcasting system as a whole. Because the Commission does not solicit competing applications, the onus is on the applicant to demonstrate that the application filed is the best possible proposal under the circumstances and that the benefits proposed are commensurate with the size and nature of the transaction. In view of the absence of a competitive process, the benefits test is an appropriate mechanism for ensuring that the public interest is served. As indicated in its television policy (Public Notice CRTC 1999-97), the Commission generally expects applicants to make commitments to clear and unequivocal benefits representing a financial contribution of 10% of the value of the transaction, as accepted by the Commission.

The applicant did not seek to obtain an exemption from the Commission's policy with respect to the required percentage of tangible benefits.

From the outset, it was evident that the Commission would have difficulty establishing what, from its perspective, would be an acceptable valuation of the TVA portion of the transaction. TVA was acquired as part of a larger transaction that involved numerous regulated and unregulated assets with an estimated value of more than $6 billion. Among the regulated assets, only TVA's television broadcasting assets are governed by the Commission's benefits policy. According to QMI's estimates, the regulated cable distribution assets of Vidéotron ltée would represent close to 75% of the total value of the transaction, whereas TVA's assets would represent less than 6% of this total value. The calculation also takes into account the potential value of the premium paid to acquire a controlling interest in the shares of TVA.

There was significant discussion at the public hearing about the methodology used in assessing the value of the transaction. QMI filed with its application an analysis by Ernst & Young on the evaluation issue. To determine the value of the transaction associated with regulated activities, Ernst & Young primarily used a multiple of the Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and corroborated its valuation of the total value of TVA by comparing it to its stock market capitalization. The Commission requested a further independent evaluation from Mr. Jean-Marc Suret, professor of finance and Director of the School of Accounting at Laval University in Québec. Professor Suret used the EBITDA methodology, as well as several other methods to determine the value of the transaction. The applicant's financial advisers, Ernst & Young and TD Securities, filed comments with respect to the Suret report.

QMI's proposal entailed calculating the amount of benefits in relation to its share (36.1%) of TVA equity and not in relation to the controlling shares it has acquired, which make up 99% of the voting shares. Ernst & Young estimated the value of the transaction associated with TVA's regulated activities at between $600 and $660 million, the equivalent of an EBITDA multiple of 10-11. QMI estimated that, for calculating tangible benefits, the value of its interest in TVA equity was in the range of $217 to $238 million. QMI also proposed, in its original application, a tangible benefits package valued at $30 million. According to QMI, this would represent approximately 13% of the estimated value of the transaction. At the public hearing, however, QMI increased the benefits package from $30 to $35 million.

The Suret report established a total value for the TVA transaction that was reasonably close to Ernst & Young's valuation. At the same time, however, the Suret report found that the multiples used by the applicant were on the low side for TVA's regulated activities.

In previous decisions, the Commission has generally calculated the value of a transaction, for the purpose of establishing tangible benefits, on the basis of the percentage of equity held. In most of the previous transactions, the value of the transaction was equivalent to the purchase price or to the amount actually paid by the buyer, and this amount usually included existing debt and any acquisition premiums. The Commission made an exception in Decision CRTC 2000-86 dated 24 March 2000 and permitted a purchase price that excluded the long-term debt of NetStar Communications Inc., an undertaking acquired by CTV Inc. In accepting the applicant's arguments to this effect, the Commission stated, among other things: "The Commission will expect applicants, in future transactions, to demonstrate that the measure they have used to determine the value of the transaction is the most appropriate under the circumstances."

At the public hearing, the Commission questioned the applicant about factors that might serve to reconcile the various multiples proposed. The multiples varied from the 10-11 proposed by QMI, to the multiple of 23 noted in the Suret report for the BCE/CTV transaction (Decision 2000-747). On this point, QMI declared at the hearing that the multiple of 23 mentioned in the Suret report was based on erroneous figures, and that the multiple should have been in the order of 15-16, as explained in the Ernst & Young report.

Among the factors justifying use of a multiple higher than 10-11 for establishing the value of the transaction is the strategic importance of TVA. TVA controls some 52% of the advertising in the French-language market, consistently achieves an audience share above 30%, and offers a superior rate of return. At the same time, the Commission also established that the valuation should take into account the characteristics of the French-language market. It is, in fact, a relatively restricted and a more mature market. As a result, it offers a more limited growth potential than the English-language market does.

After considering all the evidence on file, the Commission has concluded that the benefits proposed by QMI, even if increased in value to $35 million, would be insufficient and would reflect neither the value of TVA's regulated activities nor the size of the transaction.

In order to reflect TVA's strategic value in QMI's hands and the potential synergies this represents, the Commission has decided, by majority vote, that an EBITDA multiple of 15 would be more appropriate for the purposes of determining the value of the transaction for TVA's regulated activities. In its calculation, the Commission used the $60 million EBITDA calculated by the applicant for TVA's regulated activities and an implicit 40% control premium, also confirmed by QMI. This control premium, which is $257 million, is calculated by multiplying the $900 million value of the transaction by 40% and dividing it by 140%. In contrast with the applicant's approach, the Commission has attributed all of the 40% control premium to the buyer. The Commission attributes to QMI 36.1% of the remaining $643 million, or $232 million. By adding the above $232 million with the premium of $257 million, the Commission has arrived at a value of $489 million in respect of TVA's regulated activities. This would result in an increased tangible benefits package of $48.9 million, or 10% of the value of the transaction, as called for by the Commission's policy.

Commissioner Andrée Noël, however, considers that, in light of the maturity of the company and the restricted nature of the Quebec market, an EBITDA multiple of 15 is too high, and a multiple of no more than 13 would be more appropriate in this case. The use of this multiple would result in tangible benefits in the order of $42.4 million over a seven-year licence term.

QMI has requested the privilege of using the public airways. The onus is thus on the applicant to demonstrate that the application filed is the best possible proposal under the circumstances, and that its approval is in the public interest. In this context, the Commission is convinced that an increased benefits package of $48.9 million is commensurate with the size and nature of the transaction and will contribute significantly to achieving the objectives of the broadcasting policy for Canada, as set out in section 3 of the Broadcasting Act. Considering the vast resources at QMI's disposal, the Canadian broadcasting system stands to benefit, particularly with respect to French-language broadcasting.

Benefits package

As indicated above, the value of the benefits proposed by QMI, and increased at the hearing, was to be $35 million over a licence term of seven years. The applicant proposed to allocate more than 90% of the amount to on-screen benefits, with more than 80% committed to priority programming and programming directed to youth, and with the balance committed to training, research and support projects. The Commission has decided to require the applicant, as a condition of approval (see Appendix III), to implement a tangible benefits package of $48.9 million over a seven-year period. The Commission also requires that the total amount be split between on-screen benefits and other benefits in the same ratios as the original benefits set out in Appendix II, which gives a summary of eligible benefits based on the sum of $35 million QMI proposed at the hearing. However, should the applicant propose a different distribution of the benefits, the Commission requires that the proposal be submitted for approval within 30 days of the date of this decision.

Commissioner Andrée Noël would have stipulated that the amount of $42.4 million be distributed in the same manner and in the same proportions as set out above.

As a benefit, QMI proposed to set up a unit specializing in investigative journalism and feature stories at TVA and to allocate $3 million to this project. The Commission is of the opinion that this is not acceptable as an eligible benefit flowing from the transaction. The applicant did not adequately demonstrate how this unit would be different from TVA's regular news reporting function, nor did the applicant take into account the fact that feature stories should be covered in the course of regular news reports already in TVA's schedule. The Commission notes that QMI made a commitment at the hearing to reallocate the $3 million to priority programming, should the Commission not consider this proposal an eligible benefit. The Commission consequently expects this amount to be reflected proportionately in a new distribution of the benefits, either as set out in Appendix II, or in accordance with such other distribution plan as may be proposed by the applicant and approved by the Commission.

Priority programming

To enable the Commission to verify that the required expenditures for priority programming are over and above those to which TVA has committed in respect of its existing obligation to broadcast eight hours per week of priority programming, an appropriate baseline or reference point must be established. At the hearing, QMI set $8.5 million as the reference point, based on fiscal year 1999-2000 figures. However, the applicant's 2001-2002 priority program list shows that priority programming expenditures will total $8.7 million. On the basis of financial projections filed by QMI, the Commission has decided that the annual reference amounts applicable to TVA for determining what constitutes incremental expenditures in respect of on-screen priority programming benefits should be calculated according to the following annual baselines:

Year

$ (million)

2001/2002

8.7

2002/2003

8.9

2003/2004

9.0

2004/2005

9.1

2005/2006

9.3

2006/2007

9.4

2007/2008

9.5

Regarding funds to be devoted to priority and youth programming, the Commission notes the following commitments by QMI:

· 95% of incremental priority and youth programming expenditures shall be directed to companies that are not affiliated to QMI, meaning companies in which QMI or any undertaking affiliated to QMI holds less than a 30% interest;

· 10% of the funds shall be directed to French-language creators and production companies located outside Quebec;

· No administrative costs shall be paid out of this fund;

· Expenditures shall, unequivocally, be incremental expenditures the licensee would not have incurred without this transaction;

· Contributions such as licence fees and investments shall exceed the trigger rates required by public and private funding agencies, and the excess shall be considered an increment;

· Revenues from these programs shall be reinvested in new priority programming produced by the independent sector.

As far as the concept, screen-play and interactive content development fund is concerned, the Commission notes the following commitments:

· The new programs shall be produced by an independent producer, in the priority programming categories, for exhibition on TVA;

· 20% of the funds shall be directed to Francophones outside Quebec;

· No administrative costs shall be paid from this fund;

· Interactive content elements shall not be exclusively Internet-based, or of predominant benefit to the Canoë and InfiniT portals;

· Any development expenditures recovered from programs produced in this context shall be reinvested in priority programming development.

During discussions at the hearing concerning the interactive content development fund, the applicant referred to the possible creation of [Translation] "an independent committee composed of a majority of third parties not related" to QMI's undertakings for the purpose of evaluating these projects. The Commission is of the opinion that such a committee would also be desirable for priority and youth programming. It therefore requires as a condition of approval (see Appendix III) that the applicant submit, for approval, a proposal to establish committees that would evaluate projects QMI intends to finance from the priority and youth programming fund, and from the interactive content development fund. The Commission also requires that each committee have representatives of regional independent producers and independent producers from outside Quebec. In addition, the Commission expects these funds to be used to finance new projects that are submitted after they have been approved by the evaluation committees proposed by QMI. The Commission also expects variety programs that have access to the funds to be distinct from the types of program currently in TVA's schedule and that they promote Canadian French-language music.

In addition, the Commission requires the filing of a detailed audited report, concurrently with the annual return for TVA, setting out the actual expenditures on the base level amount of eight hours per week of priority programming in each of the next seven years. Such spending may exceed but shall not be less than the baseline amounts given above for each year. As part of this report, TVA shall file a detailed breakdown of its expenditures each year on the priority programming and related initiatives accepted as benefits of this transaction. This reporting must demonstrate, over the seven-year period, the allocation of a minimum of $39.8 million (this being 81.4% of the benefits package of $48.9 million noted in paragraph 31 and in Appendix III of this decision) to on-screen initiatives relating to new priority programming, incremental to expenditures on the eight hours per week of such programming referred to above, and irrespective of any spending in excess of the aforementioned base level amounts.

As discussed at the hearing and accepted by QMI, the Commission has established in Appendix IV to this decision a list of various reporting requirements. Their purpose is to verify that the benefits package QMI is required to implement is clearly incremental to expenditures that TVA would have made in any case during this period. These requirements are appended, as conditions of licence, to Decision 2001-385, which renews the licences for TVA and CFTM-TV.

Interventions

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

Secretary General

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

Appendix I to Decision CRTC 2001-384

Condition Precedent

Approval of Quebecor Média inc.'s application on behalf of Groupe TVA inc. (TVA) for authority to transfer effective control of TVA and its regulated subsidiaries will only be effective provided a third party not associated with Quebecor inc. or any of its affiliates files an application for authority to acquire TQS inc., the Commission deems said application to be complete, and TQS inc. is placed in trust to the satisfaction of the Commission.

Unless the Commission otherwise directs, the following timetable must be respected in order to fulfil the terms of this condition precedent:

7 September 2001: Submission of a proposed trust agreement for approval by the Commission. Once the trust agreement is accepted by the Commission, the Commission must receive confirmation, by 21 September 2001, that the trust has been established and TQS inc. has been effectively transferred.

21 September 2001: Submission of a complete application for authority to acquire TQS inc.

Appendix II to Decision CRTC 2001-384

SUMMARY OF ELIGIBLE BENEFITS PROPOSED BY QMI*

ON-SCREEN BENEFITS

$

%

Priority programming and youth programming

28,500,000

81.4%

Concept and screen-play development

1,500,000

4.3%

Interactive content development

1,500,000

4.3%

Closed captioning for the hearing impaired

500,000

1.4%

SUBTOTAL

32,000,000

91.4%

TRAINING, RESEARCH AND SUPPORT

Educational TV - Institut national de l'image et du son (INIS)

150,000

0.4%

Developmental workshops - INIS

125,000

0.4%

QUEBECOR scholarship fund via INIS

50,000

0.1%

Audiovisual management training program (HEC)

1,025,000

2.9%

Support to BANFF program

200,000

0.6%

Education Francophones outside Quebec with partners

275,000

0.8%

Education cultural communities (Youth eMage)

200,000

0.6%

Concordia / UQAM research consortium

250,000

0.7%

Public Law Research Centre -University of Montréal

200,000

0.6%

Research program - new media copyright issues

200,000

0.6%

Support to Press Council

100,000

0.3%

Film Bank-digital conservation program

225,000

0.6%

SUBTOTAL

3,000,000

8.6%

GRAND TOTAL

35,000,000^**

100%

*Given that the Commission has decided that the $3 million proposed for the creation of an investigative journalism unit and for feature stories is not an eligible benefit, the Commission has included this amount under the heading "Priority and youth programming," as agreed to by the applicant at the public hearing.

^**The benefits package has been increased to $48.9 million, as required by this decision. This amount must be allocated in accordance with the requirements specified in paragraph 34 of the decision.

Appendix III to Decision CRTC 2001-384

Conditions of approval

QMI must establish a tangible benefits package related to this transaction with a value of $48.9 million over a seven-year period

QMI must submit, for the Commission's approval, within 30 days of this decision, a proposal to establish independent committees to evaluate proposals submitted to receive funding for priority and youth programming as well as development funds for interactive content.

Appendix IV to Decision CRTC 2001-384

Reporting Requirements

The following outlines the various items upon which Quebecor Média inc.(QMI) shall file an audited annual report. The purpose of this report is to permit the Commission to verify the incremental nature of proposed benefits expenditures totalling $48.9 million over seven years. This reporting requirement shall thus remain in effect for a seven-year period.

QMI shall submit an audited report, concurrently with the filing of the annual return for TVA, providing the following:

i) the original and repeat priority programs broadcast over the course of the reporting year in fulfilment of the network's base level requirement of eight hours per week of priority programming. The information provided shall include, in the case of each program, the program title, program category, date of broadcast and the duration of the broadcast;

ii) the actual expenditures related to the base level requirement of eight hours per week of priority programming referred to above, exclusive of any benefit spending related to benefits;

iii) each hour of incremental original priority programming broadcast during the reporting year, identifying, in the case of each program, the program title, program category, date of broadcast and the duration of the program;

iv) all programs, including interactive programs, produced as a consequence of incremental expenditures accepted as benefits of the transaction, and for which a licence fee was paid by any specialty service operated by TVA or any company related to it. The list shall include the amount paid by the specialty service for the broadcast rights for each program;

v) a detailed audited report, setting out the actual expenditures on the base level amount of 8 hours per week of priority programming. Such additional spending must exceed the amounts set out below :

Year

(million $)

2001/2002

8.7

2002/2003

8.9

2003/2004

9.0

2004/2005

9.1

2005/2006

9.3

2006/2007

9.4

2007/2008

9.5

vi) a list of all programs produced as a consequence of incremental expenditures accepted as benefits of the transaction, and for which a consideration for their sale or distribution was paid to TVA or to any company related to it. The list shall include an indication of the amount paid for each program excluding reasonable sales expenses actually incurred in respect of the distribution of such programs to unaffiliated companies, and an indication of how all such revenues will be reinvested in TVA's priority programming;

vii) a list of projects that were financed from the independent fund for concept and screen-play development for priority programming, as well as programs produced and development expenses recovered for reinvestment in the funds;

viii) a list of all programs in which TVA, or any company related to it, has taken an equity investment using funds allocated to incremental benefits expenditures under this transaction. QMI shall also report on any profits earned from this equity investment and demonstrate that such profits are being reinvested in additional, incremental TVA priority programming;

ix) an indication of all expenditures by TVA, or by any company related to it, on third party promotion in the 2000/2001 broadcast year, together with evidence demonstrating that the proposed benefits relating to third party promotion are incremental to this 2000/2001 base level; and

x) a description of the television initiatives undertaken in fulfilment of benefits commitments, and a list of expenditures associated with each. In addition, the Commission expects the annual report to indicate QMI's expenditures on all of the other benefits accepted by the Commission and set out on page 42 of TVA's Supplementary Brief, but not otherwise covered under the reporting requirements listed above.

Appendix V to Decision CRTC 2001-384

Requirements with regard to cross-ownership

1. The licensee shall limit to no more than forty percent (40%) the number of those serving on its board of directors who are persons who are now or have been a member of the board of directors of Quebecor inc., Quebecor Média inc. (QMI), or any corporation or business undertaking controlled directly or indirectly by Quebecor inc. or QMI.

2. The licensee shall adhere to the code of professional conduct it has established, and which the Commission approved in this decision, to ensure the independence and separation of the newsrooms. Any amendment to the code must be approved by the Commission.

3. The licensee shall maintain a monitoring committee to review any complaints relating to the independence and separation of the newsrooms. Any amendment to the mandate or operation of this committee must be approved by the Commission.

4. TVA, LCN and LCN Affaires operations shall be independent of the other QMI entities.

5. TVA management shall be separate and independent of the managements of QMI's newspapers and shall have the authority to make independent decisions on day-to-day matters.

If the Canadian Broadcast Standards Council (CBSC) adopts a code of conduct concerning cross-media ownership applicable to the industry as a whole, and if the code is approved by the Commission, the Commission would be prepared to consider suspending the application of conditions 2 and 3 above. The CBSC code of conduct would include an appropriate monitoring mechanism to be administered by the CBSC. Any application by the licensee to suspend these conditions should include confirmation that the licensee supports the CBSC code of conduct, including the monitoring mechanism, and that the licensee is a member in good standing of the CBSC.