TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
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Vancouver, B.C. Vancouver (C.-B.)
Le 5 mai 1999 May 5, 1999
In order to meet the requirements of the Official Languages
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and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
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Canadian Radio-television and
Conseil de la radiodiffusion et des
Transcript / Transcription
Public hearing / Audience publique
BEFORE / DEVANT:
Cindy Grauer Chairperson / Présidente
Andrée Wylie Commissioner / Conseillère
Andrée Noël Commissioner / Conseillère
AUSSI PRÉSENTS / ALSO PRESENT:
Karen Moore Conseillers juridiques /
Jean-Pierre Blais Legal Counsel
Marguerite Vogel Hearing Secretary and
Director, Vancouver Office
Secrétaire de l'audience
et Directrice, Bureau de
HELD AT: TENUE À:
Empire Landmark Empire Landmark
Rooms 520/522 Salles 520/522
Vancouver, B.C. Vancouver (C.-B.)
Le 5 mai 1999 May 5, 1999
- ii -
TABLE OF CONTENTS / TABLE DES MATIÈRES
Presentation by / Présentation par:
Kelowna Broadcasting Ltd. 578
Okanagan Skeena Group Limited 632
Intervention by / Intervention par:
Kelowna Broadcasting Ltd. 661
Okanagan Radio Limited 670
549501 British Columbia Ltd. 682
Mark's Work Warehouse 700
Team Yamaha-Honda Kelowna 704
Kelowna Rockets Hockey Club 707
Reply by / Réplique par:
Okanagan Radio Limited 715
Kelowna Broadcasting 721
Presentation by / Présentation par:
CKAY-AM Radio Inc. 741
Canadian Broadcasting Corporation 771
Intervention by / Intervention par:
CKAY Radio Inc. 792
Canadian Broadcasting Corporation 800
CKAY-AM Employees 805
La Fédération des francophones de la
Reply by / Réplique par:
Canadian Broadcasting Corporation 817
CKAY-AM Radio Inc. 831
Presentation by / Présentation par:
Community Communications Ltd. 838
Vancouver, B.C. / Vancouver (C.-B.)
--- Upon resuming on Wednesday, May 5, 1999
at 0900 / L'audience reprend le mercredi
5 mai 1999 à 0900
2931 THE CHAIRPERSON: Good morning, ladies and gentlemen. We will now resume this public hearing. Madam Secretary?
2932 MS VOGEL: Thank you, Madam Chair. We will be starting with Item number 6 on the agenda and I would just like to review the process for competitive applications.
2933 There are four phases. Phase I is the presentation by the applicant to the Commission and 20 minutes is allocated for this presentation.
2934 In phase II the applicants reappear in the same order to intervene against competing applicants. Ten minutes is allocated for each intervention.
2935 Phase III is where the appearing interveners make their presentations to the Commission. Ten minutes is allocated for each presentation.
2936 In Phase IV the applicants appear in reverse order to rebut or comment on interventions. After any of these phases, there may be questions from the Commission.
2937 With your leave, Madam Chair, I will read Item 6 into the record.
2938 THE CHAIRPERSON: Thank you, Madam Secretary.
2939 MS VOGEL: Item 6 is an application by Kelowna Broadcasting Ltd. for a broadcasting licence to carry on an English-language FM radio programming undertaking at Kelowna operating on the frequency 102.3 MHz, channel 272B, with an effective radiated power of 2,000 watts. The applicant proposes to provide a country music service.
2940 Would you proceed when you are ready, please?
PRESENTATION / PRÉSENTATION
2941 MR. FROST: Thank you, Madam Secretary, and good morning, Madam Chair. Good morning, members of the Commission and CRTC staff and CRTC staff in Ottawa.
2942 My name is Nick Frost. I am President and founder of SILK-FM Broadcasting, which is the controlling shareholder of Kelowna Broadcasting. To my right is Cindy Kindret, Personnel/Office Manager of SILK; to my left is Donalyn Hodge, Q102 Canadian Talent Coordinator; to my far left is David Larsen, SILK-FM Program Director.
2943 In the second row behind Cindy is Robert Malatest of Malatest and Associates who did our Economic Studies; behind me is John McCormack, SILK's Auditor; behind Donalyn is Roy McKenzie, SILK-FM Sales Manager; and behind David is Jeff Vidler, Vice President of the Angus Reid Group who did the Kelowna format search. Cindy has been with SILK-FM for two years, David for five, Roy for eleven, Donalyn for fourteen years. John McCormack appeared with me, here, as a founding shareholder and Director at the original application for SILK-FM in 1984 and, finally, our chart flipper, Rick Madison, from SILK Sales Department.
2944 It was a year ago last Friday that the CRTC revised its policy for commercial radio. One of the changes allows for ownership of two stations on any one band in a given community. The Policy Review said:
"The CRTC's strategy is to rely more on market forces to permit fair and sustainable competition."
2945 The Commission also said that in assessing new applications -- whether for a new station or conversion of AM to FM -- it would look at the merits of each proposal. On the merits, you spoke of the benefits brought to the communities concerned and the broadcasting system as a whole.
2946 Four years ago we appeared here to oppose a fifth station in Kelowna. We said that creating another two-station combo would hurt SILK. We agreed that our city needed an FM country service, but instead suggested converting the existing AM to FM country. However, the fifth licence was granted and it went on to become the number two station in the market. Three years later, country was dropped from the station that you licensed and replaced with a Hot AC format. Country was moved to the sister AM station and SILK-FM has found itself competing with two AM-FM combos, both since purchased by large, well-funded broadcast operations.
2947 That is why we are here today. First, we are asking for a licence to return this FM country service to a potential audience of 150,000 people in the Central Okanagan -- from Winfield in the North to Peachland in the Southwest. Second, SILK needs a level playing field. To continue our locally-owned and operated service in Kelowna, we need two stations to compete with Jim Pattison and Okanagan Skeena.
2948 Today I would like to cover three things. First, the need for a new FM service; second, our proposal to provide it; and third, the Kelowna market.
2949 Last spring, as we began preparing this application, we knew that we had to ask Kelowna what kind of station it wanted. We chose to go directly to the listeners. Rather than offer a few basic choices, our questionnaire covered nineteen different radio formats -- as shown on the chart -- and listed typical artists for each one. We got 7,000 responses. With a little help from a few churches, the Christian music choice went through the roof. Of all other formats, country music was the clear winner.
2950 At the same time, we asked the Angus Reid Group to design an extensive, more scientific format search. Watching early results from the first questionnaire, we asked for the Christian and Classical categories to be added so that we missed nothing. The Angus Reid study said:
"Country emerged as the most popular choice for a new FM station in Kelowna. It delivered the highest combination of loyalty and reach of the thirteen music formats presented. The high interest expressed in a new FM country format appears to be driven by a strong preference among country fans to hear their format returned to the FM dial."
2951 Past BBM ratings also show that Kelowna supported and wants country music on FM. For two and a half years the new country FM station gained an average nineteen share of local tuning, making it the number two station in the market during this period. Then, one Monday morning in March '98, in the middle of BBM ratings, the city awoke to find country gone. It had been moved to the AM band where subsequent ratings showed it with an eight share. Many BBM Diary holders said they were annoyed and confused. And listeners wrote us. They are clear about wanting country back on FM. These 410 letters really hit home and say more than just the numbers on the charts can. They supported a new country FM station in the first place. They have had a taste of it and they listened to it, and they just want it back.
2952 I hope you have had time to read some of the letters we included from country music fans. They are really worth it. The need was shown four years ago, here. The applicant then presented the same kind of evidence that we bring you today. In granting the licence then, the Commission said:
"An additional local radio station programming country music will contribute to the diversity of service available to listeners in the growing Kelowna market."
2953 There is still that need for FM country in our market.
2954 Our proposal: SILK has stayed the course. When we asked for an Easy Listening licence in 1984, the naysayers were many. Competitors said we wouldn't last a year. Some said our audience was too old or we had too few resources. One of the local newspapers said: "There aren't enough elevators here for them to make it." But you granted us a licence anyway, saying:
"The broad diversity of shareholders who have committed their personal resources to the establishment of this company is highly representative of British Columbia."
2955 SILK-FM signed on June 21, 1985, six months to the day from getting your go ahead and we did succeed.
2956 SILK was presented as a fresh, easier alternative to the other Kelowna radio stations and from the start did well. Over the years, as Easy Listening music evolved, the station gradually adapted, still continuing its softer sound and identity. SILK's ownership, management and people have stayed constant too. However, much around us has changed. We watched the new FM country station arrive in '95, the sale of that combo in '96, a format change for their AM in '96, the sale of the second combo in '97, two format changes on the first combo in '98 and a format change on the second combo four months ago. More change is ahead soon.
2957 Now, I would like to introduce Cindy Kindret who will tell you a little bit more about our company. Cindy?
2958 MS KINDRET: Good morning. Seven years ago, SILK started the Rainbow of Opportunities Fund to help Kelowna families and individuals who can't afford recreational opportunities. So far, we have raised and donated $330,000 in cash, without a nickel of overhead and to this day SILK subsidizes all day-to-day expenses. Rainbow's board of directors reflects the community at large with SILK staff volunteering many hours to keep it humming.
2959 From our peers, SILK has received frequent recognition -- recently for the '98 BCAB Creative, the '98 CAB Community Service Gold Ribbon and a '99 RTNDA Honourable Mention. Three years ago, we started SILK Internet, now the largest Internet service provider in Kelowna and five years ago SILK returned our original shareholders' investments with a modest annual return.
2960 All of SILK's resources, experience and efforts now go to only one radio station. A second station for this company would give us the chance to benefit from efficiencies and help us stay the course.
2961 Now here is David Larsen.
2962 MR. LARSEN: Good morning. Thank you, Cindy. Q102 will take a broad view of country music, with two-thirds of our library devoted to exciting country music stars of today like Canada's Shania Twain, Paul Brandt, Patricia Conroy and superstar international artists like The Dixie Chicks, Alan Jackson and Trisha Yearwood. A third of our music will feature country classics from superstars like Garth Brooks, Reba McEntire and perennial Canadian favourites like George Fox, Prairie Oyster and Ian Tyson.
2963 New music will be carefully selected from Canadian and foreign charts like The Record and Billboard Magazine. Staying with our desire to ask our listeners, unique Kelowna taste will be determined by auditorium testing and by carefully monitoring responses from the Q country audience. We will solicit listener input on music and other programming elements with "Kelowna's Q to call" and the Q102 "in touch" lines and through Q-cards that will be distributed at Q102 community events.
2964 Q102-FM Today's Country will be bright and upbeat, encouraging listener interaction through morning show contesting, daily features like "The Q Country Cafe" and the "Q Country Top Five at Five". Our on-air staff will relate to the listeners, they will know the city and they will love country music.
2965 Q102 News will air every half hour during mornings, hourly during afternoon drive and at key times through the day and on weekends. Q News will focus on local issues giving our listeners a decidedly Kelowna spin on the news with 70 per cent of all news aired being local. Q Country News will include the latest sports stories with an emphasis on local teams and events as well. Our weather expert will present his weather twice an hour during the key morning and afternoon times and once every hour throughout the rest of the day. Traffic updates will be passed on to Q102 listeners twice an hour during morning and afternoon drive and Kelowna Q country listeners will also find hourly community events aired throughout the day.
2966 Today, country music is more popular than ever. In fact, country radio now reaches 60 per cent more people today than it did 10 years ago. In Canadian and American markets, country stations ranked in the top three in literally hundreds of cities including Calgary, Dallas, Ottawa, Phoenix, Halifax, San Diego, Edmonton and Seattle. Kelowna is more than ready to rejoin this list of great cities that enjoy the excitement of country music on FM in crystal clear stereo.
2967 Now, Donalyn Hodge.
2968 MS HODGE: I have always been a big music fan. It is the main reason I got into radio and I am particularly proud to be working in radio at a time when so many Canadian artists are achieving phenomenal success: Sarah McLachlan, Shania Twain, Terri Clark, Alanis Morissette, Chantal Kreviazuk. Their styles are as diverse and unique as each one of their names. The common thread? Yes, they are all women but that is not it. What I am thinking about is the fact that they all started their careers in small towns. It has to begin there. Each developed the music within the community and church choirs, school productions, local talent shows. Support and encouragement has to start in the community. If it not fuelled there, the passion to create music can simply fade away.
2969 We began our initiative in our typical way: We started by going out to the community and finding out what they would like first, by gathering information on Kelowna musicians and groups we also held two informal focus groups and created an online musicians survey. The input we received was invaluable. It resulted in a unique and responsive plan, we believe, for Canadian Talent Development. Next, we crafted our Mission Statement which reads:
"To provide exposure, access and support to Okanagan musicians and be accountable for making a difference in the pride our city has for them."
2970 From there we developed individual programs. To highlight some of them: Under Exposure: Q102's "Best of the Okanagan" concert. Access: Q102's online "Best of the Okanagan Music Directory" and support: $3,0000 continued for FACTOR and $12,000 for local musicians and groups.
2971 And finally, to remain accountable to musicians we decided to create the Okanagan Musicians' Advisory Board. After all that was in place, we were so proud of our plans for Q102 we brought the whole company together. SILK-FM will match all amounts over the same period and SILK.net will contribute $6,000 annually in non cash.
2973 MR. FROST: Thank you, Cindy, David and Donalyn.
2974 I would like to talk about the Kelowna market now. Our city is one of the fastest growing places in Canada. People from all over see the Central Okanagan as a great place to raise a family, begin a career, start a business or retire. By the year 2002, Kelowna's population will grow by an additional ten per cent. This economy is stable and diversified.
2975 Among the factors driving our growth are tourism, agriculture -- including our world-class wine industry -- retirement and capital construction. A few planned projects or those already underway are the Phase II expansion of Big White Ski Resort with a 100-room Coast hotel and 35 new chalets; the five-year airport expansion, the multipurpose arena, four-lane upgrading on Okanagan Lake floating bridge, the New Destination Casino, and many large residential developments. The value of projects underway currently is $280 million, which the value of proposed projects estimated conservatively at $520 million.
2976 In the past seven years, retail trade grew even faster than the population, as we show on this chart. Kelowna's retail sales went from $624 million to $1.1 billion. Despite recent news about B.C.'s economy, buffeted by the Asian flu, the Central Okanagan, with its diversified economy, has weathered that storm well. Few places can be so certain of their future as Kelowna.
2977 We have held this market up to the light, examining it thoroughly. We are confident in Kelowna's future economy. We know the radio revenue, we know how it has grown, as we show in this chart, and we know hot it will keep growing. We have asked listeners what they want and we have asked advertisers what they need. And then, with our own local experience, we asked ourselves, "Is this proposal reasonable? Is it conservative?". We said, "Yes" and here is why.
2978 First, Kelowna retail sales will grow at least five per cent a year on average for the next seven years. Second, Kelowna's radio sales per capita rate is two-thirds higher than Victoria and rising. Third, future radio sales are projected conservatively at .66 per cent of retail sales. Fourth, actual Kelowna radio sales from '97 to '98 grew by $545,000. This seven per cent increase is $345,000 more than we originally predicted. Sixth, advertisers say they will spend the same -- 67 per cent -- or more -- 22 per cent -- in next year's advertising budgets. Seventh, forty-five per cent of advertisers interviewed by CV Marketing who said they would spend on a new station said they would increase budgets to do that. Eighth, FM country music is a distinct unique format that will generate new radio revenues.
2979 The Call for Applications in Kelowna directed applicants to address the impact on revenues of existing operations -- the CRTC often uses the phrase "Not cause undue harm". Part of our Year One sales will come from existing stations but that includes SILK-FM too. With Kelowna's good economy and excellent future, such a short-term decline will have a minimal impact on our two competitors -- a minimal impact from which they will rebound. Even if these two large combos were to experience more than such a minimal effect, it is hard to imagine on an aggregate basis, with their large size and considerable assets, that either would experience "undue harm" from SILK's proposal.
2980 SILK needs this. Being a stand-alone in Kelowna has always been a challenge. It got tougher four years ago when a second combo arrived, tougher when both firms were sold to larger companies, and a lot tougher last year when the country FM switched to Hot AC. Over the past year our company, with the same people, the same sound, the same signal and greater efforts, has seen ratings dropped dramatically. Pattison and Skeena have two Kelowna radio stations. SILK has one. As this chart shows, BBM ratings currently show our company at a 22 per cent share compared to 34 per cent and 44 per cent, respectively, for our two competitors. We can be a good competitor to any firm but not with only one station.
2981 We are asking for the chance to serve another audience and for the efficiencies of being a combo as well. A second licence for SILK will provide market equilibrium without limiting future FM applications or conversions.
2982 In summary today: First, the need. Many listeners who still don't know how they lost their country FM in the first place, supported an application four years ago and then supported the station by listening. The AM service just doesn't cut it. We received 410 individually-written letters that personally expressed their need for a new FM country service in Kelowna.
2983 Second, our proposal. We can do this. We live in Kelowna. We have worked hard over the years to provide good service to our city. We have stayed the course with our format and commitments. SILK is the only locally-owned media company in our city. The Angus Reid survey shows that most people in Kelowna think that is important. The proposal before you is for high quality programming, good Canadian talent initiatives and commitment. Q102's application will maintain diversity in the market by ensuring three radio news providers and a stronger newsroom for both our stations as well.
2984 And finally, the market. Few cities will grow like this one. The Central Okanagan has a remarkable economic future. Research shows that even during the B.C. slowdown Kelowna's economy is stable, still strong and will remain strong.
2985 Members of the Commission, we are a small, good company that wishes to remain part of the Canadian Broadcasting System as an independent locally-owned company. A year ago the CRTC said its revised radio policy:
"... will provide for a strengthened radio industry, while responding to long-standing concerns regarding diversity of voices, media cross-ownership and fair competition."
2986 A second licence for SILK will help level the playing field in Kelowna. We want this licence. We won't disappoint you and we won't disappoint Kelowna.
2987 Thank you.
2988 THE CHAIRPERSON: Thank you, Mr. Frost, ladies and gentlemen. Commissioner Wylie?
2989 COMMISSIONER WYLIE: Good morning, Mr. Frost, ladies and gentlemen.
2990 You were here yesterday?
2991 MR. FROST: I personally was for the morning part.
2992 COMMISSIONER WYLIE: So you heard our exchange with Rogers.
2993 MR. FROST: Yes, I did.
2994 COMMISSIONER WYLIE: Perhaps we can go into a similar exchange before we look at the particulars of your application although in some ways it is difficult to know if we can read your position from your application because you may not give the same interpretation to the numbers that we will suggest to you for answers. But as a general question -- the reason I say that is even if I suggest that the market may have difficult absorbing another station, you obviously think differently -- we would like your view in a more general fashion as to how we should proceed in analysing competitive applications under this new policy that allows greater concentration and the first question we asked Rogers yesterday was whether, given the Commission's abandonment as an actual measure, the radio market criteria -- but still producing them -- whether it means that we should be hands-off completely about our view of the ability of the market to absorb a new station and the extent to which that may or may not be in the public interest.
2995 In other words, should we just licence anyone when there is frequencies available and let the competitors rise in the market -- or fall -- depending on their ability to sell advertising?
2996 MR. FROST: Well, I think you are moving in the right direction with your policy statement. In fact, I think you are absolutely bang-on with that statement of a year ago, everything I have read, as to the matter --
2997 COMMISSIONER WYLIE: Which statement?
2998 MR. FROST: Well, talking about letting the market forces and competition play more of a part and you speak of diversity and choice for the listener. I think the Commission can go further in the direction you indicated by your question. I think that, of course, will come a limit. Advertising revenues, whether for radio or for any advertising media, have a fixed finite amount but I think in radio there is room now to move much more toward more licences in general overall.
2999 So I would say that there will come a time -- I think the Commission should always be concerned in our country about matters of how one can live up to one's commitments. So I think there will come a finite time. I think the Commission has provided -- whether it be the radio market report or now the report for each market -- that by providing the information about how our industry is doing begins, if not finishes, the discussion on how we are doing and how you are able to grant new licences but I think you are certainly moving in the right direction so far as I can tell.
3000 COMMISSIONER WYLIE: When you say there is a limit, how should that limit be determined? By bankruptcies or stations shutting down or should the Commission find where that limit is in its licensing processes?
3001 MR. FROST: That is a big question. I think knowledge of the market and there are standards, I think, that prevail in most kinds of advertising -- percentages, that sort of thing. I can't answer how you should know when you get to when a market might be saturated but I don't think the industry in Canada is there yet and I think it has a little ways to go, some ways to go, before it gets there.
3002 COMMISSIONER WYLIE: Isn't that to be determined, though, market by market?
3003 MR. FROST: I think so.
3004 COMMISSIONER WYLIE: Rather than the industry. There is usually a different history in the markets, different commercial situations. There is sometimes recessionary blips in some areas and so on. But I seem to hear you say that there has to be some analysis.
3005 MR. FROST: I do think that, yes.
3006 COMMISSIONER WYLIE: And that would leave the Commission some room to disagree with proposals then depending on the market.
3007 MR. FROST: I am afraid to say.
3008 COMMISSIONER WYLIE: Because obviously when applicants come forward they believe that the numbers speak positively and that they will be able to stay on top so it will have to be inevitably but like Rogers yesterday, your view would be that there is an onus on the applicant to try to establish that the market can bear another station and you would seem to agree that there is likely going to be some judgement on the part of the Commission as well.
3009 MR. FROST: Yes.
3010 COMMISSIONER WYLIE: Rather than just leave it to the market to settle itself and to licence anyone who comes forward with a decent proposal.
3011 MR. FROST: No, I don't think that is the way we should do it -- the latter case.
3012 COMMISSIONER WYLIE: Now with regard to format, that has been deregulated for some time, or at least the Commission has not defined formats and regulated the extent to which the licensee kept within it until a change was approved and I read to Rogers yesterday the paragraph where the Commission clearly says it is not prepared to go back to a regime where FM radio formats would be strictly defined and regulated.
3013 So in light of that what is your view of the importance that is to be placed on the format proposed without going into your particular situation which is an example of that? Should it matter to the Commission, the format that is brought forward in a competitive situation?
3014 MR. FROST: Well, I think so, yes. I think I heard Mr. Viner say something about the best idea or words to that effect. I think that is how we are proposing to be radio guides in a particular market and I think that is useful at this stage in an application -- the type of format.
3015 COMMISSIONER WYLIE: As a measure of the reasonableness of the proposal?
3016 MR. FROST: Yes.
3017 COMMISSIONER WYLIE: And you seem -- from your presentation and your application -- to quite understand the two main objectives of keeping sufficient voices in the community and benefit the system as a whole through wider-ranging, perhaps, projects rather than just the provision of news and information.
3018 Is there anything else you would like to tell us about how you feel this radio policy should be applied or developed because as I said yesterday we are all looking -- both the industry and the Commission -- at how this will develop without going back on the old measures and systems and mechanisms.
3019 MR. FROST: Well, I do think -- with respect, I think that is the right way to go and I think being less involved, once operations are up-and- running, with what happens to the format is the way to go. I heard you ask Mr. Viner about what criteria should be used then in judging applicants or broadcasters and I am not sure his answer is exactly the same as mine, but I think track record is important to look at for a broadcaster. I think how one looks at one's Canadian talent commitments. I think being local is important and can reflect in the proposal itself. I think looking at a market and is it balanced? I think you have spoken about a country that is balanced and I think that needs to be often looked at in a particular region as well.
3020 Those could be some of the things that could be used perhaps apart from the formats themselves.
3021 COMMISSIONER WYLIE: Mr. Frost, I know you have made some projections and with the help of some professionals as to what the Kelowna market can absorb and what it will be like in the few coming years but it remains that our figures show that in 1998 both AM stations in the market lost money and only two of the three FM stations were profitable and that the aggregate PBIT on margin percentage for Kelowna has been negative for three years and that that margin has been from '93 to '98 .6 per cent compared to Canada's 6.5 per cent and also that in 1998 the PBIT margin for the five stations now operating in Kelowna, according to our figures was minus 1.7 per cent compared to the average for Canada of 13.8 per cent.
3022 In light of these very recent figures for 1998, for example, if the Commission were to pay attention to the ability of the market to sustain another station how should we read this -- if we put it into the mix of whether or not it is a good idea to add a station in the market. What should we do with these figures which are as recent at 1998?
3023 MR. FROST: I think first you should look and see the direction they are moving in. They are improving and have been for two or three years by my reading. It has been said in the documents put forward for this hearing, it has been a very volatile market. Two of the three radio players have been sold and the other two players have just arrived really. One of them hasn't even been here a year -- Pattison. But these are very good companies, very good track records and their track records will speak more about the future PBIT, I think, than the past does.
3024 COMMISSIONER WYLIE: But these were not additions.
3025 MR. FROST: No, but I think you asked about the trend of the PBIT and it is minus 1.7. I think that everything is in place now, that the trend that has been established already will continue and that I think were we to be granted a sixth station, it would help our future PBIT. I expect that our station as a stand-alone will not be contributing positively to the PBIT in the future so I think it would provide a balanced market.
3026 I think that each of the three companies having two stations would be in a year or two would reflect itself positively in the numbers you have referred to.
3027 COMMISSIONER WYLIE: So you would like us to put more faith into the projections rather than the most recent past as to the ability of the market.
3028 MR. FROST: Yes, I would.
3029 COMMISSIONER WYLIE: Because if you look at your supplementary brief at page 27, there are five-year projections there which show you to have, on the first year of PBIT -- now as a percentage of sales, is that comparable to -- I guess it is the same. Well, if I look at the one above operating profit, that would be before. Where is the line that would show before interests?
3030 MR. FROST: Profits before interests and taxes? If you are on page 27, I think the last line is PBIT.
3031 COMMISSIONER WYLIE: Yes.
3032 MR. FROST: Minus 28, is that what you are looking at?
3033 COMMISSIONER WYLIE: Yes, and in the first year and then immediately in the second year being positive.
3034 MR. FROST: Yes.
3035 COMMISSIONER WYLIE: And declining some but still remaining positive. Considering that even the FM stations from the figures I read you, in 1998 only two of the FM stations were profitable. Isn't that optimistic to put a sixth station in and expect in year two that you already have a positive PBIT.
3036 MR. FROST: No I don't. I think it is conservative actually. Country music has been shown to be a successful format. I think it will do well. We expect it would be number three, number four in the marketplace and I think the other two FM stations -- one has recently made a format change just four months ago to a classic rock format and the other FM station, which is called the SUN FM now, I believe is doing very well in the ratings and I think you are going to see growth in all FM stations very soon.
3037 And I think this would be actually a conservative projection for this FM and for SILK-FM as a combo.
3038 COMMISSIONER WYLIE: And the FM that exists already?
3039 MR. FROST: Our FM you mean?
3040 COMMISSIONER WYLIE: Yes. It would not be harmed financially by the addition of a sixth station.
3041 MR. FROST: Our FM, SILK-FM?
3042 COMMISSIONER WYLIE: Yes.
3043 MR. FROST: I think it would be harmed somewhat, yes I do.
3044 COMMISSIONER WYLIE: But you would see that as a temporary reduction.
3045 MR. FROST: No, I think it would be more or less permanent. Country music dovetails a bit with the format we have. David am I getting this right? Would you like to add anything here?
3046 MR. LARSEN: I am a programmer and you want me to comment on economics.
--- Laughter / Rires
3047 MR. FROST: I think you are right.
3048 COMMISSIONER WYLIE: Why not.
3049 MR. LARSEN: Yes, why not jump in. There is my chance. I think that Nick is right, that country music and AC audiences do share audience and I think that is the point that he is driving at but I also think that what he is saying is that the economy is such that with the new players in the market that those two FMs that are owned by other companies are going to show profit in the near future as ours will. There will certainly be a long-term effect in terms of ratings but I think that he is saying it is going to be positive in two years or more, but I am probably getting in trouble, Nick, diving in here with the economic stuff if you like.
--- Laughter / Rires
3050 MR. FROST: I will start talking about programming again.
3051 MR. LARSEN: Please.
3052 MR. FROST: I hope David's answer to that question, Commissioner Wylie, that SILK would probably see some permanent reduction in its audience because of the addition of a country station on the FM band. In short, I think all -- in a six-station market -- all four FM stations, I believe, would be profitable in a year or two on an operating basis and there are some AM stations in there too, of course. I can't speak about those necessarily but all the FMs, I think, are on their way to doing well now and would be doing well in a year or two.
3053 COMMISSIONER WYLIE: Now, another measure, I suppose of whether the Kelowna market can absorb another player -- or perhaps two because we have two applications before us -- is to look at how many stations there are in similar population groups and we have looked at markets with five stations in them and we find that, I think, in looking at maybe the other application I saw in another list as well. But if you take a comparison of population and the number of radio stations in the market, commercial stations, removing the CBC, in Victoria there are five but there is over 300,000 people. Of course, we were told yesterday there should be eight.
--- Laughter / Rires
3054 In Saskatoon there are five and there is over 220,000. In St. John's, New Brunswick there are five and there is a 174,000 people and in Sudbury there are five and there is a 160,000 people and in Kelowna there are five and I had as a figure for population 140,000 but I noticed that you said 150,000. But in any event, there is another measure of -- even if we were to abstract Victoria if we had found it persuasive yesterday that the market can absorb much more -- is that not another measure of whether or not the market is saturated and there would be the type of undue harm that you seem to believe the Commission shouldn't allow.
3055 In other words that giving more stations would mean possibly closures, in some form or other.
3056 MR. FROST: I think the Commission should look at all the evidence it can in coming to decisions like the one before you now. I think that in Canada almost every market is different. The ones you mentioned are so different from each other and in our case in Kelowna part of our uniqueness is the mountains that the map showed you earlier.
3057 We are a very enclosed market. I think some of the markets you mentioned have a great deal of out-of-market tuning that could affect the discussion of how many stations in a given community.
3058 David you are better at these markets, aren't you?
3059 COMMISSIONER WYLIE: Yes, and while you are at it I did notice that in your supplementary brief at page 8, you address out-of-market tuning and you pin it at approximately 18 per cent. Right?
3060 MR. LARSEN: Yes.
3061 COMMISSIONER WYLIE: Which is lower than what our staff has calculated. But in any event, considering that in Victoria it was 45 per cent if I recall I would like you to address whether that is not a third measure that would tell us of the effect of a new station would be at the expense of the stations that are there because of the lower level of out-of-market tuning.
3062 MR. FROST: Do you want to answer that?
3063 MR. LARSEN: I am not sure I grasp the question.
3064 COMMISSIONER WYLIE: Well, the argument that was made yesterday in the Victoria market, or one of them was, there is 45 per cent out-of-market tuning. So if we do a good job of serving the community there is room there to repatriate the market share from outsiders -- Canadian and non-Canadian -- and my question to you is, since the out-of-market tuning in the Kelowna market, by your own calculation, is low, it is 17.7 per cent, you say, there isn't much room then to gather audience from other than the existing stations and, thereby, having a dramatic effect possibly on the ability of the others to continue performing.
3065 MR. LARSEN: I understand. Certainly, 17 per cent is significant. There is some out-of-market tuning that could be brought in from this country station from Penticton and other sources, cable sources and such but it is not as significant as it would be in a market like Victoria. But in terms of the other question regarding licences per market -- and I think Nick is absolutely right -- each market is very different and we said yesterday, Victoria there is a chance there may be eight licences soon in that market and people are saying it is under-serviced and I think Saskatoon, there is applications for licences there as well. Just in the Okanagan Valley, Penticton, I am sure, the population may be 40,000 people with three licences and Kamloops, 80,000 with four licences so I think each market has to be judged differently.
3066 MR. FROST: If I could ask Jeff Vidler, maybe, to mention in his survey -- Jeff, you found some numbers about outside tuning, I think?
3067 MR. VIDLER: Yes. Of the people who would listen to the country station as a station they would tune most often, which works as a good bell in terms of market share. Roughly ten per cent of these people currently listen to an out-of-market country station in Penticton.
3068 COMMISSIONER WYLIE: So your point would be that the out-of-market tuning is to a greater proportion to a significant proportion? The ten per cent would be what format do the people listen to who listen to out-of-market --
3069 MR. VIDLER: Country, it is country.
3070 COMMISSIONER WYLIE: And the percentage is?
3071 MR. VIDLER: Ten per cent of those people who would say that the FM country stations listened to most often are currently listening most often to an out-of-market station.
3072 COMMISSIONER WYLIE: Isn't that low in terms of repatriation? Am I reading right that this means that 90 per cent of those who listen to out-of-market stations listen to formats other than country?
3073 MR. VIDLER: No, some of them have no station they identify right now as stations that are their favourite.
3074 COMMISSIONER WYLIE: But of the proportion that -- it is still meaningful, isn't it because of the proportion of those that you would help to repatriate as listeners, you say only ten per cent listen to a country format that is coming from outside.
3075 MR. VIDLER: So ten per cent are not listening to a radio station on the market right now, that is correct.
3076 COMMISSIONER WYLIE: Right. So that would be the base that you could hope to repatriate to an FM --
3077 MR. VIDLER: And in addition to that there are listeners who do not have a favourite station at that particular point. And as well, I mean, I understand that some of the listening will come from FM country fans who are currently listening to country on AM radio.
3078 COMMISSIONER WYLIE: Yes, and are not satisfied with the sound.
3079 MR. VIDLER: That is right.
3080 COMMISSIONER WYLIE: It is only one measure, I agree, but what I have been doing is trying to paint a negative picture by combining the historical, even very recent figures, the out-of-tuning which is one way of getting your advertising --
3081 MR. FROST: Commissioner Wylie, if I may, just to finish on that subject. You are absolutely right about the smaller amount of outside tuning but, you know, the other side of that coin is that our radio market is -- well, we call it pure -- a very solid local radio market. You reach virtually everybody with the local stations.
3082 The other side of that coin of listeners in the community going beyond their own city to listen to a station, very little of that occurring in Kelowna and I think that has a kind of synergy that can make each market unique.
3083 And as to the number of stations that you refer to, of course those are historic numbers, those reflect licensing patterns of the CRTC in the past, naturally, but even the number of shoe stores in Kelowna, it seems, for some reason in Kelowna, there is more shoe stores, there is even neurosurgeons who say there are too many neurosurgeons in this town.
3084 COMMISSIONER WYLIE: It is all that mountain climbing.
--- Laughter / Rires
3085 It wears the "sole".
3086 MR. FROST: So it is a very competitive city, not just in radio, I can tell you.
3087 MR. VIDLER: I might just add, taking a look at the figures further to our discussion, roughly 20 per cent of those who would listen to the FM country, either listened to an out-of-market or did not have a favourite station right now.
3088 COMMISSIONER WYLIE: Talking about choosing Kelowna, I suddenly had a flashback years and years ago of falling in the ditch in Kelowna and breaking my ankle, spending Sunday morning in the Kelowna hospital.
3089 MR. FROST: I wish I had known that before we got here.
--- Laughter / Rires
3090 COMMISSIONER WYLIE: I think I had the accident in Blue River -- is there a place called Blue River? It is 35 years ago.
3091 MR. FROST: Yes, to the North of Kelowna somewhat. That would not be in our city.
--- Laughter / Rires
3092 COMMISSIONER WYLIE: But I ended up in Kelowna hospital but I remember there was a question of, "Do I die of a broken ankle or the mosquito bites?" because we were in the ditch.
--- Laughter / Rires
3093 Anyway, that is not relevant to today's discussion but it certainly reminded me of Kelowna.
3094 You have mentioned that there would be some effect on your own station and as well on other stations if you were authorized to start a sixth station in Kelowna.
3095 Now, in the deficiency responses, at page 2, you say that:
"An estimated breakdown of the sources of the proposed stations advertising revenues for the first year would be 92.6 per cent from existing radio stations." (As read)
3096 MR. FROST: Yes.
3097 COMMISSIONER WYLIE: And have you done the calculation -- I may have missed it -- for what happens in year two, year three, with regard to your revenue sources, particularly from the exiting radio stations?
3098 MR. FROST: As to whether the revenue would come from existing as opposed to new sources?
3099 COMMISSIONER WYLIE: Yes, the proportion. I assume that what you say here, in answer to question 1, is that 92.6 per cent of your advertising revenue in the first year would be poached, basically, from exiting stations including yours.
3100 MR. FROST: We have used those ratios pretty much throughout the five years. Whatever was established in our proposal for year one we have extended as far as the ratios of existing revenue to new revenue.
3101 But that would be based on your optimistic view of how well these stations would do in the future as compared to the past. Mr. Vidler's eyebrows have just been moving.
3102 MR. FROST: Should I go to him now?
--- Laughter / Rires
3103 COMMISSIONER WYLIE: It is up to you. But just so I understand what is there because over 90 per cent would be money that would have been made by the stations and is not because it is made by you.
3104 MR. FROST: Yes.
3105 COMMISSIONER WYLIE: But is it high like that because it includes your optimistic view that everybody is going to be doing much better in 2000 and forward than they were doing in the past.
3106 MR. FROST: Well it certainly is. Our projections reflect the growth of retail sales, which is five per cent over the next seven years and so is the growth we propose in radio sales, five per cent and there aren't many markets in this province, in this country, I think, that are looking at that. It is amazing how you see the radio revenues grow when you have a five per cent rate.
3107 So yes, the good pie is clearly going to get larger and that is why we are here, to propose a sixth station. It would seem in a market of this size and many markets that that would not be the norm but this city, as Mr. Malatest says in his report, is going to grow by ten per cent in the next two years.
3108 Robert, is there anything you wanted to add to that side of things?
3109 MR. MALATEST: You are getting at when the break-even point would come for the other stations and we do have two scenarios which, I think, Nick can actually show based on a very conservative estimate of a five per cent increase in retail sales and a .66 per cent share of the retail sales by the radio market. That has some hit on some of the stations but, more importantly, if we take what we consider probably be the best case -- or not the best case, but a more likely scenario, we still have our five per cent increase in retail sales and we have a .7 per cent share for radio sales which shows by the year 2000, in fact, all of the stations have recovered their revenues to the five station level.
3110 MR. FROST: Commissioner Wylie, I have a chart that I think would be useful. May I go to that and just illustrate?
3111 COMMISSIONER WYLIE: Absolutely. It is attached, I guess, to your --
3112 MR. FROST: Yes, I think you have a copy of it, if not we can get you one.
3113 COMMISSIONER WYLIE: No, I think I have it.
3114 MR. FROST: You may not have that one.
3115 COMMISSIONER WYLIE: It will be hard for me to be able to see.
3116 MR. FROST: I have two charts that I think will illustrate what we think some of the potential impact could be on this market. In our application, we proposed that the ratio of radio sales to retail sales would be .66 of one per cent. The average ratio of radio sales to retail sales is .72 per cent. We have represented the .72 per cent ratio of radio sales to retail sales over the next seven years by this taller set of bar charts. The lower charts represent the numbers we put in our projections in our application, projecting the radio revenue over the next seven years based on retail sales as projected by Robert Malatest.
3117 So there are two scenarios that I am laying out here for you today. For example, in the year 2000, the year that such a station as we propose might start, if you use the lower .66 per cent of retail sales, you would see that we have projected 8.3 million in radio revenue in the year 2000.
3118 The .72 per cent of retail sales would account for 9.1 million in the year 2000. The actual, at the moment, at the end of '98, is 7.9. You will see that we didn't know what that number was. When we put our application in last July, we had predicted that the radio sales would be at 7.5 million. We are suggesting to the Commission that these are conservative projections for the next seven years for radio revenue and that the .66 per cent is a conservative ratio of retail to use.
3119 If I may go to the year 2000 and show you what that might mean in the case of the sixth station -- 1998 radio sales 7.9 million. At the lower .66 per cent of retail sales, as we projected in our application, 8.3 million total radio revenues. Q102 projections are 959,000.
3120 If, with all things remaining the same except the ratio, if it were the average as recorded over the past seven years of .72 per cent of retail sales, you would then see total radio revenues in the year 2000 of 9.1 million.
3121 We think this is the most conservative, a worst-case scenario, if you will, and could cause there to be 7.4 million of existing radio revenue for the five station, including us, SILK-FM but a realistic projection is also, we feel, that there could be as much as 8.1 million in the year 2000 for five existing stations.
3122 Exactly what is going to happen is impossible to predict, but these numbers are conservative or realistically suggest and over time should remain in those levels so that it would be safe, I think, to project that the potential radio revenue for five existing stations will be somewhere, in the year 2000, between 7.4 million and 8.1.
3123 Now this is a conservative worst-case scenario. It doesn't take in new radio revenue at all. It is simply the natural growth as we projected in the market based on retail sales.
3124 I hope that helps a little bit to understand what the effect could be in this market. There could be some impact on existing stations in the worst case.
3125 COMMISSIONER WYLIE: Are you the applicant who filed -- I think you are -- the study by somebody by the name of is it Duncan or Campbell, explaining how the transposition of share to revenues depends on format and that country is, if I recall, a 1.1 to whatever ratio?
3126 MR. FROST: One point two.
3127 COMMISSIONER WYLIE: When you did these calculations, did you take that into consideration at all or discounted it altogether based on the format?
3128 MR. FROST: We listed the Duncan conversion ratios for two reasons, really. One, to illustrate that country is somewhat less than an AC or a news/talk, to put it in context, and then we indicated that our five-year predictions were less than a one-to-one ratio simply because we felt it would be conservative, it is a new station.
3129 COMMISSIONER WYLIE: Even if Duncan says that it is one to 2.0.
3130 MR. FROST: He says that would be the average. It is not clear what he -- at least I am not aware of any research -- has done when a new station does sign on.
3131 COMMISSIONER WYLIE: These studies would be more on an ongoing basis?
3132 MR. FROST: That is my assessment of what he has put together.
3133 COMMISSIONER WYLIE: And if I recall, you decided to conservatively discount this theory and in the calculations you were just looking at, you would have taken the conservative.
3134 MR. FROST: In the case of our projections, yes. In the second scenario, no doubt Q102 sales would be somewhat more than $959,000 if the market were as bullish as 9.1, obviously nothing is finite, but we see the range of damage could fall between those scenarios.
3135 COMMISSIONER WYLIE: Now, in making these calculations, did you take into consideration that the existing country station, CKBL, would remain on AM?
3136 MR. FROST: No, we think they would move to another format.
3137 COMMISSIONER WYLIE: But what about if they were licensed on country FM which is what their application is.
3138 MR. FROST: Yes, with us, you mean? You mean if we were licensed and they were licences?
3139 COMMISSIONER WYLIE: Yes, depending on the discussion. The general discussion we have had if format is not regulated in what way do we take it into consideration? If we were to take your optimistic view that Kelowna is a growing market and there is no problem with a sixth station. So now we have established the market's ability to absorb a station without undue harm assuming the Commission is prepared to make that assessment.
3140 Then the second one is, to what extent do we take format into consideration and I think I heard both Rogers and the applicants yesterday and you this morning say, "Well, it should be a measure of how reasonable and intelligent the broadcaster is in judging the market at the minimum because he can change the format before he even gets going."
3141 What if we were to licence CKBL as well using the argument that, "Well, there isn't room for a sixth station, it is the broadcaster's decision and problem" and seeing that they already have country on AM and you would be a start-up station, would your projections change dramatically, if that were the case?
3142 MR. FROST: Well, it is new territory. A question like that, of course, two licences at the same time, yes.
3143 COMMISSIONER WYLIE: But that is what we have before us.
3144 MR. FROST: Yes, yes.
3145 COMMISSIONER WYLIE: And you are not technically mutually exclusive and we are under a new policy so what should we do with this?
3146 MR. FROST: In 25 words --
3147 COMMISSIONER WYLIE: And what would you do if we did what you consider is not quite the right thing and give them an FM frequency?
3148 MR. FROST: We surely were aware there are two applications before you. We believe ours is the better of the two. We would be pleased to take the licence in almost any circumstances and even if you were to licence a second one. That is a big change in our market and you could be free to licence one now and one in a year, of course I am thinking of ours. But I think that the principle is -- I think not too jarring a change is a good way to go and I think the market -- if one were to get into specific formats -- could deal best with our presentation, a country FM, there would probably be a format change on the existing AM country and I think that could provide a very good balance of six radio services, two AM/FM combos, one FM/FM combo and the opportunity in six months, 18 months to come back and say, "We would like to flip this particular format to another FM".
3149 COMMISSIONER WYLIE: You mean, your competitor come back?
3150 MR. FROST: Yes. If we were both licensed, I would think we would be as civilized as that market of Victoria -- awfully civilized there with each of their different formats.
3151 COMMISSIONER WYLIE: I think you would have to be very aggressive.
--- Laughter / Rires
3152 MR. FROST: Well, one can be both.
3153 COMMISSIONER WYLIE: Not polite at all.
--- Laughter / Rires
3154 So what you are saying is you will accept this licence regardless.
3155 MR. FROST: Yes, and our commitments would --
3156 COMMISSIONER WYLIE: And you made your business plan on the basis that CKBL-AM would remain as an AM country?
3157 MR. FROST: That is right.
3158 COMMISSIONER WYLIE: And you did not, though, on the basis that they maybe an FM country. What would be the actual impact? Have you calculated what the actual impact would be of CKBL being successful in getting an FM frequency?
3159 MR. FROST: Well it would be an impact on our company but all we are saying is just give us a chance to be on the same playing field. It would be more of an impact, clearly, with another FM but --
3160 COMMISSIONER WYLIE: But it wouldn't be the same playing field if you had two FMs and they had an AM and an FM.
3161 MR. FROST: No but that is --
3162 COMMISSIONER WYLIE: That is what they are gong to tell us, I am sure, when they come.
3163 MR. FROST: I think they are but it is a lot more level for us if there were two FMs.
--- Laughter / Rires
3164 COMMISSIONER WYLIE: That is why one of our colleagues always says there is no such thing because that is why the football players change at every -- if I said period, you will laugh -- inning -- no, not innings either -- quarter.
3165 MR. FROST: Donalyn, do you have anything to add?
3166 MS HODGE: I am just bitting at the chop here. I was interested when you were saying what would happen if CKBL did get a licence as an FM. We have all our predictions looking at what the community wanted first and we saw the need for a country FM service and we based our calculations on a sixth station market with that scenario.
3167 As to talk about the level playing field, you also have to consider who the players are in the market. At this point, we are the only locally-owned media company in Kelowna, let alone radio broadcaster.
3168 The other two firms have two stations. Regardless of AM or FM, they have chosen their formats and we are here to toot our horn, to say that we would like two stations as well, and we are here to serve the community and I just wanted to get that out, that the playing field -- no matter how many slopes in it -- equals out with the same number of radio licences within the market.
3169 COMMISSIONER WYLIE: So you are on the right side of the field?
3170 MS HODGE: I am on the upper slope, I am hoping.
3171 MR. FROST: Thanks, Donalyn. David, anything to add?
3172 MR. LARSEN: No.
3173 MR. FROST: Anybody else?
3174 COMMISSIONER WYLIE: So the answer is you want this licence, you think you can make a go of it as a sixth player in the market. It will be easier or more difficult depending on what else we may authorize and how you may be able to affect to the tune of 92 per cent in the first year the existing stations?
3175 MR. FROST: Yes, I do, Commissioner Wylie and I wonder, Rick, would you put the chart up on ownership for just a moment. I think that level playing field, as you say, can be described from different ventage points but this chart that we had in our presentation -- no, not that one Rick, the bar chart, the one that has been up already, chart A-09. You are very good in sales, Rick.
--- Laughter / Rires
3176 Commissioner Wylie, if in the case of us getting an FM with country you would surely see the 22-share for our company go up and you would probably see the 44-share for the SUN, CHSU and "The Bullet" go down with not much change to the group in the middle whereas let's say that CKBL-AM which is country now, if our application were approved, let's say it goes to oldies, which actually was doing better with a 10-share than country is now on the AM station, you might find that they wouldn't take too much of a drop at all.
3177 In other words, we think that while the level playing field can be interpreted differently what you would end up with here is 33, 33, 33.
3178 COMMISSIONER WYLIE: That is with CBKL on AM?
3179 MR. FROST: Yes, with the two FMs for that company -- David, they would be doing better, wouldn't they? They would be a little bit ahead of us?
3180 MR. LARSEN: It is pretty speculative, I am not sure what format they would do, if they would do country as well, then there would --
3181 COMMISSIONER WYLIE: If you tell me you are going to do country, they tell me they are going to do country, I take it for granted that you are both be doing country.
3182 MR. LARSEN: They are going to do country. So in that in that sense, I think Nick is right. I mean, no matter what happens, if a sixth licence is granted and there is an AM/FM flip granted, it is going to break out somewhere in the area of each combo is going to have 30-share and divide the rest of the numbers up depending on how things go, but it is going to be pretty even in terms of audience.
3183 COMMISSIONER WYLIE: I don't know if you have anything more to add or answer a question I didn't ask.
--- Laughter / Rires
3184 Because these are all the questions I have. Next time I go to Kelowna, I am bringing my crutches.
3185 MR. FROST: Commissioner Wylie, I appreciate very much the opportunity to be here. We are very excited about being before you and the opportunity of providing a new service to this city as I was 15 years ago, a distinct service.
3186 We are convinced there is a terrific need for country in this market, more so than when I proposed easy listening. We would commit ourselves to starting and running a country station like we did to the easy listening station and you could sure count on us and the market, Kelowna, is just growing leaps and bounds -- that is not a takeoff on your foot injury. Sorry.
--- Laughter / Rires
3187 Most important for me, this has been a big project for the last year and it was when I applied 15 years ago. We are a good company and we want to stay in this broadcasting system. We think we add something. My long-term goals for our company is to have the people who are running it own it one day. They will pay me market value, I hope, but we need this and we will treat it well and we hope you will look at us favourably.
3188 COMMISSIONER WYLIE: Thank you, Mr. Frost, ladies and gentlemen. Thank you, Madam Chairman.
3189 THE CHAIRPERSON: Thank you, Commissioner Wylie. I believe Legal Counsel has a question.
3190 MS MOORE: Thank you, Madam Chair. I would just like to ask if you could put the two charts -- submit them for the public record. Are you in a position to do that today?
3191 MR. FROST: Yes, we have copies in colour here. You can have them in minutes.
3192 MS MOORE: Okay, great. Thank you very much. Those are my questions.
3193 THE CHAIRPERSON: Thank you, Counsel. Thank you very much, ladies and gentlemen. You have been great.
3194 I think what we will do is take our morning break and reconvene at 10:30. Thank you.
--- Short recess at / Courte suspension à 1015
--- Upon resuming at / Reprise à 1035
3195 THE CHAIRPERSON: Ladies and gentlemen, we will now resume the hearing. I believe Commissioner Wylie wants to make a clarification.
3196 COMMISSIONER WYLIE: Yes, I misspoke myself in my exciting about past injuries and said there would be eight stations in Victoria if we approved them all. It is six stations. Three approvals plus five stations does not compute to eight stations. I apologize.
3197 THE CHAIRPERSON: Thank you. Madam Secretary?
3198 MS VOGEL: Thank you, Madam Chair. Item 7 on our agenda is an application by Okanagan Radio Ltd. for a broadcasting licence to carry on an English-language FM radio programming undertaking at Kelowna, operating on the frequency 103.1 MHz, channel 276B, with an effective radiated power of 11,000 watts, upon surrender of the current licence issued to CKBL Kelowna.
3199 The new FM would adopt CKBL's current country music service.
3200 The applicant is requesting permission to broadcast simultaneously on the AM and FM bands for a period of three months before surrendering the current licence issued to CKBL Kelowna.
3201 Go ahead whenever you are ready.
PRESENTATION / PRÉSENTATION
3202 MR. McKINNON: Madam Chair, members of the Commission and Commission staff. Thank you for hearing our application. My name is Hugh McKinnon. I am President of Okanagan Skeena Group Limited.
3203 We are pleased to have this opportunity to appear before the Commission to provide our vision of what is best for the local radio market of Kelowna, for the listeners and for the existing stations.
3204 Since the Commission approved Okanagan Skeena Group's acquisition of Nornet Broadcasting earlier this year, we have continued to work to do what we believe is right for Canadian radio. When I say "doing what is right for radio", our view is you must look at each market on its own to determine what is best for that community and what will sustain a healthy local radio presence in each of the secondary markets where we operate.
3205 As the Commission is aware, our primary focus has been to provide high quality radio service in every B.C. and Alberta community we are privileged to serve. The combined companies of Okanagan Skeena Group and Nornet have created a strong secondary radio market player in Western Canada. We believe we can continue to service these smaller markets and grow our operations. We look forward to that growth.
3206 We need to participate in markets which make economic sense and which can support the licences issued for that community. Our concern in Kelowna, as you will hear from our panel, is that this is not a community which can support an additional licence.
3207 It is our view, however, that this is a market which will benefit from and can support our application to flip our AM country service to the FM band.
3208 As the Commission has seen in the filings in this proceeding, the primary issue is provision of a high quality country music service to Kelowna. I would highlight for the Commission that our company has a strong commitment to Canadian country music and its artists. Okanagan Skeena Group operates more country music radio stations than any other company in Canada. We are committed to the country audience in Kelowna and look forward to continuing to be able to service the listening audience.
3209 I will now turn the microphone over to Michael Tindall to introduce the panel and quarter back our presentation.
3210 Thank you.
3211 MR. TINDALL: Thank you, Hugh. Madam Chair, Commissioners. Please allow me to introduce our staff panel. On Hugh's right is our Senior Vice-President, Dave Calder. Dave is experienced in radio and television broadcasting as well as national representation. Before moving to broadcasting some 19 years ago, Dave was a respected studio musician. I believe he changed careers because he thought the hours would be better.
3212 On Hugh's left is our Counsel, Chris Weafer. Beside Chris is Hans Jansen, a principal in Bay Consulting and beside Hans is Stuart Jack, a principal in Price Waterhouse Coopers. Both of these firms have provided third-party consulting for our submissions to these proceedings.
3213 On my far right is our Kelowna General Manager -- General Sales Manager -- Paul Mann. Paul has a long history in country radio dating back to his first job at CJOC Lethbridge in 1965 and culminating in the launch of CKBL Kelowna in 1995. Paul is also the voice of the long-running syndicated radio program, "The Canadian Farmer".
3214 Next to Paul is Kelowna Senior Sales Representative, Kerry McNaull. Kerry is one of the longest-serving radio sales representatives in the Kelowna market. She has experienced firsthand the effects of the introduction of the fifth radio licence in 1995, the subsequent rate-cutting that ensued and is, in fact, still a factor in the market today.
3215 On Mrs. McNaull's left is Jason Mann whose first job in country radio was in 1988 at CKTA Taber. Jason worked for three years at CCMA country station of the Year, CKRY Calgary, before joining CKBL Kelowna as its first and present Program Director. While in Calgary he was the publisher of "Country Today" magazine and is currently the producer of the "Canadian Farmer" radio program.
3216 On my immediate right is Kelowna News Director, Moira McLean. Moira's background includes experience at CKNW Vancouver and a year as press secretary to the BC Leader of the Opposition before joining our staff in 1997. Moira is also involved with the Kelowna Rockets Hockey Club whose entire schedule, both home and away games, is presently broadcast on CKBL.
3217 My name is Michael Tindall. I am the Vice-President, Southern Media Unit for Okanagan Skeena Group responsible for the Kelowna stations. My own broadcast experience began in 1963 with CBC Vancouver. In 1974, I joined Skeena Broadcasters, the company which eventually became Okanagan Skeena Group, becoming Vice-President and General Manager before departing in 1983 for a position overseas. I returned to the company in 1989 as we began to expand into the Okanagan valley.
3218 Madam Chairperson, members of the Commission. You have already heard in detail today about the superior quality of signals on the FM band -- and you heard that yesterday with some excellent demonstrations -- how, given the choice, many listeners indicate a distinct preference for the FM band and how during the CKXM Victoria application, Canadian country stations are faring better on FM than AM.
3219 Our company is unquestionably committed to the country music format, programming by a wide margin the largest number of country music stations in Canada -- 16 in total. A list of those stations and the communities served is attached as Appendix II.
3220 We believe as well that the loyal audience of country listeners in Kelowna is also highly committed to supporting country music on the FM band as evidenced by the 900 letters of support provided in our application.
3221 We point also to the letters of support for our application from the Canadian country music industry representing some 24 artists from Lisa Brokop, Farmers Daughter and Sean Hogan to Michelle Wright, Patricia Conroy and Charlie Major.
3222 Out station's commitment to the community of Kelowna is also without question. While no benefits were required by the Commission related to the purchase of the stations, we nevertheless have been making substantial contributions to the community as we continue to work toward achieving profitability.
3223 During this rebuilding process, CKBL and its sister station have committed to raise 600,000 for the Kelowna Cancer Lodge, the new Ben Lee Park and the performing arts theatre of the new Kelowna Community Arts Centre.
3224 The two stations contribute 13,000 each year to Okanagan University College for a scholarship in the visual and communication arts, a total of $69,000 when donations are complete in 2001.
3225 In addition, CKBL has hosted free concerts starring Canadian country music artists Patricia Conroy and Julian Austin, and 1999 marks the third year that CKBL has sponsored a free public performance of the Snowbirds aerial acrobatic team in Kelowna. The performance and accompanying commentary from Snowbirds pilots is also broadcast live each year on CKBL.
3226 As mentioned, CKBL has committed to carry the full season of Kelowna Rockets Junior Hockey games, both home and away, to Kelowna area listeners for five years, hiring additional staff and making capital investments for specialised equipment. Support for the hockey team from ourselves and others represents a core element contributing to the construction of a new 6000 seat arena scheduled to open in August of this year.
3227 The foregoing events have provided no-charge entertainment for 70,000 to 80,000 Kelowna area residents and the fundraisers have resulted in hundreds of thousands of dollars raised for Kelowna charities and community projects. Providing the entertainment and staffing the fundraising events incur various hard cost which are absorbed by the stations without offsetting revenue.
3228 Members of the Commission, we trust this more than adequately demonstrates our commitment to country music listeners and to the community of Kelowna. This commitment will be reinforced and sustained by allowing us to flip our AM service to the FM band.
3229 Competitors have commented on the changes our company initiated in march 1998 when CKBL was moved from the FM to the AM band and a new station, SUN-FM began broadcasting on the former CKBL position on the dial.
3230 We have been criticized for being proactive and making what we believe was not only a sound business decision, but a decision that was good for radio in Kelowna.
3231 Faced with this situation, the responsible decision, the decision necessary to sustain financial viability for the two stations, was to make more effective use of the FM band by programming to a broader audience in Kelowna yet still retaining a service for country music listeners. To do otherwise would have resulted in further audience decline followed by revenue decline and both stations' inability, ultimately, to meet their financial and programming obligations.
3232 At the time of the programming change in March 1998, and in anticipation of the Commission's Radio Market Review, our company publicly announced that it would apply to return CKBL to the FM band when that became possible. And this is the application now before you.
3233 We submit that the Commission's approval of our application will satisfy the country audience in Kelowna without material impact on the existing stations. We will also repatriate country listeners who may have switched to tapes, CDs, distant country stations on cable or country music television thereby strengthening the overall radio market, again without material impact on existing stations.
3234 This is, of course, of paramount importance since annual trading shows the retail radio market in Kelowna actually dropped by $188,000 in 1998 versus the year previous and the national radio market was artificially inflated by one-time spending by the provincial government in support of, among other projects, the Nisga'a Land Claims Treaty.
3235 As an indication of how fragile the Kelowna radio market is, we observe that just this week two key radio advertisers, Kelowna Lincoln Mercury and Orchard Ford have cancelled all radio advertising. This represents an annualized drop in revenue of approximately three per cent for our two stations alone.
3236 Members of the Commission, we have heard that Victoria, with a population over 300,0000, is a 12 million dollar radio market with five stations. We are dealing in Kelowna with a radio market of 145,000 and approximately 8 million dollars in overall sales, or 7.3 million dollars with barter removed.
3237 If retail sales stabilise or recover slightly and if national sales maintain or improve somewhat we might anticipate a two to four per cent improvement in cash sales. This represents 150,000 to 300,000 new dollars to be split among the five stations. All stations could benefit and none should be materially impacted. We hope that the four out of five stations which have not yet achieved profitability in Kelowna would be able to do so and I will notify that, Madame Chair, here in that in fact two stations have achieved profitability in Kelowna.
3238 Kelowna residents enjoy over-the-air broadcast service unparalleled in much of Canada including five commercial radio stations, CBC Radio and a resident television station all competing for share of this relatively small audience. The five commercial stations provide a healthy selection of diverse formats including news/talk, classic rock, soft rock, country and top 40.
3239 While the CBC Radio station doesn't take advertising dollars out of the market, at least not yet, television provides significant competition and the introduction of advertising on certain cable channels as well as the real estate and automotive channels has provided new challenges for radio in the market.
3240 The Kelowna Daily Courier newspaper has just been purchased by Horizon Publishing, an American company with a record of aggressive print marketing and we expect increased competition for advertising dollars from this sector as well.
3241 Repatriating CKBL to the FM band will, we believe, substantially satisfy the needs and desires of the Kelowna country music audience without causing material harm to existing stations. Concurrently it will allow CKBL to make further commitments to both Canadian country artists and the community in addition to those we have already documented.
3242 In the area of Canadian Talent Development, and specifically in recognition of the benefit of converting CKBL from AM to FM, our company will commit to bring to Kelowna a minimum of three Canadian country acts annually to perform at the new 6,000 seat Kelowna arena and will donate annually to the Fernie Country Music Festival a sum of $5,000. These two third-party commitments total $15,000 annually.
3243 CKBL will commit to raising its donation to FACTOR to $10,000 each year for the first-term of its licence, those funds to be directed solely by FACTOR as they see most beneficial to the development of Canadian country music talent.
3244 CKBL will also work with its 15 sister country stations to ensure the broadest possible air play of Canadian country artists through the production of new programs to be broadcast across all stations profiling the best of Canadian country music and artists.
3245 We submit these are aggressive and fair commitments for a station still struggling toward the break-even point in a market just now approaching a size where it may possibly begin to sustain the five existing commercial radio stations. We also observe that while the country format in Canada as a whole is in a period of decline, as shown in Appendix I, that decline is generally less serious on FM stations than AM stations.
3246 In conclusion, we submit that our application to change CKBL-AM to the FM band will allow the station to maintain existing services and offer new programming, will satisfy the demonstrated needs and desires of the Kelowna country music audience, will cause no material economic harm to incumbent licensees and will result in the addition of some $25,000 annually in direct Canadian Talent Development funds.
3247 We believe that CKBL stands a much better chance of financial recovery and meeting those programming and community obligations if the Commission chooses to allow the station to return to the FM band and we respectfully ask you for that opportunity.
3248 Thank you, Commissioners, for your time and attention. We would be pleased to answer your questions.
3249 THE CHAIRPERSON: Thank you. I think perhaps I should address this first question to Mr. McKinnon. I think you were here yesterday and heard the exchange Commissioner had with Mr. Viner of Rogers and also this morning with Mr. Frost of SILK-FM and I wonder if you had any comments in that regard, and in particular how we might proceed in evaluating these kinds of applications in the context of the new radio policy. Should we be hands-off completely with regard to market issues, base our decisions on frequency only? What should we be looking at, in general and then if you could give me your views on that, I would appreciate it.
3250 MR. McKINNON: I believe that the Commission has in their radio review policy, I believe strongly in one thing they have pointed out: The ability for the market for sustainable competition in the marketplace and I believe that -- I have been involved in local secondary market radios and my family is since 1971 and one of the fundamentals of it is profitability. I mean profitability will allow that station to be a strong community supporter and be the community bulletin board for that community and just the issuances of more licences in a community will just take away from the service of those stations.
3251 So I believe we must look at things on a market by market basis.
3252 THE CHAIRPERSON: And what things should we be considering when we look at markets -- if we should be looking at them and we have removed the market entry criteria and we look at individual markets, what things should we be considering with respect to profitability? And certainly the question is a general one, but also when we look at Kelowna with a large number of stations for the population and a little PBIT, what should we be looking at when we look at Kelowna in particular?
3253 MR. McKINNON: I think what you have to look at is the total radio advertising dollars in that community and the ability for the existing stations to maintain the profitability. As we have seen in Kelowna, we have four stations out of five that have not been profitable and I think that that is one of the things that fundamentally has to be looked upon in that market and that each market is different and unique but still the fundamentals of the profitability have to come into play and the amount of radio advertising growth, the growth in radio advertising revenue and also the number of the disparity.
3254 I mean, as we have heard here, the AM band -- to use my esteemed colleague, Nick, as he said -- the AM band just doesn't cut it and to put another FM, issue a sixth licence in the marketplace and just forget about the AM band I think would be a big mistake.
3255 I think that fair competition is very good for radio and fair competition is not an AM country station competing with an FM country station.
3256 THE CHAIRPERSON: So what is fair in your view, then?
3257 MR. McKINNON: I guess fair is that the market will have enough radio revenue so that each station has the opportunity to be profitable. The Commission, unfortunately, can't regulate profitability but I think what they can do is keep an environment where each radio has the opportunity to be profitable.
3258 THE CHAIRPERSON: Thank you. The Kelowna population grew pretty rapidly from '91 to '97. Do you expect this rapid rate of growth to continue?
3259 MR. McKINNON: I will pass that question over to Mike.
3260 MR. TINDALL: No, we don't, Madam Chair. There are all kinds of documents around the regional district and others that show the population growth dropping for a couple of reasons: In migration is slowing, as the population ages the natural growth from children obviously drops off and I think we are looking at 2.8 and down to 2.1 per cent if we go ten years down the road. We could certainly supply you with charts showing that later one, but the population growth is not going to boom like it did.
3261 I believe Kelowna, in '90 or '91, had seven per cent in one year, which is a phenomenal growth. Conversely the other ends of the valley, Vernon at the top, had about three and a half and Penticton was just down around three. So Kelowna did experience an enormous spurt of growth early in the decade. It has slowed and the original district projections show it is slowing further.
3262 THE CHAIRPERSON: Thank you. Now, I know you don't expect, if I understand correctly, you much audience growth or revenue growth by flipping your format to AM to FM, is that correct? Do I understand you correctly?
3263 MR. TINDALL: I will answer the financial and defer to Jason for the audience. Our projections have shown approximately a 60,000 dollar change in revenue by going from AM to FM which is why we say we don't think there is any material impact on the market because we anticipate that even at a two per cent growth rate there would be 150,000 new dollars in the market. So taking 60 of them it would take that percentage but it wouldn't have material impact on the market and it would be simply repatriating audience plus that which we already have listening to CKBL.
3265 MR. JASON MANN: Hi. I think we can assume that we will have an increase in audience but it obviously wouldn't be that much more considering that we were at a 12 per cent share of marketplace with the country on FM prior to making the change. Currently we are around an eight share. So I guess my estimates would be somewhere in the neighbourhood of about a two to three per cent increase.
3266 THE CHAIRPERSON: What if you went back to 12, what impact would that have if you retained or went back to the 12-share? What impact would that have?
3267 MR. JASON MANN: I will defer that to Paul.
3268 MR. PAUL MANN: Thank you, Madam Chair. As Mr. Frost pointed out earlier this morning in his presentation, it is somewhat a game of finite splits of market share and there is not question that our decision that we made a year ago in March to move country, for that moment at least, to the AM band was purely one, as Mr. McKinnon put, driven by, we hope, good business decision and that is to be sustainably profitable in our marketplace eventually.
3269 The difference, however, in the share points is directly related to that very fine line between red ink and black ink and we sat a year ago with approximately a 29 per cent combined market share with a country FM and an oldies AM format. So I guess the question would be can we get it back up to the historical high of ninth year and an average high of around 15? It is a working progress and probably a two to three point gain would make ultimately about 100 to 150,000 annualized revenue gain on the combo a year or two down the road -- not an overnight scenario.
3270 THE CHAIRPERSON: What I am sort of trying to get at, as you, yourself, put it in your presentation this morning, Kelowna is a fragile market.
3271 MR. PAUL MANN: Very much so.
3272 THE CHAIRPERSON: So I think it is a question of us looking at and hearing from you and the broadcasters there what are the various eventualities, and I have been struck by how conservative you have been in your projections with respect to the new FM and I am just trying to explore if you were to get more growth, where would it come from and what would be the impact on the market?
3273 MR. JASON MANN: If I just might make a general observation that I think a lot of people that listened to "The Bullet" when it was on FM were actually people who would have preferred the Top 40 music choice which is now being offered on 99.9 in Kelowna, which is our FM now, and so I think that number might have been artificially high at that time based on the competitive level in the marketplace. I think what we can look at is repatriating listeners from CMT-Cable radio stations like KISS and CIG-FM in Penticton as well tapes and CDs.
3274 MR. JANSEN: Madam Chair, one of our consultants has some information there that might be helpful for you.
3275 MR. JANSEN: Madam Chair, it may well be possible that there is a peak year. For instance, in 1997 there was a peak year of growth but if you look at the recent period from 1995 to 1998 we see that there were actually two years where there was negative growth in local airtime sales. In 1995, local airtime sales declined by 4.8 per cent and in 1998 by 3.2 per cent. So Mr. Frost this morning saying that five per cent is reasonable may be true for some years but if you look at a five-year period, it is more likely to be one or two per cent rather than five per cent.
3276 MR. PAUL MANN: Madam Chair, if I might, on this current fiscal year as well an update that all of our broadcast companies in Kelowna share the information and this is to the end of March for the fiscal year to date. In fact, the local cash revenues in the market for radio, which drive the majority of our overall revenues, are in fact at just 1.1 per cent for the year-to-date over last year.
3277 THE CHAIRPERSON: Thank you.
3278 MR. JASON MANN: I am sorry -- Madam Chair?
3279 THE CHAIRPERSON: Yes?
3280 MR. JASON MANN: I would also like to add that with the estimate of audience in the station going back to FM, we could look at Appendix II and see that over the six surveyed decline of market share, out of the 13 markets that we look back at BBM information only one of which actually increased in market share that being Hamilton with the change of format, I believe, directly impacting Toronto with KISS-FM.
3281 THE CHAIRPERSON: As you know, the Commission no longer regulates format and I wonder what your views are on the extent to which we should look at format in making licensing decisions, as you yourselves have experienced, you changed a format to reflect the market conditions.
3282 MR. TINDALL: Ma'am I think that we have to -- and in reply, I guess to your policy questions -- I think that every market has to be examined individually and you have to look for stability and diversity in the market. Introducing another country signal is an interesting approach but I don't think it introduces diversity. Introducing a sixth station will certainly not introduce stability in this fragile market -- if we can continue calling it that.
3283 THE CHAIRPERSON: That is your word.
3284 So I think we are very concerned about the market and the format. In terms of what the Commission should be considering, we have heard that you do not wish to go back to the classical tests but I think very much that a number of those classical tests -- strictly from a business point of view -- still warrant some pretty serious attention.
3285 You can't have stations performing in the market if they are not making money and if we get too many stations in the market, any market, there will be some stations that suffer and will not be able to live up to their commitments.
3286 So I wonder if you could just elaborate a little bit more then on the impact that the addition of a sixth station would have in the market and in particular to the profitability of your two stations?
3287 MR. TINDALL: Yes, if you just give me a moment, we have some financials that we did not submit but certainly could later in the day.
3288 We are suggesting that were CKBL to remain as an AM and a sixth licence were granted we anticipate our local revenues would decrease 45 per cent year one and our national revenues would decrease 60 per cent.
3289 If we look at CKBL moving back to the FM band and a sixth licence, we are anticipating a 35 per cent decline in local and 60 in national. That would be with a sixth station and the flip.
3290 THE CHAIRPERSON: Thank you. Now, I have some programming questions actually and then I will get back to some of these other issues.
3291 Would the station offer the same kind of programming as is now on the AM?
3292 MR. JASON MANN: Yes.
3293 THE CHAIRPERSON: So basically the same, everything the same but on an FM band instead of AM.
3294 MR. JASON MANN: Correct.
3295 THE CHAIRPERSON: Thank you.
3296 MR. TINDALL: We are working, Madam Chair, with our compatriots in Alberta and in Terrace at the FM station there on some additional programming. We are not able to introduce it yet but there will be additional programming and one of them is a nighttime call-in show profiling country artists, live guests, and that kind of thing.
3297 I think the position we find ourselves in is that we believe we are presenting already a pretty substantial program lineup and a lot of good community service and we are doing a very good job with the radio station and we are not yet profitable. So with respect, we would like a bit of leeway to get back to the point where we are actually, hopefully profitable and continue doing what we are doing now very well.
3298 THE CHAIRPERSON: Thank you. You have stated as part of your 22,000 dollar contribution to the Canadian Talent Development there would be 10,000 dollars for three annual Canadian country acts and I wonder if you could just elaborate a bit more on that.
3299 MR. TINDALL: Can I name the acts? No.
3300 THE CHAIRPERSON: No.
3301 MR. TINDALL: We have said that we would expand roughly 65 per cent of those funds against talent and 35 per cent against hall rental, travel for artists and that kind of thing. We do have this new arena being built which is going to provide an extraordinary venue for a city that hasn't had one and we anticipate no difficulty at all getting country acts into Kelowna.
3302 THE CHAIRPERSON: Thank you. My last question is in the Commission looking at our options, if we were to consider either licensing both or approving both applications or denying both applications, what do you think would be best for the Kelowna market?
3303 MR. TINDALL: For the market?
3304 THE CHAIRPERSON: For the market.
3305 MR. TINDALL: Likely denying both. That would maintain the most stability.
3306 THE CHAIRPERSON: And are you of the view that we should be considering the stability of that market as an important factor knowing that we have to balance that against the diversity for listeners?
3307 MR. TINDALL: We believe that stability and diversity are the two cornerstones of the Commission's vision, if you like. If we don't continue stability and we don't continue diversity then we will end up with a lot of stations sounding the same. In a large city that might be fine because you have a much larger audience to split. When you get into a place with 145 or 150,000 people it is a finite audience. There was a remark earlier that we are in a pure market, that there is not a lot of off-air competition, there is certainly cable competition but when you take the CBC out of that 150,000 it is a very small market.
3308 THE CHAIRPERSON: So perhaps at this time we might, how should I say it, we might decide that the need for stability outweighs the need for added diversity.
3309 MR. TINDALL: Which would be a status quo decision -- freeze the market for a period of time and then come back? Well, you might decide that, yes. Would we agree with at? I think we would agree with that more than we would agree with a sixth station -- very definitely.
3310 THE CHAIRPERSON: Thank you. Commissioner Wylie has a question.
3311 COMMISSIONER WYLIE: One of the objectives the Commission has is service to the community concerned, diversity of news voices as well as benefits to the system as a whole as a result of its licensing decisions. What is your view about the extent to which a local broadcaster can best serve the community if it is compared to a larger company who is not an independent operator in that particular market? We would obviously be looking at not the larger cities where it would not be so relevant, but in a town like Kelowna, is it easier for a local broadcaster to serve the community in the manner intended by the radio policy than for a larger company operating in many markets and not necessarily rooted in that market, from a business perspective?
3312 MR. TINDALL: Madam Wylie, we are local broadcasters in all of the markets where we operate. Our staff live in the towns, we are committed to the towns, they join the service clubs, we go out of our way to support the community. I consider us local broadcasters everywhere we operate and with respect to the previous applicant I don't think the issue of whether you are actually owned there or not, if you are behaving properly is at all relevant.
3313 COMMISSIONER WYLIE: So it is more, in your view, the staff and the policy and the soul of the station as required by the owners rather than the owners' roots being in the community, is what you are saying.
3314 MR. TINDALL: Absolutely. I have been involved with the company, as I told you earlier, for a long, long time and when we operated only in very small places, Terrace and Kitimac and Prince Rupert and places like that, we did not have the attitude that we were small town broadcasters. We had the attitude that we were broadcasters and we would do the very best we could and we continued to do that and our record stands on that and that has carried on. Our philosophy is that we serve the towns in which we broadcast and we do that very, very well.
3315 COMMISSIONER WYLIE: So your view would be for the Commission to look at the performance on the air and in the type of activities that you are able to commit to, or that you have done, to see whether the community is served rather than who the owner is.
3316 MR. TINDALL: Absolutely, ma'am.
3317 COMMISSIONER WYLIE: Thank you. Thank you, Madam Chair.
3318 THE CHAIRPERSON: Thank you, Commissioner Wylie. I believe legal has a question.
3319 MS MOORE: Thank you, Madam Chair. In your February 11, 1999 response to the Commission deficiency questions you indicated that you would be prepared to accept the Canadian Talent Development commitments as a condition of licence but you stated that this was assuming no other licence is granted. Does that continue to be your position?
3320 MR. TINDALL: Yes, it does. We would be extremely hard pressed. As you have heard, we are looking at, if a sixth licence is granted, a drop of anywhere from 35 to 45 per cent in local sales and 60 per cent in national sales. We would simply be unable to fund additional commitments under those circumstances.
3321 MS MOORE: Would you be in a position to make any commitments if a second licence were approved?
3322 MR. TINDALL: Is your question, would we make additional commitments if a second licence were approved and we were still AM or we went to FM?
3323 MS MOORE: Assuming that both applications are approved, are you in a position to commit to Canadian Talent Development budgets as a condition of licence?
3324 MR. TINDALL: I draw your attention back to what we have just said. Even with the FM flip and a sixth licence we anticipate a drop of 35 per cent in local retail revenues and 60 per cent in national revenues and I would respectfully suggest that that would make it very, very difficult to commit any additional dollars. That would make it very difficult, frankly, to operate a station.
3325 MS MOORE: Thank you, Madam Chair.
3326 THE CHAIRPERSON: Thank you. Thank you very much, gentlemen. Unless you have anything to add at this conjecture? No? Thank you very much.
3327 MR. TINDALL: No. Thank you.
3328 MS. VOGEL: We will proceed with Phase II wherein the applicants reappear in the same order to intervene against other competing applicants.
3329 I would invite Kelowna Broadcasting to come forward with their intervention.
3330 MR. FROST: Madam Chair, members of the Commission and staff.
3331 We are opposed to the granting of a second FM licence for Okanagan Skeena for the following three reasons: First, their application is uninspired, unbelievable, without research and contradictory. Second, the market is already unbalanced. A second FM station for Skeena would make it worse. Third, Okanagan Skeena lacks credibility as a country broadcaster.
3332 The first point. Does Skeena really want to serve the FM country listeners that they abandoned? Their six-page supplementary brief provides no economic, audience or market research and assertions made there are not supported. For example, in referring to the 1995 CRTC decision they state:
"The creation of that new FM -- CKBL-FM -- did result in a negative impact on the operations of other stations in the market as indicated by the CRTC's analysis of the market. There is no reason to suggest they will be impacted by this proposed flip from AM to FM." (As read)
3333 The short section in their supplementary brief given to discussion of the impact on existing stations contains nothing but unsubstantiated assertions. Near the end of its brief the applicant says:
"This application is unlike any traditional response to a Call for Applications to serve a market that the Commission has dealt with. This application is not purporting to represent that there is a significant new market in Kelowna to support the application as filed."
3334 But they are applying for a new FM service saying:
"The station will do better on the FM band and will not materially impact existing stations in the market."
3335 In Appendix I of its February 11, 1999 response to CRTC questions, Skeena provides five year status quo sales projections for its AM station in a five-station market. On page 11 in their FM application, the applicant gives five-year sales projections for this proposed FM country station, also in a five-station market. As shown in this chart, they show that their existing AM country station will get better sales than their proposed FM country station and they also project profits for the AM station that would be greater than those proposed for their FM country station. Skeena seems to be saying that they would be better off without a new FM station.
3336 Okanagan Skeena is saying that their FM country station, rated number two, could not make profits a year ago but that their current AM country station, rated number five, can now make good profits for five years into the future.
3337 All of this is not plausible. The CRTC September Call for Applications for Kelowna directs applicants to respond to six points in the Call. Here is point two:
"The expected audience of the proposed service and its impact on the audiences of existing radio stations."
Skeena has failed to respond to this point.
3338 Point four:
"An analysis of the markets involved and potential advertising revenues taking into account the results of any survey undertaken supporting the estimates as well as the impact on advertising revenues of existing radio stations."
Skeena has failed to respond to that point.
3339 My second point in this intervention: A second FM station for Skeena would put SILK's future in question. In their intervention, the applicant suggests that we are out to devastate their AM country station. This is not true. What has been devastated is SILK. Skeena's move to Hot AC, playing 60 per cent of our music, has caused significant damage to our company already. In describing the impact of their new FM country station, they briefly refer to SILK stating:
"The station is very strong in the 25 to 54 and 35 plus demo."
3340 Nowhere does the applicant refer to the fall '98 BBM, the first full ratings with their new Hot AC FM station, in which our station took a dramatic, and likely permanent, decline in audience. SILK-FM has already, and continues to suffer a material adverse impact. We have experienced nothing like it in 14 years.
3341 Since 1995, we have successfully weathered stiff competition against two bigger local companies in Kelowna. However, since 1995 we have found it increasingly difficult to compete against two much larger radio companies, each with two AM/FM combos. Skeena's recent tactical programming changes with both of their two radio formats highlights the disadvantage for a stand-alone like SILK.
3342 If Okanagan Skeena were to now get an FM/FM combo, we will be at an even greater competitive disadvantage than we are today. SILK's audience would again, and again permanently, drop significantly. We would fight back as we have before, but this time I think it would be a lost cause.
3343 Finally, the applicant's credibility. On Monday, March 19th, in the middle of BBM spring '98 ratings, CKBL-FM, "The Bullet", abruptly dropped its number two-rated country music service without any advance notice to listeners. The same morning, sister station CKFR-AM dropped oldies to accommodate the displaced country, and again without notice. Okanagan Skeena evidently made these two decisions without local listener input or audience research. Listeners were confused, angry and disappointed.
3344 A few days later, Kelowna radio advertisers were told by the company's sales reps that once the CRTC rules changed in a month or so they would be right back with country on FM. In May '98, in seeking support for their FM application, Skeena ran newspaper ads that said:
"The Bullet made a temporary move to 1150-AM, making room for our new sister station SUN-FM."
3345 We believe that serving the public interests includes specific commitments to Canadian talent, community service and news. But equally, we believe it is about how we treat our listeners day-in, day-out. It is about staying true to loyal local listeners and if there is a real need for change, it is about involving them in it. It is their station too.
3346 This is not the United States with unregulated, free-for-all competition where formats change monthly and there are plenty of other stations waiting to jump for the next biggest market share. Here in Canada -- in Kelowna -- there are no other stations able to play FM country and serve this disenfranchised audience. If existing stations did move to fill the void, they would leave behind their own audiences. Evidently Skeena took this into account when it dropped FM country. It seems they felt the CRTC would have no choice but to grant them a quick flip back to FM.
3347 We decided to give you a choice. Along with many in the community, some of them here today, we believe it would be wrong to grant Okanagan Skeena another FM licence to program country music when they betrayed that audience. If a solid number two station wasn't good enough a year ago, what will happen if this FM country station they are applying for ends up number three or number four in the ratings? What would happen then? What message could other broadcasters take if a large public radio company like Okanagan Skeena can manoeuvre its formats so as to cause a need for service and thereby get another FM station?
3348 There are a number of available FM frequencies still left in Kelowna. If Skeena finds that its business purposes are really served by a new FM licence, and if there is a need and opportunity for an exciting new format, then they are free to return here at any time with a viable application which meets CRTC criteria. That would be in the public interest, and as they have in other places, they can quote me.
3349 In summary, this application is perfunctory, implausible and lacking evidence. The proposal would do away with an independent player that doesn't want to go. And thirdly, a new FM for Skeena, in these circumstances, would be inappropriate. We ask that this application be denied.
3350 Thank you.
3351 THE CHAIRPERSON: Thank you. I believe legal has a question.
3352 MS MOORE: Thank you, Madam Chair. You have stated that -- this is on page 3 of your intervention, at the bottom of the page -- you have stated:
"If Okanagan Skeena were to get an FM/FM combo we will be at an even greater competitive disadvantage."
3353 Of between the Commission approving both applications, or denying both, which would you prefer?
3354 MR. FROST: Thank you. Well, there is no doubt about that in our mind. The playing field isn't level now. We were here five years ago and said it wasn't then and it is not just about the number of stations, it is about the size of our competitors and it is not about the profitability of six stations, it is about the profitability of three companies. So we would favour, of the both or none, we would favour both.
3355 MS MOORE: Thank you, Madam Chair.
3356 THE CHAIRPERSON: Thank you. Thank you, gentlemen.
3357 MR. FROST: Thank you.
3358 MS VOGEL: Our next intervener is Okanagan Radio.
3359 MR. TINDALL: Madam Chairperson, Commissioners. We appreciate that members of the Commission have read and digested both the application from Kelowna Broadcasting for the sixth radio licence to broadcast a second country format in Kelowna and the subsequent interventions from Okanagan Skeena Group and other affected parties.
3360 Accordingly, we propose only to briefly readdress certain key issues and then we would be pleased to answer questions from the Commission.
3361 First and foremost, the applicant fails to provide programming diversity in the market proposing instead to introduce a second country signal in Kelowna. As evidenced from the attached Appendix I entitled "Six Survey Decline of Market Share on Canadian Country Stations", it is abundantly apparent that country radio share of hours tuned in Canada is shrinking. BBM tells us that shrinkage is as high as 30 to 40 per cent between spring '96 and fall '98 with AM stations generally suffering the worst decline.
3362 We suggest that the economics of the market are such that it cannot support an additional licence of any format and it certainly cannot support the addition of a duplication of an existing service.
3363 The new station would split the existing limited and declining country audience between two stations, making either or both unprofitable and diminishing significantly their ability to meet their financial and other obligations.
3364 We do acknowledge the Kelowna market is experiencing minimal population growth. That growth, however, is meaningless when, as we have demonstrated, country radio's share of market is suffering serious erosion from one side of Canada to the other.
3365 The applicant relies on disputed growth projections to justify possible revenues for a new station including retail growth. In fact, growth of retail has come to mean less and less to radio stations as more and more chain retail and big-box stores use print or television, or use no advertising at all, depending instead on their high-traffic mall or stand-alone locations to drive business into their stores.
3366 By way of example, Kelowna plays host to big-box retailers like Costco, The Brick, Wal-Mart, Chapters Books, Extra Foods and the Great Canadian Superstore. Chain retail stores include Cotton Ginny, The Gap, Eddy Bauer, Footlocker, the Levi Store, Moore's The Suit People, Randy River, Northern Elements, Fairweather, Mariposa Stores, Reitman's and dozens and dozen of others. The retail growth and square footage represented by these examples alone is enormous.
3367 Of these retailers mentioned, however, not one of them is an advertiser on any of our radio stations nor, to the best of our knowledge, are they a significant advertiser on any other radio station in the city.
3368 Orchard Park Shopping Centre in Kelowna is the largest mall between Edmonton and Vancouver with 150 retail outlets. Twelve of them -- only eight per cent -- are regular radio advertisers.
3369 Neither retail growth nor total retail square footage necessarily translates into growth in available radio advertising dollars and the Commission should not be misled into believing aggressive retail growth in a community means anything more than additional choice for consumers. It most assuredly is not a guarantee of any sort of increased radio advertising spending and we have already demonstrated the fragility of retail radio advertising by observing the cancellation this week of all radio advertising by Kelowna Lincoln Mercury and Orchard Ford.
3370 With regard to a number of the economic studies filed by the applicant, we believe they are confusing, inaccurate or irrelevant to the application and we invite questions in this regard from Commissioners to the representatives of Price Waterhouse coopers and Bay Consulting.
3371 We also believe that the application is deficient in that it does not clearly identify who will operate the new station, leaving control of the Board of Directors in the hands of minority shareholders and mistakenly representing the application as one for an FM/FM combo when in fact it is not.
3372 The ability of the Kelowna market to support a sixth commercial radio station is a crucial element in this hearing. When the Commission approved in 1996 the sale to Okanagan Skeena Group of then CKIQ and CKBL-FM, and in 1998 the sale to Jim Pattison Industries of CKOV and CKLZ-FM, it recognized that both companies were acquiring money-losing operations.
3373 Further, the Commission observed that the public interest would be best served by the new owners ensuring continuity of service in the market. That the stations were and still are losing money is a function of too few available advertising dollars and too many commercial radio licences in Kelowna.
3374 We believe the Commission must examine each market on its own merits and, further, that there is little correlation between major markets and secondary markets. The Bay Consulting study submitted as part of this intervention clearly outlines this disparity.
3375 The CRTC is aware from its own data of the desperate financial condition of some Kelowna radio stations dating back before the 1996 decision and of the Kelowna market's failing struggle to support even five commercial radio stations. Those market conditions have not changed materially. In fact, in fiscal '98, Kelowna retail advertising expenditures declined by $188,000 and, while national radio advertising increased, it was predominantly as a result of vastly accelerated spending by the provincial government.
3376 In closing, we would like to quote the applicant who at the 1994 Commission hearing which considered the fifth licence for Kelowna stated Kelowna had a population of 125,000 people going on to say:
"Kelowna needs another 25,000 people to support four radio stations, never mind five."
3377 On page 593 of their application, the applicant notes that Kelowna's population has now reached 145,000 persons. We draw the Commission's attention to the fact that the current population is still 5,000 short of the same number the applicant stated was necessary "to support four radio stations, never mind five."
3378 The applicant went on to state:
"It is our view that Kelowna cannot support a fifth radio station. We expect the impact on SILK services will be significant."
3379 We ask: How can Kelowna support five radio stations if it is not now supporting four?
3380 Members of the Commission, we agree with the applicant's statements in 1994 and respectfully suggest five years later that the Kelowna market has still not achieved the growth or viability required to successfully support four radio stations, never mind the five presently on the air.
3381 We submit that under these conditions the granting of a sixth licence is neither sensible nor warranted at this time.
3382 Thank you for hearing our intervention. We would now be pleased to answer your questions.
3383 THE CHAIRPERSON: I believe legal has a question.
3384 MS MOORE: Thank you, Madam Chair. On page 3 of your intervention, in the first full paragraph, you state that with regard to a number of the economic studies filed by the applicant, "we believe they are confusing, inaccurate or irrelevant", et cetera.
3385 Could you please provide further detail in this regard and when answering this, could you please speak specifically to which studies you were commenting on?
3386 MR. TINDALL: I will ask Mr. Jansen to carry on with that.
3387 MR. JANSEN: Actually, I will ask Stuart Jack of Coopers and Librand to focus specifically on the critiques of these studies and I will answer any more questions that you may have.
3388 MR. JACK: The FCC study really is based on American data that is 20-years-old and really is not appropriate to the smaller Canadian marketplace that you have in front of you. The study in terms of the format finder for the Canadian stations, the country stations with an 1.2 ratio really does not address the entry of new country stations coming into the market and in a Canadian marketplace. Again it is based on American data.
3389 For the other studies that Malatest used, the various indicators that they have used, they were based on July forecasts of 1988. When they updated the forecast into 1999 for, what we believe a good reason, that they did not include the retail sales forecast for 1999 because it was not favourable to their cause. The retail sales in a key indicator. If you look at the population growth, construction, tourism growth, they are perhaps interesting data but advertising is bought on retail sales and it makes sense if your retailers are not making money, they are not buying advertising.
3390 Malatest projected that there would be a four plus per cent growth in retail sales. What in effect happened in the economy in 1998 was a downturn in retail sales in the B.C. economy and we believe that the situation in the Okanagan area follows that and we believe that there is no real justification.
3391 In summary, for the market in Okanagan the retail sales is a key indicator. The applicant, SILK, has not demonstrated that there would be substantive growth in retail sales there and we have shown, through the Conference Board data, that in any case, the advertising sales is only a portion of retail sales. We believe that the retail sales growth would be more in a line of about three per cent and the advertising sales growth would be scaled down by about 55 per cent of that. It would not leave enough growth in the market for the existing stations to recover their losses before the year 2004.
3392 In other words, you would have substantial red ink in that market for a number of years and given that four of the five stations are already demonstrating that they are unprofitable, this would really put into question the viability of those stations.
3393 MR. TINDALL: Counsel, I just want to point out all this is included in the intervention just to make sure. I wanted to be very sure. I didn't want to stray or something. Thank you.
3394 MS MOORE: Yes, I understand that. Thank you. That is my question, Madam Chair.
3395 THE CHAIRPERSON: I believe Commissioner Noël has a question.
3396 COMMISSIONER NOËL: On page 3 of your rebuttal, or reply I should say, you say:
"We also believe that the application is deficient in that it does not clearly identify who will operate the new station, leaving control of the Board of Directors in the hands of minority shareholders and mistakenly representing the application as one for an FM/FM combo when in fact it is not." (As read)
3397 Could you explain exactly what you mean by that affirmation?
3398 MR. TINDALL: Yes, Commissioner Noël, and I will defer that to our Counsel, Chris Weafer.
3399 MR. WEAFER: Thank you, Commissioner. When we reviewed the application and the ownership structure of the application, a great deal of the material was filed under the letterhead of SILK-FM and under the letterhead of the company operating that station. But as we looked through the ownership material and the application, and we looked through the shareholder's agreement, albeit a very short shareholder's agreement. It identifies that the minority shareholders of the company actually control the Board of Directors of the company that is applying for the licence which causes us some confusion as to actually who will control the company.
3400 While on the one hand it seems to be the majority shareholders, on the other hand, the shareholder's agreement identifies the minority as the controlling interest.
3401 COMMISSIONER NOËL: Do you mean Bartell Enterprises?
3402 MR. WEAFER: Actually, it seems to be a consolidation of a number of minority shareholders, all of those, if you look in the application material, there is a number of small shareholders who have signed shareholder's agreement and in those shareholder's agreements it identifies that the minority shareholders will control the Board of Directors.
3403 COMMISSIONER NOËL: Unfortunately, I don't have a copy of that shareholder's agreement in front of me.
3404 MR. WEAFER: It is a fairly short document that is found at -- just one moment, Commissioner. If we look at page 502 of the application, it identifies that it is SILK-FM that requires the second licence. If you look at page 403 of the application, it refers to the shareholders.
3405 COMMISSIONER NOËL: If you don't mind, we will get the shareholder's agreement and I will have it in a couple of minutes. So we will maybe pause for a moment.
3406 THE CHAIRPERSON: I think what we will do is perhaps pursue some of these questions in reply so that we have a chance to read the documentation.
3407 MR. WEAFER: Certainly. Thank you.
3408 THE CHAIRPERSON: So Commissioner Noël?
3409 COMMISSIONER NOËL: That was my only question.
3410 THE CHAIRPERSON: Thank you, gentlemen. Madam Secretary, proceed.
3411 MS VOGEL: I believe we are ready to proceed then with Phase III and that is where appearing interveners make their presentations to the Commission and again ten minutes is allocated for each presentation.
3412 Our first intervener is 549501 British Columbia Ltd., Jim Pattison Industries, and I invite them to come forward.
3413 MR. ARNISH: Good morning, Madam Chairperson and CRTC Commissioners. My name is Rick Arnish. I am President of the Jim Pattison Broadcast Group. 549501 British Columbia Limited (Jim Pattison Industries Ltd.) is the owner-operator of CKOV-AM and CKLZ-FM in Kelowna, British Columbia.
3414 With me today at my far right is Dean Cooper, Vice-President and General Manger of our Kelowna stations, and along with Rob Bye, Program Director of CKOV and CKLZ-FM.
3415 We appear before you today to request the Commission to deny the application by Kelowna Broadcasting Ltd. for a new FM licence for Kelowna that would bring the total number of commercial licences in the marketplace to six. There are numerous cultural, economic and financial reasons why this application should not be approved.
3416 When considering the merits of this application, the Commission must take into account what benefits Kelowna Broadcasting Ltd.'s proposal will bring to the community and the broadcasting system as a whole. In our view, this application has no merit at all. Where is the diversity in programming and how does their proposed programming benefit the community or further the objectives of the Broadcast Act?
3417 Please allow me to draw the Commissions's attention to the following pertinent information which was filed back in October of 1994.
3418 "One, the City of Kelowna is too small for five radio stations. Two, the new FM country proposal will strongly impact existing radio stations' ratings and cause revenues to drop significantly. Three, the addition of another station now will likely result in reduced services. Four, no Canadian city Kelowna's size has five radio stations. Five, Radio profitability here is not high by B.C. standards and profits aren't growing. Six, a new station now will move Kelowna profitability below zero and likely increase the number of money-losing stations. Seven, statistically in Canada, stations of Kelowna's size already lose money, never mind splitting the pie further. Eight, the City of Kelowna now appears to be entering a period of flat or declining growth with building starts and real estate sales showing significant decreased for the first time in years. Number nine, local radio revenue projections have been impacted by the change in the nature of local retail sales with the introduction of big-box mega stores who don't advertise. Number ten, a new FM country licence will take listeners from most local stations. Eleven, there is even a statement that the resultant shifts in Kelowna radio ratings will likely cause the worst damage to AM radio where there is potential for an AM station to go dark. And number twelve, it appears that gains made by licensing a new FM station would be more than by spiralling losses on the AM side." (As read)
3419 The facts I have just presented are as true today, perhaps even more so, as they were when SILK-FM Broadcasting filed an intervention against Four Seasons Radio Ltd.'s application for a fifth licence in Kelowna on October 12, 1994. Their intervention and concerns from 1994 proved to be correct. Today, we have the very same grievous concerns in 1999.
3420 In addition to what I have already said, I would ask the questions: Where is the public interest being served with an application for another country radio station? How is Kelowna Broadcasting Ltd.'s request for a new licence going to add to the diversity and choice for consumers when the market is already well-served by a full-time country radio station?
3421 And, speaking of the community goodwill and diversity of voices, if the applicant is successful in receiving approval, their 24,000 dollar annual Canadian Talent Development initiatives will not begin to cover the total dollar value of lost broadcasting jobs and careers in the Kelowna market due to over licensing.
3422 Now, Dean Cooper and Rob Bye will give you our view of the economic environment and impact of what is happening in the Kelowna market today.
3423 MR. COOPER: Thank you, Madam Chairperson and CRTC Commissioners for the opportunity to make this intervention appearance today. We only have a few minutes to make our case so I want to cut to the chase. There can be a lot of smoke and mirrors presented at these hearings but let's get blunt.
3424 The Kelowna market is a mess. Since the introduction of the last new service in Kelowna, people have lost jobs in Kelowna radio, service to Kelowna area listeners has decreased and operating profits have turned to losses. If this application is approved, the situation gets worse.
3425 Before we discuss why that statement is a fact and not just conjecture, let's look at what happened when CKBL-FM was licensed by this Commission.
3426 As Nick Frost himself predicted about Kelowna radio at the Commission's hearings on the subject, and I quote:
"We will likely see a large drop in profitability and a reduction in local service and programming." (As read)
3427 What actually happened? All radio stations reduced employees to try to reduce losses. Prior to the start of broadcasting by CKBL-FM, our radio stations employed 40 full-time and 11 part-time staff. We had news and sports reporters covering local events, meetings, court hearings and sports events. We had live announcers 18 hours a day. We were interactive with our audience 18 hours a day.
3428 Today we employ only 30 full-time people and five part-time. We are using a computer and voice-tracks much of the day on our FM station and syndicated programs -- many of these from the United States -- on our AM station. News coverage is much reduced and sports coverage of local events is now down to zero. We have to rely on calls or faxes for results. We are working hard to provide what our listeners want but we continue to lose money so even what we are doing now is in jeopardy.
3429 We have discussed plans in the event the Commission approves this application. Our immediate reaction will be to reduce five full-time and three part-time jobs and more cuts could follow.
3430 MR. BYE: But job losses are only part of the story. We will have to reduce news coverage by eliminating the only local news reports available in the market now during the evening and on weekends. We will use a satellite service from outside our market. We will force our listeners to hear about traffic tie-ups on the Port Mann bridge here in Vancouver instead of the floating bridge in Kelowna which is all our listeners would be interested in.
3431 We will be unable to be interactive with our listeners when it comes to reporting sports or news stories. The phone will ring but there will be no one to answer it. How does that provide significant benefits for the listening public in Kelowna?
3432 The last opportunities for community interaction through local talk shows will go. No longer will people talk Kelowna politics, Kelowna taxes, Kelowna issues and concerns. Kelowna listeners will not have the opportunities they once had to talk to the Mayor, our MLAs, our MP. No, they will be forced to listen to discussion of Vancouver issues or worse, American issues.
3433 Canadian Cultural Diversity will be lost. These are not threats, they are economic realities. Is that what the CRTC wants for Kelowna radio listeners? Is the CRTC seeking reduced local radio? Is a reduction or the elimination of the expression of views and opinions what the public wants?
3434 Perhaps what the CRTC wants is for our News/Talk AM station, CKOV, to become a jukebox, a low-cost music machine.
3435 MR. COOPER: For our employees and our company, we plead with the Commission not to let this happen. Allow the Kelowna market to try to recover from the damage already done by the introduction of a fifth station just three and a half short years ago.
3436 In the handout we have given you, actually on the last page, you will find a page entitled, "We have great relationships." This page lists a variety of groups and organizations who have come to us for support. We work hard for local arts groups, sports teams, special events, charitable organizations and our own non-profit society, Kids Care.
3437 We are able to do it because we still have enough people resources to get the job done. We get results for them, that is why they seek exclusive arrangements with us year after year. If we have to reduce staffing again all these community groups will suffer. We simply won't be able to provide the people. They will be gone. Is that what the general public wants for Kelowna?
3438 When we commissioned KPMG to look at the market prior to submitting our written intervention, we had anecdotal evidence of the sluggish Kelowna market. KPMG dug out more evidence of the serious instability of the area and, in particular, the poor performance of the Kelowna radio advertising scene.
3439 MR. BYE: Kelowna Broadcasting says that the retail market is growing. It is but by much smaller percentages than in earlier years as shown in our written intervention. More importantly though, local small retailers, the backbone of the radio advertising market, are disappearing as big-box retailers open in Kelowna and put them out of business. These big-box retailers either don't advertise at all or use little or no radio.
3440 MR. COOPER: Kelowna Broadcasting talks about construction activity in and around Kelowna as if that were an indicator of potential radio advertising growth. How does building a replacement high school for a condemened building add one radio advertising dollar? It doesn't. Their argument completely misses the point.
3441 Kelowna Broadcasting says that Kelowna's economy continues to outshine the province's economy. Is that good news? The B.C. economy, to quote Tony Viner, is in the tank. Kelowna's may only be slightly better but it is still bad.
3442 MR. BYE: Kelowna Broadcasting talks about a high population growth. As we stated in our written intervention, the growth rate is less than half of what it was five years ago. For example, the annual growth rate in the period 1990 to 1993 was six per cent whereas growth rates in the next five years are expected to be between 2.4 and 2.8 per cent.
3443 Radio advertising dollar growth in Kelowna is very small. In fact, recent months have been down again over the previous years. That means less for each station -- less revenue, less listeners, less employees, less Canadian cultural diversity, less service, less community support.
3444 MR. COOPER: Again, we urge the Commission not to approve this application. If Kelowna Radio has any chance of returning to profitable levels, thereby allowing a return of valuable services to our listeners, we need time. We need to allow the economy to stabilize. A mess is not cleaned up overnight and adding another new station could be a deadly blow to the Kelowna market. Please help us to try to serve a community with the kinds of radio our listeners' need and deserve.
3445 MR. ARNISH: In summary, we at CKOV-AM and CKLZ-FM believe that the Kelowna market is neither large or profitable enough to support the addition of a sixth radio station. The Commission, through CRTC annual returns, does know the financial viability of the Kelowna marketplace since licensing the fifth station in 1995.
3446 The fact of the matter is the Kelowna radio market is in very serious financial plight. Licensing a sixth commercial radio station is not, we believe, in the public interest as stated in our written and verbal intervention and will only exacerbate the already perilous losses taking place in the Kelowna radio market. Thank you for your time.
3447 THE CHAIRPERSON: Thank you, gentlemen. I just want to clarify one point. One of the interesting, I suppose, observations in comparing what we heard yesterday about Victoria and what we have heard, certainly, from some of the presenters here this morning is that notwithstanding some perhaps not terribly optimistic outlooks for Victoria, all the broadcasters there feel it is a very bland market, in fact, not very supportive of expansion and what we are hearing from at least two of the three in Kelowna there isn't the same kind of optimism with respect to the local market.
3448 You are here intervening in opposition to Kelowna Radio today. I believe you filed an intervention with respect to Okanagan Radio and I wonder if you could elaborate a little bit on that for me.
3449 MR. ARNISH: Well, in our written intervention which was filed with the Commission, our point that we wanted to come across was surrounding the word commitment and in our life and the business that we are in Kelowna Radio commitment means an awful lot to us and we really feel that yes, indeed, the Okanagan Skeena group left the Kelowna FM country listeners high and dry when they decided to take the format off the FM and put it back on the AM channel. Not to say, though, that they haven't served the market well on the AM side for the Kelowna country music audience but I don't know, with all due respect to our competitors in the marketplace, if they should be rewarded with another licence to flip their AM to FM when you start talking about the word commitment to the community.
3450 THE CHAIRPERSON: So if I could summarize from what I am hearing from you is that in your view we should deny both applications.
3451 MR. ARNISH: Yes, I would say that is true. If you are asking us what we think the Commission should do, we suggest that the Commission should let the market stabilize. The other applicant is not bringing diversity of programming to the marketplace by applying for a country format. Yes, it is on FM but it is country, which is already in the marketplace. The market is unstable financially. You know, and we all have heard here today so far, that four of the five stations are in financial difficulties at this point in time. The other FM, the fifth licence which was granted in 19994 has only been in the marketplace for three and a half years. The market really hasn't had a chance to stabilize. It is a very competitive market and we are competitors along with the rest of our broadcasting friends in Kelowna. But having said all that, with a new station, format flips and changes, the instability of the marketplace to generate the revenue for profitability is still in place today and perhaps will get worse unless the marketplace decides to have a turnaround and I say that is going to be paramount to the British Columbia economy having a turnaround as well.
3452 The marketplace can't support a sixth station and I really do believe -- and that is the opinion of our company -- that both applications should be not denied for those reasons.
3453 THE CHAIRPERSON: I don't know if you were here yesterday.
3454 MR. ARNISH: I was.
3455 THE CHAIRPERSON: And you heard the discussion Commissioner Wylie had with Mr. Viner at Rogers and also this morning.
3456 MR. ARNISH: It was excellent.
3457 THE CHAIRPERSON: I just wonder if you have any comments you would like to make or suggestions for us with respect to how we might be approaching some of these applications in the new environment where we have eliminated the radio market entry multiple licence ownerships and no longer regulate formats and what we should be looking at.
3458 MR. ARNISH: Thank you for that opportunity. I thought the dialogue yesterday was very enlightening. I am of the opinion that I am very pleased to hear that the Commission is perhaps reevaluating all these scenarios. I am certainly one -- and our company is -- for deregulation where it really benefits the community as a whole, not just the broadcasting community but the communities we all serve. But I was disturbed as a broadcaster when the Commission decided to eliminate the market criteria study.
3459 I think this market of Kelowna is a prime example of my concerns. I think eliminating that completely and allowing applicants to apply for new licences in a marketplace like Kelowna -- or any secondary market of that size -- and licensing them all is not in the best public interest because at the end of the day there is only so many dollars to go around and only so many dollars to create jobs and, yes, you could licence five, six, seven stations in the marketplace but at the end of the day how many stations are going to be in existence that are going to serve the community the way the Commission would like to have them serve the community or us, as broadcasters, would like to serve the community as well.
3460 I think, in answer to that question, the market criteria study was very important. If it is not that down the road then perhaps it has to be something else but I think you have to take the financial viability in the marketplace into consideration.
3461 I think there was some dialogue yesterday as well about condition of licence. Would an applicant agree to a COL? There is nothing to say that in the Kelowna applications down the road that if both licences are granted by the Commission, or even one, that the broadcaster that gets that licence is going to stick with country music and I think that is a very important commitment to the community and I know in the past we have lived in the broadcasting industry with COLs and I think we have lived with them quite well and I think that, again, gets back to the word commitment.
3462 If you are making a commitment to the community, then I think you have to stick with it but there is nothing to say with country music the way it is going -- and we have country radio stations in our group as well -- the growth of country radio in North America is declining annually and there is nothing to say that down the road if another licence was granted in Kelowna for either the flip from AM to FM or a sixth licence that the country music listeners might not be left high and dry again.
3463 THE CHAIRPERSON: Thank you, Mr. Arnish. I believe Commissioner Wylie has a question.
3464 COMMISSIONER WYLIE: Yes. If you understood from my questions of yesterday, I heard you say, "Reevaluating". We are not reevaluating our policy. We are looking at how we apply it, which is different. So we eliminated the market criteria. I am not suggesting that reevaluating whether that was a good idea. Our policy stands as it is. The question becomes now, what else do we do to achieve the objectives we have that we are not going to apply the market criteria in a manner that would say we are not going to even look at new applications in this market.
3465 So I wouldn't want to have given the impression, which I have perhaps given to you, that we were reevaluating. We are actually assessing with the industry how we go about doing this in different circumstances.
3466 MR. ARNISH: And I think that is very positive. I am glad to hear that.
3467 COMMISSIONER WYLIE: But we are not backing away from the policy. You see the difference.
3468 MR. ARNISH: I do but I still think it is a very positive dialogue that you are having and it started here in Vancouver and I know you are going to take that across the country as well.
3469 COMMISSIONER WYLIE: Yes, but I would hate to give you the impression that we are going back from what we said. It is just what does it mean, how do we apply it? Thank you.
3470 THE CHAIRPERSON: I believe legal has a question.
3471 MS MOORE: Thank you, Madam Chair. At the third last page of your intervention, you refer to a KPMG study. Did you file that with your written intervention?
3472 MR. COOPER: The KPMG study forms the basis of the intervention that was written. The points that are presented come right out of the study that was done by KPMG but there isn't a separate document that they wrote.
3473 MS MOORE: The study itself was not attached to your written intervention?
3474 MR. COOPER: No, it isn't.
3475 MS MOORE: Thank you. Thank you, Madam Chair.
3476 THE CHAIRPERSON: Thank you. Thank you very much, gentlemen. Madam Secretary.
3477 MS VOGEL: Our next intervener is Mark's Work Warehouse. Would you come forward please? Please go ahead whenever you are ready.
3478 MR. EGLI: Madam Chair, other members of the Commission. My name is Ed Egli and I am owner/operator of Mark's Work Warehouse in Kelowna. I have bought media in the Kelowna market for the last ten years. Previous to this from 1978 to 1988, I bought media in Vancouver, in Vancouver Island where we opened 22 stores while using radio as our major advertising vehicle. I am against a sixth commercial station in Kelowna simply from the fact that another station would dilute even more what is getting to be a marginal buy for an advertiser.
3479 Please review Appendix I. I bring to your attention a March, 1999 Angus Reid survey conducted in the Kelowna market. In this survey radio in total is considered at the bottom of consumers' perception of local advertising. The same survey taken in 1997 shows a higher percentage for radio than the 1999 survey.
3480 Next is my view of the economic conditions in Kelowna. We are all aware of poor economic conditions in British Columbia yet there is a perception that Kelowna is far exceeding the B.C. average. I disagree with this as I talk a lot with other local businesses and all I hear is doom and gloom in the local market.
3481 In the ten years I have been in Kelowna, I have never seen such an excess of anti-real estate in the retail sector. In fact, at this time I am negotiating with three different locations to possibly move by 10,000 square foot store. My business is slightly up but more alarming my transaction count is down which leads me to ask myself should I be spending this much on radio and with which of the five current stations, let alone considering a sixth.
3482 This spring I had an opportunity to execute a media buy for a new retail store in Edmonton. In doing this, it opened my eyes to how much more cost effective it is to reach the population base I felt I needed. Please review Appendix II. On this sheet, I tried to summarize in very simplistic form the amount of population versus the number of radio stations in my key target areas.
3483 As you will note with Vancouver and its 13 commercial radio stations in the 25 to 54-year-old target there is a population of 1,064,000. This works out to be in a perfect world 82,000 per station. In Kelowna if there is a sixth station that would work out to be just above 12,000 per station. In Edmonton, with a population of 503,000 in the 18 to 49-year-old target it works out to be an average of 50,000 per station where in Kelowna it works out to be less than 12,000.
3484 I find it interesting that I believe I heard in the hearings yesterday that Edmonton could be considered over-radioed yet in looking at this comparison where does this leave Kelowna? In reviewing these numbers, it is very clear that the current five stations let alone six stations in the Kelowna market are underpopulated in these important demos.
3485 I firmly believe that if Kelowna had six stations, the radio pie would not get any bigger but the size of the pieces would just get smaller. Another station would just confuse the smaller advertiser even more and probably take any budget he or she had and put it into less expensive vehicles.
3486 I know these facts reflect a simplistic perfect world but in general they show me, as a potential advertiser, Kelowna does not have the key demo population to support six stations or if it does an advertiser investing his budget into radio does not get a quality return on his or her investment.
3487 Thank you for the opportunity to voice my opinion.
3488 THE CHAIRPERSON: Thank you. Commissioner Wylie has a question.
3489 COMMISSIONER WYLIE: Mr. Egli, it is a little bit unusual for advertisers to complain when there is going to be the addition of a competitor in the market because usually it means that the cost of advertising is likely to decrease. Now, do I understand you -- if I put this in pedestrian terms -- that what you are saying is even if the cost is lower, there are so many stations per population ratio that you have to buy on to reach your target that it is still not cost effective for you?
3490 MR. EGLI: Yes.
3491 COMMISSIONER WYLIE: And that you would be better off spending in newspapers, billboards, whatever. Is that the philosophy?
3492 MR. EGLI: I think you hit it right on the head, there. I feel that I can that radio is fairly effective but I have a budget that is probably more than most people's budget. A smaller retailer would just not even consider trying radio. Even with five stations, it is difficult if they can't any message across.
3493 COMMISSIONER WYLIE: And so it would be almost a situation -- your argument would be that too much competition there is a point for you where it becomes a negative?
3494 MR. EGLI: Yes, very much so.
3495 COMMISSIONER WYLIE: Because the prices go down but you would be --
3496 MR. EGLI: Prices go down but your frequency goes down, everything goes down with it.
3497 COMMISSIONER WYLIE: We hear you. Thank you very much for making your presentation. I have no other question. I just wanted to make sure I understood your point. Thank you very much.
3498 THE CHAIRPERSON: Thank you very much.
3499 MS VOGEL: Our next intervener is Team Yamaha-Honda Kelowna.
3500 MS KLEIN: Good afternoon, Madam Chair, members of the Commission. My name is Danielle Klein and I am the controller for Team Yamaha-Honda in Kelowna.
3501 As our letter indicates, we at Team Yamaha are opposed to the addition of yet another station in the Kelowna broadcast area. Team Yamaha has worked hard and advertised aggressively to reach the consumer. Our advertising costs are already extremely high as we feel to get market share and to reach the consumers who all have different radio taste we must advertise on all Kelowna stations.
3502 Team Yamaha will not increase its advertising budget over the next three years to accommodate another station. We feel that by having yet another station that slowly businesses like ours that deal in non-necessity products will not advertise in the Kelowna broadcast market. We will look for other ways to advertise -- newspapers, television, et cetera.
3503 Kelowna is a volatile market, businesses start-up and then close down at an alarming rate. Because of the reliance on tourism, established businesses like ourselves have a yearly budget in amounts. Adding yet another station to a limited market will only spread the money thinner.
3504 If our budget cannot effectively advertise on the radio market, businesses like ours will look to other mediums. Team Yamaha will not support yet another station trying to jump into a limited resource pool. The resources we have budgeted for advertising are already stretched thin enough. The population of Kelowna is not large enough to entertain yet another station.
3505 Simply put, this does not make economic sense to Kelowna advertisers. We do, however, feel our dollar will be better spent with our existing country station going to the FM dial. More people listen to FM stations than AM therefore making our jobs much easier. Five stations in the Kelowna market is enough. Six stations in the Kelowna market is not only wrong for business advertisers' pocketbooks but it must surely be a nightmare for all the stations to actually think that they would break even.
3506 Thank you for giving me the opportunity to speak.
3507 THE CHAIRPERSON: Commissioner Wylie has a question.
3508 COMMISSIONER WYLIE: You have heard my exchange with Mr. Egli that my understand of his intervention is the same as your point.
3509 MS KLEIN: Yes.
3510 THE CHAIRPERSON: Yes. It is that fragmentation, eventually, is not helpful for the advertiser is your point for the same reason which would be the population ratio to the number of stations.
3511 MS KLEIN: Yes, that is correct.
3512 COMMISSIONER WYLIE: And therefore the difficulty of cost effectively reaching a sufficient number of the population.
3513 MS KLEIN: Correct.
3514 COMMISSIONER WYLIE: Thank you very much. We hear you and we thank you for coming.
3515 MS KLEIN: Thank you.
3516 MS VOGEL: Our next intervener is Kelowna Rockets Hockey Club.
3517 MR. HAMILTON: Good afternoon, Madam Chair and Commissioners. My name is Gavin Hamilton, I am the Director of sales and marketing for the Kelowna Rockets Hockey Club.
3518 The Rockets are a member of the Western Hockey League which is a member of the umbrella Canadian Hockey League. There are 18 teams in the WHL in Manitoba, Saskatchewan, Alberta, British Columbia, Washington State and Oregon State. There are 54 member teams of the CHL, many of them in cities that have been mentioned in today's proceedings -- cities such as Halifax, Sudbury, Peterborough, Saskatoon, Regina and Kamloops.
3519 Our players are 16 to 20 years of age and have dreams of playing in the NHL. Last year, the Canadian Hockey League drew 4.6 million fans combined which was 500,000 more fans than the six Canadian NHL teams combined. As you can see this is a grassroots league existing for the most part in smaller markets.
3520 One of the main components of having a viable franchise is a local play-by-play station. We are fortune in Kelowna to have in place a five-year commitment from CKBL to carry our full regular season schedule and playoffs. This amounts to roughly 80 games -- sometimes more depending on your playoffs success. We are trying to emulate the success of our neighbours to the North in Kamloops in that regard.
3521 The agreement we have with CKBL is in a way historic in Canadian junior hockey. In a sense, they pay a right's fee in cash and kind to have the broadcast rights to Rockets Hockey. To our knowledge, no other broadcast company has taken such a significant interest in the WHL franchise. CKBL was one of the first Kelowna companies to commit to purchasing a luxury suite in the new Kelowna Centre. These local commitments were paramount to RG Properties, the building developer, actually proceeding with construction.
3522 The word "community" seems to come up a lot in these proceedings. I cannot help but feel there is no better sense of community than a radio station becoming a partner, if you will, with a local business. Hockey teams are a part of many Canadian communities. They are a source of pride and honour. With these points in mind, the Kelowna Rockets do not believe that Kelowna can absorb a sixth commercial radio licence at this time. More importantly, we are concerned that the duplication of the country format proposed would do serious damage to the existing AM country station and our partner CKBL.
3523 CKBL has made a significant investment with our hockey club and only one season into a five-year contract. The above-noted sixth licence would seriously erode the overall audience of CKBL also causing further financial strain on that licence as it operates as an AM station.
3524 This could certainly affect negotiations at the expiration of our current contract. In the past year CKBL went above and beyond the written word of our agreement, again showing us their commitment to the Rockets, more importantly the community of Kelowna.
3525 Thank you for your opportunity to appear before you.
3526 THE CHAIRPERSON: Thank you. Commissioner Noël.
3527 COMMISSIONER NOËL: Welcome to the Rockets. I am from Montreal and for us it is has a special meaning.
--- Laughter / Rires
3528 MR. HAMILTON: Oh yes, we have a little ongoing discussion on the name "The Rockets" I understand.
3529 COMMISSIONER NOËL: Well, we think it is proprietary to Montreal but --
--- Laughter / Rires
3530 I have one question. You are talking about the erosion of the market but don't you think that if there is a sixth commercial radio -- I am putting a scenario here -- there is a sixth commercial radio in Kelowna, there will be competition to air your hockey games more than with five?
3531 MR. HAMILTON: Perhaps not after today.
--- Laughter / Rires
3532 COMMISSIONER NOËL: You feel the need to change your name right away.
--- Laughter / Rires
3533 MR. HAMILTON: No, I don't think that is going to increase the competition. Where CKBL generates its revenue is from play-by-play advertising and if we add in another station, I believe that is going to dilute maybe that piece of the pie that everybody has been talking about that would be directed towards Rockets Hockey. If there another FM station that would take a portion of that which may ultimately lead to reduced advertising in our hockey schedule.
3534 COMMISSIONER NOËL: Thank you and I allow you to keep the name.
3535 MR. HAMILTON: I think yours is "The Rocket" now, isn't it? I think they dropped the "S". It is just "Montreal Rocket".
3536 COMMISSIONER NOËL: Well, he was just one.
--- Laughter / Rires
3537 MR. HAMILTON: Very true, one of a kind.
3538 THE CHAIRPERSON: I believe Commissioner Wylie has a question.
3539 COMMISSIONER WYLIE: What about the "Pocket Rocket"? I take it that you are not appearing on the other application but you did file an intervention in support . Are you concerned at all that if CKBL were changed to FM with a more appealing musical sound that perhaps you would have a problem remaining on the station or have you made some -- you know what I mean? If they were allowed to change to FM, I gather you support that?
3540 MR. HAMILTON: Yes, I do.
3541 COMMISSIONER WYLIE: You have no concern that their desire to broadcast the games may change because in the end there is a difficulty in appealing to the audiences with music only. At least that is what we are told and we heard the difference yesterday quite dramatically. Do you follow me?
3542 MR. HAMILTON: Yes.
3543 COMMISSIONER WYLIE: That there would be less of a need to fill airtime with spoken words which include sport.
3544 MR. HAMILTON: I guess I would disagree. If you do award the flip and our games would then be carried out on stereo, as yesterday we heard it certainly sounds a lot better, so the play-by-play would be much more exciting and I believe in the Kelowna market that the place that our hockey team has perhaps in the community is an important part of it.
3545 There would always be an audience that wants to listen to those games and whether it was on AM or FM they would find it as well as there are advertisers that want to connect to that hockey audience because you really are drawing from every listener type and age group when you put hockey games on the radio.
3546 COMMISSIONER WYLIE: Oh yes, and it could bring loyalty to the country station for someone would may not have listened to it otherwise.
3547 MR. HAMILTON: Exactly and then at the end of the night when you turn it off that is the first station they turn on in the morning.
3548 COMMISSIONER WYLIE: Or they may continue listening after the game -- to calm down.
--- Laughter / Rires
3549 MR. HAMILTON: Very true.
3550 COMMISSIONER WYLIE: Have you had actual discussions with Okanagan about the continued carriage if they were to be on FM?
3551 MR. HAMILTON: Yes, that was something that we discussed sometime ago and their commitment is certainly to continue to carry the Rockets.
3552 COMMISSIONER WYLIE: They agree with your position on the appropriateness or commercial value of continuing.
3553 MR. HAMILTON: Yes.
3554 COMMISSIONER WYLIE: Thank you very much. Thank you, Madam Chair.
3555 THE CHAIRPERSON: Thank you very much.
3556 MR. HAMILTON: Thank you.
3557 THE CHAIRPERSON: I believe that concludes Phase III, Madam Secretary?
3558 MS VOGEL: Yes, that is right, Madam Chair.
3559 THE CHAIRPERSON: I think what we will do is adjourn for lunch, reconvene at 2:00 with Phase IV of the Kelowna applications.
--- Recess at / Suspension à 1230
--- Upon resuming at / Reprise à 1403
3560 THE CHAIRPERSON: Good afternoon, ladies and gentlemen. We are now ready to resume with Phase IV. Madam Secretary?
3561 MS VOGEL: Thank you, Madam Chair. In Phase IV the applicants appear in reverse order to rebut or comment on interventions so I would like to invite Okanagan Radio to come forward for rebuttal please whenever you are ready.
REPLY / RÉPLIQUE
3562 MR. TINDALL: Thank you very much. Madam Chairperson, Commissioners, I would just like to make a small point going in. We have words thrown around like "censure" and "default" and "abandonment" and I would like to say that I have worked for this company for 20 years. I personally resent those phrases. It is a very, very good company. I am very proud to work there. I have also had staff members ask me to pass on that sentiment that they too are proud to work there and they don't feel that the use of words like that is appropriate.
3563 Commissioners, we would like to make an important point. We are going to technically upgrade an existing station by moving from the AM band to the FM band. It is not a new signal, it is the same station. We have an excellent record on CKBL on the AM band. We produce significantly more spoken word and have entered into greater community commitments than was the case with the previous AM format replaced by CKBL.
3564 All commitments will continue, programming and otherwise. We are absolutely rock solid on commitments. Our listeners have strongly indicated their desire to see CKBL back on the FM band and we are simply following the CRTC policy by applying to do so.
3565 The Commission has asked applicants for their views on how competing applications should be dealt with and to further address this topic we point out that the 1997 Statistics Canada figures show 212 of 488 reporting radio stations were unprofitable. The majority of unprofitable stations were in secondary markets. So fully 34 per cent of all reporting units were not profitable.
3566 The Bay Consulting Group study assessed the profitability of FM stations. On page 2, they show the stations with greater than three and a half million dollars of revenue, that is FM stations, enjoyed after tax profits of 20.6 per cent of total revenues. When we moved down to stations in the 1.25 million to three million category, the profits dropped to 5.8 per cent and stations with revenues less than 1.25 million, essentially the existing and proposed Kelowna FM stations, experienced a loss of three per cent.
3567 So, Commissioners, with FM stations size does matter. We draw this to the Commission's attention to further demonstrate our contention that markets will need to be treated on a market-specific basis and also that there is a significant change in profitability between major and secondary markets.
3568 Our company is being accused by Kelowna Broadcasting of abandoning the country audience. We trust our earlier discussions of our company's commitment to the Canadian country music industry answers any question in this regard. Clearly our appearance here today applying for a flip to FM for our country service demonstrates our continuing commitment to the country audience in Kelowna.
3569 Regarding revenues, it is certainly not our position that moving to FM would result in a reduction of revenue. That will be clear in the documents we will file later this afternoon with regard to the discussion this morning about our projected losses if a sixth station were licensed.
3570 With regard to the concern that we did not file sufficient supporting documentation regarding the market, we observe that we already operate a country music station in Kelowna. We know on a daily basis the status of revenues and expenses and our projections are based on this very real-life experience.
3571 When we moved country to the AM band, we did indeed say that we would try very hard to return to the FM band. We did not state anywhere that we were returning, as suggested by one intervener, simply that we would apply to return once the regulations had changed and we have applied as we promised our audience.
3572 Madam Chairperson, Commissioners, the question of how to satisfy Kelowna country music listeners with a minimum impact on existing stations can be accomplished simply by granting our application for this technical upgrade of an existing station. We are the experienced country radio operators, we have an outstanding record of community service and, again, we ask you for this opportunity to repatriate CKBL, "The Bullet" to the FM band.
3573 Thank you. We would be pleased to answer your questions.
3574 THE CHAIRPERSON: We don't have any on the panel, but I believe legal does.
3575 MS MOORE: Thank you, Madam Chair. First, I just note with respect to the projections that you were mentioning, I don't believe it would be appropriate at this point in the proceeding to submit that for the file. Just to clarify that point.
3576 MR. TINDALL: As you wish.
3577 MS MOORE: Okay, and I will just carry on. Again, just to clarify for the record -- and this was mentioned in your written intervention and it was again discussed today with Commissioner Noël -- your concern with respect to the statement of control by the other applicant and if maybe you turn to the shareholder's agreement for Kelowna Broadcasting -- do you have that available?
3578 MR. WEAFER: Is that at page 403 of the application file?
3579 MS MOORE: That is right.
3580 MR. WEAFER: And there is multiple copies of that.
3581 MS MOORE: Right. And just to be clear for the record, your concern is in particular with respect to paragraph 4 and how that is consistent with the statement of control, whether that is consistent with the statement of control that was made?
3582 MR. WEAFER: The concern is that the company is controlled by the minority shareholders and the concern further is that in positioning the two stations as a combo, they will have differing controlling entities and how those two stations will manage that is a matter which we don't understand and was not address in reply to the intervention we filed which pointed that out. So that is our concern.
3583 MR. BLAIS: What you are saying is that because the majority of the directors would be representatives of the minority shareholders, that control, therefore, lies in the hands of those directors notwithstanding the fact of the shared ownership. Is that your position?
3584 MR. WEAFER: That and at law the control of the company -- the directors certainly do a high level of control of the company and certainly that Board of Directors will be a different Board of Directors than the apparent partner company.
3585 MR. BLAIS: Right.
3586 MR. WEAFER: The problem we foresee is if the start-up company that is licensed is not particularly successful, we don't understand how the two entities will properly be able to allocate resources, losses, profits because they are not of the same control.
3587 MR. BLAIS: Thank you. We will ask the applicant next to address that. Thank you.
3588 MS MOORE: Thank you, Madam Chair.
3589 THE CHAIRPERSON: Thank you. Thank you very much, gentlemen. Madam Secretary?
3590 MS VOGEL: I would now call Kelowna Broadcasting to come forward for its rebuttal. When you are ready.
REPLY / RÉPLIQUE
3591 MR. FROST: Thank you, Madam Secretary. Madam Chair, Members of the Commission and staff.
3592 I would like to respond to the interventions collectively and to these two main points. First, the market doesn't need another station and second, the new station will undermine the financial viability of existing stations.
3593 The interveners say the market is already well-served with country and that there is no need for a new FM country station. Pattison says that the CIGV-FM signal in Penticton and CKBL-AM in Kelowna "provide a good service for country music fans." But that is not what country fans are saying. Both those stations broadcast in mono, CIGV-FM isn't local and the two stations together now get about half the ratings of the FM country station when it did exist in Kelowna.
3594 Okanagan Skeena claims that we have applied for a format already available on their AM station and thereby not providing diversity. However, in their application itself they say:
"It is now clear that OKS is not serving all of the country audience at the level they had become accustomed to." (As read)
3595 If this need is enough for Skeena to ask for a new FM station, isn't it good enough for SILK to do the same? The listener survey, the Angus Reid study, past BBM ratings, hundreds of letters, their own 800 petitions and forms and the 1995 decision itself make it clear that a new FM country station will provide diversity and choice for Kelowna.
3596 Pattison and Skeena say that a second station for SILK will seriously undermine the financial viability of their stations. For two large operations with such scale and resources these assertions seem disproportionate. What about SILK's financial viability if we don't get a second station? We have also had to weather the impact of the fifth station as they say they did. Each of these companies has two stations. SILK has only one. SILK's future probably depends on this licence. Is that true for them?
3597 Both competitors tell us -- and I may draw your attention here to the size of our two competitors. We have pulled this from the CRTC database and it shows current stations owned by both large companies -- that neither provide a tangible benefits payments when purchasing their respective combos since each was unprofitable. Pattison says that the market still hasn't recovered and Skeena says Kelowna hasn't passed the traditional three-criteria test "for some years".
3598 Recent CRTC figures show that while PBIT is still negative, it is steadily improving. Net profit before taxes increased by $500,000 this past year and is now positive at $296,000. In 1996, the last year of the CRTC's Radio Market Report, Kelowna did meet all three criteria. In any event, the CRTC said it discontinued the use of this report because it wishes to encourage competition. Pattison and Skeena are good, strong operators who know how to run efficient, successful businesses including combo radio stations. While the introduction of a sixth station could cause a short-term dip in these profit indicators, there is every reason to expect Kelowna's profitability will reach record new levels sooner rather than later.
3599 Pattison asks, "What is different now compared to the conditions five years ago when we intervened against a fifth station?" First, there are now two large players, each able to survive a new stand-alone combo like us. Second, Kelowna is entering a long-term cycle of stability and new building activity unlike anything I have seen in the 25 years in this city. Third, the CRTC has changed its policy limiting a single owner to one FM station, thereby encouraging competition and choice for listeners.
3600 However, two aspects of the hearing five years ago are the same. First, SILK is still being outgunned by two AM/FM combos against our one station as we said we were five years ago and second, in granting a licence in 1995, the Commission apparently recognized that a then locally-owned company needed a second station to survive.
3601 Okanagan Skeena has attempted to discredit the research used in this application and virtually all of our predictions. However, their consultant, Price Waterhouse Coopers, PWC, says that it was beyond the scope of their assignment to provide forecasts themselves, therefore PWC provides no credible projections for the Kelowna market with which you could compare ours.
3602 Malatest & Associates, who provided our economic research, are specialists in market-by-market analysis with a proven track record with clients such as B.C. Tel, the B.C. Central Credit Union and B.C. Hydro. I would like now to have Robert Malatest to respond to the PWC report and other economic issues raised today. Robert?
3603 MR. MALATEST: Thanks, Nick. Not being from radio, I don't have the same level of eloquence as Nick, but my role today is to basically show you the growth in the Kelowna market and demonstrate why there is a solid foundation for growth in the Kelowna market.
3604 When I was listening to the various applicants, I thought I was listening to a discussion of Port Alberni or Port Hardy, some economically depressed communities. It surprised me that we are all talking about the same community. I have heard the Kelowna market described as a mess and very fragile. But I think we have to really look at what has been the long-term growth in the Kelowna market and what to expect for the future.
3605 The first thing we should look at is Kelowna's population. In the last year, Kelowna's population growth was double that of the B.C. average. In fact, there is only one other area in British Columbia that grew faster than Kelowna and that was the Whistler area has. What does this growth mean? I means that in the next five years there is going to be another 20,000 people living in the Kelowna area.
3606 That translates into adding another city the seize of either Port Alberni, Courtenay or Cranbrook to Kelowna's population. So we can't sort of ignore the growth in the Kelowna market.
3607 The second point that was brought up was this fragile economy, or the economy was in a mess. In fact, Kelowna's recent economic growth would be the envy of any mayor or CEO across Canada. In 1998, employment growth in Kelowna was 7.9 per cent. That is five times the provincial growth rate and this isn't a transitory phenomena. Over the last ten years, Kelowna's employment growth has averaged six per cent per year. That is four times the national rate. It has a long-term track record of surpassing provincial and national growth rates.
3608 The only negative indicator cited by other applicants has been the downturn in new home construction, yet our data filed with the CRTC points out that retail sales have little correlation with new home construction. For example, last year in Ontario, new home construction declined by 0.5 per cent yet retail sales increased by eight per cent.
3609 We have also heard about how the downturn in the B.C. economy is affecting the Kelowna economy but, in fact, Kelowna's economy is well-shielded from that of British Columbia. Less than five per cent of the after-tax income in Kelowna is derived from forestry and mining activities and that is well below the average of most other communities across British Columbia.
3610 The third point is Price Waterhouse, in contradiction to their client, points out that retail sales are correlated with radio sales and earlier today, PWC suggested that retail sales in Kelowna were growing by only two to four per cent this year. However data released in the last month by the Financial Post indicates that Kelowna retail sales increased by 5.2 per cent in both 1997 and 1998 and are projected to grow by 5.6 per cent this year. This data further confirms that our retail sales forecasts are a conservative estimate of the growth in the Kelowna market. Nick.
3611 MR. FROST: Thank you, Robert.
3612 In Appendix one of its response to the CRTC's follow-up questions three months ago, Okanagan Skeena provided was asked for and provided five-year status quo sales projections for its Kelowna AM country station in a five-station market. An accompanying assumption states -- "Revenues grow five per cent per annum." The black line represents those projections.
3613 If Skeena is projecting that its own radio sales for a fifth place AM country station will grow by five per cent per year for the next five years, how can they say our projections for total Kelowna radio sales of five per cent are too high?
3614 We are simply saying, the market is going to grow five per cent and not right away. They too, in their own internal projections, I am assuming, have looked at the market the same way we have. That is all we are saying today -- that the market is going to grow by five per cent.
3615 In summary, the fundamental points of our application stand unrefuted, we believe. First, there is a real need for FM country music in Kelowna. Kelowna listeners supported an FM country application four years ago and then supported it by listening. An AM country service is not what they supported.
3616 Second, if you give us the go ahead, we will make this station a success. We will invest between both our stations $480,000 in Canadian Talent Development. We are prepared to work hard to make Q102 an exciting and valuable addition to Kelowna radio and we promise to stay the course for as long as it takes.
3617 Third, Kelowna can support a new FM country station. Our extensive research into the local economy shows that even during B.C.'s slowdown Kelowna is strong, stable and growing at a remarkable and sustainable pace.
3618 Finally, SILK-FM broadcasting wishes to remain part of the Canadian broadcasting system as an independent, locally-owned radio company. In this new consolidated radio world, we are not a seller or a buyer. Fifteen years ago, probably against the odds, you opened the door for an independent, locally-owned radio company to provide a new easy listening alternative for Kelowna.
3619 There are fewer independents around these days but a balanced broadcasting system in Canada needs large, medium and small-sized players. In a regulated broadcast system like ours there are only so many opportunities, only so many situations for that door to open. We are asking that you open the door now for this company. Apart from the benefit that we believe it will bring Kelowna, I believe it will be a positive message for other small and medium-sized players throughout our country.
3620 Thank you very much.
3621 THE CHAIRPERSON: Thank you, Mr. Frost. I believe Commissioner Wylie has a question.
3622 COMMISSIONER WYLIE: It is the second time that this comes up. On page 5 at the top -- maybe I misunderstand this, but wouldn't Skeena's projections here of a five per cent growth would be without the addition of a station.
3623 MR. FROST: That is correct.
3624 COMMISSIONER WYLIE: So their own station would grow by five per cent if you are dividing the pie among five. How do you correlate this -- I am missing something here -- to saying why isn't that the same as you saying the market will grow five per cent per year but it will be divided up differently?
3625 MR. FROST: Yes, but the fundamental projections we are putting forward and have put in our application for the existing radio sales are five per cent but these appear to be challenged throughout. They are saying the market isn't going to grow by that.
3626 COMMISSIONER WYLIE: If there were a sixth station, that line could be flatter. The effect on their own station of a five per cent growth of the entire market would be different if there were a sixth station unless that station took absolutely no revenue.
3627 MR. FROST: If I understand you correctly, Commissioner Wylie, we are simply putting forward the point that this market without a sixth station will grow by five per cent.
3628 COMMISSIONER WYLIE: Yes, as a statement, that is right. But if there is a sixth station this chart here would presumably look different in the sense that their growth may not be five per cent if it is divided differently.
3629 MR. FROST: Well presumably whatever shares the stations have, let's say in year one, their rates would be at some rate of growth and one would think it would also be at five per cent on average.
3630 COMMISSIONER WYLIE: On average, but averaged over six.
3631 MR. FROST: The share might be less but the growth would be five per cent.
3632 COMMISSIONER WYLIE: Yes, I see your point about the growth. If there is a growth of five per cent, there is a growth of five per cent. Where I see a disconnect somehow is that Skeena would not be in the same position with a five per cent growth and a sixth station, everything being similar.
3633 MR. MALATEST: Maybe I can just answer that. I think there reason we are pointing to the chart is that many of the interventions filed against this application had dealt with the market is flat or declining --
3634 COMMISSIONER WYLIE: Yes, I understand that.
3635 MR. MALATEST: And we are just pointing out evidence that other applicants have actually pointed that internally with no change the market is going to grow by five per cent.
3636 COMMISSIONER WYLIE: But yes, but it doesn't refute the question of whether a five per cent growth divided up among six players is necessarily as much in the interest of the community as a five per cent growth divided up among five players. When we begin with players who have only very recently showed any ability to go beyond even FMs that are not profitable, one FM that isn't profitable in the last reported numbers is not usual.
3637 MR. FROST: Commissioner Wylie, that is simply the point we wanted to make as Robert said better than I, I think. We have in our application and throughout, and applicants yesterday with respect to Victoria spoke of new sources of revenue. We chose not to impress you on those but I think most broadcasters in most markets --
3638 COMMISSIONER WYLIE: Press me?
3639 MR. FROST: Impress or press?
3640 COMMISSIONER WYLIE: Oh, impress.
3641 MR. FROST: Well I don't know if I impressed you, I hope I have impressed you, but --
3642 COMMISSIONER WYLIE: No, no, I thought you meant you didn't set me straight. I didn't understand properly because you are quite welcome to --
3643 MR. FROST: I think we simply wanted to be conservative and say that this is a growing market with or without a sixth station and that we believe there will be new revenues, depending on how good a job that stations does in selling its new format.
3644 COMMISSIONER WYLIE: But this chart doesn't go the second step of saying --
3645 MR. FROST: No, it doesn't.
3646 COMMISSIONER WYLIE: Is five per cent with a new player in the market good enough. When we begin at the base of the pyramid that we don't necessarily all agree about how big it is but nevertheless.
3647 MR. FROST: May I just check with my cohorts who may give me a rough time if I don't ask them now to see if I have left something out?
3648 COMMISSIONER WYLIE: Whether I need to be set straight.
--- Laughter / Rires
3649 MR. FROST: That is possible.
3650 MR. MALATEST: I won't be setting you straight here, but just to point out the five per cent is a very conservative estimate. I mean we are talking about five per cent but other scenarios, if we use the point, 7 per cent of retail sales has a much bigger pie so when we looked at the presentation we made today, we are talking five per cent as the floor but I think there are opportunities for more.
3651 COMMISSIONER WYLIE: So the question becomes what is the difference between a Conservative and a Liberal estimate?
--- Laughter / Rires
3652 COMMISSIONER WYLIE: Thank you.
3653 THE CHAIRPERSON: Legal, I think, has a question.
3654 MR. BLAIS: Yes, just one subject. I am trying to clear up this control issue. As you know, it is Schedule 6 of your original application which is a statement of uncontrolled licensee. You state there that SILK-FM Broadcasting will hold 60 per cent of the issued common voting shares and therefore will control Kelowna Broadcasting which is the proposed licensee and ultimately through SILK-FM, the control indirectly is in the hands of Mr. Frost.
3655 Now, it has been pointed out that when one looks at the various shareholder's agreement that at paragraph 4 of those it would appear that the agreement -- there would be a board of seven members and the minority shareholders would be entitled to elect four of those and SILK would be entitled to three and there appears to be an inconstancy between that and the notion that SILK is controlling the would-be licensee. So perhaps you can help me reconcile that.
3656 MR. FROST: Sure.
3657 MR. BLAIS: Thank you.
3658 MR. FROST: First, SILK at the moment owns a 100 per cent of Kelowna Broadcasting. The company is incorporated. Those shareholder agreements would prevail if the company is successful in getting this licence. The minority clause, if I can refer to it as that, is identical to a clause we had in 1984 when we applied for SILK-FM Broadcasting. In fact, so is the whole agreement. We did this 15 years ago, we thought we would do it this year to let the people who are investing in this company to know that we wanted to talk to them, to listen to them.
3659 We wanted to let them know that we are tied to the community. John McCormick, one of our original shareholders -- he appeared here with me then -- has been in our company since then and, if I may ask him if that has been a problem anytime in our 15 years. John?
3660 MR. McCORMICK: Having the honour, I guess, of attending most of the board meetings from the beginning there has never been a problem with the directors controlling the company. The company works in a cooperative manner. A number of the shareholders of SILK-FM Broadcasting are also shareholders of Kelowna Broadcasting so collectively they control both of the companies. Ultimately, Nick controls both through that process.
3661 An analogy might be that it is not a lot different than a publicly traded company where there is thousands of shareholders and the Board of Directors also run the day-to-day operations but should it come down to a dispute between the two, ultimately the shareholders control the company.
3662 MR. BLAIS: I am having difficulty understanding that because the way it is drafted here, I see these shareholder's agreements to be a unanimous shareholder's agreement in sum total and it suggests here that there shall always be a majority of the seven to be the minority shareholders. So the company wouldn't be controlled in its day-to-day operations by those directors when push came to shove.
3663 MR. McCORMICK: Having regard to that intervention, we went back to the original shareholders and we have for you available a revised shareholder's agreements that addresses that issue and all of the shareholders unanimously consented to withdrawing that paragraph.
3664 MR. FROST: I was as surprised as anybody to see that. I thought, "Where on earth did the interveners find that?" These agreements are identical to ones on record for SILK-FM Broadcasting. So I went to my lawyer and asked him and he said the agreement is between the shareholders and -- I wish I could tell you exactly the wording -- but the 60 per cent of the company can be voted by me and would be.
3665 You know, the last thing -- you can tell, I hope you sense that I want our company to survive and any control of this company would be the last thing I would do in any way, shape or form. But it is appropriate -- I asked Cindy to phone the shareholders and I said, "The interveners have raised this, would that be a problem?" and what did they say?
3666 MS KINDRET: They were more than happy to do whatever was required to support this application.
3667 MR. FROST: It is not as though they said, "I will only become a shareholder if you put that clause in." We just took the agreements from 1984 and I don't think it was raised at the hearing here, then, and we didn't think it was a serious item, quite frankly. We still don't.
3668 MR. BLAIS: It is not an enormous item, it is just that we have to clear it up because whatever we state to be the control now has an impact on the future should there be a change in control. So if I understand correctly what you are saying is that you are sticking by your original intent is to have the statement of control to remain within SILK, that is what you really want and that if the Commission were to grant you a licence, you would file, presumably, the documents, the corporate documents that would reflect that intention.
3669 MR. FROST: Absolutely.
3670 MR. BLAIS: That may require down the road an amendment to what you filed so far but we probably don't have to deal with that today but you are sticking by that your intention is as the original Schedule 6 statement that control is in the hands of SILK.
3671 MR. FROST: Absolutely, unequivocally, no doubt about it.
3672 MR. BLAIS: Thank you.
3673 MR. FROST: Thank you.
3674 THE CHAIRPERSON: Thank you, gentlemen. I think that is all.
3675 MR. FROST: May I add one final comment?
3676 THE CHAIRPERSON: Indeed.
3677 MR. FROST: In rebuttal, really. You know, much has been said about our hearing five years ago and how prescient I was, evidently. But we didn't encourage a fifth station to be here. We fought it. We intervened. Nobody else did in the market. The spokesman who was here today and spoke to that was at that company and that company did not intervene. So you know, second, we wouldn't be here but for the actions -- two of them -- by Skeena. We had no plans to be before you for a second FM application. However, they dropped the country format and the hearing, for which there was no call, we were there. And, second, they said they were going to go for a second FM station.
3678 There was no doubt in our mind that that was their intent and I think they have said that. Well, at that point those actions, those three, we had no choice but to be here. You said that you want fair competition and that is why we are here. You have opened the door that much so we could be here as part of a call and, boy, sitting out there this is a tough one. But if not Kelowna, with your new policy, where? And if not with big companies like these, when? And if not with a good state, of course, company like ours, who?
3679 It is a tough one and I wish you luck. We have done our best to let you know that we would like to stay the course further.
3680 Thank you for the time.
3681 THE CHAIRPERSON: Thank you, Mr. Frost. Thank you, ladies and gentlemen.
3682 MR. FROST: Thank you.
3683 THE CHAIRPERSON: I believe that concludes Phase IV of the Kelowna applications. Madam Secretary?
3684 MS VOGEL: Yes, Madam Chair. It is over to you. You want to proceed?
3685 THE CHAIRPERSON: Yes, proceed please.
3686 MS VOGEL: The next application on our agenda today is Item number 8 in the agenda and that is an application by CKAY Radio Inc. for a broadcasting licence to carry on an English-language FM radio programming undertaking at Duncan, operating on the frequency 89.7 MHz, Channel 209B with an effective radiated power of 2146 watts, upon surrender of the current licence issued to CKAY Duncan.
3687 The Commission notes that this application is technically mutually exclusive with the application filed by the Canadian Broadcasting Corporation for Victoria, British Columbia which is also scheduled at this hearing for the use of the 89.7 MHz frequency.
3688 Mr. Drew, do you require a bit of setup time? You were mentioning audio equipment earlier?
3689 MR. DREW: I have my tape recorder here.
3690 MS VOGEL: So you are all ready to go?
PRESENTATION / PRÉSENTATION
3691 MR. DREW: Thank you very much. Madam Chairperson and members of the Commission.
3692 My name is Dick Drew. I am President of CKAY located in the Cowichan Valley Regional District, the CVRD. This is the area between Victoria and Nanaimo. A map of the CVRD is included with this submission. Joining me is my wife Aline Drew, Secretary of our company. We own 100 per cent of the shares of Radio CKAY 1979 Inc. We purchased the company in 1979. With us today to answer your technical questions is Mr. Tony Gardiner, professional engineer, President of Kensar Telecommunications Ltd. Mr. Gardiner is recognized as one of North America's leading broadcast engineers.
3693 We respectfully request your permission to flip CKAY-AM to 89.7 FM. Should CKAY-AM be denied permission to move to FM 89.7 it might only be a short matter of time before CKAY-AM is forced to close down and cease broadcasting, thus denying local radio service to the 75,000 people of the Cowichan Valley Regional District and employment to ten professional broadcasters, most of whom are homeowners, raising families, paying taxes. Some are entry level broadcasters who use CKAY as a springboard to larger, more profitable markets. Saying that CKAY-AM might close down is not a threat, it is a statement of fact.
3694 Should CKAY remain as an AM station, it is only a matter of time before its aging transmitters will require replacing. Our 1000-watt overnight and stand-by transmitter is 35-years-old. Our 10,000 watt daytime transmitter is 27-years-old. Both are tube type. Replacement parts for either transmitter are difficult to obtain and enormously expensive. One tube alone, which must be rebuilt every year, costs $3,000. Equipment in each transmitter hut, both towers, guy wires and ground system are all 35-years-old.
3695 As owners/operators of CKAY, my wife Aline and I live in constant fear of the day when CKAY's aging broadcast equipment wears out and requires replacing. A new 10,000 watt AM transmitter costs between 60 and 80,000 dollars. That, or any similar cost, would sound a death knell to CKAY-AM and a death knell to local radio service to the 75,000 people living within our nine communities because it would not be a financially responsible investment.
3696 Another reason why CKAY as an AM station cannot survive is the well-known fact that for the past 20 years audiences have been abandoning AM for FM. It reached a crisis point a decade ago and is continuing. You, as members of the CRTC, know that better than anyone since you are constantly reviewing applications from broadcasters willing to surrender what were once valuable AM frequencies for FM frequencies. At this hearing alone there are four applicants from British Columbia, including a 50,000 watt AM regional clear channel frequency with outstanding coverage throughout most of B.C. ready to be surrendered.
3697 Our awareness that CKAY needed FM to survive goes back to 1992 when I first discussed my concern with the DOC, now Industry Canada. In 1993, I wrote to the then Chairman of the CRTC, Mr. Keith Spicer, outlining our need. I followed his advice and engaged professional engineer, Mr. Tony Gardiner, to search out a frequency. Tony?
3698 MR. GARDINER: Commissioner, CKAY retained my firm six years ago to find an FM frequency that would service the Cowichan Valley area of British Columbia. Regretfully, when the FM Allotment Plan was developed over two decades ago, it did not allot any frequency to the city of Duncan. Attempts to find a drop-in frequency were compromised by the proximity of the Cowichan Valley to the U.S. border plus the large number frequencies allotted to the nearby cities of Vancouver, Victoria and Seattle.
3699 We even looked at an array of low power stations as a compromise but we were well aware of Industry Canada's negative view on this approach, that is multiple, small stations to serve a contiguous area. At that time, therefore, we were left with no choice but to inform our client that an FM station for the city of Duncan and the Cowichan Valley was simply out of the question.
3700 More recently, when we learned that Industry Canada had released one of five educational band frequencies to the CBC to rebroadcast their Vancouver AM station on FM into the Cowichan Valley and Victoria, we immediately contacted Mr. Drew of CKAY and suggested that it might be possible to secure one of the four remaining frequencies for his station. All five frequencies require special field testing due to the proximity of CHEK-TV, Channel 6 in Victoria and, with CKAY's and Industry Canada's authorization, last year we conducted an approximately one month comprehensive interference test program of the four remaining frequencies.
3701 Testing was coordinated with Industry Canada offices in Vancouver and Victoria and CHEK-TV and, once completed, indicated that a Class-B facility on channel 209, that is 89.7 MHz, would offer acceptable coverage to the Cowichan Valley and cause negligible interference to CHEK. The other three frequencies -- in terms of serving the Cowichan Valley area -- were found to be less desirable and were less likely to support a Class-B station. Encouraged by the results of the test programme, Mr. Drew asked that we proceed with a full application to Industry Canada for channel 209.
3702 MR. DREW: As Mr. Gardiner explained, a wrong was committed two decades ago when regulators failed to allocate a local use FM frequency to serve the residents between Victoria and Nanaimo, now known as the Cowichan Valley Regional District, an area which now has a population of 75,000 and by the year 2011 will have 94,500.
3703 The wrong was committed years ago. You can right that wrong now. You can right that wrong by approving our request to survive. You can right that wrong by granting CKAY permission to broadcast on channel 209, 89.7 FM.
3704 Unlike other applicants whose request to flip from AM to FM may be motivated by their desire for corporation growth, our request is more basic. Our request is based solely on our need to survive. We need 89.7 to survive. We need 89.7 to continue serving our nine communities. We need 89.7 to continue employing people locally. We need 89.7, and respectfully request you grant us permission to broadcast on 89.7.
3705 CKAY is fighting two losing battles. One is the speed at which audiences are abandoning AM to FM. In the CVRD, the BBM reports 28 FM stations with a share of audience. One Victoria FM station whose transmitter is located inside the CVRD has a larger share of audience than CKAY. This is outlined in detail in Schedule 15, sections 1 and 2.
3706 The other losing battle we have been fighting since CKAY signed on 35 years ago is the fact that our signal does not reach a large part of the nine communities of the CVRD scattered over an area encompassing 3,285 square kilometres -- over half the size of Prince Edward Island. A map is attached with these notes. The nine communities are Duncan, Crofton, Mill Bay, Ladysmith, Lake Cowichan, Shawnigan Lake, Chemainus, Youbou and Cobble Hill, all small communities collectively very large. This is reported in detail in Schedule 15, section 6 of our application.
3707 This weakness will be overcome with our move to 89.7 where we will broadcast from Environment Canada's 260-foot tower on top of Mount Sicker -- Mount Sicker is located near Chemainus.
3708 Over the years, CKAY has received many local awards and received hundreds of letters acknowledging our community involvement of which we are very proud of. The award, however, which touched us the most was the award CKAY received from the Fifth Annual West Coast Disaster Response Conference. Unknown to us, we were nominated for this prestigious award by the Mayor and Council of the City of Duncan. They nominated CKAY for the important work we did for the community during the disastrous five-day winter storm of December '96 and January '97. This is covered in more detail in Schedule 15, section 7 of our application.
3709 While CKAY was dispensing critically important information to the thousands of people who were stranded in their homes -- many without hydro and telephones, relying on battery-operated transistor radios to hear when they might receive help -- their only link was CKAY. Unfortunately, many residents could not hear CKAY. To quote from a newspaper article of January 15, 1997, ten days after the crisis ended:
"Duncan's CKAY radio station has been praised for providing critical information during the recent massive snowstorm. But its value in an emergency is lost on many residents who cannot tune in because the signal is blocked by neighbouring mountain ranges. The station is available on cable radio, but many rural residents do not have access to cable." (As read)
3710 The article went on to explain how one CVRD Council member, Mr. Richard Hughes, said, and I quote:
The CVRD and local councils could help CKAY lobby the government to change the station's frequency to reach more people." (As read)
3711 Well, members of the Commission, the CVRD Directors and local councils have lobbied you with their letters. Let me quote from a few letters you have received recently.
3712 Mrs. Jean Brown, Mayor of the Town of Lake Cowichan:
"Lake Cowichan in on the fringe of radio reception, so we need our local station's improved capability." (As read)
3713 Mr. Joe Allan, CVRD elected representative:
"At present, the residents of Cowichan Lake South, Skutz Falls and beyond are not able to receive the current local CKAY-AM radio broadcast for local information, public service updates and more important local emergency news broadcasts. A broader range FM frequency would make this information available." (As read)
3714 Mr. Michael Coleman, Mayor of the City of Duncan:
"I was surprised to hear that this area had been left out of the FM allocations. Hopefully, your application will see this omission corrected. Yes, we wholeheartedly encourage Industry Canada to assign an FM frequency to serve this area and the CRTC to grant their approval for CKAY to convert from AM to FM, thus insuring a continuation of local radio service." (As read)
3715 With your permission, I would like to play a brief message that was left on our overnight answering machine. Now the audio quality is very poor, so I have included a transcript:
"I saw in today's paper where Dick Drew is going for an FM station to have the transmitter up on top of the mountain. I think it is a wonderful idea. I do not have television, radio is my source of everything and I, tonight, right now, cannot get CKAY. I get so many different stations, with one on top of the other one, and I don't think any one of them is CKAY. They sound out of the country, you know, out of the province. Anyway, may name is Laura Maxwell. I live in Duncan and I sure would like to see him get a good strong signal for CKAY. Thank you." (As read)
3716 Our First Nations people, Chief Lydian Hwitsum, Chief of the 3,500 members of the nine Cowichan tribes wrote:
"We support CKAY because they are our local station. They provide service to us which we would not receive or rely on from other stations located outside of our area. The 3,500 members of our nine local tribes which from the Cowichan tribes really on CKAY for school closings, local news, birthdays, anniversaries and the hundreds of other services only a local station will provide." (As read)
3717 During the question period, I would be honoured if you asked about a project we have just completed with the nine Cowichan tribes which we are very proud of. I have no time to deal with it now.
3718 Now, let's deal with the subject of how local business suffers when local resident cannot receive a listenable signal and tune to out-of-market signals -- in our case 28 FM signals.
3719 Mr. Fred McGuiness, Owner/Operator of Solitaire Press Ltd. wrote:
"As past president of the Chamber of Commerce and as a local business person, I wholeheartedly support and encourage your application to convert CKAY from AM to FM. Your loss of audience to out-of-market FM stations causes our local retailers to suffer loss in may ways. First, the majority of local businesses cannot afford the high cost of advertising on FM stations in Victoria, Nanaimo or Vancouver to reach their target markets. Second, advertising coming from Victoria, Nanaimo or Vancouver harm local merchants by enticing shoppers to spend their dollars outside of their home area. This causes a trickle down effect. Fewer sales mean fewer people employed locally, fewer dollars for supporting local events and charities, less money for improvements and reinvesting in our area. In our case, less money is spent in printing and advertising. Recently our area was impacted with the introduction of the discount giants, Wal-Mart and the Great Canadian Superstore. Coupled with the downturn in the B.C. economy, it is difficult enough for local business to survive. I have to support any independent business that wants to make our city a better place to live." (As read)
3720 Mr. Terry Evans, the Cowichan Valley's largest new car and truck dealer, a second generation family business soon to be a third generation family business. In his letter to you, he wrote:
"We are a local independent business which requires radio to advertise on. It is felt that if CKAY fails in its bid to acquire 89.7, it will have serious impact on their ability to continue to be viable. If this were the case, we feel that the loss of the local radio station would ultimately have a detrimental effect on our business. Out of town stations and their advertisers would draw our business to other larger centres." (As read)
3721 Mr. Evans hit the nail right on the head:
"Out of town stations and their advertisers would draw our business to their larger centres." (As read)
3722 Let's deal with the new car and truck business. Under the terms of most franchise agreement, new car and truck dealers cannot advertise on radio stations outside of their franchise market. However, dealers in Victoria, Nanaimo and Vancouver can advertise into the CVRD through spills on FM stations in their market. CVRD listeners hear their out-of-market commercials, visit their out-of-market dealerships and our dealers are helpless to fight back.
3723 Mr. Ron Austen -- this is a critical letter -- General Manager, Cowichan Community Centre:
"The Community Centre provides a wide variety of recreation, sports, cultural and education programs and activities for the citizens and visitors to the Cowichan Valley. We rely heavily on radio advertising and through the generosity of CKAY free public programs and interviews to promote these events. Unfortunately, due to the limited broadcast capabilities of CKAY's 1500 AM frequency, there are portions of the Cowichan Valley which do not receive a clear broadcast signal of our messages. By moving from AM 1500 to FM 89.7, with our main transmitter located on Mount Sicker, near Chemainus, CKAY 89.7 would be able to reach out to the entire Cowichan Valley population. Please grant CKAY Radio their request for the 89.7 FM frequency." (As read)
3724 And, finally -- and I am going to say right now, I have never met this man, I have never spoken to him on the telephone. His name is Mr. Ronald Arnott of Ladysmith, B.C. I was tempted to call him and thank him. I will do that later. He said:
"I am a resident of Ladysmith, B.C. which is located approximately 15 km North of Duncan. I have never been able to listen to local news. They are drowned out by an oriental station, 1470 and a religious station, 1570. Over the years, I have been in contact with City Hall and several disaster organizations to voice my concern but all advise me that 'at the present time nothing can be done about it.' I, therefore, strongly and humbly request that you seriously consider granting the remaining FM frequency 89.7 to Mr. Drew of CKAY so that he can construct a transmitter on Mount Sicker as soon as possible and thereby beam a clear signal to Ladysmith." (As read)
3725 Members of the Commission, I pray you give me reason to phone Mr. Arnott in Ladysmith and tell him, "Yes, Mr. Arnott, something has been done about it. Thanks to the wisdom of the CRTC you will soon be hearing local new interference-free on CKAY-FM. Mr. Arnott, you can then say to the oriental station, 'Sayonara' and to the religious station, 'Go in peace.'"
3726 Members of the Commission, I respectfully request you deny the application of CBC/Radio-Canada on 89.7 and approve their use of another frequency and give 89.7 to CKAY.
3727 Thank you. Merci.
3728 THE CHAIRPERSON: Thank you, Mr. Drew. Commissioner Wylie will have some questions.
3729 COMMISSIONER WYLIE: Good afternoon, Mr. Drew, Mrs. Drew, Mr. Gardiner. I like your Vancouver tuxedo. I am looking at the maps here. Mr. Gardiner, the current contour, the current AM signal gets into Vancouver, is that a receivable signal of any quality, the current AM signal?
3730 MR. DREW: Let me back up a little bit and say these are the theoretical contours that were filed with the original brief for 1500. They are not in reality good signals into Vancouver. In fact, the whole array is a pattern such that the coverage throughout the Cowichan Valley area is very poor notwithstanding the fact that I guess about seven years ago they went from a kilowatt to ten kilowatts so you have to accept these contours as being theoretical. They are not proven. And in fact --
3731 COMMISSIONER WYLIE: You are talking about the AM right now.
3732 MR. DREW: One may say the same about FM and AM, yes.
3733 COMMISSIONER WYLIE: Because the FM, you would see the point five encompassing all of Victoria and Vancouver, et cetera, but that is not a good signal.
3734 MR. DREW: That is correct. B.C., in fact, is quite different from Saskatchewan and parts of Eastern Canada where the terrain really, if I may use the words, screws up the theoretical algorism used for predicting coverage contours.
3735 COMMISSIONER WYLIE: But worse on AM, I suspect.
3736 MR. DREW: Not necessarily, sometimes better on AM.
3737 COMMISSIONER WYLIE: Even if you are high.
3738 MR. DREW: Yes, being high on AM doesn't help. Being high on FM helps a lot. The line of sight is what gives you the coverage unlike AM which follows the surfaces.
3739 COMMISSIONER WYLIE: We were just assessing that this morning. My theory was partly because there is potash in Saskatchewan in the ground, it is not as rocky.
3740 MR. DREW: Mainly because it is flat and the connectivity is quite a bit higher. If you look at the CBC station, the 50 kilowatts station, I suspect it has the best coverage in Canada on AM.
3741 COMMISSIONER WYLIE: In any event, I suspect, Mr. Drew, even if you did reach Victoria and Vancouver your response would be what comes into Duncan from Victoria and Vancouver -- or from Victoria, anyway -- is more damaging to your business than the other way around.
3742 MR. DREW: I would like to think that people in Vancouver, Seattle and Victoria would listen to CKAY but my ego won't allow me to say that.
3743 COMMISSIONER WYLIE: That is less likely.
3744 MR. DREW: Major market people will not listen to small market radio.
3745 COMMISSIONER WYLIE: But the other is more like. Now, your overnight and daytime coverage on AM is not the problem. It is simply that it is AM.
3746 MR. DREW: No, the coverage is a very serious problem.
3747 COMMISSIONER WYLIE: No, but the difference between night and day, you don't have to change --
3748 MR. DREW: Yes.
3749 COMMISSIONER WYLIE: Oh, you do?
3750 MR. DREW: Yes, we do. We have to cut back to 1000 watts. We basically, in the winter time, at 4:30 in the afternoon say goodbye to everybody and ask them to come back at 10 o'clock the next morning.
3751 COMMISSIONER WYLIE: Oh, yes I missed a zero here. It is 10,000 and 1000 overnight so you have the overnight.
3752 MR. GARDINER: If I may add to that. The person who made the comment about receiving a platter of other stations, this would be nighttime typically when the skyway just bangs in from the whole continent.
3753 COMMISSIONER WYLIE: Yes, I had missed a zero here that you have to go down by 9000 watts. Now the problem here is obviously that we have two applications on the same FM frequency and you have made your point clear about the need you have, et cetera.
3754 I wonder, Mr. Gardiner, if you could be of any help to us about what the possibilities are technically. We ourselves have looked at various possibilities of how many applicants we could accommodate considering the overlap that is expressed between you and the CBC and then some of the overlap with the Victoria applications. What is your view of, number one, either you or the CBC could be accommodated on another frequency? For example, in the 88 frequency area, have you looked at this? Have you looked at whether there are possibilities here to find some accommodation other than what is before us and is mutually exclusive?
3755 MR. GARDINER: First of all, there are five frequencies, as you all know, allotted to Saturna Island which constitute the educational band frequencies. All of them, because of their proximity to the CHEK-TV, Channel 6 carrier, require special analysis and interference analysis which I have already mentioned we undertook about a year ago.
3756 The first channel is 201 which is 88.1 MHz so all things being equal you could say that that is probably the least desirable frequency and the top frequency allotted to Saturna Island, which is 217 or 91.3 would be the best. I say all things being equal, they are not.
3757 When we did the interference analysis, we were not aware at that time that the CBC was even considering the frequency of choice we had picked. I can't say that they started to look at it after we did. It is probably a moot point, but CBC when it did an analysis of the area to find a frequency that it could move its Vancouver AM service to, found that when they looked at 217 as a first choice, as I say that is the furthest from Channel 6 and should be the most desirable, they found that they were getting calls from, I think it was KBCS down in Belleview, complaining that they were causing interference.
3758 Also, Channel 218 is part of Industry Canada's FCC allotment plan for a future station in Port Angeles. So not withstanding the fact that there are already applicants I guess here this week, applying for 217, we rejected it. We knew that 213 was in the process of already being assigned for the Vancouver AM service to the CBC so we picked the next best frequency which was 209 -- 205, 201 are still on the table, I guess. I haven't seen any evidence of either of those frequencies being applied for.
3759 I would be very upset if my client were to be moved down a notch or two because of the closer proximity to Channel 6. On the other hand, if they were put into the pool with Channel 217 which is 91.3 I would want to do quite a bit more engineering analysis to determine the effects that that selection would have an a proposed allotment for Port Angeles.
3760 I don't know if that has helped you.
3761 COMMISSIONER WYLIE: And then the 91.3 is the one that Okanagan Radio proposes to use from the Malahat site.
3762 MR. GARDINER: That is my understanding.
3763 COMMISSIONER WYLIE: Which Mr. Drew is very opposed to because of the height and the ability then to cover the Cowichan Valley area.
3764 MR. GARDINER: Oh yes, that will put a very, very strong signal into the Cowichan Valley area, yes.
3765 COMMISSIONER WYLIE: Now, when you say that the use of 201 and 205 would require some analysis, are you saying that it is technically possible to manage this so that it can be used for the purposes either of your client or of the CBC?
3766 MR. GARDINER: In my view the risks are higher. It would be costlier. When we did the interference analysis, we did not evaluate 201 and 205 because at that time it appeared as though we had two choices, and, again, this is a little more than a year ago.
3767 COMMISSIONER WYLIE: 88.9 and 91.3?
3768 MR. GARDINER: Correct, correct. The one we did a full evaluation on was 89.7 which is the frequency that our client is applying for.
3769 COMMISSIONER WYLIE: But as an engineer you say you haven't tested this, you know there will be problems. You are not in a position to say whether the use of 88.1 and 88.9 from Saturna Island is possible, that it is doable technically.
3770 MR. GARDINER: I suspect that they are doable.
3771 COMMISSIONER WYLIE: And when you talk about costs, what are you talking about?
3772 MR. GARDINER: You are putting me on the spot. You see, we --
3773 COMMISSIONER WYLIE: Just a ballpark figure. Are we talking double? Even that you are not prepared to say.
3774 MR. GARDINER: I don't think so. The problem is, first of all, we would have to go back and do another analysis. I think we had a clear signal from CHEK whereas they did not object to applying for 209. I think they would get a little bit "antsier" about an applicant coming in so close to their frequency. They may be opposing an application on 205 and more likely on 201, I don't know.
3775 COMMISSIONER WYLIE: And it may require them to do some alterations as well -- CHEK, right?
3776 MR. GARDINER: It is possible, but the onus is usually not on the incumbent but on the newcomer.
3777 COMMISSIONER WYLIE: Shall I rephrase that -- some alterations may have to be done to the CHEK installations at whoever's costs in order to accommodate the use of 88.1 and 88.9 but they are not absolutely impossible.
3778 MR. GARDINER: No, not in my opinion.
3779 COMMISSIONER WYLIE: But Mr. Drew they are not a solution for you.
3780 MR. DREW: Well, my understanding -- and that is why I would like to confer with Mr. Gardiner -- my understanding is that they won't work from Mount Sicker, which is the site that we have selected and have made the arrangements with and it is a better site from our point of view because it is up near Chemainus. The other site, of course, is on the Malahat, which is where those other frequencies are right now where they can work from.
3781 When we conducted our testing, we took a transmitter up to the top of Mount Sicker and we did two days of testing, of field testing to make sure that we did not interfere with CHEK-TV. I am not sure if those other frequencies would work on Mount Sicker or not.
3782 COMMISSIONER WYLIE: Well, it would appear from what I understand that they would be more likely to work from Saturna.
3783 MR. GARDINER: That is correct. In fact that is where those channels were originally allotted.
3784 COMMISSIONER WYLIE: And how would that work with you, Mr. Drew?
3785 MR. DREW: My understanding is the problem it would give me a beautiful signal into Victoria, which I wouldn't mind --
--- Laughter / Rires
3786 -- and I think I would do pretty good in Seattle and Vancouver.
3787 COMMISSIONER WYLIE: Wouldn't that be nice. You wouldn't even have opposing interventions from the Victoria stations.
3788 MR. DREW: Don't count on it.
3789 COMMISSIONER WYLIE: No, no but if we said now that you have to use it, then they would have no opportunity to complain.
3790 MR. GARDINER: Can I just add that we did look at Bruce Peak which is on Saltspring Island adjacent to Saturna. It is a wonderful site but we had some concerns. I mean, it would cover Vancouver beautifully, it would cover Victoria and, as an engineer, I didn't see it as a Duncan or a Cowichan Valley station any more. I saw it more as a regional station.
3791 COMMISSIONER WYLIE: But it would reach Duncan nevertheless.
3792 MR. GARDINER: Oh yes, it would.
3793 COMMISSIONER WYLIE: You just said a while ago that Victoria people wouldn't listen to a Duncan station.
3794 MR. GARDINER: let me back up a little bit and thank you Dick for pointing out.
3795 The geography is such whereas it would work well into Duncan per se it being Bruce Peak or Saturna Island. It would not work as well into the area to the North of Duncan and heading up toward Ladysmith where you have a range of mountains blocking and that is why we ended up with the so-called big Sicker Mountain which is the ideal site for the area, we think.
3796 COMMISSIONER WYLIE: And, again, the 88 frequencies may be useable from there?
3797 MR. GARDINER: I really have to put a big, big "if" on that. I wouldn't say they can't be but it is a tough going.
3798 COMMISSIONER WYLIE: And that would interfere with CHEK.
3799 Mr. Drew, we understand your desire for an FM frequency. You understand that we have two competing applicants before us. What is your position at the end if you don't get 89.7? What happens? Would you accept an approval and leaving the frequency question to be managed or discussed or negotiated which sometimes the Commission has done?
3800 MR. DREW: That is difficult to answer. We know what 89.7 will give us. We know 89.7 will get us into Lake Cowichan and Scutz Falls and Honeymoon Bay which are markets which we have very, very great difficulty trying to get in during the day and we can't get in at night.
3801 That is a key consideration to us. If those other frequencies would give us that, then I would say yes, but there is a big, big question mark on those from the initial work that Tony did on our behalf.
3802 COMMISSIONER WYLIE: Well, I don't have any other questions, Madam Chair, and we thank you for appearing before us two days in a row.
3803 MR. DREW: Thank you.
3804 THE CHAIRPERSON: Thank you very much. That is it.
3805 MS VOGEL: Our next item is an application by the Canadian Broadcasting Corporation to amend the broadcasting licence of the broadcasting licence of the radio programming undertaking CBUF-FM Vancouver by adding a transmitter at Victoria operating on the frequency 89.7 MHz, Channel 209B, with an effective radiated power of 1700 watts.
3806 The Commission notes that this application is technically mutually exclusive with the application filed by CKAY, which application has just been heard.
3807 THE CHAIRPERSON: Thank you, Madam Secretary.
PRÉSENTATION / PRESENTATION
3808 M. GROULX: Madame la Présidente, mesdames du Conseil bonjour. Je m'appelle Robert Groulx et je suis directeur de la Radio française de Radio-Canada en Colombie-Britannique. Permettez-moi d'abord de vous présenter les gens de la Société qui m'accompagnent aujourd'hui. Tout d'abord, à ma gauche, Denis Doucet, et à ma droite, Sam Nemes, premier chef de diffusion et distribution du Service de l'ingénierie de la Société, et à mon extrême gauche, M. Paul Monty, premier agent aux Affaires réglementaires à Radio-Canada.
3809 Nous sommes heureux d'être ici aujourd'hui pour vous présenter notre demande d'assurer le service de la Première chaîne à la capitale de la Colombie-Britannique et à l'extrémité sud de l'Ile de Vancouver.
3810 J'invite maintenant mon collègue, Denis Doucet, directeur-général de l'exploitation et de l'administration de la radio française à faire la mise en situation de notre demande.
3811 M. DOUCET: Bonjour. Conformément à la Loi sur la radiodiffusion, la Société a, depuis sa création, conservé l'objectif d'offrir l'ensemble de ses services radiophoniques à l'ensemble des Canadiens. Notre réseau de la Première chaîne et de la Chaîne culturelle s'est étendu au fur et à mesure que les fonds étaient disponibles.
3812 C'est ainsi qu'en 1967, le service français de Radio-Canada atteignait Vancouver avec l'ouverture de CBUF-FM.
3813 Au cours des récentes années, les projets d'amélioration des signaux existants et d'extension de la Chaîne culturelle ont été privilégiés puisque, d'une part, nous avions l'opportunité d'obtenir des nouvelles fréquences pour corriger des déficiences importantes de nos services existants et, d'autre part, la population desservie par la Chaîne culturelle était nettement inférieure à la population desservie par la Première chaîne.
3814 Plusieurs projets étant maintenant réalisés, ou en voie de l'être, nous envisageons l'extension de la Première chaîne dans la seule capitale provinciale qui n'a pas encore le service, celle de la Colombie-Britannique, Victoria.
3815 M. GROULX: J'aimerais maintenant vous présenter un aperçu de CBUF-FM, de sa présence en Colombie-Britannique et de sa programmation.
3816 D'abord les émetteurs. Nous avons déjà des émetteurs dans neuf régions de la province: Vancouver et Chilliwack dans la vallée du bas-Fraser; Kelowna et Kamloops dans l'Intérieur; Prince George, Terrace, Kitimat et Dawson Creek dans le centre et le nord; et, enfin, Port Alberni dans le centre sud de l'Ile de Vancouver.
3817 Nous rejoignions ainsi près de 85 pour cent de l'auditoire potentiel à l'exception de la deuxième population francophone en importance dans la province, celle de Victoria. En la couvrant -- Victoria -- nous atteindrons ainsi près de 95 pour cent de cette population.
3818 CBUF diffuse 24 heures par jour un programme d'émissions nationales et régionales, procurant ainsi à notre auditoire un reflet de la région au pays, du pays à la région et des régions de la province, les unes aux autres.
3819 CBUF-FM produit 43,5 heures d'émissions régionales par semaine, dont trois émissions régionales quotidiennes, deux émissions de week-ends, des bulletins de nouvelles régionales sept jours par semaine et des calendriers communautaires six jours par semaine. En voici une brève description. "CBUF Bonjour" est une émission d'information, d'actualité et de services, à fort caractère culturel qui dessert l'ensemble de l'auditoire régional de 6 heures à 9 heures.
3820 "Micro Midi" est une émission spécifiquement journée vers la communauté francophone. C'est le lieu de rencontres et d'échanges entre les associations régionales et les regroupements communautaires de la province qui participent tous à cette émission quotidienne de midi à 13 h 30.
3821 "Rendez-Vous" est une émission de service et de retour à la maison qui diffuse le sommaire des actualités provinciales et inter-provinciales de la journée, des entrevues et des chroniques culturelles et d'intérêt général de 15 h à 17 h 30.
3822 "La Grande Balade" du samedi est un magazine socioculturel axé sur les loisirs et la famille, les samedis.
3823 "La Grande Balade du dimanche" est une émission disc-jockey d'accompagnement et de service axée sur les activités culturelles et familiales.
3824 Enfin, nos bulletins de nouvelles régionales ont le mandat de couvrir l'actualité de la province avec un accent spécifique et une attention particulière aux dossiers de la francophonie, éducation, ententes Canada-communauté, et cetera.
3825 Nos émissions nationales, maintenant. La station de Vancouver est un centre de production nationale. Ceci veut dire qu'en plus de son mandat de produire des émissions régionales, elle a aussi le mandat de produire des émissions pour les deux chaînes, pour bien refléter sa réalité au reste du pays. En voici quelques titres:
3826 "Ici Vancouver", "Le Monde à Lanvers", "Néo-Géo" pour la Première chaîne et "Silence on Jazz" pour la Chaîne culturelle.
3827 Nous produisons aussi des séries nationales de documentaires ou autres pour ces deux chaînes. Nous contribuons régulièrement aux nouvelles nationales de même qu'aux émissions nationales: "Tournée d'Amérique", "D'un soleil à l'autre", "Info Culture", "Le Monde Aujourd'hui", "Indicatif Présent" et "275-Allo".
3828 "Le Monde à Lanvers" est une émission hebdomadaire de création et de fantaisie, axée sur les tendances socioculturelles de la Côte ouest.
3829 "Néo-Géo" est une émission hebdomadaire qui explore les nouvelles sonorités mondiales.
3830 "Ici Vancouver" est un disc-jockey sur les nouvelles tendances musicales de la Côte ouest et cette émission est diffusée quatre soirs par semaine sur les deux chaînes nationales.
3831 Enfin, "Silence on Jazz" est une émission hebdomadaire de la Chaîne culturelle qui met en vedette les grands noms du jazz canadien et de la Colombie-Britannique, tous les samedis soirs de 20 heures à 23 heures. "Silence on Jazz" est aussi une émission à laquelle nous contribuons de l'argent de production qui met en valeur des captations et des enregistrements de musiciens de la Colombie-Britannique qui se retrouvent à notre antenne nationale.
3832 Nous couvrons les grands dossiers de Victoria, de son assemblée législative, de la communauté francophone et de l'Ile de Vancouver avec des correspondances régulières de notre collègue de la télévision française ou lors de reportages spéciaux, d'entrevues téléphoniques ou d'émissions en direct, comme ce fût le cas lors des Jeux du Commonwealth de 1994 et de la semaine nationale de la francophonie en 1996.
3833 Nous avons développé un réseau de correspondants dans diverses localités de l'Ile, Nanaimo, Courtenay, Victoria, Campbell River, par exemple, qui contribuent régulièrement à nos émissions régionales.
3834 Nous parlons avec des représentants de la francophonie et de ses associations et organismes, dont la Société francophone de Victoria, l'Association francophone de Nanaimo, de même que celle de Campbell River et avons développé une collaboration régulière avec un représentant de l'Université de Victoria qui parle des activités de cette institution.
3835 En fait, nous parlons beaucoup de Victoria et de l'Ile de Vancouver à la radio française mais pour le moment les contenus qui en sont issus sont d'abord destinés à renseigner les auditeurs de la province desservis par nos autres émetteurs de ce qui se passe dans la capitale puisque la réception pour les francophones de la capitale provinciale y est en ce moment très aléatoire.
3836 Malgré ces difficultés, la communauté participe activement aux événements organisés par la Radio française.
3837 Par exemple, la vitalité de la communauté scolaire de l'école Brodeur de Victoria, première école entièrement francophone de la province, s'est traduite par la participation de deux de leurs élèves au Gala provincial de la chanson dans la catégorie interprète, candidats qui se sont ensuite rendus aux finales du Chant'Ouest deux années consécutives. Malheureusement, leurs prestations, autant au Gala provincial qu'au Chant'Ouest, ne pouvaient être entendues à Victoria.
3838 La mise en service d'un émetteur à Victoria aura donc comme effet immédiat de rendre ces contenus accessibles à ceux qui y contribuent tout en leur donnant aussi l'occasion de recevoir intégralement et avec qualité la programmation de CBUF.
3839 Nous prévoyons développer une couverture journalistique plus régulière de Victoria en y installant un journaliste radio. Les nouvelles installations techniques de nos collègues de la radio anglaise nous permettront de produire d'autres contenus issus de la capitale avec plus de facilité.
3840 Enfin, nous croyons qu'à l'entrée en service de cet émetteur, les auditeurs de Victoria participeront et susciteront plus de couverture de notre part, accroissant ainsi encore plus notre reflet régional au pays et le reflet de cette région à elle-même et aux autres régions de la province.
3841 Un aperçu de Victoria et L'Ile de Vancouver maintenant. La communauté francophone de Victoria est active et vivante depuis l'arrivée des premiers Canadiens-français en 1843, venus sur l'Ile de Vancouver pour y travailler pour la compagnie de la Baie d'Hudson. D'ailleurs on trouvera vers les années 1860 déjà des programmes d'enseignement du français et de cours d'immersion, alors que l'Université de Victoria a déjà son département de français.
3842 Aujourd'hui, Victoria compte près de 6 000 francophones de langue maternelle et près de 30 000 personnes parlent français dans la région de la capitale provinciale. Ce sont là des auditeurs potentiels pour la radio française.
3843 C'est la communauté francophone la plus scolarisée de la province: 59 pour cent de cette population détiennent une formation universitaire, 17 pour cent une formation collégiale et 17 pour cent une formation secondaire.
3844 Cette communauté s'est donnée une vingtaine d'organismes et d'institutions dont la Société francophone et l'Association historique.
3845 On y retrouve aussi deux écoles qui offrent un enseignement en français dont l'école Brodeur, la seule à offrir en Colombie-Britannique un enseignement complètement en français de la maternelle à la douzième année.
3846 Plusieurs francophones travaillent dans les secteurs de l'éducation, de la santé, du tourisme et de la restauration et les communications. Selon le rapport de consultation de la communauté francophone de la Colombie-Britannique, ils offrent leurs services au sein des institutions fédérales- provinciales, dans les organismes associatifs, dans l'entreprise privée ou dans les domaines artistiques de création.
3847 La communauté francophone demande un émetteur depuis 1972, alors que l'implantation du plan accéléré de rayonnement lui donnait l'espoir d'entendre la radio française dans la capitale. C'est ensuite en 1978 que le dossier est relancé mais sans succès. On s'attendait ensuite à ce que l'implantation puisse se faire au début des années 80, ce qui pour des raisons budgétaires et techniques ne put se réaliser. En 1987, Pierre Juneau, alors président de Radio-Canada, écrivait au président de la Société francophone, Jean Lagassé, que l'extension du rayonnement doit céder le pas au profit du maintient des services actuels.
3848 Nous en arrivons maintenant à la demande qui est devant vous, rendue possible par le dégagement de certaines fréquences dues au travail de recherche d'ingénierie de Radio-Canada, collaboration avec le groupe OK de la capitale provinciale et de CHEK-TV. Notre objectif est de couvrir la région de la Capitale provinciale.
3849 CBUF-FM contribue au développement du talent canadien de la Colombie-Britannique de diverses manières. Nous produisons plusieurs émissions nationales qui chacune à leur façon font la promotion du talent franco-colombien aux auditeurs du Canada.
3850 Nous produisons depuis trois ans un volet de cinq épisodes de la série "Nouvelles Sous le Soleil" qui encourage l'écriture radiophonique en vue de diffusion de textes dramatiques originaux dans les stations de l'ouest du Canada.
3851 Ensuite, nous produisons une fois par année un Gala provincial de la chanson francophone qui met en compétition trois auteurs-compositeurs et trois interprètes qui ont été présélectionnés par un jury local, avant d'entrer en compétition. Ce Gala est diffusé en différé à notre antenne.
3852 Une fois par quatre ans -- les deux dernières en 1993 et en 1997 -- CBUF-FM produit et diffuse sur les quatre antennes de Radio-Canada dans l'ouest le Chant'Ouest, c'est-à-dire un festival inter-provincial de la Chanson francophone qui regroupe les finalistes des galas provinciaux des quatre provinces dans une émission spectacle produite en collaboration avec les agences culturelles de l'ouest.
3853 Nous enregistrons aussi des concerts de musique de jazz avec des musiciens de la côte du Pacifique, concerts qui sont diffusés à la Chaîne culturelle de Radio-Canada.
3854 Nous diffusons aussi dans nos émissions régionales et dans les émissions nationales que nous produisons les nouveautés de la production discographique musicale de Vancouver et de la province en musique de jazz et en musique classique.
3855 Nous produisons avec des réalisateurs et des journalistes pigistes des séries documentaires et des émissions à thème, par exemple, "Un Canadien à Hong Kong", série sur le bouddhisme, diverses séries sur les amérindiens de la Côte ouest et "Noël Pacifique" émission qui met en vedette chaque années les contes originaux qui sont produits pour la radio.
3856 Enfin, nous diffusons dans nos émissions quotidiennes des commentaires et critiques sur les activités artistiques et culturelles de la région, en plus de nombreuses entrevues avec les artistes qui peuvent s'exprimer en français.
3858 M. DOUCET: Selon la Loi, programmation de la Société doit être offerte en français et en anglais, de manière à refléter la situation et les besoins particuliers des deux collectivités de langue officielle. Elle précise également que le service doit être offert partout au Canada de la manière la plus adéquate et efficace au fur et à mesure de la disponibilité des budgets. Comme le disait Robert tout à l'heure, la communauté de Victoria réclame un service adéquat depuis fort longtemps, service qui ne peut pas être assuré par notre émetteur de Vancouver.
3859 De plus, le Conseil a constamment exhorté la Société d'étendre et d'améliorer ses services partout au Canada. Dans sa décision du 30 mars 1988 renouvelant les licences des réseaux de radio, le CRTC avait demandé à Radio-Canada de procéder à une étude des besoins des francophones hors Québec en radiodiffusion et de présenter un rapport et un plan d'action.
3860 Ce rapport, déposé en février 1990, a proposé un plan d'action touchant de multiples objectifs en matière de programmation et de rayonnement. L'ensemble des projets notés au chapitre de l'amélioration du rayonnement était justement la capitale provinciale de la Colombie-Britannique, Victoria.
3861 La mise en oeuvre de ce plan a été échelonné sur plusieurs années selon la disponibilité des fonds pour la réalisation de ces projets. Plusieurs projets sont maintenant réalisés. Par exemple, nous avons amélioré la présence régionale en Nouvelle-Écosse et à l'Ile-du-Prince-Édouard. Nous sommes maintenant prêts à installer un nouvel émetteur pour desservir Victoria.
3862 Le Conseil a fait suite à ce rapport dans le dernier renouvellement des licences des réseaux en mars 1993 et a noté l'engagement renouvelé de Radio-Canada à maintenir le service offert aux francophones hors Québec et à poursuivre ses efforts pour en améliorer la qualité.
3863 Pour la capitale, Victoria, nous avons déposé cette demande pour corriger la déficience de notre service. En effet, le signal de la Radio française diffusé à Vancouver est inadéquat pour desservir Victoria. Même si en théorie Victoria se situe tout juste à l'intérieur du périmètre de 500 microvolts par mètre carré, en fait les montagnes créent des obstructions et Victoria se retrouve à l'extérieur du périmètre réaliste de la station de Vancouver.
3864 Au fait, la réception est tellement mauvaise que lors de la diffusion d'émissions importantes, certains auditeurs se déplacent en auto vers un endroit où la réception du signal de Vancouver leur permettra d'écouter l'émission.
3865 D'autre part, la câblodistribution pourrait être envisagée pour corriger cette lacune. Nous savons qu'elle ne peut satisfaire que l'écoute fixe. Une grande partie de notre auditoire est en déplacement et pour elle la câblodistribution ne peut pas être une alternative.
3866 Notre demande est donc justifiée par les exigences de la Loi sur la radiodiffusion, les attentes du Conseil en matière de service aux auditoires francophones hors Québec, les objectifs de la Radio française de Radio-Canada et les attentes des auditeurs francophones de cette région.
3867 Nous croyons que la façon la plus efficace et la plus économique de desservir cette région est d'utiliser la fréquence FM 89,3. En voici quelques raisons. D'abord ce canal est dans la bande éducative, soit la bande non-commerciale. Nous respectons ainsi les propos du Conseil dans l'avis public 1983-22 sur le Plan radiophonique à long terme de la Société Radio-Canada stipulant que nous devrions utiliser, dans la mesure du possible, des fréquences dans la bande éducative, non-commerciale.
3868 Deuxièmement, nous ne nous sommes pas opposés à ce qu'un radiodiffuseur privé utilise le 107,3, fréquence commerciale même si cette fréquence était réservée pour le service de la Chaîne culturelle dans cette région.
3869 Nous avons à nos frais surmonté les difficultés techniques afin de rendre possible l'utilisation de la partie éducative, non-commerciale de la bande FM
3870 Enfin, pour desservir la région de Victoria, c'est la façon la plus économique puisque nous pourrions installer ce service dans un site actuellement exploité par la Société.
3872 M. GROULX: En conclusion, nous croyons que, par cette audience publique, nous pourrons assurer enfin un service adéquat et efficace à Victoria et à l'Ile de Vancouver, étendre le service de Radio-Canada à la capitale de la Colombie-Britannique pour que cette communauté fasse partie avec le reste de la province par le biais de la Radio française de Radio-Canada en Colombie-Britannique, améliorer davantage les services radiophoniques aux francophones hors Québec, et compléter le dernier lien pour la radio française à suivre la route transcanadienne.
3873 Je vous remercie, Madame la Présidente, mesdames du Conseil. Nous sommes maintenant disposés à répondre à vos questions.
3874 CONSEILLÈRE NOËL: Alors je vous remercie pour votre présentation. Nous sommes tous, moi la première, concernés par le fait que la radio française doit se rendre un peu partout.
3875 J'aimerais juste clarifier quelques points avec vous. J'avais des chiffres que les analystes du Conseil nous ont fournis qui proviennent du dernier recensement de Statistiques Canada qui date un petit peu mais on nous permet dans une population à Victoria même, et là vous pourrez me dire que peut-être j'ai mal écouté quand vous avez parlé, de 1074 francophones. Vous nous avez parlé de 6 000 francophones pour victoria et de 30 000 personnes bilingues. Est-ce que vous pouvez me réconcilier ces chiffre-là?
3876 M. GROULX: Oui, tout à fait, je pense que vous parlez, Madame, du chiffre qui fait allusion aux francophones de langue maternelle dont la langue d'usage est toujours le français tandis que les chiffres que j'utilise sont les francophones de langue maternelle, c'est-à-dire le total des francophones de langue maternelle et quand j'utilise le chiffre de 30 000 je parle donc de francophones, c'est-à-dire de Canadiens d'expression francophone.
3877 CONSEILLÈRE NOËL: Je vous remercie. Mon autre question -- je n'aurai pas beaucoup de questions, je comprends très bien vos motifs, mais mon autre question porte sur les fréquences. Est-ce que vous préférez que je m'adresse à vous en français ou en anglais sur la question des fréquences?
3878 M. NEMES: En anglais, s'il vous plaît.
3879 CONSEILLÈRE NOËL: En anglais? On a parlé et on -- je m'excuse, je recommence.
3880 We discussed earlier in the presentation of CKAY of the possibility of using a different frequency, one of them would be 88.1 and I can understand that you have your English station on Malahat Ridge already and that would be an advantage for you to be located at the same place. But have you made any studies about the possibility of using 88.1 on Saturna Island? Because from what we could gather of the discussion earlier with Mr. Gardiner, 88.1 would give a clear signal in Victoria. It is not good for Duncan but it is good for Victoria. So could you comment on that?
3881 MR. NEMES: Yes. Due to the proximity of Channel 201 which is 88.1, Channel 6, it must operate from Saturna Island to coincide with Channel 6.
3882 In the past we had done some tests to see the coverage of an FM station from Saturna to Victoria and it proved that it wasn't successful. In the 1980s CFMS moved from Saturna to Greater Victoria due to the fact that there are terrible coverage problems, therefore, there is no good coverage from Saturna into Victoria but there is possible and acceptable coverage from Saturna to Duncan which was not tested yet.
3883 COMMISSIONER NOËL: So in your view from Saturna there is no good coverage for Victoria but there would be good coverage for Duncan.
3884 MR. NEMES: It is possible to have good coverage --
3885 COMMISSIONER NOËL: But not to Elizabeth -- what was the name of that place?
3886 MR. NEMES: Ladysmith?
3887 COMMISSIONER NOËL: Yes, Ladysmith.
3888 MR. NEMES: Again, in order to find out what coverage it can get, there has to be a test.
3889 COMMISSIONER NOËL: As you realize if you sat through the whole hearing yesterday and today, I think the whole issue revolves around what frequency can be used in the most efficient way to cover what territory. Would you be ready -- je peux la poser en français aussi. Est-ce que vous seriez prêts à vous asseoir avec les autres demandeurs de licence pour déterminer quelles sont les meilleures possibilités techniques pour accommoder toutes les demandes si on décidait, par exemple, d'accorder toutes les demandes?
3890 M. DOUCET: On est sans doute prêts à s'asseoir avec les autres radiodiffuseurs. Naturellement, on ne voudrait pas que dans une telle démarche que les fréquences du service public soit choisies au détriment de la demande qu'on fait actuellement dans la mesure où les objectifs qu'on poursuit actuellement avec cette demande-là sont respectés, on est prêts à s'asseoir avec eux et voir quel est le meilleur agencement possible qui peut accommoder.
3891 CONSEILLÈRE NOËL: Alors moi je n'ai pas d'autres questions, Madame la Présidente.
3892 THE CHAIRPERSON: I do. I just want to clarify. In your presentation today you refer to the frequency 89.3 and I am wondering if on page 15 --
3893 MR. GROULX: What page again, please?
3894 THE CHAIRPERSON: Page 15, second to last paragraph.
3895 MR. GROULX: I think that is a typo.
3896 THE CHAIRPERSON: Yes, thank you.
3897 COMMISSIONER WYLIE: It is also on the record, that is why. We just need to correct the record.
3898 THE CHAIRPERSON: If I could just get back to this frequency matter. You referred to CFMS that was located on Saturna, they had technical problems and had to move. Is that correct?
3899 MR. NEMES: That is correct.
3900 THE CHAIRPERSON: And was that a Victoria station?
3901 MR. NEMES: That was a Victoria station, yes.
3902 THE CHAIRPERSON: And when was this?
3903 MR. NEMES: In the 1980s.
3904 THE CHAIRPERSON: In the 1980s. Have there been any technical developments to refinements that may have changed since then?
3905 MR. NEMES: With regards to propagation, there is no technical development. However, as I mentioned yesterday, all the applications today for Victoria were based on CBC's initiative to try to see if a frequency allocated to Saturna can work in Victoria. Therefore, in 1997 we did test two frequencies, 213 which we are using today for English radio and 217 -- 217, you have applications right now from Okanagan Radio and the Corporation applied for the same frequency in Vancouver for Radio Three.
3906 THE CHAIRPERSON: Thank you. Madam Wylie, any questions? Thank you very much. That is all. Madam Secretary?
3907 MS VOGEL: Thank you, Madam Chair. This takes us to Phase II where the applicants reappear in the same order to intervene against other competing applicants. A reminder that ten minutes is allocated for each intervention. So I would invite CKAY Radio to come forward for their intervention.
3908 MR. DREW: Madam Chairperson and members of the Commission.
3909 Mon nom est Dick Drew. Je suis président de la station de radio CKAY située dans la région de la vallée Cowichan.
3910 La région de la vallée Cowichan se situe entre Victoria et Nanaimo. Une carte de cette région est incluse dans ma soumission. Je suis accompagné de mon épouse, Aline Drew, secrétaire de la compagnie. Nous possédons cent pour cent des actions de CKAY, 1979.
3911 Je suis aussi accompagné de Monsieur Tony Gardiner, ingénieur professionnel, président de Kensar Telecommunications Inc. qui pourra répondre à vos questions d'ordre technique. Monsieur Gardiner est l'un des ingénieurs les plus importants dans la radio-télédiffusion en Amérique du Nord.
3912 If you have read my intervention dated April 5, 1999, you will know, and I hope appreciate, the fact that I have avoided the sensitive, explosive issue of French-Canadian versus English-Canadian. Because I avoided it, do not be blind to its existence. Page two of my intervention points out that I am a French-Canadian and so is my wife Aline, so are our three children and our three grandchildren.
3913 I began my broadcast career in Quebec City in 1958. Read page two and you will see that if anything I am pro French-Canadian. My intervention is based on 89.7 being the only remaining FM frequency available to adequately serve the 74,000 people living in the nine communities of the Cowichan Valley Regional District and how CKAY needs 89.7 to survive and continue serving the nine communities of the CVRD -- a map is enclosed.
3914 These nine communities must have and deserve to have their own local FM radio station. My opposition to Radio-Canada is based solely on their underutilization of the last remaining valuable frequency. Three other frequencies are available to them, none of the three are practical for CKAY.
3915 My intervention points out that it is only a matter of time before CKAY's aging transmitters will require replacing. Should that occur, CKAY-AM would likely be forced to shut down forever. The 60 to 80,000 dollar cost of a new 10,000 watt transmitter for a small market stand-alone AM station is simply not a viable expense. These costs, combined with the continuing loss of AM listeners to FM, would not support it and that is why FM for CKAY is critical to ensure its continuance.
3916 CKAY has been searching for an FM frequency since 1993. There were none. When FM frequencies were allocated many years ago, the area between Victoria and Nanaimo was overlooked. Not one local use FM frequency was assigned. It is only now that Industry Canada and the British Columbia Department of Education are willing to release the FM education frequencies. It is only now that they are doing this so we are able to look expectantly and with some confidence to the future. I have here a letter from the Minister of Education, the Honourable Paul Ramsay, offering that frequency to us.
3917 As stated on page 4 of my intervention, I am not opposed to Radio-Canada establishing a repeater. I would support their bid for a repeater using one of three frequencies which are available to them. Broadcast engineer, Mr. Tony Gardiner, confirms that either will serve them well as a repeater for Victoria -- Channels 201, 205 or 217.
3918 Their underutilization of a valuable frequency is best supported when you review BBM audience figures of CBC/Radio-Canada French service in other major Canadian cities: Vancouver, CBUF. Their signal is heard from Nanaimo through to Victoria, I hear it in my car very well. It is available on cable radio, it is available to many, many people, many hundreds of thousands of people and yet in the fall survey of '98, their average quarter hour listeners were 200. Edmonton, CHFA, I come from Alberta, I know there is a lot of French people living there, that is how come I am French-Canadian. CHFA, in the fall survey 100 average quarter hour. Toronto, CJBC. A gazillion people live in that market. The fall '98 had 1900 people quarter hour. The survey before that they had 700, the survey before that 100 -- underutilization. The complete reports for Items 5, 6 and 7 of my April 5th intervention.
3919 CBUF-FM 97.7 is already available over the air in the CBRD and in Victoria. It is also carried on Shaw Cable in these two areas to approximately 60,000 homes; CVRD, 10,000 homes; Victoria, 50,000 homes. The source: Shaw Cable.
3920 Further evidence of underutilization of a valuable frequency can be found on page 12 of their application. Their estimates of mother tongue are in the 3000 uV/m area, English 87 per cent, French two per cent, others 11 per cent. In the 500, 86 per cent English, French one per cent, others 12 per cent.
3921 Rather than take your valuable time now, I would ask that you review at your leisure Items 8 and 9 located on page 6 of my intervention. They detail how I offered to work with Radio-Canada and the difficulty I had later when trying to see a copy of their application.
3922 Item 10 on page 6 points out that SOCAN royalties are at risk. Should CKAY-AM be denied 89.7 and be forced to eventually shut down, SOCAN Canadian talent would lose. However, if you assign 89.7 to CKAY we survive, we thrive and keep paying a percentage of gross revenue to SOCAN. That made a lot of sense to the people at SOCAN when I discussed it with them recently.
3923 Now, I would like to take my remaining time to thank Radio-Canada and I say this most sincerely. I thank them. Had they not applied against us, we, the staff at CKAY, would never have known to what enormous extent the community wants their own local radio station, CKAY, to survive, and how they are prepared to fight for it. The first inkling the community had that CBC/Radio-Canada was opposing their station -- and that is what CKAY is to them, their station -- was a small item in a weekly newspaper. Two days later, another weekly newspaper incensed at the thought of the CBC beating up on their local radio station published a story five columns wide under a double headline. You have a copy of that story. Other area newspapers picked up the story. It was as if lightning had struck our community. A fire storm of letters to the editor, phone calls to CKAY, some very irate, some very profane. Follow-up newspaper stories and letters to the CRTC created a groundswell of support for CKAY.
3924 Usually in small communities local newspapers could not care less about the success of the local radio station. Most newspapers would prefer the local radio station fail, leaving more advertising dollars for them. But the thought of a huge monolith, faceless government corporation from Ottawa called the CBC striving to force a member of the community out of business was just too much. They set competitive differences aside and rallied the nine communities of the CVRD.
3925 So I want to thank CBC/Radio-Canada for being a lightning rod, igniting our nine communities and rallying ordinary Canadians from all walks of life to fight for, to defend and to support their local radio station CKAY.
3926 These are ordinary Canadians from all ethnic backgrounds who live in our nine communities. Ordinary Canadians who quite frankly are fed up with high taxes, government bureaucracy and outsiders telling them what is good for them. These are ordinary Canadians spending their own hard-earned money on stamps and envelopes to write to the CRTC, send copies to Radio-Canada and CKAY. Unlike the two Vancouver-based groups who are appearing in support of radio-Canada -- one group funded by tax dollars from Ottawa, the other funded by tax dollars from Victoria -- the ordinary Canadians you heard from in support of our application receive no government funding, they don't want government funding, they just want what is rightfully theirs.
3927 Members of the CRTC, unless you have lived in a community with only one local, caring radio station, you will never understand the feeling of pride, possessive ownership and dependency people have towards their local radio station. If you feel Radio-Canada must expand into our area and if you believe they must live here in harmony with the majority of the public, many of whom you have heard from, the I respectfully suggest that you grant Radio-Canada permission to broadcast on one of the three frequencies mentioned earlier and you grant 89.7 to CKAY.
3928 Thank you. Merci.
3929 THE CHAIRPERSON: Thank you, Mr. Drew, Mrs Drew, Mr. Gardiner. Commissioner Wylie? No questions.
3930 MR. DREW: Thank you.
3931 MS VOGEL: I next ask the Canadian Broadcasting Corporation to come forward for its intervention.
3932 M. GROULX: Madame la Présidente, mesdames. Je m'appelle Robert Groulx, directeur de la radio française pour la Colombie-Britannique de Radio-Canada et je suis toujours accompagné de Paul Monty des Affaires réglementaires, de Sam Nemes de l'Ingénierie et de Denis Doucet de l'Exploitation nationale.
3933 Nous nous adressons maintenant à la demande de CKAY et nous nous proposons donc de présenter cette intervention dans la langue de diffusion de cette station.
3934 Madam Chairman, ladies and gentlemen of the Commission. In intervening against the application by CKAY, we will speak essentially on CKAY's choice of an educational, non-commercial FM frequency. In contrast with the CBC's efforts to open the educational, non-commercial part of the band in the area and, by consequence, to open the rest of the band as well and to avoid applying for a frequency in the commercial part of the band. There are a few points we made in intervention against OK Radio Group earlier that bear repeating.
3935 At this hearing, there is a public broadcaster fulfilling its role stated in the Broadcasting Act, and a private broadcaster performing no doubt a valuable service for his local community, both vying for the same FM frequency, an educational, non-commercial FM frequency.
3936 At first glance this appears to be a conflict between the objectives of the Corporation and the interests of another broadcasting undertaking, a conflict of two public interests.
3937 Yet this conflict could have been averted had the public broadcaster applied for an educational, non-commercial FM frequency and the private broadcaster applied for a commercial FM frequency. The down side would be, however, that there would be increased competition within the private sector for FM frequencies.
3938 The distinction between the educational, non-commercial portion of the FM band and the rest of the band is an important one and that is, there is a section of the FM band that was reserved to enrich diversity on the FM band, with the provision of public, educational, student, community, non-commercial programming.
3939 This distinction allows us to consider the CBC's application. It is to provide a public, non-commercial service. It is a service that responds to public policy regarding the extension of this public service everywhere in Canada. It will add a new programming service in Victoria and in a new language and thus add to programming diversity in Victoria and the southern tip of Vancouver Island.
3940 And in opposition, CKAY's application essentially to continue an existing commercial service on the portion of the band reserved to provide a different kind of service. In many areas, it is not possible to make such an educational, non-commercial versus commercial distinction. The CBC occupies a number of commercial FM frequencies where educational frequencies are too few or too restricted or where they are unusable because they might interfere with a television station broadcasting on Channel 6. Conversely, a number of commercial stations broadcast on educational, non-commercial FM frequencies where there are no commercial FM frequencies left.
3941 But on Vancouver Island, both CBC and private broadcasters are in a position to make that distinction. In fact, the CBC made that distinction possible with the help of Industry Canada, OK Broadcast Radio Group and CHEK-TV which broadcasts on Channel 6 on Saturna Island. We have spent time, resources and money to free the educational, non-commercial portion of the band and by consequence we have decongested the rest of the band.
3942 As a rule the CBC has avoided applying, whenever possible, for commercial FM frequencies that private broadcasting can use as the Commission asked it to do. The fact that we have not intervened against those applicants who have applied for 107.3, even though it has been identified in the CBC's Long Range Radio Plan, is further testimony of our efforts not to impede private radio.
3943 And so today, when the CBC has made all attempts to avoid competing with private broadcasters for FM frequencies, it now finds that it is private broadcasters that are competing with it, rather than competing amongst themselves.
3944 We believe CKAY should have followed the latter course of action. If CKAY is to provide a single, perhaps accidentally in Victoria, should it not compete with private applicants in Victoria for a commercial frequency?
3945 In summary, we submit there is a choice in assigning an educational, non-commercial FM frequency either to a new public, non-commercial service that would contribute to programming diversity, or to an existing, albeit worthwhile, commercial service. We submit the ultimate test should be which one would make best use of this educational, non-commercial FM frequency?
3946 Le tout respectueusement soumis, Madame la Présidente, mesdames du Conseil. Nous sommes maintenant à votre disposition.
3947 THE CHAIRPERSON: Thank you, Mr. Groulx, gentlemen. We have no questions. Thank you. Madam Secretary?
3948 MS VOGEL: Thank you, Madam Chair.
3949 THE CHAIRPERSON: Oh, I wonder if this might be an appropriate time to take a ten-minute break. So we will reconvene at 4:10.
--- Short recess at / Courte suspension à 1600
--- Upon resuming at / Reprise à 1620
3950 THE CHAIRPERSON: Ladies and gentlemen, we are ready to resume. Madam Secretary?
3951 MS VOGEL: Thank you, Madam Chair. We are starting Phase III which is where the appearing interveners make their presentations to the Commission. And again ten minutes is allocated for each presentation.
3952 Our first intervener this afternoon are the CKAY-AM Employees. Would you come forward, please.
3953 MS HAMILTON: Madam Chair and Commissioners. Scott Brown is unable to attend due to an expected commitment back at the station and Ryan Awram will be attending on his behalf.
3954 My name is Tracy Hamilton and I am the General Manager and Sales Manager of CKAY. I have been employed at CKAY for five years. I moved to Duncan five years ago, bought a home and presently have my 20-year-old son living with me while he attends university in Victoria. I tell you this to reinforce with you that I want to stay in Duncan and remain at CKAY. I speak on behalf of the other members of the staff who have lent their names to our letter opposing the CBC application. Joining me is Ryan Awram, an on-air personality with CKAY.
3955 Most of our staff have homes, are raising families, paying taxes and wish to remain employed at CKAY. Since CKAY is an entry level radio station, some of our staff are less permanent as they await their big break and move on to fame and glory.
3956 Our letter of March 29th is attached. We urge you to read it and study the implications of denying CKAY the FM frequency which we so desperately need to compete and to survive. It is a well-known fact that the Cowichan Valley is an area of very high unemployment. Ten jobs may seem insignificant to Ottawa, but a loss of ten jobs in the Cowichan Valley is critical.
3957 Should CKAY be denied 89.7 it will only be a matter of time before CKAY is forced to shut down. As you have heard owner Dick Drew state here -- and can read in the various applications he has filed with you -- CKAY's transmitter is very old and will soon need replacing. Combined with the shift of AM audiences to FM, it is a recipe for disaster. Should CKAY be forced out of business -- and that is what you will be doing if you approve the CBC application -- you will be killing at least ten permanent jobs in the Cowichan Valley and that is what our appearance here today and the staff letter opposing is all about. It is about jobs -- our jobs.
3958 We have been overwhelmed at CKAY by the outpouring of support from our listeners. Although most of the letters sent to you have focused on the important role CKAY plays in the community and the need to expand our signal coverage with FM, some letters have mentioned the important role CKAY plays in providing jobs and the impact we have on the local economy. Let Ryan Awram quote from a letter sent to you by Mr. Raymond Bush.
3959 MR. AWRAM: Thank you, Madam Chair and Commissioners. This letter is from Mr. Raymond Bush:
"As a financial consultant in this Valley for many years, I have witnessed the remarkable contribution by CKAY. It represents a local investment in the community which has a direct impact on the local economy. For many of us, it is the only station we listen to daily. This is a time for the CRTC to be sympathetic towards local listeners. Please grant CKAY 89.7." (As read)
3960 In another letter, Mr. Reed Elley, our federal Member of Parliament, he states to you in this letter, and I quote:
"CKAY provides a valuable service to all of the nine communities of the Cowichan Valley Regional District. Equally important is the fact that they employ people who live here, have families here, raise children, pay taxes and contribute in many important ways to the betterment of these communities. AM is quickly becoming obsolete."
3961 Mr. Len Goodman, chartered accountant, he writes:
"The French-speaking population of our area is only one per cent of the total population. The CBC already has a French frequency in Vancouver that is strong in this area. We would be disappointed to think that our local radio station may suffer by losing this FM frequency to a repeater for an already existing signal, especially when there are so many jobs at risk. We need CKAY to continue its strong local presence. We strongly support its application for an FM frequency." (As read)
3962 Mr. Lance Stewart is a restaurant owner and an Executive Director of the Duncan Business Improvement Society. His two-page letter to you covered many aspects of CKAY's important role in the community including, and I quote:
"I can see CKAY as an essential service. I can recognize CKAY as a force in our area that the community absolutely relies on for local information. I view this station as a valuable charitable service. CKAY is community. The last facet of my view of CKAY is that it is a business. That is one thing that I always forget -- CKAY needs to operate as a business. The whole time that CKAY owners and its employees have been volunteering for the community and working their way into all of our lives, they were establishing themselves as our radio station with a solid business plan. If CKAY receives this frequency, the Cowichan Valley will most certainly flourish. Please make the logical choice. Give it to the little station that has earned it." (As read)
3963 And finally, the last letter from Mr. Bernie Dinter, he is a business person in the Valley:
"CBC has an important role in keeping Canada informed about their culture and country but not at the expense of harming a local private broadcaster. I understand there are three other FM frequencies available for CBC/Radio-Canada that will provide them with the same coverage. It is my hope that as you deliberate these points in distant Ottawa, that you consider the feelings of the local community members."
3964 MS HAMILTON: These were quotes from only a few of the many letters sent to you. We hope you read them all and get a true sense of the important role CKAY plays as a community leader and a provider of jobs -- our jobs.
3965 I am going to kind of go off my speech part here, just for one moment. I have sat here -- and this is actually my first time in front of the CRTC -- and I have listened to chain radio stations, I have listened to everything, I have listened to it from a dollar value. The Cowichan Valley is devastated right now with unemployment. I really do not want to be one of those unemployed people who also is residing in the Cowichan Valley with a home. How many times we can keep coming back, how many times as an independent broadcaster we can afford to come back and keep applying for FM? I don't know. I don't know that answer but it is our jobs and where do we go from here?
3966 So you find attached a copy of the March 29th letter of intervention. Please take a few moments to read it. I repeat: it is about jobs -- our jobs.
3967 We, the staff of CKAY, respectfully request you deny the CBC application and grant 89.7 to CKAY because it is about jobs -- our jobs.
3968 Thank you.
3969 THE CHAIRPERSON: Thank you very much. Madam Wylie?
3970 COMMISSIONER WYLIE: Good afternoon, Ms Hamilton, Mr. Awram. I have already read your intervention and I listened with interest to your oral presentation today and I don't think there is any need for me to ask any questions and take away from the eloquence of your presentation. So we thank you for appearing.
3971 MS HAMILTON: Thank you.
3972 THE CHAIRPERSON: Thank you very much.
3973 MR. AWRAM: Thank you.
3974 MS VOGEL: Madam Chair, the second intervener, Conseil scolaire francophone de la Colombie-Britannique -- excuse my French, please -- they have indicated that they can't attend today so we will be moving on to intervener number three.
3975 THE CHAIRPERSON: Thank you, Madam Secretary.
3976 MS VOGEL: And I would like to call La Fédération des francophones de la Colombie-Britannique.
3977 MME BERNIER: Madame la Présidente, mesdames les membres du Conseil. Mon nom est Nicole Bernier, je représente ici la Fédération des francophones de la Colombie-Britannique. Je suis responsable des communications.
3978 Je suis ici pour appuyer la demande de la Société Radio-Canada et pour souligner les raisons qui nous motivent à appuyer cette demande, soit l'intérêt ou le besoin vital pour la communauté francophone d'avoir accès au signal de la radio en français dans la région de la capitale provinciale.
3979 Qu'on pense, bon, il y a plusieurs francophones qui vivent dans cette région. Vous savez que la région de Vancouver et de Victoria c'est là que 55 pour cent de la population francophone de la Colombie-Britannique vit dans le Vancouver métropolitain and la région de la capitale provinciale. C'est important pour -- en général la population de la Colombie-Britannique est un peu dispersée, mais il y a quand même une concentration assez importante de francophones dans la région.
3980 C'est important pour la communauté de pouvoir avoir accès aux services. Qu'on pense, par exemple, à l'école Brodeur à Victoria. Les jeunes pour l'instant n'ont pas nécessairement accès aux émissions faites à leur intention. Je pense à "275-Ados", par exemple, ou "275-Allo". Bon c'est une réalité des francophones de cette région que d'être coupés d'un service qui est offert aux jeunes francophones en situation minoritaire dans d'autres régions du pays et c'est très important d'être capables de se relier à l'ensemble de la communauté francophone du pays et c'est vrai pour les jeunes et c'est vrai aussi pour les francophones qui vivent dans la région. C'est vital pour eux d'être capables d'avoir accès à l'information en français mais aussi de pouvoir se reconnaître dans la programmation locale.
3981 Radio-Canada représente un lien vital pour la communauté, c'est-à-dire d'être capable de se reconnaître dans les institutions, d'être capable de savoir les activités qui se passent et qui la touchent de près en tant que communauté. Cette réalité-là n'est pas reflétée nécessairement dans les médias anglophones, alors c'est important de ce point de vue-là pour l'identité même de la communauté.
3982 Deuxième point que j'aimerais apporter qui motive notre appui à demande de la Société Radio-Canada c'est le fait que la Société a l'obligation légale de diffuser sa programmation en français et en anglais à l'ensemble du pays et la Fédération des francophones revendique ce type de services pour la Colombie-Britannique depuis 1972, ça fait depuis 1972 qu'on demande l'accès à ces services en français sur l'ensemble du territoire de la Colombie-Britannique. Alors ça fait plusieurs années que nous le demandons et c'est très important que ça se fasse bientôt et le fait que les autres fréquences ne nous garantissent pas qu'il y aura ces services-là, que ça sera possible techniquement, et que ça peut nous imposer d'autres délais nous porte à croire que c'est important de donner cette fréquence-là à la Société Radio-Canada.
3983 Il faut donner à la Société Radio-Canada les moyens de remplir ses obligations légales et ici on a un bel exemple, et c'est essentiel, c'est même une exigence du CRTC de desservir la région de la capitale provinciale, alors il faut leur donner les moyens et je crois qu'il y a une urgence d'agir à ce niveau-là.
3984 J'ai entendu d'autres intervenants vous inviter à faire un choix logique. Je n'ai aucun doute que vous allez faire un choix tout à fait rationnel. Vous savez que nous on vous invite à faire un choix -- bon, il y a deux sortes de rationalité, la rationalité des valeurs et la rationalité des intérêts. On vous invite à faire un choix de rationalité des valeurs, c'est-à-dire on sait que comme nation, comme pays, on s'est donné comme valeur collective d'avoir deux langues officielles et d'appuyer les minorités linguistiques à travers le pays. Alors c'est une valeur collective qu'on s'est donnée qui va au-delà des batailles de cotes d'écoute, des intérêts mercantiles, des intérêts autres que les valeurs en tant que telles.
3985 Au coeur de l'identité canadienne on trouve le fait qu'on se soit dotés de deux langues officielles et on vous demande de nous donner les moyens, en tant que minorité linguistique ici, de pouvoir se développer, de pouvoir développer nos communautés et c'est essentiel pour nous que d'avoir des services en français de radiodiffusion.
3986 Merci beaucoup, Madame la Présidente et les membres du Conseil.
3987 THE CHAIRPERSON: Thank you.
3988 CONSEILLÈRE NOËL: Je vous remercie, Madame Bernier, de votre intervention. Je pense que le Conseil est très, très conscient du mandat de la Société Radio Canada, ça ne nous échappe pas. Ce qu'on a à concilier ce sont vos besoins et les besoins de survivre d'une station beaucoup plus petite et je pense qu'on va faire tous les efforts qui sont en notre pouvoir pour s'assurer que tous les besoins sont desservis. Je vous remercie.
3989 THE CHAIRPERSON: Madam Secretary?
3990 MS VOGEL: Thank you, Madam Chair. We are now starting Phase IV of this process where applicants appear in reverse order to rebut or comment on interventions. So I would invite CBC to come for their rebuttal.
REPLY / RÉPLIQUE
3991 M. GROULX: Madame la Présidente, mesdames du Conseil. À moins que vous n'ayez des questions supplémentaires à nous adresser, nous n'avons pas de déposition supplémentaire à faire.
3992 CONSEILLÈRE NOËL: En fait moi j'aurais une question supplémentaire. Peut-être que vous pouvez inviter votre ingénieur à vous rejoindre. Je pense que la question s'adresse à lui, à moins que vous ne soyez en mesure de me répondre.
3993 M. GROULX: Je pourrais tenter une réponse, mais je préfère qu'elle vienne de lui.
--- Rires / Laughter
3994 COMMISSIONER NOËL: I would like to know, you mentioned earlier in the process that the station-to-station which was transmitting our of Saturna Island into the Victoria market had to reestablish itself somewhere else, it couldn't transmit in a proper fashion on an FM band out of Saturna Island.
3995 Could you tell me if there would be, and we noted that you are not transmitting in stereo on "La Première chaîne", it is a mono station, would there be the same problems for a mono station transmitting out of Saturna rather than a stereo station? Is the technical problem the same with a mono or a stereo transmitter?
3996 MR. NEMES: Due to the terrain in the area, we expect to have the same problems with mono service as stereo with regards to the multipart and the coverage. We also, a few years ago, we tested to see the coverage and the quality of coverage by checking the TV audio of Channel 6 out of Saturna and we experienced a lot of multipart interference and they transmit in mono.
3997 COMMISSIONER NOËL: Thank you. That was my only question.
3998 THE CHAIRPERSON: I believe Commissioner Wylie has a question.
3999 CONSEILLÈRE WYLIE: Soit vous, Monsieur, ou Mr. Nemes.
4000 What is your understanding of the availability of the commercial as opposed to the non-commercial, educational band? What is your understanding of the rules that govern that and who has the power to release the difference between the two. How does it occur that commercial frequencies are used by the CBC and non-commercial frequencies are used by commercial broadcasters? How does is that regulated or governed and what are the rules, in your view? Because much was made in your presentation cet après-midi de l'importance de faire la distinction entre les deux, et cetera. Il semblait que vos arguments étaient basés, en grande partie, sur cette distinction. Alors je voudrais comprendre comment vous vous comprenez la différence entre les deux et comment se fait-il que la bande commerciale est utilisée pour des raisons non-commerciales et vice versa?
4001 M. MONTY: Je pense que nous reconnaissons que lorsqu'il n'y a pas de fréquence non-commerciale de disponible à ce moment-là, par la force des choses, les diffuseurs publics peuvent aller à la bande commerciale. Inversement aussi, et ça c'est produit, lorsqu'il n'y a pas de fréquence commerciale disponible, il y a des diffuseurs privés qui ont obtenu l'autorisation d'aller à la bande non-commerciale.
4002 CONSEILLÈRE WYLIE: Et de qui obtient-on l'autorisation?
4003 M. MONTY: Bien évidement, la ligne directrice c'est la bande non-commerciale éducative qui est vouée à la diffusion publique communautaire. Alors le CRTC peut, évidemment, faire ses choix à la lumière de cette...
4004 CONSEILLÈRE WYLIE: Nous, nous n'attribuons des fréquences telles. Nous attribuons des licences pour utiliser des fréquences mais ce n'est pas nous qui attribuons les fréquences. C'est soit "Industry Canada", le ministère de l'Industrie. Quand vous avez un certificat technique à ce moment-là vous venez au Conseil pour une licence pour exploiter la fréquence mais je comprends mal -- soit que je sois mal informée -- votre position qu'il y a une différence si distincte entre les deux.
4005 Moi j'avais cru qu'en partie c'était aux ministères des provinces qu'on demandait -- est-ce que vous avez besoin de ces fréquences pour des buts éducatifs?
4006 M. MONTY: Mais ce n'est pas strictement éducatif.
4007 CONSEILLÈRE WYLIE: Mais je comprends mal la distinction que vous faites et comment on s'en départit parce que dans certains cas ce n'est pas qu'il n'y a plus de fréquence du tout.
4008 M. MONTY: D'abord ça ne serait pas les provinces à mon avis car ce sont des fréquences qui sont éducatives et non-commerciales.
4009 CONSEILLÈRE WYLIE: Oui, mais je croyais moi que le ministère de l'Industrie s'informait d'habitude vis-à-vis les provinces pour voir s'ils avaient des buts pour l'utilisation de ces fréquences et vous dites que c'est quand il n'y a pas d'autres fréquences accessibles mais il me semble qu'il y a eu des cas où il y avait des fréquences mais quand même on a utilisé une fréquence non-commerciale pour des buts commerciaux.
4010 M. MONTY: Bien il faudrait remonter à nos dossiers. En fait les quelques cas qu'on peut se rappeler c'était lorsque ce n'était pas possible d'utiliser une fréquence commerciale, qu'une entreprise commerciale pouvait aller à cette partie-là de la bande.
4011 CONSEILLÈRE WYLIE: Alors la distinction n'est peut-être pas aussi claire que celle que vous faites.
4012 M. MONTY: C'est-à-dire on reconnaît que ce n'est pas étanche.
4013 CONSEILLÈRE WYLIE: Notre intérêt, nous évidemment, est d'essayer de nous assurer de desservir tous les besoins et de nous assurer qu'il y a coopération de part et d'autre pour que ce soit possible alors c'est la raison pour ma question parce que si on s'attache à cette distinction-là plutôt que d'essayer de voir s'il y a des solutions pour que tous les gens soient accommodés, à ce moment-là on n'y va pas de la même perspective.
4014 M. MONTY: Bien j'étais pour dire exactement ça. S'il n'y a qu'une fréquence commerciale disponible et vous voulez attribuer plus d'une licence commerciale, évidemment nous reconnaissons que cette distinction ne peut s'appliquer là. Il y aurait un manque de fréquences commerciales et à ce moment-là...
4015 CONSEILLÈRE WYLIE: Oui parce que nous, en ce moment, nous essayons d'examiner quelles sont les portes de sortie, les possibilités d'accommoder le plus de parties possibles dans cette situation qui semble chevaucher et Victoria et Duncan.
4016 M. MONTY: Et à ce moment-là nous pouvons reconnaître que la distinction ne peut plus s'appliquer...
4017 CONSEILLÈRE WYLIE: Oui, et qu'il s'agit d'essayer de voir s'il y a des solutions possibles pour accommoder tout le monde. Je vous remercie. Je ne suis pas certaine moi non plus. Je vous posais la question de bonne foi. C'est parce que moi j'ai toujours compris qu'il n'y avait pas de distinction si étanche que ça entre l'utilisation de ces deux bandes.
4018 M. MONTY: Et effectivement je pense que pour résumer notre position c'est lors que cette distinction est possible, oui il devrait y en avoir mais lorsque ce n'est pas possible, évidemment ce n'est pas si étanche.
4019 CONSEILLÈRE WYLIE: Alors s'il y avait possibilité de coopération quelle qu'elle soit vous seriez ouverts à examiner les possibilités pour accommoder le plus de parties possibles et de rencontrer tous les besoins possibles.
4020 M. MONTY: Bien je pense que l'engagement de Denis Doucet tantôt était clair.
4021 CONSEILLÈRE WYLIE: Oui, nous vous remercions. Merci.
4022 MR. NEMES: If I may add, in the Canadian language or Canadian allotment band they make a distinction between educational channels and commercial channels. When you check the manual, you will see that educational channels are separated from the commercial channels.
4023 COMMISSIONER WYLIE: I don't deny the distinction. What I am puzzled about is how it comes about that commercial frequencies are used by non-commercial operators and vice versa and what are the rules governing that and whether it is as rigid a distinction as I would have been led to believe, perhaps, by your presentation.
4024 So I am not questioning that there is not a distinction, I am questioning or wanting your position on what you see leads the use of commercial frequencies by non-commercial operators and vice versa.
4025 MR. NEMES: I believe that priority should be given to non-commercial operators for the educational band. That is the priority. After that, if there are other available frequencies, I guess --
4026 COMMISSIONER WYLIE: Yes, yes, but that is a judgement to be made. What my question was, was what are the rules, whatever it is they are that one would make that distinction, what would be the basis for the distinction? But I thank you for your answers. Thank you.
4027 THE CHAIRPERSON: I believe legal has a question.
4028 MS MOORE: Thank you, Madam Chair. From an engineering perspective, in your view, is there a difference in the nature or level of interference between mono and stereo?
4029 MR. NEMES: With regards with the nature of interference to Channel 6, nature of interference to other FM frequencies, no.
4030 MS MOORE: There is no difference in your view in a need for a level of interference?
4031 MR. NEMES: When you analyze a certain frequency, the analysis is not based on a stereo service or a mono service. The analysis is based on interference is just a frequency regardless of the operation, if it is mono or stereo.
4032 M. BLAIS: Je voulais savoir si vous avez exploré -- là vous faites une demande pour fournir un service dans cette zone-là sur la bande FM. Est-ce qu'il y a des solutions que vous avez explorées sur la bande AM qui auraient pu être poursuivies?
4033 MR. NEMES: Can you please repeat it in English?
4034 MR. BLAIS: Sorry. I was wondering, obviously you are asking to have access to the FM frequency. I was wondering as part of your thinking on solutions whether you explored AM as a solution?
4035 MR. NEMES: A few years ago when we were thinking of applying for the English service, yes we hired a consultant and on the file we have a report from the consultant. There is one possibility to go to AM co-cited with CKDA, using the same antennas or modifying their antenna system and the cost to implement that AM station was close to 800,000 dollars.
4036 MR. BLAIS: I am thinking particularly in light of the fact we were hearing applications for some flips with the Victoria market. Would there be opportunities there? Were the Commission to approve some of those flips there may be some frequencies that would open up, I am not sure if that is an option for you.
4037 MR. NEMES: We are applying for an FM frequency, not for an AM.
4038 M. GROULX: Et si je peux rajouter un élément. La radio française en Colombie-Britannique a plus de 30 ans d'existence sur la bande FM, partout sur l'ensemble de son territoire parce que les habitudes d'écoute sont particulièrement fortes même si elle n'est pas très bien disponible dans la région de Victoria. Je pense que ce serait un changement d'habitude particulièrement important et pas très favorable au développement de l'écoute de l'auditoire francophone.
4039 MR. BLAIS: Je ne nie pas que ce n'est pas la solution idéale, mais nous sommes toujours en train de trouver des solutions de compromis qui peuvent maximiser de part et d'autre les intérêt de tout le monde. C'est pour cela que j'explorais cette possibilité-là. Je réalise que ce n'est pas votre première option, mais je voulais savoir si vous l'aviez explorée et si je comprends bien vous me dites que c'est une option que vous n'aimez pas par rapport à la qualité du son.
4040 M. GROULX: Je ne pense pas qu'il est nécessaire de revenir sur tout ce que vous avez déjà entendu sur les difficultés du AM, mais aussi en particulier un des éléments importants que M. Nemes vient de soulever, c'est le coût d'implantation et le coût d'exploitation qui est considérablement plus élevé.
4041 M. BLAIS: Merci.
4042 THE CHAIRPERSON: I believe Commissioner Wylie has a question.
4043 COMMISSIONER WYLIE: So there will be -- there may be, depending on how the Commission makes its decisions -- possible installations and AM frequencies available and Mr. Nemes to say we applied for an FM frequency, if the Commission were to judge that it wants to accommodate a number of parties, there are commercial operators operating talk/radio stations on the AM band and would you agree that "La Première chaîne" is not as much musical as "La Deuxième chaîne".
4044 M. GROULX: L'orientation de programme qui est prise de plus en plus par la Première chaîne est plus orientée vers le soutien sur la bande FM que sur la bande AM.
4045 CONSEILLÈRE WYLIE: Alors si c'était une solution pour vous, vous n'implanteriez pas le transmetteur si vous deviez le faire sur la bande AM?
4046 M. GROULX: Ce n'est certainement pas notre premier choix.
4047 CONSEILLÈRE WYLIE: Non, mais je comprends bien. Vous avez évidemment faire une demande sur une fréquence FM que ça ne serait vraiment pas votre premier choix mais vous n'avez rien de plus à dire sur la possibilité de cette utilisation-là parce qu'on accommode dans les marchés là où on le peut le plus d'implantations possibles et ça a été vrai pour Radio-Canada, ça a été vrai pour plusieurs parties.
4048 On fait ce qu'on peut pour accommoder les gens d'une façon raisonnable alors c'est pour cela qu'on explorait cette possibilité.
4049 M. DOUCET: Si vous me le permettez, je ferai juste un retour sur les récentes audiences que la Société a eues devant le Conseil dans d'autres marchés, celui de Montréal en particulier, celui de Québec où on a démontré la programmation actuelle de la première chaîne qui n'était plus adéquate pour une bande AM et je pense que la plupart des radiodiffuseurs reconnaissent que la bande AM est de plus en plus évacuée au profit de la bande FM. Donc si on veut être cohérents avec le développement de la Première chaîne actuellement, où on a demandé plusieurs changements de la bande AM à la bande FM, on aurait une incohérence dans notre approche en prétendant que pour Victoria c'est un marché particulier où tout à coup la bande AM pourrait répondre aux besoins.
4050 COMMISSAIRE WYLIE: Mais la cohérence n'est pas toujours possible.
4051 M. DOUCET: Ça je l'avoue mais naturellement la question de coûts, comme Robert l'a mentionné, va être un élément très significatif. Actuellement dans notre budget d'immobilisation en a les argents nécessaires pour faire une implantation FM dans un site qui existe actuellement. Si nous devons développer un nouveau site, nous devons réévaluer complètement cette demande.
4052 COMMISSAIRE WYLIE: Je vous remercie.
4053 CONSEILLÈRE NOËL: Juste une petite question additionnelle. Je pense que s'il y a deux demandes, ce qu'on appelle communément des "flips" dans le jargon, il y aurait donc deux séries d'installations AM disponibles à bon compte peut-être. Alors c'est une suggestion que je vous fais.
4054 M. DOUCET: Je l'entends. Il y a plusieurs "flips" de toute façon AM à FM qui se produisent actuellement mais en terme de coûts d'exploitation annuels une fréquence AM coûte beaucoup plus cher qu'une fréquence FM et l'investissement qu'on devrait faire en exploitation pour cette station de Victoria serait plus significative que ce qui est prévu actuellement et pourrait peut-être compromettre l'exploitation de d'autres services dans d'autres communautés.
4055 Ce sera sans doute un sujet qui sera repris lors du renouvellement des audiences pour les réseaux, mais je crois qu'il faut tenir compte de l'ensemble du service qu'on a à donner et des coûts que chaque région représente dans l'ensemble. Donc c'est pour ça que je dis on devra réévaluer le coût de cette installation-là par rapport aux autres besoins qu'il y a dans le pays.
4056 THE CHAIRPERSON: Thank you, gentlemen, very much.
4057 MS VOGEL: I would now invite CKAY Radio to come for their rebuttal.
REPLY / RÉPLIQUE
4058 MR. DREW: Thank you very much and we will respect that this has been a long day and will keep our comments very short. In 41 years in the broadcast business, I finally heard CBC utter the word "cost". I had never that uttered by someone at the CBC before and it was wonderful to hear them say that AM is too costly to operate which is very true. The hydro bills alone are staggering. So I thank them for that.
4059 During the break, I was interviewed on CBC/Radio-Canada for the six o'clock news tonight on television and probably on radio and the interviewer asked me -- and it was his words, not mine -- if I felt like David against Goliath. Now if this is broadcast on the CBC, he will likely lose his job for having raised the subject but I feel like David versus Goliath in this situation.
4060 We don't have the resources to take tests and tests. We spent a lot of money testing what we have already since 1993. Just a couple of very, very quick comments.
4061 The educational frequencies -- I keep hearing that it is educational, educational. Well I like to think that we are educational. We are the only service in the Cowichan Valley to those people and we educate them. We tell them what time it is, we tell whether weather storms are coming, we tell them when their schools are being closed, when their schools are open, we tell we have a half hour program every day, an educational program every morning, from 8:30 to 9:00.
4062 The other morning, we had a half hour program, we had experts in, talking about the gypsy moth situation. Now this may not mean anything to you people but on Vancouver Island this is a critical situation. There is going to aerial spraying over the cities of Duncan and Victoria. Some people are in favour or it, many people are opposed, many are confused and you are looking at one. I really don't know is it good or is it bad, but we had experts in the studio. I think that was very educational. Much of the stuff that we do, the broadcasting we do, is educational.
4063 So I would like to respectfully say, let's forget what is educational and what isn't educational. When the Minister of Education writes a letter saying, "Hey, we think what you are doing is wonderful and we support your bid for that FM frequency", I think that is an endorsement. That letter is not on file with you people, I am sorry, I never thought to file it with you but it is on file with Industry Canada and it is signed by the Minister of Education, The Honourable Paul Ramsay. I think that answers that question.
4064 There is another thing that hasn't been brought up here. The CBC may soon become commercial. Does that mean that CBC will surrender all of their frequencies because now they are not holier than thou? They are talking about becoming commercial, it is in the papers, it is in their submissions. Does that mean they will surrender their licences because now they are carrying commercials?
4065 I stand to be corrected, but is Radio-Canada in Quebec not allowed to carry commercials? There were years ago. I am not sure if they are now but when I was working in that area they carried commercials. They don't? Oh, okay.
4066 I get back to underutilization, as I mentioned in my remarks. An average quarter hour of 100 people in a city the size of Vancouver with a signal that goes all through southern B.C. and yet only 100 people are listening on an average quarter hour is underutilization. That frequency can be better used over here.
4067 They have wrapped themselves in the Canadian flag and I am offended at that. They say, "You have to fulfil your legal obligations" and I am offended at that because what about the legal obligations to the anglophones in our community to have service? Do they now have legal rights? I believe they have legal rights and I am offended that they would bring the Canadian flag out and wrap around their shoulders.
4068 My wife made an interesting comment over lunch. She speaks English with a fairly broad accent and Aline is a very astute person. We have been married a long time and she keeps shocking me sometimes with her statements, and she said, "You know, if Radio-Canada gets 89.7 and we don't, I am moving back to New Brunswick because it will be very uncomfortable for anyone with a French accent in our area". And I am offended when my wife has to say that. I am hurt. I don't ever want this country to reach a point where someone with a French accent, or with an Indian accent, or with a Swahili accent, feels uncomfortable living in their community.
4069 They said, "Why didn't they go for 107?" We looked at 107, five or six years ago. We can't move 107. It won't go north of the Malahat where we have to serve. 89.7, at the risk of spending another $100,000 which I certainly don't have to find another frequency, 89.7 works, the others don't and I respectfully request that you give us 89.7, give them another one of the three and let us all live in harmony.
4070 Tony, I believe you have some remarks.
4071 MR. GARDINER: Just a couple. First of all, Dick, you did exaggerate my reputation and experience but thank you for that anyway.
4072 MR. DREW: Wait a minute. According to your invoices, you --
4073 MR. GARDINER: But I have been practising engineering and have been designing AM and FM stations in British Columbia since 1969 and it is not the time and place to get into an engineering argument, but Commissioner Noël, you did bring up the CFMS situation and you talked about stereo versus mono.
4074 Approximately 12 years ago one of our clients came to us and wanted an FM station in Squamish and the company was called, Mountain FM, many people in the room will be well aware of it, Louis Potvin, and we did tests at the time -- we already has suspicions because we had seen it with stereocasting at some of the larger Vancouver stations where we started off with a stereo station and we backed off to mono because clearly the mono coverage was far superior to the stereo coverage.
4075 So while I am not saying that you recommend that the CBC go back and consider Saturna Island with a mono FM transmitter, it is something they may wish to look at because as I recollect -- and a gentleman who is from Victoria pointed this out to me before this hearing started -- CFMS, I believe, was stereo and there is no question that you will have far more interference and coverage problems with a stereo signal than with a mono signal and I stand on record in saying that based on experience.
4076 Thank you.
4077 COMMISSIONER WYLIE: Mr. Gardiner, may I ask you the same question I asked Mr. Nemes and the CBC panel. What is your view of how the distinction between the commercial and non-commercial band is managed by Industry Canada?
4078 MR. GARDINER: As you have already said, Commissioner, the band that was allotted was created by Industry Canada -- at the time the Department of Communications -- and the lower portion was put aside, channels 201 to 220 for educational use -- and I have never seen any further breakdown on their definition of what educational is.
4079 I have heard at Industry Canada, people at high level saying, "Well in our opinion when applicants come for frequencies in that band, they should have the support of the provincial government in which they are applying for a frequency". If that is the case, I think Mr. Drew has that, but I can't go any further. But I would like to make it clear that they are not calling it a non-profit band and I think there are already some precedents for assigning commercial broadcasters into that band.
4080 COMMISSIONER WYLIE: Yes, and vice versa.
4081 MR. GARDINER: And vice versa, of course. Absolutely across the country.
4082 COMMISSIONER WYLIE: Thank you. It is something, perhaps, I should educate myself further on but it was never clear, very clear to me, what the distinction was for Industry Canada's certification.
4083 MR. GARDINER: I am not sure it has been clear to a lot of people.
4084 COMMISSIONER WYLIE: Well, if you have been at it since 1969 and you don't know, I don't feel so badly.
4085 Thank you.
4086 THE CHAIRPERSON: Thank you. Thank you very much gentlemen. Madam Secretary?
4087 MS VOGEL: Thank you Madam Chair. Item 10 on our agenda is an application by Community Communications Ltd. for a broadcasting licence to carry on an English-language low power specialty FM radio programming undertaking at Surrey, operating on the frequency 107.3 MHz, channel 297LP, with an effective radiated power of 27 watts.
4088 The applicant proposes to provide a news/talk service with a minimum of 80 per cent of the broadcast week devoted to Category 1 spoken word programming. Whenever you are ready.
PRESENTATION / PRÉSENTATION
4089 MR. MAcNAUGHTEN: My name is George MacNaughten. I represent Community Communications Ltd.'s application. Before I actually touch on our presentation, I would like to ask those of you who are returning to the Hull office, presumably in the next day or so, if you would express our sincere condolences to the Touchette family. Marcel Touchette's sister who died recently, we were informed on Friday by Claire Desaulniers that she was a young woman of about 50, a mother and I think she said a grandmother as well, and this time of bereavement would be difficult for Mr. Touchette and I say that because Marcel Touchette and Mike Burnside have been with us through this circuitous route to today for almost the past three years and in every occasion both Mr. Touchette and Mr. Burnside have acted expeditiously and in a professional manner for us and we do feel a bit of sorrow for Mr. Marcel Touchette and his family. So if you would do that, I would appreciate it.
4090 That indeed gets us into the thrust of our application. I was asked a little while ago if I had any written material that I wished to pass around so you could all have copies of and I really don't have because I don't think it is necessary to really require the printed word at this stage of the game. We got into this application in July 23, 1996, under the community B format. The year and a half that followed took us through quite very difficult phase until we didn't have to appear. This is my first appearance by the way at a CRTC Commission. It was an appearance hearing and it was heard in December of 1997, of which the Commission chose to turn down our application in a community B format due to the, as we understand it, spirit of community wasn't quite there. I think it was more our Board of Directors wasn't seen to be one that was volunteer or appointed within the community.
4091 So we were urged almost immediately by the CRTC, Mr. Burnside and Mr. Touchette that that application that we did hand in, however, could probably take on a much more meaningful look if we reclassified our application to commercial. We did that, we did that very quickly in January of 1998 and were taken through a deficiency phase in the early stages of last year until finally on June the 4th of last year, the CRTC then took our application and said it was acceptable to go to the next available public hearing.
4092 And here we are now, almost a year later, and I must have this whole thing memorized but I did scratch down some notes just to make sure that I touched on the right issues and not knowing the format of the hearings -- I only arrived today. In fact, I were the last on the list and I thought we were going to be up tomorrow afternoon and I was very cavalier today when I was up and about and I was told that, "No, you better get down because it looks like they are going to wrap it up today". So I scratched out a few pieces of information that I want to touch on.
4093 I have about 30 years in the media. Like the young lady from CKAY who mentioned this is also her first time at the hearing. My experience in the media is one on the journalistic side and major market places. I have never been to small markets. I started in Regina and then went to Toronto and spent most of my time there, then to Calgary and then back to Toronto. So I was listening quite intently to some of the stories with regards to their applications and with the interventions that were taking place, gladly, we don't look as if we will be taking off a lot of time today with the couple of interventions we did get in writing. They saw fit not to attend the hearing, so I guess this should be fairly brief and I know that I won't take the full -- is it 20 minutes we are allotted? I am sure I won't need the full 20 minutes.
4094 The diversity of Surrey's demographic is quite unique. It is the seventh largest city in Canada and the second largest city in the province of British Columbia.
4095 On one side it is quite cosmopolitan, on the other, paradoxically, I would say it is very pigeonholed into an ethnicity that has become quite known across Canada and that is the Indo-Canadian community. It is the largest concentration of Indo-Canadians in Canada and predominantly 97 per cent of that ethnicity is the Punjabi-speaking Indo-Canadian, the Sikh community.
4096 They appealed to me about approximately two years ago about doing some sort of programming that would somehow bring together an understanding in this community of the cosmopolitan side and their side and we realized that it would take people with very strong journalistic backgrounds to pull off a formatted station that would be able to get that message across to people in a manner that is conducive to the maintenance of harmony in the community of Surrey and so that is what spurred us on from the beginning and it dovetailed into some other areas.
4097 In doing our own work -- and as you can appreciate not being a member of the CAB, not having a radio licence -- figures and numbers are not really available to the new kid on the block. You are not going to get the cooperation from radio marketing groups so we depended on Statistics Canada and Stats Can came up with some numbers for us.
4098 In one or two of the interventions where it says the radio revenue for the lower mainland was 214 million dollars, which were our figures, what really happened there was Statistics Canada misread and gave us the total amount of electronic media revenue for the entire province. So when I finish my presentation, I think you will find that those interventions will be redundant because we have built in some features to our application that make things more, as I say, conducive to the individuals who are still here.
4099 So to dispel any fear by the interveners and to allay any anxieties that they might still have, Community Communications proposes that these will be the following parts of our own conditions of licence. If you look in the application, I believe it is section -- excuse me, it will take too long so I can come back to it if I have to. I will be questioned after, I am sure so it will probably come up at that stage.
4100 We have made the thrust of our application new revenue to come into this industry. There are 10,400 commercial enterprises in the City of Surrey. Some say 88 per cent, some say 94 do not and have not advertised in the electronic media in the lower mainland.
4101 Now, it is easy to understand when you consider a place, for instance, like Toronto. If you are a furniture store or an automotive dealer in Scarborough and you want to garner business from Mississauga, you would advertise in the metro Toronto marketplace and you would be very confident in knowing that you would probably get a good deal of business from Mississauga when you can jump on the 401 and take 20-25 minutes to get there.
4102 In the lower mainland, it is quite a different story. The expense of advertising for a Surrey businessperson to get their message out in the lower mainland would cost far too much to try and attract business that comes from several other areas that have their own businesses. For instance, automotive dealers in Surrey wouldn't advertise at $500 for a 30-second commercial to get people from the northshore to cross about two or three bridges and come all the way into Surrey where they have already passed five of those car dealerships.
4103 Our figures that we have done are based on wearing out shoes. These are primarily figures that I have gotten and obtained myself from the Rotary breakfasts that I have addressed and from the Chambers of Commerce sessions that I have had with the business community. So I have been hands-on and although the figures aren't accurate, they are certainly with a good merit and a good spirit of honesty.
4104 So what we have done is, I put together what I consider to be my condition of licence to make sure that this is all new revenue coming in and it doesn't impinge on any existing radio stations. The electronic media, not only will there not be any accounts solicited by us who are already advertising, but we are going to within the boundaries of our Constitution urge the newcomer to advertise on our radio station because that is the thrust of our application, to really accommodate the business community in Surrey and the only way we can do that is to make a promise prior to our airtime that all our accounts that we have on the books will be paid for and that they will also be those who have not advertised with the electronic media for the past 24 months. If we don't, then we forfeit our right to the licence.
4105 Incidently, I was told about a year or so ago that you would make it a condition of licence that we would be on the air, I think it is within 12 months of being licensed which we would. So that would compress the time frame down to somewhere in the next six, or seven or eight months or from whenever we got the approval to go ahead. We would provide you with the necessary paperwork that would reflect our new business being just that so nobody is losing any.
4106 Also when you consider this kind -- I know it is probably unusual in listening today, in listening to the other applications, but in this situation you don't really -- it is not too often you can get six or five bodies together and everybody comes out a winner, and I will just point out who wins here. Certainly, the listener gets to participate in the unique services that face the cosmopolitan population like this one. We are providing a category one programming, a talk radio station for the listeners. Also we are employing a good number of people. Some of them are youngsters embarking on a new career, some of them are seasoned professionals who will be coming in to do what I call the discipline side of radio such as the news and the commentary. Of course, we would benefit because it is our business enterprise. The CRTC, under its relatively new formula for taxation, of course, will be benefitting with new revenue dollars coming in. The existing commercial electronic media will have nothing to worry about because they won't be losing any of their existing business.
4107 To touch on one of the interventions, the one by JR country which is the Pattison group, he stated in his intervention to us in writing that 12 per cent of his business comes from Surrey and to that I say two things. Number one, I don't know that if I was in this marketplace and only getting 12 per cent of my revenue from the second largest city in this marketplace that I would do a lot of bragging about it but I will tell you this for a fact that half of that comes from Jim Pattison Toyota. So there is a very small percentage of people in this area that have done business with them anyway. But as I said to you just moments ago, in our formula for condition of licence that wouldn't be an issue in any case.
4108 I saw on the applications -- they were just similar, it was the problem of diluting the advertising dollar in the lower mainland, so I think we have addressed that with low power. We are catering to Surrey and not to anywhere else. In fact, Tony Gardiner is our engineer -- I don't know if he is still here, yes, he is. I don't know if any of you were on the panel when we were in the community B situation two and a half years ago, but the footprint of our signal, which is in the last page of our application, is a low power signal which shows, I think it is 27 watts. Low power, as we understand it, takes us up to 50 watts and I think that by the time that we would get on the air it would be something like 50 watts and that 107.3 will give us coverage for Surrey and nobody has to be concerned about interference. We were short spaced to Squamish and also to Abbotsford, I believe, is 107.5.
4109 That is the thrust of our application. It changed its face only because we went from one category to a commercial one and as I say it is our first time applying before the CRTC so if we have departed from what you consider to be normal routines, I guess we have. But I don't need to make a speech, I just wanted you to know where it was coming from and how we got this far.
4110 Thank you.
4111 THE CHAIRPERSON: Thank you, Mr. MacNaughten. I am interested. You have 30 years in the media, I just wondered if you could give me a little background about your 30 years, I gather in the East, in journalism?
4112 MR. MacNAUGHTEN: I started in Regina back in 1969. I went to Toronto in the early '70s. I was through most of the '70s. I wanted to get into learning more about the news, the television news side of things, so I had an opportunity to go to Calgary to CFCN. I was there for a couple of years then I wanted to learn more about sales so I went back to Regina and I worked at the station that I didn't work at the first time in sales, and then went back to Toronto and spent the '80s and so on through there.
4113 I have been the oldest guy in the newsroom so I think that when the recent graduate students from the Ryerson or from the different journalism programs, I would take them under my wing and I would set up files on them and take them through programs of the Rogers group who I spent most of my time with.
4114 I have done quite a bit in the media, so I guess sales and journalism are my strong points.
4115 THE CHAIRPERSON: Thank you. With respect to the size of the advertising market, I know you said you had some trouble getting accurate figures and there was some confusing with respect to the numbers that you had obtained from Statistics Canada. The CRTC does release market figures for the market that are publicly available and I don't know if you are aware now that the Vancouver market, the total radio advertising market, is 88 million dollars a year.
4116 MR. MacNAUGHTEN: Yes, I do know that.
4117 THE CHAIRPERSON: You do know that. And I was wondering, given this change how this has altered your business plan and if you have any new figures for us?
4118 MR. MacNAUGHTEN: Actually, it hasn't altered it because as I said to you before we are concerned with Surrey only which approximately 90 per cent of that commercial business doesn't advertise in the electronic media. So we are determined to bring in new dollars, whatever they might be.
4119 THE CHAIRPERSON: So notwithstanding the fact that your original understanding was that the radio advertising market was in excess of two million dollars a year --
4120 MR. MacNAUGHTEN: Oh, I was delighted to say we can get a big piece of that but I wasn't disappointed to find out that it was 83 million, I believe, for the lower mainland.
4121 THE CHAIRPERSON: So it doesn't alter in your mind your ability to meet your target revenues?
4122 MR. MacNAUGHTEN: Not at all. We have been allotted 150 minutes a day in our broadcast day from 6:00 a.m. to midnight. That works out to be predominantly 30-second spots, say 300 spots. There are 10,400 businesses. We wouldn't be able to accommodate most of them anyway but we expect that prior to air time, we will have our traffic grid booked and paid for, for your edification and, of course, for the rest of the electronic media to see that we have brought in new dollars for this whole venture as opposed to tapped into some of their existing business.
4123 THE CHAIRPERSON: I am curious to know what kind of a sales mechanism you are going to put in place to do this.
4124 MR. MacNAUGHTEN: It has been in place actually. We have kind of a verbal waiting list of people who are waiting to see us get our licence and get ready to go and bring them in. This isn't going to be what you would consider small-town radio. This is a major broadcast standard coming into that area and I have spent the last couple of years now with the Chamber of Commerce and with the civic administration in Surrey and with the service clubs speaking to the business community and we just will not be able to handle the stampede as soon as we get on.
4125 These people have wanted to advertise but when you get right down to the breakdown of where that dollar is going to go when people from Delta will not come to Surrey for a restaurant, or they will not buy their furniture here and that is the unique part of Surrey.
4126 THE CHAIRPERSON: Why don't I just talk a little bit about programming, if I may. I know you are primarily going for an open line talk format with a minimum level of 80 per cent to be devoted to spoken word and you are having both seasoned professional news broadcasters with pre-imposed graduate BCIT journalism students. I wonder if you could just elaborate for me a little bit on the fact that it will be a limited signal coverage and how you are going to dedicate yourself to Surrey. I mean, it is a reasonably expensive format, as you may know.
4127 MR. MacNAUGHTEN: Our breakfast, for instance, 6:00 to 9:00, will be a traditional kind of a breakfast show. It will be information and because we are talk radio we will have some interviews in there from either the previous day or the upcoming items of the day but it will be traffic, it will be weather, it will be news and it will be honed-in locally to Surrey.
4128 It is a very good question because there is a lot of people in Surrey that work in Vancouver. They need to know what is going on in the tunnel and on the 401 and in the other areas before they get there. So we will be similar-sounding in our presentation on air as other traditional radio stations will be covering the whole area but our reasons for doing it will be because the second largest city in the province is travelling this morning to work. The same with coming home, the home drive.
4129 The talk starts from 9:00 to noon. We have a midday business package that we will be putting together, from noon to 3:00 will be talk, and in there will be the midday package of business and regular news. Talk will change personalities from 3:00 to 6:00, from 6:00 to 10:00, from 10:00 to 2:00, and then we either go from 2:00 to 6:00 with live or we haven't decided to pick the best of or to go with what a lot of talk stations do and they take that wee hour of the morning and they revamp the prior afternoon of somebody and try and get into a different area.
4130 But it will be full participation radio talk show, listeners will be encouraged to call- in. We will be working in the community. One of the thing I didn't mention here was that I have a musical background. I came from a strong musical sense and the Surrey Symphony is undergoing extreme difficulties financially lately and they are depending -- I don't know if you have heard about this -- on casino taxation in the province of B.C. under the new casino licensing business and they are so much at a margin right now that they can't afford to not get another $3500 a month from the casino business and it looks like they will get it but that just keeps their above water and being an old love of mine I decided that we will pledge as a condition of licence as well $50,000 a year to the Surrey Symphony. Right now what traditionally happens is the youth in Surrey find themselves in a springboard situation to graduate to the Young Symphony Orchestra of Vancouver. We hope that over the years, that might turn around and Surrey becomes the focal point for the actual Youth Symphony. So that was something I wanted to mention to you.
4131 THE CHAIRPERSON: And will all your programming be produced locally or will you rely on some acquired or syndicated programs?
4132 MR. MacNAUGHTEN: That is the difference. It will be local. We are not bringing in any American shows or any other syndicated shows from Canada. This will all be local talent.
4133 Now I will tell you at the risk -- I don't want to tip my hand and let you know by name who is going to come in -- we have some very well-known people who are going to be hosting a couple of our shows and that will set the tone for others who are less experienced and need the guidance of some of us who have been in the business for quite some time and I think it will ease things out nicely but we will have a very high professional standard of broadcasting.
4134 THE CHAIRPERSON: You bave a high degree of spoken word programming and you probably know news/talk is a more expensive format and I wonder if you could let me know the projected number of news and programming staff that will be required to effectively operate the station.
4135 MR. MacNAUGHTEN: I think we had on our original 22, and I think we have raised it now to 29 -- we had 21. When I say "had", and there seems to be discrepancies, when we reapplied for the commercial licence, a lot of this material was able to carry itself through. We didn't have to go and redo all our application, so we thought we would probably stay with 21 as a total amount but then we realized that there are some people that we don't need and there are some other people that we do need. You are taking a chance on bringing in some talk show hosts who have never been talk show hosts before, but the true fact is you don't graduate from high school and go to talk show school. Most talk show hosts are seasoned professionals, there are lawyers, medical people, politicians -- I suppose they are one of the same, lawyers and politicians -- and they become household names as seasoned professional broadcasters so we are bringing in people that haven't done that but are highly-skilled excellent communicators and what I want to do is have a situation for them should they fail at being a talk show host that we can put them in another area of radio that might be more suited for them and so those numbers of 21 are probably going to be more like 29.
4136 THE CHAIRPERSON: And how many of those will be paid positions?
4137 MR. MacNAUGHTEN: Just about all of them. There would be about four talk show hosts that we expect to bring in on independent contracts.
4138 THE CHAIRPERSON: That would be paid.
4139 MR. MacNAUGHTEN: Paid as a contract by the month. The rest would be your traditional news director, your sports director, your news people, there will be students under the CTV program which we will contributing to as well who will be in on payroll. I would say, without having given it a lot of thought, probably about 85 per cent would be payroll and there would be a small percentage that would contract their work to us.
4140 THE CHAIRPERSON: But under contracting you would still be paying them. What I am trying to get away from is the fact --
4141 MR. MacNAUGHTEN: There are not volunteers in this one. This strictly a business venture for everybody.
4142 THE CHAIRPERSON: Utilizing BCIT students, pre and post graduate, and I am wondering a little bit what they would be doing and if you have had discussions with BCIT in this regard?
4143 MR. MacNAUGHTEN: We have had cursory discussions with them only in the general sense because they know what we are talking about. When the time comes, what I ideally want to do, is I want to get students who are between year one and two in their summer periods to work with us and then I want to get graduate students to offer them an opportunity for a career in broadcasting. Now, they won't be coming in wired into a contract and that is because the nature of radio is that you come in as a youngster, you develop your skills and then you move on, you get opportunities usually to move on maybe in different areas like television or perhaps even the print media but I will have a hands-on role in the indoctrination of the younger people who are new in broadcasting, I can assure you.
4144 And BCIT -- I didn't mean to single out them out, there are about three or four real quality journalism schools here, but they are the biggest and they are the ones that we will probably aim at first.
4145 THE CHAIRPERSON: So they certainly play quite a prominent place in your discussion of your staffing and I am wondering what percentage of your employees would be either these year one or two students or new graduates?
4146 MR. MacNAUGHTEN: Oh, there would be probably four to six. I think when we were talking about under the CTD program, we committed to at least four if not six in any period of time, in any year, that we would always a flow of youngsters. For the summertime it is important to get the year one students who are in between semesters to get out into the field and actually see if they are going to really like what they are into.
4147 My responsibilities with Rogers Communications were that was my job as well as being an on-air announcer, was to get these young people out in the real world and really report on some nasty situation of news that they are probably not thinking about when they are going to their journalism schools, but I think it is the best way and I will be taking that project on myself and scaling other people in it, and having it work smoothly. But that is a very important part of our business.
4148 THE CHAIRPERSON: Have you given any thought to what percentage of our overall employees would be made up of either students or new graduates?
4149 MR. MacNAUGHTEN: Well I said four to six out of 29 -- what is that? Seven per cent, seven, eight per cent.
4150 THE CHAIRPERSON: I wasn't sure whether you were only referring to the CTD students or one or the other.
4151 MR. MacNAUGHTEN: No, we want to make sure that we have a CTD commitment fulfilled and that we move people in and out of that program as we should. One of the things about Surrey, you might not have heard of softball city, and it might sound frivolous but softball city is the main stage for the Canada Cup where all the world softball players come and play their world-class tournaments. And it is quite a magnificent set-up there and they have been after the media for quite some time, "Could you give us some kind of coverage?" Well, we hope that with us being located out in that community, that we will become involved in much more of a sense that a typical media would be simply out covering scores.
4152 THE CHAIRPERSON: Thank you. Do you have any evidence such as a listener survey that would indicate that there is a demand for the service you are proposing?
4153 MR. MacNAUGHTEN: Well the demand is certainly there commercially. As far as listeners go, it there has never been a radio station in the community, it is very hard for us to go out and do our own BBM kind of a survey. We have talked to a lot of people and generally people will say, "We do want a radio in our community." The general public aren't usually the ones who will come out and say, "No, we don't want a radio here so we will attend a CRTC hearing and tell them so". So I haven't really found it necessary to go out and go after the 363,000 people who live in Surrey and try to come up with some formulas to do some door knocking with them to find out if they listen. And I don't know how valuable or our sincere those numbers would be anyway.
4154 THE CHAIRPERSON: I know that you believe that you can convert some Surrey print media through advertising. Again, do you have any marketing studies or results from your door knocking or anything you can give us that would support your contention that would?
4155 MR. MacNAUGHTEN: Well, we thought that we would go out in a broad sense and ask the business community if they would send letters to the CRTC and I got tangled up in that with 10,400 business and I figure I think this can pretty much speak for itself as well.
4156 The only medium to them at this particular stage, as I explained to you, because of the traditional radio stations that cover this whole area has been print and it has been the local print. Most of the Surrey media, again, only advertises in the local print media. That is not to say The Sun and The Province which are the two main newspapers here in Vancouver. It is The Leader, The Now, the very local papers.
4157 This is seen as an addendum to their advertising dollar. We can work print in some cases with the new electronic media in Surrey as well as showing the benefits of radio advertising as opposed to all the other media, radio advertising giving you the biggest bang for your dollar. I think most people know that. That is why we can't have cigarette advertising on the radio. You can have it in the paper.
4158 THE CHAIRPERSON: When you talk about getting tangled up with the 10,000 businesses, I am not sure what you are referring to. Does that mean you do have some results you can share with us or you don't? You are going to them later and not before?
4159 MR. MacNAUGHTEN: No, what I was saying to you was there are 10,400 eligible commercial enterprises for advertising in Surrey. I have spent the last couple of years dealing directly with them, generally at breakfast meetings or luncheons and so on and also through the Chamber of Commerce and the Rotarians and it is the sense that we have, that we have put down a list of people who want to come and advertise with us. And we are not counting the Royal Bank or the people who want to advertise on our finance programs. Those will come through national ad agencies, usually from down East.
4160 We are talking about the local business person in Surrey who gets first dibs on the advertising traffic grid and those are the people that have said, "We overwhelmingly support the station coming here and we do want to advertise". So if 90 per cent of them said, "We don't want to advertise with you, we are a success" --
4161 THE CHAIRPERSON: So you do have a list of people you have spoken to who have indicated a willingness to advertise?
4162 MR. MacNAUGHTEN: Oh, we did put a list together and we actually had them sign a facts sheet indicating that they hadn't advertised before but they would herald in the day when they got their own radio station. So we do have a basis for that.
4163 THE CHAIRPERSON: I wonder if we have that. Do we have that?
4164 MR. MacNAUGHTEN: No. We didn't really package that up and sent it off to the CRTC. There were some people that were a bit leery of having their business names going out helter skelter who didn't understand what this was about. So I just said, "We will keep it advance just in case somebody wants it, then we will approach you at the appropriate time." We can do that. If you wanted us to we could probably take ten days to get that thing done if that was important to you.
4165 We have been gambling for the last three years a fair amount of money and time into an enterprise that we consider to be very worthwhile and w just wouldn't have gone this far if we would have felt there were too many flaws in it or it was a flimsy application.
4166 THE CHAIRPERSON: I know that you used the figure of between two and four per cent of the listening audience of your station would be comprised of listeners who previously listen to out-of-market stations and I think we just talked a bit about that with respect to Vancouver stations. How do you come up with that figure?
4167 MR. MacNAUGHTEN: I came up with that figure because I was asked by the CRTC to come up with one. I said to the, "We are not going to be in that marketplace, we are only in Surrey so what can we do? There are no radio stations here and there are no specific figures. So I am going to take a look at the other stations who are successful and the ones who haven't been successful and see what I can find as a happy ground for, again, the second largest city in the province." So that is my figure. And it might be too ambitious, I don't know.
4168 THE CHAIRPERSON: Thank you. Again I guess you have estimated that between 2 and 2.5 per cent of the advertising revenue comes from the expense of existing stations. Could you explain how you arrived at that estimate?
4169 MR. MacNAUGHTEN: Well, again I was asked to -- it was like with the BBM. They won't rate us because we are "segmentized" in the marketplace so if we were to go on the air this fall, for instance, the BBM would put us on the air and they would give us our freebie first rating, which wouldn't go anywhere but at least they would tell us where we sit.
4170 When I spoke with the people who do these numbers on that random sample method of surveys they do, they said, why don't you consider yourselves, since you are going to be a Surrey applicant with no figures available to you, "Take some numbers that we think might work, because there have been other situations where we have taken communities that large and have put radio stations in, usually they are multiple stations, three or four or five or six, and we have been able to come up with some numbers. So if I gave you that number, would you be able to live with that?" And I said, "Well, the CRTC would like a number and it is not a question of can I live with it, I don't know, it has to make sense. This is a viable application." And they said, "You could probably look at two per cent because of the standard of broadcasting that you seem to be wanting to bring to Surrey."
4171 And I think that again we get down to our product. It has to sell and it has to penetrate the marketplace in a manner that is conducive to that.
4172 THE CHAIRPERSON: Thank you. We have talked about the size of Surrey which is a population of 360,000 and you have estimated that the contour of your proposed station would encompass only 305,000 people. But you talk about your principal market area be comprised of 600,000.
4173 MR. MacNAUGHTEN: Again, we had to take a signal. That was based on our early estimate at 107.3 at low power where our signal would actually go to. When we looked at our own contour, and talking with the engineering people, some of that signal would take us into some other heavily populated areas, a piece of Delta, a piece of Richmond, a piece of Burnaby. So we took maps that gave the populations in those specific areas. We sent the maps off to the CRTC in fact showing the circles of what those numbers added up to and they came to about 600,000.
4174 To be honest with you, our signal isn't going to get into that area and we won't have numbers that high. But they weren't done to embellish our application in any way, they were just done to show that it could be possible that people in those areas would listen to us for whatever the reason.
4175 So it is hard being first in an area.
4176 THE CHAIRPERSON: Absolutely.
4177 MR. MacNAUGHTEN: Nobody wants to co-operate with you and give you numbers, and it is very difficult to --
4178 THE CHAIRPERSON: I understand that.
4179 I'm almost finished. I just have a couple of more questions.
4180 Based on a comparison with other full power stations in Vancouver -- and I know I have talked a fair amount about the competition you would be facing from these stations -- your revenue projections appear to be very optimistic to us for a low power station. Can you explain your estimate that your station would generate $7.9 million in advertising revenue in your fifth year, and maybe give me an idea of how you came to that figure?
4181 MR. MacNAUGHTEN: Indeed, that is an ambitious figure. We wanted to also make this palatable to the CRTC. We didn't want to be seen coming in here with some mickey mouse little operation that is not going to generate revenue that is going to make it worthwhile for anybody.
4182 So we took our traffic grid, we took our rate card, and we took penetration ratios of how long it is going to take us to get to this particular area. So we took -- I will just read them off here to you, the percentages.
4183 Commercial minutes sold in year 1 is 75 per cent. This is based on 300 30-second spots a day at $100 a spot. So if you take the five -- I think it was a five-year pro forma we put together. If you take those figures from 75 per cent in year 1, 85 per cent in year 2, and then 90 for the following three years, we show us never having saturated the entire traffic grid. Because I want to be realistic and say that maybe we won't. But based on these percentages that we feel we are going to do, we don't think we are going to be far away from doing it.
4184 We also wanted our rate card to be high enough, not only to best represent our product, because it will be worth that, but also we knew there would be a certain nervousness in this community by the other commercial licence holders, and we wanted to make sure that they understood that we were putting ourselves in a position, in a lot of cases, to out price them, to assist them in not being as nervous as they might have thought.
4185 So those numbers, that arithmetic is based on $100 for a 30-second spot stretched over the entire day. So our AAA time will reflect a little bit less in the morning than it will in the drive home in the afternoon. It is almost like we redefined AAA time, but our afternoon drive is the showcase of our show. So those numbers are pretty much based on us getting that percentage of grid penetration.
4186 It is ambitious, but people who know me and know what I have done over the years know that I have to have an ambitious plan together to make it work. So again, if we are half wrong we still do quite well.
4187 THE CHAIRPERSON: Your advertising revenues are projected to remain constant after year 3. Can you explain that, the rationale for that?
4188 MR. MacNAUGHTEN: Well, only because we felt that there would be a levelling off and that we probably weren't going to go beyond 90 per cent of a full traffic grid. As you know, overnight from midnight to 6:00 in the morning we don't have to count as commercial time, and we are going live over there as much as we can. So we are going to sell our overnight.
4189 I took a small percentage of a fairly inexpensive rate card for the overnight show and kind of threw that into the mix as well and said we -- because you are going to know how much revenue our radio station is making if we are licensed, and so it should add up. So we took that we probably wouldn't be beyond 90 per cent of our daytime prime time traffic base in years 3, 4, 5 and ad infinitum.
4190 I honestly believe that we will be 100 per cent full before we go on the air, but you are not going to sit here and have much patience with somebody saying that. It is an intangible we are selling, I know that, but it is an ambitious program and we are going to make sure it works.
4191 But I wanted to be realistic without you saying "How can you be 100 per cent?"
4192 THE CHAIRPERSON: No, I appreciate that. I also wanted to know, again, how you estimated the sell-out rates, 75 per cent the first year, increasing to 90 per cent in year 3, and I guess you have really just kind of gone through that, haven't you?
4193 MR. MacNAUGHTEN: Well, we just sat down and said, you know, "How successful are we going to be with me doing most of the marketing and selling?" Now, I do have people who are coming in to work with me who are seasoned professional radio media salespeople. They came in, however, after these figures came together.
4194 I felt "How much can one person possibly do? I can't wire myself into filling more than 75 per cent of that first year. I just want to be realistic. I don't think I am going to be successful in doing that. But I also want to be up and positive and be able to say I can do 100 per cent, but let's be realistic. I should be able to do 75."
4195 It has been my experience that if you shoot for high numbers you get somewhere up near there as opposed to being satisfied with something lower and being very disappointed in the end result.
4196 So 75 per cent of the traffic grid being filled the first year I don't think is unrealistic when I have had nothing but two and-a-half years now to state my case as eloquently as I can in the marketplace and try to define what we are going to do. We have no stations to act as a base for us to work with.
4197 We don't really know how much advertising dollars, for instance, are in Surrey.
4198 THE CHAIRMAN: So you are going to take the sales on yourself, are you, for the moment?
4199 MR. MacNAUGHTEN: Well, in the biggest sense of making sure that that is done and put to bed and carried on, and so on.
4200 THE CHAIRMAN: You will have a sales force which you will head, or you intend to do most of it yourself?
4201 MR. MacNAUGHTEN: No. I intend to help in any way I can. But we will have a -- we are a bit top heavy in the female side of things, and we didn't do this for any special reason, but when I have been hiring for the prospective employees coming in, in my experience over the three decades I have been in radio, in broadcasting, I have found that men are great at clearing car lots and selling and having closing out sales in furniture stores, but when it comes to the cerebral side of things my experience has been that it has usually been a woman that can get in there and sell an intangible like the media. They seem to be more skilled at it.
4202 So I said what I am going to do is, when I throw this open for interviews, I am going to be looking more closely at that side of it. I just lucked out and I ended up with most of these people coming in.
4203 So the Vice-President of Sales is a woman. She is very skilled in what she does and very highly regarded in the media.
4204 So I have gone -- I have lined them up. I haven't brought anybody on yet, of course, but we have quality people and a lot of them you will find will be women, but that is because they are best suited for the work.
4205 THE CHAIRMAN: I just have one more question.
4206 MR. MacNAUGHTEN: Yes.
4207 THE CHAIRMAN: In your oral remarks you referred to the CRTC's new formula for taxation in explaining that this would make us a winner. I'm just not quite sure what you were referring to.
4208 MR. MacNAUGHTEN: Well, I thought it was fairly new. A couple of years ago we got an amendment to the new -- referred to as the new formula. I don't know what "new" means. Does it mean three years or 10 years?
4209 THE CHAIRMAN: Yes, okay. I understand.
4210 MR. MacNAUGHTEN: In licensing where we pay --
4211 THE CHAIRMAN: Right.
4212 MR. MacNAUGHTEN: -- and it something like point something over --
4213 THE CHAIRMAN: Right. I guess we don't call it the formula for taxation, so I just wasn't quite --
4214 MR. MacNAUGHTEN: But if you think about it though --
4215 THE CHAIRMAN: Yes. All right.
4216 MR. MacNAUGHTEN: -- with that formula all new revenue coming in is going to be pretty beneficial to everybody.
4217 THE CHAIRMAN: Thank you.
4218 MR. MacNAUGHTEN: Nobody loses.
4219 THE CHAIRMAN: I'm finished. I believe legal counsel has a question.
4220 MS MOORE: Thank you, Madam Chair.
4221 First, I just wondered, did you consider hiring consultants to assist you with the preparation of market studies and audience share projections?
4222 MR. MacNAUGHTEN: Actually, I got some of the figures through friends of mine who did it for nothing, and I did it that way.
4223 MS MOORE: But you didn't submit any actual reports in writing that they have prepared or submitted their qualifications or what their methodologies had been in arriving at their figures?
4224 MR. MacNAUGHTEN: With regards to which numbers?
4225 MS MOORE: With respect to your market studies, your audience share projections, your projected advertising revenues?
4226 MR. MacNAUGHTEN: I have done that pretty much on the 30 years experience in broadcasting that I have done, and I have worked with successful stations and I know that those numbers are not unrealistic for someone of my professional standard.
4227 MS MOORE: So you didn't feel it was necessary to hire consultants to assist you with the preparation of those figures?
4228 MR. MacNAUGHTEN: No. I pretty much relied on my own abilities for that. We hired professionals on the technical side of our application more so than anything else. It was the viability of low power that we were more concerned with. We are in a city of 360,000, almost, that does not have the facility for radio, so I went primarily on what I felt by talking to people directly.
4229 MS MOORE: Thank you.
4230 Are you familiar with the Commission's CTD policy?
4231 MR. MacNAUGHTEN: Just in its broad sense, that we have committed to, I think, under that one, four or six people a year. I think this one says four, but we changed. That was from the Community B application, and I think it said we were committed to four under the Canadian Talent Development Program. I think we have changed it to six.
4232 MS MOORE: Have you read the Commission's CTD policy?
4233 MR. MacNAUGHTEN: Not totally, no.
4234 MS MOORE: In your response to deficiencies you were asked to confirm your plans in this regard with respect to your $27,000 budget in terms of the breakdown and the eligible third parties that you would be making payments to.
4235 Do you have any further details that you could add in that regard today?
4236 MR. MacNAUGHTEN: I don't, but I wasn't looking at that, my cohort was, for the most part.
4237 Have you got --
4238 MR. MacNAUGHTEN: We answered the question. It was No. 9.
4239 MS MOORE: I am referring first to the Commission's letter dated 16 March 1998, which is at page 34 of the application file.
4240 MR. MacNAUGHTEN: We answered them all in chronological order.
4241 MS MOORE: Your response is at page 37 of the application file. You confirmed your commitment, but you didn't offer any details and I'm just wondering if you had further details that you are in a position to offer to me.
4242 MR. MacNAUGHTEN: Oh, I see. I'm sorry, I misunderstood you.
4243 No, we didn't go any further into the CTD program after this. We just said whatever guidance we are supposed to follow, we will be following it.
4244 MS MOORE: So you haven't identified yet the eligible third parties that you would propose to make the payments to?
4245 MR. MacNAUGHTEN: No, we haven't.
4246 MS MOORE: Thank you.
4247 Will your talk format include open-line programming?
4248 MR. MacNAUGHTEN: That is primarily it, yes.
4249 MS MOORE: Are you aware of the Commission's policy regarding open line programming?
4250 MR. MacNAUGHTEN: I haven't read it in detail, but I am as familiar with it from the journalistic side as you can be.
4251 MS MOORE: What policies or practices, if any, will you be putting into place to meet the Commission's concern in this regard with respect to, for example, balance, high standard, abusive comment, things of that nature?
4252 MR. MacNAUGHTEN: Well, you can be sure that if we get licensed as an entity in radio that we will be following to the letter all regulations the CRTC has with regards to anything that we do on the air --
4253 MS MOORE: But you haven't developed --
4254 MR. MacNAUGHTEN: -- whether it is political correctness or --
4255 MS MOORE: But you haven't yet developed any policies or practices with respect to this issue?
4256 MR. MacNAUGHTEN: No, we haven't -- not etched in stone yet. We have pretty much taken this application to this stage by not employing anything but commonsense. I mean, broadcasting is really just commonsense, and I think those of us who know the difference between editorial freedom and libel are the people that you have to have working with you, and they are seasoned professionals working with us.
4257 MS MOORE: Thank you.
4258 With respect to your staff numbers, you mentioned a staff level of 29. I'm just wondering, would all of these people be in the area of news and programming?
4259 MR. MacNAUGHTEN: No. Most of them would be on-air staff such as news, sports, weather, traffic people and, of course, the on-air talk show hosts.
4260 MS MOORE: How many of the 29 would be in positions related to news and programming?
4261 MR. MacNAUGHTEN: No, most of them would be on-air staff such as news, sports, weather, traffic people and, of course, the on-air traffic talk show hosts.
4262 MS MOORE: How many of the 29 would be in positions related to news and programming.
4263 MR. MacNAUGHTEN: I think we have that on page 47. There is a breakdown in our application here.
4264 MS MOORE: Maybe you can just tell me.
4265 MR. MacNAUGHTEN: Well, this is the one we had -- and we still haven't revised this. I am saying to you now that we will probably be ending up with about 29 but based on the 21 that we had for this application, we have one program director general manager, five host personalities and that has changed already to seven, the news director which would be the vice-president of news, two reporters, three news announcers, two producer-operators, two sales people, promotion public relations, one, general help about three, that has increased because we are going with secure overnight so we are going with overnight security. Traffic will be two instead of one so you can see the 21 has gone to at least 25 now.
4266 So your question was how many would be on air as opposed to --
4267 MS MOORE: How many would be in positions related to news and programming?
4268 MR. MacNAUGHTEN: There would be about five. When you say programming, I will just clarify something for you. Unlike music radio where the program director looks after the product and shuffles things around that way, we don't have a program director as a program director. The station manager is a chartered accountant and she is fully aware of the things that we feel that will manage the station for us.
4269 MS MOORE: And are all of these 29 positions paid positions?
4270 MR. MacNAUGHTEN: They are paid positions as payroll salaried employees. There will be about four to five that will be in on their own, what we call independent contractors who will contract their services to us for a month and we will pay them.
4271 MS MOORE: All 29 would be paid positions, whether they were employees or on contract.
4272 MR. MacNAUGHTEN: I think I answered that question from the Chairperson earlier.
4273 MS MOORE: I just wanted to clarify.
4274 MR. MacNAUGHTEN: There are no volunteers.
4275 MS MOORE: Thank you. I believe my co-counsel has some questions.
4276 MR. BLAIS: Just to clear up, you mentioned the broadcast CRTC licence fees, the broadcasting fees. How much have you allotted to that amount in year one?
4277 MR. MacNAUGHTEN: You want to address some of this? Mark Semeniuk would probably be better.
4278 MR. SEMENIUK: That is just a percentage of the revenue. If you give me the formula I can work it out on my calculator. I don't have the exact number. We grouped it into -- hold on, I will find the exact response here.
4279 MR. BLAIS: Well, in your letter of 25 March, 1998 when we asked you to specify what other expenses were in the financial operations for various years, you indicated that the category "other" included the CRTC licence fees. So presumably you have done the calculation.
4280 MR. SEMENIUK: I did, I just don't have it handy. Sorry. It is a formula. It was 1.25 per cent of the revenue.
4281 MR. BLAIS: Because you have also indicated that that category included other amounts and I want to explore what those amounts you were including in that category, "other expenses."
4282 MR. SEMENIUK: Well you would just take the difference. I remember we also included charities in that response.
4283 MR. BLAIS: That is correct, I wanted to explore that one.
4284 MR. SEMENIUK: Well we are generous people, so we will be giving money to a charity and also in that category --
4285 MR. BLAIS: I see you are having difficulty finding the amount. It is just that the other category is nearly a quarter of a million dollars and it seemed like a significant amount of money.
4286 MR. SEMENIUK: Well that would be merely charitable donations on behalf of us.
4287 MR. BLAIS: And is there a particular policy that would drive you to provide money to charities?
4288 MR. SEMENIUK: No, we do like to give back to the community. That is the focus of our station.
4289 MR. MacNAUGHTEN: The $50,000 for the symphony is part of that as well. There is the Canadian Disaster Relief, there is the B.C. Hospice Society, and there is the Disabled Disabilities groups that have approached us already and asked if we could be of support to them so we added up what we thought would be meaningful and that is what we came up with. And of those revenues, if I am correct about them or close to it, then that doesn't seem like a big percentage to turn back to the community.
4290 MR. BLAIS: Thank you for those clarifications.
4291 MS MOORE: Thank you, Madam Chair.
4292 THE CHAIRPERSON: Thank you, gentlemen.
4293 MS VOGEL: Madam Chair, there are not interveners and so this is the end of this item and the end of the appearing items on this agenda. If I could just read something short for the record.
4294 Even though there is no oral presentation of the applications that are listed in the agenda as non-appearing, they are nevertheless part of this public hearing and as such they will be considered by the Commission and a decision will be rendered at a later date.
4295 Thank you, Madam Chair.
4296 THE CHAIRPERSON: Thank you, Madam Secretary. That concludes our public hearing and it has been a most interesting two days. I would like to take this opportunity to thank all the applicants and the interveners for the contribution they have made to our understanding of the issues and the public record of this proceeding.
4297 As I said in my opening remarks, it should be noted that this is the first time the Commission is hearing radio licence applications since it issued its new radio policy. Therefore, we would encourage the industry to give us some input as to how we might evaluate these types of applications given that we have put in place a new and more flexible framework designed to enable the radio industry to become stronger financially, compete more effectively and meet the challenges of the 21st century.
4298 And industry has certainly responded and I want to thank them for sharing with us their extensive knowledge of the markets they serve.
4299 On a personal note, this is the first hearing I have chaired and I would like to thank all the participants and in particular my colleagues, Commissioner Andrée Wylie and Andrée Noël and all of the staff for their help at this hearing. An enormous amount of work by all parties is involved in preparation of a hearing and I would like to recognize and thank everyone for their efforts.
4300 Thank you very much. That concludes this hearing.
--- Whereupon the hearing adjourned at 1815 /
L'audience est ajournée à 1815