ARCHIVED - Decision CRTC 2001-746

Decision CRTC 2001-746

Ottawa, 7 December 2001

Cogeco Inc. and Bell Globemedia Inc., on their behalf,
on behalf of their respective subsidiaries and on behalf of
a company to be incorporated (Acquisition TQS)
Montréal, Rimouski, Québec, Trois-Rivières, Sherbrooke, Chicoutimi/Jonquière and Saint-Fulgence, Quebec 2001-1088-3, 2001-1082-5, 2001-1083-3, 2001-1084-1, 2001-1085-9, 2001-1086-7, 2001-1087-5

19 November 2001 Public Hearing
in Montréal

Transfer of effective control of TQS - Transfer of the assets of Cogeco Radio Television Inc. stations at Trois-Rivières, Sherbrooke and Chicoutimi/Jonquière, affiliated with TQS and SRC - Amendment to TQS licences - Applications approved

1.

The Commission approves the application by Cogeco Inc. (Cogeco) and Bell Globemedia Inc. (Bell Globemedia) on their behalf, on behalf of their respective subsidiaries and on behalf of a company to be incorporated (Acquisition TQS) (collectively referred to as "the applicant") for authority to acquire effective control of TQS Inc. (TQS) by purchasing 2,698,763 common voting shares (i.e., 86.02% of all issued and outstanding shares). Those shares are currently held in trust by Mr. Pierre Hébert pursuant to the trust arrangement approved by the Commission on 13 September 2001.

2.

The proposed change in control is in response to Decision CRTC 2001-384 authorizing the transfer of effective control of TVA to Quebecor Média Inc. (Quebecor) in which the Commission imposed a condition precedent requiring that the control of TQS be transferred to a third party not associated with Quebecor.

3.

The Commission notes that Cogeco Radio Television Inc. (CRTI), a wholly-owned subsidiary of Cogeco, will hold 60% of the shares of Acquisition TQS. CTV Television Inc. (CTV Television), a wholly-owned subsidiary of CTV Inc., which in turn is a wholly-owned subsidiary of Bell Globemedia, will hold 40%. The Commission also notes that Acquisition TQS will hold 98.94% of the shares of TQS after the successive transfers of the TQS shares currently held by Cogeco (12.92%) to CRTI, and then from CRTI to Acquisition TQS.

4.

The Commission notes that TQS is the licensee for the TQS network, CFJP-TV in Montréal and its retransmitter CJPC-TV in Rimouski, and CFAP-TV in Québec. Also, TQS and CRTI each have a 20% interest in Canal Indigo, a pay-per-view specialty television service. Indirectly, through NetStar Communications Inc., CTV also has a 24.95% interest in Viewer's Choice which, in turn, has a 40% interest in Canal Indigo. Together, TQS, CRTI and CTV will hold slightly less than a 50% direct and indirect interest in Canal Indigo.

Benefits

5.

Under the television policy established by the Commission in Public Notice CRTC 1999-97, applicants that acquire television stations must make commitments to clear and unequivocal tangible benefits representing a financial contribution of 10% of the value of the transaction, as accepted by the Commission.

6.

The proposed value of the transaction is $73.9 million and the applicant proposed a financial package valued at $7.39 million as the tangible benefits of the transaction. The proposed benefits are to be allocated over a six-year period, as follows:

On-screen benefits

Training and support

7.

The Commission accepts the dollar value of the transaction as well as the projects submitted as benefits. Also, the Commission requires, as a condition of approval, that the applicant file an application, within thirty days of the date of this Decision, to amend the conditions of licence for the stations owned by the applicant to include the following two conditions:

· the applicant shall allocate $6,798,000 (i.e., 92% of the proposed tangible benefit package) to Canadian independent producers, excluding undertakings directly or indirectly linked to shareholders of the licensee, for the production of new priority programs from categories 7b) and 9 for original broadcast on the TQS network.

This condition is in addition to the existing TQS condition of licence requiring that it allocate at least $4 million per year and $40 million over seven years to independent production, and its commitment to broadcast at least five hours of priority programming per week in each year of the licence term.

· the applicant shall file an audited annual report to be used to verify the implementation of tangible benefits. These detailed annual reports must be consistent with the format proposed by the applicant and accepted by the Commission, as set out in the appendix.

8.

The applicant also pointed out that the association of Cogeco with Bell Globemedia and CTV Television will provide numerous benefits to TQS, including maintaining the current TQS strategy and programming style which has enabled the company to move towards profitability. The new owners intend to continue in that direction while improving network programming, especially in terms of information. The Commission expects that the anticipated synergy between TQS and CTV will primarily benefit Canadian programs broadcast on TQS.

Concentration of ownership

9.

The two proposed shareholders, CRTI and CTV Television, currently have a limited presence in the French-language media market.

10.

To date, the presence of CRTI is limited to two radio stations (CFGL-FM Laval and CJMF-FM Québec) and six regional television stations affiliated to TQS and SRC, as discussed in the next section. Together, according to BBM viewer data, these television stations have an approximate 4.5% share of the Quebec television viewing audience.

11.

CTV Television's presence in French-language media is limited to an 80% indirect interest in Réseau des Sports (RDS), a 50.1% interest in Canal Évasion, a 16% interest in Artv, and a 24.95% indirect interest in Viewer's Choice, which owns 40% of Canal Indigo. In all, French-language television services in which CTV Television has ownership interests account for a share of approximately 1.8% of the Quebec television viewing audience.

12.

Therefore, the two proposed shareholders have, at most, an approximate 6.3% share of the Quebec television viewing audience. The acquisition of TQS will increase this share by approximately 8.1%, for a total share of 14%. The Commission considers that approval of this transaction will have a limited impact on media concentration in Quebec.

Transfer of assets of CRTI regional stations

The Commission approves the applications to transfer to TQS the assets of television stations affiliated to the TQS network and with the CBC's French-language network and currently owned by CRTI (i.e., CFKM-TV and CKTM-TV Trois-Rivières, CFKS-TV and CKSH-TV Sherbrooke, CFRS-TV and CKTV-TV Chicoutimi/Jonquière and the transmitter CKTV-TV-1 Saint-Fulgence). The assets of those affiliates will be transferred in two steps. They will first be transfered to Acquisition TQS, and then to TQS. Upon surrender of the current licences, the Commission will issue licences for the above-noted affiliated stations to Acquisition TQS and then to TQS. The new licences will expire 31 August 2005, the current expiry date. The licences will be subject to the same terms and conditions as the current licences.

14.

In its discussions with the Commission, the applicant confirmed its willingness to honour all conditions and commitments imposed when the licences of the affiliated stations were renewed. The Commission expects TQS to honour all its current commitments, particularly those relating to the broadcast, on an annual basis, of a minimum weekly average of at least 1 hour and 20 minutes of local newscasts on CFKM-TV Trois-Rivières and CFKS-TV Sherbrooke, and a minimum weekly average of at least 1 hour and 23 minutes of local newscasts on CFRS-TV Chicoutimi/Jonquière, as set out in Decisions CRTC 98-100, 98-102 and 98-503.

15.

The Commission noted the agreement in principle entered into by CRTI and SRC with respect to production of local news relating to the affiliation to SRC of stations CKTM-TV Trois-Rivières, CKSH-TV Sherbrooke and CKTV-TV Chicoutimi/Jonquière. The Commission expects the terms of the final agreement to clearly show that commitments regarding local news will be maintained for the stations affiliated with SRC until the current licence terms expire. With regard to the above, the Commission requests that the applicant file a copy of the final agreement with SRC within thirty days after it is signed.

16.

With respect to the TQS stations serving the three above-mentioned areas, the Commission notes that the two aforementioned parties have agreed to separate the TQS and SRC newsrooms in the markets concerned, effective 1 September 2002, and on the merit of separate editorial control. In the Commission's view, this will contribute to the diversity of news voices, thereby meeting the needs of the local communities.

The Commission intends to review the way in which the applicant has honoured its commitments regarding news and local programming when it considers the licence renewals for TQS and SRC regional stations.

Amendment to TQS licences

The Commission approves the application to delete conditions of licence 2, 3 and 4 with respect to the composition of the TQS Board of Directors, the Code of Ethics and the complaints review committee, which are listed in Decision CRTC 2000-418 renewing the licences of the TQS network, CFJP-TV Montréal and its transmitters CJPC-TV Rimouski as well as CFAP-TV Québec. These three conditions of licence were imposed to ensure diversity of media voices as well as a clear line of demarcation between the activities of Quebecor's dailies and weeklies on the one hand, and TQS's newsrooms on the other.

19.

Since multiple ownership by Quebecor was the primary reason for imposing the aforementioned conditions of licence, the Commission considers that the conditions are no longer necessary in the current situation. The applicant committed to continue to abide by and apply all other applicable terms and conditions of licence. The Commission also notes that in its reply to concerns raised in an intervention filed by the Fédération nationale des communications (FNC), the applicant stated that TQS management would remain totally independent of Bell Globemedia English-language broadcasting undertakings, such as CTV and CFCF-TV, and independent of the daily newspaper, The Globe and Mail.

Cultural diversity

In its applications, the applicant indicated that TQS will endeavour to provide programming that is enriched by the multicultural reality of Francophones in Montréal. When the licences of CTV and Global were renewed, they made commitments to participate in a task force on cultural diversity. In Public Notice CRTC 2001-88, Representation of cultural diversity on television - Creation of an industry/community task force, the Commission called upon the Canadian Association of Broadcasters to develop an action plan for creating a task force including representatives of the broadcasting industry and the community. In its notice, the Commission emphasized the importance of having the participation of all sectors of the broadcasting industry. Therefore, the Commission expects TQS to participate in the task force.

Service to the visually impaired

In its discussions with the Commission, the applicant stated that if costs became reasonable, TQS could eventually provide some programming with audio description, once the network is profitable. The Commission notes that in decisions issued in December 2000 licensing new digital specialty television services, it encouraged licensees of new Category 1 specialty services, over their licence terms, to provide increasing amounts of programming accompanied by audio or video description. More recently, in decisions issued in the summer of this year renewing the licences for the television stations owned by CanWest Global, CTV and TVA, the Commission imposed requirements regarding the provision of increasing amounts of such programming. The Commission advises the licensee that it intends to review the matter of service to the visually impaired at the next TQS network licence renewal.

Closed captioning

The Commission is committed to improving service to television viewers who are deaf or hearing impaired. Over the period since the Commission announced its policy on closed captioning in Public Notice CRTC 1995-48, it has consistently encouraged broadcasters to increase the amount of captioned programming they provide. The Commission now requires the licensees of television, specialty and pay television undertakings to achieve a minimum percentage level of captioned programming appropriate to the nature of the service that each provides. Generally, the specified minimum requirement for English-language services is 90% of all programming.

At the last TQS licence renewal in October 2000, the Commission relieved the applicant of the policy requirements on closed captioning. The applicant did, however, make a commitment to gradually increase the percentage of closed captioned programming from 30% in the first year of the new licence term to 75% in the seventh year of the licence term, if by the third year, technology that would make attainment of these increases financially viable has been developed.

The Commission encourages the applicant to achieve a 90% level of captioning before expiry of the TQS network licence. In the meantime, the Commission expects the applicant to focus on improving the quality, reliability and accuracy of closed captioning, and to work with representatives of the deaf and hard of hearing community to ensure that captioning continues to meet their needs. The Commission further expects the applicant to support and participate in any industry/community initiatives designed to improve the quality and quantity of captioning in French, particularly real-time captioning.

Depiction of violence on television

Following complaints filed concerning the depiction of violence in some TQS programming, the Commission discussed the matter with the applicant at its last licence renewal. In the current applications, the applicant argued that measures currently in place are effective, and that it intended to maintain them throughout the licence term. The Commission expects the applicant to continue with the approach discussed at its last licence renewal and set out in Decision CRTC 2000-418, namely the commitment that films that may contain scenes of violence be aired at later times.

Interventions

The Commission considered the numerous interventions submitted with respect to these applications, which were mostly in favour of approval. It also considered the comments made in some interventions, namely those submitted by the Association des producteurs de films et de télévision du Québec (APFTQ), the Association québécoise de l'industrie du disque, du spectacle et de la vidéo (ADISQ) and the Fédération nationale des communications. The Commission is satisfied with the applicant's replies to the matters that were raised.

Related CRTC documents

Decision 2001-384 - Transfer of effective control of TVA to Quebecor Média inc.

• Decision 2000-418 - Renewal of the licences of the Quatre Saisons television network, of CFJP-TV Montréal and its transmitter CJPC-TV Rimouski, as well as of CFAP-TV Québec

• Decision 98-503 - Acquisition of the assets of CFRS-TV and of CKRS-TV Jonquière and its transmitter CKRS-TV-1 Saint-Fulgence

• Decision 98-100 - Licence renewal for CFKS-TV Sherbrooke

• Decision 98-101 - Licence renewal for CKSH-TV Sherbrooke

• Decision 98-102 - Licence renewal for CFKM-TV Trois-Rivières

• Decision 98-103 - Licence renewal for CKTM-TV Trois-Rivières

Secretary General

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

Appendix to Decision CRTC 2001-746

Reporting requirements

1.

The following outlines the various items upon which the applicant shall file an audited annual report. The purpose of this report is to permit the Commission to verify that the the proposed benefits expenditures totalling $7.39 million over six years are incremental expenditures. This reporting requirement shall therefore remain in effect for a six-year period.

2.

The applicant shall submit an audited report, concurrent with the filing of the annual return for TQS, providing the following:

· A detailed annual report of actual expenditures related to the base level requirement of five (5) hours per week of priority programming for the next six (6) years and a breakdown of the expenditures incurred as tangible benefits.

· The report must show that over the TQS licence term an amount of $6,798,000 was spent for various initiatives accepted as on-screen benefits, in excess of the base level amounts for the five (5) hours of priority programming to which TQS committed. Also, incremental expenditures incurred for priority programming accepted as on-screen benefits shall exceed the minimum amounts of $4 million per year and $40 million over seven years that TQS is required, as a condition of licence, to devote to independent production. Incremental expenditures shall total at least $1,133,000 per year, effective 1 September 2002. Total expenditures must be at least $46,798,000 over the licence term.

· The list of original and repeat priority programs broadcast by TQS over the course of the reporting year in fulfilment of the base level requirement of five (5) hours per week of priority programming. The description of each program shall include the program title, program category, date of broadcast and the duration of the broadcast.

· The list of programs produced as a result of incremental expenditures accepted as benefits of this transaction broadcast in the course of the reporting year shall include the program title, program category, date of broadcast and the duration of the broadcast.

· A description of other initiatives undertaken in fulfilment of tangible benefit commitments, and a list of expenditures associated with each.