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ARCHIVED -  Decision CRTC 88-571

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Decision

Ottawa, 31 August 1988
Decision CRTC 88-571
CKCY 920 Ltd.
Sault Ste. Marie, Ontario -873812200 -873813000 -873814800
Following a Public Hearing in the National Capital Region on 7 June 1988, the Commission approves the application for authority to transfer effective control of CKCY 920 Ltd. (920 Ltd.), licensee of CKCY and CJQM-FM Sault Ste. Marie and CJWA Wawa, through the transfer of all of the outstanding shares of the licensee company from the existing shareholders to Mid-Canada Communications (Canada) Corp. (Mid-Canada).
Messrs. Paul Fockler, John Meadows, Basil Carruthers and John Dacey each hold 25% of the voting shares in 920 Ltd., which has been the licensee of the radio stations in question since January 1985 when the Commission approved their acquisition from Huron Broadcasting Limited (Decision CRTC 85-67 dated 30 January 1985).
At the 7 June public hearing, Mr. Paul Fockler, President of 920 Ltd., outlined the factors contributing to the decision to sell the company. He explained that shortly after the acquisition of the three radio stations, Sault Ste. Marie experienced a sharp down-turn in its single-industry economy. Concurrently, an aggressive new U.S. radio station, WYSS-FM Sault Ste. Marie, Michigan, began to direct its programming and promotional efforts upon the licensee's market to the extent that by the following year, 920 Ltd.'s radio stations were struggling to retain their accustomed share of the local listening audience. As estimated by Mr. Fockler, the American competitor has extracted more than $600,000 in advertising revenues from Sault Ste. Marie in the current broadcast year.
Mr. Fockler explained that this combination of factors has contributed significantly to the licensee's inability to achieve a stable financial position and as a consequence of declining revenues, 920 Ltd. has found it necessary to decrease expenditure in a number of areas. Examples of such measures include the reduction of six staff positions in Sault Ste. Marie, the elimination of weekend news, discontinuation of local service in Wawa and disaffiliation from the News Radio network. At present, the licensee company is in a "desperate" financial position.
Mr. Fockler noted that these local radio services could not continue without the infusion of significant funds and submitted that Mid-Canada, with its excellent record as a radio broadcaster in northern Ontario, its substantial financial resources and depth of talented personnel, has the means to make these radio stations successful in what has become a very difficult and competitive market.
Mid-Canada is owned 100% by Northern Cable Services Limited (Northern). The largest shareholder of Northern, with 48.3% of the outstanding voting shares, is CUC Limited which has extensive cable television interests in southern Ontario. The remaining 51.7% of Northern's voting shares are held by the Sudbury Broadcasting Company Limited (20.1%); by Radio & TV Distributors Limited (17.5%) and by various northern Ontario investors (14.1%), who together form a majority on Northern's Board of Directors.
Through Mid-Canada, Northern also controls six television stations and their rebroadcasters in northern Ontario and operates AM radio stations in Timmins, Kapuskasing, Hearst, Sudbury, Blind River, Elliot Lake and Espanola. Northern also owns 100% of the Ottawa Valley Broadcasting Company Limited, licensee of CHRO-TV Pembroke and holds a 45% interest in the radio partnership licensed for CHUR North Bay.
Mid-Canada proposes to purchase 100% of the outstanding shares of CKCY for $1.4 million from bank debt. As part of its application, Mid-Canada submitted that, "Of this, $1,200,000 will refinance existing CKCY debt, with the remainder being distributed to the shareholders. The cash deficiencies generated by CKCY 920 Ltd. in our five-year projection will be serviced by existing Mid-Canada cash flows". Based on the evidence filed with the application, the Commission has no concerns with respect to the availability or adequacy of the required financing.
Broadcasting in Northern Ontario and the Issue of Corporate Concentration
Due to Mid-Canada's considerable broadcast holdings in northern Ontario, the issue of concentration of ownership was of significant concern to the Commission in its assessment of this application. Specifically, the Commission has examined the potential impact that approval of these applications would have on existing radio revenues and listenership figures in northern Ontario.
In assessing applications for the transfer of the ownership or control of broadcasting undertakings in northern Ontario, the Commission has consistently given special recognition to the social, geographic and economic factors which set this area apart from most other regions of the country.
In Decision CRTC 85-146 dated 27 March 1985, in which the Commission approved Mid-Canada's acquisition of three Sudbury radio undertakings and one radio service in each of Blind River, Elliot Lake and Espanola, it stated:
Although it has been a consistent policy of the Commission to preserve the diversity of broadcast voices in all parts of Canada, the social, geographic and economic realities of Northern Ontario have also made it necessary to accept a considerable degree of media concentration in the region... In light [of this], especially the continuing difficulties encountered by the smaller market stations in providing viable services, ... the Commission considers that the creation of a chain of northern Ontario stations such as that proposed by Mid-Canada is in the public interest.
Of further note is the presence in the region of Telemedia Communications Inc. (Telemedia), another licensee with extensive broadcasting holdings in northern Ontario. Accordingly, the Commission considers that Mid-Canada's entry into the Sault Ste. Marie market will serve to balance the concentration of ownership of radio holdings in this region.
In summary, the Commission is of the view that in this case, the issue of concentration is offset by the fact that Mid-Canada's entry into the Sault Ste. Marie market will serve to balance the presence of another major broadcasting interest in the area and that access to Mid-Canada's large and diversified operating base will enable these small stations to continue to provide a vital local service. Further, the Commission considers that assurance of a viable Canadian alternative in the internationally competitive Sault Ste. Marie market should assist in repatriating a portion of the Canadian revenues and listenership now being lost to American radio stations.
Proposed Benefits
As stated in a number of decisions relating to applications for authority to transfer effective ownership or control of broadcasting undertakings, and because the Commission does not solicit such applications, the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
The Commission reaffirms that the firensnmn nenrnwnenenanlncnnneî naîis that the proposed transfer of ownership or control yields significant and unequivocal benefits to the communities served by the broadcasting undertakings, to the Canadian broadcasting system as a whole, and that it is in the public interest.
In particular, the Commission must be satisfied that the benefits, both those that can be quantified in monetary terms and others which may not be measurable in terms of their dollar value, are commensurate with the size of the transaction and that they take into account the responsibilities to be assumed, the characteristics and viability of the broadcasting undertakings in question, and the scale of the programming, management, financial and technical resources available to the purchaser.
Mr. George Lund, Vice-President and General Manager of Mid-Canada prefaced his presentation of the benefits to be realized as a result of this transaction by stating:
In view of the impossible financial position that CKCY 920 Ltd. now finds itself in, there can be no doubt that the most important benefit of this transaction for the people of Sault Ste. Marie is the strong financial support we will provide, so that the continued operation of the radio stations is assured.
Stating that the repatriation of radio tuning from the American stations was Mid-Canada's primary goal, Mr. Lund proposed that the major focus of attention would be improved programming on CKCY and CJQM-FM, with the emphasis on a "Canadian and local Canadian" approach. With respect to the recent discontinuation by 920 Ltd. of local service to Wawa, Mid-Canada committed to improve service to this community by providing three hours of local programming each weekday. Noting that there is evidence that the residents of Wawa would prefer to receive the programming offered by the AM station in Sault Ste. Marie, rather than the FM service as is presently the case, Mid-Canada indicated that it would submit a new Promise of Performance and expend the necessary funds to effect such a change.
Mid-Canada perceives a direct link between community involvement and listener loyalty and, to this end, will undertake audience research to fine-tune its programming strategy to ensure "that the stations become very involved and very visible in every event and activity taking place in the Sault".
Moreover, Mid-Canada intends to improve the stations' positions in the market and to heighten both local and national program/sales profiles by undertaking additional publicity and promotional efforts such as computer sales aids, marketing seminars and the selling of air-time as part of a northern Ontario "buy".
Other initiatives to be undertaken, particularly as a result of Mid-Canada's substantial resource base, include more extensive on-air promotion of Canadian talent; program exchanges with and access to Mid-Canada's other undertakings, with participation in programs such as "News in the North"; direct access to Mid-Canada's Parliamentary Bureau, and the provision of internal education and courses and seminars for the stations' staff.
With respect to benefits that can be quantified in monetary terms, Mid-Canada proposed a number of initiatives. In terms of Canadian talent promotion, Mid-Canada has budgeted $5,000 per year for the radio stations' participation in the Mid-Canada Talent Caravan. This project is a joint effort undertaken by each of Mid-Canada's radio and television stations, which aids new performers from the area to launch professional careers through the staging of live local talent concerts, culminating in a one hour prime-time television special produced in Sudbury. In addition, Mid-Canada undertook to honour 920 Ltd's current annual Canadian talent development commitment of $6,500.
In order to carry out the planned improvements to the service in Wawa, Mid-Canada indicated that it will be providing for one and a-half new staff positions, specifically one full-time announcer/salesperson and one part-time receptionist, at a cost of $31,500 per year.
Moreover, to restore the number of personnel in Sault Ste. Marie to the prior levels Mid-Canada also committed to hire three programming and two news staff, as well as one salesperson, at an initial expenditure of $115,309 in the first year of the new licence term, increasing to a total of $637,155 in year five.
In terms of capital improvements, Mid-Canada has committed to correct reception problems in Wawa by making the necessary improvements to the transmitter at a cost of $5,000. From its initial inspection of the CKCY transmitter site, Mid-Canada identified a number of necessary improvements, for which it committed $25,000 in the first year, to a total of $40,000 over a five-year licence term. Finally, in keeping with its plans to increase community involvement and awareness, Mid-Canada proposed to acquire a vehicle for this purpose at an initial cash outlay of $25,000, with $7,000 in annual maintenance and operating costs.
The Commission notes Mid-Canada's proposal to accomplish all of the commitments outlined above within the regulatory framework as currently defined by the stations' present licences. In addition, the Commission notes Mid-Canada's written assurance, as stated in a letter dated 5 April 1988, that
Should 920 Ltd. not meet our financial projections, Mid-Canada and Northern Cable ... will ensure the fulfillment of these commitments.
Conclusion
The Commission has carefully considered the benefits outlined in the application and has concluded that the proposed transfer of ownership is in the public interest and that the benefits to the communities to be served are commensurate with the size of the transactions and the viability of the undertakings.
With respect to those benefits which are not easily measurable in terms of their dollar value, the Commission recognizes the stability and financial strength that Mid-Canada can provide to ensure the continuation of a vital local service in a marketplace that is increasingly subject to aggressive U.S. competition. In addition, the Commission recognizes the synergistic benefits to be realized through Mid-Canada's group of television and radio services, particularly in the areas of programming and Canadian talent development.
The Commission also considers that those benefits which were quantified in monetary terms, including both direct and indirect expenditures, are commensurate with and take into account the responsibilities to be assumed in the market to be served.
As for concentration of ownership, the Commission is satisfied that Mid-Canada's ability to provide both economic and operational viability to these radio stations given the geographic and economic conditions of the region, as well as the balance in major broadcasting interests that will be brought about by Mid-Canada's presence in Sault Ste. Marie, outweigh any perceived problems or concerns in this regard.
The Commission acknowledges the intervention submitted by the Wawa and District Chamber of Commerce in support of this application.
Fernand Bélisle
Secretary General