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ARCHIVED -  Decision CRTC 92-543

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DECISION
Ottawa, 6 August 1992
Decision CRTC 92-543
Rawlco Communications Ltd.
Toronto, Ontario - 912006400
Redmond Broadcasting Inc.
Toronto, Ontario - 920179900
Martin Rosenthal
Cobourg/Mississauga, Ontario - 920176500
Following a Public Hearing in Toronto commencing 19 May 1992, the Commission denies the applications noted above. All three of the applicants sought amendments to their existing FM licences authorizing them to move to the frequency 99.1 MHz and to make other related technical changes.
The frequency 99.1 MHz was formerly assigned to the all-news radio station in Toronto operated by the CKO Radio Partnership (CKO). The licences issued to CKO for radio stations in Toronto and elsewhere across Canada were revoked by the Commission in August 1990 (Decision CRTC 90-745). The 99.1 MHz frequency is the last remaining FM frequency allocated for use in the Toronto area. Based upon the evidence available to it, the Commission is not satisfied that, at this time, any of these applications represents the best possible use of this frequency.
Rawlco Communications Ltd. (Rawlco), which has been licensed to provide a new country music FM service in Toronto on the frequency 92.5 MHz (Decision CRTC 90-693), was the first to file its current application to switch to 99.1 MHz. Following receipt of Rawlco's application, the Commission issued a call for applications from other FM broadcasters in the Toronto area wishing to make use of that frequency (Public Notice CRTC 1991-126). The above-noted applications by Redmond Communications Ltd. (Redmond) and Mr. Martin Rosenthal were filed in response to the call. Redmond is the licensee of CJEZ-FM Toronto, which operates in a Group I Easy Listening format. Mr. Rosenthal is the licensee of the programming undertaking consisting of CFMX-FM Cobourg and its rebroadcasting transmitter CFMX-FM-1 Mississauga, and offers a service consisting predominantly of classical music. Mr. Rosenthal proposed to change the frequency and location of the Mississauga transmitter.
The Commission stated in its 1991 call that, in considering any applications for use of 99.1 MHZ in the Toronto area, it would be concerned with what would constitute the most appropriate use of this frequency. Although the call was limited to existing broadcasters seeking to upgrade their signals, the Commission emphasized that its decision to proceed in this manner should not be construed as any predetermination on its part that such use would represent the most appropriate use for the frequency. The Commission also reaffirmed the fundamental objective of the FM policy, that being to ensure that "...the overall services provided in any given market are as varied and comprehensive as possible".
Some 2,435 interventions were submitted in support of one or other of these applications; the vast majority of these (approximately 2,000) were in favour of Mr. Rosenthal's proposal. The Toronto public hearing also provided a forum for 48 other parties to express their concerns to the Commission regarding these applications. A large number of these were of the opinion that the public interest would best be served if the Commission were to deny all three applications and re-open the call to include applications from as many interested groups as possible. Other interveners argued that the frequency 99.1 MHz should only be awarded to an applicant prepared to fill what they perceive as Toronto's most vital need - a Black/Dance/ Multicultural FM station. It was against this background that the Commission heard arguments from the three competing applicants as to why each should be awarded the frequency.
Rawlco based its application not on any particular technical shortcomings associated with the frequency of 92.5 MHz assigned to its proposed Toronto FM station or on any anticipated financial problems. Rather, Rawlco stressed the desirability of the greater coverage and improved stereo signal it claimed would be possible using 99.1 MHz, as compared to the coverage and signal quality it expects to obtain using its currently authorized frequency.
Rawlco claimed that the proposed frequency would increase from five to six million the potential audience for its station, with most of the increase accounted for by those living in rural areas outside Metropolitan Toronto. The applicant stated that rural populations traditionally include a higher proportion of those interested in listening to country music than do urban populations. The applicant suggested that the increase in audience potential would translate into revenues in each of the first five years of operation averaging almost 20% more than the revenue projections contained in its original application.
The Commission notes that, because Rawlco's station is not scheduled to commence operations until December 1992, it is difficult to establish the degree of signal quality improvement of the frequency 99.1 MHz over 92.5 MHz. The Commission also notes that virtually all of the increased audience potential claimed by Rawlco for the proposed frequency would be resident in areas outside of the Toronto Census Metropolitan Area (CMA) for which it was originally licensed.
At the hearing, Rawlco conceded that, while full coverage audience figures may enhance the impression that an advertiser has about a station's coverage, most advertising is sold based upon the audience share a station has within the CMA. Since Rawlco is expected to obtain adequate coverage throughout the Toronto CMA on 92.5 MHz, the Commission considers that the applicant may have overestimated by a significant amount the projected revenue increases it argues would be attainable using the proposed frequency.
Redmond, as did Rawlco, predicted that a switch from its present frequency to 99.1 MHz would bring about a substantial increase in audience potential and revenues for its Toronto station. Redmond also stated that it has received complaints from listeners experiencing reception difficulties with CJEZ-FM in the eastern part of Toronto. This applicant, however, was unable to document the area or areas where these difficulties have been experienced, nor did it specify the extent of the problem. Redmond added that complaints have also been received from listeners in downtown office towers, apartment buildings and parking arcades. Again, no evidence was filed to substantiate these technical problems. The Commission notes in this context Redmond's acknowledgement at the hearing that its present frequency has the best coverage potential of any of those assigned to the three applicants.
The Commission recognizes that Redmond is currently experiencing some financial difficulties, not only with CJEZ-FM, but also with its stations in St. Catharines and Simcoe, Ontario. Only the Redmond station in Calgary is profitable. Redmond claimed that the increased audience share is critical to the ability of CJEZ-FM to compete with the other five Toronto FM stations operating in the Group 1 format, all of which have much higher power outputs. Although Redmond offered no specifics regarding the significance of the revenue increases it projects for the Toronto station on its overall radio operations, the applicant did contend that "...securing the financial viability of CJEZ has implications that go beyond the Toronto market". Redmond, however, like Rawlco, appears to have assumed a direct and proportionate relationship between an increase in potential audience outside the Toronto CMA and increased revenues. The Commission considers that Redmond may similarly have overestimated the revenues it projects to gain from the increased audience potential associated with the proposed frequency of 99.1 MHz.
Having considered Redmond's arguments, the Commission is not persuaded that reception problems are solely responsible for the licensee's financial problems. Nor did the applicant convince the Commission that the proposed switch to 99.1 MHz, and the potential increase in revenues that may be realized as a consequence, would contribute in any substantial or effective manner to resolving these financial difficulties.
The Commission's determination that neither Rawlco's nor Redmond's application would represent optimum use of the frequency 99.1 MHz, and hence its decision to deny these applications, is based upon the lack of evidence to substantiate any significant technical limitations associated with use of their existing frequency assignments within the Toronto CMA, and on the relatively minor financial or marketing advantages that either might expect to gain from use of 99.1 MHz.
Mr. Rosenthal did put forward evidence of technical deficiencies associated with the frequency on which he operates CFMX-FM-1 Mississauga. Mr. Rosenthal also provided documentation of the substantial losses incurred to date in his efforts to provide Toronto FM audiences with a classical music service. Over the years, Mr. Rosenthal has contributed approximately $8 million to cover the losses of CFMX-FM.
In Decision CRTC 88-292, the licensee was authorized to establish a Mississauga rebroadcaster of the Cobourg station. Upon commencing operations, the licensee discovered that the reception quality of the Mississauga signal in Toronto was poor. In Decision CRTC 90-806, the Commission approved a power increase for CFMX-FM-1 Mississauga. The reception quality of this signal within its coverage area, and particularly in the downtown area of Toronto, remained poor.
According to the Fall 1991 BBM figures, the licensee had an audience share of 2.2%. Although the service has attracted a share as high as 3.3% (summer of 1991), it has never earned more than 1.2% of Toronto radio revenues. The licensee contends that the discrepancy between audience and revenue share reflects the fact that the top four or five Toronto stations with a cumulative audience share of 50% attract 75% to 80% of the advertising revenues. Mr. Rosenthal indicated that his difficulty in selling air time is exacerbated by the fact that many potential advertisers in downtown Toronto are unable to receive the station's signal at their place of business. The applicant contends that the proposed frequency would enable his service to capture a 5% share of the Toronto audience, a level sufficient to ensure its viability.
The Commission acknowledges the inadequacy of the CFMX-FM-1 signal in Toronto. However, given the unique FM radio situation in Toronto, as outlined earlier, it has not been convinced that, at this time, the applicant's proposal would represent the best possible use of the frequency 99.1 MHz. The Commission, bearing in mind the FM policy's fundamental objective that the overall services in each market be as varied and comprehensive as possible, must ensure that scarce frequency resources are put to their optimum use. It notes in this regard that approval of this application would free for use in the Toronto area an FM frequency of only limited effectiveness. Nevertheless, the Commission considers that another technical option might be available to the licensee of CFMX-FM-1 to resolve the station's particular signal deficiency in the downtown Toronto area and considers that this option is worth exploring to determine its feasibility. The Commission invites Mr. Rosenthal to consult with the Commission and the Department of Communications.
Allan J. Darling
Secretary General