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ARCHIVED -  Decision CRTC 90-676

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Decision

Ottawa, 26 July 1990
Decision CRTC 90-676
Pelmorex Broadcasting Inc., on behalf of Mid-Canada Radio Inc.
Pembroke, Blind River, Elliot Lake, Espanola, Kapuskasing, Sudbury, Timmins, Hearst, Sault Ste. Marie, Wawa and North Bay, Ontario - 894745900 - 894746700 - 894747500 - 894748300 - 894750900 - 894751700 - 894752500 - 894753300 - 894754100 - 894755800 - 894756600 - 894757400 - 894758200
Following a Public Hearing commencing 24 April 1990 in the National Capital Region, the Commission approves the applications for authority to transfer effective control of Mid-Canada Radio Inc. (Mid-Canada) through the transfer of 100% of that company's issued and outstanding common voting shares from Northern Cable Holdings Limited (Northern) to Pelmorex Broadcasting Inc. (Pelmorex).
Mid-Canada is a company formed from the amalgamation of CKCY 920 Ltd. with The Ottawa Valley Broadcasting Company Limited in January 1990. It is licensee of the 14 following radio stations in northeastern Ontario: CHRO Pembroke, CJNR Blind River, CKNR Elliot Lake, CKNS Espanola, CKAP and CFLK Kapuskasing, CHNO, CFBR and CJMX-FM Sudbury, CFCL Timmins, CFLH Hearst, CKCY and CJQM-FM Sault Ste. Marie and CJWA Wawa. Mid-Canada is also a 45% shareholder in a proposed new company that, once incorporated, will become the licensee of CHUR North Bay (see Decision CRTC 90-565 dated 26 June 1990). All of these stations operate in the English language, with the exception of CFBR, CFCL, CFLK and CFLH, which are French-language stations.
The vendor, Northern, is also the 100% shareholder of Mid-Canada Communications (Canada) Corp. (MCC), the licensee of 7 television stations and their rebroadcasters in northeastern Ontario, including CBC and CTV twin-stick operations at Sudbury, North Bay and Timmins. At a 5 July 1990 hearing in the National Capital Region, the Commission heard applications for authority to transfer control of MCC from Northern to Baton Broadcasting Incorporated. A decision on these applications is pending; should they be approved, Northern will then have divested itself of all holdings in radio and television. It will remain, however, as licensee of more than 65 cable television undertakings in northeastern Ontario, and will continue to control licensee companies operating same 17 other cable systems in that same region.
At the 24 April 1990 hearing, spokepersons for Northern provided the following explanation for that company's decision to divest of its radio and television holdings:
 We are convinced that we must narrow our focus...in order to keep up with the technology and the present competition... At the time that the Commission authorized cross-media ownership in  northeastern Ontario, there was a clear need to rationalize television and radio broadcasting while effectively allowing growth of cable service... Today we reach a new phase in the evolution of broadcasting in northeastern Ontario. Under separate ownership, each component of the broadcast system will be stronger and better equipped to meet the challenges ahead.
The purchaser, Pelmorex, is not currently involved, directly or indirectly, in any other licensed broadcasting undertakings. It is ultimately controlled by Pierre Morissette who, for five years until the spring of 1989, served as President and Chief Executive Officer of Canadian Satellite Communications Inc. (CANCOM).
At the hearing, the Commission questioned the purchaser extensively on its business plan, and on its willingness and ability to meet all of the commitments it would assume as owner of the radio stations, even if their financial performance fails to measure up to projections. Although the radio stations, on a consolidated basis, have been unprofitable for several years, the purchaser expressed confidence in its forecast of their improving financial health. Pelmorex also supported the view taken by Northern that such economic considerations as may have created the need for media cross-ownership in the past have largely disappeared or are substantially diminished in importance. Among other things, it noted that the financial results for the stations are on track with the projections contained in the applications. It also cited the growing diversification and strength of the regional economy.
The Commission notes that the price to be paid by Pelmorex for the Mid-Canada shares is approximately $6 million, subject to adjustments. Based on the evidence submitted at and following the hearing, the Commission is satisfied with the adequacy and availability of the required financing, and with the purchaser's ability to ensure that all licensing commitments and responsibilities are met, notwithstanding any unexpected shortfalls in the financial performance of the stations.
Because the Commission does not solicit competing applications for authority to transfer effective control of broadcasting undertakings, 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. As a first test, the applicant must demonstrate that the proposed transfer will yield significant and unequivocal benefits to the communities served by the broadcasting undertakings and 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 that may not easily be measured in terms of dollar value, are commensurate with the size of the transaction and 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.
The Commission has assessed the proposals put forward by Pelmorex as the benefits of this transaction, and is generally satisfied that they are significant and unequivocal, and that approval of these applications is in the public interest.
According to the applicant, the significant and unequivocal benefits flowing from this transaction include the important, though intangible, benefit represented by the entry into the broadcasting system of "an experienced, financially strong and well qualified new company" whose presence will add diversity and whose sole focus "will be on the improvement of radio broadcasting".
Proposed by Pelmorex as the tangible, quantifiable benefits associated with the transaction are the applicant's commitments for direct expenditures totalling a minimum of $645,000 over five years on various improvements and initiatives. The Commission expects Pelmorex to ensure, as a minimum, that all of the $645,000 in capital and operating expenditures are made over the course of the next five years, in accordance with the schedule set out by the applicant.
The single largest item in the proposed benefits package is the establishment of a two-way satellite network service to link the various radio stations, representing capital and operating costs of a minimum of $250,000 over five years. Using Sudbury as the network's hub and principal production centre, but drawing as well upon the input of all the stations, the applicant has proposed to distribute a minimum of nine hours per week of "regional" news, information and entertainment programming designed to enhance and enrich the present local programming.
The Commission notes and expects the applicant to adhere to its commitment to make predominant use of freelance broadcasters and other talent resident in the region served by the Mid-Canada stations for the production of the new enrichment features and other new foreground programs to be distributed on the regional network service.
Although the information submitted with the applications suggested that, at least initially, all or most of the new programs produced for network distribution would be in English, Pelmorex indicated at the hearing that, over time, increasing amounts of the English-language production would be adapted in French for distribution by the French-language stations serving Sudbury, Timmins, Kapuskasing and Hearst:
 What was definitely intended was that, given that there is a lot of research and resources being committed to sourcing stories, reviews and profiles, ...a number of these profiles will include French-Canadian individuals (as well as) events that relate to a market which is substantially French speaking.... I guess the intent was to evolve into this , and I would expect that in the early stages or year one...in the 25% range of the English features (would be adapted into French), but I would like to strive...towards at least half (over the licence term).
The Commission expects the applicant to adhere to this commitment to enhance the quality of the programming presented on the four French-language stations, and notes in this connection the applicant's further undertaking to hire additional programming staff, including a new General Manager to oversee the operation of the French-language stations.
In interventions presented at the hearing by Larry Burling, the Town Clerk of Elliot Lake, and by Philip Stanghetta, representing a group of Blind River residents, concern was expressed that the applicant's proposal to introduce regional network programming would be at the expense of the local service currently provided by the radio stations serving their communities. In reply, the applicant assured the intervenors that its plans to insert programming with a broader regional focus into the schedules of the various Mid-Canada stations were intended to improve the overall quality of service, but that it was not its intention to replace local programming:
  The local news coverage will not be replaced. It is definitely going to be maintained.... We are definitely intent on maintaining the very essence of what radio is all about, and that is local presence and involvement.... We are committing to maintain our local facilities and resources as they currently exist (and) that includes staff. If there are any changes...then we would undertake to definitely discuss that with the community involved and also with the Commission.
The Commission expects the applicant to abide by all aspects of this important commitment.
The Commission acknowledges the strong support for approval of these applications contained in the many non-appearing interventions forming part of the record of the 24 April 1990 hearing.
Alain-F. Desfossés
Secretary General