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Broadcasting Decision CRTC 2005-23
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Ottawa, 31 January 2005
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Rogers Broadcasting Limited
Sudbury, Ontario
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Applications 2003-1064-9, 2003-1061-5, 2003-1062-3
Public Hearing in the National Capital Region
7 June 2004
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CIGM, CJMX-FM and CJRQ-FM Sudbury - Licence renewals
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The Commission renews the broadcasting licences for the radio programming undertakings CIGM, CJMX-FM and CJRQ-FM Sudbury, from 1 February 2005 to 31 August 2011.
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The applications
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1.
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The Commission received applications by Rogers Broadcasting Limited (Rogers) to renew the broadcasting licences for the radio programming undertakings CIGM, CJMX-FM and CJRQ-FM Sudbury, which expire on 31 January 2005.
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2.
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The applications raised the issue of the appropriateness of the continuation of the business arrangement, described as a local sales agreement (LSA), currently in place between Rogers and Newcap Inc. (Newcap), another radio licensee in the Sudbury market.
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Interventions
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3.
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The Commission received three interventions in connection with these applications, from the Canadian Association of Broadcasters (CAB), the Friends of Canadian Broadcasting (FCB), and Mr. Frank Hartmann.
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4.
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The CAB commented on the issue of whether or not LSAs are captured under section 11.1 of the Radio Regulations, 1986 (the Regulations), which pertains to local management agreements (LMAs). The CAB's position is addressed in The Commission's policy on local management agreements (LMAs) - Determinations concerning the appropriateness of various existing and proposed LMAs, including local sales agreements, between the licensees of radio stations serving the same market, Broadcasting Public Notice CRTC 2005-10 (Public Notice 2005-10), also published today.
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5.
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The FCB alleged that the LSA had resulted in a monopoly in radio advertising, and had the effect of reducing service to listeners, reducing diversity of voices in the Sudbury area, and depriving advertisers of a marketplace in which to present their messages. The FCB also alleged that, in the period since Rogers entered into an LSA with Newcap, licensee of CHNO-FM Sudbury, Newcap has been delinquent in meeting its local programming obligations. These concerns are identified in CHNO-FM Sudbury - Licence renewal, Broadcasting Decision CRTC 2005-22, also published today. Since Rogers is a partner with Newcap in the Sudbury LSA, FCB considered it appropriate to file its intervention to Rogers' applications as well.
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6.
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Mr. Frank Hartmann, a Sudbury business person, submitted an intervention that was also critical of the LSA between Rogers and Newcap. In Mr. Hartmann's view, there is no difference between the LSA currently in place and an LMA, in terms of according Rogers too much control over the operation of the Newcap station. Mr. Hartmann considered that, as a result, an unhealthy monopoly exists in Sudbury's English-language radio market. He also echoed FCB's concerns about reduced local service and inadequate staff levels at CHNO-FM.
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The licensee's replies
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7.
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In response to concerns raised by the interveners, Rogers stated that the Sudbury LSA is based on a mutually-acceptable revenue sharing arrangement, within which it acts as the exclusive sales representative for Newcap's FM station. The licensee indicated that it did not request Commission approval to continue operating under the LSA on the ground that the agreement was not an LMA, as defined in the Regulations, since it was limited to the radio advertising sales component of the Sudbury stations owned by Rogers and Newcap. Rogers noted that, under the LSA, its role is strictly to generate commercial sales, so that Newcap's FM station, as well as its own undertakings, can benefit. It emphasized that all other elements, including the music and other programming broadcast on each station, its engineering and administration, remain under the control and management of the station's licensee.
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The Commission's analysis and determinations
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8.
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The Sudbury LSA provides that Rogers shall act as the sole and exclusive advertising sales representative for the Sudbury stations, with responsibility to secure local, regional and national radio advertising contracts for the radio stations licensed to Rogers and those of Newcap. Rogers is also responsible for all duties related to the sale of advertising time for the stations, such as providing traffic, credit, sales, invoicing, collection, sales tax remittance, sales management and commercial production services, and has sole discretion in determining the rate card value of any advertising airtime. The revenues from advertising airtime sales generated by the stations as a whole are shared between Rogers and Newcap according to a set percentage.
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9.
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The issue of whether an LSA is an LMA requiring prior Commission approval under section 11.1 of the Regulations was discussed with the licensee at the hearing and is examined at length in Public Notice 2005-10. In that notice, the Commission concludes that LSAs, such as that between Rogers and Newcap in respect of their Sudbury radio stations, are LMAs and, as such, require prior Commission approval pursuant to section 11.1 of the Regulations.
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10.
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In Local Management Agreements, Public Notice CRTC 1999-176, 1 November 1999, the Commission announced its policy determinations with respect to LMAs. The Commission indicated, among other things, that it would "be generally inclined to approve" LMAs that: include unprofitable stations; include a number of stations that does not exceed the number of undertakings that may be commonly owned under the ownership policy; and are limited to a specific term and represent a temporary alternative business model that will allow the broadcasters to improve their performance. The Commission added that, in exceptional circumstances, it may approve an LMA that includes the participation of a number of stations that exceeds the limit allowed under the common ownership policy. It emphasized, however, that radio licensees would be required to demonstrate clearly that the participation of radio stations in excess of the allowable ownership limit would be in "the public interest and that it does not create a situation of inequity within the market."
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11.
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As noted in Public Notice 2005-10, there are four radio stations falling under the Sudbury LSA. This exceeds the number that a single person would generally be permitted to own under the common ownership policy. The Commission noted further that the Sudbury stations reported positive profit margins, before interest and taxes, as of 31 August 2003, with the exception of one of the three stations licensed to Rogers, and that, on a consolidated basis, Rogers' Sudbury stations did report a positive profit margin as of that date.
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12.
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In the Commission's view, Rogers failed to present a compelling case that its particular circumstances are exceptional or warrant continuation of the Sudbury LSA currently in place between it and Newcap, beyond a reasonable period to allow the parties to wind up this business arrangement in an orderly fashion. More specifically, the Commission considers that the LSA is a potential impediment to healthy competition between these local broadcasters and might discourage other broadcasters from entering the market in the future and, in addition, may well have a negative impact on the diversity and quality of programming for the reasons discussed in Public Notice 2005-10. Its termination would thus be in the public interest.
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13.
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Accordingly, the Commission authorizes the licensee, by condition of each licence, to continue to operate its stations under the terms of the current Sudbury LSA until no later than 31 May 2005, at which time the LSA must be terminated.
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Conclusion
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14.
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On the basis of its review of these licence renewal applications and the licensee's past performance, the Commission renews the broadcasting licences for the radio programming undertakings CIGM, CJMX-FM and CJRQ-FM Sudbury, from 1 February 2005 to 31 August 2011. The licences will be subject to the conditions of licence set out in New licence form for commercial radio stations, Public Notice CRTC 1999-137, 24 August 1999, as well as to the condition set out in this decision concerning the Sudbury LSA.
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15.
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The Commission reminds the licensee that it must fulfil all of the commitments to benefits described in Rogers acquires the assets of radio stations and a radio network in Ontario, Broadcasting Decision CRTC 2002-92, 19 April 2002, in which the Commission approved the applications by Rogers to acquire the assets of CIGM, CJMX-FM and CJRQ-FM Sudbury from Standard Radio Inc.
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Employment equity
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16.
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Because this licensee is subject to the Employment Equity Act and files reports concerning employment equity with the Department of Human Resources and Skills Development, its employment equity practices are not examined by the Commission.
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Secretary General
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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
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Date Modified: 2005-01-31
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