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ARCHIVED -  Decision CRTC 99-482

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    Decision

    Ottawa, 28 October 1999
    Decision CRTC 99-482
    Affinity Radio Group Inc.
    London, Ontario - 199801502
    Rogers Broadcasting Limited
    London, Ontario - 199902086
    CHUM Limited
    London, Ontario - 199902234
    Tillsonburg Broadcasting Company Limited
    Tillsonburg, Ontario - 199902292
    28 June 1999 Public Hearing
    National Capital Region
    Introductory statement - Licensing new radio stations
    The Commission held public hearings on 4 May 1999 in Vancouver and 28 June 1999 in the National Capital Region. These were among the first hearings at which the Commission considered competing applications for new radio licences after it adopted its new commercial radio policy in April 1998 (Public Notice CRTC 1998-41).
    At each of these public hearings, the respective panels discussed with applicants general questions relating to the implementation of the commercial radio policy. The discussions focused on the factors that the Commission ought to consider when assessing competitive radio applications to serve a particular market, in light of the new commercial radio policy and the public interest.
    In the context of the consultation with the full Commission required by the Broadcasting Act before decisions on applications are made, the Commission has found that the factors set out below will generally be among those relevant to the evaluation of competitive applications under the new policy. The relative weight and significance of the various factors will vary depending on the specific circumstances of the market concerned. The Commission will continue to consider whether the proposed use of the frequency is optimal in all the circumstances.
    Factors relevant to the evaluation of applications
    Quality of the application
    In assessing this factor, the Commission will evaluate commitments in a number of areas. For example, the Commission will assess the overall business plan provided by the applicant, which includes the proposed format. Further, depending on the circumstances, it may be relevant to assess Canadian content commitments and, if applicable, commitments related to the level of French-language vocal music.
    The manner in which applicants intend to reflect their local community, including the community's diversity and distinctiveness, remains important. The Commission will therefore examine local programming proposals and the benefits that the applicant will bring to the community.
    The new policy places emphasis on Canadian talent development (CTD). The Commission considers that the applicant's CTD proposals are important elements when the quality of the application is assessed.
    Diversity of news voices in the market
    This factor relates to concerns regarding concentration of ownership and cross media ownership. The Commission has stated in this regard that it seeks to strike a balance between its concerns for preserving a diversity of news voices in a market, and the benefits of permitting increased consolidation of ownership within the radio industry.
    Market impact
    The possibility that licensing too many stations in a market could lead to a reduction in the quality of service to the local community remains of concern to the Commission. The economic condition of the market and the likely financial impact of the proposed station upon existing stations in the market will therefore be relevant.
    Competitive state of the market
    Since the new radio policy permits one party to own more radio stations in a market than was the case under the previous policy, the new ownership limits increase the possibility of competitive imbalance in a radio market. This factor will be relevant when evaluating applications for new commercial radio stations under the policy.
    Importance of factors
    As indicated above, the relative importance of each of these factors will vary in each case depending on the specific circumstances of the market concerned.
    Summary of the decision
    The Commission considered four competing applications for use of FM frequency 102.3 MHz/channel 272B. Affinity Radio Group Inc. (Affinity) and Tillsonburg Broadcasting Company Limited (Tillsonburg Broadcasting) proposed to replace their existing AM stations in London and Tillsonburg respectively with new English-language FM stations. Rogers Broadcasting Limited (Rogers) and CHUM Limited (CHUM) requested broadcasting licences to establish English-language FM stations in London.
    The Commission, by majority vote, approves the application by CHUM. It denies the three remaining applications.
    The Commission will issue a licence to CHUM expiring 31 August 2006, subject to the conditions specified in the licence to be issued.
    The Commission is convinced that the London radio market can support another radio station. It considers that CHUM presented a high quality application with an impressive business plan. CHUM's proposed station will respond to the diversity of the community by introducing programming of interest to a younger demographic group that is not well served in the market. CHUM's proposed station will also provide a new source of local information which will be relevant to younger listeners. Furthermore, CHUM will make significant contributions to Canadian talent development. Accordingly, the Commission is convinced that CHUM's proposal represents the best use of frequency 102.3 MHz.
    Background - Call for applications
    1. In March 1998, Affinity applied to convert its AM station, CKLS London, to the FM band. In response to Notice of Public Hearing CRTC 1998-3 announcing the receipt of the application, the Commission received interventions from parties who also expressed interest in filing FM radio applications for the use of the 102.3 MHz frequency. Subsequently, the Commission issued a call for applications from parties wishing to obtain an FM broadcasting licence to serve the London area using frequency 102.3 MHz or any other frequency that may be suitable to serve this area (Public Notice CRTC 1998-128). CHUM, Rogers and Tillsonburg Broadcasting submitted their respective applications to use frequency 102.3 MHz in response to this call. The applications were technically mutually exclusive with the proposal by Affinity.
    The FM applications
    2. Affinity proposed to maintain CKLS's "soft adult contemporary" format targeted to the 35+ age group. According to Affinity, its proposed station would offer contemporary music from the 1970s and 1980s with the best of the 1960s and 1990s. Affinity stated that it would take part in the Canadian talent development plan established by the Canadian Association of Broadcasters (CAB) and contribute an additional $100,000 (over the expenditures resulting from the CAB plan) over four years to Canadian talent development.
    3. CHUM proposed a "hot adult contemporary" music format with a broad target of the 18 to 44 years age group with particular emphasis on the 22 to 34 demographic. The applicant indicated that the new station would program contemporary songs of today from artists such as Bryan Adams, Alanis Morrisette, the Backstreet Boys, Brandy and Ricky Martin, as well as songs from past years featuring artists such as the Human League, Simple Minds, Red Ryder and The Payolas. CHUM stated that it would participate in the CAB's plan and contribute an additional $1.2 million over five years to Canadian talent development.
    4. Tillsonburg Broadcasting applied to replace its AM station, CKOT Tillsonburg, with a new English-language FM station. It proposed to continue to operate in a "country" format directed to the 35+ demographic. Tillsonburg Broadcasting stated that it would participate in the CAB's plan and allocate an additional $600 in each year of the licence term to Canadian talent development.
    5. Rogers' proposal for a "gold-based" music service targeted the 45+ age group. It stated that its proposed station would offer musical selections by Canadian artists such as Paul Anka, Bruce Cockburn and Rita MacNeil as well as musical selections from foreign artists such as Carly Simon, Cat Stevens and the Captain and Tenille. Rogers indicated that it
    6. would abide by the CAB's plan and contribute an additional $2 million over seven years to Canadian talent development.
    The Commission's decision
    7. The Commission has evaluated these applications in the context of the factors described in the introductory statement to this decision. The relative significance which the Commission has attached to the various factors was determined in light of the specific circumstances of the London radio market and in the public interest. In this case, the Commission has placed particular importance on the quality of the application, particularly the business plan, the diversity provided by the proposal and the Canadian talent development initiatives.
    8. The London radio market is served by seven local commercial radio stations. Taken together, these stations are profitable: in 1998, the London market's profit before interest and tax (PBIT) margin was 18.3%, whereas the Canadian average was 13.8%. Radio advertising revenues in the market increased by 9.3% in 1998. Applicants at the hearing indicated that revenue growth is strong in 1999. According to the Fall 1998 Bureau of Broadcast Measurement (BBM) survey, 35% of London listening was to stations located outside the market. This level of out-of-market tuning provides an opportunity for a new entrant to repatriate audiences to a local station and thus reduce the potential impact on the existing stations in the market. Having considered all of these factors, the Commission is satisfied that the London radio market has the economic capacity to absorb an additional player without impinging unduly on the financial abilities of existing radio stations to meet their programming obligations and to continue to provide service to the local community.
    9. In approving CHUM's application, the Commission considers that CHUM has presented a high quality application with an impressive business plan. CHUM's proposed station will respond to the diversity of the community by introducing programming of interest to a younger demographic group that is not well served in the market. The Commission considers that the proposed station will attract younger listeners who are currently tuning to stations located outside London. CHUM's focus on this relatively unserved sector of the market suggests perceptive and in-depth research in developing the business plan.
    10. CHUM is noted for its reflection of cultural diversity especially in its English-language television services. At the hearing, the Commission asked CHUM about its plans to reflect the multicultural and multiracial diversity of Canadian society in accordance with Public Notice CRTC 1998-41. CHUM stated that its "philosophy is that all of our stations, be they television or radio, in all of the markets in which they operate, are encouraged to reflect the community in which they do operate". The applicant further indicated that, through its London Awareness Program, it will provide air time to community groups to promote cultural festivals and other community events.
    11. The applicant indicated that the proposed station will be primarily music driven with a variety of contemporary musical selections from the 1980s and 1990s. It will feature news, weather and traffic surveillance reports interspersed among musical selections thus providing another source of local information on the radio dial, one that will be relevant to younger listeners.
    12. The Commission considers that CHUM will make significant contributions to Canadian talent development. As noted earlier, CHUM confirmed that it will participate in the Canadian talent development plan created by the CAB for expenditures to be allocated to third parties. The minimum expenditures for the London market are $5,000 each year.
    13. CHUM made a further commitment to spend $1.2 million over five years to fund the Canadian Artists Multi-Media Project in association with Fanshawe College. This contribution will be devoted to the College's Music Industry Arts and Digital Applications Programs and will be used to build three new studios and laboratories as well as to upgrade equipment for the Music Industry Arts' recording studios. The Commission expects CHUM to abide by this commitment.
    14. CHUM stated that this project will "provide the opportunity for young Canadian musical artists to develop the multi-media production skills and the technical media literacy which will be required for the digital air waves of the next millennium."
    15. The Commission recognizes the effort expended in developing this project and considers that, in addition to benefiting young Canadian musicians, the establishment of a state-of-the-art facility in digital technology will benefit the Canadian music and broadcasting industries.
    16. In assessing the application by Tillsonburg Broadcasting, the Commission determined that the Tillsonburg community is currently receiving an adequate level of radio service, as compared to other communities in Canada of a similar population size. Accordingly, given that 102.3 MHz is the last frequency available in the region, the Commission does not consider the application by Tillsonburg Broadcasting to be the best use of the frequency.
    17. In regard to Affinity's application, the Commission considers that, although it addresses the current competitive environment in the London market, the applicant did not present a persuasive business plan. In the Commission's view, the overall quality of CHUM's application ranked ahead of the one submitted by Affinity.
    18. The Commission considers that both CHUM and Rogers presented impressive proposals. On balance however, the Commission considers that CHUM's proposal more adequately addresses the balance between the demands of London listeners and what is currently available in the market. Furthermore, CHUM's Canadian talent development initiatives will contribute more to the local community.
    19. Based on all of the foregoing, the Commission is convinced that CHUM's proposal represents the best use of frequency 102.3 MHz.
    Other matters
    19. The licence will only be issued and effective when the new station is ready to begin operation. When the licensee has completed construction and is prepared to commence operation, it must advise the Commission in writing. If the station is not constructed and ready to operate within 12 months of today's date, extensions to this time frame may be granted provided that the licensee applies in writing to the Commission before the 12-month period or any extension of that period expires.
    20. As proposed, the new FM station will operate on the frequency 102.3 MHz, channel 272B, with an effective radiated power of 4,770 watts.
    21. The Department of Industry has advised the Commission that this application is conditionally technically acceptable. The Department will only issue a Broadcasting Certificate once it has determined that the proposed technical parameters will not create any unacceptable interference with aeronautical NAV/COM services.
    22. In accordance with section 22(1) of the Broadcasting Act, the Commission will only issue the licence and grant the authority to operate when it receives notification from the Department of Industry that its technical requirements have been met, and that a broadcasting certificate will be issued.
    23. The Commission notes that this licensee is subject to the Employment Equity Act that came into effect on 24 October 1996 (1996 EEA), and therefore files reports concerning employment equity with Human Resources Development Canada. As a result of a consequential amendment to the Broadcasting Act, the Commission no longer has the authority to apply its employment equity policy to any undertaking that is subject to the 1996 EEA.
    24. The Commission has considered all of the supporting and opposing interventions submitted in respect of these competing applications.
    Related CRTC document
    " Public Notice CRTC 1999-137 - New licence form for commercial radio stations
    This decision is to be appended to the licence. It is available in alternative format upon request, and may also be viewed at the following Internet site:

    www.crtc.gc.ca

    Secretary General
    Dissenting opinion of Commissioner David McKendry
    I would approve the application by Rogers Broadcasting Limited (Rogers) rather than CHUM Limited's (CHUM) application because:
    1. Rogers' contribution to Canadian talent development is significantly greater than the contribution by CHUM. Rogers' contribution is $2 million; CHUM's contribution is $1.2 million.
    2. Rogers' Canadian talent development contribution is more directly related to the development of Canadian artists, including exposure for new Canadian artists, than CHUM's contribution. Rogers would donate $1.5 million to the Foundation to Assist Canadian Talent on Records (FACTOR) and $500,000 to Orchestra London. CHUM's contribution will be used to build studios and laboratories and upgrade equipment at Fanshawe College with respect to the college's Canadian Artists Multi-Media Project.
    3. Rogers' local programming proposal contains more spoken word material of direct and particular relevance to London than CHUM's proposal. Rogers offered over 16 hours of news and information programming each week with 75 per cent local content. CHUM did not offer a specific level of news, stating that its station would have a music-driven format.
    4. The majority of the panel of Commissioners gives too much weight to the formats proposed by the applicants. Formats have been elevated by the majority from an element of the applicants' business plans to a matter of special importance in the context of introducing diversity into London. The Commission essentially abandoned the regulation of radio formats in 1990, a policy confirmed by the Commission in its 1998 commercial radio policy. As a result, the Commission has no intention of ensuring that the format on which it has placed particular importance in this decision is implemented and maintained.
    Size counts
    The Canadian broadcasting system plays an important role in the development of Canadian artists. As a result, the amount and nature of an applicant's proposed contribution to Canadian talent development are important when assessing competitive applications for new radio licences.
    Rogers' proposed $2 million contribution for Canadian talent development is significantly greater than CHUM's $1.2 million contribution. As discussed below, I have also considered the nature of the talent development contributions proposed by the applicants.
    The most bang for the buck
    The Commission's 1990 FM radio policy said that airplay was the primary way for the broadcasting system to fulfil the role of Canadian talent development: "The Commission is of the view that the Canadian broadcasting system has an important role to play in the development of Canadian artists, primarily through airplay." (Public Notice CRTC 1990-111.) The Commission also stated "that it is equally important to ensure that an adequate supply of Canadian material is available". In addition, exposure for new artists concerned the Commission: "A major concern continues to be the provision of adequate exposure for new Canadian artists." (Emphasis in original.)
    The Commission's 1990 views carried through to its 1998 commercial radio policy (Public Notice CRTC 1998-41). For example, the Commission encouraged the Canadian Association of Broadcasters to continue to explore ways to increase the availability of high-quality Canadian recordings, noting the importance of supporting and promoting new Canadian talent. (Paragraphs 84 and 85.) The Commission said: "The Commission considers that playing Canadian music is a vital contribution that radio makes toward fulfilling the cultural goals set out in the [Broadcasting] Act." (Paragraph 91.)
    With respect to the applications by Rogers and CHUM, Rogers' Canadian talent development contribution is more directly related to the development of Canadian artists, particularly in the context of Commission's radio policy.
    Rogers would contribute $1.5 million to FACTOR and $500,000 to Orchestra London. FACTOR is a not-for-profit organization that assists Canadian recording artists and songwriters. FACTOR also provides support to Canadian record labels, distributors, producers, engineers, and directors. Rogers undertook to play on its proposed London station the recordings of artists from Ontario who were supported by FACTOR as a result of Rogers' contribution.
    According to Rogers, Orchestra London features programs that range from classical masterpieces, to contemporary classics, to children's and family concerts, to educational series. The orchestra presents annually over 100 Canadian conductors and artists. Rogers stated that its contribution would be conditional on Orchestra London using the funds for initiatives that directly contribute to the development of Canadian musical talent.
    Not a bad thing but...
    CHUM's contribution will be used to build studios and laboratories and upgrade equipment at Fanshawe College with respect to the college's Canadian Artists Multi-Media Project. This is not a bad thing. Beyond the immediate benefits to the construction industry, the students who are trained in these facilities will undoubtedly be able to make a contribution to the music and broadcasting industries in Canada and elsewhere. However, the proposed Rogers' Canadian talent development contribution is much more directly related to the development of Canadian artists, including exposure for new Canadian artists. It is also more directly related to radio's vital contribution towards fulfilling the cultural goals set out in the Broadcasting Act: the playing of Canadian music. To play Canadian music, Canadian music must be available. The proposed Rogers contribution goes directly to the creation of Canadian music.
    The majority states that "CHUM's Canadian talent development initiatives will contribute more to the local community [than Rogers' initiatives]." (Paragraph 17.) This may be correct if the initiatives are used to hire London construction workers and if the equipment is upgraded by London suppliers. However, there is no assurance that this will be the case and there is no assurance that the students who will train in the facilities built by CHUM's talent development initiatives will come from London.
    Direct and particular relevance
    The Commission's definition of local programming states: "In their local programming, licensees must include spoken word material of direct and particular relevance to the community served, such as local news, weather and sports, and the promotion of local events and activities." (Public Notice CRTC 1998-41, paragraph 190.)
    According to Rogers, the company's proposed station would place "a heavy emphasis on local news and information." (Transcript, paragraph 438.) The company proposed to provide 16 hours of news and information programming each week, including a 30 minute news program in the morning drive period and a 30 minute magazine show at noon. News and information programming would be about 12 per cent of the available Monday through Sunday air time; about 75 per cent of the news and information programming would be local.
    CHUM did not offer a specific level of news and information programming, noting that "the void in the [London] market is a music-driven format and in a format such as that, news does not play a big role." (Transcript, paragraph 766.) During the hearing, CHUM was asked: "When you were working on your schedule, have you been able to make a breakdown of what would be at least, let's say, spoken word and music? Have you been able to do that?" The company replied: "No, we don't have actual percentages of how much spoken word versus music, but it's important to note that this is a music-driven format." (Transcript, paragraphs 770-771.)
    CHUM did clearly point out during the hearing that news and information programming would not be absent from the station. (For example, transcript, paragraphs 766, 769, and 772.) Rogers, however, made a much more explicit and significant commitment than CHUM to spoken word material of direct and particular relevance to London, such as local news, weather and sports, and the promotion of local events and activities.
    The London decision and cultural diversity
    The majority apparently gives more weight to CHUM's reflection of cultural diversity than to Rogers' reflection: "CHUM is often noted for its reflection of cultural diversity especially in its English-language television services." (Paragraph 9.) First, the matter at hand is not a television service. Second, if cultural diversity in television services is a factor in considering competitive radio applications, Rogers owns CFMT-TV, Canada's first multilingual and multicultural television station that, according to Rogers, annually reflects 22 languages and 30 cultures, including three live daily newscasts in Italian, Portuguese and Chinese.
    The majority states, "At the hearing, the Commission asked CHUM about its plans to reflect the multicultural and multiracial diversity of Canadian society in accordance with the Public Notice CRTC 1998-41." (Paragraph 9.) The decision then discusses CHUM's philosophy and London Awareness Program. Rogers was also asked about its policies and practices to support and reflect cultural diversity. Rogers described initiatives ranging from its Ryerson Multicultural Scholarship Program (paragraph 503) to its Equity Advisory Committee (paragraph 517) to its Community Screening Committee (paragraphs 525 and 526.)
    Rogers is not superior to CHUM with respect to cultural diversity but neither is CHUM superior to Rogers. Both companies have similar and laudable philosophies, policies and practices. It is wrong to cite CHUM's initiatives as a factor that should favour the company's application over Rogers' application.
    Format: the wrong horse to pull the regulatory cart
    The majority states that they have placed particular importance on the diversity introduced by CHUM's proposed programming. (Paragraph 6.) The majority states that CHUM "will respond to the diversity of the community by introducing programming of interest to a younger demographic group that is not well served in the market." (Paragraph 8.) The majority summarizes CHUM's format in paragraph 10 of the decision.
    The Commission said in its FM policy for the 1990s: "The Commission considers that the need to maintain format distinctions has diminished and that competition between broadcasters striving to attract audiences in a multi-station environment will ensure a measure of diversity among stations seeking mass audiences." (Public Notice CRTC 1990-111.) The Commission's 1998 commercial radio policy noted that the Commission "essentially abandoned" the regulation of formats in 1990. The Commission stated, "It is not prepared ... to return to a regime where FM radio formats would be strictly defined and regulated." (Public Notice CRTC 1998-41, paragraph 52.)
    The majority of the panel of Commissioners gives too much weight to the formats proposed by the applicants. Formats have been elevated by the majority from an element of the applicants' business plans to a matter of special importance in the context of introducing diversity into London. This is a mistake because the Commission has no intention of ensuring that the format on which it has placed particular importance in this decision is implemented and maintained. It also undermines the concept of regulatory certainty since the decision gives formats prominence that the radio industry and others had been told was abandoned in 1990.