TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
APPLICATIONS FOR FM RADIO
IN LONDON, ONTARIO /
DEMANDES POUR RADIO FM
À LONDON (ONTARIO)
HELD AT: TENUE À:
Conference Centre Centre des conférences
Outaouais Room Salle Outaouais
Place du Portage Place du Portage
Phase IV Phase IV
Hull, Quebec Hull (Québec)
June 28, 1999 28 juin 1999
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès-verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
Canadian Radio-television and
Conseil de la radiodiffusion et des
Transcript / Transcription
Applications for FM radio
in London, Ontario /
Demandes pour radio FM
à London (Ontario)
BEFORE / DEVANT:
David McKendry Chairperson / Président
Commissioner / Conseiller
Andrew Cardozo Commissioner / Conseiller
Jean-Marc Demers Commissioner / Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Peter McCallum / Commission Counsel /
Annie Paré Avocates du Conseil
Peter Cussons Hearing Manager and
Secretary / Gérant de
l'audience et Secrétaire
HELD AT: TENUE À:
Conference Centre Centre des conférences
Outaouais Room Salle Outaouais
Place du Portage Place du Portage
Phase IV Phase IV
Hull, Quebec Hull (Québec)
June 28, 1999 28 juin 1999
TABLE OF CONTENTS / TABLE DES MATIÈRES
Presentation by / Présentation par:
Affinity Radio Group Inc. 4
Rogers Broadcasting Limited 80
CHUM Limited 133
Tillsonburg Broadcasting Company Limited 194
Intervention by / par:
Affinity Radio Group Inc. 263
Rogers Broadcasting Limited 267
CHUM Limited 268
Tillsonburg Broadcasting Company Limited 269
Reply by / Réplique par:
Tillsonburg Broadcasting Company Limited 279
CHUM Limited 284
Rogers Broadcasting Limited 285
Affinity Radio Group Inc. 286
Hull, Quebec / Hull (Québec)
--- Upon resuming on Monday, June 28, 1999
at 0900 / L'audience reprend le lundi
28 juin 1999 à 0900
1 THE CHAIRPERSON: Good morning, ladies and gentlemen, and welcome to this public hearing.
2 My name is David McKendry. I am a CRTC Commissioner and I will be presiding over the hearing today and tomorrow. Allow me to introduce my two fellow Commissioners who are here today. On my right is Commissioner Andrew Cardozo and on my left Commissioner Jean-Marc Demers.
3 The staff who will be assisting us are legal counsel Peter McCallum and Annie Paré and the hearing Manager and Secretary is Peter Cussons. Please don't hesitate to call on them if you have any questions at all regarding matters of process during the course of the hearing.
4 It is our intention to complete our consideration of all the applications on this hearing by the end of tomorrow. In a few minutes I will just run through with you the schedule that we intend to follow in a little more detail.
5 Today we will be examining competing applications for the single remaining FM frequency for the London-Woodstock, Ontario, region. Tomorrow the remaining applications will be considered, including six applications for the licence renewal of radio and television undertakings where non-compliance with regulations and conditions of licence is the main issue. I should add that non-compliance is an issue that the Commission views very seriously.
6 The Commission will hear the presentations of all interested parties and will take all views and comments presented into account before rendering its decision. Before we begin to hear the parties who will make presentations, I will ask the Secretary, Peter Cussons, to go over some administrative and housekeeping matters regarding the conduct of this hearing.
7 MR. CUSSONS: Thank you, Mr. Chairman.
8 Good morning, everyone. I would just like to confirm that our examination room is next door, the Papineau Room, where anyone can view the applications considered at this hearing, along with any related documents, interventions and replies. I should add that there are several applications on this hearing which are non-appearing and decisions will be rendered on these in due course.
9 As you have stated, Mr. Chairman, we are considering four competing FM applications today and I would just like to review this process. During the first phase, I will invite applicants to present their applications. They are allowed a maximum of 20 minutes for this exercise, including any audio or visual presentations. This is followed by questions from the Panel and, if necessary, legal counsel.
10 Phase II consists of the applicants returning in the same order to intervene to the competing applications. We allow 10 minutes each for this. Since no outside interveners have requested appearance, we would then proceed to the rebuttal stage where each applicant, in reverse order, is given a maximum of 10 minutes to respond to any and all interventions.
11 It is now my pleasure to introduce the first item. We have an application by Affinity Radio Group Inc. for a broadcasting licence to carry on an English-language FM radio programming undertaking at London, operating on a frequency of 102.3 megahertz, channel 272B, with an effective radiated power of 4,600 watts, upon surrender of the current licence issued to CKSL London.
12 Upon implementation of the FM licence, the AM transmitter, CKSL London, would simulcast all the programming of the FM station for a "phasing-in-period" of no longer than three months from implementation of the FM licence.
13 Now I will turn things over to Mr. O'Brien and his colleagues.
14 Mr. O'Brien?
PRESENTATION / PRÉSENTATION
15 MR. O'BRIEN: Good morning. My name is Jim O'Brien. I am President of Affinity Radio Group Inc. Appearing with me this morning are: Jim Swan, CKSL London; Chris Ruscica, CKSL London; Chris Johnston, our legal counsel; and Gordon Elder of Elder Engineering.
16 It has been two years since the CRTC approved our application to acquire CKSL from Telmedia Communications. We had high hopes when we acquired the station of stemming its financial losses and returning the station to profitability. We have had considerable success in this respect with the two other AM stations we acquired at the same time, CHAM in Hamilton and CKTB in St. Catharines. CKSL, however, has presented us with problems of an entirely different order of magnitude.
17 First, we were unaware of the seriousness of the impairment of CKSL's signal caused by the physical obstacles abutting our transmitter towers, among other factors, described in the supplementary brief. It is difficult enough nowadays for AM stations to capture sufficient audiences. When the signal is impaired, the task becomes virtually impossible.
18 We retained two engineering firms to investigate means of improving the AM signal. Both confirmed that the signal could not be improved at the current site. The cost of moving to a new site and constructing new towers would have been prohibitive given the financial outlook of CKSL as a stand-alone AM station. We were left with no other choice than to seek an FM frequency.
19 Elder Engineering finally selected 102.3 megahertz as a suitable frequency for London. It had originally been assigned to CKDK-FM, Woodstock, as a drop in frequency in 1984, but that station subsequently changed its frequency. Gorden Elder will explain more in detail the nature of CKSL's current signal problems.
21 MR. ELDER: CKSL's present array was built in 1964, with five towers on a line facing north and south. Its day and night patterns must protect many stations on and adjacent to 1410 kilohertz. Hence, almost all of its 10 kilowatts must be radiated in northerly directions over a relatively narrow arc.
22 AM broadcast antennas of this type are seldom proposed nowadays because of their inherent design and operating problems. These include high currents, high losses, poor stability, low radiation efficiency and restricted bandwidth, which reduce CKSL's signal strength and especially its sound quality.
23 CKSL's antenna is the weakest link in the chain between studio and listener. Its narrow bandwidth eliminates higher audio frequencies and produces sound nearer telephone than broadcast quality, resulting in low fidelity music.
24 Modern digital audio processing equipment is now used at CKSL, but it cannot overcome or compensate for these antenna deficiencies. The transmitter is amplitude modulated at up to ten kilohertz, but the antenna can radiate only four to five kilohertz, maximum. Satisfactory results would require a new array on a larger site with six or more taller towers either in line with wider spacing or in a parallelogram as part of a modern transmitting system.
25 CKSL's array is defective, but until the 1980s its transmitting site remained satisfactory because the surrounding land was flat with no significant obstructions built on it. However, half of this area now has artificial terrain up to five storeys high, which has a significant adverse effect on CKSL's transmissions.
26 During the 1980s, land immediately west and south of CKSL's transmitting site became the city of London's principal landfill or dump site and will continue to be for at least the next 15 to 30 years. It will only get larger, compounding CKSL's signal problems. The resulting hills are now up to 15 metres or 50 feet high, which is 30 per cent of the 49 metre tower height. The hills scatter some of CKSL's radiation, which distorts its pattern and impairs coverage in various directions.
27 In 1983 to 1986, Ontario Hydro planned a new high voltage transmission tower line alongside Highway 401, then routed southerly. It was eventually implemented and creates additional CKSL pattern distortion and power absorption.
28 The transmitting facilities of many AM stations are threatened and affected by additional obstructions due to urban growth. CKSL's are now in a hostile environment and subject to external problems, as well as the internal array deficiencies already discussed. As a result, its transmitting problems have become exceptionally serious.
29 MR. O'BRIEN: The second key factor affecting CKSL has been the dramatic change in the competitive structure of the London market. When we entered into our agreement to buy CKSL from Telemedia in early 1997, the competition at that time would have been Telemedia's FM station, an FM station in St. Thomas, and two AM/FM combinations owned respectively by Blackburn Radio and Radiocorp. We knew that this competition would be formidable, but we thought we could handle it.
30 However, shortly after our agreement with Telemedia, CFHK-FM moved its studios from St. Thomas to London and at the end of 1997 began operations under an LMA agreement with Blackburn's two stations, CFPL-AM and FM. As the Commission is aware, Shaw Radio subsequently agreed to purchase the three stations and that application is on the non-appearing side of the Agenda for this hearing.
31 As well, Telemedia purchased Radiocorp's two London stations and that application was on the agenda of a public hearing last month as a non-appearing item. Assuming these applications are approved, the result will be a radical restructuring of radio ownership in London. CKSL, a stand-alone AM station, will be facing two very strong competitors, each with two FM stations, as well as an AM operation. CKSL simply does not stand a chance in this competitive arena unless it is permitted to broadcast on an FM frequency.
32 For more than 40 years CKSL has been providing a valuable local service to London residents. An appendix attached to our supplementary brief outlines the many contributions the station has provided to worthy causes under our stewardship, contributions that are confirmed by some 60 letters of acknowledgement and support contained in our application and the interventions. Jim Swan will elaborate further on CKSL's community involvement and Chris Ruscica will then discuss the impact on the station's audience of the current signal deficiencies.
34 MR. SWAN: Thank you.
35 Commissioners, CKSL Radio was the first radio station to offer the community of London a choice of voices. Prior to our sign-on, there was one other station, CFPL Radio. Since then, as you know, several other stations have been added to the London broadcasting landscape. It is ironic to me that it is literally the landscape now that today is one of the important factors that compromises our ability to effectively serve our community.
36 Commissioners, my working career for the last 22 years has been in London and I have spent my entire life in broadcasting. That has brought with it heavy involvement in community service. I was honoured in 1991 when the Central Canada Broadcasters selected me for The Howard Caine memorial award and later in London when the London Community Foundation honoured me with the Ivey Award of Excellence for community service.
37 CKSL Radio has made it possible for me to continue the efforts that result in such acknowledgement. The principals of Affinity Broadcasting are themselves heavily committed to charitable work. Community service, therefore, is a key element of Affinity's corporate culture and I have been strongly encouraged to continue and expand my work in this area on behalf of CKSL and on behalf of Affinity.
38 CKSL Radio gives concerted exposure to events and organizations that might gain only passing mention through some of the more dominant media in our community, such organizations as Over 55 Inc. -- that is a group in our city dedicated to finding employment for experienced segments of our community, people over 55 -- such things as the Kiwanis of London Music Festival, an event that provides a venue for talents of over 2,000 young musicians.
39 Here is just an illustration of the station's effectiveness in the area of community service. CKSL recently undertook a month-long series of interviews to promote an event organized by the YM-YWCA to bring attention to women of distinction in the community. CKSL talked to these outstanding women, discussed their achievements and listened to their views on the choices that are open to young people, both male and female. The role of CKSL Radio in the success of this event was described in a letter that we received from the organizers, and I quote:
"Thanks to your assistance in informing the community of this outstanding event through your generous coverage ... 1,050 people joined us ... the highest attendance at the celebration (and) the largest fund raising dinner in the history of the London Convention Centre ... raising almost $70,000 to support the Y's residential leadership program for young girls ages 13 to 15."
40 The list or organizations that CKSL Radio assists on an ongoing basis through on-air interviews, public service announcements and by attending events as master of ceremonies is fairly lengthy. It includes the Children's Hospital of Western Ontario, The Heart and Stroke Foundation, The London Shriners, The Alzheimers Association of London and Middlesex, The Elgin, London and Middlesex Lung Association, The Big Brothers of London, The Big Sisters of London, The United Way of London, The London Chamber of Commerce, The Thames Valley Children's Centre, The London Breast Cancer Society, The London Cancer Society, The Canadian Diabetes Association, The London Regional Art and Historical Museum, Mission Services of London, SARI -- that is The Special Abilities Riding Institute -- Crime Stoppers of London, The Block Parents of London, Habitat for Humanity, The Parkinson's Association, The London Sweet Adelines, Meals on Wheels of London, Alcoholics Anonymous, the London Hadassah Wizo, The Kidney Foundation, and there are others.
41 In addition to public service announcements that focus on local community events which we broadcast at least once every hour of the broadcast day, we also have an entertainment guide that is featured four times daily and it highlights everything from concerts to art shows. We also support the arts community through interviews and designed campaigns for Orchestra London, The London Fanshawe Symphonic Chorus, The Karen Schuessler Singers, Encore the Concert Band and more.
42 CKSL Radio also reflects the heritage of one of London's native sons, Guy Lombardo, with extensive coverage and campaigns for the Royal Canadian Big Band Festival, which is on right now in our city. We also feature a variety of information on the very active theatre life in London and the region, with hands-on support to the nationally renown Blyth Festival of Canadian Plays. Management has encouraged my role as a member of the Board of Directors of the Blyth Festival, where I am able to offer advice and assistance as a representative of the media.
43 As I mentioned earlier, management is entirely supportive of the connection that I maintain with other organizations as well that include Mission Services of London where I serve as an advisor to their Public Relations Group, The Agape Foundation where I am President of the Board of Directors, and Fanshawe College where I serve as an advisor to the Applied Arts Division.
44 Radio reflects community. For over 40 years CKSL Radio has played an important role in building London's pride in its community by doing what radio does, provides feedback on its major achievements and by focusing on significant undertakings that have resulted in such things as the development of world-leading achievements such as the first Children's Museum in Ontario and the development of Block Parents, an organization that is now national in scope.
45 Our contribution to community life would be much stronger if we were able to reach a wider audience with an FM signal. The benefits of such a signal would be tremendous for the myriad of community organizations that CKSL supports and all of those who benefit from those organizations.
47 MR. RUSCICA: Thank you, Jim.
48 CKSL programs a soft adult contemporary format featuring the music from the 1970s and 1980s, with the best of the 1960s and 1990s. A large component of our music is unduplicated by other London stations. Our programming is directed to persons in the 35 to 55 age group and primarily to the older half of that demographic. CKSL's format, thus, provides diversity for radio audiences in London, both with respect to its music and its target demographic.
49 The critical problem, though, is that our music is degraded by the quality of our AM signal. The findings of Edison Media Research, which conducted the survey of London radio listeners in February of this year included in our application, clearly indicated the pressing need for CKSL to change to an FM frequency. The survey covered persons 18 to 54 years old. Most tellingly, only one-third of the respondents had listened to any AM radio station in the month preceding the survey. This finding confirms the trend throughout North America, as noted by Edison, that few people under 54 years old are listening to AM and even fewer listen to music on AM.
50 As part of its survey, Edison played examples of music in CKSL's format, as well as examples from five other formats. In our demographic, the 35 to 54 age range, 13 per cent of the respondents stated that a station playing CKSL's music would be their favourite and 34 per cent said they would listen a lot to such a station. These percentages are buttressed by the significant number of respondents who indicated that they would listen more to CKSL if it were moved to the FM band.
51 In the last BBM survey, CKSL captured a mere 1.8 per cent share of audience. The findings of Edison Media Research are strong evidence that a move to the FM band would capture audience shares for CKSL in line with those of the other London FM stations and restore the station to profitability. I should note in passing that out-of-town stations, as a group, capture over 25 per cent of the hours tuned in London. CKSL on FM could be expected to repatriate a portion of this out-of-market tuning.
52 The issue of our signal strength and quality is the paramount problem. In talking with listeners and retailers, many have noted a deterioration of CKSL's signal strength over the past few years. In many instances, retailers have told us to call on them once we were on the FM band.
53 I want to emphasize our fundamental commitment to the community that has been addressed by Jim Swan. We have faced a mountain of adversity, including a mountain of landfill, to reflect the community that we live and work in. Our commitment is firm to increase and enhance our work with the community.
54 As noted in our brief, a change to the FM band will enable us to add an afternoon drive show to our local programming and enhance our news content and community involvement. As demonstrated by the numerous letters filed with the application and by way of supporting interventions, many groups and individuals in London rely on CKSL to bring their messages to the public.
56 MR. O'BRIEN: There are important benefits that will flow from your approval of this application. First, it will allow CKSL to survive as an independent, distinct radio voice in London. We are confident that with an FM signal, CKSL will substantially increase its audience and stem the financial hemorrhaging we have been experiencing for two years.
57 Secondly, as Chris noted, we will be able to extend our local service by enhancing our afternoon drive show to complement our current morning show and we will be able to enrich the content of local and regional newscasts programmed each hour through the broadcast day and on the half-hour during prime listening periods.
58 Third, our community service initiatives will become even more effective as we reach a larger audience with our public service announcements and various campaigns that Jim Swan described.
59 Fourth, we commit to contribute $100,000 to Canadian talent development initiatives over and above the minimum annual expenditure of $5,000 required under the CAB guidelines. This sum will be spent over five years and directed to programs designed to make music instruction available to children of talent in the London area who lack the financial resources to develop their talents.
60 Finally, these benefits will be realized without any appreciable impact on the operations of the other London commercial radio stations. CKSL already exists in the market and we do not plan to change the music format and other programming elements the station now provides. Assuming the Telemedia and Shaw applications are approved, these two large broadcasting companies, each with three stations in London, will be well able to absorb the impact of CKSL changing to an FM frequency.
61 Commissioners, we filed our application to broadcast on 102.3 megahertz in March 1998, more than 15 months ago. As you know, our application to change our frequency was to be considered at a public hearing last July, but was removed from the agenda because opposing intervenors expressed an interest in applying for the same frequency. Ironically, none of those interveners responded to the Commission's subsequent call for applications.
62 In the meantime, your consideration of our application has been delayed a year with very serious consequences for CKSL. The Commission has our financial statements and can readily see the extent of the financial losses we have sustained over two years. We cannot continue to operate the station under these circumstances.
63 We most urgently ask the Commission to approve our application. With your approval, we will be able to not only sustain, but substantially strengthen the services CKSL provides and restore the station to a position worthy of its long-established traditions in the London Community.
64 THE CHAIRPERSON: Thank you very much.
65 I would like to ask you a few questions that flow from your application and from your presentation to us here this morning. I would like to understand fully the circumstances surrounding your acquisition of CKSL and the circumstances that led you to apply to the Commission to change from an AM frequency to an FM frequency. You touched on that in your presentation this morning, the technical problems and so on.
66 As I understand it, you began operations in September 1997. Is that correct?
67 MR. O'BRIEN: That is correct, sir.
68 THE CHAIRPERSON: Then in March 1998 you applied for the conversion to FM. Is that right?
69 MR. O'BRIEN: That's correct.
70 THE CHAIRPERSON: When did you first become aware that an FM frequency was available, taking into account the fact that you began operations in September? Did you know at that time that there was an FM frequency available?
71 MR. O'BRIEN: We had actually done a search. Our goal was to have an AM/FM combination, as we are trying to do now in Hamilton, so we had actually looked at FMs, but had been told that there were no frequencies available. So, our initial look at it was that there were none available.
72 Gordon Elder had done work on CKSL-AM and had done a proof of performance. We went to Gordon and talked to him about our situation on the AM and the FM and Gordon, over a period of time, developed this FM frequency for us.
73 THE CHAIRPERSON: When did you realize that you needed to convert to FM? Given that you began operations in September 1997, when did it become obvious to you that you had to do something?
74 MR. O'BRIEN: After we took over the station, we were going through some files and found the report from Gordon in the engineering files. In this report, in some detail, he outlined the difficulties of trying to prove in the array the effect of the environment that it was in. Our situation with CKSL and CHAM-AM and CKDB-AM were all identical. All stations needed refurbishing, updating, new studio equipment, just better audio quality, of which we did to all the studios.
75 In the case of CKDB-AM and CHAM-AM, in both these instances the stations responded very well to the upgrades. In the case of CKSL, it did not. So, two of the three with identical capital investment and technical improvements responded very well to the changes. CKSL didn't, unfortunately.
76 THE CHAIRPERSON: So, at the time you began operations and I suppose at the time you acquired the station as well, you didn't really appreciate the severity of the technical problems. I think that is a point you made this morning to us.
77 MR. O'BRIEN: That's correct.
78 THE CHAIRPERSON: I guess my question to you, to be frank, is why weren't you aware of these problems? They seem to have been well known for several years, particular the problems with the landfill site and so on. Mr. Elder's report I think as early as 1988, if I recall correctly, identified that problem. My question is: During the acquisition process, why wouldn't you have become aware of the problems that were identified?
79 MR. O'BRIEN: First of all, many AM radio stations are the result of limited capital expenditures to upgrade and improve them. The technical quality often suffers from the lack of commitment to AM. We didn't approach the AM radio stations that way at all. We went at them vigorously. For example, in Hamilton we spent over $200,000 on a new transmitter, all new digital processing equipment, new broadcasting equipment through it all, and the result is the station's technical quality is exceptionally good.
80 To answer your question about CKSL, we did the same listening, if you want to call it that, to CKSL and to the other stations and, from our experience, concluded, in looking at the studio equipment, that it would respond to those technical upgrades that the other stations did respond to. In terms of the knowledge of the degree or seriousness of it, we had not seen material of -- that material had not been seen prior to takeover.
81 THE CHAIRPERSON: And in the course of the takeover, this isn't material that you would have sought in evaluating whether or not to purchase the station, the supplementary proofs of performance and so on?
82 MR. O'BRIEN: We did not see them, sir.
83 THE CHAIRPERSON: Okay, thanks.
84 The station was operated, I take it, for at least 10 years with these technical problems before you acquired it. I guess I have a question about how did the previous owner manage to operate the station in that environment for such an extended period of time.
85 MR. O'BRIEN: With a successful FM station.
86 THE CHAIRPERSON: So, it was the fact that it was a combo with an FM station and you are operating it, I think as you pointed out to us this morning, as a stand-alone AM station?
87 MR. O'BRIEN: That is correct.
88 THE CHAIRPERSON: I guess at the time you purchased the station you must have -- you were aware that it was a combo and you felt you could operate it as a stand-alone station. What led you to that conclusion?
89 MR. O'BRIEN: London, as a market, is a good broadcast market and we believed that there was an opportunity in the marketplace for the station to provide a particular type of programming. On the other two AMs, they have news/talk information packages and we felt that the older demographic could be well served by an AM station at that time.
90 THE CHAIRPERSON: Does CKSL share any facilities and services with CIQM?
91 MR. O'BRIEN: We are in the same -- what happened is we split the studios at that time, yes, partly, but our offices are separate and distinct.
92 THE CHAIRPERSON: Are there any advantages to you from an efficiency point of view of sharing those facilities?
93 MR. O'BRIEN: Actually, the overhead -- the rental cost of the studios is very, very high, extremely high.
94 THE CHAIRPERSON: When you say "extremely high" --
95 MR. O'BRIEN: On a cost-per-foot basis.
96 THE CHAIRPERSON: Higher than market value in London?
97 MR. O'BRIEN: Yes.
98 THE CHAIRPERSON: You are bound to an agreement that will require you to share these facilities for some time?
99 MR. O'BRIEN: That is correct.
100 THE CHAIRPERSON: How long is that agreement?
101 MR. O'BRIEN: We have another seven years to go.
102 THE CHAIRPERSON: Your AM station, CKSL, as you pointed out, is part of a -- you have two other AM stations, as I understand it. To what extent do you share services with those AM stations? Are you able to achieve any efficiencies by operating them as a group?
103 MR. O'BRIEN: Yes, there are certain efficiencies that can be achieved. As the stations become more successful in their marketplaces, we hope that they will provide us with a marketing advantage when we go to larger national and regional advertisers, but the stations, within their marketplace, obviously must have sufficient audience to warrant any advertiser buying, whether singly or in combination.
104 THE CHAIRPERSON: Just to make sure I understand the efficiencies that are being gained, in fact the sharing of facilities with CIQM is a disadvantage rather than an advantage, but you are able to achieve some benefits operating as part of the three AM stations?
105 MR. O'BRIEN: We have, as a matter of interest, looked into trying to find a way to get out of this lease, which does not appear to be possible. The point is it is very expensive real estate.
106 THE CHAIRPERSON: If you did get out of this lease, is this a significant factor in the results that you are --
107 MR. O'BRIEN: On a monthly basis, it is a fairly high amount of money every month. It's an ongoing overhead basis and the environment isn't as good as we would like. There are no windows, it is cave-like in structure, as this room is. It is pretty hard to see the weather.
108 THE CHAIRPERSON: If your application before us is successful, will you continue to share these facilities? Will you still be bound by the same lease arrangements, and so on?
109 MR. O'BRIEN: To be honest with you, until the Telemedia purchase is completed -- I am not aware if they have bought the Radiocorp building or not, but if they have bought that building, which is an excellent building and large size. As to whether there would be an opportunity for both Telemedia and us to vacate our present environment, we have not gone back to talk to them about that, sir.
110 THE CHAIRPERSON: I was looking back at some of the station's revenues over the years and the 1998 revenues are 23 per cent of the 1994 revenues, which I think clearly emphasizes the decline in revenues that you have been talking about. Given that the same technical problems existed in 1994 as existed in 1998, what do you think is the primary cause of this very dramatic decline in revenues? Is it strictly the technical problems or is it because of the competition with the combos? Can you give us some insight into what you think are the really critical factors in that very large decline in revenue?
111 MR. O'BRIEN: A stand-alone AM is a very hard sell. When you are in combination with the FM, the leader-follower effect occurs and you are able to help the AM radio station in its revenue-creating activities. The market has become very competitive. As I mentioned in our presentation, The Hawk from St. Thomas moved in with the Blackburn stations and those three stations were sold in combination, making for very strong competition.
112 As you note in the numbers, sir, the AM revenues have been declining in the market, in general. FM has been doing well, AM has been suffering in the London market.
113 THE CHAIRPERSON: The 1998 revenues are 23 per cent of the 1994 revenues, the 1998 expenses are 47 per cent of the 1994 expenses. What are the reasons that the expenses haven't declined to the same degree as the revenues?
114 MR. O'BRIEN: Are you speaking of CKSL specifically?
115 THE CHAIRPERSON: Yes.
116 MR. O'BRIEN: Obviously, there is a threshold or a level that you can't get below no matter how much you may wish in terms of providing the level of service that we think is required for a radio station in the marketplace. As Jim Swan has outlined, we are committed to the community, we are committed to public service, and there is a level we just can't get below to provide the service that we think we are responsible to do.
117 THE CHAIRPERSON: I notice that sales and promotion expenses, by and large, tracked downwards. The decline in revenues, as I mentioned earlier, were 23 per cent in 1998 of the 1994 revenues. Sales and promotion were 29 per cent in 1998 of the expenses in 1994. So, they tracked downwards, by and large, in the same degree as the revenues, but administration and general are 93 per cent; that is, in 1998 they were 93 per cent of what they were in 1994. Why wouldn't administration and general expenses have declined to a greater degree than they have?
118 MR. O'BRIEN: On a percentage basis, obviously, the cost of a manager -- as the revenue decreases on a percentage basis, obviously that number still increases, actually, on a percentage basis. We just don't believe it's possible to reduce the operating level and provide the service, whether it's internally or externally, with less people and less quality people than we have.
119 THE CHAIRPERSON: So, the consolidation with the other AM stations in terms of at least general and administrative expenses really hasn't led to significant savings, I take it.
120 MR. O'BRIEN: I think to be really direct on that, the traffic billing accounting, the systems that are available today in terms of technology can reduce overhead as the station grows, but there is a floor base level that you still can't do without bodies. At least we don't know how to do it yet.
121 THE CHAIRPERSON: As I mentioned earlier, sales and promotion expenses declined in lockstep, by and large, with revenues. If you had kept sales and promotion expenses at a higher level, as you did with general and administrative, do you think that would have had a positive impact on revenues?
122 MR. O'BRIEN: When we purchased the station, we joined the Radio Marketing Bureau in Canada, the Radio Advertising Bureau in the United States. We had the Radio Marketing Bureau come in and do an analysis of the London market, particularly of the London Free Press, the newspaper presence, the value and the revenue they were creating. We undertook major sales training activities within the station with the personnel and the reality is that our people had a really tough time on the street trying to compete as a stand-alone AM. It has been a very hard battle, sir.
123 THE CHAIRPERSON: I guess the heart of my question is: If you had not cut sales and promotion expenses and sustained them at a higher level, would you have been able to sustain greater revenues? Is the decline in revenues a function of the decline in sales and promotion expenses?
124 MR. O'BRIEN: Our people are paid on a 15 per cent commission basis and there is a basic draw, but the 15 per cent is a reflection of the revenue that they generate or the revenue the station enjoys or doesn't. So, it is in a proportionate level sir.
125 THE CHAIRPERSON: Thanks.
126 I would like to move now from discussing some of the past performance to taking a look at the future. I think I would like to understand clearly what will happen if your application is denied by the Commission. Will CKSL cease to operate?
127 MR. O'BRIEN: That is a decision that we would have to really do some arm-wrestling with to determine the viability and how we would manage to continue in the marketplace. It would be a very tough task, sir, a very difficult task to compete as an AM stand-alone in view of the changes in the marketplace with the two combos of three stations each.
128 THE CHAIRPERSON: I take it you are saying a very difficult, but not impossible task.
129 MR. O'BRIEN: I didn't say that. Very difficult is correct.
130 THE CHAIRPERSON: But you do believe that the station could continue to operate?
131 MR. O'BRIEN: We would have to have a very heart-to-heart chat about that, sir. It would be a near impossible task to generate revenues on a stand-alone with two combinations in competition, to be honest with you. You have commented about our costs of operation. It would be very hard to continue to provide the level of service we have and absorb those kinds of losses, to be honest with you.
132 THE CHAIRPERSON: Let me look at some of your 1999 forecast financial figures. I would like to compare some of those to your 1998 actuals. Your 1998 actuals were filed in confidence with the Commission when you reported them to the Commission. I am wondering if you have any difficulty with me using the specific figures when I am asking you the questions today or would you prefer I dealt more generally in orders of magnitude. The question is: Can I use your 1998 data in our questioning today?
133 MR. JOHNSTON: Would it be possible to do it in terms of percentages, as you have previously, or do you have to cite specific numbers?
134 THE CHAIRPERSON: I could use percentages, but then it would be possible for somebody to derive the 1998 actuals by using the percentages. I can proceed by talking in generalities and that is fine with me.
135 MR. JOHNSTON: That would be helpful, I think.
136 THE CHAIRPERSON: So, you would prefer we kept the 1998 numbers confidential.
137 Your April 26, 1998 letter to the Commission notes on page 2 that the large increase in revenue, and I quote, "will primarily come from newspaper advertisers." Then your February 5th, 1999 supplementary brief, at page 7, states that you will primarily expand your revenue base by capturing audiences now tuning to out-of-market stations. Which view is correct?
138 MR. O'BRIEN: Advertisers are looking for radio stations with the largest audience possible for their chosen demographic or the need for their business and by increasing the audiences, obviously your opportunity to charge more per unit is real. That is for certain.
139 The other point, which I mentioned earlier, is the Radio Marketing Bureau have done some very interesting studies regarding newspaper relative to radio and it is very exciting information. As a matter of fact, in some markets they are experiencing some very strong growth as a result of the consolidation of radio's efforts of selling radio against newspaper.
140 THE CHAIRPERSON: I am not sure I understood the response. What I am trying to understand for the purposes of us gaining insight into your application is that one part of the record says that the growth in revenue will primarily come from newspaper advertisers and if I read what you submitted to us correctly, you at another part say that it will come by capturing audiences from other radio stations.
141 So, in one part of the record it says most of the revenues come from taking audience away from other stations and in another part it says most of the revenues come from taking advertising revenues away from newspapers. I want to know which view we should rely upon in looking at your application.
142 MR. O'BRIEN: What we are saying is that by looking at the radio station's opportunity to perform, we believe that there is a large audience available for the station in that marketplace and subsequent to attracting that audience, we believe that there are advertising dollars that are presently being expended in the marketplace that we can convert to radio advertising dollars, sir.
143 THE CHAIRPERSON: So, it's a combination of the two. Is that correct?
144 MR. O'BRIEN: That is what I am saying.
145 THE CHAIRPERSON: Can you provide us with any information about how much will come from newspapers and how much will come from attracting audiences from other stations?
146 MR. O'BRIEN: On April 26th in our memo we outlined that the revenue from existing stations we consider to be less than $250,000 and from sources not advertising on radio about $250,000. We believe that newspaper would be a conversion at about $850,000. Those are the numbers that we had submitted to the Commission as our best guess.
147 THE CHAIRPERSON: In terms of the newspaper conversion of $850,000, do you have any analysis that you could provide us with to substantiate that estimate?
148 MR. O'BRIEN: I don't know if the Commission gets the Duncan Report, which is an American publication, but in the markets where they have consolidated radio with the same stations but fewer owners and more aggressive selling, the Duncan Report clearly outlines that the group radio stations are increasing radio revenues significantly and generally at the expense of newspaper. So, it's an overall increase in radio revenues, rather than cannibalizing from existing stations. So, the Duncan Report outlines markets such as Rochester, Syracuse, markets that are relatively close to us showing a positive response to the new radio conditions.
149 MR. RUSCICA: If I may add, BBM is also rolling out its RTS qualitative data survey, which will be available in the London market a year from now. They have already produced significant results in markets such as Victoria in allowing radio to target print advertisers.
150 THE CHAIRPERSON: Thank you.
151 If you could point us to any particular issue of the Duncan Report that would help us understand the $850,000 with respect to the newspaper conversion, that would be helpful to us.
152 Before I get to the expenses that I talked about with you just a minute ago in terms of comparing them, just let me ask you a couple of other questions about the revenues. What percentage of forecast advertising revenue will come from audience taken from out of market stations?
153 MR. O'BRIEN: In our projections, we are looking at a combination of audience that is presently tuning to other stations and also the people listening to stations in the market and the report by our research people indicate that the level of satisfaction is not as complete as they would like. In other words, there are people presently listening to London stations, as well as out-of-town stations, that are getting partial satisfaction, but they believe that a more finely-honed format directed primarily to that audience group would have audience response both from external and the in-market stations.
154 THE CHAIRPERSON: Are you able to give us an estimate of the percentage that you would obtain from the out-of-market stations?
155 MR. O'BRIEN: You are speaking of revenue? Excuse me, I want to be sure what you are saying here.
156 THE CHAIRPERSON: I am speaking of forecast advertising revenue. What percentage do you anticipate will come from audience taken from out-of-market stations?
157 MR. O'BRIEN: We think somewhere between 20 and 30 per cent. Twenty-five per cent is the number.
158 THE CHAIRPERSON: Thank you.
159 What percentage of the forecast listening audience will be made up of listeners who currently tune to CKOT-FM Tillsonburg?
160 MR. RUSCICA: We forecast, with respect to the CKOT Tillsonburg, it would approximately be in the 30 to 35 per cent that are tuning in to the London market.
161 THE CHAIRPERSON: Thank you.
162 I would like now to go back to the point I raised with you earlier of comparing some of the 1999 forecast expenses and revenues with the 1998 actuals.
163 In terms of programming expenses, I note that in 1999 compared to 1998 there is a substantial reduction. I can't be any more specific than that without tipping off what the 1998 number is. My question to you is: Why the substantial reduction and, more specifically, does this mean you will be doing less local programming?
164 I noticed in your oral presentation this morning you talked about a drive show in the afternoon. The bottom line of my questioning is: Why is there such a substantial decline in 1999 programming expenses over 1998?
165 MR. RUSCICA: That was a result of the serious financial situation were facing at CKSL. I must point out, though, that we endeavour to ensure that all our programming remains local and completely committed to the local community.
166 THE CHAIRPERSON: In the five-year forecast period in fact the annual programming expenses never get up to the level they were in 1998. Is that again a reflection of the fact that you will be doing less local programming in the future than you did in 1998?
167 MR. JOHNSTON: There is a little bit of confusion here at the table, Mr. Chairman. The numbers that I am looking at show a level of programming expense for 1998 actuals with not a significant increase, but an increase in the projections in the first year.
168 THE CHAIRPERSON: I am getting my 1998 actuals from the CRTC's financial database system, which I understand is prepared from information filed by the company.
169 MR. JOHNSTON: We filed the financial statements in confidence. The statements that were filed with the application, as far as I can see here, show an increase in the forecast amount over the 1998 actuals. I am wondering if that is something that I could check with your staff members here during the break or whenever would be convenient.
170 THE CHAIRPERSON: Perhaps at the break you could speak to Mr. McCallum and see if we can agree on what the 1998 actuals were then. As I say, for your information, I am taking the actuals from our financial database system, which I understand is prepared from the data filed by the company.
171 Let me then look at technical expenses and we can see whether or not we can come to any agreement there. In technical expenses again I note a substantial decline in 1999 over 1998. In fact in the information I have, they never climb back up in the five-year forecast period to what they were in 1998. So, my question again is: Why is there a substantial decline in technical expenses?
172 MR. O'BRIEN: Traditionally and pretty consistently, it is much less expensive to operate an FM operation than AM. AM radio stations are quite inefficient in terms of their use of power and with brand new transmitting facilities on the FM, we would expect relatively little expenditure in technical expenses for the first period of time, very little. FM transmitters, FM systems today, being solid state, they are literally dead reliable and redundant as well. So, your costs to operate FM is significantly less, sir.
173 THE CHAIRPERSON: Thank you.
174 Looking at sales, advertising and promotion expenses, in this case there is a very large increase forecast for 1999 over 1998. I suppose, intuitively, one would expect an increase in sales and promotion as you start a new station or a new FM service. My question here really goes back to the programming question again, which Mr. Johnston is going to discuss with Mr. McCallum at the break, but I will put the question out now.
175 On the face of it, there has been a large increase in sales and advertising and promotion and a decrease in programming. So, again the question would relate to are you decreasing programming and putting that money into sales and promotion expenses, if you could elaborate on that. You may not be in a position to elaborate on it until Mr. Johnston has had that conversation.
176 MR. JOHNSTON: The figures certainly bear out what you are saying on sales and promotion. It is the programming one that we are having difficulty with, that comparison.
177 THE CHAIRPERSON: We will perhaps hold on the question.
178 Perhaps, though, on the sales and promotion you could outline some of the initiatives that you will be undertaking, not all of them but the key initiatives that will account for the quite large increase in sales and promotion. What will you be doing that you aren't doing now?
179 MR. RUSCICA: In the sales and promotion category, we will be increasing our sales force. As well, we will be spending more money on the training of our sales people. For promotion, as with any brand new FM, you budget substantially to make a major impact in the market, particularly in the area of advertising in your pre-launch, launch and post-launch phase of the station.
180 THE CHAIRPERSON: Are you able to break that down at all into specific initiatives, number of staff you will be hiring, increased advertising? I don't know what the items would be, but can you give us a little insight into the specifics?
181 MR. RUSCICA: We plan to expand our sales department by four people, as well bringing in a promotion person and an assistant for that person. We also plan to allocate sums towards various advertising campaigns, which, for competitive reasons, I don't want to elaborate in extreme detail here.
182 THE CHAIRPERSON: In administration and general expenses, the forecast 1999 expenses are significantly below the 1998 expenses. Based on the numbers I have, I would say they are dramatically below. What do you forecast you will be able to achieve in the area of administration and general that would allow you to realize such large reductions in the FM environment that you can't achieve in the AM environment?
183 As I recall our earlier discussion, you said you have reached rock bottom in administration and general, you can't go any lower. So, what is different about the FM environment that will allow you to achieve dramatic reductions in administration and general?
184 MR. RUSCICA: We foresee a number of efficiencies that we will be able to obtain. As was previously mentioned by Mr. O'Brien, through our other operations we are able to achieve efficiencies in many administrative functions.
185 THE CHAIRPERSON: But you can't achieve any of those efficiencies in the AM environment. Give me an example of two or three areas where you can achieve it in the FM environment that you can't in the AM environment.
186 MR. RUSCICA: For example, the support people that we have on the AM environment. We can utilize people from outside or, I should say, from our other operations in assisting with our work. Right now in our administrative functions, our order processing, et cetera, we can achieve greater efficiencies through the utilization of our other operations.
187 THE CHAIRPERSON: But those can't be utilized in the AM environment that you are in?
188 MR. RUSCICA: At this point, one of the other elements that will change is a combined sales manager/manager position that we will have in place as well that helps produce those efficiencies.
189 THE CHAIRPERSON: Can we just look at depreciation for a moment. It's going up significantly in 1999 over 1998, several orders of magnitude. Is that because of investment that you would make in new equipment in an FM environment?
190 MR. RUSCICA: Yes, that's correct.
191 THE CHAIRPERSON: Similarly, interest expense goes up dramatically. I assume that's related to the financing costs for the new equipment.
192 MR. O'BRIEN: The financing costs. Obviously, the initial funding of the operating losses will -- we are predicting some pretty significant losses, as you can see, for the first period of time here and, in addition to that, the financing costs as well.
193 THE CHAIRPERSON: What is the capital expenditure to convert to FM?
194 MR. O'BRIEN: The transmitting site alone is $350,000. That is just the antenna and the transmitter at the site. We have already put in about $300,000 in studio improvements.
195 THE CHAIRPERSON: This wouldn't be land. This is just the $350,000 as the equipment?
196 MR. O'BRIEN: The broadcast equipment.
197 THE CHAIRPERSON: Why would the depreciation expense in 1999 be $139,000 if the equipment cost is only $350,000? Would you depreciate it that quickly?
198 MR. O'BRIEN: We will be writing off in a five-year period.
199 THE CHAIRPERSON: So, you will write the equipment off over five years.
200 MR. O'BRIEN: The area where you get accelerated write-offs, sir, is on your computer equipment primarily. The tax laws are such that -- and we have a very heavy investment in computerized equipment -- they will be dramatically written off. Written down, excuse me.
201 THE CHAIRPERSON: Just to make sure I understand, your investments --
202 MR. O'BRIEN: The studio equipment will be an accelerated write-down.
203 THE CHAIRPERSON: I just want to make sure I understand. Your capital investment to convert to FM is $350,000?
204 MR. O'BRIEN: That is correct.
205 THE CHAIRPERSON: And in the first year you will write off for depreciation $139,913 of that expense or that capital cost?
206 MR. O'BRIEN: That is the number that our CFO has given us.
207 THE CHAIRPERSON: Thanks.
208 With respect to local programming -- and I understand Mr. Johnston will be speaking to Mr. McCallum about the expenses related to that at the break -- I just want to make sure I understand your local programming. How many hours of local programming do you do now in a week?
209 MR. RUSCICA: Approximately 122.
210 THE CHAIRPERSON: In the new FM environment, you would do how many hours?
211 MR. RUSCICA: Either the same or more.
212 THE CHAIRPERSON: Does your financial forecast assume the same or more?
213 MR. RUSCICA: Our financial forecast is based on approximately the same.
214 THE CHAIRPERSON: Thank you.
215 In terms of the move to FM, what specific areas of your local programming would benefit from that shift? Is it primarily the larger audience reach or are there any other elements of local programming that would benefit from a move to FM?
216 MR. RUSCICA: First of all, the audience reach would be significant in providing benefits to the community. Secondly, we plan to enhance our other day parts, as well as add to our news department.
217 THE CHAIRPERSON: I want to ask you a little bit now about your format. Have you considered trying other formats, other than the one you currently have in place?
218 MR. RUSCICA: Currently, in London, there are really no other opportunities. AM has become a news/talk-driven medium and both the other AM stations in the market are currently programming news/talk and sports. As a result, it really eliminates any other possibilities.
219 THE CHAIRPERSON: Did Edison Media Research do any research into the possibility of other formats?
220 MR. RUSCICA: Primarily, they focused on what we currently are programming, the soft AC format, because we saw that there was an opportunity in an unserviced area there. That was sort of the primary thrust of the research. They did test other formats in the research as well.
221 THE CHAIRPERSON: When they tested the other formats, which formats did they find most favourable?
222 MR. RUSCICA: What we found or, I should say, what was found was the current format that we are already in, the soft AC format.
223 THE CHAIRPERSON: I wonder if I could get a comment from you that would help us out when we are considering competing applications. What weight do you think we should give to proposed formats when we are looking at competing applications? As you know, we don't regulate formats any longer, but we are presented with different formats often when we are considering competing applications. In your view, is format something we should give much weight to?
224 MR. RUSCICA: I believe that if there is a segment of the marketplace that is not being served -- and we have clearly demonstrated that there is this segment that is not being served -- I think there should be consideration given to that. There is, if you will, a vacuum there in that these people really don't have a lot of choice.
225 Because of the favouritism toward FM, we are not going to see them come to the AM band, but I think what they do do on FM -- and it has been indicated as such in the research -- is they will tune to the station that they hate the least as opposed to like the most until such a station comes and fills that need for them.
226 THE CHAIRPERSON: Let me ask you a couple of questions about market share. Do you have an estimate of the average annual rate at which you expect the London radio market to grow in the short term and in the long term?
227 MR. RUSCICA: We are talking in particular in the radio market?
228 THE CHAIRPERSON: Yes, that's right.
229 MR. RUSCICA: Currently, it is tracking approximately a one per cent growth so far this year. We see that as part of the difficulty in the London market because we certainly have studied the local economy and find it to be quite vibrant. We see that as a result of, in particular, rate instability in the marketplace.
230 With the pending decisions on the two three-station groups, it is certainly our feeling that this will provide a somewhat stabilizing factor in terms of rate integrity and allow growth in radio revenues in the market. As well, the direction toward print advertisers and other advertising dollars that are currently not being solicited, we feel that will also provide a growth opportunity in the market.
231 THE CHAIRPERSON: Can you give us an estimate of the audience share that you expect CKSL-FM will obtain in the London market years one through three? For the first three years of operation, what market share do you anticipate that you will get?
232 MR. RUSCICA: Initially, we look at year one in a six to seven share, years two and three up to an eight share, and a potential levelling out into an eight and a half or nine share in the marketplace.
233 THE CHAIRPERSON: In terms of advertising revenues that you will generate, what percentage of those advertising revenues do you think you will get from existing stations in the London markets?
234 MR. RUSCICA: We outlined in our documents we anticipate around $200,000.
235 THE CHAIRPERSON: Sorry, $200,000 or $250,000?
236 MR. RUSCICA: Excuse me, $250,000.
237 THE CHAIRPERSON: That is all from existing stations in the London market as opposed to out of market?
238 MR. RUSCICA: That's correct, and we foresee that it will have a minimal impact on the existing stations in the London market, particularly given the scenario if the two three-station groups come to be in the market.
239 THE CHAIRPERSON: I would like now to talk for a couple of minutes about the Commission's commercial radio policy and how we should think about applying it when we are considering applications such as the ones we are considering in this hearing. That commercial radio policy was set out in Public Notice 1998-41.
240 I would like your views about whether or not the Commission should take into account the financial viability of individual stations in the market in determining questions of market entry. Is that something that you think is important for us to take into account?
241 MR. RUSCICA: Are you speaking in respect of, in this example, our financial viability?
242 THE CHAIRPERSON: I am speaking generally, but I would expect that you would want to place your answer in the context of your application. So, you can give me a general response and you can bring that to bear on your particular application, if you like.
243 MR. RUSCICA: There should be consideration given to that. However, I must point out, as has been addressed earlier, that only as an FM station do we have the chance to grow and thrive in that market. Currently, as an AM station up against the two three-station groups, that will be a challenge very difficult to overcome.
244 THE CHAIRPERSON: With respect to the level of competition in the market, how should we take that into account? You can place that answer, if you like, in the context of the London market. How do we understand what the level of competition is and how should we take it into account when we award licence in a situation such as this?
245 MR. RUSCICA: In essence, it is going to become a new environment, particularly in light of the other two applications in the market. Literally, the whole blueprint for the market will be redrawn. So, in some respects, in taking a historical model and trying to project that ahead is somewhat difficult because we foresee that there will be, if you will, a period of adjustment in that market if the other two groups come together, as well as ourselves as a new entry in the marketplace.
246 THE CHAIRPERSON: Should we be worried about over-licensing in a market?
247 MR. RUSCICA: Not in this market. Certainly, all the economic indicators we have reviewed indicate that the London market is in good shape and has tremendous growth potential. There are many economic barometers that certainly indicate that London is in good economic shape. The Financial Post survey of markets indicates that income in London is nine per cent over the national average, retail spending is seven per cent over national average, the unemployment rate is the lowest it has been since 1991 in London. It is in fact lower now than the national rates.
248 There is a tremendous amount of retail activity going on in London. Industrial vacancy rates have declined substantially in the London market. So, all the indicators are that the London market is experiencing and will continue to experience growth and there is room for another station and an FM station, that being ours.
249 THE CHAIRPERSON: When we rank competitive proposals, what evaluation criteria do you suggest that we use?
250 MR. RUSCICA: I would say, in one respect, if you want to call it, the criticality of our situation. In our current environment with our AM transmitter site, compared to any other applicant before us we are in a deteriorating situation. As has been pointed out by Gordon Elder, this landfill site is growing and will continue to grow. Therefore, two years from now our signal will continue to be impacted and deteriorate.
251 Compared to two of the applicants, of course, they are new entries and another one is from outside of town that already has an existing FM and they have an AM signal that will not change. As it stands today, it will remain the same two years from now because they don't have these outside influences impacting on the signals. Certainly, I think that has an element in it.
252 I think there is a certain amount to be said about the heritage of the station in the market. CKSL has been in the market for over 40 years, has provided a voice to the community. As outlined by Jim Swan, it continues to provide a voice to the community, providing a voice to many groups that otherwise don't have a voice in London. I believe those are two key areas in determining.
253 THE CHAIRPERSON: What about the size of the contribution to Canadian talent development? Is that an important criteria?
254 MR. RUSCICA: I come from the school of quality as opposed to quantity. I think there is a certain amount to be said in terms of who you are serving with your additional Canadian talent development initiatives. Again there are those who are under-served that do not get the attention in the marketplace and it's extremely important that they do.
255 With our initiative in focusing on children, there is a tremendous need there. There are many children in the London area that, for no fault of their own, don't have the ability or the resources to pursue musical talents or musical direction. We feel that on a quality level this certainly addresses a great need and will have a tremendous impact in the city of London and literally could play a role in finding hidden talent and helping many young people in their future lives.
256 THE CHAIRPERSON: In the radio policy we address the issue of cultural diversity and we said in the decision, and I quote:
"The Commission encourages broadcasters to reflect the cultural diversity of Canada in their programming and employment practices, especially with respect to news, music and promotion of Canadian artists." (As read)
257 Given the growing diversity in markets such as London, is this an issue that you have considered and can you outline your approach in this area for us?
258 MR. RUSCICA: It certainly is an area we have considered and I can speak for Jim Swan, who has certainly focused on those areas in his morning programming and his other community work.
259 Would you like to elaborate at all on that, Jim?
260 MR. SWAN: We respond to the community as it responds to us, so we hope that through interviews and presentations we reflect the cultural diversity in our community and help raise awareness of a continuing cultural diversity. The city has the intercultural centre and there are a number of initiatives that come out of that that we reflect through interviews and presentations.
261 From time to time, although we may not add the music to our play list, as such, we interview the people who are producing this music and play examples of it and let our community know that these things are there. As the cultural community establishes itself with various events, we reflect those. In fact a very large cultural event is scheduled for the first part of July, Sunfest, that gives exposure to almost every culture in our community. We will undertake interviews with the organizers of those events as they approach.
262 There are a number of situations like that as the year goes by that we encourage through that sort of exposure, as well as assisting them when they ask. When the need is expressed, then we help them as well with advice in their marketing and in their presentations to the community and help them access some of the rest of the media in the community as well without prejudice to our own, with a knowledge that we are able to reach a segment of the population, a demographic segment, that they may be interested in and helping them access some of the rest of the media as well.
263 So, our encouragement is done through the use of our own medium, but, as well, with knowledge of what is needed within the community to help raise their awareness there, too.
264 THE CHAIRPERSON: Thank you very much.
265 With respect to the Canadian talent development, you are committing to contribute $100,000 over and above the existing level of commitment at the rate of $25,000 a year beginning in the second year of operation over four consecutive years. Would you accept a specific condition of licence in this area?
266 MR. JOHNSTON: Just for clarification, Mr. Chairman, I believe the commitment is $25,000 per year, including the minimum amount. So, it would be $20,000 per year over five years.
267 THE CHAIRPERSON: Thank you for correcting that. Would you accept that as a condition of licence?
268 MR. JOHNSTON: Yes.
269 THE CHAIRPERSON: Thank you.
270 In your application you indicated that moving CKSL-FM transmitting facilities to a site would cost in excess of $1 million and that is just not acceptable for you. I have a question about whether or not you have looked at other options in the AM band. Let me just give you a couple of follow-up questions to that.
271 Could you comment on the technical feasibility of moving CKSL up the AM dial to the recently-expanded portion of the band; namely, to a new frequency located between 1605 kilohertz and 1700 kilohertz?
272 MR. O'BRIEN: The answer would be no. When I first came into the broadcasting business, it was a radio station 1600 on the dial. You get no free tuning whatsoever. If people don't dial either digitally or on a rotary knob, there is no free tuning. People don't go by it by accident. That is number one.
273 Number two, the inherent characteristics of ultrahigh frequencies are very low coverage, even with high power. So, as an option to go to the new portion of the band, the answer would be it would not be a reasonable or feasible option for us to consider. One of the main difficulties, of course, is you are still on AM, with the decreasing interest from an audience point of view in terms of participating in music programming.
274 THE CHAIRPERSON: Would the use of another AM frequency between 535 kilohertz and 1600 kilohertz offer any significant improvement over the signal limitations you currently suffer on the 1410 frequency?
275 MR. O'BRIEN: I guess there are two distinct issues here. One of them is the propagation characteristics of different frequencies. Obviously, lower frequencies get far more efficient coverage.
276 The inherent difficulty is not as much AM as AM receiver. As you well know, the AM receivers do not -- even the stations that are omnidirectional with less inherent quality degradation as a result of an array system, still the receiver is a limiting factor. AM receivers are of relatively poor quality. The problem is more a receiver problem than actually the transmitting facility, in our opinion.
277 THE CHAIRPERSON: Thank you.
278 This is my last question for you, although my fellow Commissioners may have a question or two for you.
279 As you know, your application is competitive with three others for the use of the 102.3 FM frequency. In such a situation, the Commission seeks the competitor's views to assist it in deciding which applicant has proposed the best use of the requested frequency. What, in your view, are the compelling reasons to grant you the requested frequency? In what ways does your proposal constitute the best use of the proposed frequency?
280 MR. O'BRIEN: CKSL, as Chris Ruscica commented earlier, has been in the market for 40 years and has done a good job in the community service. Our commitment to the community, our commitment to public service is real. It is not proposed, it is something that has been going on since we have purchased the stations in a strong manner.
281 We believe, in terms of the new environment that we are going into, which is the two large groups, three stations each, in view of the fact that we are an AM-only station and the fact that our company is a relatively new voice in the broadcast industry, we work very hard. The other stations are doing quite well relatively, from where they bought them to where they are. So, we think we have made a commitment and have demonstrated that we are working very hard in this industry to provide an alternate service that listeners appear to be appreciating.
282 THE CHAIRPERSON: Thank you.
283 Commissioner Cardozo has some questions for you.
284 COMMISSIONER CARDOZO: Thank you, Mr. Chair.
285 Good morning, gentlemen. I have a few quick questions that I wanted to ask to clarify some things in my mind.
286 As I understand it, the three basic problems you are facing at the moment are essentially three business decisions that you made which were perhaps not optimal: First, CKSL has a transmission problem which existed and had been documented before you purchased the station, but you weren't aware of that and that didn't emerge in your due diligence process; second, the rental agreement with Telemedia is rather difficult for you because it's above market value; and, third, you bought an AM station in a situation which you feel is in a difficult position when in a stand-alone situation.
287 So, essentially, these are the three problems you face, which will be alleviated by a flip to FM. Does that capture the nature of your problems?
288 MR. O'BRIEN: And the competitive situation in the market, the changing landscape in terms of the competition, sir.
289 MR. CUSSONS: Could you please use your microphone?
290 COMMISSIONER CARDOZO: Did you want to just say that again so we have it on the record?
291 MR. O'BRIEN: In addition to that, of course, is the changing landscape of the London market with the proposed acquisitions of the two AMs and FMs.
292 COMMISSIONER CARDOZO: Of course, as Mr. Swan said, it's both the environmental landscape next door and the competitive landscape.
293 That leads me to ask: A single FM in competition with what could be two three-station combos, will that situation be so much better or will you, down the road, want to come back and apply for that AM so that you at least have two against the other three-station combos, if that is what happens there?
294 MR. O'BRIEN: I don't believe that would be the case. Most recently in the St. Catharines-Niagara market, CHOW Welland, which was licensed in 1957 at 1470 on the dial, just completed its change to FM that the Commission granted them. Not only have they changed to FM, it has been a rebirth of the facility. The advertiser response, the listener response has been quite dramatic, to say the least. So, when stations that are on AM have the opportunity to flip to FM, the renewed vigour is absolute, it is not imagined.
295 COMMISSIONER CARDOZO: And you don't need that supplementary AM to --
296 MR. O'BRIEN: I think most people -- I shouldn't say "most", but many people who have had the AM, unless it's a strong particularly good facility, would find it to be something they are possibly holding for the hope of the future of flipping to digital. By and large, the AM operations are a drain rather than a productive asset in many cases, unless they enjoy a position of specialty programming.
297 In the case of St. Catharines, our station is a news/talk station as a large signal and is doing well in the market because it has a format opportunity that it owned when we bought the station. When those opportunities are limited or not available to you, then your battle is extraordinarily uphill.
298 COMMISSIONER CARDOZO: Affinity Radio has over or under 100 employees?
299 MR. O'BRIEN: Over.
300 COMMISSIONER CARDOZO: So, the employment equity report that you provide us is more for information in that you come under the Human Resources Development and the Human Rights Commission jurisdiction?
301 MR. O'BRIEN: That is correct.
302 COMMISSIONER CARDOZO: Lastly, let me ask you about the voice of the community. I think, Mr. Ruscica, you mentioned that your station provides a voice to the community that otherwise does not exist. I think those were the words you used. Mr. Swan has noted an extensive list of groups that you have worked with over the years. You don't feel that the other existing stations provide the kind of voice that you do?
303 MR. RUSCICA: As Jim mentioned at the beginning, there are groups that are somewhat smaller, that, say, are not as savvy about getting attention in the community and we certainly provide contact to the community with them. As well, there are topics and issues that we touch upon that some of the more mainstream stations don't feel it's viable for their audience or of interest to their audience. There have been a couple of instances where we have provided coverage on some events recently that there was just no interest outside of our radio station.
304 MR. SWAN: It's a matter of providing a more full voice. The other stations may give passing mention to some of these organizations. Because of our demographic -- and we are looking at an older demographic to whom this format appeals -- we spend more time on those issues.
305 Recently, we did a series of interviews and programs that brought attention to an international conference that was taking place at the University of Western Ontario on death and bereavement. It is not a topic that many other stations in their formats felt comfortable in, but we felt that it was an area that our audience had perhaps more particular interest in because of their age demographic. We brought it forward because it was internationally recognized and we thought that the community should know that this international conference was taking place.
306 Serendipitously, some of the speakers spoke to issues that were then receiving world attention. One of the issues was violence on the 6:00 o'clock news and another issue was violence as it pertains to teens. So, this was an issue that, serendipitously, became very timely.
307 The conference itself had been taking place and happens every second year and the first was 10 years ago. It might not receive a lot of exposure in the electronic media, but we felt that it was something that we could bring forward. It is those kinds of things that just give extensive coverage to that sort of issue.
308 Over 55, we mentioned, is another organization, not that the other media won't touch on and cover it, but we are able to just give a further resonance to it.
309 COMMISSIONER CARDOZO: This is an approach that you plan to carry on if you are granted the FM licence?
310 MR. RUSCICA: Certainly, and it's in the nature of all of us working there that we have an orientation of helping people. Even if it's a retailer, we want to help a retailer find customers. If it's a community organization, we want to help that community organization get its message to the public or a charitable organization that is looking for new members or participants. We operate in a helping mode.
311 MR. SWAN: I would just like to personally say that it was great relief when I discovered the core philosophy of the Affinity Group involved that kind of community service. When you work for a broadcaster, it's inherent that we become involved in the community. It is just part of our response. I have become quite involved, but if you work for someone who thinks that your attendance to some of the committee and other functions that you are doing might not be bringing them direct results, then you feel that you can't participate at the same level.
312 To discover that Affinity and the core owners of Affinity participate in their communities in this way and encourage me to continue to do and expand on what I am doing was a tremendous relief. So, I look at it with great confidence that as we are able to have a better voice with the FM frequency and, indeed, then a better revenue base, that will only continue. The kinds of philosophies that we are able to take to the community we will be able to continue in a more vigorous way.
313 COMMISSIONER CARDOZO: Thank you. That covers my questions.
314 Thanks, Mr. Chair.
315 THE CHAIRPERSON: Thank you.
316 Mr. McCallum, I think you have some questions?
317 MR. McCALLUM: Thank you.
318 Just to clarify for the purpose of the record the condition of licence that Commissioner McKendry asked about in terms of the Canadian talent development contribution, I think Mr. Johnston suggested that the amount would be $20,000 over five years, in addition to the $5,000 already committed according to the CAB plan. I make that a total of $125,000.
319 In your supplementary brief, page 8, you also refer to $125,000, but with a slightly different rhythm because you are suggesting $5,000 a year, the CAB contribution, but $25,000 per year starting in the second year, going years two to five. Which of the two is it? It is the same total amount.
320 MR. JOHNSTON: Sorry for the confusion over that. I probably confused matters more than I should have by interjecting. I think the intent is, as I understand it now, of the additional $100,000, that will be $25,000 over four years starting in the second year.
321 Is that correct, Chris?
322 MR. RUSCICA: Yes.
323 MR. McCALLUM: And that would be the condition of licence if this is granted?
324 MR. JOHNSTON: Yes.
325 MR. McCALLUM: Thank you.
326 Referring to your presentation this morning, on page 10 you referred to the fact that you would be able to extend your local service by enhancing the afternoon drive show and also enrich the content of local and regional newscasts. Could you explain in what way you would enhance the afternoon drive show and also in what way you would enrich the content of local and regional newscasts?
327 MR. RUSCICA: With respect to the afternoon drive show, we see an enhancement in terms of the information content that would be part of that, as well as an increase in surveillance material -- i.e., weather, traffic -- and also more community events that would be focused on through that afternoon drive show.
328 In our news, we see more or, I should say, increased coverage of news events in and around London, again complementing what we are already doing earlier in the day; also, with the addition of a news person and complement of part-time news people as well.
329 MR. McCALLUM: So, there already is an afternoon drive show?
330 MR. RUSCICA: Yes, there is.
331 MR. McCALLUM: Are there any other areas that, in your mind, would be enhanced if this application is granted, other areas of programming?
332 MR. RUSCICA: It would allow us to do even more work in the community as a result of the additional news people, again finding community groups organizations that don't get a considerable amount of coverage in the London area. This would enable us to go further into the community, more participation and more interactivity with the community and the radio station as well.
333 MR. McCALLUM: In terms of on-air, that would be reflected in the local and regional newscasts?
334 MR. RUSCICA: Yes.
335 MR. McCALLUM: In terms of how it benefits programming, the two areas are the afternoon drive show and local and regional newscasts?
336 MR. RUSCICA: And also, as an FM, we would have more resources to even increase and enhance what we are doing in our morning or other day parts on the radio station.
337 MR. McCALLUM: Thank you.
338 If this application were granted, you would accept, I assume, the standard condition of licence that it be implemented within a year's period of time?
339 MR. RUSCICA: Yes, that's correct.
340 MR. McCALLUM: In terms of achieving the advertising revenues that would be many times greater than those currently achieved by CKSL -- I think you referred to increased audience share that you hope to achieve if this application is granted.
341 MR. RUSCICA: That's correct.
342 MR. McCALLUM: Is that the one and only factor that would lead to such an increase in revenues or are there any other factors?
343 MR. RUSCICA: No, there are other factors. As noted in some of the written interventions in our application, there are retailers out there that have been very specific and said, "We will do business with you if you go to FM." They just do not see the AM band as an area they want to do business on.
344 Secondly, we foresee a tremendous opportunity in the area of extracting dollars from print advertising. The RMB, through its print initiative, has identified London as a key market for radio to grow revenues from the print area. The BBM qualitative data that is going to become available to us within the year is another area that will certainly help us and help radio as a whole in London achieve significant growth.
345 MR. McCALLUM: When you talk about repatriating audiences to this market, are you including within your figures the St. Thomas station that has a studio in London?
346 MR. RUSCICA: We see that station as inside London.
347 MR. McCALLUM: Oh, I see. So, aside from St. Thomas, the repatriation refers to other stations, particularly CKOT Tillsonburg?
348 MR. RUSCICA: Yes, that's correct.
349 MR. McCALLUM: Thank you.
350 Also, when you responded to Commissioner McKendry that you did test other formats aside from the existing format, I take it that refers to the specific tapes that were played during the Edison Research studies?
351 MR. RUSCICA: Yes, that's correct.
352 MR. McCALLUM: I understand from reading the Edison Research studies that some people responded as to which format would be their most favoured format after they listened to the different tapes.
353 MR. RUSCICA: That's right.
354 MR. McCALLUM: Can you explain why you continued with the same format and dismissed all the other types of formats after having looked at the Edison Research results?
355 MR. RUSCICA: We saw this tremendous vacuum in the target demographic that we have been discussing. We also were able to see there was out-of-market tuning in that demographic and it was through the Edison Research it confirmed that and the music that was played for the respondents certainly confirmed again what was quite evident, that there was this gap for that demographic. There is a considerable amount of tuning out of market in that demographic.
356 MR. McCALLUM: So, you used these results to basically confirm your proposed switch to FM, to use the same format rather than to switch to FM and adopt a different format?
357 MR. RUSCICA: It was also used to determine whether or not there were other opportunities in the marketplace.
358 MR. McCALLUM: And, in your view, this was the best opportunity?
359 MR. RUSCICA: Yes, it was. We saw it as being one of the most under-served areas.
360 MR. McCALLUM: Thank you very much.
361 THE CHAIRPERSON: Thank you.
362 We will take a break now. During the break, Mr. McCallum and Mr. Johnston are going to consult with respect to my question around comparing the 1998 actual programming expenses with the forecast programming expenses. I don't know whether or not we may need to come back on the record after the break following that discussion. Perhaps you could come back to the table after the break.
363 Before we do call the break, just let me outline briefly how we see the day unfolding. Mr. Cussons has outlined the procedures and so on. We want to finish, as I mentioned earlier, the competing applications today. After we have finished hearing from Affinity, we will be hearing from CHUM. I suppose we may finish with CHUM by the lunch break.
364 I am sorry, I have reversed the order. It is Rogers we will be hearing from next and then CHUM after the lunch break. We scheduled the lunch around 12:30 or so, but we will play that by ear, depending where we are with Rogers. We will take about an hour for lunch. We forecast today that we would end up around 7:00 o'clock. I don't know whether that is precisely where we will end, but it is just to give you an idea where we anticipate we will be.
365 We will adjourn now for a break. We will take 15 minutes and come back at 11:00 o'clock.
--- Recess at / Suspension à 1045
--- Upon resuming at / Reprise à 1106
367 THE CHAIRPERSON: Mr. Johnston, I understand you had a conversation with Mr. McCallum at the break. Perhaps you could tell us the outcome of that conversation.
368 MR. JOHNSTON: We spoke of the difference in the programming expenses between what I had seen in our filing and also on the depreciation. Mr. O'Brien could speak to the depreciation first, I think. That is a relatively simple matter, but the other seems to be more complicated and I will explain that in a minute.
369 MR. O'BRIEN: I called the number cruncher and what I had eliminated or not thought about was the total write-off of all the AM broadcasting equipment, which is basically scrapped at the end of the time. So, the numbers are accurate.
370 THE CHAIRPERSON: So, the relatively high number in 1999 is the write-off of the undepreciated capital cost of the AM equipment?
371 MR. O'BRIEN: Yes, that is correct.
372 THE CHAIRPERSON: Thanks.
373 MR. JOHNSTON: On the issue of the programming expenses, we weren't able to come to grips with that in the conversation I had with Mr. McCallum and we will need to do a little more analysis on that, with your permission, Mr. Chairman.
374 What I propose is we do that and submit in writing a rationalization of the numbers that the Commission has with those that were submitted for August 31, 1998. We propose to do that within a week and serve the other parties competing with us so that they would have an opportunity to comment on that, if they wish.
375 THE CHAIRPERSON: I take it this information would be in the nature of an explanation of the apparent difference in numbers as opposed to a modification of the forecasts or anything like that.
376 MR. JOHNSTON: No, there will be no modification of the forecast, but an explanation for the differences.
377 THE CHAIRPERSON: Thanks very much.
378 Maybe I will ask Mr. McCallum to comment on the proposal.
379 MR. McCALLUM: Actually, just one clarification question. In terms of the Canadian talent development expenses, are they reflected in the pro forma statement of revenues and expenses?
380 MR. JOHNSTON: They are not and they should be.
381 MR. McCALLUM: So, your explanation would somehow explain what the situation is vis-à-vis those, I take it.
382 MR. JOHNSTON: Yes. That would not be altering the application, of course, because those were committed to in the application. They weren't reflected in the projections, as far as I understand, but I will check that and make certain.
383 MR. McCALLUM: So, if I understand it correctly, the material that you are proposing to file, these explanations of the differences and rationalization, would be filed and served on the Commission and other parties by the 5th of July. Correct?
384 MR. JOHNSTON: Correct.
385 MR. McCALLUM: Other parties would have until July 9th to comment and you would have until the following Monday, July the 12th, to reply in writing, if necessary. Is that satisfactory?
386 MR. JOHNSTON: That is perfectly satisfactory, thank you.
387 MR. McCALLUM: Thank you.
388 THE CHAIRPERSON: Thank you, Mr. McCallum.
389 Unless there are other matters, thank you very much for appearing this morning and we will see you again later today.
390 Mr. Cussons, perhaps you could call the next party.
391 MR. CUSSONS: Thank you, Mr. Chairman.
392 We will now hear an application by Rogers Broadcasting Limited for a broadcasting licence to carry on an English-language FM radio programming undertaking at London, operating on a frequency of 102.3 megahertz, channel 272B, with an effective radiated power of 4,700 watts. The applicant is proposing an adult-oriented musical format that includes a diverse selection of music.
393 It should be noted that Rogers has a television presence in London via the multilingual and multicultural television station CFMT-TV-1 and, through an affiliate company, is also the incumbent cable distributor.
394 We have Mr. Viner and his colleagues.
395 Mr. Viner, whenever you are ready, sir.
PRESENTATION / PRÉSENTATION
396 MR. VINER: Thank you, Mr. Cussons. We will take a second to get settled, if we may.
397 Mr. Chairman, Members of the Commission, I am Tony Viner, President of Rogers Broadcasting. With me today, on my immediate right, is Gary Miles, Executive Vice-President, Radio Operations; next to Gary is Sandra Stasiuk, Vice-President, Finance, Radio Operations; on my left is Wolfgang von Raesfeld, Vice-President and General Manager of CKGL-AM and CHYM-FM, better known as CHYM-FM, in Kitchener; and next to Wolf is Sandy Sanderson, Executive Vice-President, Programming for Rogers Broadcasting.
398 We are pleased to be before you today to present our application for a unique new FM radio station to serve listeners in London. We will make three main points in our remarks today.
399 First, our proposal addresses a clear and identifiable gap in the local radio market. It will directly appeal to under-served listeners in the 45-plus age group by offering more news and information programming and a more diverse selection of music than other local FM radio stations. In so doing, we will repatriate listeners to local radio and will further strengthen the radio market in London.
400 Second, we will build on our extensive experience with the adult contemporary format, our demonstrated ability to provide popular, high quality news and information programming, and our knowledge of radio markets in southwestern Ontario in order to provide a unique alternative FM service in London.
401 In the 1960s, Rogers Broadcasting launched Canada's first FM radio station, when very few people actually owned radios capable of receiving an FM signal. Today, that radio station, CHFI in Toronto, is Canada's most successful soft adult contemporary radio station. In the 1990s, we undertook substantial investments to launch Canada's first all-news AM radio stations, 680 News in Toronto and CKWX 1130 News in Vancouver. For the past five years, we have owned and operated two radio stations in the neighbouring market of Kitchener, CKGL-AM and CHYM-FM.
402 We have undertaken substantial investments to improve the quality of the programming provided by CKGL-AM. In 1997, we converted CKGL from a music format to the significantly more expensive to operate news/talk format. That radio station has now been re-positioned in the local market as "News/Talk 570: CKGL Kitchener". CHYM-FM is programmed in the adult contemporary format and currently is the market leader.
403 Third, if this application is approved, Rogers will make substantial contributions to the broadcasting system. Over the years, Rogers Broadcasting has been a leader in supporting Canadian creative expression and Canadian talent development. We were one of the original founders of FACTOR in 1982 and since then have provided a total of $3.5 million to support its work.
404 Rogers Broadcasting also has long been committed to employment equity. We were one of the founding members of Canadian women in Communications. In February of this year, we were extremely pleased to be awarded the CWC Employer of the Year citation. Today, almost half of all senior management positions in Rogers Broadcasting are filled by women.
405 MR. MILES: We believe that our proposal to establish a new FM radio station with a unique and distinctive adult-oriented format will directly address the needs and interests of a significantly under-served segment of the local radio audience in London and, in so doing, will make a substantial contribution to increased choice and diversity in the market.
406 Local radio stations in London face significant competition for the attention of listeners from out-of-market radio stations. These out-of-market competitors include radio stations from larger markets such as Toronto, as well as U.S. radio stations.
407 As you can see from Chart I, out-of-market radio stations account for a substantial share of listening in the London market. Out-of-market listening increased from 34 per cent in the spring of 1998 to over 37 per cent in the spring of 1999. Listening to out-of-market radio stations is significantly higher among people over the age of 45 compared with people under 45.
408 As is illustrated in Chart II, listeners in London over the age of 45 devote almost half of their listening time to out-of-market radio stations. In contrast, listeners under the age of 45 devote less than a third of their time to out-of-market radio stations.
409 Clearly, the needs and interests of listeners over the age of 45 are not being addressed fully by local radio stations and these listeners are tuning to out-of-market radio stations for increased choice and diversity. In the next few years, demographic trends could result in further out-of-market tuning in London.
410 As you can see from Chart III, the percentage of the population of London that is over 45 years old is projected to increase significantly, from 33 per cent in 1996 to 39 per cent by the year 2006. At the same time, obviously, the percentage of the population that is under 45 is expected to decrease, from almost 67 per cent in 1996 to less than 61 per cent in the year 2006. Our application for a new FM radio station to serve listeners in London is specifically designed to respond to these underlying demographic and market trends.
411 In preparing this application, we were guided by the new policy and regulatory framework for commercial radio broadcasting established by the Commission in Public Notice CRTC 1998-41. In that Public Notice, the Commission clearly set out its expectations that FM radio stations in markets served by more than one commercial radio station should provide a substantial amount of high-quality local programming of direct and particular relevance to the community being served.
412 We believe that the new FM radio station we are proposing more than meets this expectation. It will provide a unique mix of music and news and information programming that will be of particular interest to under-served listeners in the 45-plus age group. In so doing, it will significantly increase choice and diversity in the local radio market and will repatriate listeners from out-of-market radio stations.
413 London is a dynamic and growing radio market. Notwithstanding a substantial loss of tuning to out-of-market radio stations, local radio stations in London have experienced strong growth in revenues and in profitability over the last few years. Advertising revenues have increased at an average annual rate of over seven per cent over the past five years and an average annual rate of almost six per cent over the past three years. In fact advertising revenues have increased by over nine per cent in 1998.
414 Radio broadcasters in London as a group have been profitable since 1995. In 1998, they achieved operating and PBIT margins well ahead of the English-language radio industry in Ontario and in fact across the country. The financial projections filed with our application reflect the potential for our proposed new FM radio station to repatriate audiences and to benefit from the natural market growth with little or no impact on existing radio stations.
415 MR. von RAESFELD: Our new FM radio station will quickly distinguish itself in the London radio market by providing news and information programming and musical selections that directly respond to the interests of the under-served listeners in the 45-plus age group. Our target listeners are maturing "baby boomers". They are politically aware and are deeply interested in our local community. They expect to have access to a wide variety of local, regional and national news and information.
416 Our proposed new FM radio station will directly respond to these expectations. As set out in the sample schedule presented in Chart V, we will provide 30 minutes of information programming each hour from 6:00 a.m. to 9:00 a.m. on weekday mornings, including news, weather, traffic, sports, and business and entertainment features. A half-hour magazine program will be scheduled each day at noon, with a major news package at 5:00 p.m. and 6:00 p.m. each weekday.
417 Our newscasts will provide detailed coverage of local, regional and national issues, extensive business and sports reports, and detailed five-day weather forecasts from Environment Canada. Shorter news, weather and sports packages will be available throughout the day.
418 Based on our extensive experience in the nearby market of Kitchener, we know that our target listeners will be most interested in news and information programming that directly addresses the events and issues that are shaping life in their community. Up to 75 per cent of the news and information programming that we provide will have a strong local focus.
419 For example, our business news and information will cover economic issues of interest to the traditional service and light manufacturing industries located in the London area, with an additional focus on news and information directed towards the agribusiness and high-technology and research development sectors. In addition, we will directly contribute to the lively local arts and cultural scenes in London. We will profile local artists and provide extensive information on activities of major cultural organizations, such as the Grand Theatre and Orchestra London.
420 As is set out in Chart VI, we will clearly distinguish ourselves in the market by providing over 16 hours of news and information programming each week, about three times the news and information programming currently provided by CJBX-FM and about five times the news and information programming provided by other FM radio stations in London.
421 Our target listeners are looking for soft adult contemporary music selections that our research currently indicates are not available on local FM stations in London. As such, they are increasingly tuning to out-of-market radio stations.
422 Our proposed new FM station will respond directly to this demand by providing musical selections by such Canadian artists as Paul Anka, Bruce Cockburn and Rita MacNeil. Foreign artists will include Carly Simon, Cat Stevens and Captain & Tenille. Selections by these musical artists were not available on any local FM radio station in London over the course of an average week earlier this month.
423 As you can see from the sample schedule, soft adult contemporary music will be featured in the mid-mornings, afternoon and early evening periods. In the late evening on weeknights, the station will provide musical selections with an even softer and more relaxed sound.
424 Our target listeners are oriented towards soft adult contemporary musical selections, but they also have eclectic music tastes, with a well-developed interest in a wide variety of musical tastes from jazz to swing to light classical to gospel. Our proposed new FM radio station will respond to these interests as well.
425 On Saturday, the late evening period will be devoted to jazz. We will play selections by such Canadian recording artists as Oscar Peterson, Moe Kaufman and Diana Krall. On Sunday mornings, we will feature gospel music, including selections by such Canadian artists as Canadian Gospel and Carolyn Arends. The late evening period on Sunday will be devoted to light classical.
426 As we have done in Kitchener, our proposed new FM radio station in London will quickly establish a reputation of active involvement in the local community. We will seek out opportunity to serve the community by using the promotional resources of our radio station to support initiatives that address important local issues and concerns.
427 In addition, we will establish a local advisory board, including active and informed residents of London and the surrounding area. This advisory board will meet regularly and be consulted on all policy matters relating to the programming and operation of the proposed new radio station.
428 Our application also includes substantial additional commitments to serve the local community and to contribute to the achievement of the Broadcast Policy Act. Orchestra London was established in 1937. In addition to providing a number of musical programs each year ranging from classical masterpieces to children and family concerts, the Orchestra is committed to musical education.
429 If this application is approved, Rogers Broadcasting will provide $500,000 over seven years for a significant new music education initiative to be developed and implemented by Orchestra London. The initiative will directly support development of young musicians in the London area. It will provide high school music teachers with enhanced teaching resources and will create significant new opportunities for students to participate in the performance of classical works, including a new city-wide showcase of young musicians, to be hosted each year by Orchestra London.
430 We are delighted by the enthusiastic response of Orchestra London to our offer to help and are very impressed with the comprehensive education initiative that they have designed. The funding that we are proposing for this initiative reflects our strong commitment to serving the local community and the musical diversity of our proposed new FM radio station.
431 MR. VINER: In addition, if this application is approved, we will provide a total of $1.5 million to FACTOR over seven years to support the important work of this organization in developing and promoting Canadian musical recordings by new Canadian musical talent. Rogers Broadcasting will request that FACTOR earmark $1 million specifically to support the recording of the works of Canadian musical artists suitable for air play on adult contemporary radio stations.
432 As the Commission is aware, there is a serious shortage of new Canadian music in this genre. This initiative is intended to help resolve this problem and will benefit all adult contemporary formatted radio stations in Canada, as well as Canadian creative musical talent. We will request that FACTOR earmark the remaining $500,000 to support the recording of the works of Canadian musical artists who either are currently based in or who began their musical careers in Ontario.
433 This proposal will support the continuing growth and development of Canadian musical artists from Ontario and, thereby, help them to achieve greater prominence across the country. Rogers Broadcasting will further support the development of these artists by ensuring that all FACTOR-supported recordings made by them as a result of this earmarked contribution are played on our proposed new FM radio station.
434 The two proposals set out in our application represent a commitment by Rogers Broadcasting to contribute a total of $2 million over seven years and to undertake other promotional activities to support Canadian creative expression and the development of Canadian musical talent. These commitments are contingent only upon the approval of this application.
435 If this application is approved, there will also be significant intangible benefits. For example, our radio stations in Kitchener work closely with the faculty of Connestoga College to provide students enrolled in radio broadcasting courses with an opportunity for hands-on work experience. We offer internships for Connestoga College students each year and currently employ 12 graduates at the radio stations on a full-time basis.
436 If this application is approved, we will establish an equally strong working relationship with the faculty and students at Fanshawe College in London. Based on our experience in Kitchener and our feedback from the Director of Fanshawe's broadcasting program, we believe that this would result in a significant benefit to Fanshawe students.
437 In summary, we believe that the approval of this application for a new FM radio station in London with a unique and distinctive adult-oriented format would be in the public interest for the following three reasons:
438 One, it will address the gap that currently exists in the market for an adult contemporary service with a heavy emphasis on local news and information. Filling this gap will strengthen the London radio market by repatriating audiences from out-of-market radio stations. There will be little or no negative economic impact on other radio stations in the market.
439 Two, our knowledge of the format and the market enable us to respond to the strong expectation established by the Commission in Public Notice CRTC 1998-41 that FM radio stations in competitive markets should provide a substantial amount of high-quality local news and information programming that is directly relevant to the community being served.
440 Three, it will result in significant tangible benefits totalling $2 million over seven years for the development of new and emerging Canadian musical talent, along with other intangible benefits.
441 As a company committed to radio for the long term, we have sustained significant short-term financial losses in introducing new formats in other markets. We intend to invest the resources necessary to develop this new station in the London market. We are seeking this licence not to enhance the market value of our portfolio, but to build and retain a viable station.
442 For all of these reasons, Rogers Broadcasting believes that this application is in the public interest and should be approved. We look forward to any questions you may have for us.
443 THE CHAIRPERSON: Thank you very much, Mr. Viner. We do have some questions and I will ask Commissioner Cardozo to ask those questions.
444 COMMISSIONER CARDOZO: Good morning to you, Mr. Viner, and your colleagues.
445 I will divide my questions up into five areas, in this order; namely, programming, Canadian talent development, the equity plan that you have filed, marketing, and our radio policy. I would like to hear some of your views on that in terms of how they relate to this process.
446 Let me start by asking you about programming, which is, essentially, what the listener is going to get at the end of the day. I noticed the charts that you have presented today, but I wonder if you could help me understand your research in determining the format that you have picked.
447 I have been looking at some of the other BBM data, which looks at the audience profiles currently in the London market. I gather that this information may be confidential, so I won't go into it in detail, but just provide you with this observation. For the three AM stations, the markets tend to respond to or cater to the 35-plus age group and for FM the 25-plus age group, especially 25 to 49.
448 The one age group that we collect, or the two, are the 12 to 17 and 18 to 24. If you are coming into the market and presenting, as you say, a distinctive new different format, I look at the market and see that the age groups you are looking at, the 45-plus, are being quite well served, but the groups that are not being well served are the 12 to 17 and the 18 to 24. I am looking at some of the trends across the country with a hits format, which is quite popular, and I am wondering why you didn't choose that and chose this particular format instead.
449 MR. VINER: The programming people in my company always hesitate when I open the microphone to respond to any sort of programming questions, so I am going to refer the first part of your question to Sandy Sanderson with respect to the selection. We believe that there is a significant amount of unserved audience 45-plus in the London market.
451 MR. SANDERSON: You have stolen my main point, Tony.
452 COMMISSIONER CARDOZO: That's why they don't let you speak.
453 MR. SANDERSON: Exactly. It has nothing to do with his knowledge of programming.
454 In the demos 35-plus, 45-plus, 50-plus, 55-plus, 65-plus in London, the number one station is "other". Other wins.
455 COMMISSIONER CARDOZO: Meaning out of market?
456 MR. SANDERSON: Yes. So, to us that represents an opportunity. Obviously, the AM stations, because there is more news and information, primarily will garner an older audience, but it's not the older audience that wants music. Of the older audience that wants music, a lot of them are outside the market.
457 MR. VINER: We think the 45-plus tuning in London and most markets, Commissioner, to AM is, in large measure, because of the news and information, as Sandy has indicated, available on AM stations, which is traditionally not available on FM stations. What we are proposing today is to try to go off in a new direction. In many of our AM stations, specifically the one in Kitchener and another one in Victoria, what we have tried to do is provide a high level of local service and then some talk programming in the other day parts.
458 What we are proposing here is a significant and high level of local news and information, but to have music available in the other day parts. We think there is a role for that sort of combination, so that listeners can hear both the music they want and have their information needs met on one station. We don't think they have to have it on a number of different stations. So, that is what we are proposing to do.
459 There is a Jethro Tull song, "Too old to rock and roll and too young to die." It sort of reminds me of me, but I think that is the target group we are looking for.
460 COMMISSIONER CARDOZO: Will you be playing Jethro Tull?
461 MR. VINER: I don't think so.
462 COMMISSIONER CARDOZO: Just because of that song or --
463 MR. VINER: Oops, I answered a programming question!
464 COMMISSIONER CARDOZO: They come in that category.
465 So, you don't think the 18 to 24 or younger target group is not the top group worth going after, from a business perspective?
466 MR. VINER: We saw a gap in the market in an area in which we have programming expertise. We saw a significant amount of out-of-market tuning in an area where we thought we could address that need. I think that, essentially, is one of the key factors. We thought we could build a business model on it, of course, but that is where we thought the need was for an FM station in London.
467 COMMISSIONER CARDOZO: So, it is a format fairly similar to CHFI-FM or not as soft?
468 MR. VINER: I am not allowed to answer that question.
469 MR. SANDERSON: I think it would be as soft, maybe softer, than CHFI.
470 COMMISSIONER CARDOZO: Let me ask you about the balance of programming. You have said you would have more news and information programming than is generally offered in the FM music stations. What is the balance you are planning in terms of percentage? What does that break down to?
471 MR. von RAESFELD: There is approximately 12 per cent of news and information programming on the radio station on Monday through Sunday. For the 126-hour period, 12 per cent of that would be news and information. We would have half-hour news packages in the morning drive period, major news packages at 5:00 and 6:00, a half-hour magazine show Monday through Sunday from 12:00 to 12:30, and there would be hourly newscasts throughout the rest of the broadcast day from 6:00 o'clock in the morning until 6:00 p.m. in the evening. It is 16 hours, which is approximately 12 per cent of the total time.
472 COMMISSIONER CARDOZO: What percentage of that would be local or is that too hard --
473 MR. von RAESFELD: We are talking about 75 per cent of that would have a local presence.
474 COMMISSIONER CARDOZO: That would include within a newscast where you might have international, national and local stories, you are saying?
475 MR. von RAESFELD: That's correct, and 75 per cent of it would have a local flavour.
476 MR. VINER: Those percentages, Commissioner, are very difficult to nail down. Wolf runs two superb stations in Kitchener. I can listen, much to his chagrin, to the station in Toronto and they consistently lead with local stories. We do that not because we are just fine licensees, but because that's what our audience is most interested in. So, I think it's fair to say that the emphasis will be entirely local. It is difficult. Kosovo or Middleton, those kinds of days occur and we are going to follow those stories.
477 COMMISSIONER CARDOZO: How would you see your reflecting the cultural diversity in your programming of music and news? Is that something you have addressed to date?
478 MR. VINER: Commissioner, we think because of our background with CFMT and our heavy reliance on news that we will reflect the cultural diversity available in the marketplace. We don't have any specific programming that necessarily responds in language to different groups, but we think that we have a sensitivity to news. We have two people who are on our programming advisory board at CFMT who will provide us with some input on reflection and we believe that we can do that, but we will primarily do it through the vehicle of our news programming.
479 COMMISSIONER CARDOZO: What I was asking is not so much in programming that would be targeted to specific communities such as the programming you do with CFMT, but more within your English-language programming, which is what you are doing. How would you reflect the diversity of the population there and in that area? I guess in music terms, if you were of a different group, you might include Ricky Martin, but he doesn't fit in your schedule, so you would have to have Santana maybe or Jethro Tull.
480 MR. VINER: Yes.
481 COMMISSIONER CARDOZO: One of the things we observed in the applications that you have filed for here and for Victoria is they are, in some aspects, rather similar applications. I don't want to suggest that a boilerplate approach is necessarily bad because you certainly come to this process with a lot of experience in radio across the country.
482 I am wondering if you could share with us what you think are the similarities of your application and the market in Victoria and London and what do you think are the differences?
483 MR. VINER: Perhaps I can begin. The similarities are -- and we noted them ourselves -- the significant out-of-market tuning. I think the most important thing is the significant out-of-market tuning to a group that's 45-plus and, if I may say, a target audience that our company has had a long and successful track record in responding to them. I think that the communities are stable. They are largely white collar communities.
484 I am trying to recall -- Gary, you may know better than I -- the relative size of the markets.
485 MR. MILES: In fact they are very similar. Victoria, as they will probably say, has roughly about 315,000 people in the trading area and it's about 320,000 in London. The radio revenue market in London is a bit higher than it is in Victoria, but that is because there is less out-of-market tuning and as you repatriate more audience back, you can do that. Our experience with repatriating audiences in Victoria through CIOC-The Ocean shows that the right format targeted to the right audience that is not currently being served locally will bring the audience back and people will come and listen to it.
486 So, you are right, it wasn't a matter of blueprinting one and doing it in the other place, but also factored into it are the number of services currently available in the community, which sort of speaks to your first question about the 18 to 24 audience and things like that. It really is a factor of how many pieces of programming are available that tends to increase the audience and the audience does come from that out-of-market tuning that is looking for that service some place else, other than what is available in the marketplace, because the market hasn't expanded or because there haven't been enough frequencies.
487 MR. VINER: We think it's a good idea. We think it's a good idea that we can put together a format that hasn't really been tried in Canada and, as a result, in markets where there is significant tuning to outside sources, this might be a solution to that issue. Those are areas of our expertise. There is a need that needs to be filled and we think that we can pioneer a new and different format. We have had some experience in pioneering new and different formats and we have been successful. Honestly, those are the reasons.
488 COMMISSIONER CARDOZO: Would you see sharing music less between the two stations?
489 MR. VINER: We would, indeed, if we were so fortunate as to be licensed in both markets.
490 COMMISSIONER CARDOZO: I meant to add that part, of course.
491 With regards to the Canadian talent development, you have indicated the contribution that you would be willing to make if you were licensed, but you ticked off the box that said you would not participate in the Canadian talent development plan created by the CAB. Is that intended or was that an error?
492 MR. VINER: I didn't tick that box, but I think the intention was to suggest that $1 million and a half was probably over that which was provided under the CAB plan, which I and Duff Roman --
493 COMMISSIONER CARDOZO: The first $5,000 would be in --
494 MR. MILES: I did tick the box and that is what I meant. We thought at this stage of the game $5,000 more or less.
495 MR. VINER: But, yes, you are right, the first $5,000 should be thought of as meeting that CAB plan.
496 COMMISSIONER CARDOZO: You have noted that part of that contribution would be allocated to FACTOR and you would request that $1 million of this would be earmarked to support Canadian recording works in the adult contemporary field. Have you had any discussions with FACTOR at this point? Is that something that they are prepared to do?
497 MR. VINER: Sandy, who is a FACTOR board member, can respond to that, but I believe there is a letter on file --
498 MR. SANDERSON: The answer is yes.
499 MR. VINER: Do you want to hit your microphone, Sandy?
500 MR. SANDERSON: Yes. The letter was filed June the 2nd.
501 MR. VINER: It is not unusual for FACTOR to accept requests such as this. I think Heather would recognize this need.
502 COMMISSIONER CARDOZO: Let me ask you a couple of questions about the equity plan that you have filed with your application. I just wanted to get some information on some of the things that you are doing. I will refer to the page numbers, but you don't need to. I will just be asking a few short questions off it.
503 On page 4 of the equity plan you mention the Ryerson Multicultural Scholarship Program. It looks like that ran from 1985 to 1990. I am just wondering if it is still running and what your evaluation of it was and what the success of the program was.
504 MR. VINER: Yes, it continues to run. I think that in our most recent licence renewal it was something that we had at CFMT and which we had agreed to continue. It has been wonderfully successful. Each year I attend a luncheon where the recipients are honoured and I continue to be impressed by the energy and innovation and the wide variety of backgrounds from which these students come.
505 There was a Chilean student who I met at the last luncheon, there was a Pakistani whose parents had emigrated to Canada, all of whom wanted to further their careers in the media. So, there is an impressive group. We are pleased to continue the program.
506 COMMISSIONER CARDOZO: Are there many aboriginal students as well?
507 MR. VINER: We have honoured aboriginal students. I think there was one two years ago. It's a question of two factors, I guess, the number of aboriginal students that are available -- Ryerson, as you know, helps us make these selections -- and the second is as to whether or not they have applied for or meet the criteria.
508 COMMISSIONER CARDOZO: You have talked about the Women in Management Committee, which you have now renamed the Equity Advisory Committee. Do I have that right?
509 MR. VINER: That's correct.
510 COMMISSIONER CARDOZO: What has been your evaluation of that?
511 MR. VINER: They have certainly gotten us off the dime. The Women in Management Committee was originally formed prior to, frankly, the interest in this area that both the Commission and legislators have taken. We didn't have enough women in management roles and we wanted to know what the barriers to them were, so we asked for volunteers and convened the Women in Management Committee.
512 They told us a bunch of things, many of which we didn't like, and we tried to change a number of our practices. I won't tell you about not golfing at company functions because that's exclusionary to women, I would be embarrassed to tell you that, but it's things like ensuring that for every management position that we have we include a woman on the short list so that we at least interview a woman, that we rigorously maintain our posting policy so that the old boys' network doesn't happen, that jobs they weren't even aware were available get given out before they even have a chance to apply, more reliance on potential and less on experience. You have heard them all before.
513 In any event, that was most helpful. We changed a number of our practices as a result of that. It has changed into the Equity Advisory Committee, in part, because we recognize a need in the company to address issues not only with women, but a number of diverse groups, and there is a legislative requirement that we have internal equity and that committee assists us in job evaluation. So, those are the reasons why it has evolved into that committee.
514 COMMISSIONER CARDOZO: So, it is dealing with the four designated groups now?
515 MR. VINER: That's correct.
516 COMMISSIONER CARDOZO: I notice elsewhere you have made reference to what you just said about expanding your short list and so forth, but that at the end of the day merit is still the essential element that makes the choice and I think that's important to note. It's sometimes forgotten in what employment equity is all about.
517 MR. VINER: I must say it was the clear recommendation of, first, the Women in Management Committee and then the Equity Advisory Committee that all everyone wanted was a fair chance.
518 COMMISSIONER CARDOZO: You talked about diversity management in a few places. What is involved in that diversity management and diversity management training?
519 MR. VINER: A couple of years ago, I guess, we felt that it was important that all of our managers be trained in diversity management. Trevor -- does anybody remember his last name? We trained all of our managers. We went across the country, talked about diversity, tried to get all of our managers to understand the differences in the population. We did this as a business imperative. We just couldn't draw upon only certain segments of the population if we wanted to be a successful broadcaster. We trained every single one of our managers. That was sort of our starting point.
520 Subsequently, when our new managers are now trained, they are trained in diversity. They each go through a diversity training course, we talk about religious cultural differences, how to handle those and, frankly, to be aware of our own prejudices. I believe that has been a successful program.
521 COMMISSIONER CARDOZO: It seems like the aspect of diversity planning goes beyond employment equity and perhaps deals more with issues of reflecting diversity.
522 MR. VINER: We are broadcasters. I think both in front of and behind the microphones and cameras, we feel we have to reflect society. As I say, we do it because it makes good business sense.
523 COMMISSIONER CARDOZO: It sounds like that relates quite a bit to the section in our new radio policy that Commissioner McKendry was asking the previous applicant about.
524 I just have one more question on this topic -- actually, it's a different topic, but related -- and that is the CRTC on-air portrayal policy. You mentioned the Community Screening Committee and you mentioned that editors monitor the portrayal of designated group members using an established checklist. Could you just give us a bit more information on that?
525 MR. VINER: I can give it a try and Sandy probably can help. These are issues related to reportage where we feel it's unnecessary to designate the race of a criminal, for example. We try to be careful that we deal sensitively with women's issues while fulfilling our obligation to report the news.
526 There is a list of things, which I could furnish you with, that 680 News does and all of our stations use. I am sorry, I couldn't repeat all of them to you now. They don't let me near the studios. I would undertake to furnish you with that list, if you would like it.
527 COMMISSIONER CARDOZO: You have to do something about your authority.
528 MR. VINER: It has been whittled away over the years, Commissioner.
529 COMMISSIONER CARDOZO: They seem to keep you on a short list on many points.
530 MR. MILES: Could we make sure that goes in the record, please?
531 MR. SANDERSON: We normally have control of his microphone. This is a whole different thing.
532 COMMISSIONER CARDOZO: Let me just ask you in closing on that topic how you see these issues of equity, diversity and on-air portrayal will relate to this particular licence.
533 MR. VINER: I tried to say that I think that the most important way will be in our news coverage. We believe that we have some sensitivity because of our experience at CFMT. We have a couple of our programming advisors who split their time or live in London, who we believe will make us aware of items of special interest. We work with CFMT in Toronto to try and ensure that we cover appropriate news events. I think primarily the answer is in our expanded news coverage, combined with the sensitivity that we have developed through our licence at CFMT.
534 COMMISSIONER CARDOZO: Let me ask you some questions on marketing. You have noted that, in your view, the London market would continue to grow at an annual rate of five per cent. Do you see that continuing over the course of this licence period?
535 MR. MILES: Yes. We think that the London market has some great advantages. First of all, it's in southern Ontario and Ontario is a pretty hot market. It is probably the fastest growing region in Canada. Secondly, according to the CRTC returns, over the last five years this market has grown close to seven per cent. As we indicated, last year it was nine per cent alone.
536 We know what our growth is in Kitchener. It is well over the national average for radio revenue, which is about six per cent. So, we actually understated what we thought perhaps the revenue would go for purposes of making sure that we came in with a solid proposal in which we didn't over-promise and under-deliver. So, I don't see any problem with that five per cent growth continuing over the next four or five years.
537 COMMISSIONER CARDOZO: The listenership of London markets, you note, has decreased in recent years. From 1993 to 1998, it decreased from about 74 per cent to 65 per cent. That you don't see as being related to the economy. It is related to what is offered?
538 MR. MILES: Exactly. As Sandy had indicated, the out-of-market tuning is actually going up and even worse amongst the 45-plus, clearly a product of, as we mentioned before, three things: First of all, the services that are available within the marketplace; the changing demographics of the market that want something a bit more than just music, they want news and information; and the size of the market, such as London, in which you can't sustain an all-news radio station, for instance, like we do in Toronto and Vancouver, as well as a very solid instrumental soft AC, trying to combine both of them. We believe that that audience will come back and will be a very viable one.
539 Just on that alone, the economic registrations that Wolfgang had handed me, which is in the growth of the building and construction data alone, it's about 7.1 per cent over the last number of years. As you know, radio revenue follows retail growth and when retail growth is strong, radio revenues are strong.
540 COMMISSIONER CARDOZO: For the out-of-market market that you are after, can you identify the stations who have taken that share away from London that you want to take back from?
541 MR. MILES: I can't specifically because I also am not allowed to get into the programming field, but certainly others are broken down in the BBM.
542 Sandy, do we have the exact breakout of what those are?
543 MR. SANDERSON: Out-of-town in spring are the two CBCs, CFCA in Kitchener and the Woodstock station and Tillsonburg. I have 18 per cent American stations also that make up the total. The American ones are not identified.
544 COMMISSIONER CARDOZO: So, you think you can capture a portion of that back to London?
545 MR. SANDERSON: Yes.
546 COMMISSIONER CARDOZO: And that is why you are suggesting you wouldn't make much of a dent on the existing London market?
547 MR. MILES: What we have figured out in terms of at least the first year and then going forward is that we believe the market is going to grow at five per cent. We have estimated four per cent. We believe that if the market grew at five per cent, that is an additional $900,000 worth of revenue into the market just through the natural growth. We have estimated we would take about 46 or 47 per cent of that money. So, about half of it would come. It would be a new service, new listeners, it would be naturally attractive.
548 The second one is that an interesting phenomenon has taken place in the television business. We saw it first in Kitchener. Of course, the television stations, through the globalization -- and I use the term literally and figuratively -- don't sell locally any more, so there is a tremendous amount of local radio advertising. When television rates get real cheap, they tend to go on television. They tend to want to get attracted into that medium.
549 What has happened is that as the rates have gone up, they have literally kicked them out. We have had good examples of this in Kitchener where we had lost good radio advertisers from CHYM-FM to television and now they are back not only on our station, but also on the other stations in the market. So, that accounts for approximately 23, 24 per cent, Sandra?
550 MS STASIUK: Yes.
551 MR. MILES: We are going to, quite obviously, repatriate some listeners that are listening to the Tillsonburg station, but this is not market revenue that is going over to Tillsonburg. They don't spend money on there. They will come back home, the market will grow in London and more people listening to radio means more market revenue. We are accounting for about 31, 32 per cent for that repatriation.
552 MR. VINER: I think you referred earlier, Commissioner, to Victoria. I might just use it as an example. When we launched CIOC-FM The Ocean in Victoria, there was an even larger percentage of out-of-market tuning. When we launched the station and over the period of time which we have operated, we have repatriated much of that tuning.
553 The important thing to note about repatriated tuning is simply that when it's back in its home market, advertisers will pay for it. Generally speaking, you don't benefit from your out-of-market tuning. 680 News doesn't benefit from its coverage in Hamilton. So, that is tuning that is lost to the market and revenue that is lost because the tuning isn't there, but the other stations usually don't benefit from that tuning that they have in their out-of-market stations. That is the anomaly. I hope I am clear, but that is the anomaly that occurs.
554 So, if you can get tuning in your home market, you can charge for it. If you get tuning outside of your home market, very often you can't get paid for it.
555 COMMISSIONER CARDOZO: But you would like to go compete with the out-of-market folks, too?
556 MR. VINER: If we are specifically talking about Tillsonburg, I think what happens is that they will do better in Tillsonburg, they will always do better in Tillsonburg, and that's because they are good and they provide local programming. It's what their market is looking for in terms of the service.
557 London advertisers usually won't pay for that tuning to an out-of-market station, so there isn't a big drop in revenue because of it. Most stations draw on the revenues from their area of dominant influence. It is usually that if we can repatriate the audience, we can charge for it and it lifts the market, as we experienced in Victoria, but nobody really lost money because of that.
558 Again I am using the analogy of Victoria. In that case, there were a number of Vancouver stations who were getting that audience, but weren't charging for it. Their advertisers weren't paying for it. The advertisers were more interested in people who live in Vancouver. So, we think the analogy is the same here.
559 COMMISSIONER CARDOZO: Let me move to some questions on our new radio policy and ask you for some of your thoughts on how we go about evaluating things in this new age.
560 First, let me just ask, rather than have the whole conversation again -- Mr. Viner, you had a conversation about this topic with Vice-Chair Wylie in Vancouver at that hearing on May 3rd. Let me just start by asking whether you have any additional comments. I was going to ask whether you still stand by everything you said, but I thought I would put it more discreetly and ask if you have anything to add to what you had said at that hearing.
561 MR. VINER: No, but then I will go on to add that Commissioner Wylie and I talked about this and I must say that I wasn't particularly well prepared. I told her what I believed then and believe now to be the truth, which is that the Commission should evaluate the best idea. The Commission should look at the contribution to the achievement of the objectives of the Broadcasting Act. The surrogate for that over the years has become Canadian talent development.
562 Then Vice-Chair Wylie and myself engaged in some discussion as to market viability and I continue to believe that some measure of market viability should be taken into consideration.
563 COMMISSIONER CARDOZO: Do you mind if we just take that segment of that discussion and put it on the record for this hearing? It is in the public domain already, but --
564 MR. VINER: If you take out the "uhs" and "ums" from the transcript, you may put it in.
565 COMMISSIONER CARDOZO: So done. There are a few "kind ofs", which you might not --
566 MR. VINER: Thank you for pointing that out, Commissioner. If you promise to edit it.
567 COMMISSIONER CARDOZO: I was going to read one of those paragraphs, but I won't. What I will just note for the record then is that we will add from the May 3rd hearing paragraphs 2092 to 2189. That transcript is available in our examination room, if anybody else would like to have a look at it.
568 I have a few questions I would like to ask you in relation to this market, first on the issue of over-licensing. I will just mention a couple of things that you talked about.
569 Commissioner Wylie asked, "What do you see as the damage to the broadcasting system of licensing without regard to the ability of the market to sustain an additional station?" You indicated that over-licensing might result. You noted that -- I take it this is in reference to your submissions to our radio policy hearings back about a year and a half ago -- you thought the multiple ownership policy was necessary because under conditions at the time there was too much dissolution and dilution of investment.
570 Here is a nice paragraph I will read. It is really well edited and put, I am sure.
"I know that the Commission is concerned about three issues. One is Canadian, one is diversity, but the third is high quality. My concern is that over-licensing might lead to lower quality." (As read)
571 When we are looking at this market and the kinds of applications we have before us, we have two choices. One is to stay with the same number of licensees by providing a licence to one of the two existing AMs and one would be to flip to FM or to allow a new licensee into the market, which is the case of your application and one other. Would that possibly constitute over-licensing as a result of that lowering of quality?
572 MR. VINER: I don't believe so, obviously, or I think we wouldn't have come forward with our proposal. I think there are a number of factors that have been both discussed by ourselves and the previous applicant, which indicate that London is a healthy market. I can't remember all the figures, but substantially above average in retail sales and we know the strong growth in the radio market itself. In this case, we don't believe that over-licensing would be an issue.
573 What I said first to Commissioner Wylie and would say to you is at that point, if there is not damage to be done to the market through over-licensing, then the best idea combined with the contribution to the Canadian broadcasting system, I think, should be issues that the Commission should consider.
574 It is difficult for me to put myself in the place of the Commission, but I believe that on a case-by-case basis the Commission should determine whether or not the market can sustain a new entrant, which not all of my colleagues agree. There should be a bias towards licensing, except if there is a demonstration that the market cannot sustain a new entrant. I believe it's important that the Commission look at it on a market basis rather than on an individual licensee basis.
575 COMMISSIONER CARDOZO: So, given what you are saying about this situation -- I hear your answer clearly -- in general, do you think we should be concerned about the market viability of new stations or should we just licence everybody who can be there and let the market determine --
576 MR. VINER: No. I think absolutely you should be concerned about the health of the market. I think we have plenty of examples -- and I would prefer not to cite them -- of what happens when licensees have faced terrible financial pressures. Many licensees respond admirably and develop innovative new approaches, but I don't think there is much question that there are some licensees in which the only alternative perhaps they have is to diminish local service.
577 I think that when the Commission considered this in the introduction of the radio policy, it was because the Commission recognized that without some consolidation service levels were being reduced during times of economic hardship in some markets to unacceptable levels. So, I think the Commission should be concerned with it, but it should be on a market basis.
578 COMMISSIONER CARDOZO: With this situation, looking at London, what is your view on whether a change in frequency is simply a flip or a new entrant? In the Victoria market, you were applying to flip. Here you are applying to be a new entrant.
579 MR. VINER: I think that if you believe the market can sustain a new entrant, then I fall back to the best idea. If you believed that the highest quality, most diverse, best serving Canadian needs was done by an application who proposed to flip, then that should carry the day.
580 I am going to speak hypothetically here, which always gets me into trouble, but I think there are some situations where an applicant should come in front of you and make the case that if they either apply for a flip or apply for a new FM and they are an AM stand-alone, you may determine that that is the only way in which that new service can be introduced in the market because of the dynamics or economics or competitive factors in the market. I think you have to look at it on a case-by-case basis.
581 With respect to this particular application, I think there is every indication that this market can sustain a new entrant. Then I think you have the unenviable task of making a decision as to which of these applicants make the best and highest use of the frequency. Because we don't have the formats, you are going to have to look at what makes sense, will economic factors keep them in their format, but I think you have to look at things like both the tangible and intangible contributions to the system and ensure that those contributions are substantial.
582 COMMISSIONER CARDOZO: In terms of sustainability, should it matter to us whether there is a difference between whether a market can sustain a new entry and whether it will be only somewhat adversely affected by one?
583 MR. VINER: I think I said in Vancouver, Commissioner Cardozo, that I don't think broadcast licensees have a right to a guaranteed revenue stream or PBIT. I think that what you have to decide -- and I don't think it's an easy job -- is whether or not a new entrant in a market will so adversely affect that market that there will be a significant reduction in service levels as a result.
584 COMMISSIONER CARDOZO: One of the other policy issues is local reflection. Let me ask you a loaded question, which is: Two of the applicants here are in the local market now. You and one other would be entering from outside. Should we be giving any weight to people who have spent time in the market, who know the market, have reflected it? Should there be any marks for, in a sense, longevity or loyalty as opposed to a new entrant?
585 MR. VINER: I think it should enter into your considerations, but I think that none of us would be able to grow if that were the overriding concern. I would argue that we have been in southwestern Ontario and we have a demonstrated track record of superb local service in any market in which we have entered.
586 So, I think that it is something the Commission should consider, but I return to what I said before -- I am not smart enough to change my thinking -- I think the best idea should win. If you believe that the best idea is from a local applicant because that local applicant knows that market and you are persuaded by that, then I think that you should give that licence, but I don't think you should do it simply because someone -- I don't think there is any right of incumbency.
587 I don't think we have one in the markets in which -- I am not going to come before you and argue that I have been in Vernon, so I deserve to have a licence in Vernon. I will come to you because I have a good idea for that licence in Vernon.
588 COMMISSIONER CARDOZO: Assuming that your application is approved for an FM licence, would you be interested in applying for that AM down the road? I ask that because, as I recall the discussion back at the time of the radio policy hearing, the major argument was that one needed to have multiple ownership in order to survive in a market. Here you would be a single FM, if you were licensed, competing against two three-station combos and, I suppose, one AM. Could you survive with the one FM?
589 MR. VINER: Yes, we could. I think it's important to note that one of the benefits that we have always argued that occurs with multiple licence ownership is that a rising tide lifts all boats and the experience in the U.S. is that independents have in fact done well in a market which is largely consolidated.
590 I think the previous applicant indicated that rate stability was an important factor in what they thought would occur as a natural result of the consolidation to which you have referred. So, I think that we could survive. We are a large company with significant resources, both human and financial, the former being the more important, and I certainly think we could survive.
591 Would we apply for the AM licence? Maybe. I don't have an idea for what I would do with it right now, but if the economic circumstances were there and we had a good idea, I would come in front of the Commission and ask for it. That is what we do. We are radio broadcasters and we are interested in growing our company. So, sure, I think it is likely that we would, but we have no specific plans to do so.
592 COMMISSIONER CARDOZO: But the flip wouldn't be true, that if you did and your application was rejected for that -- we are really going far down the road --
593 MR. VINER: Sure, I understand.
594 COMMISSIONER CARDOZO: -- you wouldn't at some point throw up your hands and say you can't survive with the one FM? If the option open to you continued to be just the one FM, would you be prepared to live with that for the long term?
595 MR. VINER: Yes.
596 COMMISSIONER CARDOZO: Do you see having synergies with your other operations, both in London, your cable or -- CFMT is just a rebroadcast?
597 MR. VINER: CFMT is just a rebroad.
598 COMMISSIONER CARDOZO: But, say, with your other stations. You have stations in Kitchener. Are there other synergies there?
599 MR. VINER: There are synergies. Radio, however, is built on local market strength. The synergies that really occur, I think, are a result of being able to amortize the costs of smart people like Sandy and Wolf and Gary and Sandra, to amortize the cost of research, to exchange ideas, to attract talented people because of the opportunities to grow and develop. So, there are a number of synergistic opportunities. Operational synergies are more difficult to attain and we don't worry over much about them.
600 COMMISSIONER CARDOZO: That covers the specific questions I had and I am just wondering if you have any other comments to make. I note your summary in your opening comments, but are there any other issues we have mentioned or haven't mentioned that you would like to close on?
601 MR. VINER: It is a very fair question, Commissioner, but I don't think I have an answer to it.
602 Have I missed anything that is obvious to my group? No, I think that --
603 COMMISSIONER CARDOZO: Speak now or --
604 MR. VINER: Yes, sir.
605 COMMISSIONER CARDOZO: Thank you very much.
606 MR. VINER: Thank you.
607 COMMISSIONER CARDOZO: Thank you, Mr. Chair.
608 THE CHAIRPERSON: Thank you.
609 Mr. McCallum, do you have some questions?
610 MR. McCALLUM: Thank you.
611 In discussion with Commissioner Cardozo, you mentioned that you had filed a letter from FACTOR on file relating to your discussions with FACTOR and I think you said it was dated the 2nd of June, 1999. Is that correct?
612 MR. SANDERSON: I said June the 2nd. That is the date on the letter. I spoke rather quickly. I was assuming it had been filed, but I do have the letter right here.
613 MR. McCALLUM: I don't think it has been filed, so are you seeking to have it filed?
614 MR. SANDERSON: Yes, we would be happy to do so.
615 MR. McCALLUM: With the permission of The Chair, this could be filed and available for anybody else to comment on at a later time.
616 THE CHAIRPERSON: Yes, it should be filed.
618 MR. McCALLUM: With respect to that engagement then on Canadian talent development, I take it if your commitments were to be translated into a condition of licence, that would be acceptable to you?
619 MR. VINER: Yes, it would.
620 MR. McCALLUM: It would go something along the lines of a $2 million commitment overall, allocating approximately $286,000 per year with the first $5,000 to go to the CAB plan. Does that reflect approximately what you had?
621 MR. VINER: As long as you use the word "approximately", counsel, yes.
622 MR. McCALLUM: Thank you.
623 With respect to the Victoria application that was made not too long ago, would this station and that one in Victoria have similar music play lists?
624 MR. VINER: Sandy, you might want to address this.
625 We used soft AC this time instead of gold-based for just that reason.
626 Sandy, the question was: Will they have similar play lists?
627 MR. SANDERSON: The answer is yes. It is more semantic.
628 MR. McCALLUM: How do the two differ between soft AC and gold-based?
629 MR. SANDERSON: Semantics. They are the same.
630 MR. McCALLUM: And you are looking for a 49 per cent maximum weekly hits level as well. Right?
631 MR. SANDERSON: Yes.
632 MR. McCALLUM: But I take it the programming decisions would be all made at the local level if this licence is awarded?
633 MR. SANDERSON: Yes.
634 MR. McCALLUM: If you were granted this licence, you would implement within 12 months, if that were made a condition of licence?
635 MR. VINER: Yes, we would.
636 MR. McCALLUM: Thank you.
637 THE CHAIRPERSON: Thank you very much.
638 We will now adjourn for lunch and return after lunch with CHUM. We will take until 1:30 for lunch, so we will see you again at 1:30.
639 Thank you.
--- Recess at / Suspension à 1236
--- Upon resuming at / Reprise à 1330
640 THE CHAIRPERSON: Mr. Cussons, could you please call the next applicant?
641 MR. CUSSONS: Thank you, Mr. Chairman.
642 Our next application is by CHUM Limited for a broadcasting licence to carry on an English-language FM radio programming undertaking at London, operating on a frequency of 102.3 megahertz, channel 272B, with an effective radiated power of 4,770 watts. The applicant is proposing a contemporary adult hit music format. It should be noted that CHUM Limited has a television presence in London via CFPL-TV.
643 I will ask Mr. Sherratt to introduce his party.
644 Mr. Sherratt?
PRESENTATION / PRÉSENTATION
645 MR. SHERRATT: Thank you, Mr. Secretary.
646 Mr. Chairman and Members of the Commission, I am Fred Sherratt, Executive Vice-President and Chief Operating Officer of CHUM Limited. With me today are Jim Waters, President, CHUM Group Radio, who is immediately in front of me. On his left is Linda Benoit, General Manager of CKKW and CFCA-FM Kitchener. Beside Linda is Duff Roman, Vice-President, Industry Affairs, CHUM Limited, and on Jim's right is Ross Davies, Vice-President of Programming, CHUM Group Radio.
647 On my immediate right is Shelley Sheppard, CHUM Limited Corporate Accounting, and on my left is Steve Malison, Professor, Music Industry Art/Digital Applications at Fanshawe College in London. Hans Jansen who does our market research from Bay Consulting was to have been with us today, but, unfortunately, his mother passed away in Holland and he is there attending the funeral today.
648 It has been quite a while since CHUM has appeared before the CRTC with regard to radio. CHUM Limited has its roots in radio. Allan Waters bought a daytime-only AM radio station in Toronto in 1954. At that time, 1050 CHUM only broadcast from sunrise to sunset. In May 1957, it went 24 hours and became Canada's first Hit Parade radio station.
649 Over the next 42 years, CHUM Limited grew to include 24 radio stations, six television stations and nine specialty services. We operate the Educational Television Service in Alberta, Access, and are also involved in the environmental music business. Through CHUM City International, we are exporting our programming and our expertise around the world.
650 CHUM was an early believer in Canadian radio. We still have the faith and that is the reason we are here today seeking your approval of our application for a new FM service in London. This is not our first attempt to acquire a radio station in London. Three years ago, at the invitation of existing operators, we did due diligence in order to make an offer for their properties. They chose not to sell and when the stations came to the market again just recently, we were not the successful bidder.
651 Fortunately, during this interval, we were successful in acquiring CFPL Television. The Mayor of London, Her Worship Dianne Haskett, stated in her letter to you, and I quote:
"The NEW PL has proven to be a strong community supporter and its focus on London and its local news and information coverage has been outstanding. I believe that the establishment of this new station will complement its sister television station."
652 Should we be successful in our application, we look forward to adding to the CHUM tradition of strong community involvement in London.
653 Jim Waters, President, CHUM Group Radio, will quarterback our presentation to you today.
654 MR. WATERS: In preparing this application, we have done extensive analysis of the economic circumstances of the London market, research to determine the programming needs of the community, and have joined with Fanshawe College to create a new, exciting Canadian talent development initiative.
655 The research filed with our application confirms two key factors: There is a programming void in the market and London is sufficiently large and vibrant to support the entry of a new radio station.
656 When the dust settles, there will be three broadcasters in the London market: Blackburn/Furber operating CFPL-AM and FM and CFHK-FM has just been sold to Shaw; Telemedia, which operates CIQM-FM, is awaiting approval to acquire the assets of CJBX-FM and CJBK-AM; and Affinity Radio, which operates CKSL.
657 London, Ontario is a top 10 ranked market, which has shown solid growth since the 1991 census. The private-sector FM radio reporting units in London had combined pre-tax profits of $2.2 million on revenues of $11.6 million during the last reporting year available, 1997. This 17.9 per cent profit margin is very healthy compared to other similar markets. In Edmonton, the margin was 9.8 per cent, in Winnipeg it was 11.4 per cent. Operating income or EBITDA, which is perhaps the best comparative measure, was $3.3. million or 28.3 per cent of total revenue, a strong performance by any measure.
658 In order to determine the size of the market and project realistically achievable advertising revenues for a new local station, CHUM retained the Bay Consulting Group to analyze London and work with us in preparing sales forecasts. The results indicate that the market for air time sales is large and growing. By 2001, radio sales will be $18.7 million and by 2004 will have grown to $22 million.
659 We have developed realistically achievable targets for air time revenue by taking into account the local dynamics of the market, the experience of new radio stations in other markets, the characteristics of the proposed new station, and analysis of the potential to further develop the FM sector in the area.
660 We have forecast modest growth in both audience share and revenues in the first seven years of operation. Our projections indicate that sales of $1.8 million by year two and $2.3 million by year four are achievable for our new station in London.
661 Linda Benoit is our resident radio expert in this part of Ontario, having been General Manager of our Kitchener operations since we acquired them in 1993. Linda has also been our point person in London on this application.
662 MS BENOIT: It has been CHUM's experience most recently for me in the Kitchener/Waterloo market that when a new format is introduced to the community, a tremendous opportunity is created to attract new business categories to use radio as their advertising medium of choice, to attract new listeners to the local market, to repatriate listeners who may have abandoned radio as their medium of choice, and to improve relationship in the community at large by providing access to community groups for fund-raising and community awareness projects.
663 V-102.3 FM has been designed to accomplish these objectives. Ross Davies will outline the audience research used to develop our musical approach, but first I would like to touch on our approach to the community.
664 It is vital to the success of V-102.3 FM that we become an integral part of London. Being involved and focused on the needs and concerns of the local community is an essential ingredient in the station's operating philosophy. Through the "V-Cares Community Program", we will provide an ongoing fund-raising initiative with a mandate to provide financial assistance to London's community and social service programs.
665 Throughout the year, the station will develop various events and activities designed to not only raise money, but to increase awareness of important community programs. We will develop "V-Cares Community Line", a 24-hour interactive phone service providing continuous information regarding community services. The V-102.3 FM Website will be a further extension of this program, providing hot links to London's various community service programs.
666 CHUM Limited has already established itself as an integral part of the London community through its ownership of CFPL-TV, which is a proven strong community supporter. V-102.3 FM will complement its sister station's efforts with a focus on local news and information.
667 The London market will be promoted as a recreational, cultural and shopping destination through our "London City Awareness Initiative" and we have committed to work closely with the city of London in this endeavour. V-102.3 FM has guaranteed the city of London a weekly schedule of 28 30-second announcements throughout the year as part of the program. This is a firm commitment throughout the licence term, which virtually eliminates this category from our revenue potential.
668 We have covered two of the elements essential to the success of a new radio station, confirmation of the market's economic capability to support it and the establishment of strong community goals. However, key in the development of any station is its music format, which Ross Davies will now cover.
669 MR. DAVIES: Currently, the London radio landscape offers listeners two talk formats and a soft adult music format on the AM dial, while country, classic rock, album rock and soft adult are the formats offered on the FM band. There is currently no station designed to appeal to younger adults who do not prefer rock or hard rock, yet still want to hear upbeat and lively music without being put to sleep. V-102.3 FM will fit perfectly in between London's two soft adult stations and the two rock stations.
670 Coincidental with our market research, we initiated a programming study designed to examine the existing formats, confirm that a hole existed, and then explore formats for the potential appeal in fulfilling that need. The project was conducted last January. Over 600 people between the ages of 18 and 54 were interviewed with regard to their listening habits and their music preferences. We also examined perceptions of which radio stations currently provide programming that satisfies those preferences. The sample was selected to mirror the London market.
671 Respondents in the study were played audio samples of five different formats and were examined for potential listening appeal and actual passion or loyalty to that particular format. They were asked to identify any existing London station perceived to be actually providing that particular sound.
672 The detailed results of the study are contained in our submission. However, the overwhelming conclusion from the study showed that what is known in radio jargon as "hot adult contemporary" not only had the largest appeal, but was also considered by close to 25 per cent of the respondents to not be currently available in London.
673 The combination of these two factors, availability of and passion for a format, gives us an extremely reliable indicator of a particular format's potential. The findings from this study confirmed our earlier findings that in London there is no radio station offering a musical format designed to appeal to a primarily female audience between the ages of 25 and 39.
674 V-102.3 FM will play contemporary songs from today by artists such as Bryan Adams, The Backstreet Boys, Brandy and Alanis Morissette, as well as songs from the past years that you don't hear very often any more, from artists like The Human League, Simple Minds, Red Ryder and The Payolas. There is a clear void in the market for a radio station such as this and our research study clearly confirms that the people of London want a station like V-102.3 FM.
675 While V-102.3 FM will schedule 35 per cent Canadian music throughout its broadcast week, it will also actively promote Canadian talent in a number of different ways. Through its association with the CHUM Radio Network, the station will have access to numerous syndicated specials on Canadian performers, along with the use of an extensive library of recorded interviews with up-and-coming Canadian talent. Such programs as "The Salute to the Junos" and "The Sunday Funnies" will be a part of the station's line-up.
676 V-102.3 FM will be a lively sounding contemporary station for the people of London. Its young adults will hear a variety of new and different songs of today and the 1980s and 1990s. V-102.3 FM will complement this sound with a presentation that reflects the spirit and personality of the community of London.
677 As a key part of our involvement, we have developed a strong Canadian talent initiative, which Duff Roman will outline to you.
678 MR. ROMAN: CHUM Limited has taken a comprehensive approach to Canadian talent development initiatives and will only proceed with a project if and when the following criteria are satisfied: First, the proposed initiative must address a real need in the music community. There must be tangible benefits on a realistic scale.
679 Next, wherever possible, the initiative should facilitate the involvement of the relevant stakeholders. It may be through consultative or advisory boards or a hands-on commitment in the execution and promotion of the initiative. And, finally, there must be an opportunity for ongoing lasting benefits where the initiative, once engaged, has every chance for long-term success.
680 CHUM Limited spearheaded the founding of FACTOR, the Foundation to Assist Canadian Talent on Records, in 1982. To date, our support to the Foundation exceeds $2.5 million. CHUM Limited was the founder and provided all of the initial funding for MusicAction, which addresses the supply of Canadian francophone musical recordings.
681 We took leadership in addressing the production of music videos by establishing VideoFACT, which to date has funded 1,530 videos. We established Artsfact in British Columbia and, with the launch of Bravo!, established BravoFact. The project we are proposing for London, Canadian Artists Multi-Media Project, which we have shortened to CAMP, fulfils all the criteria that distinguishes these outstanding Canadian talent development initiatives.
682 The arrival of the long-heralded convergence of digital technologies is now impacting the music and broadcasting industry. The music industry has already adopted such digital formats as CD, DAT and mini discs, with new challenges coming in from the Internet in the form of MP3 and other formats, and the multi-media potential of DVD and enhanced CD-ROM.
683 In this new world, the Music Industry Arts (MIA) and Digital Applications (DA) Programs at London's Fanshawe College need to grow and evolve. Due to the rapidly accelerated technology used in this program, significant changes must be made in order to accommodate the turnover in hardware and software and an ever-increasing student enrolment. As part of its commitment to the development of Canadian music in the London community, V-102.3 FM will, when licensed, work with Fanshawe College in building a new Canadian Artists Multi-Media Production centre to fulfil the need for these changes.
684 Steve Malison is here and I hope he will have the opportunity to tell you himself how he and his colleagues worked with CHUM to develop the CAMP initiative.
685 Digital audio, digital video, digital audio broadcasting and specialized multi-media authoring requires specialized service areas. In all, the CAMP initiative proposes the construction and equipping of three new rooms at Fanshawe comprising a lab service area, an audio mixing service area and a preview/consulting service area, as well as the upgrading of existing MIA studios. The total cost of these projects is $1,200,000. When licensed, CHUM Limited will undertake the total $1,200,000 of this project through annual instalments.
686 Mr. Chairman, we believe this community-based initiative presents a unique opportunity to each young Canadian musician and audio-oriented professionals the essential production and recording technologies of the new digital world. We look forward to collaborating with Fanshawe College in the development of the CAMP initiative, which will be of continuing benefit to the entire Canadian music and broadcasting industries.
687 MR. WATERS: Mr. Chairman and Members of the Commission, I would like to summarize the benefits that approval of this application for a new FM broadcasting service in London will bring to the community and the system.
688 First, it will fill a confirmed programming void in the London market for a radio station designed to satisfy the needs of the large unserved audience of adults between the ages of 25 and 39.
689 Second, CHUM promises to continue its tradition of strong community involvement through such initiatives as the "V-Cares Community Program", which will raise funds to assist London's community and social service programs, and the London City Awareness Initiative in cooperation with the city of London.
690 Finally, as part of its commitment to the development of Canadian music and the London community, CHUM will work with Fanshawe College to build a new Canadian Artists Multi-Media Production centre through the CAMP initiative at a cost of $1,200,000.
691 Mr. Chairman, Members of the Commission, we respectfully ask for your approval of this application and will be pleased to answer any questions you may have.
692 THE CHAIRPERSON: Thank you very much, Mr. Waters.
693 Commissioner Demers will ask you some questions.
694 COMMISSIONER DEMERS: Thank you, Mr. Chairman.
695 Good afternoon, ladies and gentlemen. I hope you didn't bet who was going to ask the questions this afternoon. They will probably be questions that you have heard this morning, but they will be asked of your group. I will start from the audience and build up into all the aspects that you have heard questions on this morning.
696 If we jump right in and look at the audience you wish to serve, particularly the younger 20 or 30-something, where are they right now in London? Who do they listen to?
697 MR. WATERS: Commissioner Demers, I think I am going to hand that off to my expert programming assistant sitting right beside me, Mr. Ross Davies.
698 MR. DAVIES: Thank you, Jim.
699 As you heard this morning, there is a lot of out-of-town tuning in the London market and certainly some of those people will be found listening to some of those radio stations. There is also a number of these people who are currently listening to existing London radio stations because they have no other choice.
700 Our format will be designed to fit in between these radio stations and offer them, I think, a clear first-choice radio station that they haven't had up to this point. So, it's a combination of both out-of-market tuning and some of the existing radio stations in London.
701 COMMISSIONER DEMERS: If we extend that into the domain of advertising, what is CHUM's success in attracting advertising to this younger generation?
702 MR. WATERS: That is a pretty big question. I think in all of our properties, Commissioner Demers, we like to do research so that we are answering the needs of all of the markets in which we operate. I think that is our first concern so that we are serving or at least filling the void, as we spoke about in our opening remarks.
703 As Mr. Sherratt pointed out in the opening remarks, our history is in Hit Parade or top 40 radio, I guess, is a better way to call it, but I think it's an audience that we are comfortable serving, both on radio and on television.
704 Ross, I don't know if you have anything to add to that.
705 MR. DAVIES: I was actually going to say the same thing. We have a number of stations operating in similar type formats. We have a fair amount of experience in selling to advertisers in this particular demographic.
706 COMMISSIONER DEMERS: Thank you.
707 Have you made an estimate of the revenue which this new station would generate from that audience?
708 MR. WATERS: I just want to make sure I have the numbers right for you, Commissioner. I hope I am answering the right question here. Are you asking where we will get the revenue from that we have put into our projections?
709 COMMISSIONER DEMERS: The amount maybe and where you would get it.
710 MR. WATERS: The projected revenue in the first year is $1.5 million, which would be in the schedule.
711 COMMISSIONER DEMERS: Your projections are based on the fact that all your revenues would come from the selling, if you wish, or the fact that you have a young audience?
712 MR. WATERS: Yes.
713 COMMISSIONER DEMERS: There are no projections of having other types of audience?
714 MR. WATERS: No. The core audience that we will be targeting this format at, Commissioner, would be 25 to 39, but in our other experience when we have programmed at that demographic, you will get some spill to the demographic below 25 and some over the age of 39. That is where we expect the revenue to come from.
715 I think that we are introducing a new service to the London market here that appeals to a primarily female demographic in the 25 to 39-year-old area and I think it is a very attractive demographic to advertisers, which we have found in other experience. So, I think our projections are well within reason here.
716 Shelley, would you like to add to that, or anybody? Am I missing anything?
717 MS BENOIT: Perhaps just to expand on that point, if your question, Mr. Commissioner, is where would the advertising revenues be coming from, we estimate, based on experience in launching a new radio station in Kitchener/Waterloo -- we launched a new format, not a new station -- one of the reasons for doing so was to fill a void in the marketplace and, in so doing, we attracted a largely new customer base that had not perhaps been using radio as its advertising medium of choice in the local market.
718 So, we do believe that in providing this new service, which would be an alternative service to what is available, a good percentage of our revenues will come from new business development, another per cent will come from advertising budgets which are increased as a result of having more diversity in the marketplace, and about a third would probably be gained from other media, which could include outdoor, it could include print, it could include anything from flyers to even other radio and television stations. I don't want to use the word "television", but radio stations.
719 If that helps clarify the point, that is where we feel the revenues will be generated from.
720 COMMISSIONER DEMERS: Thank you.
721 Let's turn to another point maybe looking forward. Would it be in CHUM's plans to, at one point down the road, add an AM station to this operation?
722 MR. WATERS: You are right, you are repeating the questions from this morning.
723 Commissioner, we hadn't really thought about it. Obviously, what we are proposing here is just a new FM station, but I suppose if the opportunity did arise to add an AM station and we felt that we could operate it efficiently, I am sure that CHUM would consider doing that, yes.
724 COMMISSIONER DEMERS: This is not another original question. Since CHUM is in the London area already in a particular forum, could you elaborate on the synergies that will be or will not be available to you?
725 MR. WATERS: Certainly. As has been pointed out, CFPL Television was acquired by CHUM not too long ago, but we certainly look forward to working with the staff over there. I know they have been at it a little bit in London, so they are a little bit more familiar with the market than we are at this point.
726 I know that they operate very well there and are very involved in the community and we look forward to joining them in their efforts dealing with different groups in the community. I know that they do great work on the Children's Miracle Network Telethon. I think we would like to be involved with them on projects like that.
727 I think also in the area of news coverage in our television stations in the area, both in Windsor, London and Wingham, we have a total of 68 news people employed in this area in television, with 34 vehicles as well. So, I think the area is well covered news-wise and I think we would be remiss if we didn't work with the television people on taking news from them or exchanging ideas and news with them since they are here. I think those are a couple of the areas where we would be working closely with the television station.
728 COMMISSIONER DEMERS: You have spoken generally, but would you have examples -- maybe other stations that you have -- where you get synergies from other parts of the CHUM organization? Would there be something more specific than that that would happen? Would there be, say, some employees that would be the same with the two stations?
729 MR. WATERS: I think one of the best examples I could give you, Commissioner, is in Toronto 1050 CHUM and 104.5 CHUM-FM and Citytv work together every year on the CHUM City Christmas Wish, which raises money to help children at Christmastime. I think an initiative like that certainly could be carried over into London. We do quite a bit in Toronto of exchanging air talent. Some of the people at City work on the air on the radio stations and vice versa; some of the radio people work in television. I think that is another area that we could do that here.
730 Our staff in radio in London will definitely be separate from the television staff, although it's our plan to live at the same address. There is room for us there, but the staff will definitely be separate. I think there would probably be some cross-promotion between the two entities from time to time. There are quite a few opportunities there available to us and I think we will definitely take advantage of those, as we can.
731 Ross, did you want to add something.
732 MR. DAVIES: I think even a more recent example would be yesterday's AIDS Gay Parade in Toronto, where Citytv televised the parade live, CHUM-FM had their vehicle in there, and we were joining forces together in being a part of this whole festivity. That is not unusual for us to do things like that.
733 Every year at Christmas we have the CHUM morning show broadcast live in support of the CHUM City Christmas Wish from Nathan Phillips Square, where we incorporate Gord Martineau and Jim McKenny from our television. They are part of that broadcast. Citytv brings down a camera and captures the whole thing on film and broadcasts it on their news later that night. So, those are great examples of how two stations working together can really drive a charity event such as that.
734 MR. ROMAN: Maybe I could add just one further thing and that is that, as has been pointed out, Mr. Commissioner, the staffs are separate. On a day-to-day basis, as they go about providing radio coverage and television coverage, we think that there may come a time at any given time -- an ice storm, as was recent, would be a case history -- where we would have the depth of resource on the television side to take care of an instantly-breaking story, to have the manpower, person power perhaps, to address the situation.
735 That resource would always be there and certainly we wouldn't hesitate to use it if we had a repeat of what happened in eastern Canada with the ice storm. That is something where you need the manpower. I think, from that aspect, we are very blessed to be able to access that kind of personnel.
736 COMMISSIONER DEMERS: Would it be fair to say that generally, as Mr. Waters said, staff would be separate, but on special occasions or particular events you would work together and exchange?
737 MR. WATERS: Yes, sir, that would be correct.
738 COMMISSIONER DEMERS: On another point, I believe you referred in your opening remarks to the change of circumstances in the area as to ownership, that the landscape is changing at the moment. Does that have any affect on your application? In other words, if we look forward again and there are those changes that are announced, would that change your application today?
739 MR. WATERS: No, it wouldn't, Commissioner. We look forward to the challenge. One against three or four doesn't scare us.
740 COMMISSIONER DEMERS: Thank you.
741 Now we get closer to the commercial radio policy. In applying the commercial radio policy, should the Commission take into account the financial viability of individual stations in the market in determining market entry?
742 MR. WATERS: Yes, I think they should. I have certainly listened to the comments from this morning and I have read some of the other transcripts. I think financial viability is very important.
743 MR. SHERRATT: I might add to that, if I may, Commissioner Demers. I think you used the phrase "individual station's viability". I think the viability that should be addressed is the viability of radio as a whole. You may have individual stations that, for whatever reason -- bad management, circumstance, bad programming, whatever it may be -- isn't doing well, but the rest of the market may be doing very well. So, I don't think the Commission, in any of its actions, should protect a bad operator.
744 I think what we really mean is can the viability of the market as a whole absorb another radio station into its framework and keep the level of service that is existing now and improve upon it. That is the kind of viability that I think is important.
745 COMMISSIONER DEMERS: Thank you.
746 Do I read into what you have answered that that includes the level of competition in the market? Should that be taken into account? The players are certainly of a different magnitude in the London market. Would you have something as to the competition? Would you have comments on the level of competition before getting into the market?
747 MR. SHERRATT: You, obviously, are going to have competition. I am not sure that I quite grasp your question, sir. If you are talking about smaller players versus bigger players, I understand that because London, we are all assuming, is going to shake out into two very large owners, one not quite a large owner and another player, which is what we hope will happen.
748 We think that each can find its way, but we don't think it's incumbent upon the Commission to take into consideration individual players, as I said a moment ago, nor do I think that the Commission -- I guess I shouldn't go down that road. I don't want to get interventionalist at this point, but I think tenure has something to do with your consideration as to what kind of consideration should be given to existing operators. If there is no tenure, then they are new operators.
749 COMMISSIONER DEMERS: Thank you.
750 I suppose you have thought of the criteria that the Commission should use to rank competitive applications?
751 MR. SHERRATT: Yes, we have had extensive discussion about that, I guess going back, as the Chairman mentioned this morning, to your Victoria hearing and your discussions there. Clearly, applications should be ranked on their merit, their merit in contributing to the local community, providing a diverse service, a service that is not available and adding to the diversity of the radio services available in the community, and their contribution to the system as a whole.
752 That is a judgmental decision that this Commission will make. We have been comfortable with that process for many years when you had rigid guidelines and when you didn't have rigid guidelines. By and large, history has shown that wise people in consultation, having heard presentations and studied the presentations -- by and large, not always. I wouldn't want you to go away thinking we think every decision you have ever made was the best one, but, by and large, the system and the process has served the system well, we believe, in this country.
753 Having said that, you face some dichotomies, particularly when you get into the problems that you are being exposed to as it relates to flips from AM to FM and some of the scenarios that can fall out of that. It's simple. In a single-station market where there are lots of frequencies and there is a single operator and that is all that can be there, there is no problem with them flipping from AM to FM. There are frequencies there.
754 If you go to another market -- Halifax could be a good example. I think there are enough frequencies. There are a couple of engineers here today, but I think there are enough frequencies in Halifax that every AM station could flip to FM. It has been discussed in the market, but the great fear that everybody has if they came forward and did that is that nine people would come out of the woodwork and want another radio station in Halifax that really doesn't need another radio station. The market there is all right, but it really can't handle another radio station at this time, so people sit back a little bit.
755 In four-station markets, small or medium-size markets, the policy says now if you consolidate you can only own three radio stations. We will take Peterborough where we operate, as an example. If we were to consolidate with Power, who have the other two stations there, there would be an orphan AM radio station. What do you do with it if they consolidate?
756 Neither they nor we would want to be left with an AM-only radio station in a market like Peterborough and yet you don't want to flip it to FM because now you have another player in the market, an FM, and that may be difficult to handle for a stand-alone against the three stations. So, that creates a problem.
757 In a market where you have multiple operators and not enough FM frequencies to go around, then somebody is going to be disadvantaged if you allow one to flip an AM to FM and not the others. So, those are the things that you have to wrestle with and I think that is what Mr. Viner was getting at this morning when he said in those situations, when they come up, focus on the merits of the application.
758 In the case of new applicants -- and I reiterate that I would think that's what you are dealing with in this situation -- you are dealing with one frequency that is left in this part of southwestern Ontario. There are three applicants for a new FM radio station and one applicant who wants to move that frequency from where it was allocated. We want to move it to London, he wants to move it to the small town of Tillsonburg. So, that's what you are wrestling with. There, clearly, the merits of the applications are what count as far as London is concerned.
759 So, as you go on, historically, when you go back -- we were having this discussion this morning with a couple of the engineers. I think it was right around the war years when the frequency allocation for FM took place. Canada was shortchanged. We did not do very well. We didn't get very many frequencies.
760 There were FM transmitters operating in this country in the late 1940s and early 1950s in radio stations and the employees in the building didn't even know what that box was that was running. It was an FM transmitter, but there wasn't a receiver in the community, and many of those went dark. They shut them down because they weren't doing anything. FM receivers didn't move and that was the end of that little wave of FM.
761 Right now we are in a situation where we don't have anywhere near the frequencies that they had in the United States in the allocation. So, we have been shortchanged. A lot of us -- and it was discussed this morning -- are staying in the AM business because in some very special situations it's still a very good business and doing a very good job in serving the public. In other places, you try to run music formats that you can do that appeal to a very small segment of the audience, but eventually you are hopeful they will become digital frequencies and will be able to convert those to digital.
762 When Jim was saying that we might apply for an AM, the other thing we might want to do in London down the road is apply for another digital frequency. If it moves fast enough, you might bypass going back to AM, which is clearly yesterday's methodology, and jump to a digital-only station.
763 The situation we are in now is we don't have enough FM frequencies to convert the system to FM, so your judgment is going to have to play a great part in that. I think there are some situations you can develop that will be automatic, that are easy to do, others where you are going to have to make the decision.
764 COMMISSIONER DEMERS: Thank you, Mr. Sherratt.
765 Now I will turn back to programming and be very specific, close to your day-to-day operations. My question is: How will you strike a balance between music, news and information at your proposed station?
766 MR. WATERS: Commissioner, what we are asking for or what we have found out is the void in the market is a music-driven format and in a format such as that, news does not play a big role. We believe that the people who are listening to the radio station want to feel comfortable that through the news presence that we do have we will always let them know what is going on, that if there is a big event that happens, we will always tell them about that. I think that is our job in a music-driven format. It is just to keep them up to date.
767 If it's a big event such as Kosovo or whatever it might be, if they want more detail on that, there are places that they can go -- on radio, all-news stations in the market, or there are certainly all-news television services to which they can go to get more detail -- but I think as long as our audience feels comfortable that we will inform them of what's going on so they can make the choice to go somewhere else to get detail, I think we have done our job.
768 MR. DAVIES: Monsieur Demers, if I may elaborate just a little bit on what Jim said, we will have news on this radio station. Our audience in that demographic obviously wants to know what's going on. So, we will offer them news in morning drive periods and afternoon drive periods. That goes without saying.
769 However, as Jim said, this is a music-driven format and it is primarily going to be focused on music. We will make sure that they are informed every single day in the morning and afternoon of the events that they need to be informed about. As Jim said, in the event of anything that occurs like an ice storm or whatever, we are fortunate to have the facilities of CFPL Television and our newsroom there to go to immediately.
770 COMMISSIONER DEMERS: When you were working on your schedule, have you been able to make a breakdown of what would be at least, let's say, spoken word and music? Have you been able to do that?
771 MR. DAVIES: No, we don't have actual percentages of how much spoken word versus music, but it's important to note that this is a music-driven format. There will be an hourly presence of news, for example, surveillance, traffic, weather, all those normal ingredients you would find with any radio station.
772 I don't want you to think that this is going to be just a jukebox without any kind of local involvement or local awareness. That is absolutely not the case. I don't have the exact percentages, but there will be a steady presence of that information every day during the week.
773 COMMISSIONER DEMERS: Thank you.
774 Madam Benoit, would you have a breakdown in the station where you operate?
775 MS BENOIT: Offhand, I would not have a firm percentage breakdown, other than I can describe to you that we do complete surveillance in the morning drive-time and in the afternoon drive-time. The community is well served and I think it's an elaboration on what Jim has said, that when you operate a primarily music-intensive radio station, it is to give the basic alert of particular news. Then if the person wants more detail, they usually go to another more news-intensive service to get that.
776 MR. SHERRATT: I think a good example of that is in Toronto where on CHUM-FM or CHUM-AM we have a news presence, but on CP24, the regional all-news operation that operates out of city, we work closely with 680 News in developing a news presence because they are news 24 hours a day and their listeners don't expect to hear a song on 680 News. So, we have no problem whatsoever in working with Rogers on that service with their news station and our news television station. That kind of cooperation goes on.
777 The listeners to 104.5 CHUM-FM or 1050 CHUM clearly expect to be alerted as to what is happening, but they will then either migrate to television or migrate to radio to get the detail and the continuous updates where they know they are going to get it 24 hours a day.
778 MR. ROMAN: I would add that even in music-driven stations we go where the people tell us they would like to get information. So, even the most popular music-driven formats have information-oriented morning shows. The requirements of the morning show, getting up to work, to school, wanting to know what happened overnight, sports information, even music fans want that information. It's a busy time, there is terrific audience turnover at that time.
779 So, essentially, you are not trying to prove that you have the most music necessarily in that morning show. You have to have the best morning show and talk belongs in the morning show. There are other peaks during the day. I am sure Ross, rather than give you a percentage or minutes, could tell you probably that there would be news at the top and bottom of the hour, for instance, in the morning show and probably news packages, one or two, in the afternoon where it is less important because at that point you have been up for a while, you have heard from not only your favourite station, but from many sources.
780 What you turn to the V station for is the music. So, you have to go with the essence of the station. In this case, as someone else pointed out, you wouldn't be looking for your favourite records on 680 CFTR and you wouldn't be looking for talk on your favourite music station V-102.3.
781 So, I think that we have sort of been through these processes when we have explained our research to you, where we look and how we intend to serve our audiences. Essentially, what we do is not a secret. It's on the air and it has been with us since the rock and roll days when music became an essential and important ingredient. It's difficult to make a lot of talk co-exist with an equal amount of music. Essentially, you are either fish or fowl and we are music-driven.
782 MR. DAVIES: Monsieur Demers, at the risk of making the answer even longer to the question, very briefly, we conduct, as Duff says, an enormous amount of research into these formats. As much as I personally would like to think that these people would like to have more news, information and things like that, the fact is for the people who are partisans of this kind of format -- this is their first preference, their first choice -- they want to know the major events, but they don't want the detail.
783 In London, they can go to a number of other radio stations. As we have heard this morning, it is quite well serviced in the areas of news/talk. There are lots of opportunities for them to get that.
784 However, the other thing I wanted to say is we are going to be live local and it is going to be part of our mandate of our announcers on this radio station to be plugged into this community. It is real vital to this radio station that our announcers reflect what is going on and what is of importance to our listeners. So, it is going to be part of their responsibility as announcers to make sure they are plugged in and aware of what are important issues to our target audience. I think we will really be quite well covered in that area.
785 MR. SHERRATT: They have an old saying in music-driven radio: It's what you say, not how long you take to say it.
786 COMMISSIONER DEMERS: Thank you.
787 If I can turn to Professor Malison from Fanshawe, I have just a few general questions on the relationship with the CAMP project. Can you outline the general cost, maybe describe in more detail the relationship, what is the CAMP centre and what does it entail?
788 MR. MALISON: Commissioner, at Fanshawe we are looking at more involvement in digital technology. To do that, we looked at three separate rooms to accommodate that. One room is what I call a pre-production centre, which is a lab, which is the bulk of the cost because it involves workstations with digital technology that is expensive and turns over quite rapidly.
789 The second room is a surround sound room, which is evident in digital technology, not only in television but in film and in radio. That surround room will be a production centre, as opposed to a pre-production centre. The final room is a much smaller room, which is just a preview, kind of a client-listening environment, which is much smaller, lower cost.
790 As far as rough figures, the lab takes up most of the money. It's $690,000. The production area, which is the surround sound room, is about $300,000 and, finally, the client-listening room is somewhere around $60,000. There are also upgrades to our existing studios to accommodate this further leap to digital technology, which comes in at about $155,000.
791 COMMISSIONER DEMERS: Thank you.
792 So, it's a project in itself that nobody else is sharing in or is the college sharing in that?
793 MR. MALISON: That's correct, only CHUM is involved in this CAMP project.
794 COMMISSIONER DEMERS: Thank you.
795 Does it involve the construction of a new building?
796 MR. MALISON: It does, Commissioner. It involves retrofitting existing facilities to change over these rooms to meet the criteria of digital technology.
797 COMMISSIONER DEMERS: Thank you.
798 Will it be open to other than students at Fanshawe, the resultant construction?
799 MR. MALISON: It will not. It will be restricted to MIA students who have enrolled in the programs. There are two programs involved. One is called Music Industry Arts, which is a two-year undergraduate program, and the other one is Digital Applications, which is a one-year graduate program. The facilities will be restricted to those students.
800 COMMISSIONER DEMERS: Maybe you have answered this question. There would not be any possibility of revenue out of that from -- could it generate revenues from the college point of view?
801 MR. MALISON: It could. The facility we are looking at is state-of-the-art. When that happens, people are attracted to it. It is going to draw in people from outside of Fanshawe.
802 COMMISSIONER DEMERS: Thank you, Professor.
803 Now to CHUM, Mr. Waters or somebody else. In the event of a delay -- you probably heard these questions before, but not here today. What if there were changes? If the construction of this project would not happen, what would be the alternative for CHUM to invest in a project? Have you considered that?
804 MR. WATERS: Commissioner, we have not. As Duff mentioned in his remarks, they had quite a session at Fanshawe with Steve and some of his coworkers down there. I think they took a weekend.
805 Maybe, Duff, you could talk about this a little bit more.
806 They took pretty much a weekend to get right into this project and to design the rooms. It was quite an involved process. I think we are very excited about doing it. It's really the plan so far.
807 MR. ROMAN: Could I add something?
808 MR. WATERS: Sure. Please do, Duff.
809 MR. ROMAN: I think another part of your question, sir, was with regard to flexibility in the financing of the project. Were you getting there with the delays or the construction of the rooms? We are very flexible. We realize that some payments can't be done on equal annual instalments. If it has to be front-loaded a little bit, we will certainly be very flexible with Fanshawe. It's important that it be a real project handled as a real project should be and not simply some window dressing. We are very, very keen on this taking off.
810 I would like to get my plug in here now, if I could, for digital sound, digital radio. As you know, I am the high priest of the church of "digitology". I have been painted with that brush by my colleagues in the radio business. It is digital, digital, digital with me constantly.
811 I don't want the point to escape here that we have really come to the threshold of full convergence of digital technologies. Very shortly in Toronto, we will be launching full digital radio and that will require not just full CD-quality sound, but an exercise in using the capability of data and multi-media. That kind of specialized training to produce these enhanced CDs, to produce the software, to fill the data stream has to come from somewhere.
812 We have talked to financial institutions. We have been in touch with a number of them across the country with questions about: What are you going to do in the coming digital age? It became apparent prior to my discussion at Fanshawe when I met up with Steve and his associates that we had struck a nerve, that there was some real fertile ground here.
813 I have to tell you, it was an exhilarating weekend when we could explore the capabilities and the possibilities, both for our industry, which is moving into the fully-digital world, and for an educational institution like Fanshawe, which is charged with, in a sense, the responsibility of creating the trained personnel to make this all work.
814 So, with this world ahead of us of radio with pictures, full multi-media, CD-quality sound, we could have picked other initiatives, but we felt, as we did when we worked with Rogers and others in founding FACTOR, that this was an idea whose time had come, that this was the perfect initiative for this stage of both the evolution of the music industry and where radio as an industry is going. So, essentially, I feel as excited, I think, as Steve and others there. We had one of those "Eureka!" moments, "Aha, this is it!"
815 I hope that is helpful to you, sir.
816 COMMISSIONER DEMERS: Thank you. I will let counsel at the end see if he wants to ask more questions on that point since sometimes the Commission is concerned that if a project were not to start or, regrettably, maybe in your case, not take on, then what would be the conditions of licence that would follow.
817 MR. SHERRATT: I think one of the key things here, Commissioner Demers, is that this project didn't come from us, it came from Fanshawe. When we went to Kitchener, we went to Connestoga College and said, "What can we do to make a contribution to the educational process of people in our industry or in music", and we came up with our aboriginal project. They came up with it. We didn't come up with it, they came up with it.
818 In this case, Duff went to the people at Fanshawe and said, "Where are your problems? What is happening?" It was out of that that this whole process developed. It came from them, not from us. I think their concern is that through some error in judgment you might not give us the licence and they wouldn't get these new facilities.
819 COMMISSIONER DEMERS: Thank you.
820 Professor, I hope you sleep well tonight.
821 I will come back to the radio policy. Mr. Sherratt answered quite generally and maybe it was covered in your answer, but I will come back to maybe zero in on a particular point of the policy. It is the fact that the Commission does not hold a licensee to a particular format. I don't know if you have something to add to that. Since we may or may not use as a criteria the format, we would like to hear you if you have something to add.
822 MR. SHERRATT: As my colleagues have told you, the format that has been chosen for London is one that research told us was needed in London, that there was an appetite for this format and it didn't exist. One of the great dangers in going through that whole process and then making it public is that by the time you get the licence and get on the air, somebody else who is already there thinks, "That's a good idea, so we will do it", and they take away the opportunity.
823 I don't see that happening in London. It did happen to us in Kitchener, but that's another story. The station that took the format did very well with it. In this instance, there is a need and it is our intention, based on satisfying the need -- and that is what the business is based on. The business judgment is also the social judgment. It's the need that you need to fill. The hole is there, the format will work, and there will be no need for us to change.
824 The only thing that would cause you to change format would be probably a change in the competitive environment of the market because people have chosen their niches now and they are pursuing them. You don't have criteria any more, but there was a time before that that the regulator didn't have criteria as well and yet people pursued different formats to serve different audiences because it was good business to do that.
825 One of the dangers, I guess, in anything is that people dump on top of each other and you have everybody trying to chase the same audience and you don't get enough diversity. That was what the rules on formats were brought in to try and overcome. Maybe it did a bit because it sure locked people into country and formats like that, but it really let people get down the middle pretty easily.
826 So, I think there was wisdom in what you did, but you know most of the operators. Most of the operators are before you on a regular basis. We certainly are. We are here today, based on our history and our reputation, telling you that this is the niche that we see, this is the niche that the research has told us needs to be filled, and that is the role we are going to fulfil.
827 The only reason we would change it is for the reasons I have discussed. You deal with most licensees very regularly and you have a chance to discuss it with them on a regular basis and we think that you will make the judgment on the merits of the applicant and the applications.
828 MR. WATERS: Commissioner, this is a new application, but I think it's important that you know that we do this everywhere that we operate. It's our mandate to ask the listeners what they expect from us or what they want from radio in the market. So, it's not something that we have only done in London. We do it everywhere that we operate.
829 We think that's what you have charged us with by giving us a licence, to serve the needs in the community in which we operate, so we are constantly asking them what they want and how we are doing at what we are doing. So, I think it's important you know we do that everywhere.
830 COMMISSIONER DEMERS: I have to understand that it should be/could be a criteria for the Commission in this particular hearing where there are competitive applications for the London market. Should the format be one criteria?
831 MR. WATERS: Yes. We wouldn't have a problem with that.
832 MR. DAVIES: Monsieur Demers, in addition to the research that we conduct at CHUM -- I have been raised in this business. I was raised in radio. I have been in radio stations since I was two years old and I have been working at it practically for 25 years.
833 I have had an opportunity to go down to London, obviously, in preparation for these hearings and spent a lot of time down there. I have never seen an opportunity like this. It was quite surprising to see that it existed down there. As Mr. Sherratt said, I am not surprised in one way because the existing operators are very comfortable in their particular formats right now. This is a gaping opportunity to serve a particular demographic that is being under-served in this market right now. It is just nice to know that I haven't lost my ears, I guess, because the research backed that up as well.
834 COMMISSIONER DEMERS: Thank you.
835 I am getting to the end of my questions. Would there be any other compelling reasons, from your point of view, that the Commission should take into account to grant you the licence that you are applying for? Are there some other things that we haven't discussed that you feel should be discussed, compelling reasons to grant CHUM the licence in the context of a competitive surrounding?
836 MR. WATERS: Commissioner, I don't think you have missed anything as far as asking us the questions. I think what is very important to us is to reiterate the three points that we made in our opening comments. That is that we feel very, very strongly about the format opportunity here in London, the 25 to 39-year-old female demographic for hot adult contemporary, we feel very strongly about our CAMP initiative with Fanshawe College, and we feel very strongly about the opportunity to participate in the community in conjunction with our sister television station and to do good things in the London community that way. So, other than those three things, I think those are the very strong reasons why our application should be approved.
837 COMMISSIONER DEMERS: Thank you.
838 Just a last question, but on an important subject, though. In what sense would your application take into account cultural diversity?
839 MR. WATERS: I think, first of all, it should be known that the CHUM philosophy is that all of our stations, be they television or radio in all of the markets in which we operate, are encouraged to reflect the community in which they do operate. I think that there are several initiatives that we deal with within the company at all times.
840 Duff, maybe you could talk about those.
841 MR. ROMAN: Sure. I think that we have shown very steady progress in improving the way we have addressed the people we serve, the community we work and live in through our equity programs, in terms of how we have reached out to the four groups. I think you will find that our scorecard in those areas are improving very rapidly with regard to women, to visible minorities, to native persons, and to the disabled.
842 We have, as you know, a great reputation for reflecting our community visually on our television operations in every community we are in, most particularly in that metropolitan melting pot known as Toronto. I think for us it is important to understand the rhythm and the pulse of each community we serve.
843 Perhaps we haven't spent as much time as we would like to on our community initiative, V-Cares. What we intend to do there with regard to our local management is showing leadership as we feel the radio station is really the touchstone of communication for all individuals and all groups in a community. I think that we have some terrific examples of that.
844 For instance, we have an initiative that we haven't been able to provide any real depth on and that is the London Awareness Program. This is so important and has been so successful in its various guises in both Windsor and in the Kingston and Brockville areas when we provide on-air support through these initiative awareness programs.
845 What happens is that this air time is locked in. We can't sell it. The person or the organization receiving the air time is a client, not a hand-out. In other words, it's not begging for community service or public service announcements. The city of London will be able to use that air time to promote cultural festivals, music festivals, road closures. They can do anything they want with it. They know that it's there, it's an ad bank, and it's treated by us as a paid on-air schedule. We produce and create the spots gratis or they bring them into us.
846 So, we have organized in many ways an approach, taking things that are often -- I don't want to use "voluntary" in the wrong sense, but I am saying that we try to put them out front on both radio and television, the CHUM Limited organization. It's not an afterthought after the commercials or after the disc jockeys. These community cultural awareness initiatives are part of the fabric of our broadcasting undertakings.
847 If you want any more information, I would be pleased to direct you to what we have been doing through our employment equity initiatives and through any other further follow-up you would like to hear about in these areas.
848 COMMISSIONER DEMERS: Thank you.
849 Thank you, Mr. Chairman.
850 THE CHAIRPERSON: Mr. McCallum, I think you have some questions.
851 MR. McCALLUM: Thank you.
852 Just dealing with the Canadian talent development and your commitments with Fanshawe College and the $1.2 million over five years, if the Commission were to make a condition of licence out of that commitment, how should it be fashioned, in your mind? Should it be tied to Fanshawe College? Can you give us some ideas?
853 MR. ROMAN: Well, it's their idea. You know what I am saying. In the sense that Fanshawe College developed the program, certainly we as patrons and funders are very strongly committed to it being Fanshawe's CAMP initiative, yes.
854 MR. McCALLUM: So, if we design some sort of condition of licence around that, you would have no problem with it, I take it?
855 MR. WATERS: That would be fine.
856 MR. McCALLUM: I am asking you partly because you are locked into that specific initiative and if anything ever were to go astray, you would have to apply for an amendment to divert the funds in some alternative way. I take it you are entirely comfortable with that.
857 MR. WATERS: We understand that, yes.
858 MR. McCALLUM: Thank you.
859 I take it also if this licence were granted, you would implement within 12 months and that would be a condition of licence as well.
860 MR. WATERS: Yes, we would.
861 MR. McCALLUM: Dealing just with the out-of-market tuning and also the question of where the target audience comes from, I think the current statistics show that the out-of-market tuning in the London market represents now about 35 per cent of total tuning. You also mentioned that you expect about $1.5 million revenue in the first year. Could you explain how much would come from out-of-town tuning and how much would come from existing stations from that $1.5 million?
862 MR. WATERS: Yes. It's about 30 per cent from local stations and 35 per cent from other media and 35 per cent from new business generated in radio in the market. I can give you the numbers, if you --
863 MR. McCALLUM: Just multiply 1.5 times those percentages. Right?
864 MR. WATERS: Exactly, sorry.
865 MR. McCALLUM: Further, vis-à-vis that 35 per cent that comes from out-of-market, how much of that 35 per cent do you hope to capture? I am talking about the 35 per cent of total tuning comes from out-of-market stations. How much of that 35 per cent do you hope to capture?
866 MR. DAVIES: I think it's hard to determine exactly how much we are going to repatriate from out-of-market tuning. However, if we are to assume that in the first year of operation we can get somewhere in the neighbourhood of a 7.5 per cent share, it is going to come from a combination of sources.
867 Our station in Kitchener, for example, KOOL-FM, comes into the London market. I would anticipate, unfortunately, we might repatriate some of those listeners. There is a station that is being rebroadcast up in Toronto out of Woodstock in the Energy 108 format. I am fairly confident we will repatriate some of those listeners as well.
868 I think it will be a combination. It may be one or two points from either one of those and then it will be a combination of a little bit here and a little bit there from the in-station markets in the London area. I can't predict exactly how much we will repatriate to a science, but I think that is generally how it will probably unfold.
869 MR. McCALLUM: I see. It is difficult to predict because of that.
870 Aside from the stations in Kitchener and Woodstock, are those the ones you would primarily expect to get repatriation from? Would you take some from the Tillsonburg station, for example?
871 MR. WATERS: Legal counsel, actually, the three that you have named have the biggest share of out-of-market tuning. So, I would suspect that that's where quite a bit of it would come from, those three.
872 MR. DAVIES: It would be unlikely that we would take much out of the Tillsonburg station. Their format is quite different, much older skewing than this format.
873 MR. McCALLUM: Thank you.
874 Just a couple of questions about the market study that was done by the Bay Consulting Group. I just wanted to understand a couple of points.
875 I am looking at section (b) on page 7 where you seem to identify hot AC as the top opportunity.
876 MR. DAVIES: Yes.
877 MR. McCALLUM: I am reading something that says P1 35 per cent and P2 23 per cent. You have arrows to those two figures and you say that this is an extremely large opportunity.
878 MR. DAVIES: Yes.
879 MR. McCALLUM: What is it about those columns that make that the large opportunity?
880 MR. DAVIES: In research, counsel, we will conduct a study and ask people -- we will play this particular representation sound of a radio station, in this particular case hot AC, and they will hear that sound played to them. We will ask them: Could this be your favourite station or your second favourite station? Then we ask them: If that is your favourite station, is there a station existing in that particular market that's providing that service? So, it's a combination of those factors that we determine whether or not there is an opportunity for a format.
881 In this case, that P1 is what we call in radio jargon as your first preference, which is critical to the success of a radio station. A figure like 35 per cent is extremely high given national norms. It's normally for this particular format. You could expect it in the 30 to 37 per cent range. For us to see something at 35 per cent, that's what we mean by it's a huge opportunity because that's well above the norm. That is what we meant. It is those people who would list that station as their first preference. P2 means it's your second choice, second preference.
882 MR. McCALLUM: So, the P1 35 per cent, is that what makes hot AC the top format?
883 MR. DAVIES: When you combine that with what we call unfilled -- it's 23 per cent there, which means almost a quarter of the people say that this kind of a radio station does not exist. So, when you combine those two facts together, that is what gives us a really, really good, accurate description of what is available out there. That is a very good measure.
884 MR. McCALLUM: Can you explain to me what the difference is between hot AC and rock mix? They talked of rock mix on the previous page.
885 MR. DAVIES: Yes. In this great business of ours, we use the word "contemporary" in so many different variations and yet there is rock mix, which is also a contemporary or current-sounding radio station. The big difference between this particular format and the hot AC format is, basically, it's a more rock-driven, harder-edge sounding format with appeal to much more of a male audience.
886 As you will see in that column there, you will see that there is 61 per cent tuning preferences for males. That is one of the significant differences between those two formats. You will also see in the rock mix that the P1s or the first choice people is only 14 per cent. That is not very large. That market either doesn't like that music or it is already being served.
887 In this case, you will see that CFPL-FM is largely credited with being the station that sounds like that. So, from a competitive point of view, that is obviously being done to some extent in the market, so we wouldn't be interested in that.
888 MR. McCALLUM: But CFPL is also mentioned in the column beside the hot AC.
889 MR. DAVIES: Yes, but 26 per cent is a lot easier than 41 per cent. I think that indicates that in London there are people who are listening to CFPL because they have no other choice, because that radio station that we are describing does not exist. It may be the closest thing to contemporary music for them, if you will, so they have no other choice. That is why they will get credit in that particular format. I would hope that if we are successful, you would see that number decrease for CFPL-FM, unfortunately for them, but that doesn't make sense.
890 MR. McCALLUM: What do the statistics show in terms of the adult contemporary results?
891 MR. DAVIES: Again a 23 per cent P1 indication is lower than the norm, which means that it is already being done in that market. The unfilled is only 21 per cent and there is a good reason why. You will see over on the far right-hand side CIQM-FM at 55 per cent. The station thought to be that radio station is really, generally, considered to be the AC or soft AC radio station in London. So, again that tells us that the opportunity there isn't that large for us to go in because someone else is already doing that.
892 MR. McCALLUM: Do you add those two numbers together, the 23 and the 21? Is that what you do?
893 MR. DAVIES: No. Twenty-one per cent say that that's not being currently done, but there is only 23 per cent that say it would be their favourite choice. You don't add them together. I know this gets confusing, but you don't add them together. You look at them separately saying that 23 per cent say this would be their favourite, and that number to us is fairly low. That's not a good opportunity, it would be average.
894 Of those people talking about that radio station, only 21 per cent say that it's not being currently done, whereas 23 per cent say that the hot AC format is not being done, yet the opportunity or P1, which is a key factor for us, in hot AC is 35 per cent. That's what tells us that they want this radio station.
895 As I said earlier, that is what confirmed my own findings when I went down there. I said, "Gee, there is no one doing this thing down here, this is an opportunity", and sure enough, when 35 per cent, which is above the norm, say that this is a format that they would like, we know we have a home run.
896 MR. McCALLUM: Looking then at modern AC, I see P1 as 25 per cent. What does that mean?
897 MR. DAVIES: Again people like that music, but the unfilled is only 11 per cent. There may not be that much of an appetite again because CFPL-FM is really doing a job there. If you see, they have almost 80 per cent of the audience. I don't want to go up against that competitor. That is a big battle.
898 I was interested to hear Mr. Cardozo's comments this morning about Ricky Martin. I was sitting in the hotel room this morning listening and I was trying to think of a song that would really identify this radio station and it was Ricky Martin's "La Vida Loca".
899 I don't believe that there is a station in London right now -- I stand corrected to our competitors here, but I would be shocked if there is a station that is playing that in regular rotation in the London market. Yet it is the hottest song in the universe right now. I think that is a good indication right there that there is a void in that market. That is Ricky Martin mania. This station V-102.3 FM would be playing that song.
900 MR. McCALLUM: Thank you.
901 THE CHAIRPERSON: Thank you, Mr. McCallum.
902 We will now take our afternoon break. We will come back at 3:10 with the next applicant.
903 Thank you very much.
--- Recess at / Suspension à 1454
--- Upon resuming at / Reprise à 1515
904 THE CHAIRPERSON: Mr. Cussons, perhaps you could call the next applicant, please.
905 MR. CUSSONS: Thank you, Mr. Chairman.
906 The next application is by Tillsonburg Broadcasting Company Limited for a broadcasting licence to carry on an English-language FM radio programming undertaking at Tillsonburg, operating on a frequency of 102.3 megahertz, channel 272B, with an effective radiated power of 4,000 watts, upon surrender of the current licence issued for CKOT Tillsonburg. The applicant is proposing a country music format.
907 Upon implementation of the FM licence, the AM transmitter CKOT Tillsonburg would simulcast all the programming of the FM station for a "phasing-in-period" of no longer than three months from implementation of the FM licence.
908 We have Mr. Lamers and his team.
909 Mr. Lamers?
PRESENTATION / PRÉSENTATION
910 MR. LAMERS: Thank you.
911 Ladies and gentlemen, Commission staff, Members of the Panel, Mr. Chair, I am John Lamers, the owner and General Manager of Tillsonburg Broadcasting Limited. Behind me are Mr. Doug Allen, our engineering consultant, and Mr. Jim Craig, our consultant.
912 With me, starting at my far right, is Mr. Grant Burgess, Partner, Grant Thorton Chartered Accountants, and Mr. Doug Cooper, who has been Program Director for Easy 101FM and CKOT 1510 AM for over 13 years. To my immediate left is Mr. Jerry Daniel, News Director of both our stations, who has lived most of his adult life in Oxford County and originally worked for my father in the late 1950s, and Mrs. Karlotta McCarthy, Account Executive for both stations and a third-generation employee.
913 Tillsonburg Broadcasting is one of the last of a rare breed, a family-founded, owned and operated company, broadcasting in and for the community we have called home for over 70 years. In 1955, my father started up CKOT-AM as a 250 watt station to serve his fellow farmers. Forty-five years later, I am running the company he built. Tillsonburg Broadcasting is truly unique because this is our only business.
914 CKOT-AM and FM are the sole source of revenue for the company. We do not have radio or TV stations in other markets, cable holdings, specialty channels or retail outlets. We are simply a local business that has one goal: to provide responsible advertising, decent entertainment and important information for our community.
915 CKOT-AM and FM have survived under some of the toughest conditions imaginable to any broadcaster: competition from the country's biggest broadcasters, limited financing and a serious technical impairment. With limited family resources, we have competed for audience and revenue against the stations from larger centres, stations with deep corporate pockets, allowing them the luxury of big marketing campaigns and high-priced programming.
916 We have managed to turn a marginal profit on an AM station that is, for extended periods of time, only on the air nine hours a day. We have done this by offering the area we serve programming they need, locally-produced news and information that other stations beaming into the area ignore, offering air time to local community organizations and ethnic-cultural groups when no one else would and reflecting the concerns and achievements of the audience.
917 CKOT-AM has served the Tri-County area, Oxford, Norfolk and Haldimand-Norfolk, for 45 years. Through all of this time, the signal has been a problem. CKOT-AM is the only "Day Timer" in Canada. The station is restricted to broadcasting only when the sun is up. This means that during the winter months, the station can only sign on at 7:45 a.m. and must sign off at 4:45 in the afternoon. It is hard to build audience loyalty when you are only on the air for periods as short as nine hours. As we approach the millennium with satellite communications, the Internet, global telephone service and personal digital cellular phones, CKOT-AM is archaic, a hold-over from the days of Marconi and Fess/en/den.
918 MR. COOPER: The stigma of being a daytime-only station impacts us on many fronts. National advertisers do not want to buy time on a station whose inventory changes with the times of the sunrise and sunset.
919 CKOT-AM does not subscribe to BBM because the data would be of no use when trying to buy advertising when, as an example, during the winter months, the most important times of the broadcast day, breakfast and drive times, are limited to an hour and a half. Imagine trying to sell premium newscast sponsorship for the early morning to a local business when the station can only broadcast a 6:00 a.m. newscast for four months, from May to August.
920 There are no staff cost savings associated with a day-timer. To maintain the best staff possible, it is our policy to staff up as if we were a full-time station. It would be counter-productive to hire staff for the summer months when we broadcast for 15 hours just to let them go in the winter. Despite the restricted revenue, keeping qualified communicators is a priority.
921 During the winter months when the weather and traffic conditions can change from hour to hour, an AM day-timer cannot properly serve its listeners. This is apparent when school children and their parents need to know about bus cancellations, especially when we are not on the air until 8:00 a.m. By that time, most students would normally have been picked up.
922 MR. LAMERS: The CRTC Regulations have helped us become successful broadcasters. The reason my father applied for the FM licence in 1965 was to extend the coverage of the AM. The policy that restricted simulcasting in the 1970s was a mixed blessing. It forced us to provide distinct programming on the FM, but left us with the restricted AM signal. Easy 101 FM has become a hit with an appreciative audience throughout the Tri-County areas, as well as Middlesex County, but CKOT-AM 1510 still struggles to survive.
923 In 1988, the Commission had directed Tillsonburg Broadcasting to move towards a frequency alignment that would have increased the broadcast hours on the AM. However, the American regulator, the FCC, turned down the approved plan on technical grounds. We have been unable to find an effective alternative since.
924 CKDK-FM in Woodstock, now owned by Shaw Communications, applied for and upgraded to a C channel at 103.9 megahertz in October 1993, freeing up the assigned Oxford County frequency of 102.3. As much as we desired that frequency for our AM, the CRTC's policy restricting ownership of two radio licences of the same type was clear. The frequency has been dormant for the past seven years and until the 1998 change in ownership policy, we were unable to apply for it. In the interim, Industry Canada has not redesignated this frequency away from its historical allocation in Oxford County.
925 Again we are looking to the Commission's policy to help us. The change in commercial radio policy permitting ownership of two stations in a frequency band, as noted in the April 30th, 1998 Public Notice, has opened the door for us to apply for the 102.3 Oxford County frequency. Granting Tillsonburg Broadcasting 102.3 would put into effect the directive issued by the Commission in 1988 and permit us to provide uninterrupted service to the Tri-County area.
926 MR. DANIEL: Gentlemen, with the ability to broadcast 24 hours a day, we will improve upon an already impressive local broadcast service. Our newsroom has 112 years of combined experience. From our facilities, we prepare and deliver all of the newscasts with the help of stringers throughout the Tri-County. The new FM service will present news on the hour from 6:00 a.m. to 11:00 p.m. daily. Since one company owns all of the regional newspapers and with CKDK-FM Woodstock simulcasting Energy 108 from Burlington, the new FM station will become an alternative news voice in the Tri-County.
927 The new FM will continue to locally produce ethnic-cultural programming such as "Building Bridges", a feature on the communities in the area, and three hours of weekly ethnic programming consistent with the Commission's desire for broadcasters, and I quote:
"...to reflect Canada's ethnic-cultural diversity and contribute to the production of ethnic programming."
928 Programs on country living and agricultural news will also continue to make up part of the community profile of the station.
929 We have named this format "Community Country", a healthy dose of community-focused information with a mix of past and present country hits. Over half of the selections will come from the 1988-1998 era of country music. We will also play the best of the 1970s with music from artists like Eddy Arnold, Ray Price, Johnny Cash and Charlie Rich, as well as early 1980s stars, like Alabama and the Oakridge Boys.
930 We will continue to support Canadian talent from our region, as well as Canadian country music artists from outside our market who receive little exposure on the tightly-formatted big city stations. Targeting the Tri-County region, the new service will provide an alternative to CJBX-FM, the music-intensive new country service licensed to the London region. Our locally-produced programming is specifically designed for the people who live in the Tri-County area and will exceed anything currently available on FM in both scope and community service.
931 We are proud to note that every intervention filed on the Tillsonburg Broadcasting application has been positive. Not one was negative and this is testimony to the vital part this local company plays in the lives of an appreciative audience.
932 MS McCARTHY: I am proud to be a third-generation employee of Tillsonburg Broadcasting. My father-in-law worked for the company for 33 years and, upon his retirement, I stepped in and took over where he left off. We also have others who have been with the station for 45 years, as well as a husband and wife who work together.
933 We are all part of an extended family. There are staff members who, having left to pursue other career opportunities, have come back to Tillsonburg, settled down with their families and returned to the station. I work for a station where clients can call us to book advertising and when they do, they call us by first name.
934 You can call us old-fashioned, too. We don't have an automated phone system, and for good reason. Our listeners have instant access to the station between 5:00 a.m. and midnight everyday and from midnight to 5:00 a.m. listeners can reach the owner at home.
935 People tell us just how nice it is to be able to speak to a real live person instead of a machine. This is of invaluable service to our community, especially in times of emergencies, such as school and highway closures and for people to phone in sports scores or those who witness a news event or even simply a family member wanting to acknowledge a birthday or an anniversary, and the list goes on.
936 The stations are truly an integral part of our communities they serve. We know our listeners and they know all of us not only through the station, but also from church, sports events and other community activities. It is also reassuring to know that the owner of both stations is on the premises during the day. This ensures decisions can be made quickly and implemented almost immediately without having to go through a boardroom meeting at a distant head office.
937 MR. LAMERS: We have looked at the other applications before you. I have no doubt that any one of the other applicants would bring a very professional, high-quality service to London, but what we are talking about is a frequency allocated and historically used in Oxford County. When 103.1 was turned back to Industry Canada after the Commission granted CIQM-FM London its current 97.5 position, we did not apply because this was a London frequency.
938 Rightfully so, the CRTC gave 103.1 to CHLO-AM in order that it could flip to the FM dial and be reborn successfully as CFHK-FM The Hawk. 102.3 is an Oxford County frequency and should remain in the area it has been allocated to serve.
939 The Commission has set the precedent by permitting music-based AM stations, particularly in the country format, to move to the FM band. This has helped revitalize dying AM stations such as CHOW Welland, now Spirit FM, and signal-impaired stations like CHOO Ajax, now KX96. Converting CKOT-AM 1510 to the FM band would improve its signal quality and extend its broadcast day allowing it to operate and compete on a level playing field with the other area broadcasters which are readily received in the area.
940 Granting this licence to Tillsonburg would not, by the CRTC's definition, constitute licensing a new station; rather, it would simply upgrade an existing service. Licensing CKOT-AM 1510 as an FM would not seriously impact the revenue stream of any of the London stations. Any new licence in London will have a serious negative impact on all existing licensees in the area, including Woodstock and Tillsonburg.
941 According to the Economic Development Council, London's market growth has diminished over the past decade, as noted by Telemedia in its intervention. A new station will take existing revenue away from the present stations inhibiting programming commitments and threatening the profitability of the London stations.
942 Of great concern to us is that licensing any of the other applicants would seriously impact the audience and subsequent revenues of CKOT-FM. While only 20 per cent of Tillsonburg Broadcasting's revenue comes from London, any reduction of that portion of the company's income would have disastrous consequences.
943 If the licence for 102.3 went to any of the other applicants, there would be drastic outcomes for us: the potential for reduced local programming on CKOT-FM, negatively impacting the Tri-County area, and cutbacks at an already fragile AM operation. Most importantly, licensing any of the other applicants will not resolve Tillsonburg Broadcasting's 45-year-old sunrise-sunset problem for CKOT-AM. Without the upgrade of CKOT-AM to the FM band combined with a reduction of the FM's historic revenue, the future of this family business will be in serious jeopardy.
944 In summary, Tillsonburg Broadcasting is the only Canadian broadcaster left that has tried to deal with a daytime-only frequency. It has tried to make this work for the betterment of the community it has served for over 45 years. The FCC's decision had prevented us from carrying out the CRTC's directive to improve the signal. The Commission, by means of its revised policy for commercial radio, has given Tillsonburg Broadcasting the opportunity to resolve this long-standing and, I may add, embarrassing problem.
945 The objective of this new policy "is to ensure a strong well-financed radio industry that is better poised to achieve its objectives under the Act and to meet the challenges of the 21st century." By granting 102.3 to Tillsonburg Broadcasting, the Commission will put into effect its own policy and permit the station to move into the next millennium on a frequency band that will better serve its constituents.
946 To survive as a small-market broadcaster, it has been essential the service focus on providing the community with high-quality, diverse programming that meets the specific needs of the coverage area. Tillsonburg Broadcasting has, throughout its existence, lived up to and exceeded its obligations to the Broadcasting Act.
947 Our programming is varied and comprehensive. We provide a balance of information, enlightenment and entertainment. We are a truly independent news voice that contributes to diversity in the region. Our programming is of high standard and balanced on matters of public affairs. We have survived by providing service that is relevant to our community everyday. We reflect the ethnic-cultural diversity of our region. Our programming is locally produced in our studios.
948 The public benefit we bring to the table is the ability to carry on the tradition of giving our coverage area high-quality, locally-produced and originated programming that mirrors the needs, hopes, challenges and triumphs of our community. In denying this application, the Commission would take away the opportunity to let a small-market broadcaster do what it does best: serve their public.
949 It would also send a clear message to the Canadian radio listeners that grassroots programming, programming from the heart of the community, is no longer important in this country. It would say that generic, pre-packaged programming from some large urban centre was more important.
950 CKOT-AM's plight represents a measure of injustice, not only for Tillsonburg Broadcasting but also for area residents. The frequency in question at this hearing has been assigned to Oxford County to benefit the residents of the area. The most sensible remedy is a switch from CKOT-AM 1510 to 102.3 FM. Without this, the long-term viability of both operations would be questionable. Its ability to live up to its commitments to the residents of Oxford, Norfolk, Elgin and Middlesex and its ability to fulfil the objectives of the Broadcasting Act would be in serious jeopardy.
951 This is the Commission's opportunity to demonstrate its support for the local broadcaster and the community it serves. We ask you to not let this opportunity go by the way of the family farm; rather, let it enter the new millennium with the chance to grow and better serve its friends and neighbours.
952 Thank you for your time and attention. We would be glad to offer you more information on the application, how we operate our stations, and about the beautiful Tri-County area.
953 Thank you.
954 THE CHAIRPERSON: Thank you very much, Mr. Lamers.
955 Just let me start by asking a question that flows from the presentation you just made to us. On page 15, you refer to the fact that, and I will quote:
"Any new licence in London will have a serious negative impact on all existing licensees in the area including Woodstock and Tillsonburg."
956 On the next page, you go on to say:
"If the licence for 102.3 went to any of the other applicants, there would be drastic outcomes for us."
957 I just wanted to understand better what those drastic outcomes would be and what the serious negative impact would be. Can you elaborate on that, giving me as much detail as you can with respect to that impact?
958 MR. LAMERS: We probably receive a little over 20 per cent of revenue, AM or FM, from the London area. With the formats that are mentioned in the other applicants, it would drastically affect our listenership revenue base there.
959 THE CHAIRPERSON: How much of that 20 per cent would you anticipate --
960 MR. LAMERS: At least 20 per cent, yes.
961 THE CHAIRPERSON: Let me just make sure I understand this. Twenty per cent now comes from London?
962 MR. LAMERS: Yes, 20-plus.
963 THE CHAIRPERSON: Do you have any idea specifically what impact licensing a new FM station in London would have on that?
964 MR. LAMERS: I think I have to look at 20 per cent.
965 MR. BURGESS: Maybe I can provide some clarification there, John.
966 If the entire 20 per cent was taken out of the revenue stream, AM and FM, of the company, if it was done that way without any drastic cutbacks and expenses, the company would be in a break-even position, at best. You get into drastic cutbacks in staff and programming and so forth. Taking that 20 per cent right out of the revenue stream would put you in a break-even position, at best.
967 THE CHAIRPERSON: You don't think you would be able to retain any of that 20 per cent. You would lose the whole thing?
968 MR. LAMERS: Probably. We have worked since 1965 to gain that.
969 THE CHAIRPERSON: I am getting a little ahead of myself here, but while I am thinking about the impact of licensing a new FM in London, has any of the market research that you have done documented at all that conclusion you have just come to?
970 MR. LAMERS: Sorry, would you repeat the question?
971 THE CHAIRPERSON: You have done some market research in connection with this application and I am just wondering if any of the market research you have done would substantiate the view that a new FM licence in London would take away that 20 per cent.
972 MR. COOPER: The one particular applicant is going after the same demographic as we have. If they were to get the licence, it would severely impact not only on our ratings, but also revenue as well.
973 THE CHAIRPERSON: Thanks.
974 Let me ask you a little bit about the sunrise to sunset restriction limits. You discussed that in your presentation you made to us a few minutes ago. Can you just expand a little bit on how that restriction limits your potential for growth with respect to the listening audience and advertising revenues. Have you peaked now or is there still room left?
975 MR. LAMERS: No, I am sure we have peaked. We have done everything in the way of creative selling with combination packages with our FM. In 1965 I recall starting there and if I could sell an FM spot for 25 cents, I made a good day. Today trying to sell a commercial on the AM without the FM is a pretty heavy task. We do it. We have some pretty good people and some great support in the community.
976 THE CHAIRPERSON: Do advertisers typically buy a combination of AM and FM commercial?
977 MR. LAMERS: Yes.
978 MS McCARTHY: Speaking from a salesperson's point of view, most generally if we are able to sell in AM, it is only in conjunction with the FM. I have had advertisers say directly to me that they don't want to advertise on the AM for the simple fact that in the middle of winter we are only on from 8:00 o'clock in the morning until 4:15 or 5:15. That goes to show you that it is difficult for all of us to remember sometimes what time of the day we are on. I have to look at my schedule to see if we are on sometimes. So, it is hard to sell a market that isn't always available.
979 MR. DANIEL: Commissioner, I would like to add another ingredient here as far as news is concerned. I am sure Mother Nature didn't treat the capital region any kinder than it did us in the first two weeks of January. We were hit with, I think, maybe four or five snowstorms right after the other. In those first weeks, I believe there were six days -- and I am taking in context here schooldays -- out of 10 that there were school bus delays, cancellations, school closures, et cetera, et cetera.
980 Fortunately, we have a sister station that allows us to get that information out, but it really brought it home to me because we weren't on the air on AM when all of this activity was going on. So, it is extremely difficult to build listener loyalty when we are dealing from a vacuum. We are dealing from silence, we are not on the air, and it's a very, very difficult problem.
981 THE CHAIRPERSON: That leads me to ask you about Decision CRTC 88-353, which you touched on in your presentation to us earlier, and about the potential for changing the AM stations status. You indicated in your replies to our application deficiency questions that the decision has not been implemented because FCC approval was not received. I think you mentioned that again this afternoon.
982 Our review of the FCC's correspondence, which I think is dated May the 12th, 1998, indicates that no FCC objection was raised concerning the increase in daytime power from 10,000 watts to 20,000 watts. The Decision 88-353 had two dimensions to it, as I am sure you are aware. One of those was to allow you to increase the daytime power from 10,000 watts to 20,000 watts.
983 So, my first question is with respect to the daytime, the sunrise to sunset aside for the moment: Why didn't you increase your power to 20,000 watts?
984 MR. LAMERS: I think that our original thought with that application was to get the full-time coverage. While we were doing that, we looked at increasing the daytime, but it was the full-time coverage that we were after. When we couldn't get that, it didn't make economic sense viability-wise to go beyond that point.
985 THE CHAIRPERSON: Just before I go on, the FCC's letter is dated May the 12th, 1988. I think I said 1998.
986 Turning now to the proposed night service, the correspondence indicates that initially the FCC said that it would give CKOT special consideration as long as the Department of Communications granted similar consideration to a comparable U.S. proposal. So, it seemed to open the door to allowing you to go to the nighttime situation.
987 I notice that towards the end of the letter they also talk about completing a review of its protection criteria before it can give further consideration to CKOT's proposal. They go on in there, I guess making the CRTC seem speedy, saying their review may take several years to complete. I took it from that that they weren't prepared to let you go to nighttime until that review was complete.
988 My question today is: Is the review complete and is that possibility of going to nighttime really in fact there?
989 MR. LAMERS: The review is definitely complete at this stage in time. The economics for a market our size -- I don't think we could do anything from an AM improvement, anyway, from the standpoint of economics. We kept searching that out. We even went to the point of getting approval for a 1200 nighttime-only frequency -- operating 1510 day, 1200 night -- but when we made that application and got approval, that was working with Industry Canada and the FCC with maybe doing some flipping, and that didn't materialize.
990 So, we have proceeded with a number of different applications from different angles. We are at the point now where anything that we would do from keeping the AM from the standpoint of expansion just wouldn't be feasible in our market.
991 THE CHAIRPERSON: I want to make sure I understand what you are saying to me. You could, as far as the FCC is concerned, I take it, go now to nighttime with your AM because they have done their review and they are prepared to accept that as long as Canada offers a counterproposal under equivalent circumstances.
992 MR. LAMERS: Sir, as I understand it, that was contingent on some FCC approval, too, with two or three stations in the States doing some switching, and that didn't happen. That's where we are left now.
993 MR. ALLEN: Really, I am the fourth consultant on this, along with the other ones, Mr. Elder, Mr. McCauley and Mr. Williamson. So, I am not up to date on that, other than reading this May 12th letter. Reading that and the subsequent work that the FCC has done with respect to opening up channels in AM, they haven't really done anything and there has been very, very little opportunity to trade something here or there.
994 I listened to Mr. Sherratt early this morning. With respect, we lost out in FM, we lost out heavily in AM, and it continues to go on, particularly through those days when they were doing things that we couldn't take advantage of because they blocked the borders. So, I think they have still blocked the borders with respect to 1510.
995 THE CHAIRPERSON: I understand what you are telling me. If it turned out, for whatever reason, that in fact you could convert to nighttime service on the same AM frequency, I took it from one of your earlier comments that that wouldn't be an economic thing to do, in any event. Is that correct?
996 MR. LAMERS: That's correct. Viably, it just couldn't hold; it just couldn't.
997 THE CHAIRPERSON: Why isn't that economic, assuming it was possible to do from the FCC's point of view, because of the capital cost involved in relation to the market?
998 MR. LAMERS: The capital cost and the number of years that have gone by. It just isn't the same.
999 THE CHAIRPERSON: When you say it just isn't the same, you mean the AM market just isn't the same as it was at that stage?
1000 MR. LAMERS: Yes.
1001 THE CHAIRPERSON: So, do I take it that AM is a dying venue for radio stations? Given the cost to convert to nighttime, which I assume would have a capital cost involved, it doesn't make economic sense?
1002 MR. LAMERS: That's right. It just doesn't, yes.
1003 THE CHAIRPERSON: What is the capital cost to convert?
1004 MR. LAMERS: For us, somewhere between $750,000 and $1 million.
1005 MR. BURGESS: I just want to interject there as well that it is the capital cost, but given that Tillsonburg Broadcasting Company Limited doesn't have $1 million in a bank account somewhere, they would need to finance that over a period of years. So, the related financing costs as well would be prohibitive, let alone just the capital cost.
1006 THE CHAIRPERSON: So, that amount of money would be beyond the capability of Tillsonburg to finance?
1007 MR. BURGESS: Given the projected revenues and the comments that AM is not a dying form of broadcasting but pretty close, yes.
1008 THE CHAIRPERSON: In terms of Tillsonburg's ability to finance that kind of conversion, I note in a note to the financial statements for August 31, 1998 that the company is required to maintain a cash reserve of $250,000. Is that a contributing reason as to why the company wouldn't be able to finance that kind of capital investment?
1009 MR. BURGESS: That cash reserve is required by the lending institution -- in this case, Scotiabank -- as part of a reorganization a few years ago on change of ownership to John from his brother and sister. That doesn't enter into the ability to finance, it is more that the revenue streams don't dictate the financing in this case.
1010 THE CHAIRPERSON: But, nevertheless, that is a quarter of a million dollars that is kept out of the ability of the company to use for financing purposes, I take it.
1011 MR. BURGESS: That is correct at this point, yes. They can't access that until other debts are paid.
1012 THE CHAIRPERSON: That also leads me to another question relating around the company's ability to finance an expansion. I reviewed the financial statements and there is a letter dated November 12th, 1998 from Mr. Burgess to Mr. Lamers. With respect to cash flow, there is a sentence that says, and I quote:
"As you are aware, the company generates a substantial cash flow, which is not reflected at least in an obvious manner in the financial statements."
1013 I wasn't clear what that meant and I was wondering if you could explain to me what that meant.
1014 MR. BURGESS: I will do my best. Obviously, we try to maintain some confidentiality given the competitive environment, but as I had alluded to earlier, Mr. Lamers had purchased the station ownership from his brother and sister a few years ago. To do that, a fairly substantial debt was undertaken personally to purchase those shares and the only cash flow, of course, is the station.
1015 That being the case, funds have to be bonused out and/or dividended out of the cash flow of the station to meet those obligations. That is what is meant by that sentence. We dropped the profit picture down to reflect the money that has flowed out of the company to fund those obligations. That's it, in a nutshell.
1016 THE CHAIRPERSON: I don't want to press you on this if some of this information is confidential, and don't hesitate to say so if it is, but in a sense then the company is using some of its cash flow to finance something that relates to the acquisition of the business. Is that what it comes down to?
1017 MR. BURGESS: That would be correct, yes. Those obligations will go on for a while because of magnitude.
1018 THE CHAIRPERSON: Thanks.
1019 Just let me discuss for a minute other AM options and get your comments on that. Industry Canada's AM broadcast database lists the 1200 kilohertz frequency as an allocation for Tillsonburg. Have you considered using this frequency rather than your current frequency?
1020 MR. LAMERS: Again probably 15 years ago, 10 years ago we might have. It has gotten to the point in this day and age where the cost to do anything on an AM conversion to AM is just cost prohibitive in our market, if I understand the question.
1021 THE CHAIRPERSON: I am not a technical person, but the cost conversion to AM, I take it, is much higher than the cost conversion to FM. Is that fair enough?
1022 MR. LAMERS: Yes.
1023 THE CHAIRPERSON: You said, I think, $750,000 to $1 million for AM and for FM it would be...?
1024 MR. LAMERS: Over the course of time, too, we just haven't been able to put any money back into the AM because it is a sunrise to sunset. So, we have a situation now where we have a ground system, some antiquated transmitter equipment, and it just isn't in our cost base to do anything with that on an AM situation.
1025 THE CHAIRPERSON: What is the cost of converting to the FM?
1026 MR. LAMERS: The FM for us is approximately $200,000 to $250,000. Our studios are already equipped for FM, since we have FM now, so we are looking at a transmitter site. We are moving the transmitter site to our current FM site, so there is no tower involved. We are putting the antenna on the tower, so we own that land. It's moving to the future and we can do it in that way by moving the FM to that site.
1027 THE CHAIRPERSON: So, there are considerable efficiencies by integrating a new FM signal with the existing FM signal?
1028 MR. LAMERS: Very much so. As a family-operated station, I see no other way that we can go.
1029 THE CHAIRPERSON: Since 1990, the AM broadcast band has been expanded from 1605 kilohertz to 1705 kilohertz. Have you considered a new spot in the band? I suspect your answer is going to relate again to the cost of converting to AM and it's not viable no matter how you do it, but I would like to get your comment on the record.
1030 MR. LAMERS: The comment, as you say, is it just isn't viable, sir.
1031 THE CHAIRPERSON: Thank you.
1032 You touched a little bit on this in your oral presentation a few moments ago. I would like to understand what will happen if your application is not approved. Will you close down the AM operation?
1033 MR. LAMERS: We wouldn't close it down because of living in the community that we live in. It's something that I have thought about. I am not sure we can continue on or for how long down the road, but I would hate to turn around and close it down tomorrow for fear that we still have to walk up and down those streets. There is still a community that we serve that isn't served on our FM. If we just drop that -- you know, we are still a part of the community.
1034 THE CHAIRPERSON: The current equipment that you are using in the AM station, does it still have a useful life to it?
1035 MR. LAMERS: It is getting pretty close to the end.
1036 THE CHAIRPERSON: So, you would be confronted with acquiring new equipment sooner or later and I take it sooner from what you said.
1037 MR. LAMERS: Sooner than later.
1038 THE CHAIRPERSON: Let me ask you about your community country format, if you could explain how this is different, if in fact it is different, than what is currently offered on the CKOT-AM station.
1039 MR. COOPER: Could you repeat the question, please?
1040 THE CHAIRPERSON: With respect to the community country format, is that a different format than is now being offered on the AM station and, if it is, I wonder if you could elaborate on the differences.
1041 MR. COOPER: No, it is basically the same format. We would just be flipping. We play a fair amount of gold, as well as current, and that differentiates our sound from CJBX-FM.
1042 THE CHAIRPERSON: I take it also from reading your application that in the evening you do religious programming as well?
1043 MR. LAMERS: Currently on the AM, we program our religious programming between 9:00 and 10:30 in the morning, but if we are successful in getting the FM, we propose to move that into the evening, after 7:00 or 8:00 o'clock in the evening, and allow the midday to be more information-oriented.
1044 THE CHAIRPERSON: And it would be an hour and a half as well on the FM?
1045 MR. LAMERS: Exactly. We have had some interest in another half-hour program that may run in the evening and that will help, as I say, our revenue base as well.
1046 THE CHAIRPERSON: Is there religious programming on the existing FM station?
1047 MR. LAMERS: No. We are music-intense with news and information.
1048 THE CHAIRPERSON: The 102.3 frequency will put a reliable signal into the London area. To what extent will you focus programming to London?
1049 MR. COOPER: I think we will focus somewhat on London, but our main focus is the Tri-County area. The signal will go into London, but our emphasis on programming, information, community service is basically the Tri-County area, which is Oxford, Elgin, Haldimand-Norfolk.
1050 THE CHAIRPERSON: Will you do any specific programming directed towards the London market?
1051 MR. COOPER: Not specifically no.
1052 MR. LAMERS: If I could just clarify that, we do have some groups in London that we work with now, like the Royal Canadian Big Band Festival, the Over 55 group, and I am sure that if we are doing that programming, we may end up with some that we develop over the years, but it's not something that we go after. We are more concerned with the Oxford County area. In fact with our tower base, where we are proposing it will be almost in the centre of Oxford County.
1053 THE CHAIRPERSON: I just want to ask you before I forget to ask you because it was in your oral presentation and your response reminded me of it, I have the impression from your oral presentation that you almost or perhaps you do believe that the 102.3 frequency is proprietary to Oxford County and the Commission really shouldn't consider allocating that frequency outside the county. I am wondering on what you base the conclusion that the frequency is attached to Oxford County and not available to the Commission to assign to another applicant.
1054 MR. LAMERS: Heart and soul.
1055 THE CHAIRPERSON: Pardon me?
1056 MR. LAMERS: Heart and soul. It is just a feeling that we have.
1057 MR. DANIEL: Could I add something to that, Commissioner, if I may?
1058 THE CHAIRPERSON: Please.
1059 MR. DANIEL: I guess I am sort of in the heart. I live in Ingersoll. I have been there for 20 years and I have lived in Oxford the better part of my life. There is an underlying problem here that really hasn't been touched on and it may address what you are asking.
1060 Since the Woodstock FM was simulcast with Burlington, that has created a void in what I would call the centre of the county or the area that they once served. It was brought home to me -- and I refer back to our storm situation -- that the folks in the Woodstock area who called us to find out about information regarding buses and schools were very complimentary on the fact that we were the only, shall I say, voice in the wilderness giving them the information that they desired because their old reliable friend wasn't there for them at critical times during the day.
1061 Another instance has just occurred in the last six weeks and it is a rather unusual occurrence, but I am sure there are many more. As a past member of Crime Stoppers of Oxford -- I am on their Board of Directors -- since the change in Woodstock, the senior members of Oxford Community Police Service who have jurisdiction over the city of Woodstock and three surrounding townships are becoming alarmed at the substantial decrease in the amount of phone tips coming into this particular agency.
1062 Doug and I are working now to fill that void by providing a service through our two stations where we will feature a crime of the week, which we are now doing for Haldimand-Norfolk-Tillsonburg Crime Stoppers. There is a void there and you can extend that into the sports area, you can extend it to weather to a degree, and you can extend it as far as pertinent information vis-à-vis road conditions. I think we will agree that 401 is probably one of the busiest highways in Canada and it goes right by Woodstock.
1063 So, it has been told to me on several occasions that the people in Woodstock in that environment, which includes the community I live in, find themselves in no-man's-land in regard to getting information that they need at the time that they need it. I guess what John and all of us are asking is that we be given an opportunity to service that area with a different format because not everybody likes easy listening. I have a little snow on the mountain and I appreciate it, but a lot of people don't.
1064 So, it is an opportunity to fill that void with a different format to provide residents in a fairly wide area of Oxford County the information that they require almost on a daily basis during the critical times of winter. I just wanted to add that.
1065 THE CHAIRPERSON: That is helpful. You can't fill that void today -- I just want to make sure I understand this -- because your AM station operates sunrise to sunset?
1066 MR. DANIEL: That's absolutely right. We are quiet, silent, not to be heard until 8:00 o'clock in the morning. By that time, everything is over and done with.
1067 THE CHAIRPERSON: The move to 24-hours-a-day broadcasting from sunrise-to-sunset broadcasting will lead to increased tuning and advertising revenues, according to the application. Are there other factors that will lead to increased tuning besides the ability to transmit at night? Is there a better signal quality that will be a factor as well, for example?
1068 MR. LAMERS: Signal quality definitely will be improved.
1069 MR. DANIEL: I guess the answer is, yes, there is another factor. I am going to preamble this very quickly.
1070 I learned a long time ago a particular stat and I apply that to sort of my individual news philosophy. That basic stat is this. In our lifetime we spend 95 per cent of it in small groups vis-à-vis our family, when we go to work, our recreational endeavours, our social endeavours; all small groups. So, I kind of turned that around and sort of said to myself: If that is a reality, then it does make sense that we try and serve small groups in the area that we broadcast because that information is not available anywhere else.
1071 I am speaking in terms of various events that cover the news spectrum, as well as sports. If you apply that in a broadcast situation, then all of a sudden you are putting some building blocks together, and it doesn't happen overnight -- Lord knows, it doesn't happen overnight -- but over the years you keep building this wall of information and before long the people that you are serving tend to look to you as a communicator that they can trust and rely on to provide this information.
1072 The new FM would provide this service at various times during the day. We realize that the applicants that have been before you will no doubt have the kind of information I am talking about during drive and afternoon. I guess what we are saying is that we are going to offer that information in a market that is not being served at the present time. Most of the FM signals that I am aware of probably are not too news-intensive in the evening. All we are saying is we are going to provide that service in that market area.
1073 A little addendum to that would be that over the years -- and I think John has to take a lot of credit on this. John lives in the community and he realizes the value of servicing the core group of listeners by giving them the information that they require in the community. We are at a point now where on AM or FM on a major cast every week we are running approximately 75-80 per cent local and regional. Sometimes it's 100 per cent, depending on the other events happening on that particular day. That is a very, very pleasurable place to be.
1074 It has been told to me by people in the community I live that we are doing it right. It has been mentioned to me many times that, "We can rely on you to tell us what is going on in our community", and that is basically the long and the short of it. We just want to extend that service via an FM in the same area with a different format.
1075 THE CHAIRPERSON: When the AM station is on the air, are the newscasts the same? Are they simulcast on both stations?
1076 MR. DANIEL: No, no, it is entirely different, but I must say the same concentration is there of regional and local news. It is still there. I am thinking in terms of regional, Haldimand-Norfolk, Oxford and sort of the eastern part of Elgin, because there is another situation where St. Thomas, which had a long history of radio for years, finds itself without a radio station as of right now. So, we have to pay attention to Elgin County as well.
1077 THE CHAIRPERSON: I take it you can't fill the void that you talked about a little earlier and serve the groups that you just talked about with one FM signal. You do have an FM service now, but should the AM service cease and not be replaced by an FM service, that FM service can't do what you want this new FM service to do, I take it.
1078 MR. DANIEL: Probably in a percentage sense, but, as we touched on, we all have different tastes. My cup of tea as far as music is concerned is not yours. With easy listening we do manage to attract a fair number of people, but there are a lot of other people out there in the rural area that prefer a country format, so to speak.
1079 THE CHAIRPERSON: So, it is a question of formats, it is not a question of being able to provide the news, the information, the bus delays due to storms, and these kinds of things?
1080 MR. DANIEL: We are doing it. We are doing it on our AM. The problem comes right back to that basic concept that in times of need, specifically in the winter months, we are not there. We are just not on the air.
1081 THE CHAIRPERSON: But you are there with your FM service. As I understood from what you just said, the essential difference between the two FMs, if your application was approved, would be formats in terms of country music and easy listening. What would be common to the two services is the news, the information emphasis, the community emphasis, the storm delays for buses, and things like that. It really boils down to the two music formats.
1082 MR. DANIEL: And I would add, too, that since the AM has been -- how can I say -- more rural in certain areas, I think that would follow through as well on the FM format. We would have some liberties there with our rural listeners.
1083 MR. CRAIG: If I could just interject here, there are two very unique and different radio stations and formats that we are dealing with here with two very diverse audiences. One is naturally rural in nature and has been for many, many years and the other is perhaps a little more suburban or urban in nature.
1084 The moment that the rural style of radio station is no longer available, that doesn't necessarily mean that those people will move over to the other format. So, we have a very broad spectrum of people who are being served by these two radio stations right now. If one ceases to exist, they will not migrate necessarily to the other.
1085 MR. COOPER: One of the things that we do is broadcast the annual general meeting of the Tobacco Board. You could not do that on FM without negative response.
1086 THE CHAIRPERSON: Thank you.
1087 I would like to talk for a few minutes about the make-up of the listening audience. Perhaps you have already answered this question in our earlier discussion, but I wanted to know what percentage of the listening audience will be made up of listeners who are now listening to out-of-market stations. Is that the 20 per cent that we talked about earlier, which I think is London, or is it a larger percentage than that? I am talking about the new FM service here. What percentage would be made up of listeners from out-of-market stations?
1088 MR. COOPER: Probably about 20 per cent. We did some research. Rotenburg, actually, did research for us and the survey results were 53.2 per cent of respondents indicated they would listen very often or often to a new FM station in the area that played a mix of today's country hits and country hits from the 1980s and 1990s, basically the information and public service that we offer already.
1089 THE CHAIRPERSON: Can you identify the stations from which the proposed station will attract listeners and the percentage of the audience that would be made up of listeners from each of these stations?
1090 MR. COOPER: I am sure that we will attract some listeners from CJBX-FM. People who are listening to the country station now who are looking for more traditional country will flip to us. To the east of Tillsonburg there may be some listeners who are listening to CHAM in Hamilton, a country station. We may take some, but I have my doubts.
1091 THE CHAIRPERSON: Can you put a percentage of listeners that will come from the existing country station that you mentioned that you may attract to your more traditional format?
1092 MR. COOPER: I would say probably about five to ten per cent.
1093 THE CHAIRPERSON: You mentioned the Rotenburg Study and I wanted to ask you a question about that. One of the findings of the Rotenburg Study was that the proposed station, and I am quoting now:
"...will not have any significant impact on other stations within the Tri-County area." (As read)
1094 I am wondering how you reconcile that finding with your deficiency response that says 70 per cent of the revenues of the new FM station will come from local area stations.
1095 MR. CRAIG: Would you repeat that question, please? I am sorry.
1096 THE CHAIRPERSON: The Rotenburg Study concluded -- and I am quoting from Schedule 16 in your supplementary brief -- that the proposed station:
"...will not have any significant impact on other stations within the Tri-County area." (As read)
1097 Then when I look to the deficiency responses of March 12th, 1999, on the second page of that it says that 70 per cent of the revenues of the new FM station will come from local area stations. On the face of it, there is a conflict between the two observations and I am wondering if you can explain that or tell us which one we should rely on.
1098 MR. CRAIG: I would suspect, first of all, that a great deal of the listenership would come from the existing 1510 AM, which is the existing local radio station. Certainly there will be an amount of revenue which will come from those who are perhaps advertising now on other country outlets within the nearby area, such as BX and perhaps CHAM, although it is a little further away.
1099 I think also we have to understand here that the revenues that are generated at this point in time by 1510 are very low and any syphoning off of revenues from other radio stations within the nearby area would be minimal in actual dollar volume when you start to extrapolate the revenue picture over the next few years.
1100 I guess what we are saying here is that 1510 is not going to be suddenly looking at $1.5 million as their annual revenue base, that they will be increasing from a very low figure now to a somewhat higher figure, hopefully, in order to augment the income of 101.3. Those incomes, by no means, would be a hardship on BX93, for instance, or CHAM.
1101 THE CHAIRPERSON: So, you are standing by the statement in the deficiency responses that 70 per cent of the revenues of the new FM station will come from local-area stations. That is the figure that we should rely upon?
1102 MR. CRAIG: I don't think that's difficult to stand by given the low dollar figures that we are dealing with.
1103 THE CHAIRPERSON: That's fine. I just wanted to clarify, when we are considering your application subsequent to the hearing, what number we should rely on.
1104 MR. LAMERS: Could I just make one comment on this?
1105 THE CHAIRPERSON: Yes, please do.
1106 MR. LAMERS: Since the change in the Woodstock situation where there is most of the broadcasting with CKDK or the Woodstock station and the simulcasting from Burlington, that has become a very important part of our revenue over the past, say, 14 to 18 months. It has become a very important part and that's because what they are not doing, hopefully, we are doing.
1107 MR. CRAIG: I guess we could add that there is a certain amount of what would be considered as local Oxford revenue, which makes up a good part of that 70 per cent, and also the east Elgin area. With CHLO no longer in existence as an entity within St. Thomas, a certain amount of the revenues will come from there, too.
1108 MS McCARTHY: Once again speaking from a sales point of view, this revenue will also come from existing clients that we have on our FM 101.3 station currently, not that they are going to switch over and say, "We don't want to have any dealings with that station." What we are finding in the sales department is that an awful lot of our customers are saying, "If you had the FM country station rather than the AM, we would love to do both." So, we are going to generate revenue from existing customers also on the FM station 101.3.
1109 THE CHAIRPERSON: When you talk about local stations, does that include London stations?
1110 MS McCARTHY: It doesn't because of the fact that our country make-up is entirely different than the local London BX radio station. Our country that we are going to be playing is definitely not going to be played on the London station. We have customers and listeners that are very loyal to us and to our community. So, they will definitely tune in and enjoy, I am sure, the same as they enjoy it now.
1111 THE CHAIRPERSON: Looking ahead to the third year of operation of the proposed station, what would be the proposed station's tuning share in the London market in the third year?
1112 MR. COOPER: I think initially we said the first year would be 10,000. By year five, we are looking at a 90,000 queue.
1113 THE CHAIRPERSON: Thank you.
1114 I would like to now ask you a question about the Canadian talent development budget. You have proposed a condition of licence related to an annual Canadian talent development budget of $1,000 related to a $250 FACTOR contribution and $750 to the Tri-County Jazz Society. Elsewhere in your Schedule 5 Canadian talent development, you describe an additional initiative involving $1,000 towards a recording session for a local winning artist. Could you clarify for us your plans in this area, including the total annual minimum talent development budget?
1115 MR. CRAIG: John, let me start on this because we had some interesting discussions about that, especially in light of the incredible dollars that are being offered up by their applicants. I think it has to be understood, first of all, that what John is proposing here is what is the amount recommended under the CAB guidelines. Essentially, that is what was used in the application.
1116 As we talked about that -- and I perhaps suggested that maybe that should be revisited -- some very good points were made by John and his staff. They indicated the amount of local activity that they participate in, the amount of feed in the street that they are providing in appearances in assisting organizations in and around the Tillsonburg and the Oxford and Tri-County area, and they indicated that the dollar value that is attached to that in the process of bettering Canadian talent is really immeasurable. Is it $10,000, is it $15,000, is it $20,000, $30,000, $40,000? So, that has to be looked at.
1117 So, I guess as a preamble perhaps to a couple of other comments along these lines, talking about some of the music which is played, which is aired on the radio station that you will not hear anywhere else, some of the artists are assisted through the radio station currently that are not assisted by other radio stations. They have adhered to the guidelines, they are good citizens in a music sense when it comes to developing Canadian talent.
1118 With that, I am going to throw it over to Doug or John.
1119 MR. COOPER: We have always been strong supporters of Canadian talent, especially in our area. I will just name some of the artists that we have played: T. Hoffgraff from Port Dover, Terry Assumption from Burgessville, Bill Caley from Turkey Point, Lisa Erskine from Komoka -- we were playing her before she hit the national charts -- Beverley Mahood from Orwell just down the road near Aylmer, Jim Witter from London, Thomas Wade from London, Jamie Warren from Kitchener, Scott Madigan from Aylmer.
1120 There are more great artists out there. They just need the opportunity to record. We would like to offer them that opportunity by the money that we are contributing towards Canadian talent.
1121 THE CHAIRPERSON: One of the things that we will have to take into account and consider in our deliberations is the relative contributions to talent development. You have mentioned that some of the applicants have proposed amounts much larger than some other applicants.
1122 What are your views on how we should take into account in our deliberations when we are considering the four competing applications the dollar value of those kinds of contributions? How would you think we should take those into account?
1123 MR. LAMERS: I am not sure how I would take them into account if I was sitting up there.
1124 MR. DANIEL: I just know what we can do.
1125 THE CHAIRPERSON: I took it from your earlier response that you are saying -- and I want you to correct me if I am wrong, I don't mean to lead you here -- that we should take into account other initiatives in the community, other than the dollar amount of the contribution, of the cheque that is being written. Have I interpreted what you have said correctly?
1126 MR. LAMERS: I believe that's right. I guess maybe I could put it another way. Money isn't everything. It's what you do within the community and how you feel when you walk up and down the street.
1127 MS McCARTHY: If I could just add to that, money isn't always everything. John, I am sure, would love to be able to cut you a $250,000 cheque, I would like to have one, too, but we are a community-minded business.
1128 As far as local talent, we go to community fairs and record and listen and watch the kids that are up on the stage and doing their little bit. John will also go out on a Sunday and record a local church event and that is also -- I mean that is not something you are going to see as $1,000 or $200. John doesn't get paid for that, he just does it on his own.
1129 It is the same with all of us. All of us sitting at this table have gone out to cover events. We have done local parades, local fairs, watched the children and watched adults, and none of that is set aside as dollar figures. That's something that we enjoy doing and that the public likes to see us do. So, that is part of our community effort in trying to get to the local Canadian talent.
1130 MR. COOPER: One of the things that we are doing this summer is sponsoring a youth talent search in Woodstock. We are more than happy to do it, but they approached us because CKDK-FM in Woodstock is not serving that community. They were more than happy to come to us and we are more than happy to do it to promote talent.
1131 MR. CRAIG: There is a dollar value in all of what you are hearing here which has been ongoing for many, many years and will continue for many, many years. That dollar value is not necessarily reflected in the application or in the documentation in front of you and it's very difficult to put a value on that. It is ongoing, it is something that exists and it is not contingent upon gaining a licence.
1132 THE CHAIRPERSON: Thank you.
1133 We have been, as I am sure you have heard, asking the applicants for their views on how we should implement the commercial radio policy that we put in place in Public Notice 1998-41. I would like to ask you a couple of questions about that. We have just touched on one aspect of it, I suppose.
1134 What evaluation criteria do you consider the Commission should use to rank competitive proposals? What we have in front of us in this proceeding is four competitive proposals. Do you have any thoughts on the criteria the Commission should use in general to rank competitive proposals?
1135 MR. DANIEL: I am going to put my news hat on. Based on what I heard, I guess we would be the only one that is offering a fairly in-depth news service to the projected audience in regard to the FM application. We have been doing it for several years. John has indicated to me my mandate is to expand on the local/regional aspect of news and information and I am more than happy to do that. So, if that is a consideration, which I believe it is, then that is part of the consultative process, I guess.
1136 MR. CRAIG: Every application needs to be looked at based upon its merit and what it's going to do for the community that it's in in serving the community. However, I think there also is another factor that comes into play here.
1137 In a competitive situation such as this, I think it is very important that the potential damage -- not that a bad operator should be rewarded with a signal anywhere in Canada in order to fix the problem that they have perhaps caused for themselves, that's not the criteria, but it should be taken into consideration what kind of, I am going to use the word damage, a competing application can do to the existing operators within a market. That should be taken into consideration.
1138 Here we have a very unique situation where you have two parties who have some technical difficulties with their signals looking for a signal and two parties who are looking to come into a market and become good operators within that particular market vying for that one 102.3. I think one has to take a look at the difficulties that can be presented to all of the existing operators within the market by the granting of a licence.
1139 MR. DANIEL: Can I add one more thing, too? I touched on it earlier. It's the fact that CKDK-FM is, in my view, a problem. There is a vast number of people in Oxford County that, I will be frank, have been abandoned as far as radio service to their communities are concerned. I think our application addresses that situation, as well as John's eternal problem of a dinosaur day-timer.
1140 So, it is two areas there and the day-timer is the big one, believe me, but equally important is the mandate that somebody was given way back when to look after these people in this community of Woodstock and surrounding area. That is being done on a very, very limited scale as of now and probably will be for the foreseeable future. We just offer that solution to that problem.
1141 THE CHAIRPERSON: Thank you for that.
1142 I wanted to ask you a question, as we have asked the other applicants, about cultural diversity in the radio policy. We said:
"The Commission encourages broadcasters to reflect the cultural diversity of Canada in their programming and employment practices, especially with respect to news, music and promotion of Canadian artists."
1143 I think I recall from reading your application that you do three 55-minute programs a week now serving three different language groups. One, could you tell me if my memory is serving me well and, two, do you have any comments you would like to make with respect to your interest in cultural diversity in the area that you serve?
1144 MR. LAMERS: Yes, we have since 1955, since the station's inception, carried 55 minutes of Hungarian, Belgian and German because that is the population group that's probably the greatest in our area. We continue to do that not from a revenue standpoint because if one looked at the commercial base that we get from that, it's very small. Some weeks there wouldn't even be a commercial running. It's a program we have done since 1975 and I would hate to think what we would do if we took it off the air tomorrow in serving that community. That's a comment I would like to make.
1145 MR. COOPER: Right now we do an hour of Hungarian, an hour of German and an hour of Belgian. We would do more because there are other cultural groups in the area -- Polish and Dutch would be probably the next two -- but we can't when we are running a day-timer. So, if the Commission was to give us a condition of licence to offer it to other groups, there wouldn't be a problem.
1146 THE CHAIRPERSON: Thank you.
1147 My final question for you now. As you know, your application is competitive with three others for the use of the 102.3 frequency. In such a situation the Commission seeks the competitors' views to assist it in deciding which applicant has proposed the best use for the requested frequency. What, in your view, are the compelling reasons to grant you the requested frequency and in what ways does your proposal constitute the best use of the proposed frequency?
1148 MR. LAMERS: Thank you. I am glad you asked that question.
1149 What really worries me more than anything about this hearing is how we fit into the new structure of things. In our quiet way, my family has not been afraid to fight the good fight, this is how we have survived for the past 45 years, but the landscape has changed. Small-market broadcasters like us are a vanishing breed. Like everything else in the business these days, the big corporations and the regional operators are on a roll. They are acquiring more and more assets, a process that has been made easier by the regulatory governments.
1150 I worry about the impact of two of the non-appearing items at this hearing. If approved, seven licences will be merged into two large blocks of stations in London, three owned by Telemedia, three by Shaw or four if one includes Woodstock. This will form two powerful sales engines for the London radio. If the Commission grants 102.3 FM to Affinity, it will become the sole stand-alone FM station in London.
1151 As a seasoned businessman, I think Affinity, in order to survive the sheer force of these two groups, would have little choice but to form a strategic alliance or MLA with one block or the other. This is my worst nightmare. I would still have a severely impacted handicapped AM with no effective remedy to the situation and, worst of all, my FM would be under seige by two powerful groups of stations, including one using the frequency allocated to our area.
1152 Tillsonburg Broadcasting can and has dealt with radio price wars from individual London stations over the past decades, but we will never have faced anything like this before. I worry about the loss of the 102.3 frequency for the AM and the loss of revenue for the FM to an alliance of stations held by absentee owners. I worry that this may force me to seriously consider my family's involvement in the radio business, a business that I love in a community that I love and the only way of life I know.
1153 Thank you.
1154 THE CHAIRPERSON: Thank you.
1155 Commissioner Cardozo, I think, has a question for you.
1156 COMMISSIONER CARDOZO: Thank you, Mr. Chair.
1157 It is just a general question I have and it relates, to some extent, to your last comment, but also to one of the things you said in your opening. I will just mention that. On page 19, you said if we rejected your application:
"It would also send a clear message to the Canadian radio listeners that grassroots programming, programming from the heart of the community, is no longer important in this country. It would say that generic, pre-packaged programming from some large urban centre was more important."
1158 Perhaps I don't understand your company well enough, Tillsonburg Broadcasting. If we were not to grant you the licence, you still have an FM. Right?
1159 MR. LAMERS: Yes.
1160 COMMISSIONER CARDOZO: I don't want to engage you in a debate on your comment here, I fully understand what you are saying. I can identify that and I see what you are saying, but you still have a service of a local nature. In a sense what you have is sort of one and a half services, essentially, which isn't great, I grant you.
1161 MR. LAMERS: The FM is a music-intense format. We probably do a lot more news and information on the FM than if we wanted to move ahead with the FM on the 101.3, which is our easy listening. I am not sure how far we can go with that being as news and information intense as we are.
1162 COMMISSIONER CARDOZO: So, your existing FM would be primarily music?
1163 MR. LAMERS: We would continue to be news and information, but probably not news every hour on the hour, which we do now on music-intense.
1164 Jim, did you want to add something to that?
1165 MR. CRAIG: I think also I want to go back to --
1166 COMMISSIONER CARDOZO: Let me put it differently. I guess I am asking how much less -- because I think the local part you are talking about and the homegrown stuff is very important. How much less do the people in Tillsonburg get under the current situation than if you had two FMs?
1167 MR. CRAIG: If you want to quantify hours, during some months of the year they get everyday about 13 hours a day less than what they would with a full-time, 24-hour-a-day licence on 102.3. During the best time of the year, they are getting at least nine hours less than they would in terms of opportunity to gain what I would describe as a grassroots service because you have two different -- again I go back to what I said earlier. You have two different types of radio stations here that are very naturally serving two different types of audiences.
1168 The 101.3 audience right now is serving -- and for business reasons they wouldn't want to abandon or change it too much -- and has been accepted by a more suburban and urban and older demographic radio audience, whereas the existing AM station and what it would flip to, which would be a replication of that on the FM, is serving very much a more rural style of audience and a more grassroots homespun style of audience. That's what is most important here, being able to cover a much broader audience base, as a result, with the two stations.
1169 Does that answer your question?
1170 COMMISSIONER CARDOZO: Yes, it does. So, that demographic is not getting served anywhere else except on your AM, which is part-time at the moment. Right?
1171 MR. CRAIG: I think you can say absolutely it's not.
1172 COMMISSIONER CARDOZO: But you wouldn't consider doing more of that type of programming on your existing FM?
1173 MR. CRAIG: In today's broadcast parlance, it would not be a good business decision.
1174 COMMISSIONER CARDOZO: Because of the demographic.
1175 MR. CRAIG: They are very successful with their current FM operation. They would be committing economic suicide if they were to change it.
1176 COMMISSIONER CARDOZO: Because, you are saying, that is a successful business model you have with your existing one?
1177 MR. CRAIG: Absolutely.
1178 MR. COOPER: If we were to do that, we would lose the 130,000 queue we have on the FM. If we were to take some of the music from AM and put it on FM, we would lose that.
1179 COMMISSIONER CARDOZO: Thanks a lot.
1180 Thanks, Mr. Chair.
1181 THE CHAIRPERSON: Our counsel, Mr. McCallum, has some questions.
1182 MR. McCALLUM: Thank you.
1183 Just for the purpose of condition of licence on Canadian talent development, my understanding is that under the CAB plan there would be a $400 contribution sort of allocated to Tillsonburg, but what I am not clear on is what amount is the total amount for the purpose of a condition of licence.
1184 I understand there is a $400 sort of allocation there. There is a $250 allocation towards FACTOR, $700 towards the Tri-County Jazz Society and elsewhere you talk about $1,000 towards a recording session for a local winning artist. I was unclear as to what amount would be the total amount for the purposes of a condition of licence. The total of all of those figures is $2,400, but I wasn't clear whether, for the purpose of a condition, if it's $1,000, $2,000 or $2,400.
1185 MR. LAMERS: It was $1,000 on the condition of licence.
1186 MR. McCALLUM: From that $1,000 then, is $400 towards the CAB plan?
1187 MR. LAMERS: That's right, yes.
1188 MR. McCALLUM: And the balance of $600, how is that allocated?
1189 MR. LAMERS: I believe the exact commitment was a minimum direct expenditure of $1,000 total.
1190 MR. McCALLUM: Just so I understand it, where would the additional $600 then go of the $1,000 that you are talking about?
1191 MR. LAMERS: I don't think we had determined exactly where it would go at this point, but we are making a commitment of $1,000.
1192 MR. McCALLUM: Which would be the condition of licence then?
1193 MR. LAMERS: The condition of licence, yes.
1194 MR. McCALLUM: I see. You are hoping to do these other initiatives, but for the purpose of condition, $1,000?
1195 MR. LAMERS: That's right.
1196 MR. McCALLUM: Thank you.
1197 Also, if you were to get the licence, you would be implemented within 12 months. If that were a condition, that would not cause you a problem?
1198 MR. LAMERS: Not a problem.
1199 MR. McCALLUM: Thank you.
1200 Since you would be putting a signal into the London area, would you be focusing any programming towards London?
1201 MR. COOPER: We wouldn't be doing anything different than what we already are focusing on the Tri-County areas. There would be some, but we certainly wouldn't concentrate on it.
1202 MR. McCALLUM: Can you just give a little elaboration of what you are doing now and, just to be clear, what you are doing now on the AM or on the FM?
1203 MR. COOPER: What we are doing now on the AM?
1204 MR. McCALLUM: And what is it that you are doing now?
1205 MR. COOPER: Basically, it comes down to the amount of information and public service that we are doing.
1206 MR. CRAIG: It's a community country format, perhaps a little more traditional format in terms of country music than some of the hot country stations and more music-intensive country stations that you will hear with a tighter play list in terms of programming with a fair amount of access information that's tied into the overall format. It is absolutely targeted at the Tillsonburg-Oxford Tri-County area.
1207 What is being proposed here is a flip of that particular format onto the FM band utilizing 102.3 and there is no intent or there has been no intent stated to target London as a potential for audience for that particular radio station. I think it should also be obvious that there may be some opportunities where a London group might ask for some assistance, but it will be more reactive than certainly proactive.
1208 MR. McCALLUM: Thank you.
1209 Finally, just to clarify one point, you have, I believe, filed, of course, as all broadcasters do, your annual reports with the Commission, your annual statements, which are filed in confidence. The Commission has, of course, your AM results from last year and your FM results from last year. What they show is that the operating margin is more or less equal between the AM and FM operations. Can you explain why that is the case?
1210 MR. BURGESS: Basically, the station is a smaller station and there is a lot of overlap, as I understand it -- and the people more directly involved can correct me if I am wrong here -- in what people do and what side of the band it applies to. There is no real operational reason to tightly segregate. There is no reporting to head office, for example, to tightly segregate. This is head office. That is my understanding.
1211 MR. McCALLUM: I am just wondering if there is some allocation policy of how monies, both on the revenue side and on the expenditure side, are allocated to the AM and FM and if that's what is resulting in these roughly equal margins.
1212 MR. BURGESS: Could you repeat that, please?
1213 MR. McCALLUM: I am wondering if there is some sort of allocation policy, some accounting policy, by which monies are allocated to the AM or FM or do they truly reflect both the revenues and the expenditures on both sides?
1214 MR. BURGESS: The revenues would be what is actually derived from either side because that is easy to track. The expenses are, in a lot of cases, 50/50. For example, take John's salary. What percentage applies to AM versus FM? He does both. There is no point in tightly splitting maybe based on a percentage of revenues. There is really no point to it, so it's just for purposes of those reports we have chosen to split things like that down the middle. I can't offer any better than that.
1215 MR. CRAIG: I might be able to add here that the cost of the on-air staff and news staff is similar between the stations because of almost equal levels of employment on each side. Then you take the administration costs, et cetera, and you split them between the two. That's a good chunk of the reason why the bookkeeping is as it is in an equal allocation.
1216 Right, John?
1217 MR. LAMERS: Yes.
1218 MR. McCALLUM: Thank you.
1219 In the event of denial of this proposal, would the same policies follow?
1220 MR. LAMERS: Probably, as long as we can keep the ship going. I think we expressed that earlier as far as an AM operation.
1221 MR. McCALLUM: Similarly, in the event of approval of this application, would you follow more or less the same policies?
1222 MR. LAMERS: We probably would, yes.
1223 MR. McCALLUM: Thank you.
1224 THE CHAIRPERSON: Thank you.
1225 The next phase is the intervention phase where each of the applicants has 10 minutes. I think we will break for 15 minutes and come back to hear the interventions, starting with Affinity, then Rogers, then CHUM, then Tillsonburg. We will break again for 15 minutes and then we will start rebuttals, which start in the reverse order.
1226 Just to give people an idea of what time we will finish and where we are going, we will break now, come back at 5:05, do the interventions, break again for 15 minutes to allow people to gather their thoughts and do the rebuttals that are again 10 minutes each.
1227 Thank you very much.
--- Recess at / Suspension à 1648
--- Upon resuming at / Reprise à 1707
1228 THE CHAIRPERSON: Mr. Cussons, could you please call the first party at the intervention stage of our hearing that we are now entering into?
1229 MR. CUSSONS: Thank you, Mr. Chairman.
1230 I would like to invite representatives of Affinity Radio to present its intervention, please.
INTERVENTION / INTERVENTION
1231 MR. JOHNSTON: Thank you, Mr. Secretary and Members of the Commission. We will be relatively brief in our intervention.
1232 The three other applications for this frequency all have merit. The application submitted by Rogers and CHUM exhibit the kind of quality and professionalism one would expect of these organizations. There is little doubt that either company would mount a first-class radio service in London. Tillsonburg Broadcasting has the problem that you have explored with its representatives that CKOT-AM can only broadcast during daylight hours.
1233 From Affinity's standpoint, though, none of the applications have the compelling need for the use of the frequency that CKSL does. As Mr. Sherratt said: What do you do with an orphan AM? For CHUM and Rogers, the addition of a London station represents a desirable expansion of their broadcasting interests in southern Ontario, but it's not a matter of survival, as this application is for CKSL.
1234 Tillsonburg Broadcasting already has an FM station to complement and support its AM service. Further, they own the only stations licensed to serve their Tri-County local market and they are able to run a profitable radio operation.
1235 I should also say, Commissioners, that while we sympathize with Tillsonburg's problem, that it's a daytime-only AM station, at least it is a good signal that they are broadcasting and their signal is, apparently, well received and heard throughout their listening area. It's true that they have to shut it down in the evening hours, but evening hours are not the best time for radio listening, anyway. As you know, listening drops off for radio at that time of day.
1236 Another point with respect to Tillsonburg we should bear in mind is the argument that they have effectively made here today, that the regionalization of CKDK-FM's programming has opened up a good opportunity for them. I think one of their representatives said that they had been able to exploit that pretty effectively by extending their local service into that area.
1237 Finally, as one of the CRTC's deficiency questions noted with respect to Tillsonburg, the collocation of the proposed station with the existing FM station would mean that Tillsonburg would have a second FM station penetrating the London market. The existing FM station, according to the latest BBM survey, captures an 11 per cent share in the London market compared to CKSL's less than two per cent. In our respectful view, the equities in this situation simply do not favour Tillsonburg's application over that of CKSL's.
1238 We ask the Commission, in weighing the relative merits of the four applications, to balance the needs of our three competitors against the following. First is CKSL's signal deficiencies and its inability to provide its listeners and advertisers with high-quality and, in certain parts of London, even listenable sound. The CRTC has always given very high priority to this consideration in awarding a new frequency.
1239 Secondly, we believe that this application does represent the highest and best use of the frequency and that CKSL provides music to a very needed and recognized niche, with a target audience that CKSL serves and serves alone. The awarding of this frequency would maintain and strengthen that service.
1240 We are gratified that Rogers has recognized the same approximate niche and plans to serve that. It does cause CKSL a great deal of apprehension, though, because if you were to award the application to Rogers or to any of the others, it would just exacerbate the problems that CKSL now has.
1241 Thirdly, we would ask you to balance the probable introduction of a much more competitive radio market in London and CKSL, as a stand-alone AM, will face two large MSOs, not with just one FM but two FM stations to support their AM operation. Then there is the very significant contribution that CKSL makes to community service in London and the significant strengthening of its initiatives in this area that would occur with the approval of this application.
1242 Finally, I should point out that the licensing of any of the other three applications would cause considerable damage to CKSL. It would compound the problems that they already have. In our respectful view, all of these factors substantially outweigh the merits of the other three applications and provide unique circumstances that well justify the awarding of the frequency to Affinity.
1243 That's it, thank you.
1244 THE CHAIRPERSON: Thank you, Mr. Johnston. Thank you, Mr. O'Brien.
1245 I don't think we have any questions.
1246 Mr. Cussons, could you call the next applicant, please?
1247 MR. CUSSONS: Yes, Mr. Chairman.
1248 I would now like to call upon Rogers Broadcasting Limited to present its intervention, please.
INTERVENTION / INTERVENTION
1249 MR. VINER: I have seldom heard Chris Johnston so fulsome in his praise of us.
1250 We have no comment. I think that the Commission has heard a number of different applications here today and will undoubtedly be faced with a difficult task. I would only reiterate that which we had said earlier, which is we think that this licence should be granted to the applicant who, in your view, has the best idea, who can make the most substantial contribution to the system in both tangible and intangible benefits, and you must decide on whether or not the market has the ability to sustain a new entrant.
1251 With that, I have no further comment, Mr. Chairman.
1252 THE CHAIRPERSON: Thank you, Mr. Viner.
1253 Could you call the next party, please, Mr. Cussons?
1254 MR. CUSSONS: Thank you, Mr. Chairman.
1255 I now invite CHUM Limited to come and present its intervention, please.
INTERVENTION / INTERVENTION
1256 MR. WATERS: Mr. Chairman, Members of the Commission, the application by the Affinity Radio Group Inc. to purchase CKSL-AM from Telemedia was approved by you on June 25th, 1997. They applied to flip to FM less than one year later. Everyone in Canadian radio knows it's difficult to show a profit on an AM radio station, yet Affinity paid close to $1 million for this station.
1257 In light of these events, one can only conclude they saw the purchase as a means to get an FM station in London without going through a competitive process, as we have here today. Based on these facts, we respectfully ask the Commission to treat Affinity's application as an application for a new station and ask that you consider it in the same light as the applications by CHUM and Rogers strictly on its merits, not as a solution to long-standing AM woes.
1258 I would also like to comment on the Tillsonburg application. Tillsonburg is a small market with a population of 13,600. It is presently served by the applicant's two local stations, CKOT-AM and CKOT-FM. On a population-per-station basis, Tillsonburg is extremely well served. Mr. Chairman, we would suggest that to allocate the only FM frequency left in this part of Ontario to Tillsonburg would not benefit the Commission's stated policy of strengthening the broadcasting system as a whole. Members of the Commission, for these reasons, we respectfully ask the Tillsonburg application be denied.
1259 Those are our comments.
1260 THE CHAIRPERSON: Thank you, Mr. Waters.
1261 Mr. Cussons, could you please call the next party?
1262 MR. CUSSONS: Thank you, Mr. Chairman.
1263 I now invite Tillsonburg Broadcasting Company Limited to come forward and present its intervention, please.
INTERVENTION / INTERVENTION
1264 MR. LAMERS: Panel Members, Mr. Chair, except for Mr. Allen, my team and I are new at these public hearings and are unaccustomed to how business is conducted at these proceedings. I am personally not used to filing interventions and I am uncomfortable making complaints against fellow broadcasters.
1265 I think the Commission will note that we have not intervened against any recent London or regional application. However, there are several issues that arise from the applications you are considering here, the most important of which is the fact that granting 102.3 to any other application, other than Tillsonburg Broadcasting, has the potential to do serious damage to our business. When I see our family business, the sole source of bread and butter for our staff and their families, I feel I must come forward to protect our combined interests and the interests of our listeners.
1266 As mentioned earlier, our AM station shows only a 1.8 share in London and we will not be targeting London for audience. I am very concerned that Affinity Broadcasting has placed before the Commission an application that is based on some very questionable grounds. These are my key objections to their application.
1267 First, I would like to deal with Affinity's claim that the 1410 frequency has technical problems. In their application to purchase CKSL, Affinity told the Commission they were committed to making AM radio work when they applied for the station in January of 1997. They stated they believed in the future of AM radio in Canada.
1268 The Commission approved the sale in June of 1997. Affinity paid Telemedia $1 million for CKSL-AM and began operating the station in September 1997. Two months later, in December of 1997, Elder Engineering completed a technical brief for conversion of the AM to FM for Affinity.
1269 In March of 1998, less than seven months after getting the keys to the station, Affinity applied for the conversion of the FM on the grounds of a bad technical problem, a problem they claim was unknown to them when they bought the station from Telemedia. Given this story, where I come from people would say that either Telemedia sold Affinity damaged goods or Telemedia should be considered going into the used car business or Affinity got suckered for $1 million, or both.
1270 On the surface, this shows a company that was willing to spend a lot of money on a broken-down station and it is now in a hurry to change their newly-acquired AM to the FM band. This does not make sense. There are some things that don't fit here. Affinity should have been aware of the issues facing CKSL before they purchased it. The asset purchase and sale agreement states:
"Telemedia shall provide the purchaser with all materials relating to the financial and technical aspects of the stations." (As read)
1271 Having this information, they still paid $1 million for the station.
1272 Affinity requested Elder Engineering to search for an FM frequency in June 1997, the same time the Commission approved the sale and a full four months before they had control of the station. The study that Affinity used to back up its claim of technical problems was in fact one written by Elder Engineering in January 1988, 10 years before Affinity owned the frequency. Obviously, if there was a problem, it was well documented prior to the sale.
1273 Affinity knew there were some technical problems when they bought the station. These constraints have been ongoing for 10 years. Now they are unacceptable to Affinity after only two months of operation. When requested, Affinity was unable to provide the Commission with any complaints concerning poor reception of 1410. This begs the question of: Just how impaired is the signal? Also, Affinity does not have to sign-off at 4:45 in the afternoon in February.
1274 If at the time of this application Affinity knew of the technical restraints, why did they not apply for a flip to FM and make the sale conditional on finding a replacement, either on AM or FM? The technical performance of CKSL-AM 1410 was not a secret. Affinity's plans were.
1275 Affinity has been reinforcing its deficit transmitter story with another that indicates the transmitter site, which is next to a municipal landfill, has been expropriated by the city. We did a little investigation. We searched for the title on the transmitter site and found out it was owned by a numbered Ontario company, whose President is a doctor residing in Mississauga, and owned the site up until February of 1999. The site has been sold to the city of London.
1276 Affinity signed a registered lease with the previous owner of the land on February 25th, 1997. The effect of this was to attach the lease to the land title. The lease is renewable yearly for a period of nine years; in other words, a 10-year lease running to 2006. As a tenant with a registered lease, I would expect if the property was either expropriated or sold, there would be some compensation in order that ongoing business could find a suitable replacement site and there would be a mutually-agreeable time before the site is vacated.
1277 I have a copy of the registered lease, which would clearly indicate a 10-year term. I also have a copy of the land transfer of the site from the Ontario numbered company to the city of London. The total payment of the consideration for this transaction was $58,500 for land, building and towers. There was no indication of expropriation. There appears to be a straight land transfer.
1278 This raises yet another set of questions with respect to the Affinity application. Was or will Affinity be compensated as part of the registered lease and what time frame have they been given to move the transmitter site? There does not appear to be a serious problem with the frequency and certainly not a compelling argument to take the 102.3 frequency away from Oxford County.
1279 With all due respect to the CHUM and Rogers organizations and their applications, I can only say that as a small-market operator, I admire their high standards of professionalism and I must admit I am jealous of their operational budgets they manage. The Commission should be aware that licensing any new service would be damaging to the existing London stations, as well as our stations, ignoring for the moment the fact that CKOT-AM would remain Canada's only day-timer.
1280 I have here a copy of an article in this past Saturday's London Free Press by Peter Desbarats, a noted Canadian author and former journalism dean at the University of Western Ontario. It is titled, "It's no secret. London's in trouble." In this article, he comments on the fact that things are not well in London, especially a diminishing workforce and retarded economic growth.
1281 Reactions to his column indicated a growing awareness among many people that London is seriously in trouble these days and that the city's economic decline in relation to other communities is one of the chief symptoms of this. His article echoes the points raised by Telemedia in their intervention supporting our application.
1282 The city of London's Department of Planning and Economics stated in a May 25th, 1999 report that London's annual population growth rate has fallen behind that of Ontario. The primary reason is the loss of almost 10,000 jobs forcing people out of the city. This report shows London has not kept pace with the new economy of other large Ontario cities.
1283 As Telemedia noted, this is apparent when reviewing the TransCanada Radio Advertising By Market Report comparing London to other similar markets. London's radio revenues have flattened and lagged behind the growth scene in Ontario, Toronto and Hamilton.
1284 In terms of operational profitability, looking at the CRTC's market criteria, London's earnings before interest, taxes, depreciation and amortization was 1.8 compared to the national average of four per cent and 8.8 per cent for Kitchener. Radio is having a tough time in London and, with the addition of a new signal, would have a serious impact on existing stations. Licensing any of the applicants would mean yet another local radio frequency will be taken away from Oxford County.
1285 The decision by Shaw to pre-empt local programming at CKDK-FM and replace it with Toronto-Burlington programming was a staggering loss for Woodstock and the Tri-County area. The only full-time service source of information for this growing area is CKOT-FM 101, augmented by daytime service from CKOT-AM 1510. The loss of 102.3 to a London station could have serious implications for our stations and potentially could mean the loss of one or, in the longer term, both of these stations.
1286 Thank you.
1287 THE CHAIRPERSON: Thank you, Mr. Lamers.
1288 We have gone through the intervention phase a little more quickly than I would have thought. Mr. Lamers, you are first up for the rebuttal stage and I indicated earlier that we would take a small break before we went into the rebuttal stage.
1289 MR. LAMERS: Five minutes, if that's okay.
1290 THE CHAIRPERSON: We will take a five-minute break, come back at 5:30 and proceed with the rebuttal stage. Thank you.
--- Recess at / Suspension à 1727
--- Upon resuming at / Reprise à 1737
1291 THE CHAIRPERSON: Mr. Cussons, could you call the first party, please, for the rebuttal phase?
1292 MR. CUSSONS: Thank you, Mr. Chairman.
1293 In reverse order, we will call our competing applicants and we will start with Tillsonburg Broadcasting Company Limited for final rebuttal.
1294 THE CHAIRPERSON: Mr. Lamers, just before you start, during the intervention phase you cited certain documents that you had available and you made reference to in your intervention. They dealt with the lease of certain land. I am wondering if you could file those documents with the Commission. I will ask Mr. McCallum to discuss the procedures that will follow with respect to receiving and dealing with those documents.
1295 MR. McCALLUM: You will file, I guess it is, a lease of the site of the transmitter tower?
1296 MR. LAMERS: Yes.
1297 MR. McCALLUM: You had an article by Peter Desbarats as well?
1298 MR. LAMERS: Yes.
1299 MR. McCALLUM: You would file them with the Commission, making copies available for Affinity. Affinity would have until the 5th of July to respond to the filing of these. Its reply comments can deal with whatever it considers it wants to deal with vis-à-vis that and they would file those reply comments on you.
1300 Thank you.
1301 THE CHAIRPERSON: Thank you, Mr. McCallum.
1302 Mr. Lamers, could you proceed with your rebuttal comments, please?
1303 MR. LAMERS: Thank you.
1304 On behalf of my entire team, both the staff members who appeared before you and those back in Tillsonburg, I want to thank the Members of the Commission and the CRTC staff for making this process as smooth as possible for us.
1305 In the letter confirming the hearing agenda, Mrs. Diane Richer, the CRTC Public Hearing Officer, stated that since this is a competitive hearing our application is an intervention against the other applicants. This means, of course, that all the other applicants are interventions against us. My response to their interventions is based on what I have heard at the hearing and what is documented in their applications.
1306 This hearing has historical significance for radio in our area. After all is said and done, the business of doing radio will be different from where it is today. There will be two major groups of stations in the London region headed by large multi-media operators. Telemedia will have three stations, one AM, two FM, Shaw will control four stations in the London region, one AM and three FMs. This, in itself, presents a tough act to compete with and, depending on the applicant, they could become part of an MLA or some form to optimize their operational costs and revenues.
1307 Despite some statements to the contrary, we have seen other hard evidence that London is not necessarily a rosy growth market. The introduction of a new licence will cause undue hardships for the existing London operators and eventually cause the reliance on more out-of-market networking and syndicated programming. Locally-produced or hosted programming will be the first thing to go, just as we have seen it happen with Shaw's operation in Woodstock.
1308 Affinity Radio has presented an inconsistent argument. On one hand, they stated their belief in the future of AM radio and backed this up by paying out $1 million for CKSL-AM. Yet at the same time, there is evidence that they were looking for an FM frequency for the station before they took control.
1309 They claim they must move from their transmitter site and yet they have a long-term lease and there is no indication of eviction. They have not been able to show any further technical restrictions that have not been a part of CKSL's AM technical profile for the past 10 years, nor has there been compelling evidence of the average listener's concern in regard to their signal.
1310 Perhaps Affinity Radio needs to look at their overall product, not their transmitter, in order to deal with their audience and sales difficulties. They have, according to their application, turned CHAM in Hamilton and CKTB-AM St. Catharines around. CHAM-AM is the only country AM station in the region and they have been successful with the all-talk CKTB-AM, again the only station of its kind in the Niagara area.
1311 On the other hand, CKSL-AM operates in a format close to that of Telemedia's Q97.5 and our FM Easy 101. Perhaps expending their energies and searching out and implementing a unique program product, as they have done with their other AM stations, is a more commonsense resolution to their difficulties.
1312 In my opinion and in the opinion of other broadcasters, it is inevitable that Affinity will have to align itself with one of the large players in London whether they remain on AM or move to FM and CKSL-FM, duplicating much of what we do on our existing Easy 101 FM in tandem with strategic sales alliances, will have a serious impact on our historical ability to sell in London and will be injurious to us on our home turf. They have stated here today that they expect a 30 to 35 pull from our audience and our London revenues while they attack our local market with their signal.
1313 Rogers has also stated their expectations of taking back audience from us. A 31 per cent figure was quoted. So, the mission of recapturing from outside listenership is a line of attack on Tillsonburg Broadcasting's viable current FM operation and has the potential of major harm to our entire operation.
1314 I am concerned that as all these changes for the betterment of large, national and provincial broadcasters take place, Tillsonburg Broadcasting will be forgotten. We have waited for decades to fix a technical imposition that has plagued us since 1955. Our region has recently lost one localized broadcasting voice from Woodstock and potentially could lose another if 102.3 is not used for AM 1510 and goes to another applicant.
1315 At the end of that day, I would still have a severely handicapped AM with no effective remedy to the situation. Worst of all, my FM would be under seige by two powerful groups of stations, including one using the last frequency historically allocated to our area.
1316 Tillsonburg Broadcasting can and has successfully fought the radio revenue wars on a level playing field. We are prepared to continue to fight and win our share based on our strengths in the community we serve, but fighting with one hand tied behind our backs will make things very difficult. I do not sleep well at night worrying about the loss of the 102.3 frequency for our AM and the resulting loss of revenues for our FM. I worry that this may force me to seriously consider my family's continued involvement in the radio business. I worry that our loyal staff and faithful listeners will be forgotten in the name of progress.
1317 I know we can do the job of presenting important, relevant and intelligent local programming to the Tri-County area day-in and day-out because we have had to do so to survive. I am asking you for the opportunity to do so on a frequency that belongs to our region in order that we can serve our community better and, therefore, make the Commission proud of a decision to support small, local broadcasters.
1318 I thank you very much for your time and consideration.
1319 THE CHAIRPERSON: Thank you very much, Mr. Lamers.
1320 Could you call the next applicant, please, Mr. Cussons?
1321 MR. CUSSONS: Thank you, Mr. Chairman.
1322 I would like to invite CHUM Limited to reply to any and all interventions.
REPLY / RÉPLIQUE
1323 MR. WATERS: Mr. Chairman, Members of the Commission, I just wanted to say that CHUM has filed its written comments with regard to Telemedia's intervention. We felt that there were some factual errors in there with regard to our application which we felt were necessary to correct.
1324 Further to that, we have no further comments. Thank you.
1325 THE CHAIRPERSON: Thank you, Mr. Waters.
1326 Could you please call the next party, Mr. Cussons?
1327 MR. CUSSONS: Thank you, Mr. Chairman.
1328 I will now call Rogers Broadcasting Limited.
REPLY / RÉPLIQUE
1329 MR. VINER: Thank you, Mr. Chair.
1330 With respect to the financial health of the market, we, too, have filed our written response to the Telemedia intervention. It's on the file. The Commission has heard today from two incumbent licensees in London that it is, indeed, a healthy market.
1331 I would only respond to Mr. Lamers' comments in a couple of ways by saying that all new licensing inevitably has a short-term effect on incumbent broadcasters and all incumbent broadcasters, but it is rarely fatal. With his strong record and the strong record of local service that the stations enjoy, I think he has sold himself short. Based on the financial information filed with the application, it would appear that these are a couple of well-run non-metro stations and, I think, have every opportunity to survive.
1332 Other than that, Mr. Chairman, I thank the Commission for their questions and interest today. I have no further comment.
1333 THE CHAIRPERSON: Thank you, Mr. Viner.
1334 Could you please call the next applicant, please, Mr. Cussons?
1335 MR. CUSSONS: Thank you, Mr. Chairman.
1336 For our final rebuttal, Affinity Radio Group.
REPLY / RÉPLIQUE
1337 MR. JOHNSTON: Mr. Chairman and Commissioners, I want to refer to the five opposing interventions that were filed a year ago at the time this application was on the agenda for the Commission's July 1998 public hearing. They are still in the file, but we have been advised by the Secretary or by Mr. Cussons that four of these have been withdrawn; namely, those filed by Blackburn Radio, CHFK Radio, CJCS-AM Stratford and Radiocorp. I just wanted to state that for the record.
1338 The fifth intervenor, Mr. William Murray, was apparently contacted and wished his intervention to stay. Mr. Murray argued two points, that there should be a call and that 102.3 megahertz should be reserved for Woodstock. The first point has obviously been satisfied by this proceeding.
1339 On the second point, which has come up in the Tillsonburg application, it should be noted -- and this is on the public record -- that 102.3 megahertz is not allocated to Woodstock under the government's Frequency Allocation Plan. It was created for CKDK Woodstock as a drop in frequency. That frequency became vacant when CKDK moved in about 1990 to 103.9 megahertz, leaving 102.3 megahertz available to moved elsewhere. So, there is not, in our respectful view, a proprietary interest in that frequency belonging to Woodstock.
1340 The only negative intervention filed in this round, negative in the sense that it suggested that all of the applications be denied except for the Tillsonburg application, was Telemedia's. I must say that surprised us somewhat as Affinity bought the AM station from Telemedia and Telemedia, of all people, should know how difficult it is to operate an AM station, let alone a stand-alone AM station.
1341 I guess we are also surprised because they are in the process of acquiring another two stations, so they will be a three-station owner. It is difficult to imagine that they could really have a concern about Affinity converting its AM to an FM frequency and being a stand-alone situation in that market.
1342 I must say, Commissioners, that the Affinity Group has felt some irritation at the repeated inferences that there was some sort of subterfuge going on when they apply for the AM frequency, that they never meant to try to successfully run an AM operation, that really what they had in mind from the outset was to do a flip. Through your careful questioning, I hope that the chronology has been put clearly on the record.
1343 What that chronology shows -- and Mr. O'Brien was quite, I think, forthcoming about this -- is that, of course, when they acquired an AM station, they thought to themselves, "I hope we can get an FM station as a companion station." They looked into whether that was a possibility and were told by the first engineering firm that they contacted that there was no FM frequency available. So, they bought the AM station.
1344 They then put considerable money into capital improvements, into training programs, and it was only as time went on they realized that they had a bad signal problem, a very bad signal problem, worse than they had known. They contacted Mr. Elder and it was at that point, after they bought the station, that Mr. Elder's 1988 report came to light. That document was not available to them on closing. They did not know of the existence of it and it came to light in those subsequent investigations with Mr. Elder.
1345 I don't know, Mr. O'Brien, do you have anything to add to this?
1346 MR. O'BRIEN: Yes, I do.
1347 Our performance has been quite consistent in all three markets we have purchased radio stations. We purchased CKDB-AM in St. Catharines singularly and bought CHAM Hamilton singularly as an AM and also CKSL London. We did not intend to operate AM stand-alone radio stations. We have confidence in AM in terms of improving them, but that was not our goal. We do not belong to the masochist society.
1348 What we did in the case of Hamilton, St. Catharines and London is immediately begin to improve the studio and audio broadcasting quality for those radio stations. In the case of CHAM, for example, we spent over $200,000 on a new transmitter, put in a new STL link, all new audio processing equipment, the same in St. Catharines, and we did the same studio upgrades in London, Ontario.
1349 Our performance is consistent and there is nothing inconsistent in what we have done. We purchased later on, after continuous negotiation with Standard, Hits FM. You have before you right now an application for FM in Hamilton. So, we have an FM/AM combination in Hamilton and we expected to do the same thing in London, Ontario, have an AM/FM combination. We are not exaggerating or being dramatic about the serious nature of the AM signal in London, Ontario.
1350 In terms of the comments about the transmitter site, we never owned the transmitter site. We never closed with Telemedia on this transmitter site and for very good reason, because it is immediately adjacent to a dump. Leaching is a serious problem. Financing would not allow for a moment for us to own a piece of property that would have such environment risks, hazards or problems. What we did was consistent, was well thought out and was within what we had to do as business people.
1351 In terms of some marvellous plan, there has been nothing inconsistent in what we have done in all the markets where we have purchased the radio stations; three AMs to start with, we have added an FM, as I said, in St. Catharines by purchasing it, and the two applications, the one you are dealing with today and one that will be in the future on Hamilton.
1352 MR. JOHNSTON: Just to follow up on that point, it does lend some credence to what I have been saying, they did not buy it, but they entered into a 10-year lease. Had they had a plan to do a flip, why would they ever have entered into a 10-year lease for that tower site? We will elaborate on this more fully once we have a look at the documentation, but, in essence, that will be the position.
1353 Finally, we would like to say that we do agree with Telemedia's starting point in its intervention that the first priority in a competition for an FM frequency should be given to an existing AM station seeking to convert to an FM frequency. We really loved that part of the intervention until we read a little bit further.
1354 I think Telemedia takes that and it's their priority, what you have been asking us. The first priority Telemedia says is that it should go to the AM seeking to change to an FM and we assume the reason for that is to allow existing AM services contributing to their communities an opportunity to strengthen their service and compete on an equal footing with FM stations.
1355 I suggest to the representatives of Tillsonburg that if they don't think there is a problem with the signal, have a look at the supporting interventions that were filed and I would ask you folks to do that as well. I would just like to refer to a couple of short quotes.
1356 Beth Desolets who filed is an owner of a commercial establishment, she is an advertiser. She said:
"The current signal is weak and at times I lose the station completely. As well, the sound quality is poor when compared to FM stations. As a citizen, I appreciate that CKSL always puts the community first. As an advertiser, the station offers exemplary customer service. I also believe that your approval of CKSL's application will allow the station to become an even greater asset to our community."
1357 I could go on with these, but there is just one other. John D. Morgan, Ph.D., of King's College Centre made this statement:
"I have never worked with a more community committed organization than CKSL in the nearly 40 years that I have been working as a university professor and university administrator."
1358 That, I suggest, Commissioners, is why Telemedia said that the first priority in considering the awarding of an FM frequency should go to an AM station that is there doing a good community service, but needs to do a better service by converting to the FM frequency.
1359 That's all, thank you.
1360 THE CHAIRPERSON: Thank you very much, Mr. O'Brien and Mr. Johnston.
1361 That brings to a conclusion our work for today in the phase of our hearing that is dealing with the applications for the FM frequency in the area of London and Tillsonburg. I would like to thank all the applicants for their efforts today. It was very helpful to us.
1362 We will convene again tomorrow at 9:00 o'clock. Until then, we stand adjourned.
--- Whereupon the hearing adjourned at 1759/
L'audience est ajournée à 1759