ARCHIVED -  Decision CRTC 90-1074

Decision

Ottawa, 22 October 1990

Decision CRTC 90-1074

Baton Broadcasting Incorporated

Sudbury, Elliot Lake, Timmins, Kapuskasing, Kearns, North Bay, Chapleau, Pembroke and Sault Ste. Marie, Ontario - 894532100 - 894533900 - 894534700 - 894535400 - 894536200 - 894537000 - 894538800 - 894530500 - 894531300 - 900699000

At a Public Hearing in the National Capital Region beginning on 5 July 1990, the Commission considered several applications by Baton Broadcasting Incorporated (Baton) the effect of which is to seek approval of a substantial increase in Baton's television broadcasting holdings in Ontario.

For the reasons set out in this decision, the Commission approves the acquisition of effective control of Mid-Canada Communications (Canada) Corp. (Mid-Canada), licensee of CHRO-TV (CBC) Pembroke, CICI-TV (CTV) and CKNC-TV (CBC) Sudbury, CITO-TV (CTV) and CFCL-TV (CBC) Timmins, and CHNB-TV (CBC) and CKNY-TV (CTV) North Bay and their respective rebroadcasters, through its purchase of all the issued shares of Mid-Canada from the current owner, Northern Cable Holdings Limited (Northern). The Commission also approves the applications by Baton, on behalf of Mid-Canada, for authorization of the acquisition of the television assets of Huron Broadcasting Limited (Huron), licensee of CHBX-TV (CTV) and CJIC-TV (CBC) Sault Ste. Marie and for licences to carry on these two undertakings. The Commission will issue licences expiring 31 August 1994, upon surrender of the current licences issued to Huron. The licences to carry on the two Sault Ste. Marie stations will be subject to the same conditions as those specified in the current licences and any others that may be specified in the licences to be issued.

Further, the Commission approves the amendment to the licence of CHRO-TV that would change the network affiliation of the station from that of the English-language television network of the Canadian Broadcasting Corporation to the CTV Television Network Ltd. The Commission notes Baton's undertaking at the hearing to co-operate with the CBC to ensure the continued provision of CBC service to viewers by implementing the change in network affiliation approved herein only at such time as the new CBC transmitting undertaking at Deep River, as authorized today in Decision CRTC 90-1077, commences operation.

The purchaser, Baton, is controlled by members of the Eaton family of Toronto through their indirect ownership of a majority of Baton's voting shares. Baton ultimately controls CFTO-TV (CTV) Toronto and CJOH-TV (CTV) Ottawa, as well as another six originating television stations, their rebroadcasting undertakings and a radio station in Saskatchewan. Approval of these transactions expands Baton's television operations in central Canada from the Toronto and Ottawa markets well into northern Ontario.

One of the two vendors in these transactions, Northern, was, until recently, the indirect owner of several radio stations in northern Ontario. These interests were recently transferred to Pelmorex Broadcasting Inc. in Decision CRTC 90-676. As a consequence of the present decision, Northern will have divested itself of all of its radio and television interests, but will continue to operate some 80 cable television systems in the northeastern region of Ontario.

Speaking on behalf of Mid-Canada, Mr. Gaston Germain indicated that, as part of a new "strategic thrust", Northern is "redirecting energies and resources to the cable business" and had decided to sell its television holdings.

The second vendor, Huron, is ultimately controlled by the Hollingsworth family. The spokesperson for Huron, Mr. Lyn Hollingsworth, explained that because family members are currently involved in other business activities and confronted by the increasing competition and technological advances of the television industry, the family shareholders decided it was in the best interest of the company to divest itself of the television stations. Mr. Hollingsworth further noted that the President of Huron, Mr. William Elgie, will remain active in the day-to-day operations of these two television stations and, by so doing, provide a degree of continuity.

These applications have been considered by the Commission, taking into account its policies relating to transfers of control and concentration of ownership which have been clearly set out in previous decisions and public notices.

Concerns arising out of these applications include the enlarging of Baton's broadcast holdings, the potential impact on diversity of broadcast voices in northern Ontario and the fact that the signal of CHRO-TV is, and would continue to be, distributed on cable television undertakings serving the National Capital area, thereby overlapping the CTV service provided by CJOH-TV Ottawa.

At the hearing, Baton argued that the result of these proposed transfers would be that concentration of ownership of broadcast media is actually diminished in northern Ontario. Baton submitted that concerns regarding concentration are mitigated by Baton's long-standing policy of providing strong, autonomous local management, stating that it would "ensure local input" through the appointment of directors from northern Ontario on Mid-Canada's Board of Directors.

For several years, the diversity of broadcast voices in the northern region of Ontario has been restricted as a consequence of Mid-Canada's extensive radio and television broadcast holdings. The Commission is of the view that, apart from the special case represented by CHRO-TV, Baton's ownership of the stations concerned would introduce a new broadcasting voice in most of the markets in question, contributing to the reduction of concentration and cross-media ownership in northeastern Ontario which was first effected by Mid-Canada's recent divestiture of its radio holdings.

As a result of its acquisition of Mid-Canada, which holds 2.3% of the shares in the CTV network, Baton's share of CTV revenues and costs will rise from 33.1% to 35.4%. As each CTV shareholder has only one vote, Baton's nominee will represent the interests of all of its undertakings, including those of Mid-Canada through its membership on the CTV Board of Directors. Following this transfer, the board will be reduced from 10 to 9 members. By virtue of the voting rights and its board membership, Baton's voice on the CTV Board of Directors will be equal to that of other CTV shareholders.

In reference to CHRO-TV Pembroke, an intervention was received from Global Communications Limited (Global) opposing the applications by Baton, on the grounds that approval of the applications would be contrary to the Commission's policy that two undertakings of the same medium serving the same market, namely CHRO-TV and CJOH-TV, should not fall under common ownership. Global argued that the transfer, coupled with the proposed change of affiliation, would give a competitive marketing advantage to Baton over other existing or potential Ottawa broadcasters, through an enhanced ability to attract advertising sales. It predicted that, as owner of CJOH-TV and CHRO-TV, the latter station extending to the Ottawa market via cable television, Baton's probable scheduling practice "would be to off-schedule foreign, CTV and syndicated programs so that they played at different times on the two stations ... Baton would, in effect, have almost a full back door second Ottawa station".

CHRO-TV's signal originates from Pembroke located approximately 100 kilometers from Ottawa. The Commission notes that while the official Grade B signal contours of CJOH-TV and CHRO-TV overlap significantly, there is no overlap of the stations' Grade A contours. The CHRO-TV signal is extended to the Ottawa area via cable and over the years, the Commission has required Ottawa area cable operators to distribute CHRO-TV as part of their basic services because it was dependent on the Ottawa market for financial stability.

In response to Global's concerns, Baton emphasized that approval of these transactions would ensure the continued provision and enhancement of local Pembroke television service. Baton noted it was the CBC's decision to terminate the affiliation agreement with CHRO-TV and that the last affiliation agreement between the two parties expired in 1989. Baton added that CHRO-TV could not survive as a full-service local station, regardless of its network affiliation, unless it continued to have access to the advertising revenues derived from the Ottawa market. Baton indicated that, "the revenue base from Cobden to Arnprior to Pembroke is just not there to support a strong local television station" and therefore, CHRO-TV could not, in Baton's view, exist as a local station.

President and Chief Executive Officer of Baton, Mr. Douglas Bassett, suggested that, in view of the changes facing the broadcasting industry, Baton is in a position to "strengthen local stations, enabling them to attract larger audiences,... increase the diversity and enhance the quality of the Canadian component of program schedules."

Baton stated at the hearing that it intends to maximize the difference between CHRO-TV's programming and that broadcast on CJOH-TV. According to Baton, 60% of CHRO-TV programming would be scheduled in a manner which differentiates it from CJOH-TV's programming. CHRO-TV's locally-produced Pembroke programming (21 hours each week) would account for 17% of this difference.

The Commission notes, however, that while there would be approximately 50 hours each week of identical programming on both CTV affiliates, there would be significant scheduling flexibility during the popular viewing hours (6:00 p.m. to midnight). Specifically, Baton would be free to program 27 hours 30 minutes of the 42 hours that comprise the station's evening viewing period. At the hearing, Baton acknowledged that it would most likely take full advantage of opportunities to broadcast different programming on CHRO-TV, including the evening rescheduling of programming received from the network.

The Commission is of the opinion that the practice of rescheduling programs received from the CTV network could result in Baton extracting a considerably greater portion of the advertising dollars available in the Ottawa market than the two stations now attract.

The Commission is satisfied, however, that this impact of the common ownership of the two CTV affiliates could be lessened by the imposition of an appropriate scheduling restriction which would ensure that the same programs originating at the network are not broadcast at different times on the two stations.

Therefore, the Commission expects Baton to ensure, between the hours of 6:00 p.m. and midnight, that:

a) both CJOH-TV and CHRO-TV carry all of the network sales time programming provided by CTV; and

b) the above programming together with any station service sales programming that is acquired from CTV for broadcast on both CJOH-TV and CHRO-TV is scheduled at the identical time and date on both stations.

This expectation may become a condition of licence upon renewal of the stations' licences.

The Commission is of the opinion that Baton, a major participant in the industry, would not be unduly affected by this requirement. With the aforementioned restriction on CHRO-TV's scheduling of CTV programs in place, the Commission is convinced that the dual benefits of preserving and strengthening the local Pembroke television service to be provided by CHRO-TV together with the comprehensive benefits package proposed by Baton, as described below, that will accrue to viewers in all the communities served by the Mid-Canada stations, outweigh the concerns with regard to concentration of ownership and the common ownership of CHRO-TV and CJOH-TV.

Based on the evidence filed with the applications, the Commission has no concerns with respect to the availability or the adequacy of the required financing.

Having assessed these applications, the Commission is satisfied that the proposed benefits, both those that can be qualified in monetary terms and others which may not easily be measurable in terms of their dollar value, are commensurate with the size and nature of the transaction, and that they take into account the responsibilities to be assumed by the purchaser, the characteristics and viability of the television undertakings concerned, and the scale of the programming, management, financial and technical resources available to Baton.

With respect to those benefits that are quantifiable, Baton proposed a benefits package amounting to $34,172,000, a large part of which will be dedicated to the enhancement of programming available in the various communities. The Commission has assessed these proposed benefits against the background of Public Notice CRTC l989-109 dated 28 September 1989 and is generally satisfied that the package is clear and unequivocal. Baton identified various intangible benefits that will accrue to viewers and to the broadcasting system, which result from these transactions. It emphasized that the transaction would "make possible the full range of CBC and CTV programming in Pembroke and the Ottawa Valley, augmented by the strongest possible local service".

Further, Baton proposed to expand the hours of Canadian programming currently available through CBC-affiliated television undertakings in northern Ontario, and to strengthen the local services provided by the CTV-affiliated stations.

Baton indicated that its commitment to program development and similarly, its undertaking to draw upon the resources of the independent production community, will contribute to the diversity of programming available to viewers of the stations in question, particularly in the area of news and public affairs. This commitment to diversity of program choice for viewers will also create additional opportunities for the promotion and on-air exposure of Canadian talent.

Of the tangible benefits proposed by Baton, the largest proportion will relate directly to the production of new television programming. In its assessment, the Commission has given weight to Baton's commitment to increase the overall programming expenses of the Mid-Canada and Huron television stations. According to the Commission's evaluation of the stations' programming, the increased expenditures will result in a net weekly gain of approximately 20 hours 30 minutes of programming that will be broadcast by stations affiliated with the CTV Television Network and another two hours of programming for those stations affiliated with the CBC's English-language television network.

The new programs will supplement the current schedules in the following manner: CHRO-TV Pembroke will now broadcast at least 21 hours 44 minutes of locally-produced television programming; CHBX-TV and CJIC-TV Sault Ste. Marie 15 hours 26 minutes and 7 hours 29 minutes respectively; CKNY-TV and CHNB-TV North Bay 15 hours 15 minutes and 6 hours respectively; CITO-TV and CFCL-TV Timmins 15 hours 56 minutes and 6 hours 59 minutes respectively; and CICI-TV and CKNC-TV Sudbury 16 hours 8 minutes and 8 hours 22 minutes respectively. The Commission expects Baton to adhere to its commitments in this regard and to follow through on its undertaking to file a revised Schedule I for each of these stations reflecting the Commission's conclusions with respect to the proposed local programming.

The Commission acknowledges the many interventions submitted by elected federal and municipal officials, independent producers and the artistic community in support of the transfer, some of which noted the proposed increases in program production.

The Commission has taken particular interest in the specific proposals put forward in Baton's benefit package to increase the amount of programming available in under-represented categories, such as drama, music and variety and children's programming. In the area of drama, Baton stated at the hearing that it is currently developing an ongoing daytime drama series and, contingent upon approval of these applications, is prepared to allocate at least $6 million to this initiative. It emphasized that, although the concept is still in development, "it is moving towards production" and that it would be seeking partners in an effort to increase the proposed budget to $15 million annually. Should it be unable to find production partners, Baton will nevertheless spend the $6 million on the production of the daytime drama series.

Additional drama programming will be provided to viewers through the 13-episode "Showcase" series which will be produced by independent producers from the Ottawa Valley or the northeastern region of Ontario.

With respect to children's programming, Baton has proposed that these stations will produce or co-produce "Rainbow Merry-Go-Round", "Kid's Club", "Salt and Pepper" and "A Child's World".

The Commission notes that the funds dedicated for the CJIC-TV Sault Ste. Marie production of "A Child's World" are over and above the budgets for Canadian program expenditures specified in its most recent licence renewal decision (Decision CRTC 89-135 dated 6 April 1989) and are, therefore, acceptable as an incremental benefit of these transactions. The Commission expects Baton to fulfil the commitments associated with this co-operative venture while also achieving the expectations regarding Canadian program expenditures outlined in the renewal decision. Baton proposed to promote Canadian talent through its proposed "Country North" program, a co-production which will consist of 13 hour-long episodes each year focusing on performances by northern Ontario country and folk music artists.

The Commission notes Baton's plans to enhance news and information programming, particularly at the Pembroke station.

At the hearing, Baton described the improved opportunities for the exchange of news and information programming that will be instituted among the Mid-Canada and Huron television stations that will effectively enhance news coverage in northeastern Ontario and the Ottawa Valley. Baton stated that, through the technology of interactive microwave, news feeds will be provided each weekday to its northeastern Ontario stations so that "each news director, utilizing that information and those stories, along with other feature material that will be sent out of Sudbury as the base, will then package an hourlong supper time newscast".

Baton committed to increase CHRO-TV's staff by 12, including four who will be responsible for news. The amount of locally-produced news programming broadcast by CHRO-TV will be increased to over 12 hours each week.

Interventions received from the International Photographers of the Motion Picture and Television Industries (local 667) and the Sudbury and District Labour Council express concern that, while additional staff may be hired at some of the stations in question, the proposed salaries are not necessarily competitive as compared to similar positions in the field. The Commission is of the view that the assessment of a company's financial renumeration to its employees is an internal business matter and a subject for employer-employee discussions.

The Commission has also noted Baton's commitment to expand the existing Mid-Canada program development fund. Baton has proposed to double the annual amount currently allocated by Mid-Canada for the development of scripts and concepts from $50,000 to $100,000.

Baton will also make a contribution of $20,000, as scholarships, to five community colleges in the region. Moreover, a one-time grant of $25,000 will be made to the Canadian Centre for Advanced Film Studies.

The Commission has determined that the capital expenditure of $450,000 relating to a proposed power increase for CHRO-TV should not be considered as a clear and unequivocal benefit of the transfer, as the technical change is contingent on Commission approval of a separate application. This effectively reduces the value of Baton's benefits package by $450,000.

In its deliberations, the Commission was unable to accept as clear and unequivocal incremental benefits certain expenditures which were seen to form part of the normal costs of doing business. This would include the proposed improvements of studio facilities at the Mid-Canada and Huron stations. Nevertheless, the Commission reminds Baton of its statement at the hearing that "these commitments are minimum commitments and will be met whether or not our revenue projections are achieved". It therefore expects Baton to ensure that the expenditures of $33,722,000 associated with the proposed benefits package, which excludes the $450,000 associated with the proposed power increase, are made in accordance with the schedule outlined in the application.

The Commission is generally satisfied that the benefits to the communities concerned and to the Canadian broadcasting system as a whole, clearly outweigh any potential disadvantages with respect to common ownership or concentration of ownership and that this approval will yield clear and unequivocal benefits to viewers in the communities served by the Mid-Canada and Huron stations in northeastern Ontario and is in the public interest.

In Decisions CRTC 90-1075 and -1076 released today, the Commission has approved the further extension of CTV network service to Hearst and Chapleau and Wawa, Ontario. As noted earlier, another decision of today's date (Decision CRTC 90-1077) granted, subject to the submission and acceptance of new technical parameters, a licence for a television undertaking owned and operated by the CBC to rebroadcast the signal of CBOT Ottawa to viewers in Deep River, Ontario. The new undertaking should provide CBC television network service to viewers in the Upper Ottawa Valley, including those currently served by CHRO-TV, the current the CBC-affiliate.

Alain-F. Desfossés
Secretary General