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ARCHIVED -  Decision CRTC 93-75

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Decision

Ottawa, 23 February 1993
Decision CRTC 93-75
Western World Communications Corp.
Vancouver, British Columbia - 920667300
Following a Public Hearing commencing 30 November 1992 in the National Capital Region, the Commission, by majority decision, denies the application by Western World Communications Corp. (Western) for a broadcasting licence to carry on a new English-language (Group I - Pop Rock & Dance) FM radio programming undertaking at Vancouver.
Western is licensee of CKST Vancouver, which operates on the frequency 1040 kHz with a transmitter power of 50,000 watts. The station's AM signal is available to a potential audience of approximately 1.6 million in the Vancouver area, and provides an alternative rock music service targeted primarily to adults 18 to 34 years of age. This format was introduced in 1990. In the present application, Western proposed to surrender its AM licence and move this format to the frequency 94.5 MHz on the FM band, with an effective radiated power of 38,000 watts.
The licensee commenced operations on the AM frequency 1040 kHz in March of 1992. This followed the Commission's approval of an application by Western to purchase the assets of CIMA Vancouver and, upon closure of that station, to use CIMA's frequency and other technical parameters for the operation of CKST (Decision CRTC 92-27 dated 30 January 1992). Prior to implementation of the Commission's approval, CKST had operated on the AM frequency 800 kHz from a transmitter located east of Vancouver in Aldergrove, with studios at nearby Langley, British Columbia.
In its 1992 decision, the Commission noted the licensee's arguments in support of its application to move from the 800 kHz frequency at Aldergrove to the 1040 kHz frequency in Vancouver. Among other things, Western claimed that, although its alternative rock music format was attractive to listeners, the station needed the stronger signal afforded by the 1040 kHz frequency to reach adequately all of the most heavily-populated portions of British Columbia's lower mainland. The Commission also noted the licensee's statement that its operating losses and investments in technical improvements at CKST had amounted to more than $9 million by October 1991, and that it would be forced to cease operation of CKST if the application was denied.
At the Vancouver public hearing of Western's application to acquire the assets of CIMA in October 1991, the licensee had assured the Commission that, while profitability would not likely be achieved until sometime after 1996, it was confident that the switch to 1040 kHz would lead to an increase in audience and ultimately resolve the station's financial problems. Western also stated in its application that, because of the unique musical format offered by CKST, it did not perceive any significant disadvantages associated with AM, as opposed to FM, transmission.
Based upon the available evidence, including these and other statements by the applicant, and given the potential for closure of two AM stations in the same market, the Commission concluded that approval of Western's application to move to the 1040 MHz frequency would offer "... an enhanced opportunity for CKST to improve its financial situation and to continue to provide service".
The current application by Western to move from the AM to the FM band was received by the Commission on 28 July 1992, six months after publication of Decision CRTC 92-27, and some four months after operations on the 1040 kHz frequency had commenced. The proposed frequency of 94.5 MHz is one of only two FM frequencies that remain available for use in the Vancouver area. The other is the 96.1 MHz frequency vacated by the CKO Radio Partnership in 1990.
The present application was the subject of approximately 70 interventions, the majority of which expressed support of Western's request to move to the FM band. Three interveners, however, all Vancouver radio licensees, opposed the application, and two of these appeared at the hearing to present their views.
Jim Pattison Industries Limited (Pattison), licensee of CJJR-FM and CHRX Vancouver, objected to the application on both technical and marketing grounds. According to this intervener, the proposed use of 94.5 MHz would create unacceptable interference for CJJR-FM. It also argued that approval would have an undue financial impact on other stations in the market, particularly given the recent increase in the level of competition created by CKZZ-FM, the new Vancouver station licensed to South Fraser Broadcasting Limited (South Fraser) in 1990.
At the hearing, Pattison noted the short period of time that had elapsed between CKST's move to 1040 kHz and the filing of the present application. The intervener suggested that the applicant had not invested sufficient funds in promoting its new location on the AM dial, and claimed that Western had thus not met its responsibility "...to first make all reasonable effort to make it a success on the licence that it currently has". Pattison argued further that, according to the Commission's radio market policy enunciated in Public Notice CRTC 1991-74, consideration of the application should be preceded by a market study and by a call for competing applications.
The view that there should first be a call for competing applications was also expressed at the hearing by South Fraser and, in a written intervention, by the Students Radio Society of the University of British Columbia, licensee of CITR-FM Vancouver. South Fraser's President, Michael Dickinson, noted the claim made by Western in its 1991 application that CKST's financial problems would be solved by the change to the 1040 kHz frequency; he expressed scepticism regarding the validity of the similar claim made by Western in the context of the current application to move to the FM band. He added:
 I don't believe sufficient time has passed to judge [the change in AM frequencies] a failure and to grant yet another concession on economic grounds.... For [a format] to be successful, you have to stick with it, and that may take a number of years.
In presenting its application and in responding to these opposing interventions at the hearing, Western insisted that approval would not have any undue impact on other stations in the market, nor would the proposed technical parameters create any interference for CJJR-FM.
Western also rejected any suggestion that it had failed to adequately promote CKST's change in AM frequency. According to the applicant, its direct expenditures on promotion at the time of the change-over totalled $100,000; it estimated the attendant media coverage to have had an additional publicity value of between $300,000 and $400,000. The applicant stated that, while revenues had increased following the change to the stronger frequency, this increase fell short of its expectations and was parallelled by a rise in rents, salaries and other operating costs.
Western contended that it had honestly erred in its assumption that the move to 1040 kHz would be sufficient to increase the size of its audience and resolve its financial difficulties or, more specifically, that the Vancouver market would not experience the same degree of tuning away from AM as had been happening in other markets across the country. While the applicant expressed a continuing faith in the appeal of its alternative music format, it stated that it has become convinced that "...a modern rock programming service must be available on an FM frequency if it is to be successful in this market". According to Western, its position finds support in the fact that, of the more than 360 U.S. stations currently programming modern rock music, "...97% are on FM, and the 3% who are on AM aren't getting any audience".
The Commission has given careful consideration to the views and arguments advanced by Western and interveners concerning this application. The Commission acknowledges the sizeable investment by Western in the operation of CKST over the years, and the continuing losses it incurs in attempting to establish a viable alternative rock music service; the Commission's concern for the applicant's financial difficulties was demonstrated by its decision last year to approve Western's request for authority to make use of the 1040 kHz frequency in Vancouver. The Commission, along with almost 70 non-appearing interveners, also acknowledges the important support that CKST provides to local Canadian talent, and the diversity that its service brings to the Vancouver market.
With regard to Pattison's argument that Western's proposed use of 94.5 MHz would create interference for CJJR-FM, the Commission does not find this claim to be supported by the evidence. As for the suggestion that Western's efforts to promote and publicize the move to 1040 kHz were inadequate, it is the Commission's general practice not to comment on the promotional activites of its licensees. While such efforts have been presented to the Commission by licensees as demonstration of their commitment to a service, and although they may be a useful indicator of such commitment, the Commission generally leaves business decisions regarding such things as expenditures on promotion to its licensees.
Regarding the argument advanced by the opposing interveners that the Commission's consideration of this application should have been preceded by a market study, or that such consideration should take place within a competitive licensing process, the Commission is satisfied that its decision in this case not to conduct a study and not to issue a call for competing applications represents no departure from its radio market policy. In fact, the Commission has approved applications by existing radio licensees to move from the AM to the FM band in the absence of a market study and without a competitive process.
The Commission, while noting the financial commitment to date, is concerned by the short period of time that has elapsed since implementation of the authority to change AM frequencies in January 1992. In the circumstances, the Commission has reviewed the applicant's financial projections, both those filed with the previous application and those submitted as part of the current proposal, and considers that not enough time has elapsed to determine the impact of the change on the station. The Commission notes that Western, in its application to utilize 1040 kHz, had projected that it would have an audience share of 3% by 1994, which is essentially the same audience level projected for CKST operating on an FM frequency. In the Commission's view, persuasive evidence has not been presented to demonstrate that CKST could not be successful on its present AM frequency. In other major markets, the Commission's approach to date to requests to transfer from an AM to an FM frequency has been based on assessment of technical problems associated with the AM frequency. In the present case, the Commission notes that Western made no claim, nor presented any evidence, of improved coverage to be afforded by use of the proposed FM frequency or of any technical problems attached to the use of its existing AM frequency of 1040 kHz.
For the reasons stated above, the Commission has denied Western's application.
Allan J. Darling
Secretary General