TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
CALL FOR FM/
LICENCES DE RADIODIFFUSION
APPEL DE DEMANDES FM
HELD AT: TENUE À:
Delta Bessborough Delta Bessborough
William Pascoe Room Salle William Pascoe
Saskatoon, Saskatchewan Saskatoon (Saskatchewan)
17 November 1999 Le 17 novembre 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
Public Hearing / Audience publique
Broadcasting Licences / Licences de radiodiffusion
Call for FM / Appel de demandes FM
BEFORE / DEVANT:
Barbara Cram Chairperson / Président
Commissioner, Manitoba and
Conseillère, Régions -
Manitoba et Saskatchewan
Ron Williams Commissioner,
Alberta and N.W.T. Regions/
Conseiller, Régions -
Alberta et T.N.O.
Andrée Noël Commissioner, Quebec
Région du Québec
ALSO PRESENT / AUSSI PRÉSENTS:
Michael Burnside Hearing Manager /
Gérant de l'audience
Peter McCallum Legal Counsel /
John Traversy Director, Regulatory
Gary Krushen Secretary / Secrétaire
HELD AT: TENUE À:
Delta Bessborough Delta Bessborough
William Pascoe Room Salle William Pascoe
Saskatoon, Saskatchewan Saskatoon (Saskatchewan)
17 November 1999 Le 17 novembre 1999
- iv -
TABLE OF CONTENTS / TABLE DES MATIÈRES
Présentation au nom de/Presentation on behalf of:
Sask-Alta Broadcasters Limited 209
Peace River Broadcasting Corporation 266
Intervention au nom de/Intervention on behalf of:
Sask-Alta Broadcasters Limited 315
Peace River Broadcasting Corporation 316
Sask-Alta Broadcasters Limited 318
Sask-Alta Broadcasters Limited 322
Sask-Alta Broadcasters Limited 329
Réplique au nom de/Reply on behalf of:
Peace River Broadcasting Corporation 350
Sask-Alta Broadcasters Limited 355
--- Upon resuming on Wednesday, November 17, 1999
at 0900 / L'audience reprend le mercredi
17 novembre 1999 à 0900
1110 THE CHAIRPERSON: Good morning. We can start day two of the Saskatoon hearing.
1111 Mr. Secretary.
1112 MR. KRUSHEN: Thank you, Madam Chair.
1113 Our first application this morning is by Sask-Alta Broadcasters Limited for a broadcasting licence to carry on an English language FM radio programming undertaking at Lloydminster. The applicant proposes a popular music format.
PRESENTATION / PRÉSENTATION
1114 MR. KEN RUPTASH: Good morning, Madam Chair and Members of the Commission.
1115 My name is Ken Ruptash. I am the Vice-President and General Manager of Sask-Alta Broadcasters Limited. On my left is Graham Brown, Sask-Alta's Vice-President of Sales, and on my right is Glenda Spenrath, Vice-President, Finance. To Glenda's right is our communications counsel, Peter Grant of McCarthy Tetrault.
1116 We are pleased to present to you this morning our application for a licence to operate a new FM station on 95.9 serving Lloydminster, Alberta, and the surrounding area.
1117 For over 40 years, the only local radio station in Lloydminster has been our own AM station, CKSA. With the release of the CRTC's new radio policy in 1998 and given the size and growth of our market, we realized that it was long overdue for additional radio stations to serve the Lloydminster area.
1118 Before we go into the details of our plans for a new FM station, let me tell you about Lloydminster. It is a unique city in that it straddles the border of two provinces. The BBM central market area for Lloydminster covers areas in both Alberta and Saskatchewan. The population 12 plus of the Lloydminster CMA, according to BBM, is 65,050.
1119 Our AM station was started in 1957 by the late Arthur Shortell, my father-in-law. My wife, Jane Ruptash, and Graham's wife, Joan Brown, are the two daughters of Arthur and Mary Shortell. So the station has stayed in our family for 42 years.
1120 We are very proud of our roots in the Lloydminster community and we are proud of the 154 letters of support that the Commission received for our application for a sister FM station.
1121 We propose to operate our new FM station using the existing 600 foot tower owned by our sister company, Mid West Television. That will give us good coverage to the 65,000 people in the Lloydminster central market area.
1122 Before I talk about the format of our new station, I will ask Glenda Spenrath to tell you about our local community involvement and how that will increase with the new station.
1123 MS GLENDA SPENRATH: Thank you, Ken. Good morning, Madam Chair and Members of the Commission.
1124 I have worked at CKSA for over 12 years, initially to oversee the financial side of the station, but more recently also as the coordinator of its community initiatives. Many people in the community wrote letters of support to thank us for what we do for the community and we are keen to increase those initiatives with the new station. Seventy-one per cent of the letters of support comment positively on our contribution to the community.
1125 Support for local charities and institutions has always been fundamental to CKSA. Over two dozen fundraising campaigns were supported by the station last year. We will offer the same kind of support on our new FM station.
1126 But we do much more in large and small ways. To give you an example, we were brainstorming three years ago for ideas to support music in the community. The two Lloydminster school divisions have a great concert band program, but a number of students don't participate because they can't afford to buy instruments.
1127 My children are in the school system and I immediately thought now here is a place where CKSA could make a difference, so two years ago CKSA voluntarily committed to purchase new band instruments for the five year period from fiscal 1999 to 2003. These instruments belong to the schools and are available for use by deserving students.
1128 This initiative amounts to $1,600 a year, but we would like to do more. Accordingly, if our FM station application is approved, we have earmarked enough money to increase the amount of the band instrument commitment to $4,0000 a year and continue it for the seven years of our FM licence.
1129 As another example, CKSA has been very active in supporting the fundraising now going on for the Lloydminster Performing Arts Theatre. The theatre is planned to open in the year 2001. We would like to do more here.
1130 If our FM application is approved, we have earmarked $22,000 over five years to set up a technical hookup between the theatre and the station and to support Canadian concerts with regional and local artists at the theatre which can be broadcast on the station.
1131 Over the years CKSA has supported local artists in the country music format of the station. This will continue. But once we have an FM station, we will do the same for local artists in the popular music format. To this end, the station will commit to hiring a part-time Canadian talent coordinator to act as a liaison between the station and musical groups and artists in the community. This will cost $4,000 a year.
1132 Based on our track record with CKSA, you can be assured that if we are granted a new FM station, we will make commensurate contributions to the community. The combined cost of the initiatives I have described will be $57,200 over five years, again, $22,000 for the technical hookup and annual concerts at the Performing Arts Theatre, $20,000 for the Canadian talent development coordinator and $15,200 for our band instrument program.
1133 MR. RUPTASH: Thank you. Let me now focus on the program format we propose. We looked at close to a dozen possible formats within the pop/rock category. Based on our review, we propose to use a Hot AC format. We are very comfortable with that format since CKSA used it quite successfully before we switched to country six years ago. That format is a good choice for us because it fills a void in the 12 to 34 demographic, which is the least represented demo of our country music AM profile.
1134 The station will play 35 per cent or more Canadian music, with Hot AC tracks from artists like Alanis Morrisette, Jann Arden and the Tragically Hip. At CKSA, we have consistently outperformed the minimum requirement of Cancon music by five points. We expect we will do the same with our new FM station and we would be prepared to commit to this as a condition of licence if requested.
1135 The station will air ten minutes a week of free Canadian album promotions, organized in coordination with the record companies. This is an initiative that a number of larger urban radio stations have implemented and we will do the same.
1136 Now let me turn to news. The FM station will share facilities with CKSA-AM which has a recently renovated state of the art newsroom designed with FM in mind.
1137 All of our news management and news announcers on the FM station will be distinct from the AM side. We will run news at 20 minutes before and 20 minutes after the hour in morning, noon and drive time, which will complement our top of the hour scheduled newscasts on our AM station. We do not intend to use syndicated news service. Our news will involve live announcers only.
1138 Finally, we propose to have a newscast every Friday evening focusing on campus news and high school news. This will be read by students from the affected schools and the newscast will be repeated on Saturday.
1139 I want to turn now to Graham Brown who will speak to the economics of the market.
1141 MR. GRAHAM BROWN: Thank you, Ken. Good morning, Madam Chair and fellow Commissioners.
1142 When we originally filed the revenue estimates for the new station over a year ago, we were purposely conservative. We have refined our numbers since then and have a much better sense of what is likely to happen, not only if we are licensed but if a second FM station is also licensed.
1143 The key question that must be asked, of course, is whether the market can support one or two additional radio services. We have come to the conclusion that it can support two more stations, and this is driven by five reasons.
1144 First, the Lloydminster economy is strong, robust and growing. As Ken mentioned, we are often called the border city, but Lloydminster is also called the heavy oil capital of Canada.
1145 Last year oil prices were as low as $12 a barrel, but with the world price of oil at $25 a barrel, we are now in a boom period. The beneficiaries are not just the employees of the huge upgrader and refinery operations, but the two to three hundred oil and gas service companies operating in Lloydminster.
1146 Agriculture is strong and stable with a diverse range of crops, particularly canola, and one quarter of the cattle in Alberta and Saskatchewan are raised within 100 miles of Lloydminster. Beef prices are at an all-time high.
1147 The second reason for our optimism is the healthy state of CKSA. In the five year period from 1995 to 19999, our radio station had an average increase in revenues of almost 10 per cent per year. In the five year period since 1994, in fact, the radio revenue with our single station in Lloydminster has grown by almost 60 per cent. Our profits are at an all-time high.
1148 The third reason we know there is room for more stations is the incredible amount of out of market tuning. CKSA is the only local radio station and gets a 30 per share of tuning. Seventy per cent of the radio tuning in Lloydminster is to out of market stations. That is an enormous amount of out of market tuning that is available to be repatriated.
1149 Fourth, we know that there is a pent-up demand for radio time that we cannot meet with CKSA because of the fact that we are limited to country format listeners. A number of our advertisers, both national and local, have indicated to us that they would increase their budgets if more stations in different formats were licensed.
1150 Finally, we know there is room in the market for three stations, given the experience in other small communities across Canada. We have attached a chart to the notes for our oral presentation which compares nine other markets with a central market area of less than 100,000 people, each of which has two or more local commercial radio stations.
1151 As you will see, the average population 12 plus in the BBM central market area supporting each radio station in these smaller markets is 19,169. If Lloydminster had three radio stations, the average population per radio station would be 21,689.
1152 In looking at these numbers, we have to emphasize that every market has different circumstances. Certainly Lloydminster is unique in many ways. The most obvious point is the incredible amount of out of market tuning in our market.
1153 For all these reasons, we believe there is room in the market not only for our FM station, but for another FM station as well.
1154 In proposing our application, we are well aware that there will be some adverse impact on our existing AM station. In our original application filed last year, we had assumed that we were the only FM station and on that basis we assumed that the AM station would lose $150,000 in ad revenues to the FM station in year one and have only 3 per cent growth per year after year one.
1155 We have now looked at the impact of our station of two FM stations instead of one. In that scenario, assuming both FM stations go with a popular music format and CKSA stays as the only country station in the market, we see our AM revenue dropping by almost $400,000 and then staying constant.
1156 But most of the revenue for the two new stations would come from other media and from growth in radio sales.
1157 Over time the revenue and viewing share of the two new FM stations would exceed that of CKSA. But the share of each of FM station at 15 per cent or 16 per cent of overall tuning, as each has projected, would come largely at the expense of out of market tuning.
1158 We have appended some of these revenue calculations to our notes for this presentation. We think they show clearly that there is room for three stations in the market.
1159 With all this in mind, we believe it is time to add new local FM voices to the market to respond to listener demand for diversity and the advertiser demand for more outlets.
1160 But there is another compelling reason why we need an FM station, namely, the vulnerability of our TV operations. Our sister company operates the smallest twin-stick TV operation in Canada. With TV revenues heavily moving into the bigger cities and the fragmentation of our TV audience by the specialty services, our TV revenues have been static for seven years and our 1999 TV revenues fell by 14 per cent.
1161 It is imperative that we diversify to survive. The two kinds of broadcast properties that are most vulnerable in Canada today are stand alone AM stations and TV operations like ours in a small market. Adding an FM station to our stand alone AM station is a crucial part of our strategy to diversify and survive.
1162 MR. RUPTASH: Thank you, Graham.
1163 We would like to conclude our presentation by highlighting the reasons why we believe that approval of our application will be in the public interest.
1164 First, the station will be locally owned by the heritage AM broadcaster, allowing us to expand our strong commitment to the community and helping us to strengthen our company so we can better address the increased vulnerability of our TV operations.
1165 Second, we have the financial resources in place to construct and operate the FM station as well as a committed management team and staff to make it work.
1166 Third, the new FM station will provide a diverse and popular local radio format to the community.
1167 Fourth, the station will provide a new medium for local advertisers.
1168 Fifth, the station will benefit the Canadian music industry by providing a platform for airing of Canadian musical selections in the Hot AC format throughout the day.
1169 Sixth, the station has earmarked some $57,200 over five years in out-of-pocket costs for Canadian talent initiatives.
1170 We are convinced that we can provide the listeners of Lloydminster with a high quality new FM service addressing the needs of a marketplace which we have served for over 40 years. On this basis, we request approval of our application.
1171 Thank you, Madam Chair and Members of the Commission. That completes our presentation. We would be pleased to answer your questions.
1172 THE CHAIRPERSON: Thank you. I am asking the questions.
1173 The first question, as you know, yesterday that we asked was given our decisions in London, Kelowna and Victoria and the factors that we listed in the introductory statement, how do you view your application fitting into those factors and what do you think is the most important for the Lloydminster market?
1174 MR. RUPTASH: Well, in reviewing the Kelowna decision, there are two important points that I would like to draw attention to.
1175 In Kelowna there was 15 per cent out of market tuning and five stations in the marketplace. In our situation, there is 70 per cent out of market tuning in our CMA. That leaves more than enough room for two FM stations to survive.
1176 If I could draw your attention to the coloured bar graph that we attached to our presentation. I believe it's the last page that we handed out.
1177 The first bar growth shows CKSA-FM with a 30 per cent share of market, making available 70 per cent out of market tuning for repatriation. In the Kelowna situation, there was only 15 per cent available for a new entrant to take advantage of.
1178 In year one we see our CKSA-AM station moving to 29 per cent and two new FM stations respectively having 15 per cent each with still 41 per cent out of market tuning. That number seems to grow and create a trend across a five year period. That was one very important point that we drew from the Kelowna decision.
1179 Another interesting area that we came away from with the Kelowna decision was the surprise of advertisers who wrote interventions, saying "We have enough media, we don't have any additional dollars to spend and thank you very much, there's enough radio".
1180 Well, we have over 150 letters of support for our application. We just have the opposite. I would like to now turn to Mr. Brown and give some examples of advertisers who want more media in Lloydminster and actually have more budget.
1181 MR. BROWN: Thank you, Ken.
1182 Madam Chair, just some examples of some of the letters of intervention that we did get. For example, from our local McDonald's store where he said:
"We feel Lloydminster probably can support both applications being awarded and would increase our radio budget to support both stations." (As read)
1183 Another example of another advertiser was:
"I work in the woodworking industry and my craft allows me to gage the growth of our city fairly accurately. We have a difficult time finding staff and work continues to pile up. Lloydminster is a great city with huge potential. I would find extra budget to spend on both FM stations and I am confident the rest of the retailers think the same." (As read)
1184 There is a fairly good sampling in our letters of intervention, proof that the growth is there, we are into a boom economy and that the community would support that.
1185 THE CHAIRPERSON: So then do I understand of the factors that we mentioned in the introductory statements in all three decisions, and we referred to the quality of the application, diversity of voices, market impact and the competitive state of the market, that you are really saying the most important factor here is the market impact.
1186 MR. RUPTASH: Absolutely. I think we have to draw attention to the huge out of market tuning. That is where the potential is for new entrants in a marketplace. Seventy per cent is available, which is extremely high.
1187 Stations can quite comfortably operate with a 15 per cent share. With 70 per cent out there, I think the two new entrants -- we do not oppose the other application. We think the market can withstand two FM stations.
1188 THE CHAIRPERSON: Do you think any other factors in the introductory statements in the three decisions are more important in our considerations of the Lloydminster market?
1189 MR. RUPTASH: Well, I also believe that the AM/FM combo is a model that has worked in Canada. It's a model that is endorsed by the Commission. It's a natural way for an AM station to enhance service. It's the obvious next step. The AM/FM combo is the most efficient way in Canada to bring service to our valued listeners.
1190 THE CHAIRPERSON: Mr. Brown.
1191 MR. BROWN: I would just like to add that I think -- we have kind of looked at the market. We think that there is plenty of room for both FM licences.
1192 If we do that, then we are really adding to the diversity of voice also by having the different operations. Our FM news announcers would be very separate from the AM and if both applications were approved, then you would really be adding to the diversity of the voice in the market too.
1193 There is a certain amount of restrictions we have in our community by only having the one station. Those extra choices will be available to both the listeners and also the advertisers.
1194 THE CHAIRPERSON: On format, our analysis of the out of market tuning was that formats, the most popular was country and then full service for the older demographic. How did you conclude that your format, pop and rock, would be the most successful format? Out of the many, why did you choose that one?
1195 MR. RUPTASH: Well, out of the many formats available from Hot AC to classic rock to solid gold to light rock to alternative rock, there are a dozen formats that we surveyed.
1196 Seven years ago our AM station had a Hot AC format and had a 30-some share of the marketplace and was doing quite well, but in recognizing music and listener trends, we made a switch to country and now have a 30 per cent share of the marketplace.
1197 We have good knowledge of the marketplace, talking to our advertisers and our listeners every day for the past 40-some years. We have had success with the Hot-AC format and we have experience in that. We know the market would receive it. Basically, that's the reason we have chosen that format.
1198 THE CHAIRPERSON: So you have done no surveys or anything in terms of the needs assessment.
1199 MR. RUPTASH: Well, our knowledge of the marketplace. We did take a look at markets similar to our size coast to coast where there were two and three stations and took a look at the demographics that were similar to our marketplace and took a look at the formats that they were delivering and did some research in that way.
1200 THE CHAIRPERSON: You are talking, at least in your application, about an audience share going from 15 to 30 per cent over five years. You did some analysis of where that was coming from. Can you give me a breakdown in terms of percentages? From yur own station, I thought it was 15 per cent, wasn't it? It was, from your own station? Then from out of market the rest was going to be coming. Do you know which stations they would be coming from?
1201 MR. RUPTASH: Well, a lot of the out of market tuning, some of the stations are grouped under "Others" and don't represent a defined station, but a lot of them come from the larger centres in Edmonton and Saskatoon, which mostly deliver a pop/rock format. There's another country station which is some 90 miles away that leaks into the marketplace. Basically it's through alternative formats that we are delivering.
1202 THE CHAIRPERSON: Okay. So you haven't defined which stations you would be repatriating that audience from.
1203 MR. RUPTASH: No.
1204 THE CHAIRPERSON: When we go to your financial statements for CKSA in the last couple of years, 1997 and 1998, your admin and general expenses were up. In 1997 they were up 41 per cent, in 1998 77 per cent. Was there a reason for that? I would hope there would be.
1205 MS SPENRATH: Yes, Madam Chair. I guess part of it comes back to when we first started working on this application. It was in actually May of that year. That was when we started to incur costs involved with putting together, I guess, the application.
1206 THE CHAIRPERSON: So we would expect that in the future that would go back to historic levels. Is that what you are saying?
1207 MS SPENRATH: Yes, that's correct.
1208 THE CHAIRPERSON: The same for the technical. In 1998 it went up 33 per cent. Ms. Spenrath?
1209 MS SPENRATH: We made some upgrades in our technical areas in the computer area for our media touch system.
1210 THE CHAIRPERSON: I didn't get that.
1211 MS SPENRATH: For our music system. We did some upgrading technically in the music area.
1212 THE CHAIRPERSON: So it would then go back to historic levels.
1213 MS SPENRATH: Yes, that's correct.
1214 THE CHAIRPERSON: Now we have to talk about the marketplace and competitive issues. Right now CKSA, if we can say in terms of media outlets, it's three, the two TV and the AM. Would you say you would have a competitive advantage to a new entrant?
1215 MR. RUPTASH: We are talking about television and radio as a competitive advantage.
1216 THE CHAIRPERSON: Yes.
1217 MR. RUPTASH: Well, there's two points I want to examine on that question. One is whether the AM/FM combo would be unfair competition to a stand alone FM.
1218 THE CHAIRPERSON: Let's just talk about -- the question was the three, so the AM plus the TV right now versus a new entrant.
1219 MR. RUPTASH: Television and radio in our market are two different mediums. They have separate account lists. There's not very much cross-over with AM and television advertisers. We have absolutely separate sales teams, separate creative teams. There is no packaging of television and radio commercial time. There's no joint selling. It doesn't exist.
1220 THE CHAIRPERSON: You are saying we should see the marketplace as a single-stick CKSA and a totally separate entity owning the twin-stick on the television.
1221 MR. RUPTASH: Absolutely. They have different, like I said earlier, different management teams. There's no synergies between the television and radio operation.
1222 Television has a set of its own problems. As Mr. Brown said earlier, our revenues are down 14 per cent. There are many challenges that are before us in small market TV with high definition television on its way. We have to prepare and diversify our company in order to maintain revenue streams to match chose challenges that will be put before us.
1223 THE CHAIRPERSON: Do you not think that the common ownership of the three media outlets would certainly put you in a better position to withstand the entry of a new station?
1224 MR. BROWN: I'm not sure that there's a huge advantage there because the budgets that are set by advertisers are usually set according to their media choices. They would set their print advertising, their television advertising, their radio advertising.
1225 As Ken had just alluded, the difference in the lists of advertisers is quite different. When a salesperson for our radio station or the new FM rock or whichever one, whether it was our new FM or Peace River's new FM that was in to the advertisers, they would be talking about splitting up the radio advertising budget. The television is really quite separate.
1226 We have found with our experience in the market that those budgets are very separate. One really doesn't take from the other. I guess that's witnessed by the last ten years when you look at our sales figures, the growth in radio that we have seen, and we haven't seen any growth in local television. It has been very flat. Those are separate budgets.
1227 MR. RUPTASH: If I could just add to that. I think that the real concern that we have with FM tuning being 69 per cent versus 31 per cent AM in Canada and that trend over the last five years moving up and even going higher that the real disadvantage is an FM stand alone against an AM stand alone. It cannot compete. The trends are moving to FM. The AM/FM combo against a stand alone FM is a model that works.
1228 THE CHAIRPERSON: Do you think though, and you talked about it, Mr. Brown, your experience in the market, 42 years in Lloyd. We have a new entrant who has never been in Lloydminster.
1229 I understand the issue of separate markets and everything else, but there's deep roots there CKSA has and the family. Do you think that that would allow you to better withstand a new entrant in the market in an FM?
1230 MR. RUPTASH: No, absolutely not. This is a progression of our commitment to the community over 40 years in reflecting some of the issues in the radio policy and enhancing service. We are the heritage broadcaster and it's a natural transition.
1231 The AM/FM combo is the most efficient way in a small market in particular to enhance service.
1232 MR. BROWN: One of the things that we think will happen is the stand alone FM as far as setting budgets may have an advantage. We feel that when they are doing advertising budgets, when retailers are doing advertising budgets, that they will be doing "There's my television budget, there's my radio budget". There's two radio salesmen coming in or three radio salesmen coming in.
1233 They are going to say "Okay, you guys get half and you guys get half". Probably it's going to take the two together so they are probably going to be at an advantage in trying to get the assessment of the budgets.
1234 THE CHAIRPERSON: Do you think that the Lloydminster market could support a competing stand alone FM?
1235 MR. RUPTASH: Yes, we do. We have attached a chart at the back of our presentation that I would like to draw your attention to that speaks to a number of markets that we took a look at with populations under the 100,000 level. In many of those stations, there are three or more radio stations in the market.
1236 We broke it down with a look at population per radio station. As you can see, the average population per radio station comes in at 19,169. In fact, with two new entrants into Lloydminster that population per radio station would be 21,689. Taking a look at that research, it's quite obvious that two new entrants, making it a three radio station market, would fall in line with quite a few of the comparisons that we brought to your attention.
1237 THE CHAIRPERSON: I take it then that you don't consider CJNS within your market.
1238 MR. RUPTASH: CJNS is outside of our central market area.
1239 THE CHAIRPERSON: But it's in your BBM area, isn't it, the re-broad in Meadow Lake.
1240 MR. RUPTASH: The re-broad in Meadow Lake?
1241 THE CHAIRPERSON: Isn't it in your BBM area?
1242 MR. RUPTASH: No. It's in 7170. It's outside of our CMA which makes up 8091.
1243 THE CHAIRPERSON: Okay. You don't consider themselves at all as a local station or competition.
1244 MR. RUPTASH: In Meadow Lake? No, absolutely not.
1245 THE CHAIRPERSON: CJNS coming into Lloyd.
1246 MR. RUPTASH: No.
1247 THE CHAIRPERSON: No. Okay. Let's go to the AM/FM plus your television, the two televisions, do you not think that that would provide you with a competitive edge to a new entrant?
1248 MR. RUPTASH: As we said earlier, our television operation and our radio operation is totally separate. We talk to different advertisers, different client lists. There's different advertising strategies. There's no cross-selling. There's no joint marketing to have the TV station take advantage of the radio station or vice-versa.
1249 We have never done that and we do not intend to do that with an FM licence. The FM station would have a separate sales team. The AM station would have a separate sales team, as does the TV station.
1250 MS SPENRATH: If I might add, TV doesn't feel like an advantage with this past year. We are having a 14 per cent drop in the revenues on the TV side with the introduction of --
1251 THE CHAIRPERSON: I missed the first part of your sentence. I'm sorry.
1252 MS SPENRATH: I'm sorry. We don't feel that TV is a big advantage to us, especially right now with the fragmentation of the market and with the specialty channels and with the drop in our TV revenues of 14 per cent just this past year.
1253 THE CHAIRPERSON: My point was that you are the only local in terms of media outlets for Lloydminster. You have got three out of three in terms of broadcast media.
1254 MR. RUPTASH: I just want to add some history maybe to that question.
1255 THE CHAIRPERSON: Yes.
1256 MR. RUPTASH: When we signed on our first TV station in 1959, Lloydminster was 4,000 people. The model then that the Commission had in order to get second TV service to small markets where the networks had no interest was the twin-stick configuration. That's when we brought on CITL, our second station, in the seventies.
1257 There are only three twin-stick operations in the country today. We are the smallest twin-stick television market in Canada. It has become a bit of a white elephant, believe me.
1258 THE CHAIRPERSON: Let's talk about if you were given a licence. The newsrooms, have I got it correct that your television newsrooms are together, are they not?
1259 MR. RUPTASH: Yes, they are.
1260 THE CHAIRPERSON: But they are distinct from your radio newsrooms.
1261 MR. RUPTASH: That's correct.
1262 THE CHAIRPERSON: You are saying that if you received an FM, it would be another distinct newsroom.
1263 MR. RUPTASH: Absolutely. What's very important to create diversity in a marketplace is to have a separate news voice. What we have and what we have worked on over the number of years is the hardware and the software in our newsroom that allows our separate news teams to draw information from a common server and develop their own stories for their own medium. Our FM station will have its own announcers and its own News Director.
1264 In taking a look at the expenses of an FM/AM combo, there's many places you can put your money. The advantage of an AM/FM combo in a small market is that we can put our money into the product. That's where our expenses are allocated.
1265 We have live news announcers, only live news on the FM station, where many stations in other markets will throw the switch and pick up a news syndicated feed. We do not do that. We will read live news in the morning from 6 a.m. till 9, noon and drive six days a week, complemented by campus and high school news.
1266 Our staff in news, our sales team, our sports people and our news director all separate from AM, all separate from TV.
1267 THE CHAIRPERSON: News director and announcers. What about reporters?
1268 MR. RUPTASH: As well, there will be some cross-over in reporting from AM to FM, which is common in an AM/FM combo, but some of the news staff will have specific news beats to cover on the FM side. On a heavy news day, sometimes you have to assign other people to other stories.
1269 THE CHAIRPERSON: Should we consider some sort of safeguards to ensure variety in the presentation of news?
1270 MR. RUPTASH: That has been thought of as well. Our news service on the AM side presently is delivered at the top of the hour and the bottom of the hour. We are going with our FM station to a 20/20 news format where news, sports and weather will complement the AM side by broadcasting news at 20 past the hour and 20 to the hour. That will be our delivery on the FM side.
1271 THE CHAIRPERSON: How about ensuring variety in presentation of the news, that it will be at different times?
1272 MR. RUPTASH: Number one, it will be at different times and there will be a different style of delivery and a different writing style for our FM side. It will look at some stories that AM never covers.
1273 THE CHAIRPERSON: How much local programming are you planning?
1274 MR. RUPTASH: One hundred per cent. We will not pick up syndicated features to fill programming gaps or pick up satellite feeds. That is not our plan. Our philosophy, the old way, the way broadcasting started, it's live announcers on our station from 6 a.m. to midnight.
1275 THE CHAIRPERSON: CRTC is very Ottawacentric. Local programming means Lloydminster programming. How much of that are you planning, actually planning about your community and programming about your community?
1276 MR. RUPTASH: I don't think I understand your question.
1277 THE CHAIRPERSON: How much local programming in the sense of what are you going to bring to Lloydminster from Lloydminster. You talked about the plays, the performing arts. What else are you planning in terms of reflecting your community to your community?
1278 MR. RUPTASH: Well, as in the past, we have been associated with every service group and every fundraiser that comes through Lloydminster and needs help.
1279 We do things like the family stage at the Exhibition where we host local artists for a three, four day period at our fair and give artists exposure through that medium. We will through our Canadian talent developer coordinator, who will work very close as a liaison with our program director, bring new talent, more local Lloydminster from Lloydminster artists from the music category that will represent to the listeners of Lloydminster.
1280 There's a very important initiative that we have put on the table, our marriage with the concert hall. We have a cash donation there of some $20,000 that will include a direct hookup from the control room of the concert hall to our FM station for live broadcast.
1281 When the concert hall is constructed, there is a five year commitment after that where we will host a concert each year and make a minimum contribution to the concert hall of $15,000. That concert would be broadcast live with our hookup that we have at the control room at the concert hall to our FM station. As well, that hookup can be used in a mobile feature to take to the fair for our live family stage, to venues outside of the concert hall to broadcast live to our FM station as well.
1282 On our concert hall commitment, besides the out of pocket extra cash that we have committed to this very worthwhile cause, we have committed over a hundred thousand dollars of air time to ensure that the fundraising campaign for our Lloydminster concert hall and theatre group is a success.
1283 We have over 2,000 hours that we have as well donated to this worthwhile cause in our technical expertise. Mr. Spenrath sits on the board of the concert hall. That reflects Lloydminster in a big way. It's a new area that has a void in our community and we are pleased to be partners in harmony with the concert hall.
1284 THE CHAIRPERSON: You are really talking about the Lloydminster Performing Arts Theatre. Is that what you mean?
1285 MR. RUPTASH: That's correct.
1286 THE CHAIRPERSON: Can you tell me percentagewise how much local programming you are contemplating on your FM radio?
1287 MR. RUPTASH: The local programming on the FM station will comprise six hours of news per week and over 70 per cent of local programming.
1288 THE CHAIRPERSON: And local programming in my terminology means reflecting the community.
1289 MR. RUPTASH: That's correct.
1290 THE CHAIRPERSON: It means telling Lloydminster about Lloydminster.
1291 MR. RUPTASH: That's correct.
1292 THE CHAIRPERSON: So 70 per cent of the totality of the time is going to be reflecting Lloydminster about Lloydminster. Is Ms Spenrath telling you 10 per cent?
1293 MR. RUPTASH: I'm sorry, it's 10 per cent. I have a problem understanding that question. I'm sorry.
1294 THE CHAIRPERSON: What's your breakdown of spoken word/music or do you have that? Sorry, Ms Spenrath, you wanted to say something.
1295 MS SPENRATH: I'm sorry. I apologize. Yes. I understand your question. With the news, it probably makes up I would say probably six to seven of the ten per cent and the rest would be feeds from the live concerts, from the concert hall theatre and that kind of thing.
1296 THE CHAIRPERSON: Do you have a breakdown of news/spoken word in your proposal?
1297 MR. RUPTASH: News --
1298 THE CHAIRPERSON: Spoken word versus music. I'm sorry.
1299 MR. RUPTASH: News makes up 7 per cent of our commitment and the rest is music.
1300 THE CHAIRPERSON: Okay. Now, I want to go to pages 4 and 5 of your presentation. I have to note for the record that this is a new and increased CTD, is that correct?
1301 MS SPENRATH: Yes, it is. Pardon me, no it's not.
1302 THE CHAIRPERSON: No?
1303 MS SPENRATH: No. The costs remain the same actually. When we were taking a look at the numbers again with the thought of two FM markets or FM stations in our market, we looked at some of the costs and have reallocated some of the costs, mainly in the technical area where staffing was, I guess we considered not required and allocated it to Canadian talent initiatives.
1304 THE CHAIRPERSON: The question was this is a new and improved CTD from your application, Canadian talent development. It has certainly improved. It's like about $10,000 more a year.
1305 MS SPENRATH: Yes.
1306 THE CHAIRPERSON: If I understand it correctly, you are talking about $4,000 for seven years for instruments for the school.
1307 MS SPENRATH: Yes. That would include our current commitments for the first three years on the AM side which we have already been carrying on for the past two years of $1,600 per year.
1308 THE CHAIRPERSON: So it's $2,400 really.
1309 MS SPENRATH: $2,400 for the first three years, $4,000 for years four and five.
1310 THE CHAIRPERSON: Thank you. Then there is the FM application, the Lloydminster Performing Arts Theatre. This is really a hookup between the theatre and yourselves. Is that what it is?
1311 MS SPENRATH: Well, $10,000 of it would be the technical hookup, yes, between us and the theatre. The other $12,000 would be money spent to bring in local and regional artists to the theatre and hold concerts in the theatre.
1312 THE CHAIRPERSON: I have my notes here saying you said $22,000 when you were speaking. You said it again, $12,000, but the paper says $25,000. What number are we really talking about?
1313 MS SPENRATH: I apologize. Yes. $22,000 is correct. It's a typo.
1314 THE CHAIRPERSON: Okay. So out of the $22,000, $10,000 is for the technical hookup which will --
1315 MS SPENRATH: Yes, that's correct.
1316 THE CHAIRPERSON: And the $12,000 is to go to the individual performers.
1317 MS SPENRATH: Yes, that's correct.
1318 THE CHAIRPERSON: Then there is your coordinator who will act as a liaison. This person searches people out. Is that the concept?
1319 MS SPENRATH: Yes. Basically that is our link to the community, someone who is more maybe actively involved with the artists and I guess more in the know who in the community is wanting to be involved or wanting to further their career in music.
1320 THE CHAIRPERSON: That's really a sort of a programming job, would you say?
1321 MS SPENRATH: Yes.
1322 THE CHAIRPERSON: Then I also notice at page -- I don't have it written down -- that you are now increasing your commitment to Cancon, is that correct, 35 to 40 per cent?
1323 MR. RUPTASH: That's correct. Our AM station historically has outperformed the percentages as mandated by the CRTC. That same trend will follow through FM. We would be willing to take that as a condition of licence.
1324 THE CHAIRPERSON: That's at page 7. You agree with me that that again is a difference from your application.
1325 MR. RUPTASH: That's correct.
1326 THE CHAIRPERSON: I would sort of briefly like to go through your reasons as to why you believe that there can be two further markets. You would agree that the economy of Lloydminster is much like Alberta, bust and boom, especially with heavy oil it's probably even more volatile.
1327 MR. BROWN: Yes, Madam Chair. We have seen over the years a few bust and boom cycles. Those get less and less. As the expansion of Lloydminster grows, we don't see the down cycles like we used to. We think it is a more solid market. We are in a situation now where we are starting to go up again.
1328 In our history we have seen over the last five years quite a growth. The oil price went down. It has come back up. Now we see it continuing to grow.
1329 The other things that have happened in our community, in the last year there has been about 300,000 square feet of new retail space added to the community. That is going to do a lot to make Lloydminster a more regional shopping centre. As that happens, it really puts a good base there and a good base for growth.
1330 What we are going to be doing is repatriating some of the dollars, retail dollars, that are leaving the market now. As the retail sales grow, then also we should see the retail ad budgets from the advertisers grow.
1331 That comes back to the sheet that we kind of submitted with this. In year one we have shown the pie to grow to $2.4 million. We have shown that our radio station, CKSA, would drop down to $1.4, but the two FM stations we think would have a million dollars there to share. That comes from the retail sales of the region and applying the percentage of radio ad dollars that come from the retail sales.
1332 We have used a number there of .006. It's about $405 million that comes from the Financial Post market surveys of retail sales.
1333 We think that is there. It's obvious that that opportunity is there. With being able to repatriate a lot of that tuning that is going to other places, we are going to offer that choice. We think that the amount of viewing that was on that chart was the same amounts that were filed by both applicants. Both applicants come into the market at 15 per cent, bring that, repatriate some of the tuning, repatriate some of the advertising dollars.
1334 We see that that should easily be able to start at a million dollars. We see that growing over the five year period where that would grow up to $1.5 million to share. That's some of our basis of where the revenue comes from. We think it's fairly consistent with the kind of ad budgets that would be available in all markets. We really think there is room for all of us to do well and share that money. If the stations are efficiently run, they should be able to survive.
1335 MR. RUPTASH: I would like to add one point to what Mr. Brown said. Over the last five years, our AM station has enjoyed double digit increases. That's very healthy.
1336 THE CHAIRPERSON: Notwithstanding the bust, the $12 a barrel.
1337 One other question. If your application were denied and that of Peace River were approved, would you consider flipping to FM and would that resolve some of the inequity you talked about before?
1338 MR. RUPTASH: Madam Chair, the idea of a technological upgrade for our AM station would deprive the listeners of a 50,000 watt AM station country music. It wasn't eight years ago that we invested over $200,000 to upgrade our AM station to 50,000 watts. We have made other expensive additions at our tower site and our coverage would dramatically decrease.
1339 A technological upgrade from AM to FM has never been our plan at all. We would not want to deprive the listeners that we have earned and we have a 30 per cent share on the AM side with the country music format.
1340 THE CHAIRPERSON: Thank you very much.
1341 Commissioner Noél.
1342 COMMISSIONER NOÉL: Just one question. You don't have to lower that power at night?
1343 MR. RUPTASH: There is a night time pattern, as every broadcaster has to abide by.
1344 COMMISSIONER NOÉL: Except for a few.
1345 MR. RUPTASH: Except for a few lucky ones.
1346 THE CHAIRPERSON: Commissioner Williams.
1347 COMMISSIONER WILLIAMS: Good morning. I'm just going to take a quick walk through maybe some of your expenses from 1998. In the year ended 1998, Sask-Alta applied against the station some fairly aggressive management and building rent fees just from our analysis. I wouldn't mind getting some clarification on that. Maybe in fact they weren't.
1348 Could you please explain the reasons behind the large increases reported, admin and general expenses, 41 per cent in '97 and 77 per cent in '98.
1349 MS SPENRATH: Yes. Again, part of this goes back to when we started working on this FM application and I guess some work that was involved, certainly at our level between Ken, Graham and myself, and our program and engineering people as well.
1350 COMMISSIONER WILLIAMS: Okay. What are the reasons behind the large increase reported in technical expenses of 33 per cent in 1998?
1351 MS SPENRATH: We did a major, major overhaul of our media touch system, totally upgraded it. It was out of date and not Y2K compliant.
1352 COMMISSIONER WILLIAMS: As a result of some of these charges, your PBIT margin was down to 1.58 per cent. Is the '98 level of expenses expected to continue in the future or are CKSA's expenses expected to return to more historical levels?
1353 MS SPENRATH: I would have to say that we would be returning to more historical levels once the sister FM is up and running.
1354 COMMISSIONER WILLIAMS: With the management fees and building rent charges of about $312,000 with related companies, are these firm contracts that can be adjusted or how would you get them to return to former levels?
1355 MS SPENRATH: Again, some of that would be outside consulting, as you can see here with us today. No, those would be done when the FM is up and running.
1356 COMMISSIONER WILLIAMS: Okay. Thank you.
1357 I have no further questions, Madam Chair.
1358 THE CHAIRPERSON: Mr. McCallum.
1359 MR. McCALLUM: The Canadian talent development initiatives that you have outlined in your presentation this morning, that would be in addition to the CAB plan of Canadian talent development initiatives, which I think amount to $400 a year for Lloydminster.
1360 MS SPENRATH: Yes, that is correct. A portion of it would qualify. The band instrument project would qualify for the CAB's proposal. Everything else is in addition to that. However, it's something that's very integral to our community. It certainly enhances and nurtures the performing arts in our community.
1361 MR. McCALLUM: So how much of the band proposal qualifies for the CAB plan and how much is new?
1362 MS SPENRATH: All of the band instrument program qualifies. It all goes to musical instruments to two school divisions.
1363 MR. McCALLUM: I see. That was what you were planning before this change, is that right?
1364 MS SPENRATH: Exactly. We are going to increase it. We are going to increase the commitment.
1365 MR. McCALLUM: I see. I make it just over a little $11,000 a year in Canadian talent development initiatives. Is that correct?
1366 MS SPENRATH: Per year, yes, that's correct.
1367 MR. McCALLUM: If the Commission were to accept this, you would accept it as a condition of licence.
1368 MS SPENRATH: That's correct. Absolutely.
1369 MR. McCALLUM: The Canadian talent coordinator, can you explain what the duties of that person would be?
1370 MR. RUPTASH: This individual would be a liaison with our program director for the FM station, go out and seek new talent and make connection with our programming staff to expose this local new talent on our station.
1371 MR. McCALLUM: Would that person have other jobs at the station?
1372 MR. RUPTASH: No. It would be an outside person.
1373 MR. McCALLUM: Like hired as a consultant, is that it?
1374 MR. RUPTASH: That's correct. It would be someone who would go to clubs, go to festivals, make connection and bring information back to our programming department and from there gain exposure on the FM side in that particular music category.
1375 MR. McCALLUM: Thank you. We asked yesterday some of the applicants to describe their fiscal 1999 results because, of course, we don't have the fiscal 1999 results yet. Can you describe how the results have been for 1999 compared to what they were for 1998?
1376 MS SPENRATH: Yes. On the revenue side, it has been constant in radio. We have to remember that we followed two years of 14 and 15 per cent increases, so to expect 15 per cent in a third year in a row would be wishful thinking. It would be nice, but that's where the revenue side is. TV is actually down -- well, down 14 per cent.
1377 MR. McCALLUM: And that has continued into the 1999-2000 fiscal year.
1378 MS SPENRATH: On TV?
1379 MR. McCALLUM: Both TV and radio.
1380 MS SPENRATH: Radio is up and TV is flat.
1381 MR. McCALLUM: So radio is up again slightly from --
1382 MS SPENRATH: For September/October, yes.
1383 MR. McCALLUM: Thank you. How about audience share then doing the same comparison?
1384 MR. RUPTASH: For radio?
1385 MR. McCALLUM: Yes.
1386 MR. RUPTASH: Our audience share remains at 30 per cent. We haven't received the new ratings from this fall.
1387 MR. McCALLUM: Thank you. I have a little bit of problem understanding the 65,000 people that you say are within the service area of the proposed FM station. Would you explain where the 65,000 people come from.
1388 MR. RUPTASH: Well, the 65,050 people are in our central market area as defined by BBM.
1389 MR. McCALLUM: And that's area 8091?
1390 MR. RUPTASH: That's correct.
1391 MR. McCALLUM: I still have some problems. At page 11 of your application where you filled in information about the marketing information, in the 3 millivolt meter contour, you put the population as 27,435 and in the .5 contour you have 44,065.
1392 MR. RUPTASH: That's correct. On the .5 millivolt per meter broadcast pattern, there will still be some listeners outside that, as it's common in the pattern of FM, that will reach all of our CMA.
1393 MR. McCALLUM: In the definition of an FM market as stated in an FM policy for the '90s, Public Notice 1991-11, it's any area within either the 3 millivolt per meter signal contour or the central market area of the community served by the station as defined by BBM, whichever is smaller.
1394 Noticing that the 3 millivolt contour of the proposed station would not encompass all of area 8091, how can one conclude that 8091 is a realistic representation of the market?
1395 MR. RUPTASH: Well, 8091 as defined by the Peace River application in marketplace says that the number can be closer to 100,000. Even in the 3 millivolt per meter contour, that would probably reach over 50,000.
1396 MR. McCALLUM: When I superimpose the contours on area 8091, I notice that they are quite a bit smaller. For example, the contour does not reach Meadow Lake. The contour does not reach -- comes quite a long way from Vegreville. Vegreville is quite close to the border of 8091. The contour seems to include Wainwright, although I'm not so sure about that. I'm still a little puzzled about how you get the numbers.
1397 MR. RUPTASH: Wainwright is out of 8091. It's not in our CMA. We took these numbers from our BBM and we also did a StatsCan review to mirror our broadcast pattern and got those numbers from them.
1398 MR. PETER GRANT: Maybe I can add one point of clarification, Mr. McCallum. I think Mr. Ruptash has indicated that the actual technical ability of people who receive the signal will go beyond the technical contours because people with better antennas can obviously get better reception.
1399 It is important to realize it's the BBM numbers that are providing the viewing share of 30 per cent. That is 30 per cent of all of the diaries that were circulated in the whole 8091 area, whether they were beyond the contour or within the contour.
1400 If it is the case that 70 per cent of out of market tuning is true for that whole area, that is also a reflection of the diaries generally, so that can be repatriated.
1401 In other words, I guess to give a small example, you might expect to see -- if you just looked at the diaries within 8091, it may be that CKSA would be marginally higher than 30 per cent and it might be a little lower than 30 outside. The average is 30 so that makes it an appropriate number to use for the purposes of revenue calculations.
1402 MR. McCALLUM: How far beyond the contour would you realistically expect the signal to go then?
1403 MR. RUPTASH: Seventy miles. Past the contour?
1404 MR. McCALLUM: Past the contour. You are saying 70 miles from the transmitting tower.
1405 MR. RUPTASH: That's correct.
1406 MR. McCALLUM: And the contour extends out about how far in a circle from the transmitting tower then?
1407 MR. RUPTASH: The contour extends maybe 80 miles, 85 miles, not very much more. That would be the additional coverage past the technical brief that we filed.
1408 MR. McCALLUM: The contour itself extends out about 80 miles in a circle. Is that what you are saying?
--- Pause / Pause
1409 THE CHAIRPERSON: Would we like to take a few minutes to get on the common page?
1410 MR. RUPTASH: We will get back to you on that, if we could.
1411 THE CHAIRPERSON: Maybe if we can clarify it now.
1412 MR. RUPTASH: Sure.
1413 THE CHAIRPERSON: I think it will be better. How about a 15 minute break and then we can maybe come back and clear it up.
1414 COMMISSIONER WILLIAMS: If I might, I will just ask one further question for which they could come back with answer from the break as well.
1415 THE CHAIRPERSON: Yes.
1416 COMMISSIONER WILLIAMS: Also on the same page I was looking at in your application, the principal marketing area is defined as being 27,435 persons. Again, I'm having some difficulty reconciling that figure with the 65,000 that you mentioned today. If you could come back with a further answer on that as well.
1417 MR. RUPTASH: Thank you.
1418 THE CHAIRPERSON: So we will be back here at about 25 after.
1419 Thank you.
--- Recess at / Pause à 1010
--- Upon resuming at / Reprise à 1030
1420 THE CHAIRPERSON: We will reconvene and maybe get some clarification on the last issue.
1421 Mr. McCallum.
1422 MR. GRANT: Maybe I can speak to this, Madam Chair.
1423 I will start with technical issues, realizing of course that I'm not an Engineer. I think in working through what the comparisons are, it is certainly the 0.5 millivolt per meter contour. The number in the application is presumably accurate at 44,000 odd. That would be the actual StatsCan identified population within that contour area.
1424 That contour area, if you look at the map, is about 55 kilometres from the transmitter in Lloyd and is roughly circular. We think a useable signal, and of course that is not the same as the 8091 BBM CMA which is a kind of a strange gerrymandered block, which is somewhat bigger.
1425 The real useable signal will probably go further than 55 kilometres. How much is a technical question. Mr. Ruptash suggested 70 kilometres and that probably is a good approximation. That still wont' get you to the full CMA, but it will take you a long way towards the 65,000 that BBM has identified as the 12 plus population in the CMA.
1426 I guess the other thing to note is we really wouldn't need to run the maps. If you take the real signal as taking it out to 70 kilometres -- now, Wainwright is about 80 kilometres I think it is from Lloydminster, so it would be a bit beyond that, but Wainwright has another problem. That is there is a valley effect so the signal, even on a good day, is probably not going to be receivable in Wainwright for that reason just because of where the transmitter is located.
1427 I don't think much turns on this. I think the question put was whether the station would accept the CRTC definition, the smaller definition, of market for the purposes of how the CRTC protects markets. That's completely acceptable to the applicant.
1428 The only issue here is that we do think that the coverage will cover a broader population that will contribute to the revenue side. That's an issue that has nothing to do with the definition of the market for the purposes of which local stations deserve protection and which do not.
1429 Another point to say, Mr. Brown referred earlier to the retail sales for Lloydminster. These were the Financial Post survey market numbers. He mentioned $405 million. That's their estimate for the year 2001. That obviously would be retail sales right in Lloydminster. That isn't going to be counting these other communities.
1430 Last but not least, Madam Chair, you are absolutely right. The Meadow Lake rebroadcaster is in the 8091 area. I'm told it's a low power rebroadcaster of CJNB, North Battleford, and frankly it goes northward rather than southward, so it is not receivable in Lloyd.
1431 Before concluding, I did speak briefly to Glenda about the confusion on the increase in the general administration costs because somehow I couldn't credit my fee to account for it all.
1432 THE CHAIRPERSON: I was thinking you are a rich man.
1433 MR. GRANT: I don't recall having even billed these people yet. There is a simple answer. When we clarified it, it turns out it is accounted for by an increase in the management fee and the building rent for the period in question.
1434 The management fee, Glenda will explain it a bit further, but it was basically after many years at a lower level, it was a tax driven bonus to management who, of course, happened to be the owners as well, so it got reflected as an increase in the management fee.
1435 Maybe you could speak further to that, Glenda.
1436 MS SPENRATH: Yes. Thanks, Peter. I apologize for my confusion.
1437 For corporate tax earnings over $200,000, once you get beyond that point you are out of the small business range into the double taxing unless you have it flowed out to the shareholders. That is the cause for the increase in the management fee.
1438 As far as the rent goes, in my 12 years there, they have never increased the rent on the building. That was the time that we looked at adjusting the rent and it will stay constant now for some time.
1439 I apologize.
1440 THE CHAIRPERSON: Can I just ask one question? The increase in the rent, when I asked if things were going to go down to historical levels, they won't. The increase in the rent will stay.
1441 MS SPENRATH: Yes.
1442 THE CHAIRPERSON: How much -- can you give me a percentage?
1443 MS SPENRATH: How much it will increase year over year?
1444 THE CHAIRPERSON: No. I'm assuming rent will stay the same, but there has been that increase that will be injected into the expenses going forward.
1445 MS SPENRATH: Ten per cent.
1446 THE CHAIRPERSON: Ten per cent.
1447 MS SPENRATH: Yes.
1448 THE CHAIRPERSON: It was 10 per cent of the rent that was increased or is that 10 per cent because the numbers we were using, if you recall, was I think 77 per cent and --
1449 MR. GRANT: No. I think the point is that the building rent would be about 10 per cent of the total administrative costs.
1450 THE CHAIRPERSON: Okay. Thank you.
1451 MR. McCALLUM: Sorry. Just one last clarification might be helpful as well.
1452 What towns or what areas does CKSA let's say solicit and also accept advertising revenue aside obviously from Lloydminster itself?
1453 MR. BROWN: Yes. We get advertising dollars on CKSA-AM from mainly Vermillion on the Saskatchewan side, Lashburn, Maidstone, a small amount of Battleford. That's about it. Our sales out of the district area are not very high.
1454 MR. McCALLUM: So what percentage of your revenues come from areas other than Lloydminster currently from CKSA?
1455 MR. BROWN: District sales are going to be 10 per cent, less than 10 per cent.
1456 MR. McCALLUM: So 90 per cent from Lloydminster itself and 10 per cent from outside.
1457 MR. BROWN: Yes.
1458 MR. McCALLUM: Are you projecting similar patterns for the FM if this is awarded?
1459 MR. BROWN: Yes. It may be even higher in Lloydminster because the FM really wasn't perceived as being able to do a lot of district sales with. It would probably even be higher. At least that anyway.
1460 MR. McCALLUM: Thank you very much.
1461 Thank you, Madam Chair.
1462 THE CHAIRPERSON: Thank you very much.
1463 MR. RUPTASH: Thank you.
1464 THE CHAIRPERSON: Mr. Secretary.
1465 MR. KRUSHEN: Thank you, Madam Chair.
1466 The next application this morning is by Peace River Broadcasting Corporation Limited for a broadcasting licence to carry on an English language FM radio programming undertaking at Lloydminster. The applicant proposes a pop/rock music format.
1467 THE CHAIRPERSON: Go ahead when you are ready, gentlemen.
PRESENTATION / PRÉSENTATION
1468 MR. TERRY BABIY: Madam Chair, Members of the Commission and Commission staff, we appear before you full of excitement and enthusiasm for a radio station that we believe will be an important addition to the local radio dial and which will fill the void in Lloydminster, Wainwright, Vermillion, and surrounding area.
1469 I'm Terry Babiy, CEO and General Manager for Peace River Broadcasting Corporation. It's my pleasure to introduce our panel. Brad Edwards, Manager for Peace River Broadcasting.
1470 Michael Godin, a consultant on our team who is a veteran of the Canadian music industry and when Vice-President of Artists & Repertoire for A&M Records, discovered and signed Bryan Adams, Paul Janz and other recording artists. He is also a former Director of CARAS, the Canadian Academy of Recording Arts and Sciences.
1471 Terry Wainman from the accounting firm Grant Thornton in Edmonton and Dick Sienko, President of Target Broadcast Sales, based in Toronto.
1472 Peace River Broadcasting is a Canadian independent rural broadcaster currently with two broadcast undertakings in Peace River, Alberta, and also serving the region, including two licences in High Level and transmitters in La Crete, Fox Creek and Rainbow Lake.
1473 We are not a division of a major radio station chain, but a small, locally owned, financially sound broadcaster, strongly committed to providing high quality programming to serve the needs of small towns and surrounding rural communities.
1474 This is our goal: to serve Lloydminster, Wainwright, Vermillion and the surrounding region with an innovative and fresh sound with a contemporary pop/rock music format.
1475 We are not proposing a duplication of any other existing service in the entire area, but rather a brand new voice to add to the little, if any, diversity currently available and resulting in minimum, if measurable, impact on existing radio stations in Lloydminster and surrounding area.
1476 Stats Canada information for 1996, the last year such facts were available, indicates the population of Lloydminster then was 18,953. Between 1991 and 1996 there was a 9.6 per cent population growth rate. The Lloydminster Economic Development Authority estimates the current core population at just over 20,000, with the trading area totalling approximately 85,000.
1477 Lloydminster has a healthy combination of industries, including agriculture, oil and natural gas, manufacturing and retail operations, and all the amenities of a regional centre and enjoys a relatively low unemployment rate.
1478 Lloydminster has two local newspapers, the Lloydminster Daily Times and the Meridian Booster, both now under single ownership. There are currently two television stations and one radio station, all with one owner.
1479 We firmly believe that the 18 to 49 demographic is underserved and thus we feel that Lloydminster deserves to have a choice in radio programming, provided by a different voice, under separate ownership. That is why we are here before you today.
1480 MR. BRAD EDWARDS: First and foremost, the target audience for our proposed new station is the 18 to 49 pop/rock demographic, currently an underserved segment of the community. Consequently, everything that we intend to offer the listener will be new and innovative as the first FM radio station in the area and one with a pop/rock format.
1481 I have prepared a 90 second sound clip to provide just an example of our pop/rock format, different from anything else in this otherwise country music marketplace.
--- Audio Clip / Clip audio
1482 MR. EDWARDS: In addition to an entirely new source and sound of music on FM, we believe that our target audience is hungry for the music of today and tomorrow. You could almost say that "the hills and valleys will be alive with the sound of new music".
1483 We know that there is a good quantity and variety of music being recorded by talented Canadian artists with worldwide potential. We will support that knowledge by providing an exciting music mix to include 40 per cent Canadian content. We will also step up to the plate with a bold and innovative combination of talent search, music festival and music industry conference with our Slam Jam Series.
1484 I would like to ask Michael Godin to expand on this series.
1485 MR. MICHAEL GODIN: Thank you, Brad.
1486 We will conduct an annual local and regional talent search for the stars of tomorrow, provide these developing and aspiring artists with the opportunity to submit demo recording for judging by Canadian music industry professionals.
1487 The finalists will perform in a series of live concerts in a local venue, all culminating in a winner being chosen during a local music industry showcase and Internet simulcast with our station and on any other station in the world interested in airing this final showcase performance.
1488 There will also be a companion music industry conference running concurrently. It is our express intention to work closely with the leading western Canada music industry organizations, including the Alberta Recording Industry Association, the Saskatchewan Recording Industry Association, as well as the newly formed association of regional music organizations from the three Prairie provinces.
1489 We will support FACTOR in their fine work and dedication to Canadian musicians with an annual cash contribution. We will tap into the expertise of the Canadian music industry's infrastructure, including recording company Artist & Repertoire representatives, artist managers and booking agents, all in order to provide the high calibre event for the annual Slam Jam Series.
1490 Naturally, we also plan to take full advantage of the latest Internet technology and we will be Lloydminster's live real voice to the world. In addition to featuring our station's live audio, our web site will incorporate links to the web site of every Canadian recording artist available, no matter what their music format may be.
1491 It will also bring Lloydminster and the region together with the rest of the world as they first become acquaintances, then friends, via our community chat room to discuss music, education, health, safety and other timely issues.
1492 MR. EDWARDS: From the perspective of local news, Peace River Broadcasting has a self-designed mandate to provide 50 per cent local news coverage. We are also one of the very few broadcasters that specialize in play by play hockey at a community level. In the Peace country, we do the play by play of several hockey teams and we have a letter of intent between Peace River Broadcasting and the Lloydminster Blazers to provide live play by play coverage.
1493 We also plan to hold a community-wide annual auction to assist 20 community organizations with a goal of raising an anticipated $100,000 over a two day period.
1494 Time does not permit me to delve further into our various special features planned throughout the day. However, they are outlined and included as part of our written application. I believe it is quite evident that we are very enthusiastic to bring these new concepts to the entire Lloydminster area.
1495 MR. BABIY: In order to obtain a clear picture of the local business climate and mood, we undertook a community market study. Seven hundred and forty business were sent a survey. Over 510 responded with over 95 per cent providing positive feedback and support for our application.
1496 All felt the market was underserved and 86 per cent of those people would like to have an FM pop/rock station and want a more competitive broadcasting environment than currently available as the existing broadcaster holds all three radio and television licences.
1497 Peace River Broadcasting contracted the services of RCI Marketing to undertake a profile of the community. I would like to ask Brad Edwards to speak about this survey.
1498 MR. EDWARDS: One thousand, one hundred and twenty-six households were contacted in Lloydminster and surrounding municipalities by RCI Marketing. It was very evident that the existing broadcaster enjoys a very strong level of listener loyalty: CKSA at 45 per cent, CKKY at 15 person and CHLW with 6 per cent. The remaining 34 per cent were listening to out of market stations. Interestingly, some of these stations included Z99 Red Deer, Power 92 Edmonton and even 66CFR Calgary, all with a pop/rock music format.
1499 When asked their music format preference, respondents indicated the leading choices were country at 40 per cent and pop/rock at 37 per cent. By offering a local product, Peace River Broadcasting would undoubtedly alter local format preferences, but at the same time would assist in repatriating the out of market tuning.
1500 MR. BABIY: As part of our written submission, we included a letter from Linda Samletzki, President of WTR Media Sales, Calgary and Edmonton. One interesting comment contained in that letter was that a number of advertising agencies indicated, and I quote:
"-- the Lloydminster market is often tight for inventory for both radio and television over the course of the year. A new pop/rock station would increase radio listeners in the Lloydminster area resulting in agencies giving more consideration to increased radio usage."
1501 Ms Samletzki concluded with:
"I believe a new pop/rock format in Lloydminster will be an asset to radio overall, as all listeners will have a local station and format of their choice, and advertisers will be able to better target their advertising messages. Since the existing radio station is a country format, not all the potential audience is reached and thus a new audience would be delivered and a new (advertising) budget would be created for this audience."
1502 Madam Chair, while preparing our submission, we researched the potential impact on CKSA and CKKY, the two country music stations currently serving the area. We concluded that the area can support one new FM station with little, if any, impact on existing services.
1503 Country music listeners have a very strong loyalty to their format and stations. We believe the bulk of our listeners will be new local listeners who will be able, for the first time ever, to have a choice in their music programming on local radio. In fact, there is reason to believe that our presence in the marketplace would stimulate an increase in national advertising revenue.
1504 Mr. Dick Sienko, President of Target Broadcast Sales, brought evidence for this to our attention and I would ask Dick to elaborate.
1505 MR. DICK SIENKO: Target Broadcast Sales represents a number of western Canadian radio stations, including five similar type farm markets. In September 1995, my company took over national advertising representation of Melfort and Yorkton, Saskatchewan, two markets similar to Lloydminster. Our sales experiences prove that farmers and advertisers of agricultural products prefer a country format.
1506 FM contemporary formats are not the primary consideration for farm advertisers. They will buy the format if there are no country stations in the area, but the preferred format is still country. That said, there are advertisers who would like to reach beyond the country music listener.
1507 Accordingly, I believe a new pop/rock format in Lloydminster will be an asset to radio overall as all listeners will have a local station and format of their choice and advertisers will be able to better target their advertising messages.
1508 There are potential accounts in this market that are not advertising on local radio. This is due to the fact that there is no station for the 18 to 49 pop/rock demographic. Once a new contemporary FM station is established, I believe new advertisers will surface, resulting in new business being generated in the market, not a significant amount of transferred business from the existing services.
1509 MR. BABIY: This was our experience in Peace River as well. When our new FM contemporary radio station went on the air, existing business on the AM country station did not decrease. Several of the farm accounts did add FM to their media purchase, but not at the expense of the AM.
1510 We also noted that several new advertisers added the FM radio service to their buy because they were of the opinion that finally there was a station that served the needs of the 18 to 49 demographic, their target audience.
1511 We have received letters of support for our regional radio service from many businesses and inndividuals, not only in Lloydminster, but also from the regions. An example of the overwhelming support for a new FM radio station includes a letter from Judy Woyewitka, Mayor of the Town of Vermillion, who commented:
"At the present time we do not have an FM radio station providing service to this area of the province. We feel this is an area that needs to be addressed for the citizens ... we would welcome the opportunity to have Peace River Broadcasting Corp. Ltd. as a member of our community."
1512 Vicki Seabrook, Administrator for the Town of Lashburn, wrote:
"The Town of Lashburn formally gives its support for an FM station delivering rock music. A more competitive broadcasting environment would be beneficial to the market.
1513 Madam Chair, we are a dedicated group of broadcast professionals that believe, as rural broadcasters, we know and understand how to serve a region. We are committed broadcasters who have studied Lloydminster and the outlying region and we believe that we should be granted the licence. We know that we will serve the area well.
1514 We have done our homework to the best of our ability. We researched the market utilizing the expertise of RCI Marketing to establish a music profile of Lloydminster and surrounding municipalities.
1515 We conducted a survey of 740 businesses in Lloydminster which generated over 510 positive responses for our proposed new FM radio service. We also engaged the services of Research Innovations to conduct a survey of the local business community to ascertain the advertising revenue potential.
1516 We sought the expert opinion of both WTR Media Sales Inc. and Target Broadcast Sales to provide an assessment of the Lloydminster market area.
1517 We engaged the services of Canadian music industry veteran, Michael Godin. His former tenure as both National Director and Chair of the British Columbia chapter of the Canadian Academy of Recording Arts and Sciences, combined with his experience in the record industry, enables him to provide us with input and assistance in the preparation of our very ambitious Slam Jam Series.
1518 We obtained the endorsement and support of community leaders and individuals from the entire region.
1519 Madam Chair, we know that the market can sustain one new licence and it should be granted to Peace River Broadcasting, an experienced rural broadcaster, because we offer a new, unique and alternative news voice in a community where there is only one owner controlling both local newspapers and two owners of the existing television and radio licences in Lloydminster and Wainwright. We will increase the diversity of ownership in the marketplace.
1520 We will bring a new music format to the region that is not currently available on a local basis. We will refocus radio listening locally. We will repatriate out of market advertising back to the local level.
1521 We will bring a fresh and innovative approach to radio in Lloydminster and surrounding region and will develop local and regional talent and launch it onto the national and world stage.
1522 We will fill a great void in the market with a minimal impact on the audience or revenues of the existing local services. We will be a positive voice for the 18 to 49 demographic in the community.
1523 We submitted our application to the Commission under the belief that given the current size of the population and the projected growth for Lloydminster proper, only one new FM station could be fully supported. The community of Lloydminster has matured to the point that it can support one new station. There is precedent for this.
1524 As included in our written supplemental, the cities of Vernon and Grande Prairie became competitive markets at the 20,000 population level. We also know, as evidenced by the decision regarding Kelowna, the Commission is reluctant to over-license a market.
1525 To grant more than one new FM radio licence, which would result in a total of five broadcast licences -- two television, one existing AM radio and two new proposed FM licences -- in Lloydminster proper would set a major precedent.
1526 From the moment Peace River Broadcasting made the decision to apply for an FM licence for the Lloydminster area, we made a commitment to Lloydminster and the surrounding region for the long term. Should the Commission decide to grant two new licences, Peace River Broadcasting will live by that decision.
1527 Madam Chair, just an aside. We have attached financial figures reflecting the two station scenario. Let me just say our Accounant has discovered a phrase called "razor thin doable" The new numbers from Sask-Alta may rephrase that to maybe something else.
1528 In closing our presentation, please permit me to repeat that we are committed to providing Lloydminster and the region with innovative, high quality, responsive and responsible broadcasting that the community will embrace, enjoy and support and one that the Commission can and will be proud of.
1529 Madam Chair, as the Commission has indicated a desire to retain niche broadcasters, we sincerely hope that the Commission agrees with our position and grants only one new FM radio licence and that licence be granted to Peace River Broadcasting, affording us the opportunity to serve the needs and clearly expressed desires of the listening audience and businesses of Lloydminster and surrounding region with the type of local radio programming they desire and, if I may add, deserve.
1530 Madam Chair, we sincerely appreciate this opportunity to address the Commission.
1531 Thank you.
1532 THE CHAIRPERSON: Thank you. I will ask Commissioner Williams to ask you questions.
1533 COMMISSIONER WILLIAMS: Good morning. I am going to start the questioning off with a similar question as we have asked everyone that has appeared before us at this hearing.
1534 As you know, each of the Commission's recently released decisions for Victoria, Kelowna and London contained an introductory statement which outlines the specific factors that the Commission considers to be generally relevant to the evaluation of competitive applications under the commercial radio policy.
1535 Could you take this opportunity to address these factors with respect to your application and which factors do you consider to be the most relevant with respect to the Lloydminster radio market?
1536 MR. BABIY: Commissioner Williams, before I address that question, what I would first like to say is it was a great experience for Commissioners and small broadcasters alike to meet at the open forum at the CAB in Montreal. The one particular item that caught my attention was that the Commission in these days of consolidation has certainly defined my role in the industry, that of an independent broadcaster, with the phrase "niche player". In any case, you asked my opinion.
1537 I believe it is very healthy for broadcasters and listeners in general that the CRTC is interested and concerned about Canadian talent development commitments, Canadian content, diversity of news voices, diversity of local ownership, the existing voids in markets for proposed services, the economic viability of a market or region to support and sustain a new licence or licences and the ability of existing and proposed broadcasters to operate in a competitive environment.
1538 We have addressed all these concerns in our supplementary. The one I think that pertains most to the Lloydminster market is the scenario economic viability of a two licence approval scenario.
1539 COMMISSIONER WILLIAMS: Okay. Thank you. How did your organization arrive at the conclusion that a pop/rock format would be the most successful in Lloydminster? I know you have spoken to some of it in your presentation, but if you would care to elaborate.
1540 MR. BABIY: Brad Edwards.
1541 MR. EDWARDS: What I will do is just run through quickly the makeup of this particular area in question which I think in the end will give us the answer that we are looking for.
1542 Sask-Alta, for instance, have indicated that they receive only 30 per cent of the radio tuning as shown in the fall 1998 BBM. They have commented that "there is more than enough out of market tuning by itself to support two more local radio stations".
1543 The same report that they have used, BBM data area 8091, really shows that 57 per cent of the rated hours tuned is to country format radio stations. Wainwright and St. Paul, two unmeasured stations, are part of the "others" tuning.
1544 Assuming 50 per cent of the "others" hours tuned would be to these two stations, the percentage of country tuning now reaches approximately 64 per cent. We estimate that of the remaining out of market tuning, 20 plus per cent goes to pop/rock stations which we conclude is enough for one new FM station, but certainly not two.
1545 To answer the question, country music in general appeals to the 35 to 54 demographic. If we are looking at 64 per cent of this area tuning to country music first and foremost as their format preference, this is indicating to us in our conclusion that the 18 to 49 demographic, being more likely to tune to the pop/rock format, would tune to this type of format. That's how we came to the conclusion that pop/rock format was the direction that Peace River Broadcasting should go.
1546 We also, as we mentioned in our opening presentation, commissioned a survey of the marketplace through RCI Marketing. The results that we received from RCI Marketing confirm these results that we were making reference to this morning of 64 per cent country tuning, so we think there is a significant underserved marketplace in the 18 to 49 pop/rock demo.
1547 COMMISSIONER WILLIAMS: Thank you. This next series of questions will seem somewhat repetitive, but they are trying to focus in on different parts of what you just said.
1548 Could you explain why the audience share projections for the proposed station in the Lloydminster market which you provided to the CRTC in your June 21, 1999, letter showed a decline from year one to three. Is this due to the anticipated supernormal tuning during the first two years due to a novelty factor or could you give us some --
1549 MR. EDWARDS: I have been a part of station sign-ons on two other occasions in my career. There is a novelty factor. I think there is the curiosity of even the country listeners to find out what is happening in their community.
1550 I think initially the market share will skew itself from the first to second year, but I think you pretty much answered the question. I would definitely say it would have to do with the a novelty factor of a new service in the community, followed by a levelling off of that market share.
1551 COMMISSIONER WILLIAMS: In terms of out of market tuning, it's relatively high in Lloydminster. Our analysis shows that the most popular format in Lloydminster, as we all agree, is country, followed by a full format service station serving an older demographic. To what degree was tuning to out of market stations included in your analysis of that?
1552 MR. EDWARDS: If I understand that question correctly, we are talking the overall numbers.
1553 COMMISSIONER WILLIAMS: Yes. When you looked at tuning to out of market stations, how did you include that in your analysis?
1554 MR. EDWARDS: Those were taken directly from BBM fall 1998 and included all-inclusive in the Lloydminster central market.
1555 COMMISSIONER WILLIAMS: From which out of market stations would you propose your station would repatriate tuning? You have listed some in your Calgary --
1556 MR. EDWARDS: Regina had a strong showing, CKCK Regina, Power 92 Edmonton, Z99 Red Deer that I made reference to earlier. Those seem to be the three specific markets where a majority of the out of market tuning was going to be specifically related to the proposed format.
1557 COMMISSIONER WILLIAMS: Okay. A comparison of the advertising revenue projections which you submitted for your proposed Lloydminster station and comparing those with those provided by Sask-Alta indicates that your projected advertising revenues are considerably higher. Could you please explain briefly the method by which you developed your advertising revenue projections?
1558 MR. BABIY: I will let Terry Wainman deal with that one.
1559 MR. TERRY WAINMAN: Good morning.
1560 COMMISSIONER WILLIAMS: Good morning.
1561 MR. WAINMAN: The Peace River Broadcasting group did an initial market survey themselves doing face to face interviews with 90 businesses. Seventy of those 90 businesses had local budgets. The balance either had national or did not know.
1562 This sample resulted in total dollars of roughly $200,00, the 70 out of the 90. According to Peace River Broadcasting, 360 businesses licensed in the area would be a reasonable estimate of the numbers that would be buying radio advertising.
1563 Based on the 90 businesses that were surveyed and the 360 of the total that would buy advertising, we multiplied the $200,000 local revenue by a factor of four, based on that same ratio, for a total local advertising of $800,000 in the immediate Lloydminster because that's where they did their market study.
1564 They felt that there would be additional regional dollars. They did not have time to specifically market the outlying regional area, but on the basis of a rough 90 to 10 per cent ratio, they included an additional $100,000 worth of advertising for the regional area.
1565 From the WTR media sales and the target broadcast sales national rep information, there was an additional $300,000 worth of national sales there. Those combined totals were $1,200,000.
1566 COMMISSIONER WILLIAMS: If your revenue projections turn out to be optimistic and you can only achieve two thirds or 50 per cent of the amounts projected, do you think your station can survive as a stand alone operation in Lloydminster?
1567 MR. BABIY: Commissioner Williams, is that in a one or two licence scenario?
1568 COMMISSIONER WILLIAMS: That's in a one licence scenario.
1569 MR. BABIY: Yes, it can.
1570 COMMISSIONER WILLIAMS: I think you said earlier razor thin doable or something were your comments.
1571 MR. BABIY: That was the phrase in a two licence scenario.
1572 MR. WAINMAN: I'm sorry, if I might just add, Mr. Williams. Peace River Broadcasting contracted an independent market survey company by the name of Research Innovations. We have copies of that survey if the Commissioner would like.
1573 They contracted Research Innovations to reaffirm the original client numbers that they had based on their study as well as to assess the potential impact if two licences were granted. The results of the survey indicated that in a one licence market that they could expect $1,250,000, so roughly $50,000 more than what Peace River Broadcasting initially estimated through their own study.
1574 Research Innovations also surveyed a two licence market. In that two licence market the research study indicated that potential clients that would spend their FM advertising dollars would do as follows: Four per cent indicated they would decrease their proposed FM advertising budget; 84 per cent would not expand their proposed FM budget further and 12 per cent would increase their proposed FM budget to accommodate the second FM station.
1575 The resulting two FM station revenue would be nearly $1.4 million. Research Innovations further concluded and I quote:
"Peace River Broadcasting could expect at least half and up to 63 per cent of the total money spent on FM rock/pop station advertising." (As read)
1576 Adopting a median figure of 57 per cent under the two new FM station scenario, the total revenue available to Peace River Broadcasting would be about $800,000. If you refer to the revised projections that we included in the initial material, that's where the $800,000 worth of local estimated revenues would come from in the two station scenario.
1577 Our analysis of that revised two station scenario indicated this would not be a healthy financial picture. There appears to be very little room for debt servicing and debt repayment. It would also necessitate a reduction in staff size which we calculated in that projection, a reduction of three staff from the initial 15 that was in the original application down to 12.
1578 The end result is that although it's a profitable venture with two radio stations, the situation is, as Mr. Babiy has indicated, we believe razor thin doable. If you look at the cash flow projections over the five year period under the two new station scenario, there is very little room for fluctuation in either revenues or expenditures over that period of time with a two new station scenario.
1579 COMMISSIONER WILLIAMS: Okay. Thank you. You can certainly file a copy of the results of that information with the Secretary so that we have them on file.
1580 Your supplementary brief --
1581 THE CHAIRPERSON: If I could.
1582 COMMISSIONER WILLIAMS: I'm sorry.
1583 THE CHAIRPERSON: I want to withdraw that until I consult with counsel as to the filing of that because it is new information that the other side hasn't seen. That's the issue.
1584 COMMISSIONER WILLIAMS: I stand corrected.
1585 Your supplementary brief notes that the two main broadcasters in the market are CKSA and CKKY which are both country and western stations. I guess I'm curious as to why you didn't mention CJNB and its rebroadcasting transmitter, CJNS Meadow Lake, as having a significant listening audience in Lloydminster.
1586 MR. EDWARDS: Initially in putting our presentation together, we were basing our findings on the fall 1998 BBM and, to my knowledge of the Lloydminster area that is made reference to by Sask-Alta and ourselves, they do not play a significant role, if any, in hours tuned and, therefore, weren't a consideration.
1587 MR. BABIY: Also those numbers that you were referring to were off the RCI Marketing survey and not BBM.
1588 MR. EDWARDS: That is correct as well. Through the RCI Marketing research that we did, we gave several choices of what would constitute a respondent's first choice for radio in the Lloydminster market. Those results are included in our supplemental brief.
1589 The stations that you are referring to in the repeater station did not reflect in the RCI Marketing that was conducted.
1590 COMMISSIONER WILLIAMS: Okay. Thereafter it states that 15 per cent of a new station's revenue would come from CKSA and 7 per cent from CKKY. These estimates were based on interviews with businesses in Lloydminster.
1591 From the interviews, how did you arrive at the 15 per cent figure for CKSA? Did you ask specific questions and how they would reallocate their current advertising budgets? Did the participants in the interview indicate that CKKY is currently soliciting advertising in Lloydminster? There are the three questions in there.
1592 MR. BABIY: Okay. I will see if I can deal with them.
1593 COMMISSIONER WILLIAMS: Okay.
1594 MR. BABIY: There is a sample of the questions that we had asked and that sample form is in there. We asked the people what their present advertising budget is, what their proposed advertising budget would be if a new FM station arrived in the marketplace and then asked them where those dollars would come from. They just simply went through the exercise with us.
1595 We then to reaffirm those figures contracted Research Innovations to go back to those same clients to reaffirm our numbers and also provide the two licence scenario. Those figures are pretty close. Maybe Terry can expound on that.
1596 MR. WAINMAN: The Research Innovations study indicated that the source of funds for the new FM rock/pop station advertising would be as follows: Expansion of their advertising budget, 45 per cent; restructuring print budget, 21 per cent; reducing direct mail budget, 6 per cent; from the CKSA budget, 13 per cent; from the CKKY budget, 6 per cent, and from other advertising budget, 8 per cent.
1597 COMMISSIONER WILLIAMS: Okay. Thank you. We have heard your comments on the viability of two FM radio stations. In the event that licences were granted to both applicants, would you be able to compete against the existing broadcaster and would you be able to realize your advertising revenue projections under this scenario?
1598 MR. BABIY: I guess what concerns me, Commissioner Williams, is the figures that CKSA just put forward this morning which are substantially less. I must say who do I trust more, the broadcaster that's in the market or a research company we contracted out of Edmonton?
1599 I would think it would be extremely difficult, especially if what the research company says could be a 50/50 split. Our goal is to run not a bare bones repeater operation based out of Peace River with duplication of service. We intend to run a full radio station with announcers, three news staff, creative writers, traffic, promotions people. We want to run the full gamut. That would certainly tie our hands.
1600 I know of another radio station in the market, not in our market but another business, who is doing revenues of around $450,000 to $500,000. He is doing at a consistent loss of $50,000 to $60,000 per year and is running a staff of five. It shows in his air time. That's strapping your hands.
1601 COMMISSIONER WILLIAMS: We note that you have agreed to participate in the Canadian talent development plan created by the Canadian Association of Broadcasters representing contributions of $400 a year. In addition, you plan to devote $42,200 to the Slam Jam Live series as well as two thousand dollar broadcasting scholarships.
1602 Your application further indicates that you propose to generate $15,000 for the Slam Jam Live series from a venue sponsorship and two corporate sponsorships. Could you please confirm that the $15,000 will be obtained through the venue sponsorship and the two corporate sponsorships would not result in any out of pocket expenses for Peace River Broadcasting.
1603 MR. BABIY: The Slam Jam series is Brad's baby and I would love him to comment on that. We certainly worked with it with Michael Godin. They know that inside out.
1604 MR. EDWARDS: Could I have that question repeated for me, please?
1605 COMMISSIONER WILLIAMS: I guess we would like some commitment that the $15,000 that would be obtained through venue sponsorship and the two corporate sponsorships would not result in any out of pocket expenses for Peace River Broadcasting.
1606 Maybe I will just go a little further. This being the case, the costs associated with the venue sponsorships and the two corporate sponsorships totalling $15,000 would be considered indirect contributions. In light of this, would you still agree to devote this sum, $15,000 on a yearly basis, but as indirect contributions to the Canadian talent development plan?
1607 MR. BABIY: Under that case, that would just be a simple yes.
1608 COMMISSIONER WILLIAMS: I guess we have also reviewed your contributions relating to the Slam Jam Live series and note that the only cash from the station representing $6,200 would qualify as a direct contribution to CTD. We note that you are proposing to invest $21,200 a year to produce a CD featuring ten artists in the Slam Jam Live series.
1609 Your application states that proceeds from the sale of the CD will be disbursed to the organization supporting the project. Could you please provide an indication of the proportion of the expenses associated with producing the CD that you expect to recoup and would you be retaining any of these funds for your organization?
1610 MR. BABIY: The funds that would be going from the sale of the CD would be going totally to support artists. Whatever is a shortfall will come from station revenues.
1611 COMMISSIONER WILLIAMS: Okay. Few radio stations in Canada, if any, are operating under a condition of licence requiring 40 per cent Canadian content. Do you anticipate any difficulties in meeting this condition of licence in terms of availability of music or its impact on your repeat factor?
1612 MR. EDWARDS: Not at all. The two stations that I'm responsible for, for licences for two stations for Peace River Broadcasting, one a contemporary full service country station and a format very similar to the proposed format that we are presenting to the Commission today currently run at a corporate mandated level, 35 per cent which took effect January 1 of this year is the Commission's number.
1613 Our corporate mandate is 38.5 per cent. We have currently being running on that since January 1. We are looking at a difference of 1.5. No, there is no problem with it. I think we are very close to that line as it is.
1614 In terms of the availability of Canadian artists, the industry, and I think Michael Godin could certainly elaborate a little more on this being directly involved in the industry, is more vibrant now than it ever has been, going back to the fifties, the sixties and early seventies when Canadian content first took effect.
1615 Canada is on the world stage and, as was indicated yesterday in discussion, many of the top artists currently on the international charts are Canadian.
1616 MR. MICHAEL GODIN: If I could just add to that for a second.
1617 MR. EDWARDS: Yes.
1618 MR. GODIN: Historically we look at what is now considered today oldies radio, but was then current in the late fifties. You had a very tiny handful of Canadian recording artists, whether they were maintaining their base in Canada or internationally as their location, irrelevant as to whether they are actually signed to record companies in Canada or the United States.
1619 You had a relatively small number of Canadian recording artists available. Today, as an oldies format, that very small number is almost artificially higher in terms of being able to -- requiring, of course, the repetition factor -- than what was perhaps the accurate reflection of the time.
1620 In 1999, that is not the case whatsoever. You have got independent Canadian record labels, you have got the international major record labels and you have got the independent self-releasing artists to choose from. There has never been that kind of choice before. There is no problem today.
1621 COMMISSIONER WILLIAMS: Okay. Thank you. This may seem a little redundant, but how would this conditional licence affect the business plan for the proposed station compared with a conditional licence requiring 35 per cent Canadian content?
1622 MR. BABIY: It should have no impact whatsoever.
1623 COMMISSIONER WILLIAMS: Thank you. Well, that concludes my questions certainly for now. I turn it back to the Chair. Thank you.
1624 THE CHAIRPERSON: Commissioner Noél?
1625 COMMISSIONER NOÉL: No questions.
1626 THE CHAIRPERSON: Mr. McCallum.
1627 MR. McCALLUM: Just a couple of clarifications, if I may. On the Canadian talent development and CD sales, obviously you would incur some expenses to produce the CDs I take it.
1628 MR. BABIY: Yes.
1629 MR. McCALLUM: In the sales of the CDs, where would the cash go to that you receive or that is received? Let's put it that way.
1630 MR. BABIY: You would like to know which groups, whether it be FACTOR or Saskatchewan?
1631 MR. McCALLUM: No. I guess what I'm trying to get at first of all is does the total amount of the receipts from those sales go to support the artists or is it a net figure, net of the expenses to produce those CDs that goes to them, and how much would that be? What I am trying to get at is it a total amount or is it the net amount or what?
1632 MR. BABIY: We put this together. It was the net amount. It's the net amount.
1633 MR. McCALLUM: And what are you estimating to be the net amount?
1634 COMMISSIONER WILLIAMS: It was roughly in the neighbourhood of $10,000.
1635 MR. McCALLUM: I think what you did was you projected $21,000 as the CD sales. What I hear you now saying is the net amount is approximately $10,000 and that net amount of $10,000 would be devoted to the local artists. Is that correct?
1636 MR. EDWARDS: I think we are confusing the issue here. It's my understanding, and certainly Terry can jump in and correct me if I'm wrong, that total proceeds initially when we put this project together, total proceeds of CD sales was being turned directly back into the arts and entertainment locally and to the artists.
1637 MR. McCALLUM: I take it if your commitment were a condition of licence, you would accept that as a condition of licence.
1638 MR. BABIY: Oh, certainly, yes.
1639 MR. McCALLUM: Just your view on what amount of cash direct would that be for a condition of licence?
1640 MR. BABIY: It would be a multiple of -- the $42,400 is the --
1641 MR. McCALLUM: No, I'm sorry. Having responded that certain of these are indirect, the corporate sponsorship and the venue sponsorship which is $15,000 is indirect, I'm just trying to get at the amount of the direct.
1642 MR. BABIY: Then they would have to come off. We were looking at taking that money and putting it into this project as revenue generation for this project and that money would not go to the revenues of the radio station. It would go to the revenues of the project.
1643 If we secured a major sponsorship for, let's say, $5,000 that sponsorship money would go to the Slam Jam series.
1644 MR. GODIN: If I could also jump in for a second, Terry. This CD is in fact part of the Slam Jam series which incorporates the live talent search, the culmination of the winner, plus the music industry showcase.
1645 Our plan is to in fact put on a music industry conference for the Lloydminster and the entire surrounding region to incorporate expertise from the booking agent side, from the songwriting side, from the record company side, to bring the Canadian music industry to Lloydminster to provide Lloydminster and the surrounding area with the opportunity to share, learn and grow from the experts in the industry, from songwriters, from performers, from developing managers, et cetera.
1646 MR. McCALLUM: Thank you. Again, we asked the other applicant some questions about the population figures within the central market area. I wondered if we could have your views on those figures. In particular, could you assist with -- on page 2 of your presentation today, you said the total trading area population is about 85,000.
1647 In your application in the marketing information section at page 12, you put approximately 32,000 population as within the 3 microvolt per meter contour, about 57,000 within the .5 contour and your principal marketing area about 32,000 persons. Can you assist with reconciling those figures?
1648 MR. BABIY: Certainly. The first figure we are talking about is what people shop, trade, do business in the city of Lloydminster. That doesn't necessarily mean we are going to be reaching all those people in the 3 millivolt, .5 millivolt contours. Those numbers are Canada Census numbers that are in our defined region as supplied to us by D.E.M. Allen as well.
1649 MR. McCALLUM: So you are relying on the census numbers. Is that what you are saying?
1650 MR. BABIY: Those are census numbers. We are not claiming that we are going to reach 85,000 people. That's just what the Lloydminster trading area is according to the Lloydminster Economic Authority.
1651 MR. McCALLUM: I see. Perhaps you can explain then also at page 5 of your presentation today, you said you sent out surveys to 740 businesses. Can you say how many of those were within Lloydminster itself and how many were outside Lloydminster and also where outside?
1652 MR. BABIY: The majority, and I don't have an exact percentage, were from Lloydminster. There was representation from Wainwright, from Vermillion. Those are the only two areas that we also sent surveys to.
1653 MR. McCALLUM: I see. Does that apply also to the 1,126 households?
1654 MR. BABIY: That would be the RCI Marketing. I will let Brad answer that.
1655 MR. EDWARDS: The 1,126 households that you are making reference to, what we tried to do is get a true representation of the greater Lloydminster area. The 1,126 households is not entirely Lloydminster, no.
1656 MR. McCALLUM: What else does it include besides Lloydminster?
1657 MR. EDWARDS: St. Paul, Vermillion, Wainwright.
1658 MR. BABIY: Maidstone, Lashburn, some of the smaller Saskatchewan communities.
1659 MR. EDWARDS: I think that covers the core area that was surveyed.
1660 MR. McCALLUM: So you anticipate getting into the town of Wainwright, for example.
1661 MR. BABIY: Yes.
1662 MR. McCALLUM: Would there be any local programming aimed at Wainwright?
1663 MR. BABIY: Our philosophy on local programming would be to program not just to Lloydminster, but the entire region. There certainly would be news issues of Wainwright. Those listeners who are pop/rock listeners would certainly be participating in our station features and promotions and contests.
1664 It is a regional theme that we are doing. I think that would be most beneficial for Lloydminster to be a city not just of the city, but representative of as close as we could get to their trading area.
1665 I think that would be the healthiest situation for the businesses for their return on investment on our station as well as the -- I will be ashamed to ignore all that rural audience that has said "Look, we want a choice too", and that's why we went with the larger signal, chose a different tower location other than perhaps the one that Sask-Alta was kind enough to offer to us.
1666 MR. McCALLUM: I will ask a question with two perhaps scenarios. If the Commission had a concern about getting into Wainwright, would you have any difficulty if this application were approved in scaling back the contour so that they would not reach Wainwright, at least the theoretical contours?
1667 MR. BABIY: I think that would be a huge disservice to that community. I think the people of Wainwright would have a problem with that, that those folks that are served by country and western stations would feel rather betrayed since we put that into our application to be a regional radio station. I think that would be a complete betrayal of those smaller communities in the region. I would caution the Commission on putting that as a condition of licence for the sake of the community.
1668 MR. McCALLUM: I will ask it a slightly different way. If the Commission again had concern and it wished to impose a condition of licence that the new station not solicit advertising in Wainwright, how would the proposed station react to that?
1669 MR. BABIY: Well, let me answer it this way. We have a radio station that is in our coverage area in Peace River that way back when it first signed on had that condition, it would not solicit in Peace River. Their van is consistently in town. That doesn't bother us because we know -- we are going to have calls from a client. Are we going to say to the folks in Wainwright "The client called us. We have to go down and see him. He phoned. We didn't solicit, he phoned so we sent our station vehicle there to take up the cheque".
1670 I think that we would be soliciting advertising in Wainwright, yes.
1671 MR. McCALLUM: So it would be a difficulty if the Commission were to come to that conclusion.
1672 MR. BABIY: Yes, because I think the business community in Wainwright will be asking to purchase revenue on our station. I believe that we want to serve that community as well.
1673 MR. McCALLUM: Okay. Was there someone going to add something from the second row to the answer?
1674 MR. GODIN: I was just going to almost as a side bar comment that as an applicant, we don't have an issue or a problem with Wainwright having a full time sales office based in Lloydminster, as they currently do.
1675 We also do not perceive that their presence in Lloydminster to solicit the Lloydminster market for advertising on Wainwright would be an infringement on what we are doing because the reach, the target audience is completely different.
1676 Similarly, if we were to solicit advertising in Wainwright for our proposed FM station pop/rock service, it would not be an infringement on the predominant market that is advertising as agricultural product oriented advertisers on the Wainwright station.
1677 MR. McCALLUM: Thank you.
1678 Thank you, Madam Chair.
1679 THE CHAIRPERSON: If we could take a short break to talk about the marketing report. Five minutes and we will be back.
--- Recess at / Pause à 1140
--- Upon resuming at / Reprise à 1145
1680 THE CHAIRPERSON: Twenty years of practising law, you would think I would know better. What I am going to do is take under advisement the filing of that report and after the interventions, we will make a decision on that.
1681 MR. McCALLUM: Would you just clarify one thing, this Research Innovations report that you offered at one point, when was it done, this recent report?
1682 MR. WAINMAN: October 4.
1683 MR. McCALLUM: Just also to clarify, are the results of it the results that you have attached to the back of your presentation today?
1684 MR. WAINMAN: Yes, the results based on the two new FM station scenario are based on the results from the Research Innovations study, yes.
1685 MR. McCALLUM: Sorry. Which pages specifically? Are they all the pages or some of the pages?
1686 MR. WAINMAN: Well, primarily the sales projections, the revenue projections which should be the front page -- well, the front page in total, $800,000 worth in year one of total advertising revenue. Do you have the very first page, the pro forma annual statement of increment expenses?
1687 MR. BABIY: You will note that we have done a reduced staff scenario from our original in this particular quote by two and a half staff people or three.
1688 MR. WAINMAN: Three.
1689 MR. BABIY: Three staff.
1690 MR. McCALLUM: So it's just the front pages that's new. The other pages are --
1691 MR. WAINMAN: Well, there's ramifications. I mean cash flow has impacted the profit and loss. Obviously the payroll calculations, because we reduced the number of staff, has changed. The primary changes in terms of numbers are, one, the total revenues projected and, secondly, the payroll costs in respect of the reduction of three staff.
1692 MR. McCALLUM: And that's again on the first page only or are there changes on the other pages as well?
1693 MR. WAINMAN: It impacted on the other pages. For example, on page 2 you have the pro forma annual operating expenses. Included all across each category is the payroll, our salaries and benefits.
1694 MR. McCALLUM: Again, that's a two station scenario as well.
1695 MR. WAINMAN: Yes.
1696 MR. McCALLUM: And page three --
1697 MR. WAINMAN: Which is the breakdown of the payroll.
1698 MR. McCALLUM: That's also a two station scenario as well.
1699 MR. WAINMAN: Yes. Everything that was provided this morning is based on the two station scenario.
1700 MR. McCALLUM: Thank you.
1701 MR. GODIN: Madam Chair, would I be permitted to make not an addendum but an additional clarification with regard to the Wainwright concern for advertising solicited by our proposed station within their market? We had concern for that. We had awareness for that possibility.
1702 We also then recontacted Research Innovations to undertake a radio monitoring of CKKY in Wainwright. That monitoring took place October 28 of this year from 6 a.m. to noon.
1703 THE CHAIRPERSON: This is again new research that you are bringing to the table when you knew the Okanagan Skeena intervention. Is that what you are doing?
1704 MR. GODIN: That is correct. No, no, pardon me. No, no. What we did was we were aware that as a proposed regional broadcaster we were wanting to take a look at the other areas of potential impact.
1705 THE CHAIRPERSON: What was the purpose of the research?
1706 MR. GODIN: The purpose of the research was to take a look at what was also taking place within the Lloydminster market by out of market stations soliciting advertising locally as legal counsel had asked the question about the concern for soliciting advertising on our part within Wainwright.
1707 THE CHAIRPERSON: So you wanted to do the converse in Lloydminster.
1708 MR. GODIN: Correct, based on the two days undertaken on October 28 and 29. Clearly 51 per cent of that --
1709 THE CHAIRPERSON: Sorry. We are going to have to take another break. The concept of a hearing is that you don't take people by surprise with expert research and you don't change your application. You have had the opportunity to change your application long before this.
1710 I am concerned about bringing about an unfairness on other parties. That's why I was concerned about the research that was done on October 4. That's why I am going to be even more concerned about this research that has never brought up before.
1711 I would like to take five minutes again, if I could, please.
--- Upon recessing at / Pause à 1150
--- Upon resuming at / Reprise à 1153
1712 THE CHAIRPERSON: Excuse me and excuse my inexperience. We have discussed it and it really is in rebuttal to Okanagan Skeena. What I suggest is that you bring that up in rebuttal, which is phase four.
1713 MR. GODIN: Thank you.
1714 THE CHAIRPERSON: Then it can be addressed at that time.
1715 MR. GODIN: Thank you.
1716 THE CHAIRPERSON: Thank you. I am sorry for the many breaks. Thank you very much, gentlemen.
1717 We will now move into phase two, I believe.
1718 MR. DICK SIENKO: Excuse me, Madam Chair.
1719 THE CHAIRPERSON: Yes.
1720 MR. SIENKO: If the Commission wishes, I do have a map here which is a BBM map which clarifies your number 8091. You were asking earlier. I didn't know if you wish to have that.
1721 MR. McCALLUM: I think we have a map of 8091 from BBM.
1722 MR. SIENKO: I just had one with me. You could have it.
1723 THE CHAIRPERSON: Thank you. We will now move into phase two.
1724 MR. KRUSHEN: I now invite Sask-Alta Broadcasters Limited to present their intervention to the other application.
1725 MR. RUPTASH: Mr. Grant will present our intervention.
1726 MR. GRANT: Madam Chair, Sask-Alta filed a written intervention and the points made in it are already part of the record.
1727 We do appreciate that Peace River has filed some new numbers that demonstrate they could live with two FM licences being granted. We think those are more realistic numbers, but in light of this we have nothing further to add to our written intervention.
1728 THE CHAIRPERSON: You have no objection then to the filing of that market research.
1729 MR. GRANT: No.
1730 THE CHAIRPERSON: Thank you.
1731 COMMISSIONER WILLIAMS: No questions. Thank you.
1732 THE CHAIRPERSON: Thank you very much, gentlemen.
1733 MR. KRUSHEN: I now invite Peace River Broadcasting Corporation Limited to provide their intervention to the application Sask-Alta Broadcasters.
1734 MR. BABIY: Commissioners, I think you did a very thorough job of asking questions. All our concerns that would be raised in an intervention were I believe effectively answered in the question and answer session.
1735 There is just one piece of statistical information and this is not research, this is statistical information that I would like to submit. It is simply a matter of the number of business licences that are contained in Lloydminster versus other markets that are in a five or six licence scenario. I will just leave that with you for the record.
1736 THE CHAIRPERSON: What's the source of that?
1737 MR. BABIY: What's the source? It's Land and Economic Development Offices, City Halls of the various cities.
1738 THE CHAIRPERSON: Thank you. You can also file that market research, but before you leave, Mr. Babiy, I want to know -- we were faced this morning with two changes in the Sask-Alta application. At this point in terms of the intervention issue, I wanted to know your comments on the change on the CTD and the change in the Cancon.
1739 MR. BABIY: I actually commend Sask-Alta Broadcasters for coming forward with a better program than what was initially had and hopefully seeing our application may have helped them come to the table with something better, so I commend them on that.
1740 THE CHAIRPERSON: Thank you, Mr. Babiy.
1741 We will now move to phase three.
1742 MR. KRUSHEN: Thank you, Madam Chair.
1743 I now call the first intervenor to the application by Sask-Alta Broadcasters Limited, Tami Hunter.
1744 MS TAMI HUNTER: Good afternoon, Madam Chair and Members of the Commission. May I start by saying how much I have enjoyed the last couple of days here. I really have. I have learned a lot.
1745 I am here to intervene in support of the application of Sask-Alta Broadcasters Limited. As you will see by the letter I have written to the Commission, I am a country singer, songwriter and producer from Lloydminster. I would like to tell you about the marvellous support that CKSA Country 108 has given people like myself and why I think they deserve an FM station in Lloydminster.
1746 Like many other musicians, my interest in performing music really started when I became a part of local groups that played weddings and dances in Lloydminster. The bands I played with would usually do cover tunes, but approximately seven years ago I decided to write my own songs as a vocalist for a country music group.
1747 I must tell you that CKSA Country 108 has played and is still playing a very important role in the development of my career as a recording artist as well as a music businessperson.
1748 To support new artists, CKSA hosts an entertainment stage at our Lloydminster Exhibition every July and commissions interested artists to provide entertainment that is free to the public to enjoy. It is a wonderful way for the local public to see our new music local entertainment.
1749 I was fortunate enough to be the very first entertainer on the CKSA stage at the Exhibition. Many other local musicians have since appeared on the stage to entertain our local public.
1750 Over time one engagement has lead to the next to the next and I began to record my songs. I have now written and recorded two CDs to date, "Stand Tall" and "Smell the Roses". I have also compiled and produced a CD entitled "A Wishful Christmas".
1751 "A Wishful Christmas" is a very special CD which is a collection of Christmas songs sung by various Canadian artists such as Farmers Daughter, Quartet, the Jana Brothers as well as myself. All the proceeds of this album have been donated to the Multiple Sclerosis of Canada. I strongly support this organization, both as a donor as well as an individual who lives with this condition. CKSA has done everything in their power to promote this project, bringing revenue to the local MS Society to well over $10,000.
1752 In 1998 I was fortunate enough to be nominated and chosen by the Saskatchewan Country Music Association as Saskatchewan Entertainer of the Year, Female Vocalist of the Year, Song of the Year, Single and Album of the Year.
1753 Throughout my career, Sask-Alta Broadcasters Limited has provided promotion and advertising of all my recordings. They not only provided air time, but also have provided for me their expertise in developing the market strategies for the promotions.
1754 The station also continues to give me exposure as an artist by giving me headline appearances on CKSA Country 108 and by giving my music significant airplay. May I also point out that also their music programmers make a point of putting in all their advertisements at least one Canadian artist, which many Canadian radio stations do not. A lot of it is American artists on their commercials.
1755 So you will see why I am a huge fan of the local station and its management. They have been there to support myself and many other local artists such as Warne Noyce, Chad Klinger, Christine Wourms and the Prairie Dogs.
1756 The first comment I make to young artists starting out that are looking for advice is that you must have local radio station support. Without that, you have a long road ahead of you. I have had this with CKSA. They have been a tremendous support to me.
1757 With a new FM station, I am sure that Sask-Alta Broadcasters will be able to expand its role. Right now they focus on country music, but if they have a station doing pop/rock music, I know for a fact that the same support for local artists will be in this category.
1758 Lloydminster has a very active musical scene. There are perhaps more than a dozen or so groups performing regularly at this time. We need the support of local radio to develop our skills and Sask-Alta has proven that it can give that kind of support.
1759 With that in mind, I hope you will give favourable consideration to their application.
1760 Three years ago, this isn't in my proposal, three years ago I was playing at a local jamboree just outside of Lloydminster. CKSA Country 108 did not have to do this. After going into semi-retirement, I was given a huge, beautiful picture with all my three CDs that I have produced over the years as a token of their appreciation. It goes to show how much support they give to their local artists and how proud of the local artists they really are.
1761 They have made my dreams a reality and I truly value the relationship that we have established.
1762 Thank you very much for your time.
1763 THE CHAIRPERSON: Thank you, Ms Hunter. Have you ever accessed FACTOR?
1764 MS HUNTER: I have. I didn't although until I self-financed my first two albums. I didn't until the Christmas album did I apply to them which I didn't qualify, being a compilation CD. Yes, but I do support FACTOR. I think they are a wonderful organization.
1765 THE CHAIRPERSON: Thank you for driving all the way here.
1766 MS HUNTER: Thank you.
1767 THE CHAIRPERSON: Mr. Secretary.
1768 MR. KRUSHEN: Thank you, Madam Chair.
1769 I will now call the other intervenor to this item, Vic Juba of the Lloydminster Theatre/Concert Hall Steering Committee.
1770 MR. VIC JUBA: Good afternoon. I thank you for allowing me to make this presentation to you. My purpose is twofold, firstly, to emphasize the need for an FM station in Lloydminster and, secondly, to offer my support to Sask-Alta Broadcasters Limited in their application.
1771 I'm originally a farm boy raised on a homestead in north central Alberta. How well do I remember early radio, vacuum tubes, huge battery packs and lots of static. The aerial, two slender poles, a piece of wire strung in between and, of course, the higher the better for reception. Yes, you even had to have a radio licence if you had a radio receiver. Those are the early days. We have come a long way and we are progressing and an FM station would be part of that progress.
1772 After completing my post-secondary education, I was offered a job by an oil company in Lloydminster, a company that was foreign to me, as was the community. At that time Lloydminster was a small community, under 5,000 people, straddling the Alberta-Saskatchewan border. That was in 1953.
1773 Shopping was on two streets. One was paved, the other was oil, primarily with oil that was brought in by the trucks from the field. Cattle, grain and oil were the mainstays of the community. A weekly newspaper that was founded in 1905 served the community. Camrose Radio, CFCW, was probably the favourite station because of its strong signal, followed by CJCA in Edmonton. Needless to say, reception left a lot to be desired.
1774 Fortunately for us as residents, Lloydminster continued to grow and more services became available to us locally. 1957 is of significance since that's the year that CKSA started broadcasting.
1775 In 1958 Lloydminster achieved city status, the same year that a second newspaper/advertiser commenced publishing. Two years later, CKSA-TV started broadcasting, followed by CITL-TV in 1976.
1776 Along the way, McDonalds came to Lloydminster and with the more recent arrival of Superstore, Tim Horton's and Walmart, Lloydminster has come of age. Because of the establishment of new business, the building of an interprovincial college and the concurrent expansion of recreational and cultural facilities, Lloydminster has been able to expand its trading area and lessen its dependence on the larger centres that are two and a half hours distant. I specifically refer to Edmonton in the west and Saskatoon to the east. Lloydminster is fairly equidistant from the two centres.
1777 Today, Lloydminster is a vibrant community of over 20,000 people. In fact, we estimate 22,000 come next year. It serves a large trading area that is forever expanding and now enjoys the many amenities that are relegated to the larger cities.
1778 However, there is one thing we lack and that's an FM station. CKSA, the only local radio station serving Lloydminster, programs country music which not everyone enjoys. I for one like country and western, although I have got to admit that some of the new country is not quite my cup of tea.
1779 There are many times that I would enjoy some diversity of musical selections, but today my only option is to resort to cassettes and CDs. This option lacks the local news and events coverage that when combined with listening enjoyment can be obtained through radio. A local FM station would provide an alternative to many who feel the same as I do.
1780 As for a potential licensee for the new FM station, I fully support the application of Sask-Alta Broadcasters Limited. As both a businessman and a volunteer, I have had the opportunity of enlisting the services of CKSA on many occasions.
1781 As a Plant Manager, I was frequently interviewed on issues that were of interest or had an impact on the community. I also spent four years as a Communications Coordinator and as such had a close working relationship with Sask-Alta Broadcasters. I always found them to be most helpful and professional from a business perspective.
1782 Perhaps my greatest involvement with the applicant was in the role as a community volunteer. Over the years I have chaired or been involved in a variety of projects which in many cases included fundraising. In my written intervention, I enumerated a number of these projects, but let me tell you a bit more about them.
1783 First, Lloydminster has hosted both the winter and summer games for the Province of Alberta. In each case, CKSA provided extensive promotional publicity, live broadcasts of the opening ceremonies and competition results for the duration of the games. Additionally, they turned over all the proceeds from CKSA's fortieth anniversary or broadcasting celebration to the Alberta summer games.
1784 Second, I want to tell you about CKSA's support for the Lloydminster indoor swimming pool project. Besides the publicity that was provided free, Sask-Alta Broadcasters sponsored a national rock band and all of the proceeds were turned over to the swimming pool.
1785 Third is the Heavy Oil Science Centre. This $800,000 facility was opened in August of this year and extensive coverage and support was provided by Sask-Alta Broadcasters Limited over the six year design, fundraising and construction period.
1786 Last but not least, I want to tell you about the Lloydminster Performing Arts Theatre. Currently I am the Fundraising Chair for this $4 million facility. Sask-Alta Broadcasters donated a tremendous amount of free air time as well as personnel, technical expertise and there will be a cash infusion as well that will extend beyond the opening date of the theatre.
1787 I'm pleased also to recognize that both Ms Spenrath and Mr. Brown are members of the theatre committee. I also want to assure the Commission that I chaired all these projects, so I am talking with firsthand knowledge.
1788 It goes without saying that the active involvement and support of Sask-Alta Broadcasters Limited, without compensation, has contributed to the success of these projects. CKSA has also supported the Cancer Society, the Lions Club Telethon, the Lloydminster Public Library, Cowboy Countdown, Lloydminster Chamber of Commerce events, the Mayor's Prayer Breakfast, United Way and many others.
1789 In summary, Sask-Alta Broadcasters Limited has been an integral part of Lloydminster's growth and thus can be rightfully termed a Great Corporate Citizen. I have no doubt that should they be granted an FM licence, they will continue to provide a community service with diligence and competence that will be a credit to Lloydminster and area. I, therefore, fully support their application.
1790 Thank you, Madam Chair and panel, for this opportunity.
1791 THE CHAIRPERSON: Thank you, Mr. Juba. I would ask Commissioner William to ask you any questions.
1792 COMMISSIONER WILLIAMS: Thank you. That was a very good presentation that summarized a lot of your own activities and history and the contribution that Sask-Alta has made to your community.
1793 When you talk about this project that you are chairing, this fundraising for this $4 million facility, you also go on in your other written presentation that Sask-Alta has committed to help beyond the fundraising stage in the construction and in the future operations of the facility. Can you talk a bit about what sort of thing they might be doing in that area.
1794 MR. JUBA: They have agreed to annually sponsor a concert, this is for five years, and turn over the proceeds to the theatre.
1795 COMMISSIONER WILLIAMS: Thank you very much. I have no further questions, Madam Chair.
1796 THE CHAIRPERSON: Mr. Secretary
1797 MR. KRUSHEN: Thank you, Madam Chair.
1798 I now call the intervenor to the application by Peace River Broadcasting Corporation, Mr. Dave Calder of the Okanagan Skeena Group Limited.
1799 MR. DAVE CALDER: Madam Chair, Commissioners, CRTC staff, ladies and gentlemen, good afternoon.
1800 My name is Dave Calder. I am the Senior Vice-President of Telemedia Broadcasting's Western Division. While our intervention to the application was filed under Okanagan Skeena Group Limited, the Commission recently approved Telemedia's acquisition of this company.
1801 While ownership has changed, our key thoughts and concerns regarding this application have not. My reason for appearing here today is to reinforce that position and to be available to answer any questions you may have.
1802 I would like to briefly reiterate the key points of our intervention.
1803 First, we have embraced the strategic directions outlined in the CRTC's Radio Policy 1998 and have invested both time and resources to provide the Commission with our thoughts on the differences between major and non-metro markets.
1804 We support the Commission taking a close look at individual market circumstances, as has been done in Victoria and Kelowna. While we don't support micromanaging, we see the Commission's common sense approach in assessing what will work in individual markets as beneficial to all broadcasters.
1805 We submit that in this case the incumbent broadcaster, Sask-Alta, has applied for the logical and reasonable expansion of service to the Lloydminster market. The Peace River application as filed does not, in our view, meet the same test of market support.
1806 Secondly, the Commission's Public Notice CRTC-1999-111 outlined a general framework for processing both new radio applications as well as AM to FM flips or technical upgrades. Item 7 in that Public Notice provides as a possible exception to the call for applications:
"Proposals by the sole commercial operator in a market to improve service to the market, either through an AM to FM conversion or a new station."
1807 We absolutely agree with this approach in dealing with non-metro markets. To be clear, Telemedia does not oppose additional service in Lloydminster. We support it. We do, however, suggest that the first licence opportunity should go to the incumbent broadcaster who seeks to improve and/or increase service to the market.
1808 The Bay Consulting research attached to our intervention and the Commission's knowledge through filing of station financial data demonstrates that secondary markets are extremely vulnerable to economic shifts of rapid and material proportions. The panacea of more service for the sake of more service does not strengthen the radio industry in non-metro markets.
1809 Third, by choosing a transmitter site and power configuration that covers both Wainwright and Lloydminster, Peace Broadcasting is attempting, in our view, to backdoor themselves into an additional source of advertising revenue while providing no local service.
1810 They have done very limited market research. No effort has been made to quantify market impact. Total sales at our CKKY Wainwright operation have declined almost 16 per cent over the past five years. In spite of this, our company has built a solid local presence as a community-driven broadcaster.
1811 We submit that the licensing of two FM stations in Lloydminster, with one of these stations clearly targeting substantial advertising revenues flowing from the Wainwright market, would have a material negative impact on our local efforts there.
1812 Fourth, Telemedia has acquired a number of secondary market stations. We passionately believe in the future of small market radio. We have a vested interest in how the Commission deals with such markets. We plan to continue to attempt to make the Commission aware of our concerns as you implement the radio policy.
1813 We value all opportunities to provide input to the Commission on these matters, as we have today.
1814 In closing, we submit that the Peace Broadcasting application should not be approved. It offers no local service to Wainwright, yet will take revenue from this market, negatively impacting the incumbent local station.
1815 I am pleased to answer any questions you may have.
1816 THE CHAIRPERSON: Thank you, Mr. Calder. I would ask Commissioner Noél to ask questions.
1817 COMMISSIONER NOÉL: You mentioned in your intervention, and I am quoting you:
"We submit that in this case the incumbent broadcaster, Sask-Alta, has applied for the logical and reasonable expansion of service to the Lloydminster market. The Peace River application as filed does not, in our view, meet the same test of market support." (As read)
1818 Could you elaborate on that, please.
1819 MR. CALDER: The easiest way to elaborate is to take a look at two elements. One is the business proposition of both applications. It's fairly clear to us that the Sask-Alta proposition as originally filed contains numbers based on our own knowledge of the market that are considerably more viable.
1820 The Peace Broadcasting application as originally filed, we would submit, is extremely ambitious. It is much more regional in nature in terms of their proposition to solicit advertising revenue.
1821 The second element clearly is the difference in the technical briefs supplied, the pattern coverage, transmitter locations. I would submit that one application, the Sask-Alta application, and I have no way of knowing whether this discussion went on, but it's pretty clear to me that it from the start took into account some degree of protection to the adjacent local broadcaster.
1822 The Peace application clearly does not. It has also been stated here this morning by the applicant that they clearly see themselves as a regional proposition. For both of those reasons, we would see the applications as materially different.
1823 COMMISSIONER NOÉL: Do you think in the hypothesis that the Peace application would be limited in the contour and there would be a condition of licence for not soliciting advertising in the Wainwright market, would you think that the market can sustain two applicants, the two applications?
1824 MR. CALDER: If you compare the two markets, the actual town of Wainwright where our station is, it's 6,000 people. When we include Wainwright, CKKY, as a part of our regional marketing propositions, we take into account the immediate trading area, which boosts that number to about 14,000. We also actively solicit regional business out of the Lloydminster market. We have a sales presence and a news presence in that market.
1825 All of that included we put forth as a proposition of roughly 40,000. That is the number that we put in front of a regional advertiser who chooses to do business with our Wainwright operation.
1826 Having seen the transition over the past five or six years, there was a time when we had an equally ambitious presence in Wainwright to similar staffing levels and a similar business proposition to the one that Peace Broadcasting is proposing in Lloydminster.
1827 That looked pretty good until the Sask-Alta broadcaster decided to change from Hot AC to country, which is the entire explanation for the overall five year erosion of our revenue developed in the marketplace. You have gone from one country signal to two and, as everybody's research has consistently shown, that is far and away the number one most popular format in the region.
1828 We have continued to be very competitive. The proposition that Lloydminster is not a competitive market is nonsense. It currently is a competitive market, very competitive. We compete for revenue there. We get no national revenue, pure national revenue from the Lloydminster market, the reason being we are not part of the CMA and national agencies buy on the basis of CMA. We do, however, get substantial regional revenue and that regional revenue I suspect would continue to a certain extent on our operation.
1829 At the end of the day, if you add up, no matter whose population numbers you are looking at, and clearly the Commission I believe is on the right track as they stated in the Kelowna/Victoria hearings back in June I think it was, when the observation was made that format is not necessarily the primary element that is going to dictate licensing new service into a marketplace. I would agree with that.
1830 At the end of the day you have got to look at population base. You have got to look at the number of players in the marketplace and the population that is being served. Folks in Lloydminster may believe that it's a viable business proposition to add two more FM signals. I would suggest that the term razor thin doable is one I am very familiar with since most of our Alberta markets are razor doable thin as we speak before any additional service is added.
1831 A very long winded no to your question.
1832 COMMISSIONER NOÉL: Articulative no. I don't have any more questions. Do you have any questions?
1833 THE CHAIRPERSON: Commissioner Williams.
1834 COMMISSIONER WILLIAMS: I have a couple of questions. CKKY is a country format station, is that correct?
1835 MR. CALDER: That's correct.
1836 COMMISSIONER WILLIAMS: The proposed new FM is a pop/rock appealing, as we have heard from presentations from both this morning, to a different demographic than country. In spite of that, do you feel that that will have a negative impact on the Wainwright radio station?
1837 MR. CALDER: Yes. I guess there's two issues that I would respond to. One I just responded to Commissioner Noél on, that regardless of formats that are licensed, unless and except you attach conditions of licence to both new FMs, they would maintain the format as proposed. That certainly hasn't been the appetite of the Commission.
1838 There is nothing that says that one of those two entities wouldn't in pretty short order if their business plans weren't being met make adjustments that would be more aggressive in terms of taking market share away from all players, ourselves included.
1839 Even if everybody stayed on the same page formatically, in other words we continue to be country, Sask-Alta continued to be country and you introduced one or two new pop/rock signals into the marketplace, there is overlap.
1840 It is true that by format there are certain types of advertisers, local, regional and national, that will choose their advertising preference by format, but not all of them do that. It's in inverse proportions to the size of market.
1841 If you are in Vancouver and you have 14 choices, you are very targeted and very focused with the format you offer up. Your advertisers tend to be relatively distinctive, but even there there is overlap.
1842 If you are in the Lloydminster-Wainwright area and you are choosing between three or four radio stations, the world of automotive dealers, the world of some of the biggest retail categories, stereos, audio/video, fast foods, will make that world very competitive and absolutely, regardless of format, there would be some degree of erosion on our operation.
1843 COMMISSIONER WILLIAMS: Thank you for that. Why do you feel the Peace River Broadcasting application is more threatening to your business viability than the Sask-Alta one?
1844 MR. CALDER: Well, to be clear, any new proposition is going to be somewhat threatening to the business viability. The Commission has our financials and is well aware of the margins in the markets that we operate in in rural Alberta, Wainwright included.
1845 We see the Sask-Alta proposition as less damaging and offers a more viable proposition for us to continue to be healthy, primarily because of the business plan as submitted and the contour of their technical proposal. We see that their proposal responds to the Commission's call to serve Lloydminster.
1846 Had the call been to serve Lloydminster-Wainwright, we would have been here and I would have had a much bigger panel and would have been an applicant. I think that's significant.
1847 One other key point. Our revenue, unlike a broadcaster in a larger market like Lloydminster, typically those markets the revenue between national and local is split perhaps 70/30, 80/20 with the bulk of the revenue coming from local sales.
1848 Our revenue in Wainwright currently fluctuates, but it's essentially 50 per cent of our revenue coming from regional sales that are part of our network marketing and ag business forms a substantial part of that. The other 50 per cent of the revenue is roughly distributed 50/50 -- I don't want to confuse people with numbers here -- 25 and 25 of the 100 per cent are Lloydminster and Wainwright.
1849 That fluctuates, but currently when you have probably the biggest boom set of crops in the ag market in rural Alberta in the last 25 years but you have the lowest commodities prices, we don't see a lot of economic activity that stimulates the mom and pop businesses that form the basis of local sales activity at our Wainwright station in Wainwright.
1850 We have, however, held on to significant amounts of business in Lloydminster because Lloydminster is a trading centre, meaning that Lloydminster advertisers will currently spend money on the Wainwright station to solicit Wainwright residents to come and do business at those larger retailers in the City of Lloydminster.
1851 That entire business model goes out the door if you have a regional signal that appears and covers both markets. It doesn't go out the door if you have a new signal appearing in Lloydminster that essentially is targeted at Lloydminster. I hope that is clear.
1852 COMMISSIONER WILLIAMS: I think it tells me that it affects 25 to 50 per cent of your business if it's Lloydminster specific and it may affect all of your business if it isn't. Is that really what you are saying?
1853 MR. CALDER: Correct.
1854 COMMISSIONER WILLIAMS: Given the high degree of out of market tuning in the Lloydminster area, and I see that your station has about a 5 per cent audience share in the Lloydminster marketplace --
1855 MR. CALDER: We like to think it's 15.
1856 COMMISSIONER WILLIAMS: I'm just going by the Broadcast Bureau Measurement statistics of '98. I can only work with we have been provided with, your firm background information. Maybe it is 15 in '99. We can only hope in your case for sure.
1857 MR. CALDER: Exactly.
1858 COMMISSIONER WILLIAMS: But there is a tremendous out of market tuning. In fact, almost 70 per cent is out of market tuning. Do you not feel -- what would you like to comment on? The different types of radio stations that are provided, do they not have a significant effect on your business as well? There must be some out of market tuning in Wainwright as well.
1859 MR. CALDER: Absolutely. It has been interesting over the past two years since Okanagan Skeena Group merged with Nornet. It has only been in the last two years that I have regularly travelled to Alberta and worked with our station operators there.
1860 The first thing you notice is that there is substantial difference between British Columbia and Alberta driven by geography. There are very few places I can go to in rural Alberta where I can't scan on the AM dial and it's like 20 years ago.
1861 There's an amazing amount of AM radio. No question that if you have got a 50,000 watt AM as we do in Drumheller, for example, that signal is all over the place. It overlaps many of the small markets that we operate in.
1862 If you are CFCW, if you are some of the major players out of Calgary and Edmonton, this applies for television too, there simply isn't a whole heck of a lot in the way of your signal as you head out to rural Alberta.
1863 All of the major broadcasters are aware of that, you know, in Alberta and all of them to my knowledge, without exception, actively solicit business based on that extended reach, based on spill in the case of television and based on format to a certain extent when it comes to regional business.
1864 We experience it now in Wainwright much the same as Lloydminster does. I confess that we have not spent a lot of money on quantitative research in a town of 6,000 people to determine what the percentage is. As has been pointed out, we are not even a participant in BBM in those smaller markets because it simply is not cost effective for us to do so, so there's spot markets.
1865 COMMISSIONER WILLIAMS: In your presentation, you allude to the fact that Peace River Broadcasting has done very limited market research. I recognize that some of the information just came forward today, so there may be more information in that area.
1866 I guess what I'm curious of hearing your view on is how about the two licence scenario. What if there were two licences approved in that area. What would your comments be on that.
1867 MR. CALDER: I have heard on the razor's edge remarks, so the Commission won't be surprised that we have our own plans to provide service, to bring additional service into as many markets that we currently operate stand alone operations as possible.
1868 We have been a little slow in putting those plans together in putting those plans together, largely because ownership has been a fascinating process for folks like me in the past 24 months, but it is also driven by the fact that there is a new radio policy. We find ourselves just learning, as we did in the Kelowna experience, what the Commission is going to be looking for. Like any business, we are trying to understand what's going to be expected of us when we do make application.
1869 The reason I share that with you is that my initial response would be if two licences were granted in Lloydminster and one of them at least is doing material harm to our Wainwright operation, that would probably accelerate us coming back to the Commission with a proposition for an FM station of our own in Wainwright. You can bet that we would make it a regional station.
1870 Do I think that's a great proposition? From the point of the view of the listener, perhaps. That would be the only way I could think of to deal with a competitive environment where the landscape had changed hugely. Perhaps that's what will unfold.
1871 My feeling is that in that environment, much as the Commission has seen in Kelowna, there will be winners and losers, which is why I refer to my presentation to the licensing of additional signals not necessarily being a panacea for the proposed extension of service.
1872 At the end of the day, as Hugh McKinnon said in June in the hearings in Vancouver, these are businesses and they have got to be able to have a business plan that can stand the test of time, regardless of where they are originating.
1873 We would soldier on. As a company, clearly we are larger and more capable of weathering that kind of storm.
1874 In terms of the service offered up to the individual markets, I think overlicensing is always problematic.
1875 COMMISSIONER WILLIAMS: So one licence would be the lesser of two evils, to summarize your presentation.
1876 MR. CALDER: Well, to be clear again, we do accept the proposition that in a market the size of Lloydminster, they can probably absorb an additional signal, an FM signal. We accept that that will erode or certainly make it more competitive in terms of the business that we do competitively in Lloydminster. No doubt they will be to a certain extent looking to fuel that new signal from activity in Wainwright.
1877 Of the two applications, again that's the core of our intervention, they are not the same. At the end of the day, these applications are not identical. This is not a duplication of coverage. The propositions are different. This is not a similarity in business plan. Those are materially different.
1878 Yes, we agree that a second signal would be perfectly viable in Lloydminster. We actually think under certain circumstances that that may be the case in many small markets, but as I said in the intervention, we think that there's some logic to how those signals can be rolled out and deployed so that they don't back-end an adjacent market into a more fragile environment.
1879 The Commission is very aware of the fact that small market radio is just now beginning to show some vital signs of life after a pretty long haul of not doing so. That's happened for a number of reasons, but we are still talking about extremely fragile business environments.
1880 COMMISSIONER WILLIAMS: Thank you very much for providing good answers to our questions.
1881 I have no further questions, Madam Chair.
1882 THE CHAIRPERSON: Mr. McCallum.
1883 MR. McCALLUM: Just very shortly. By what percentage would you expect CKKY's listening audience to decrease if Peace River were to be licensed to serve Lloydminster? That's in the one licence scenario.
1884 MR. CALDER: Out of our docile Wainwright market? I believe that probably less than 10 per cent. The erosion that would occur to our station specifically because we are a country format would be the extreme younger end of our demo that is tuning into our station for news and information and not necessarily for music.
1885 If the Peace River application was approved and that signal was received in the Wainwright market, we would lose a small portion of the audience. My estimate would be 10 per cent, perhaps less.
1886 MR. McCALLUM: Ten per cent of the whole coverage.
1887 MR. CALDER: Yes.
1888 MR. McCALLUM: Would it be a similar percentage of advertising revenues to decrease in that scenario?
1889 MR. CALDER: No. I would suggest that the percentage would be substantially greater than that for two reasons. One is the figures I shared a few minutes ago in terms of how our revenue is currently derived from the region.
1890 We see significant material damage being done to the revenue we derive from the Lloydminster market when they are trying to reach Wainwright residents. To be clear, that's not revenue that we believe would be very significantly eroded at all in the Sask-Alta proposition because the target audience that they are spending money with us for is the Wainwright audience, not the Lloydminster audience.
1891 The revenue erosion, we would submit, would be significantly higher than the percentage of audience loss with the Peace application.
1892 MR. McCALLUM: Could you quantify that as best you can.
1893 MR. CALDER: It could be as high as 25 to 30 per cent. One would assume we would run into danger of seeing our entire Lloydminster advertising base threatened. How do you deal with that? The Commission has seen this in a number of other markets.
1894 You deal with that -- the big winner in that kind of proposition will be the regional advertiser who simply will get lower rates for their advertising. They will use it to negotiate between the two advertisers that are offering up the same box of listeners.
1895 MR. McCALLUM: Thank you, Madam Chair.
1896 THE CHAIRPERSON: Thank you.
1897 We now move to phase four. Unless people are dying of hypoglycaemia, we will go on to phase four.
1898 MR. KRUSHEN: Thank you, Madam Chair.
1899 I now call Peace River Broadcasting Corporation to reply to interventions to their application.
REPLY / RÉPLIQUE
1900 MR. BABIY: We appreciate the opportunity to reply to the intervention made by Telemedia.
1901 With regard to the Telemedia comments, we maintain that Lloydminster and Kelowna are not legitimate comparisons. Lloydminster's core population is 20,000, Kelowna 98,000; trading area is 84,000 for Lloydminster, 200,000 in the Kelowna area; number of business licences 1,353, Kelowna, 8,100. The Commission decided to maintain the status quo in Kelowna because of potential overlicensing.
1902 We firmly believe that Lloydminster can support one additional FM station and we previously noted that that 20,000 population benchmark has happened in two other scenarios, namely Grande Prairie and Vernon.
1903 Telemedia implies Peace River Broadcasting will harm the regional station in Wainwright by soliciting local advertising, but not providing local service.
1904 We do intend to sell on a regional basis, but we intend to service the region on a regional basis as well to include local news, sports, weather, pertaining to every corner of this coverage area.
1905 CKSA stated that only 10 per cent of their sales are regional. We estimated that only 10 per cent of our sales will be regional as well. We stated country listeners are true to their format. Mr. Sienko talked about farm dollars staying and sticking to country stations and not really inclined to be spent by the pop/rock station.
1906 It is a different demo. It's a younger demo. We contend that our advertising revenue won't come from radio, but will come from print from people that are trying to, or fresh sources that are trying to target that younger demographic that just can't reach it now on a country and western station.
1907 MR. GODIN: Madam Chair, if I may be permitted to make the comments that were incorrectly included --
1908 THE CHAIRPERSON: It's now your time, Mr. Godin.
1909 MR. GODIN: Thank you very much. I apologize for the inappropriate positioning.
1910 When Telemedia submitted their intervention, there was a comment made in that intervention that we would materially harm their advertising base in Wainwright.
1911 Out of real interest and also a curiosity factor, we went back to our research company, Research Innovations, and requested that they undertake a monitoring of the Wainwright station, CKKY, some kind of establishment as to the percentage of Wainwright advertisers on their station and the percentage of Lloydminster advertisers on their radio station.
1912 The study was undertaken on October 28 and 29 of this year. It was established that there were approximately 243 commercials aired over the two day period, being October 28 from 6 a.m. to noon, 2 p.m. to 4 p.m. and 5 to 6 p.m. and then again on Friday, the 29th, from 6 a.m. to noon and 3:30 to 6 p.m.
1913 Of the total number of commercials that were aired and monitored, 243 in total, 26 per cent were from Lloydminster and 20 per cent were from Wainwright. May I clarify that was of all commercials heard. Naturally, some advertisers have the assumption that the listener knows exactly where they are based from in terms of the city that they are based in.
1914 That data was then separated into the commercials where the location was evident within that commercial. We went down to a number then of city identified commercials, being 123 out of the original 243.
1915 Of the 123 commercials that were aired, 51 per cent were from Lloydminster and 40 per cent were from Wainwright, with the remaining commercials as identified from other areas representing the remainder of the 100 per cent of the 123 commercials.
1916 I'm not trying to bandy about a bunch of figures here. The sole point was that out of the identified commercials, 51 per cent were Lloydminster and 40 per cent were Wainwright.
1917 Peace River Broadcasting has absolutely no problem with CKKY Telemedia coming into Lloydminster to solicit advertising on their local station as a country format. We don't have any problems and we even encourage them to do that because they are looking at their region.
1918 As a broadcaster, we are proposing as well to serve a region and that region is not just Lloydminster and Wainwright, but includes Lashburn and Vermillion and the surrounding area, so we are hoping to be a regional broadcaster as was alluded to, the potential for Telemedia to come back at some point and also apply to be a regional broadcaster.
1919 MR. BABIY: The only other note is in our supplemental and it pertains to a survey done on what the impact on Wainwright advertising in Lloydminster would be with our new pop/rock station. It was about 6 per cent of dollars that would come to our FM station would come from Wainwright.
1920 In conclusion, we feel we have many benefits and contributions to bring not just to the city of Lloydminster and to the region and we request that you approve our application to bring pop/rock music to the entire mid-west region.
1921 Thank you.
1922 THE CHAIRPERSON: Thank you, gentlemen.
1923 You will file that, will you, Mr. Godin?
1924 MR. GODIN: Yes, we will, Madam Chair.
1925 THE CHAIRPERSON: Thank you.
1926 MR. GODIN: Thank you for the opportunity.
1927 THE CHAIRPERSON: Mr. Secretary.
1928 MR. KRUSHEN: Thank you, Madam Chair.
1929 I now call the representatives of Sask-Alta Broadcasters Limited to reply to the interventions to their application.
REPLY / RÉPLIQUE
1930 MR. RUPTASH: Madam Chair, Members of the Commission, we have filed a written reply and we have nothing to add.
1931 We do want to take the time to thank the intervenors who appeared today to support our application. We also want to thank the over 150 intervenors who wrote letters of support.
1932 Finally, we want to thank you, Madam Chair and your colleagues and staff, for conducting such a fair hearing. We hope you will come back to Saskatchewan very soon.
1933 Thank you.
1934 THE CHAIRPERSON: Thank you very much, Mr. Grant and Mr. Ruptash.
1935 Anybody else in the room can leave except us chickens because we have to do the non-appearing items. You can leave, Mr. Ruptash. The panel has to stay and the staff has to stay and the Court Reporter has to say.
1936 MR. KRUSHEN: Thank you, Madam Chair.
1937 All I would like to do is just to read into the record that there are also a number of non-appearing items as listed in the agenda of this public hearing. These items will be considered by the Commission as part of this hearing.
1938 Thank you, Madam Chair.
1939 THE CHAIRPERSON: Thank you.
1940 I want to thank everybody, the applicants, intervenors, staff and my fellow Commissioners.
1941 Thank you.
--- Whereupon the hearing concluded at 1252 /
L'audience se termine à 1252