ARCHIVED - Broadcasting Decision CRTC 2002-228

Broadcasting Decision CRTC 2002-228

Ottawa, 8 August 2002

N.I.B 95.5 Cable FM Inc.
Winnipeg, Manitoba

Application 2001-1021-3
Public Hearing at Winnipeg, Manitoba
4 February 2002

Application for a new commercial FM station in Winnipeg

The Commission denies the application by N.I.B. 95.5 Cable FM Inc. for a new commercial FM radio station to serve Winnipeg. The Commission, however, amends the existing licence for NIB's instructional campus station CJAE-FM Winnipeg by changing its authorized frequency from 92.9 MHz (channel 225LP) to 107.9 MHz (channel 300A) and by increasing the authorized effective radiated power from 13 watts to 200 watts.

This decision is one of five issued today dealing with competing applications for new Winnipeg radio stations. The Commission's overall approach to radio applications considered at the 4 February 2002 Public Hearing is set out in Introductory statement to Decisions CRTC 2002-224 to 2002-228: Applications for new radio stations to serve Winnipeg, Public Notice CRTC 2002-41, 8 August 2002.

The application

1.

At the 4 February 2002 public hearing, the Commission considered an application by N.I.B. 95.5 Cable FM Inc. (NIB) for a licence for a new commercial FM radio station to serve Winnipeg that would operate at 107.9 MHz (channel 300A) with an effective radiated power of 200 watts. The applicant indicated that, if the application were approved, it would surrender its current licence for CJAE-FM Winnipeg.

2.

CJAE-FM is licensed as an instructional campus radio station. The Campus Radio Policy, Public Notice CRTC 2000-12, 28 January 2000, (the Campus Radio Policy) defines a campus radio station as "a station owned or controlled by a not-for-profit organization associated with a post-secondary educational institution." The Campus Radio Policy further defines an instructional station as "a campus station that has the training of professional broadcasters as its primary objective." In Licence renewal for CJAE-FM, Decision CRTC 2001-141, 27 February 2001, the Commission renewed CJAE-FM's licence for a three-year term until 31 August 2004. The short-term renewal was the result of non-compliance with conditions of licence requiring CJAE-FM, during each broadcast week, to devote at least 10% of all musical selections to selections from category 3 - special interest music, 25% of its programming to spoken word, and four hours of its programming to formal educational programming that provides academic instruction.

3.

The applicant indicated that its proposed station, to be known as Cool 107.9 FM, would offer a format based on music from subcategory 21 - pop, rock and dance, which would constitute 80% of the music played. The remaining 20% of the music would come from subcategory 34 - jazz and blues.

Interventions and the applicant's reply

4.

The Commission received one intervention opposing the NIB application from a listener in Winnipeg. The intervener was concerned that NIB would not shut down its existing station if it received a licence for a new station, and would thus occupy two public frequencies in an area where the number of available FM frequencies is declining. The intervener also considered that campus stations CJUM-FM and CKUW-FM offered music that was similar to that played by CJAE-FM.

5.

In reply, NIB submitted that, if its application were approved, it would be prepared to surrender its licence for an instructional campus station as well as the frequency on which CJAE-FM currently operates. The applicant also considered that the format of its proposed station would be significantly different from the formats of other stations in the market, including campus stations.

6.

The Commission notes the interventions submitted in support of the application. These interventions commended the programming that NIB would offer on the proposed FM station.

The Commission's analysis and conclusions

7.

In its assessment of applications for new commercial radio stations, the Commission takes into account four main factors that it has identified as being relevant. While their relative importance will vary depending on the specific circumstances of the market, the four factors are as follows:

. Diversity of news voices in the community
. The quality of the application
. The impact of a new entrant on existing stations
. The competitive state of the market¹

Diversity of editorial voices

8.

In Introductory statement to Decisions CRTC 2002-224 to 2002-228: Applications for new radio stations to serve Winnipeg, Public Notice CRTC 2002-41, 8 August 2002, the Commission listed the radio, television and daily newspapers serving Winnipeg. Not counting the radio stations licensed today, this list includes eleven commercial radio stations owned by six licensees, five not-for-profit radio stations owned by five licensees as well as four CBC radio stations. Winnipeg is further served by three private television stations owned by three licensees, as well as by two CBC television stations. A new private religious television station has been approved in Proposed religious station for Winnipeg, Decision CRTC 2002-229, 8 August 2002. Winnipeg is also served by two local daily newspapers owned by two different parties.

9.

Although approving NIB's application would not increase the number of news voices in the market, the Commission considers, that in light of the above, the Winnipeg market is already well served in this respect.

Quality of the application

10.

The Commission applies four main criteria when assessing the quality of applications for new radio stations. These criteria are:

. The applicant's local programming proposals and plans for providing reflection of the local community
. Canadian content commitments
. Commitments in support of the development of Canadian talent
. The quality of the applicant's business plan, including the proposed format²

Local programming plans

11.

NIB indicated that at least 90% of the programming broadcast each week would be local programming. The station's music programming would be complemented by spoken word programming that would include eight hours per week of news.

12.

The Commission has no concerns with NIB's local programming plans, and considers that the proposed station would serve the information needs of its target audience.

Canadian content commitments

13.

NIB made a commitment that at least 40% of musical selections in category 2 - popular music played during each broadcast week on the proposed station would be Canadian. It further indicated that it would ensure that at least 10% of music selections from category 3 - special interest music played during each broadcast week would be Canadian. NIB further submitted that, as it built its music library, it would eventually be able to achieve a 40% Canadian content level for category 3 music.

14.

Under the terms of the Radio Regulations, 1986 (the Radio Regulations), an FM licensee must, during each broadcast week, devote 35% or more of its musical selections from content category 2 and 10% or more of its musical selections from content category 3 to Canadian selections. The Commission notes that the applicant's commitment with respect to Canadian selections in category 2 exceeds the minimum requirements of the Radio Regulations, and that its commitment for Canadian selections in category 3 meets the minimum requirements of those regulations. The Commission therefore has no concerns with the applicant's proposed commitments related to Canadian content.

Canadian talent development

15.

The applicant proposed to contribute, over seven years, a total of $500,000 or 5% of gross revenues, whichever is greater, to Canadian talent development. Included in this amount would be an annual contribution to FACTOR of $8,000 for a total of $56,000 over seven years, $344,000 over seven years to the Manitoba Recording Industry Association, and $100,000 over seven years for scholarships and bursaries for students at Anokiiwin College.

16.

The Commission has no concerns with respect to NIB's proposed commitments in connection with Canadian talent development.

Business plan, including format

17.

NIB's proposed station would offer a format based on music from subcategory 21 - pop, rock and dance, which would constitute 80% of the music played. The remaining 20% of the music would come from subcategory 34 - jazz and blues.

18.

As indicated earlier, NIB currently operates instructional campus station CJAE-FM. It indicated that, due to various factors, training institutions such as the National Institute of Broadcasting have been disappearing from the landscape. As a result, training funds for students have decreased to the point where the future of CJAE-FM, as an instructional station, is in jeopardy. The applicant considered that a commercial station would be more viable but also stated: "Our application does not.contemplate a change in the overall programming or station sound or the targeted listener demographics."

19.

NIB did not commission a demand study. It did, however, conduct a survey on its website. The survey indicated 64% of its listeners were male and 36% were female. It also indicated that 34% of its listeners were between 33 and 40 years old, and 36% were between 41 and 50.

20.

The applicant projected total advertising revenues of $9,451,000 over the first seven years of operation. Such revenues would grow from $603,000 in the first year to $2,217,000 in year seven. The applicant further predicted that profitability, in terms of profit before interest and taxes (PBIT) would be achieved by the second year of operation, and that a PBIT margin of 36% would be achieved in Year 7. According to NIB's projections, it would spend an average of 17% of its revenues on sales and promotional expenditures over seven years.

21.

The Commission has several concerns about the business plan that NIB has presented. NIB indicated that, while it proposed to change the status of CJAE-FM from an instructional campus station to a commercial station, it would maintain the general orientation of CJAE-FM's programming. The Commission notes that, in the two previous years for which it submitted annual returns, CJAE-FM reported no advertising revenues even though, under the Campus Radio Policy, campus stations are permitted to broadcast up to 4 minutes of advertising per hour. However, in its application, NIB projected advertising revenues of $603,000 in the first year of operation rising to $2,217,000 in year 7.

22.

In order to achieve these revenues, the Commission considers NIB would have to offer a format that would be attractive enough to gain an audience sufficiently large to appeal to potential advertisers. The Commission notes that pop, rock and dance music, which would form the backbone of the station's programming, is already available on several Winnipeg stations. It notes, however, that NIB did not commission a market study documenting a demand or need for its proposed format, relying instead on material submitted to its website. When asked to comment on whether its projected audience share of 4% was overly optimistic, the applicant replied that it was confident its projections were accurate, but was unable to present research to document the projections. The Commission does not consider that the anecdotal information on which NIB based its projected audience and tuning share is sound, and is therefore unable to determine whether the proposed format would attract the desired audience.

23.

The Commission further notes that the applicant expected to be profitable by the second year of operations, forecasting PBIT margins of 10% in Year 2 and 15% in Year 3. NIB indicated that it intended to hire recent college graduates, wherever possible, to operate the station. While acknowledging that hiring entry-level employees would serve to control operating costs, the Commission is of the view that the applicant's projected PBIT margins are overly optimistic for a new commercial radio station in the highly competitive Winnipeg market.

24.

The Commission is further concerned about the relatively low level of spending that the applicant has projected for sales and promotion. It considers that, in a competitive market, strong promotion is necessary to make potential listeners aware of the station so that they can sample its programming. NIB has projected sales and promotion expenditures averaging 17% over a seven-year period. The Commission considers that NIB would have to spend considerably more than planned on sales and promotion in order to achieve its projected audience and advertising revenues.

Impact on existing stations

25.

NIB submitted that CJAE-FM's current tuning share in the Winnipeg market was 3.9%, but could not confirm this because CJAE-FM is not a member of the Bureau of Broadcast Measurement (BBM). It argued that it had achieved this share without any adverse effect on existing commercial stations, and predicted that CJAE-FM would obtain a similar share when converted to a commercial station. NIB therefore submitted that the conversion would have no effect on the commercial stations currently serving Winnipeg.

26.

Although the applicant has indicated its intention to target an audience that would be substantially the same as that of its current campus station, the Commission notes that the new commercial station would also be free to change its programming orientation in order to achieve wider coverage. The Commission therefore considers, notwithstanding the deficiencies in the applicant's business plan, if its application were granted, that the new station would have the potential to have a negative financial impact on existing commercial stations.

Competitive state of the market

27.

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 an applicant is the licensee of an existing station in the market, and is seeking a licence for another station. In such cases, the Commission's concern is that its licensing actions not create an undue competitive imbalance in the market. The Commission considers that approval of the NIB application would have no effect on the competitive balance in the market since the applicant planned to convert an existing station from a campus station to a commercial station. If the application were approved, NIB would continue to hold the licence for a single Winnipeg radio station.

Conclusions

28.

For the reasons set out above, the Commission does not consider that the application merits approval, and therefore denies the application by NIB for a new commercial FM radio station in Winnipeg.

New frequency for CJAE-FM

29.

CJAE-FM currently operates at 92.9 MHz with an effective radiated power of 13 watts. These technical parameters are for a low-power unprotected FM service. NIB therefore would have to select another frequency for the operation of the service if required to do so to permit the best use of the frequency band.

30.

At the hearing, the applicant indicated that, due to the location of the transmitter, "we have a problem with increasing power at 92.9 MHz." Therefore, as part of its application, NIB proposed to operate at 107.9 MHz. Using the latter frequency, NIB could operate its station with an effective radiated power of 200 watts, thereby increasing the coverage area.

31.

At the 4 February Public Hearing, the Commission also considered an application by Red River College Radio (Red River). It proposed to operate a new campus instructional FM station at 92.9 MHz, the frequency on which NIB currently operates CJAE-FM. However, at the transmitter site proposed by Red River, it would be possible to operate a transmitter with an effective radiated power of 200 watts, rather than the 13 watts at which CJAE-FM operates.

32.

The Commission considers that it is in the public interest to grant Red River the use of 92.9 MHz at the site that Red River proposed and has today approved Red River's application in Application for a new instructional campus station to serve Winnipeg, Decision CRTC 2002-227, 8 August 2002. In light of this development, and of NIB's expressed preference for 107.9 MHz, the Commission hereby amends the licence for CJAE-FM by changing its frequency from 92.9 MHz (channel 225 LP) to 107.9 MHz (channel 300A) and by increasing the authorized effective radiated power from 13 watts to 200 watts. This change will result in upgrading CJAE-FM to protected status. The Commission notes that Red River and NIB will have to co-ordinate the implementation of their undertakings.

Issuance of the amended licence

33.

The Department of Industry (the Department) has advised the Commission that, while the amendment is conditionally technically acceptable, it will only issue a broadcasting certificate when it has determined that the proposed technical parameters will not create any unacceptable interference with aeronautical NAV/COM services.

34.

The Commission reminds the licensee that pursuant to section 22(1) of the Broadcasting Act, the authority will not be effective until the Department has notified the Commission that its technical requirements have been met, and that a broadcasting certificate will be issued.

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