ARCHIVED - Broadcasting Decision CRTC 2002-90

Broadcasting Decision CRTC 2002-90

Ottawa, 19 April 2002

Astral Media Inc., on behalf of 3903206 Canada Inc., Telemedia Radio Atlantic Inc. and Radiomedia Inc.
Montréal, Chicoutimi, Trois-Rivières, Sherbrooke, Gatineau and Québec; Quebec;
Hawkesbury, Ontario;
Grand Falls, Plaster Rock, Woodstock, Fredericton, New Maryland, Oromocto and Bathurst, New Brunswick;
Truro, Nova Scotia

Applications 2001-0811-9, 2001-0812-7, 2001-0813-5, 2001-0932-3, 2001-0933-1, 2001-0934-9, 2001-0935-7, 2001-0936-5, 2001-0937-3
19 November 2001 Public Hearing
Montréal, Quebec

Transfer of control of 3903206 Canada Inc., of Telemedia Radio Atlantic Inc. and of 50% of Radiomedia Inc. to Astral Radio Inc.

The Commission approves the applications by Astral Media Inc. (Astral Media) for authority to acquire effective control of 3903206 Canada Inc., of Telemedia Radio Atlantic Inc., and of 50% of Radiomedia Inc. (Radiomedia), by acquiring all shares held directly or indirectly by Telemedia Radio Inc. (Telemedia) in these corporations. A list of the broadcasting undertakings involved in these applications is provided in Appendix I.

Introduction

1.

This transaction is related to the recent decision by Telemedia to divest itself of all its radio broadcasting assets across Canada. The present decision of the Commission concerns the transfer of control of Telemedia's radio broadcasting assets in Quebec, New Brunswick and Nova Scotia. At the same Montréal Public Hearing, the Commission examined applications to transfer other radio broadcasting assets of Telemedia in Ontario and western Canada. Those applications are dealt with in separate decisions also issued today (Decisions CRTC 2002-91, 2002-92 and 2002-93).

2.

The Commission considered this transaction in the context of the Broadcasting Act (the Act) and the Commercial Radio Policy 1998, Public Notice CRTC 1998-41, 30 April 1998 (the Commercial Radio Policy). In its review, the Commission took into account the cultural, social and economic objectives set out in the Act and the Commercial Radio Policy, as well as the goal of a strong and competitive communications industry in Canada.

3.

The Commission has concluded that these applications are consistent with the objectives of the Act and of the Commercial Radio Policy, and that their approval is in the public interest. Moreover, the Commission is of the view that approval of this transaction will improve the competitive position of private French-language radio in Quebec and will enhance the quality of programming, especially news. Further, the emphasis to be placed by the applicant on musical diversity will assist in promoting the works of Canadian Francophone artists and musicians. The Commission also considers that the synergies that Astral Media has identified between its AM and FM stations will revitalize the French-language radio industry as a whole, and will ensure greater stability for AM radio in the long term.

4.

To ensure that the benefits of this transaction are realized and that the public interest is served, the Commission has decided to make its approval subject to conditions precedent. One such condition requires that ownership of CFOM-FM Lévis be transferred to a third party not associated with Astral Media. The second stipulates that an application be filed to add conditions of licence related to the operation of the Quebec radio stations involved in this transaction. These conditions precedent are set out in Appendix II to this decision.

5.

Finally, the Commission is satisfied that the financial package of $15.3 million proposed by the applicant as tangible benefits is commensurate with the size and nature of the transaction.

Background

6.

Astral Media is a leader in the Canadian specialty, pay television and pay-per-view services sector. Astral Media is also a significant participant in Quebec's radio broadcasting industry, with direct and indirect holdings in 12 AM and FM radio stations located in all areas of the province. These holdings include a 50% interest in two AM stations held through Radiomedia. Astral Media is also active in the billboard advertising sector.

7.

This transaction follows a growing co-operation in recent years between two major private radio broadcasters in Quebec-Telemedia Communications inc. and Radiomutuel inc. (Radiomutuel). In 1994 and 1995, these broadcasters undertook a major restructuring of their AM radio undertakings necessitated by the difficult economic situation and the substantial losses experienced by this radio sector in the early 1990s. They decided to combine forces and maintain a single AM station in each region of Quebec. This decision involved the closure of six AM radio stations, one each in Montréal, Québec, Trois-Rivières, Sherbrooke, Chicoutimi and Gatineau. They also created a new AM network, the Radiomedia network, anchored by two stations owned equally by Telemedia and Radiomutuel, namely CKAC Montréal and CHRC Québec. The purpose of the network was to provide a news service throughout the province, operating 24 hours a day, seven days a week (see Revocation, Decisions CRTC 94-845 and 94-846, 2 November 1994; Transfer of assets of CKAC and new French-language news network - authorized, Decision CRTC 95-118, 27 March 1995, and; Transfer of control and assets of CHRC - authorized, Decision CRTC 95-119, 27 March 1995).

8.

Subsequently, the broadcasting interests of Radiomutuel were transferred to Astral Communications inc. These interests included eight French-language FM radio stations and three French-language AM radio stations in Quebec, the Radio Énergie FM network and Radiomutuel's 50% interest in CKAC and CHRC. They also included the two specialty television services, Canal Vie and Canal Z, and a 50% interest in MusiquePlus inc., licensee of the specialty services MusiquePlus and Musimax (see Decision CRTC 2000-5, 12 January 2000).

9.

Currently, Astral Media directly or indirectly owns 12 French-language radio stations in Quebec. These include CFOM-FM Lévis whose licence is held by Entreprises Radio Etchemin inc., eight other FM stations and three AM stations. Astral Media also owns the Radio Énergie network. Telemedia owns eight French-language radio stations (six FM and two AM), one English-language AM station, and the Radio Rock Détente network that are involved in this transaction. Telemedia also holds a 20% interest in Genex Communications Inc., licensee of CHOI-FM Québec and CKNU-FM Donnacona; these holdings are not involved in this transaction. Finally, Astral Media and Telemedia each own 50% of CKAC Montréal and CHRC Québec and of the Radiomedia news network. They thus serve a large portion of the province, including the two main centres of Montréal and Québec, as well as the Trois-Rivières, Sherbrooke, Chicoutimi and Gatineau regions.

The Astral Media proposal

10.

Astral Media stated that this transaction reflects a corporate strategy adopted some years ago of concentrating its activities in the specialty and pay television industry, in radio and in billboard advertising. It added that the transaction will enable it to strengthen its position in French-language radio and to establish a presence in English-language radio in eastern Canada.

11.

The applicant argued that, with approval of this transaction, a radio group would emerge that would have the critical mass and human and financial resources required to meet the challenges facing radio today. It noted that the sale of advertising is the sole revenue source available to commercial radio. With respect to the concentration of different media in recent years, Astral Media noted that, in Quebec, both AM and FM radio have lost considerable ground to television and to the daily and weekly newspapers. As an example, it noted that, even in a market as dynamic as Montréal, radio today accounts for only 9% of the spending on advertising in all media.

12.

According to Astral Media, radio stations with formats based predominantly on talk programming, and news in particular, are under the greatest threat. It noted that French-language AM radio has experienced a decade of decline marked by a pronounced drop in the total number of listening hours and an increase in deficits. The applicant stated that radio news programming has serious problems of appeal and credibility. It indicated that this was due to insufficient resources, especially when compared to the revenues available to its two principal competitors, television and newspapers.

13.

With this in mind, Astral Media proposed a three-point plan designed to benefit the public and the Canadian broadcasting system as a whole. The plan had the following goals:

• to revitalize French-language AM radio in Quebec;

• to ensure greater complementarity among the different formats of the Radio Énergie, Radio Rock Détente and Radiomedia networks; and

• to improve the capability of radio to compete with the other media.

14.

To revitalize AM radio in Quebec, Astral Media proposed to invest in the quality of news programming by establishing in each market a common newsroom that would be better equipped and staffed by a more effective team of journalists. It noted in this regard that, since 1994, it has successfully employed such a model in Montréal, where CITÉ-FM and CKMF-FM are both served by the CKAC newsroom. The applicant also plans to make use of its newsrooms in Montréal, Québec, Ottawa/Gatineau and in other regions to collect, process and disseminate news that is more comprehensive and in depth. These improved newsrooms will supply the stations of the Radiomedia network and of the Radio Énergie and Radio Rock Détente networks, taking into account their formats and specific needs. The newsrooms will also serve other independent affiliated stations.

15.

Astral Media also intends to strengthen the complementarity of the three networks by minimizing the amount of overlap and by emphasizing the distinctive nature of each network, its tone, local roots, personality, music, news service and its community involvement. The applicant stated that Radio Énergie is directed to listeners in the 18-34 age group, providing a music mix based on contemporary hits. For its part, Radio Rock Détente is aimed at listeners in the 25-54 age group with light music for adults. Radiomedia targets listeners in the 50-plus group with a talk format focussed on news and current events. To achieve complementarity, the applicant will establish an organizational structure in which each network will have its own vice-president as well as its own music director or news director. Each region will have a product management unit for each network and three separate, independent local sales forces.

16.

Astral Media indicated that its goal of improving the competitiveness of radio comes in response to recent trends toward heavy concentration in the print media, as well as among media buyers, advertising agencies and advertisers. It also noted the recent emergence in the television broadcasting sector of vertically integrated "mega-companies" that benefit from a high degree of multimedia cross-ownership. The applicant maintained that greater concentration of radio and the establishment of strong radio networks with Quebec-wide coverage are essential if radio is to compete with these other, already highly concentrated media sectors and to avoid seriously compromising the Quebec radio industry's capacity for growth.

Procedures

17.

The Commission announced these applications in Notice of Public Hearing CRTC 2001-10, 14 September 2001 (the Notice). The Commission indicated in the Notice that it wished to examine certain questions including, in particular, the diversity of voices in Quebec, the potential market dominance resulting from the transaction, and media cross ownership. The Commission also invited interested parties to submit their comments on the applications.

18.

In response, the Commission received almost 300 letters, the vast majority of which supported approval of the applications. Certain interveners, however, had concerns or reservations, and five of these opposed approval of the applications. The concerns raised by interveners were essentially the same as those raised by the Commission in the Notice.

19.

The part of the transaction relating to Quebec broadcasting undertakings raised certain questions with respect to Astral Media's significant position in French-language radio. The principal questions of interveners related to the increased concentration of media ownership resulting from this transaction, and to the potential consequences of Astral Media's increasingly expanded position in French-language radio in Quebec. Concerns were also expressed about the consequences of this expansion for the quality of programming, the diversity of voices and the diversity of music available on radio, and for the relevance of the tangible benefits package proposed by the applicant. These matters are discussed below.

20.

On 21 December 2001, pursuant to section 92 of the Competition Act, the Commissioner of Competition filed an application with the Competition Tribunal opposing the proposed acquisition of the eight French-language radio stations in Quebec and of Telemedia's 50% ownership interest in Radiomedia. Astral Media and Telemedia then filed their own motions with the Federal Court of Canada challenging the applicability of the Competition Act to this transaction. These actions do not affect the Commission's jurisdiction under the Broadcasting Act to issue decisions on the present applications.

Analysis

21.

The Broadcasting Act establishes the Commission's mandate for regulating and supervising all aspects of the Canadian broadcasting system with a view to implementing the broadcasting policy for Canada. In fulfilling its mandate, the Commission must balance various social, cultural and economic objectives to ensure that Canadians have a strong and competitive broadcasting system.Section 5(2)(a) of the Act also stipulates that the Commission's regulation and supervision of the system should be flexible and "readily adaptable to the different characteristics of English and French language broadcasting and to the different conditions under which broadcasting undertakings that provide English or French language programming operate." The Commission took these matters into account in its assessment of the present transaction. The Commission also examined whether the transaction was consistent with the Commercial Radio Policy, particularly in regard to the provisions relating to common ownership of radio stations in the same market.

22.

In the Commercial Radio Policy, the Commission indicated that it would determine whether the position of dominance held by an applicant could affect the level of true competition available in the market. The Commission indicated that it would also investigate any concerns about the potential for gate keeping with respect to information, and the concentration of the advertising market in the hands of a single person.

23.

The Commission recognized in the Commercial Radio Policy that the radio industry operates as part of a competitive environment in which some of its competitors in other media have been allowed to consolidate. The Commission also acknowledged that increased concentration of ownership would reduce the number of competitors in some markets. On the other hand, the Commission stated that it was convinced that increased consolidation of ownership within the radio industry would enable the industry to strengthen its overall performance and attract new investment. It added that this, in turn, could assist the industry to compete more effectively with other forms of media and enhance its contribution to the support of Canadian cultural expression.

24.

The Commission also indicated that it had sought to strike a reasonable balance between the benefits of increased concentration of ownership within the radio industry and its concerns for preserving the diversity of news voices in a market. It noted that recent years have seen a considerable increase in the number of local, regional and national news sources available in most markets. These include new conventional radio and television stations, specialty programming services, community radio stations and regional newspapers, as well as emerging alternative sources of information such as the Internet.

25.

The Commission's review of applications such as these by Astral Media encompasses an assessment of the potential impact of the transaction on the market, on the level of competition and on the capacity of other existing radio broadcasting undertakings to meet their regulatory obligations. In its deliberations, the Commission also weighs the impact of the transaction on the diversity of voices in the market, on the access that artists and performers have to the airwaves, and on the promotion of Canadian talent. Further, the Commission determines whether the circumstances warrant conditions and safeguards to preserve the current balance in the marketplace.

Common ownership

26.

According to the Commission's policy on common ownership, in markets with fewer than eight commercial stations operating in a given language,

.a person may be permitted to own or control as many as three stations operating in that language, with a maximum of two stations in any one frequency band. In markets with eight commercial stations or more operating in a given language, a person may be permitted to own or control as many as two AM and two FM stations in that language.

27.

The present transaction is consistent with the above policy in all markets except Québec. In that market, which has fewer than eight commercial stations, Astral Radio would have ownership of four stations, namely CHIK-FM, CITF-FM and CHRC in Québec and CFOM-FM in Lévis. However, the applicant has committed to divest itself of CFOM-FM should its applications be approved.

28.

Accordingly and consistent with the policy set out in Ownership transfers - Application of a condition precedent where approval is predicated on the divestiture of another business asset or interest, Public Notice CRTC 2001-75, 5 July 2001, this approval is subject to a condition precedent stipulating that the approval will only be effective provided a third party not associated with Astral Media or any of its affiliates files an application for authority to acquire CFOM-FM Lévis, the Commission deems said application to be complete, and the station is placed in trust to the satisfaction of the Commission. This condition precedent must be fulfilled in accordance with the conditions set out in Appendix II. 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.

Position of Astral Media in the French-language radio sector

29.

This transaction brings an end to Telemedia's participation in the radio industry. Telemedia has been an important and experienced player in the radio industry for many years, particularly in Quebec. The transaction also increases significantly the presence of Astral Media, another major player in the radio sector. Astral Media will have a substantial presence in all regions of Quebec. In Sherbrooke, Trois-Rivières and Chicoutimi, Astral Media will be the only major player in private radio. In the Ottawa/Gatineau area, it will be the only operator of private French-language stations, although a new private French-language FM station in this region was approved in principle last year (New classical music FM station in Ottawa/Hull, Decision CRTC 2001-626, 4 October 2001). In Montréal and Québec, Astral Media will have a revenue and audience share among Francophones of more than 50%. This transaction will position Astral Media as the largest player in Quebec's radio industry, whether measured by the number of radio stations owned, audience share, or revenues.

30.

In response to the questions raised by opposing interveners regarding the position it would hold in the French-language radio industry, the applicant emphasized that its commitment to sell CFOM-FM Lévis brought the transaction into compliance with the Commission's policy on common ownership. Astral Media contended that, in this age of convergence, the radio industry cannot be considered in isolation from the global competitive environment, given the choice that the public and advertisers have for news, entertainment and advertising across a wide range of media.

31.

Given the recent movement toward consolidation of media ownership in Quebec, the Commission considers that the central position Astral Media will have in the radio industry, and the resources available to it following this approval, will revitalize French-language radio in Quebec and bring a new balance to the market. Astral Media will be better able to compete with other media and will have the means to implement its plans for improving the quality of radio, both at the local station level and on its radio networks.

32.

Nevertheless, given Astral Media's current position in the Quebec radio market, coupled with its many interests in specialty and pay television and billboard advertising services, the Commission believes that questions will remain concerning the applicant's increased prominence within Quebec's French-language radio market following this transaction. The present quality of news and information, diversity of news sources, plurality of voices, and radio market equilibrium are the consequences of competition in the market between two major broadcasters. At issue is how these various characteristics will be affected by the transaction.

33.

In view of its concerns regarding this matter, the Commission discussed with the applicant at the Public Hearing the possibility of establishing safeguards and monitoring mechanisms relative to the implementation of its commitments. The concerns raised by the Commission and by some interveners related in particular to the transaction's potential impact on local advertising sales, on the maintenance of an adequate level of local programming, and on the diversity of spoken word and music programming offered by each network. These questions are examined in the following sections.

Advertising

34.

The prominence of Astral Media in Quebec's French-language radio industry raised questions about the transaction's potential impact on advertising sales, particularly its effects on the price of local advertising. This issue was the subject of opposing interventions submitted by two organizations involved in the media placement sector, namely Radio Unie Target and the Conseil des directeurs médias du Québec inc. The latter organization submitted that [translation] "this transaction is very likely to prompt an increase in rates due to the concentration of supply and the fact that it is often difficult to use other media as alternatives to radio."

35.

In response to these interventions, the applicant indicated that it and Telemedia have operated an integrated national radio advertising sales force since 1994. Approval of the transaction will thus have no effect on the present situation. As for the sale of local advertising, Astral Media stated that its proposal to maintain three separate sales teams in each market would stimulate competition among the networks and ensure growth for the radio industry.

36.

Astral Media also referred to a study it had filed with its applications entitled Quebec French Local Media by Markets. According to the applicant, the study clearly demonstrates that competition among the various media is very strong, not only in Montréal and Québec, but also in Chicoutimi, Trois-Rivières, Sherbrooke and Ottawa/Gatineau. Each of the last four markets has at least three local television stations, three commercial radio stations, including Telemedia and Astral Media stations, as well as a daily newspaper.

37.

Astral Media also provided a study with the applications entitled Overview of Quebec's Local Media Offering, as conducted by the Carat Expert firm. This study compares the cost that advertisers pay for each thousand listeners or viewers (cost-per-thousand or CPM) in Quebec's primary and secondary markets.

38.

The Commission has examined the arguments presented by the applicant and the interveners. With respect to the Carat Expert study, the Commission finds that there is a substantial difference between the CPMs of radio and television in the French-language markets of Montréal, Québec and Ottawa/Gatineau. The study clearly demonstrates, however, that in the markets of Sherbrooke, Trois-Rivières and Chicoutimi, the CPMs are almost identical, having radio-to-television CPM ratios of 0.97, 0.98 and 0.94, respectively.

39.

With approval of the present applications, Astral Media gains a significant position in French-language radio in Quebec, particularly in the Sherbrooke, Trois-Rivières, Chicoutimi and Ottawa/Gatineau markets. The Commission notes, however, the various daily newspaper, television and other media operating in each of these markets. The Commission considers that, while these media do not substitute perfectly for radio as advertising outlets, they do serve as effective alternatives. The record of the proceeding thus demontrates that television offers local advertisers inventories and costs that are competitive with those offered by radio, particularly in the markets of Sherbrooke, Trois-Rivières and Chicoutimi.

40.

The Commission also notes that there are prospects for expansion of radio in these markets, which would produce further competition to Astral Media for advertising dollars. The Commission has received applications to operate new French-language radio stations in each of Sherbrooke, Trois-Rivières and Chicoutimi, and has issued calls for further applications to serve those markets.

41.

The Commission will wish to closely monitor the development of this competiton and its potential impact on other broadcasting undertakings in these regions. Consequently, the Commission expects Astral Media to provide the Commission with a report, before 1 November following the end of each broadcast year, detailing the annual variation in rates for local advertising sales for each of the Radio Énergie, Radio Rock Détente and Radiomedia networks and in each of the markets of Trois-Rivières, Sherbrooke, Chicoutimi and Ottawa/Gatineau. The Commission may wish to discuss these reports with Astral Media at the time of licence renewal.

Local programming

42.

In the Commercial Radio Policy, the Commission maintained the requirement that FM stations devote at least one-third of the broadcast week, or 42 hours per week in most circumstances, to local programming. The Commission indicated that AM stations should make commitments in their licence renewal applications to a minimum level of local programming. The Commission added that conditions of licence would be imposed in cases where the Commission deems them appropriate.

43.

Astral Media has committed to maintain the current level of local programming for each of the AM stations it is acquiring in this transaction. For the FM stations, Astral Media has committed to a level of local programming that is 50% greater than the required level, or a minimum of 63 hours per week, for all Quebec FM stations affiliated with the Radio Rock Détente network.

44.

Certain interveners, including Members of Parliament for Lotbinière-Les Érables and for Jonquière, la Fédération nationale des communications and le Syndicat des employé(e)s CKRS-CJAB, pointed out that the commitment made by the applicant regarding FM stations amounts to a reduction from the current number of local programming hours for stations of the Radio Rock Détente network. They said they feared this commitment would result in a decline in local news content and local program production.

45.

According to the data provided by Astral Media in reply to the Commission's questions, all of Telemedia's FM stations currently generate at least 83 hours of local programming per week, which is almost double the minimum requirement. When questioned at the hearing, the applicant confirmed this figure. It explained that the difference between the current level of local programming and its commitment was designed to provide it with a reasonable measure of flexibility. It added that it did not intend to reduce the current number of local programming hours and argued that it should not be penalized by a conversion of its voluntary efforts in this regard to a minimum requirement.

46.

The Commission considers that it would be unfair to penalize the applicant in view of the exemplary efforts of the FM stations affiliated with the Radio Rock Détente network in the production of local programming. However, considering the possible reduction in local programming hours and the concerns raised by the interveners, the Commission considers it appropriate to incorporate the applicant's commitments concerning local production and local news as conditions of licence. Accordingly, this approval is subject to the submission, within 60 days of the date of this decision, of an application to add a condition of licence reflecting the requirements for local programming and local news for the Quebec radio stations involved in the transaction, as stipulated in Appendix II to this decision.

47.

With respect to news, Astral Media stated that its first challenge would be to repatriate radio audiences by offering large amounts of high-quality news programming from various sources. It also indicated that, during peak morning hours, separate teams of journalists for the three networks would ensure diversity in the delivery of news. Further, the Commission notes the applicant's statements concerning the broadcast of news on weekends as part of the overall improvement in local content and news that will result from the establishment of a central newsroom in each local market. Astral Media has also formally committed, for the next seven years, not to close down any of the existing stations of the Radiomedia, Radio Énergie and Radio Rock Détente networks in any of the Quebec markets where these three networks are currently operating.

Diversity of programming and access to the airwaves

48.

Certain interveners representing the cultural community, such as l'Association de l'industrie du disque, du spectacle et de la vidéo (ADISQ) and l'Union des artistes (UDA), supported approval of the applications. They, however, offered comments concerning the maintenance of diversity in musical formats on the Radio Énergie and Radio Rock Détente networks, and the importance of ensuring that the works of Canadian Francophone artists have equitable access to the airwaves. They also suggested the establishment of monitoring mechanisms to help ensure that these objectives are attained.

49.

One of the major objectives of the Commercial Radio Policy is to ensure pride of place for Canadian artists on Canada's airwaves. In its policy, the Commission noted that, historically, radio has played an important role in promoting Canadian artists and music, and that the radio industry in Quebec has been particularly active in this regard. The position Astral Media will hold in Quebec's French-language radio industry together with its participation in French-language specialty television through its interests in the specialty music services MusiquePlus and MusiMax, will give it considerable influence in the careers of Francophone artists in Quebec and across Canada.

50.

In response to the comments of interveners, Astral Media committed to strengthen the complementarity of formats among the three networks it will own and to develop programming that will further differentiate the stations of the Radio Énergie network from those of the Radio Rock Détente network. It also stated that its objective was to gradually increase diversity in the range of Canadian Francophone artists whose works are aired on its networks.

51.

Regarding monitoring mechanisms, Astral Media proposed to file an annual report on the diversity of musical selections and Canadian Francophone artists aired during the previous year on each of its predominantly music-based network services, Radio Énergie and Radio Rock Détente. The applicant stated that this would serve as an uncomplicated mechanism that would enable the Commission and the public to follow its progress in this regard. At the hearing, ADISQ stated that this kind of report could be satisfactory if the report's parameters were established in co-operation with representatives of the artistic community.

52.

The Commission accepts in principle Astral Media's proposal concerning submission of an annual report, and makes its approval of the transaction subject to the submission of an application to add a condition of licence requiring such annual reporting. However, Astral Media must consult beforehand with ADISQ and UDA, as representatives of the artistic community, to ensure that the parameters established for the annual report will allow adequate monitoring to take place of access to airwaves and increases in diversity. Accordingly, the condition of approval set out in Appendix II stipulates that Astral Media must, within 90 days of the date of this decision, submit to the Commission a document setting out the parameters for its annual report, as developed through consultations with ADISQ and UDA.

53.

In addition, the Commission notes Astral Media's commitment to keep the Commission informed about concerns or complaints expressed by artists or associations of artists on the subject of equitable access to the broadcasting system. The applicant also committed to make available to the public all correspondence related to these concerns or complaints, and to provide copies of such correspondence to the Commission for its evaluation in considering the renewal of Astral Media's broadcasting licences.

Package of tangible benefits

54.

Because the Commission does not solicit competing applications for authority to transfer ownership or control of broadcasting undertakings, the onus is on the applicant to demonstrate that the proposed benefits are commensurate with the size and nature of the transaction. In the Commercial Radio Policy, the Commission stated that it expects applicants to commit to implement clear and unequivocal benefits representing a minimum direct financial contribution to Canadian talent development of 6% of the value of the transaction. The Commission added that it would forgo benefits requirements for unprofitable undertakings. However, where an applicant is applying to acquire a group of stations, some of which are unprofitable, the Commission will consider profitability on an aggregate basis.

55.

The total value of the transaction is almost $255 million. Of this amount, $227 million is assigned to assets located in Quebec and $28 million to assets in New Brunswick and Nova Scotia. In accordance with the Commercial Radio Policy, Astral Media proposed tangible benefits having a value of $15.3 million, representing 6% of the value of the transaction. The applicant also proposed to distribute the tangible benefits between the French-language and English-language radio sectors in the manner described below.

Benefits for French-language radio

56.

As tangible benefits for the French-language radio sector, Astral Media proposed a financial package of $13,620,000 over a seven-year period. The applicant further proposed to distribute this amount as follows:

• $6,810,000 (3%) will be directed to Fonds RadioStar;

• $4,540,000 (2%) will be directed to MusicAction;

• $2,270,000 (1%) will be earmarked as support for other projects whose goals are focussed upon the development of Canadian Francophone talent nationally, regionally and locally.

57.

According to the applicant's proposal, the last amount of $2,270,000 noted above would be distributed as follows:

- $1,675,000 would be devoted to the creation of a new fund (Fonds Radio Astral Media) whose purpose would be to assist in mounting performances and tours by new Canadian Francophone artists;

- $175,000 would be allocated to organizing meetings of professionals in the Quebec recording industry, under the auspices of ADISQ; and

- $420,000 would be allocated to the organization of a new annual event, Les Grands Prix Astral de la chanson francophone d'ici, to support the development and promotion of Canadian French-language songs.

58.

Regarding the amount of $1,675,000 earmarked for the creation of a new fund, the policy on contributions to Canadian talent is set out in Contributions By Radio Stations To Canadian Talent Development - A New Approach, Public Notice CRTC 1995-196, 17 November 1995. The policy is based on a funding model proposed by the Canadian Association of Broadcasters (CAB). The policy is intended to establish a level of funding that would ensure the availability of a sufficiently large pool of Canadian music and other Canadian creative material for broadcast, and to reduce the administrative burden related to the process of evaluating proposals for Canadian talent development.

59.

Under this policy, licensees accept conditions of licence requiring them to remit their contributions directly to eligible third-party organizations, including MusicAction, FACTOR, national and provincial music organizations, performing arts groups, schools and scholarship recipients.

60.

In addition, with respect to benefits associated with transfers of ownership of radio undertakings, the Commission, in its Commercial Radio Policy, replaced the benefits test and adopted the principle of requiring financial contributions equal to 6% of the value of the transaction. Under the policy, contributions must be distributed as follows: 2% to FACTOR or MusicAction; 3% to a Canadian music marketing and promotion fund, which gave rise to Fonds RadioStar and the Radio StarMaker Fund in 2000; and 1% to other Canadian talent development projects or to other eligible third parties directly involved in the development of Canadian musical and other artistic talent, in accordance with Public Notice 1995-196.

61.

Under the circumstances, the Commission considers that Astral Media's proposal to create a new fund does not accord with the spirit of the existing policy. This policy has, as a specific objective, the reduction of the administrative burden related to the process of evaluating Canadian talent development projects. The policy is also intended to recognize and employ funding structures already established by the industry. Accordingly, as a condition of approval, Astral Media must confirm to the Commission, within 60 days of the date of this decision, that the proposed amount of $1,675,000 will be paid to Fonds RadioStar, to MusicAction or to other existing, eligible funds. In addition, as proposed by the applicant, the Commission expects these existing, eligible funding structures to allocate this amount to the development of new artists performing in all genres of music, and to the support of the Canadian sound recording sector, for the purpose of promoting the careers of emerging stars of Canadian French-language music.

62.

In its intervention, ADISQ proposed that the financial package related to tangible benefits be increased from 6% to 9% of the value of the transaction because of the size of the transaction and the degree of concentration of ownership it gives to Astral Media. Moreover, Atelier Radio Enfant, in an intervention submitted jointly with the Association des radios communautaires du Quebec (ARCQ), the Alliance des radio communautaires du Canada (ARC du Canada), the Centre des ressources en éducation des médias (CREM) and the Société de communication Atikamekw-Montagnais (SOCAM), suggested that the financial package allocated to French-language radio be distributed differently, more specifically that a new fund of $7 million be created for local expression in radio and for the development of Aboriginal and French-language broadcasting services.

63.

In reply, Astral Media argued that it would be unfair to impose requirements on it that exceed those established in the Commercial Radio Policy, since its applications comply in all respects with the existing policy on common ownership of media. The applicant also noted that the proposals of these interveners would represent a departure from the Commission's existing policy on tangible benefits, as adopted in 1998, and that the current public hearing was not the appropriate forum for revising a policy.

64.

Astral Media also recalled that a portion of the proposed tangible benefits is intended to provide support for Aboriginal broadcasting. It indicated that these amounts will be paid to the Canada-wide Aboriginal Voices Radio (AVR) network, which, among other things, has recently been authorized to carry on a new FM radio undertaking to serve the Ottawa-Gatineau area.

65.

Having considered the proposals made by Astral Media and those of the interveners, the Commission is satisfied, subject to the aforementioned conditions, that the tangible benefits proposed by the applicant are clear, unequivocal and commensurate with the size and nature of the transaction.

Radio stations in New Brunswick and Nova Scotia

66.

The Commission notes that the part of the transaction relating to the radio stations in New Brunswick and Nova Scotia did not raise any particular concerns. At present, Astral Media does not own radio stations in these two provinces and will therefore assume the responsibilities currently held by Telemedia. Following its examination of this part of the transaction, and of the tangible benefits proposed by the applicant that are set out below, the Commission concludes that approval is in the public interest.

67.

As tangible benefits for the English-language radio sector, Astral Media proposed a financial package of $1,680,000 over a seven-year period. The applicant proposed to distribute this amount as follows:

• $840,000 (3%) will be directed to the Radio StarMaker Fund;

• $560,000 (2%) will be directed to FACTOR; and

• $280,000 (1%) will be earmarked as support for other projects whose goals are focussed on the development of Canadian Anglophone talent nationally, regionally and locally.

68.

According to the applicant's proposal, the last amount of $280,000 noted above will be distributed as follows:

- $70,000 will be used to fund an award presented annually in connection with The Canadian Radio Music Awards;

- $70,000 will be used to support other Canadian Music Week activities, in particular the Gold Sponsorship;

- $35,000 will provide for annual grants of $2,500 to each of the Music Industry Association of Nova Scotia and the Country Music Association of New Brunswick; and

- $105,000 will be allocated to support the development of Canadian Aboriginal broadcasting services.

69.

With respect to the proposed financial support of $105,000 for the development of Canadian Aboriginal broadcasting services, the Commission considers that the proposed support to AVR will contribute to the implementation of section 3(1)(o) of the Act. This section stipulates that programming that reflects the Aboriginal cultures of Canada should be provided within the Canadian broadcasting system as resources become available for the purpose. The Commission considers that the financial support allocated to AVR by Astral Media will benefit the Canadian broadcasting system.

70.

The Commission notes, however, that the purpose of the benefits requirements for commercial radio stations is to promote and support Canadian musical and other artistic talent through contributions to third parties. Consequently, Astral Media must, as a condition of approval, submit a report within 60 days of the date of this decision on how the financial support for AVR will be allocated among third parties for improving and promoting the development of Canadian talent, and Aboriginal talent in particular.

71.

Regarding the radio stations in New Brunswick and Nova Scotia involved in this transaction, the Commission indicated in its Commercial Radio Policy that the purchaser of an undertaking must fulfil any benefits commitments that the current licensee of the undertaking has not fulfilled. In this connection, the Commission notes Astral Media's commitment to proceed with the implementation of all of the tangible benefits resulting from previous transactions involving the radio stations in New Brunswick and Nova Scotia to be acquired in this transaction.

Issue of licences to Astral Radio

72.

Upon approval of these applications, Astral Media will undertake a corporate reorganization to transfer its holdings in 3903206 Canada Inc., Telemedia Radio Atlantic Inc. and Radiomedia to Astral Radio Inc. (Astral Radio). This will be followed by the dissolution of Radiomedia, and new broadcasting licences will be issued to Astral Radio for the undertakings currently held by Radiomedia. Accordingly, upon surrender of the existing licences, the Commission will issue new licences to Astral Radio to continue the operation of the undertakings now operated by Telemedia. These will expire on the expiry date of the existing licences, namely 31 August 2002 for digital radio station CKAC Montréal, 31 August 2003 for CHRC Québec, 31 August 2006 for CKAC Montréal and the Radiomedia network, at the end of the 2001-02 hockey season for the Réseau de hockey des Canadiens de Montréal, and at end of the 2002 baseball season for the Réseau de baseball des Expos de Montréal. The licences will be subject to the existing conditions, to the conditions set out in section 2 of Appendix II to this decision, and to the conditions stipulated in New licence form for commercial radio stations, Public Notice CRTC 1999-137, 24 August 1999.

Conclusion

73.

In its Commercial Radio Policy, the Commission stated that one of its major objectives was: ". to ensure a strong, well-financed radio industry that is better poised to achieve its obligations under the Act and to meet the challenges of the 21st century." Following its examination of the current applications, the Commission has concluded that they conform with the relevant objectives of the Act and of the Commercial Radio Policy. Taking into account Astral Media's commitment to divest itself of CFOM-FM Lévis, these applications are also in accordance with the Commission's policy on common ownership of radio stations in the same market.

74.

The Commission also examined these applications taking into account the distinctiveness of French-language broadcasting and the particular environment in which it operates. The Commission is satisfied that the proposed synergies among the Radiomedia, Radio Énergie and Radio Rock Détente networks will improve the competitive position of private French-language radio in Quebec and will enhance the quality of programming, particularly of news. Moreover, the proposals to strengthen the presence and personality of the predominantly music-based networks Radio Énergie and Radio Rock Détente, and to give greater emphasis to musical diversity, will assist in further promoting the works of Canadian Francophone artists and musicians.

75.

Considering the decline in the financial situation of French-language AM radio in recent years, as evidenced by falling revenues and increased deficits, considering as well the commitments of the applicant, the Commission is satisfied that the synergies that Astral Media has identified between its AM and FM operations will revitalize the whole of French-language radio and will ensure greater long-term stability for AM radio in particular. The Commission also considers that the applicant's plan to give the local AM station in each market a central role in the collection and processing of news, will better serve both AM listeners and listeners of the local FM stations of Radio Énergie and Radio Rock Détente. It should also represent an improvement in the management of available resources and will raise the quality of local news.

76.

The Commission is aware that the movement toward greater consolidation in Canada's media continues to raise concerns. Because of the significant position Astral Media will have in French-language radio, the Commission has deemed it appropriate to establish safeguards and monitoring mechanisms relative to the implementation of its commitments, as set out in Appendix II. The Commission will monitor implementation of each of the commitments made by Astral Media and will review the progress achieved at the time it considers the licence renewal of the stations concerned.

77.

Further, the Commission has taken into account the presence in Quebec broadcasting of other dynamic and experienced industry participants, such as Cogeco Radio-Télévision inc. and Corus Entertainment Inc. The Commission has also noted the prospects for an expansion of this market, as indicated by recently-filed applications to operate new private radio stations (see Call(s) for applications for a broadcasting licence to carry on a radio programming undertaking to serve Montréal, Chicoutimi, Sherbrooke and Trois-Rivières, Public Notices CRTC 2002-2, 2002-3, 2002-4 and 2002-5, 17 January 2002; and Notice of Public Hearing CRTC 2001-14, 14 December 2001 concerning the establishment of a new radio station at Québec). All things considered, the Commission finds that the benefits to be derived from this transaction, particularly for French-language radio, outweigh the potential negative aspects associated with the significant position of Astral Media in this sector, and concludes that approval of these applications is in the public interest.

78.

The Commission thanks the many people who took part in this proceeding by submitting written interventions or by appearing at the Public Hearing.

Secretary General

Appendix I to Broadcasting Decision CRTC 2002-90

List of Undertakings Involved in the transaction

Quebec

CHLT Sherbrooke

CITÉ-FM-1 Sherbrooke and its transmitter CITÉ-FM-2 Sherbrooke

CITF-FM Québec

CHRC Québec

CFIX-FM Chicoutimi

CIMF-FM Gatineau and its transmitter CIMF-FM-1 Hawkesbury, Ontario

CHLN Trois-Rivières

CHEY-FM Trois-Rivières

CITÉ-FM Montréal

CKAC Montréal

CKTS Sherbrooke

Digital radio station CITÉ-FM Montréal

Digital radio station CKAC Montréal

Radio Rock Détente network

CHLN/CKSM network, Trois-Rivières/Shawinigan

Radiomedia network

Réseau de hockey des Canadiens de Montréal

Réseau de baseball des Expos de Montréal

New Brunswick

CFXY-FM Fredericton

CIBX-FM Fredericton

CIKX-FM Grand Falls and its transmitter CJCJ-FM-2 Plaster Rock

CKBC Bathurst

CJCJ-FM Woodstock

CKHJ/CJCJ-FM network, Fredericton/Woodstock

Nova Scotia

CKTO-FM Truro

CKTY-FM Truro

Appendix II to Broadcasting Decision CRTC 2002-90

Conditions precedent

Approval of Astral Media Inc.'s applications on behalf of 3903206 Canada Inc., Telemedia Radio Atlantic Inc. and Radiomedia Inc. for authority to acquire effective control of these companies will only be effective provided the following conditions precedent have been met to the satisfaction of the Commission:

• A commitment reflecting the following requirements for local programming by the Quebec radio stations involved in the transaction:

- For the AM stations: maintenance of current levels of local programming and local news, as follows:

Station

Location

Minimum local programming (hours/minutes)

Minimum local news (hours/minutes)

CKAC

Montréal

31:00

10:54

CHRC

Québec

51:00

13:02

CHLN

Trois-Rivières

36:30

12:34

CHLT

Sherbrooke

35:00

14:12

- For the FM stations: a minimum level of 63 hours of local programming and maintenance of the current level of local news, as follows:

Station

Location

Minimum local programming
(hours/minutes)

Minimum local news
(hours/minutes)

CITÉ-FM

Montréal

63:00

2:44

CITF-FM

Québec

63:00

2:06

CITÉ-FM-1

Sherbrooke

63:00

2:48

CIMF-FM

Gatineau

63:00

2:41

CFIX-FM

Chicoutimi

63:00

1:46

CHEY-FM

Trois-Rivières

63:00

1:41

• For the FM stations, submission by the licensee, in each broadcast year starting in 2003 and until expiry of the implementation period for the benefits related to this transaction, of a report, in a form acceptable to the Commission, on the diversity of musical selections broadcast by the two predominantly music-based FM networks, Radio Énergie and Radio Rock Détente.

Conditions of approval

• Submission by Astral Media, within 90 days of the date of this decision, for approval by the Commission, of a document developed through its consultations with ADISQ and UDA, accompanied by the proposed parameters for its annual report on the diversity of musical selections and Canadian Francophone artists aired during the previous year on each of its predominantly music-based networks, Radio Énergie and Radio Rock Détente.

• Submission by Astral Media, within 60 days of the date of this decision, of written confirmation stating that the amount of $1,675,000 that had been allocated for the creation of a new fund for the development of new Canadian artists will be paid to the Fonds RadioStar, to MusicAction or to other, existing eligible funds.

• Submission by Astral Media, within 60 days of the date of this decision, of a report on how the financial support for Aboriginal Voices Radio will be allocated among third parties for improving and promoting the development of Canadian talent, and Aboriginal talent in particular.