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In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.
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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
TRANSCRIPTION DES AUDIENCES DEVANT
LE CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
VARIOUS BROADCASTING APPLICATIONS /
PLUSIEURS DEMANDES EN RADIODIFFUSION
HELD AT: TENUE À:
Membertou Trade and Membertou Trade and
Convention Centre Convention Centre
Maillard Street rue Maillard
Sydney, Nova Scotia Sydney (Nouvelle-Écosse)
April 17, 2007 le 17 avril 2007
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
VARIOUS BROADCASTING APPLICATIONS /
PLUSIEURS DEMANDES EN RADIODIFFUSION
BEFORE / DEVANT:
Elizabeth Duncan Chairperson / Présidente
Andree Noel Commissioner / Conseiller
Ron Williams Commissioner / Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Donna Shewfelt Secretary / Secrétaire
Shari Fisher Legal Counsel /
HELD AT: TENUE À:
Membertou Trade and Membertou Trade and
Convention Centre Convention Centre
Maillard Street rue Maillard
Sydney, Nova Scotia Sydney (Nouvelle-Écosse)
April 17, 2007 le 17 avril 2007
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
PRESENTATION BY / PRÉSENTATION PAR:
Newcap Inc. 378 / 2437
INTERVENTION BY / INTERVENTION PAR:
Coast Broadcasting 405 / 2598
Newfoundland Broadcasting Company 428 / 2774
REPLY BY / RÉPLIQUE PAR:
Newcap Inc. 449 / 2887
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
PRESENTATION BY / PRÉSENTATION PAR:
Newcap Inc. 464 / 2959
INTERVENTION BY / INTERVENTION PAR:
Maritime Broadcasting Systems Ltd. 485 / 3087
REPLY BY / RÉPLIQUE PAR:
Newcap Inc. 499 / 3167
Sydney, Nova Scotia
‑‑‑ Upon commencing on Tuesday, April 17, 2007
at 0900 / L'audience débute le mardi 17 avril 2007
LISTNUM 1 \l 1 \s 24312431 THE CHAIRPERSON: Good morning, ladies and gentlemen. Sorry for the little technical delay we had. And ‑‑ Madame Secretary?
LISTNUM 1 \l 12432 THE SECRETARY: Thank you, Madame Chair.
LISTNUM 1 \l 12433 Before we begin, just a note for the Record. Yesterday, the Panel had requested Maritime Broadcasting system to provide a breakdown of capital costs. This information has been provided and is available in the file in the examination room.
LISTNUM 1 \l 12434 We will begin with Phase One, and now we will proceed with Item 5 on the Agenda, which is the application by Newcap Inc. to convert Radio Station CHVO Carbonear from the AM Band to the FM Band.
LISTNUM 1 \l 12435 The new station would operation on frequency 103.9 megahertz, channel 280B, with an average effective radiated power of 14,000 Watts; maximum effective radiated power of 30,000 Watts; antenna height of 124.1 meters.
LISTNUM 1 \l 12436 Appearing for the Applicant is Mr. John Steele, who will introduce his colleagues. You will then have 20 minutes to make your presentation.
PRESENTATION / PRÉSENTATION
LISTNUM 1 \l 12437 MR. STEELE: Good morning Madame Chair, Members of the Commission, Commission staff.
LISTNUM 1 \l 12438 I am John Steele, President of Steele Communications, Newcap's operating division in Newfoundland and Labrador.
LISTNUM 1 \l 12439 Before we begin our presentation, I would like to introduce our team. Furthest to my right is the heart and soul of our operations in Conception Bay North, Aiden Hibbs. Aiden is the Station Manager of CHVO AM, with responsibilities for news, sales, and community development in Carbonear and area.
LISTNUM 1 \l 12440 Next to Aiden is John Murphy. John is the General Manager of Steele Communications, and has worked in Newfoundland radio for 45 years, starting at Colonial Broadcasting when VOCM AM was their only station. We were fortunate enough to have him stay on with us when we acquired Colonial.
LISTNUM 1 \l 12441 On my left is Mark Maheu, Executive Vice‑President and Chief Strategist for Newcap, and next to Mark is Kerry Pelser of D.E.M. Allen Engineering, who developed our technical plan. Kerry is an experienced professional engineer in practice for 23 years.
LISTNUM 1 \l 12442 We are here today to present our application to enable the residents of Carbonear and area, which is known as Conception Bay North, to have access to a quality, dedicated, local FM stereo signal to continue the great record of service provided by CHVO AM.
LISTNUM 1 \l 12443 Before we start into our presentation, we would like to present you a series of photos showing the communities making up Conception Bay North, the area served by CHVO AM.
‑‑‑ Audio presentation
LISTNUM 1 \l 12444 In our presentation today, we'd like to provide you with an understanding of the geography and the economy of Conception Bay North, the challenges of providing radio service to the 68 communities that make it up, our unique means of providing quality service to this small community, and the solution that will enable us to provide better technical service to them.
LISTNUM 1 \l 12445 We have provided you with a package of handouts that follow the PowerPoint presentation that we are using. The first slide shows Conception Bay North. The area in light green is the BBM area known as Carbonear Central. The 44,000 residents live in the many small communities that you see from Grates Cove in the north to Harbour Main in the south.
LISTNUM 1 \l 12446 This is not a single market of 44,000 people, but rather 68 different communities, many of them with their own retail businesses, community associations, volunteer fire departments, and social clubs.
LISTNUM 1 \l 12447 The largest centers are Carbonear, with a population in the 2006 census of 4,723; Bay Roberts, with a population of 5,414, and an extended market of just over 10,000; Harbour Grace, with 3,074; Spaniard's Bay, 2,540; and Port de Grave, with 973.
LISTNUM 1 \l 12448 It is also worth noting that most of these communities saw population declines from 2001 to the 2006 census.
LISTNUM 1 \l 12449 While retail activity is most present in Bay Roberts, Carbonear area, nonetheless there are retail businesses in all of these communities, and there are community activities, social events, news, as well as local sports in most of them. This means that we have refined a unique method of serving this community, pioneered by the folks at Colonial Broadcasting, and its flagship station VOCM AM, and the Q chain of stations, originally anchored at what was CJON AM. John Murphy and Aiden will tell you more about this in a minute.
LISTNUM 1 \l 12450 What also makes the area difficult to serve is the rough topography. Like much of coastal Newfoundland, the area is full of rocks, hills, little valleys and coves and inlets. This makes both transportation and radio propagation more difficult than in areas of flatter terrain.
LISTNUM 1 \l 12451 Clearly, the geography and dispersal of the population presents significant challenges to service and sales. What complicates the picture even more is the presence of all the St. John's stations off air, and particular the presence of the FM stations offering a superior sound and different formats.
LISTNUM 1 \l 12452 While our own St. John's stations do not sell in the area, the Stirlings Group radio and TV have a sales presence, as does Coast Radio, except advertising from the market.
LISTNUM 1 \l 12453 John?
LISTNUM 1 \l 12454 MR. MURPHY: Thank you, John, and good morning, Madame Chair, Members of the Commission.
LISTNUM 1 \l 12455 What is important to a local station's viability, from both a service point of view and a sales point of view is to reach as many listeners in all of the communities we serve as often as possible.
LISTNUM 1 \l 12456 The presence of the St. John's stations means that there is more listening to stations oriented to that city than there is to our own CHVO in its home market. In the BBM results for fall 2006, in Carbonear Central, CHVO AM only received 29 percent of the hours tuned in the market. The St. John's stations garnered 63 percent of the hours tuned, with 28 percent going to the FM stations.
LISTNUM 1 \l 12457 The trends throughout the day are really more revealing, as you can see on the screen. While CHVO, in the salmon colour, dominates in the morning drive with its strong local emphasis, this dominance falls off during the day and the FM stations, in red, end up dominating the evening hours.
LISTNUM 1 \l 12458 Part of this is just the nature of AM versus FM, and part of it is, while a fan of any particular music style will listen to the local radio station for local info in the morning, they quickly dial to an FM station for their favorite format.
LISTNUM 1 \l 12459 A significant issue for us, as well, is the ongoing technical problems with AM. I would like to ask Kerry Pelser of D.E.M. Allen Engineering to outline these problems and our solution.
LISTNUM 1 \l 12460 MR. PELSER: Thank you, John, and good morning.
LISTNUM 1 \l 12461 AM radio has a great advantage of being a groundwave that can follow topography, climbing over hills, and going down into the following valley, which is much more difficult for FM.
LISTNUM 1 \l 12462 But AM is extremely susceptible to a variety of electrical interferences. Electrical noise from high voltage power lines and leakage from coaxial cable signals cause major problems for AM receivers, as do neon signs.
LISTNUM 1 \l 12463 Other annoying interference comes from leakage from consumer electronics, ranging from computer monitors and modems to hard‑wired smoke detectors to flourescent lights.
LISTNUM 1 \l 12464 The recent arrival of digital cable has complicated matters. Cable lines go by most homes in the larger towns in the area. Unless the cable is rigorously maintained, there can be significant leakage, which can adversely affect AM reception and quality.
LISTNUM 1 \l 12465 Newcap asked us to find a solution to these many problems. Their instructions were clear: find a solution that will ensure quality stereo signal to as many homes in CHVO's service area as possible, while eliminating reliable coverage in St. John's. They did not want a St. John's station, but rather an FM station in Conception Bay North that effectively replicated their current contours and filled in holes in their service area.
LISTNUM 1 \l 12466 We found several solutions, with two main variants: first, a reasonable high‑powered signal on the highest point in the area; or a series of lower‑powered FM transmitters throughout the area.
LISTNUM 1 \l 12467 The first option is preferred, as the latter option would be prohibitively expensive, creating major engineering issues, and would be wasteful of FM spectrum.
LISTNUM 1 \l 12468 FM coverage is primarily line of sight, and given the rather rocky terrain of Conception Bay North, we needed sufficient power to push the signal into as many of the service area as possible. We believe our solution is the best trade‑off between providing coverage to our area and eliminating reliable coverage in St. John's.
LISTNUM 1 \l 12469 The contours you see on the screen have been determined using Industry Canada's standard method of curves.
LISTNUM 1 \l 12470 The more revealing contours are on the next slide, which is now on the screen. This shows the realistic contours that have been predicted by taking into account the actual topography in the area.
LISTNUM 1 \l 12471 MR. MURPHY: Thanks, Kerry.
LISTNUM 1 \l 12472 Earlier, John Steele spoke of the unique way that Newfoundland and Labrador broadcasters have resolved the challenge of providing service to the many small communities throughout our province. Newfoundland has always had a strong culture, unique to itself and shared throughout the island.
LISTNUM 1 \l 12473 There are literally over a thousand small communities, many quite isolated and with insufficient population to warrant their own radio stations. But radio pioneers, like Don Jamieson, Jeff Stirling, and Joe Butler figured out a way to serve as many of these communities as possible.
LISTNUM 1 \l 12474 St. John's has always been the hub of economic, political, social and cultural activities in Newfoundland and Labrador. While other areas of the province have their special interests and concerns, all of them have a strong interest in the provincial issues and activities generated in St. John's.
LISTNUM 1 \l 12475 With the exception of Cornerbrook, none were large enough or economically strong enough to warrant full‑time local service in those days.
LISTNUM 1 \l 12476 The answer for AM‑based radio stations was to anchor service in St. John's, with many smaller towns, including Clarenville, Gander, Grand Falls, and Stephenville, marrying as much local programming as possible to a backbone of provincial news, talk shows, and some music programming emanating from the capital.
LISTNUM 1 \l 12477 In the case of OZ FM and CJON TV, this meant pure re‑broadcasters across the province, with a rock music format on FM and a combination of the best programming from Global, CTV, and others, along with local programming on MTV, reflecting the province from St. John's.
LISTNUM 1 \l 12478 Service to Conception Bay North benefits from synergies from St. John's, but in a different way. Since all of the St. John's stations boom into our market, there is no sense in re‑broadcasting the backbone of VOCM or any station's services.
LISTNUM 1 \l 12479 But we are able to benefit from synergies by co‑locating our studies with the St. John's Newcap operations. This presents us with strong economies of scale. For example, while the CRTC annual reports for 2005 showed that, on average, Atlantic Canadian radio stations devoted 32 percent of their expenses to administration in general, this category only represents 24 percent of our projected expenses in Carbonear.
LISTNUM 1 \l 12480 There are similar savings in technical operations. In programming, we are able to share programming management with the St. John's AM stations, and benefit from some on‑air talent who do double‑duty on various stations.
LISTNUM 1 \l 12481 I would now like to ask Aiden Hibbs to describe the CHVO programming.
LISTNUM 1 \l 12482 MR. HIBBS: Thanks John, and good morning.
LISTNUM 1 \l 12483 Sharing space with the St. John's stations enables us to provide an 18‑hour‑per‑day service focused on Conception Bay North.
LISTNUM 1 \l 12484 The only programming that is not unique to CHVO is the three‑times‑daily VOCM regional newscast, a daily news magazine, and a four‑times‑a‑week traditional Newfoundland music show, as well as a Saturday night classic country show.
LISTNUM 1 \l 12485 CHVO is a country music based station, focused entirely on Conception Bay North. CHVO's four‑person sales team sells only our local station.
LISTNUM 1 \l 12486 Our sales reps, who all live and work in the community, have a double‑duty as our ambassadors. In addition to sales, their primary duty, they also keep their eyes and ears open to let us know when events are coming up that we have to cover.
LISTNUM 1 \l 12487 We have a 26‑year relationship with local Town Councils, the RCMP, the School Board, service clubs, social service organizations, churches, the medical community, emergency preparedness organizations, funeral homes, and many others. All these folks know that CHVO is the place to contact to get their messages out.
LISTNUM 1 \l 12488 And our busy newsperson covers Municipal Council meetings and other regular events, as well as spot news. As a matter of fact, in the booklet that we've provided, you'll find in the back just a partial list of some of the community events and news stories that we've physically attended and have been involved in since January 2006. Of course there are many, many more such events that we have covered and promoted.
LISTNUM 1 \l 12489 We provide a full range of news and spoken word features, along with a mix of today's best country music and country gold. Our spoken word runs the gamut from international, national, provincial, and local news, to community billboards.
LISTNUM 1 \l 12490 In all, we provide 5 hours 39 minutes per week of news unique to CHVO. Along with the three‑times‑daily VOCM regional newscast, we have over 12 hours of news per week. We have community and billboard features that run from buy and sell to funeral announcements to lost pet notices and everything in between.
LISTNUM 1 \l 12491 Weather and road conditions are particularly an issue in the area, where many people travel between communities, or even into St. John's to work, shop, or use other medical ‑‑ medical or other services.
LISTNUM 1 \l 12492 In Newfoundland and Labrador, we love our own music, and local music makes up a big part of what we do. I would estimate that our own artists take up about 8 percent of our play list every week, and each hour we feature at least one Newfoundland artist.
LISTNUM 1 \l 12493 When local artists have released new music, we cover it as soon as it is released. Recent examples are Wayne Morgan, Erin's Call, and Tony O'Leary.
LISTNUM 1 \l 12494 We propose to strengthen our commitment to our musical culture by exceeding the requirements for Canadian content development. In our application, we indicated that we would spend $10,000 annually on CCD, with $2,000 to Factor and $8,000 to the Newfoundland and Labrador Music Industry Association, now known as Music NL.
LISTNUM 1 \l 12495 These amounts are over and above the basic requirements under the new policy. We have attached a chart summarizing our proposals in this area, as well as the amounts required under the new policy.
LISTNUM 1 \l 12496 But perhaps the best way to see the impact of CHVO in our community is to hear the voices of listeners we serve every day. Given that coming to Sydney for most is difficult, we decided to visit some of them and bring their comments and feelings to you.
LISTNUM 1 \l 12497 Here is a short video of what they said.
‑‑‑ Video Presentation
LISTNUM 1 \l 12498 MR. STEELE: What you just saw was a small sample of support we received from members of our community. We'd like to be able to provide them with the music they love in a beautiful FM stereo.
LISTNUM 1 \l 12499 Thank you for your time and attention. We will be pleased to answer any question you may have about our proposals.
LISTNUM 1 \l 12500 THE CHAIRPERSON: Thank you, Mr. Steele and Panel.
LISTNUM 1 \l 12501 I'll be asking Commissioner Williams to start the questioning.
LISTNUM 1 \l 12502 COMMISSIONER WILLIAMS: Good morning, Mr. Steele and Newcap gentlemen.
LISTNUM 1 \l 12503 I guess I'm going to start in the financial area with my questioning. Based on the most recent annual return for CHVO filed with the Commission, which of course is confidential, the financial projections for your proposed FM service filed with your application, when compared to the historical financial performance of CHVO, appears to illustrate a lack of economic imperative to move to FM. Given that the existing AM service is performing at or above the financial projections you provided.
LISTNUM 1 \l 12504 Can you give us some insight as to how you arrived at the financial projections for this proposed FM services?
LISTNUM 1 \l 12505 MR. STEELE: Well, our margins are better because of the synergies that we're able to use in the back end of the ‑‑ of our operation in St. John's, where we're located there, with our dedicated local studio there.
LISTNUM 1 \l 12506 But the prime move, why we're doing is to, is a defensive move on our part, because we do well there now. We don't want the bottom to fall out. We're working with a 1960's technology in the year 2007. And we want to be able to serve the people of Conception Bay North. They deserve an FM service in 2007 that's dedicated to them locally, and by doing that, we will be able to defend our business.
LISTNUM 1 \l 12507 COMMISSIONER WILLIAMS: So it's not so much a financial imperative; it's more of a protection strategy of sorts, then?
LISTNUM 1 \l 12508 MR. STEELE: Correct.
LISTNUM 1 \l 12509 COMMISSIONER WILLIAMS: Do you have any intention to serve the St. John market and to ‑‑ and maybe comment on your ability to establish synergies with some of your St. John services.
LISTNUM 1 \l 12510 MR. STEELE: There's been a lot of dust kicked up by our competitors in St. John's about this, but it has little substance. And we ‑‑ and I'm going to get Kerry to talk probably a little bit about that in a moment.
LISTNUM 1 \l 12511 But the fact of the matter is, we want to serve the people of Conception Bay North with this service. St. John's is well served. We agreed with the Stirlings and Newman and Bell in 2002 that St. John's could sustain another FM station. We even supported Mr. Stirling in his application.
LISTNUM 1 \l 12512 That hasn't changed. You know, there is ‑‑ St. John's is well served, and it can't handle another FM station into the market, and that's why we, when we approached Mr. Pelser, we said, do not put a reliable signal into St. John's. We want to serve the people of Conception Bay North.
LISTNUM 1 \l 12513 COMMISSIONER WILLIAMS: Can you quantify the potential impact of overlapping in the St. John's markets in terms of local sales revenue or anything ‑‑ any that would be generated by CHVO FM?
LISTNUM 1 \l 12514 MR. STEELE: Our revenue for CHVO is 95, 94 percent local to ‑‑ and is in Conception Bay North. We receive next to nothing in St. John's revenue on CHVO AM, and the same will be on the FM dial.
LISTNUM 1 \l 12515 In fact, we believe that the FM service that we're proposing here will have a less reliable signal into St. John's than CHVO AM currently has in that market today.
LISTNUM 1 \l 12516 COMMISSIONER WILLIAMS: Would Newcap be prepared to offer some safeguards that would ensure that local advertising activities of CHVO would not be combined with Newcap's existing four stations in St. John's?
LISTNUM 1 \l 12517 MR. STEELE: Yes, 'cause we don't do it now.
LISTNUM 1 \l 12518 COMMISSIONER WILLIAMS: And so are there any additional technical assurances that Newcap can provide to demonstrate that CHVO's proposed 5 millivolt signal, as proposed in its application, will not impact on St. John's?
LISTNUM 1 \l 12519 MR. STEELE: I'll pass that over to John Murphy or Kerry, 'cause once I said we don't want a reliable signal into St. John's, these guys get talking, and I tend to glaze over a little bit.
LISTNUM 1 \l 12520 So they can speak a little bit more to that.
LISTNUM 1 \l 12521 MR. MURPHY: Yes. I think perhaps the best assurance you can have right now is to understand how Mr. Pelser came to the technical arrangement that's here, and how the signal will better serve the Conception Bay area.
LISTNUM 1 \l 12522 As it turns out, our primary AM signal disenfranchises almost as much as half of the bay, the Conception Bay area, because of the very nature of the AM signal in that area.
LISTNUM 1 \l 12523 The two things that will be benefitted from switching from AM to FM, one of the great ones is that we will, in fact, do a better coverage of the Conception Bay area than we are presently doing with the AM radio station, and on the other hand, as John already pointed out, this is a new era. We're competing right now with the Ipods and the downloads, and with all of the new technology.
LISTNUM 1 \l 12524 And even though we have the best solid state AM transmitter that we can get, with all of the best audio trains that there are, still, we're not in stereo, and the AM basic quality is not as good as FM is.
LISTNUM 1 \l 12525 So I'd like to ask Mr. Pelser, Kerry Pelser right now if he would give you some information on that, so that he could demonstrate to you exactly what the penetration toward St. John's would, in fact, be like, and compare it with what's happening today.
LISTNUM 1 \l 12526 Mr. Pelser?
LISTNUM 1 \l 12527 MR. PELSER: Yes, thank you, John.
LISTNUM 1 \l 12528 When we were asked to look at this application, one of the things we did look at very closely was when we prepared our technical brief, which shows the contours in it, we showed the theoretical contour, if I can call it that, that Industry Canada requires, and we sometimes call it the contour based on curves, and if you see it, it's point five FM, extends well out over ‑‑ actually, past St. John's.
LISTNUM 1 \l 12529 One of the things we also looked at was we used a program called CRC Predict, which calculates a more realistic contour, taking into account the actual terrain. That realistic map has been part of this submission, and was in the technical brief, as well as the official contour submitted.
LISTNUM 1 \l 12530 That point five contour falls short of most of the city of St. John, maybe encloses a small portion. But if you really look at it, too, a point five FM contour is really not sufficient, it's not a city‑grade contour. It's not sufficient to provide a reliable signal in an urban area such as St. John's.
LISTNUM 1 \l 12531 Hence, based on that, we assured Newcap, yeah, there may be a weak signal in St. John's from this station, but certainly not a reliable city, and certainly not a city‑grade signal that's capable of providing a solid signal that can compete with local stations.
LISTNUM 1 \l 12532 COMMISSIONER WILLIAMS: How would Newcap, what would Newcap's view be if the Commission were to consider the possibility of imposing a conditional license that would prohibit it from soliciting or accepting advertising in St. John's markets? How would you comment on that?
LISTNUM 1 \l 12533 MR. STEELE: We would accept that, but I would just like to say that we currently don't solicit advertising in St. John's there; however, if someone contacted us we would like to have the ability to accept the advertising if someone in St. John's wanted to reach the 44,000 listeners in Conception Bay North exclusively. We would like to be able to accept that.
LISTNUM 1 \l 12534 But if the Commission is not comfortable with that or whatever, we would accept it as a condition of license.
LISTNUM 1 \l 12535 COMMISSIONER WILLIAMS: Okay. Thank you, Mr. Steele.
LISTNUM 1 \l 12536 In your letter of 9 January, 2007, you modified your original CTD funding proposal to reflect the Commission's new CCD contribution regime, as outlined in the radio policy of 2006.
LISTNUM 1 \l 12537 Please confirm your understanding that, if licensed, your station will have to contribute a basic annual CCD contribution imposed by regulation, based on the station's total annual revenues and the amounts as set out in paragraph 116 of the new radio policy, Public Notice CRTC 2006‑158.
LISTNUM 1 \l 12538 Based on your financial projections, this would represent an annual CCD contribution of $500 in year one and two, increasing to $1,000 in years three through seven.
LISTNUM 1 \l 12539 So ‑‑ and also please confirm your understanding that no less than 60 percent of the station's basic annual CCD contribution must be allocated to either Factor or Music Action, and the remaining amount, if any, may be directed to any eligible CCD initiative, at your discretion.
LISTNUM 1 \l 12540 MR. STEELE: Yes.
LISTNUM 1 \l 12541 COMMISSIONER WILLIAMS: As set out in the new commercial radio policy, the new annual basic CCD contribution will be imposed on all commercial radio licensees by regulation. The Commission could impose a transitionary COL reflecting the new basic annual CCD until such time as the regulation comes into force.
LISTNUM 1 \l 12542 Once the regulation is in place, the COL will expire.
LISTNUM 1 \l 12543 Do you have any comments regarding the Commission imposing such a COL?
LISTNUM 1 \l 12544 MR. MAHEU: We wouldn't have any problem with that whatsoever.
LISTNUM 1 \l 12545 COMMISSIONER WILLIAMS: As was the case with previous Canadian Talent Development policy, an applicant or licensee may choose to exceed the minimum annual basic CCD contribution. Under the old CCD policy it was clear that your funding proposal exceeding the minimum plan requirements.
LISTNUM 1 \l 12546 As part of this application, you are proposing to contribute additional annual funding to CCD that would be over and above the basic required CCD contribution. Can you confirm for us the total annual amount of this over and above contribution?
LISTNUM 1 \l 12547 MR. MAHEU: The annual over and above contribution for the first seven years of operation would be $10,000 each year, over and above the basic requirement.
LISTNUM 1 \l 12548 COMMISSIONER WILLIAMS: Please confirm your understanding under the new policy, not less than 20 percent of this annual over and above CCD contribution must be allocated to Factor or Music Action. With this in mind, what percentage of your annual over and above CCD commitment do you wish to allocate to either of these groups, and what dollar amount does this represent?
LISTNUM 1 \l 12549 MR. MAHEU: We are allocating 20 percent of our annual over and above, which is $2,000 each year to Factor. The remaining $8,000 each year will be contributed to Music NL, and that'll be the same each year for seven years.
LISTNUM 1 \l 12550 COMMISSIONER WILLIAMS: Thank you, Mr. Maheu.
LISTNUM 1 \l 12551 Please identify the eligible CCD initiatives and the annual funding level for each that you would support with the remaining over and above CCD contribution; that is, the over and above non‑Factor or Music Action contribution.
LISTNUM 1 \l 12552 And please confirm that you would adhere to the over and above CCD contributions, as conditions of license.
LISTNUM 1 \l 12553 MR. MAHEU: Yes, we would certainly accept that as a condition of license. Our ‑‑ the balance of the over and above, the $8,000, is going to what was formerly known as the Newfoundland Music Industry Association, now known as Music NL. It qualifies under the Commission's guidelines in the 2006‑156, and $8,000 each year for the next seven years would go there.
LISTNUM 1 \l 12554 COMMISSIONER WILLIAMS: One last question on the impact. Can we get a, maybe in a sentence, to give us a clear understanding of the potential impact, if any, that the approval of the CHOV flip application may have on the incumbents in the St. John's market.
LISTNUM 1 \l 12555 MR. STEELE: For the first quarter of Newcap's fiscal year, which is different than the standard broadcast year from January through March 2007, we had 139 accounts on the air on CHVO AM. 106 of these were purely local Conception Bay accounts, and 12 were national agency accounts. 17 were placed by companies or organizations with province‑wide interest, and 2 were placed by businesses with head office in St. John's and local CBN branch.
LISTNUM 1 \l 12556 94 percent of our revenue on CHVO AM is local radio ‑‑ local dollars in the market, and we don't expect any impact on current incumbents in the St. John's market.
LISTNUM 1 \l 12557 COMMISSIONER WILLIAMS: Thank you very much, Mr. Steele.
LISTNUM 1 \l 12558 That concludes my line of questioning, Madame Chair.
LISTNUM 1 \l 12559 THE CHAIRPERSON: I do have one question. I'm just looking at the map, and I'm just wondering what the potential market, homes served, households, population is compared to your current.
LISTNUM 1 \l 12560 You mentioned 44,000 was your current, but I see the 3 millivolt is going over onto the St. John's side and taking in some of those towns along the coast, so I'm just wondering what your new potential would be.
LISTNUM 1 \l 12561 MR. STEELE: I'll let Kerry answer that.
LISTNUM 1 \l 12562 MR. PELSER: I'll have to find the populations in the application.
LISTNUM 1 \l 12563 THE CHAIRPERSON: There's no rush. And even just approximate is good.
LISTNUM 1 \l 12564 MR. MURPHY: Madame Chair, the population within the 3 millivolt per meter contour, 51,602 is the proposed numbers of households.
LISTNUM 1 \l 12565 The population in, within that contour will be largely unchanged. There will be some penetration into the west side, the area west of St. John's, and we would have to calculate the actual numbers that could possibly change there, but we predict that the penetration will be minimal, as it relates to the present CHVO coverage.
LISTNUM 1 \l 12566 THE CHAIRPERSON: So the 51,000 is compared to the 44,000? That's households, as well? They're both households?
LISTNUM 1 \l 12567 MR. MURPHY: I'll get Mr. Pelser to confirm that, but at first blush, as we look at the numbers, that seems reasonable to accept.
LISTNUM 1 \l 12568 THE CHAIRPERSON: That's sufficient for my answer. So it's not materially different, is what you're saying.
LISTNUM 1 \l 12569 MR. MURPHY: No, ma'am.
LISTNUM 1 \l 12570 THE CHAIRPERSON: I'm fine with that, Mr. Pelser, unless you've got it close there. It doesn't ‑‑ I'm good.
LISTNUM 1 \l 12571 MR. PELSER: That is essentially my understanding, as well.
LISTNUM 1 \l 12572 THE CHAIRPERSON: Okay. Thank you very much.
LISTNUM 1 \l 12573 Thank you Mr. Steele and Mr. Maheu and all the names here ‑‑ right, Aiden Hibbs ‑‑ I know one other Aiden, also from Newfoundland ‑‑ Mr. Murphy and Mr. Pelser. And the video was great. Be nice to visit.
LISTNUM 1 \l 12574 MR. STEELE: Thank you.
LISTNUM 1 \l 12575 MR. MURPHY: Thank you.
LISTNUM 1 \l 12576 COUNSEL: Madame Chair.
LISTNUM 1 \l 12577 THE CHAIRPERSON: Yes.
LISTNUM 1 \l 12578 COUNSEL: I have a question.
LISTNUM 1 \l 12579 THE CHAIRPERSON: Oh, I do this every time to Counsel. Sorry.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 12580 THE CHAIRPERSON: I do know you're here, Shari.
LISTNUM 1 \l 12581 COUNSEL: Sorry. I just wanted to go back to, on CCD for a quick second, the chart that you submitted this morning with the documents that you filed, and just take you through actually looking at year three in particular.
LISTNUM 1 \l 12582 The new policy provides that stations with total revenues in the previous broadcast year, between 625,000 and 1,250,000 must make a contribution of $1,000.
LISTNUM 1 \l 12583 In year three, we're noticing that you've identified the projected revenues for the previous year ‑‑ that would be the projected revenues for year two ‑‑ as 636,000, and then you've identified your CCD requirement as 500 as opposed to 1,000, and then your Factor contribution is 300 as opposed to the 600. So we're just wondering if that was an error, or ‑‑ ?
LISTNUM 1 \l 12584 MR. MAHEU: Yeah, I noticed that, too, while we were going through it, and there was some confusion on our part because our ‑‑ you know, we're ‑‑ this is not a start‑up, as we would be in some other situations.
LISTNUM 1 \l 12585 So we do have existing previous revenue, and we would certainly adhere to the Commission guideline of over 625,000 it's $1,000 minimum requirement. Of that, 60 percent of that, or $600, would go to Factor, and we'd be happy to make the change on this and re‑submit it.
LISTNUM 1 \l 12586 COUNSEL: We would appreciate that.
LISTNUM 1 \l 12587 MR. MAHEU: Sure.
LISTNUM 1 \l 12588 COUNSEL: If you could do that by the end of the day, that would be great.
LISTNUM 1 \l 12589 MR. MAHEU: It would be difficult today, but if you don't mind, could we get it to the Commission before the end of the week?
LISTNUM 1 \l 12590 COUNSEL: That would be fine.
LISTNUM 1 \l 12591 MR. MAHEU: Okay.
LISTNUM 1 \l 12592 COUNSEL: Thank you.
LISTNUM 1 \l 12593 THE CHAIRPERSON: Madame Secretary?
LISTNUM 1 \l 12594 THE SECRETARY: Thank you, Madame Chair.
LISTNUM 1 \l 12595 This completes Phase I of the consideration of Item V on the agenda.
LISTNUM 1 \l 12596 As there are no competing applications with respect to this item, we will now proceed to Phase II, the interventions. Other parties appear in the order set out in the agenda to present their intervention.
LISTNUM 1 \l 12597 I would now call Coast Broadcasting to come to the front. Please introduce yourself before your presentation, and you have ten minutes.
LISTNUM 1 \l 12598 MR. NEWMAN: Good morning, ladies and gentlemen of the Commission, Staff Members. My name is Andy Newman. I'm the VP of Operations for Coast Broadcasting Limited in St. John's, Newfoundland.
LISTNUM 1 \l 12599 Next to me is Andrew Bell, the President of Coast Broadcasting Limited.
LISTNUM 1 \l 12600 We'd like to thank you for the opportunity to speak to you today in person on the conversion of ‑‑ the proposed conversion of CHVO from AM to FM.
LISTNUM 1 \l 12601 Our opinions have been documented certainly by the Commission. Some of the issues that we've brought to the table have been responded to by Mr. Maheu and his Newcap team. We'd like to thank Mr. Maheu for his speed.
LISTNUM 1 \l 12602 We've bantered back and forth with Mark on several issues that we have been made aware of in the past six months. One, the issue of producing the CHVO product out of the St. John's operation. That face was true when I visited the CHVO plant back in October of 2006.
LISTNUM 1 \l 12603 Mr. Maheu did state, in his most recent response to us, that only some back end and production items are taken care of in St. John's. This represents some new information that I've not been able to either confirm or have denied.
LISTNUM 1 \l 12604 One of the other issues we did bring up, the issue of sales people from the St. John's marketplace travelling to Conception Bay several times per week. Again, that was correct information six months ago. Mr. Maheu now is stating that the process does not continue.
LISTNUM 1 \l 12605 We accept Mr. Maheu's assertions, and we do offer that we will be monitoring the marketplace for changes.
LISTNUM 1 \l 12606 We do feel, at Coast Broadcasting, that public naming of clients who have taken advantage of Newcap Newfoundland's creative selling practices ‑‑ buy one station, get one station free ‑‑ that serves no purpose today, other than to really personalize a business issues. So again, we will dispense with that line of objections.
LISTNUM 1 \l 12607 What is fact, and wheat is of the most concern, is quite simply that this change in technical service for CHVO will give Newcap five ‑‑ five ‑‑ listenable, sellable, commercial radio licenses in the greater St. John's CMA; a market they are currently only permitted to own three.
LISTNUM 1 \l 12608 Mr. Bell?
LISTNUM 1 \l 12609 MR. BELL: St. John's CMA is served by four commercial Newcap or Steele Communications licenses. Not total licenses; four Newcap or Steele Communication licenses.
LISTNUM 1 \l 12610 Mr. Maheu's assertions that CJYQ is run as a glorified community station is irrelevant, as it is clear that it is a commercial radio station.
LISTNUM 1 \l 12611 Newcap chose to bastardize the programming of CJYQ as a carrot to the CRTC in 2000, to allow them to purchase the Colonial Broadcasting Company, which gave them, again, four commercial radio licenses in a market where they were only allowed to own three.
LISTNUM 1 \l 12612 An exception to the CRTC Regulations were made ‑‑ was made. The fact that CJYQ is now Radio Newfoundland is a feather in Newcap's hat, and that they can always point to it and say, "Look what a great job we do for Canadian and local talent in St. John's". And they do. But it was their choice; a business choice.
LISTNUM 1 \l 12613 It was also our choice to enter the market with CKSJ FM, an endeavor we took on with our heads up and our eyes wide open. The reality is, CJYQ is and will be a commercial property. No different than VOCM and VOWR, which is run ‑‑ or are run as community stations. But it has retained its commercial status under the terms of the confederation.
LISTNUM 1 \l 12614 We find it interesting that they clearly acknowledge and admit that the St. John's stations broadcast into Conception Bay North, CHVO, yet they claim they will not broadcast into St. John's. Our own station, CKSJ FM has a maximum power of 20,000. They're saying that they're going to have a maximum power of 30,000 Watts.
LISTNUM 1 \l 12615 We fail to see how it's possible that we can broadcast into their area, and they're not going to be able to broadcast into ours.
LISTNUM 1 \l 12616 I think it's also important to note the comment about 44,000 and how that will increase. Conception Bay South, which they will now encumber, will increase the size of that, which is the second‑largest now after the 2006 census, is the second‑largest city in Newfoundland. How this will immaterially or only marginally increase that 44,000 number.
LISTNUM 1 \l 12617 Converting CHVO to FM under its current contours will give Newcap five strong signals ‑‑ no longer four ‑‑ covering the St. John's CMA, and a large portion of actual city boundaries. It is important to note that Newcap is stressing the CHVO signal will not propagate into the entire city of St. John's. In fact, every operator, including ourselves, in the city has issues with the train, and all operators have areas that are weak, even within the city.
LISTNUM 1 \l 12618 MR. NEWMAN: Speaking of the city of St. John's, the city of St. John's, Newcap speaks of the city in all of its discussions. Coast Broadcasting, Newfoundland Broadcasting, Statistics Canada, BBM, and the CRTC itself all list St. John's as a market as the St. John's CMA, rather than the city of St. John's.
LISTNUM 1 \l 12619 The city of St. John's has put forth publicly its agenda to amalgamate with Mount Pearl and Paradise. It is only a matter of time.
LISTNUM 1 \l 12620 Under Newcap's assertion that the CHVO FM signal will not cover the city of St. John's currently, amalgamation will mean the signal does cover the bulk of their own defined city of St. John's.
LISTNUM 1 \l 12621 Further to the assertion that Newcap wants to maintain the country format, our most recent market survey, conducted in November of 2006, indicated six to ten percent of listeners aged 25 to 54, on the Avalon Peninsula, want country or classic country music. That is not a large group.
LISTNUM 1 \l 12622 If licensed as proposed, we would respectfully ask the Commission to use some precedent to restrict Newcap's ability to market and to sell into the St. John's CMA. We would also respect and request that since the proposal calls for a local station that Newcap be required to staff the on‑air operation from Carbonear and not St. John's.
LISTNUM 1 \l 12623 We respect Newcap's synergies, from an administration standpoint, a technical standpoint. We do not accept that local radio can be done from a remote location.
LISTNUM 1 \l 12624 With respect to selling CHVO into St. John's, of concern to Coast Broadcasting is the low rate of selling, the low rate of dollar value, in which a strong signal will be sold for. It could destabilize the delicate St. John's radio market and drive rates down and bring costs up.
LISTNUM 1 \l 12625 We would like to share with the Commission the actual information from Newcap's application regarding population in the point five millivolt contour.
LISTNUM 1 \l 12626 In their initial slide this morning, they showed the area Carbonear market to be 44,000 persons. Their proposal, from their own document, shows a potential listening audience of 101,421, based on the 2001 census.
LISTNUM 1 \l 12627 We do not want to deprive the listeners of CHVO or the Carbonear area or Conception Bay North the quality we agree they deserve on FM. However, we do suggest the Commission recommend Newcap re‑examine their options ‑‑ the power, the coverage area, the contour lines, and eliminate the opportunity for them to get a potential fifth license in the St. John's CMA.
LISTNUM 1 \l 12628 We do thank the Commission again for the opportunity to see us in person on this issue.
LISTNUM 1 \l 12629 Thank you and good morning.
LISTNUM 1 \l 12630 THE CHAIRPERSON: Thank you, Mr. Newman.
LISTNUM 1 \l 12631 Commissioner Noel has some questions for you.
LISTNUM 1 \l 12632 COMMISSIONER NOEL: Yes. You have listened to their engineer this morning, and what do you make of the realistic contour that they was talking about? A realistic point five millivolt?
LISTNUM 1 \l 12633 MR. NEWMAN: When we set out to ‑‑
LISTNUM 1 \l 12634 COMMISSIONER NOEL: I have a map here, and a ‑‑
LISTNUM 1 \l 12635 MR. NEWMAN: Yes, they're ‑‑
LISTNUM 1 \l 12636 COMMISSIONER NOEL: It's probably ‑‑
LISTNUM 1 \l 12637 MR. NEWMAN: There were two maps actually indicated. One is the standard that Industry Canada and the CRTC has historically used to define markets, and the other one is done by a program, CRC Predict, I believe is the name of the program.
LISTNUM 1 \l 12638 COMMISSIONER NOEL: Which I have to mention the CRTC also uses, to appreciate ‑‑
LISTNUM 1 \l 12639 MR. NEWMAN: Yes.
LISTNUM 1 \l 12640 COMMISSIONER NOEL: ‑‑ contours.
LISTNUM 1 \l 12641 MR. NEWMAN: And it is, it is one that we ourselves look at, because we want to see what the potential is for a new FM area. We also use the CRC Predict to do our Coast Broadcasting CKSJ application. We did not file it with the Commission, but we did want to see what we would get with a worst‑case scenario.
LISTNUM 1 \l 12642 I can tell you that on any given day our worst case scenario with 20,000 Watts covers all of the area proposed by CHVO's conversion from St. John's. Our competitors operate at 100,000 Watts from similar antenna heights, and again, they cover directly ‑‑
LISTNUM 1 \l 12643 COMMISSIONER NOEL: But I think we're looking at the Carbonear flip from AM to FM.
LISTNUM 1 \l 12644 MR. NEWMAN: My point to Madame Commissioner ‑‑
LISTNUM 1 \l 12645 COMMISSIONER NOEL: And it's not going to 30 ‑‑ 100,000 Watts.
LISTNUM 1 \l 12646 MR. NEWMAN: No. It's going to be 30.
LISTNUM 1 \l 12647 COMMISSIONER NOEL: Yes. And I'm, I have the map in front of me, and the realistic contour clearly is outside of the St. John's area.
LISTNUM 1 \l 12648 MR. NEWMAN: It is a ‑‑
LISTNUM 1 \l 12649 COMMISSIONER NOEL: Point ‑ the point five. The three is well outside of it.
LISTNUM 1 \l 12650 MR. NEWMAN: Our three millivolt contour line was also well out of the Conception Bay North area when we proposed it at 20,000 Watts. It was approximately five to six kilometers over the water. These are programs that are designed to ‑‑ exactly by the way the program is named ‑‑ predict.
LISTNUM 1 \l 12651 Our concern is that the prediction may be understated.
LISTNUM 1 \l 12652 COMMISSIONER NOEL: Now, your ‑‑ in your original intervention, I heard you this morning claiming that the population coverage would be multiplied by four. Could you tell us on what sources you rely to give us those numbers?
LISTNUM 1 \l 12653 MR. NEWMAN: The Avalon Peninsula ‑‑
LISTNUM 1 \l 12654 COMMISSIONER NOEL: 'Cause that's not the evidence that they put in front of us a few minutes ago.
LISTNUM 1 \l 12655 MR. NEWMAN: The Avalon Peninsula, the coverage area of St. John's, Conception Bay North, and the Avalon Peninsula, of which the CHVO conversion will cover a good chunk of, has 234,000 people in it. The ‑‑
LISTNUM 1 \l 12656 COMMISSIONER NOEL: The Avalon Peninsula is south of that area. Am I correct in saying that?
LISTNUM 1 \l 12657 MR. NEWMAN: The Avalon Peninsula is the entire area from Carbonear to St. John's, with the bulk of the population residing in Conception Bay North and the St. John's CMA. St. John's CMA is 174,000 people, in the area defined by BBM and Statistics Canada.
LISTNUM 1 \l 12658 COMMISSIONER NOEL: When ‑‑ and you calculate the whole of St. John's into your ‑‑
LISTNUM 1 \l 12659 MR. NEWMAN: Into the 174,000.
LISTNUM 1 \l 12660 COMMISSIONER NOEL: Okay.
LISTNUM 1 \l 12661 MR. NEWMAN: That is correct, yes.
LISTNUM 1 \l 12662 COMMISSIONER NOEL: But then, you know, like I'm looking at the map, and the map says different. If the bulk of the population is in St. John's, and it's outside of their realistic coverage, and you're adding them up, it's ‑‑
LISTNUM 1 \l 12663 MR. NEWMAN: The city of St. John's has 74,000 people in it.
LISTNUM 1 \l 12664 COMMISSIONER NOEL: 74,000?
LISTNUM 1 \l 12665 MR. NEWMAN: Right.
LISTNUM 1 \l 12666 COMMISSIONER NOEL: Okay, that's ‑‑
LISTNUM 1 \l 12667 MR. NEWMAN: So I guess it is ‑‑ their population projection of the 101,421 persons is ‑‑
LISTNUM 1 \l 12668 COMMISSIONER NOEL: Now, did you hear Mr. Steele this morning saying that he would accept a condition of license not to source advertising in the St. John's market?
LISTNUM 1 \l 12669 MR. NEWMAN: I believe the question was solicit or accept.
LISTNUM 1 \l 12670 COMMISSIONER NOEL: Well, that's always been the Commission's policy; not to solicit. Accepting was always permitted.
LISTNUM 1 \l 12671 MR. NEWMAN: Mm‑hm. We currently accept advertising from the Conception Bay North area. We do not solicit it. I would suggest that we may be forced to solicit in that area, as will our other markets.
LISTNUM 1 \l 12672 COMMISSIONER NOEL: He mentioned that he would accept a condition not to solicit.
LISTNUM 1 \l 12673 MR. BELL: I think that was if it was a condition, but he also requested that he be allowed to ‑‑
LISTNUM 1 \l 12674 COMMISSIONER NOEL: Accept.
LISTNUM 1 \l 12675 MR. NEWMAN: Accept.
LISTNUM 1 \l 12676 MR. BELL: ‑‑ accept.
LISTNUM 1 \l 12677 COMMISSIONER NOEL: Yes. Well, that's always been the Commission's policy, that you're not allowed to sol ‑‑ you may not be able to solicit, but you're always allowed to accept. And you are just telling me that you are accepting?
LISTNUM 1 \l 12678 MR. NEWMAN: Yes.
LISTNUM 1 \l 12679 COMMISSIONER NOEL: ‑‑ advertising from the Carbonear market. Why should it be different for him?
LISTNUM 1 \l 12680 MR. BELL: He's currently doing it now.
LISTNUM 1 \l 12681 MR. NEWMAN: Yes.
LISTNUM 1 \l 12682 MR. BELL: And will ‑‑
LISTNUM 1 \l 12683 COMMISSIONER NOEL: Hm?
LISTNUM 1 \l 12684 MR. BELL: He's currently doing it now, and will do it ‑‑ suggested ‑‑
LISTNUM 1 \l 12685 COMMISSIONER NOEL: I can't hear you.
LISTNUM 1 \l 12686 MR. BELL: I said, he's currently doing ‑‑ they're currently doing it now, and they're suggesting requesting ‑‑
LISTNUM 1 \l 12687 COMMISSIONER NOEL: Accepting?
LISTNUM 1 \l 12688 MR. BELL: Accepting.
LISTNUM 1 \l 12689 COMMISSIONER NOEL: Yes.
LISTNUM 1 \l 12690 MR. BELL: From the St. John's market, and they're requesting that they have the ability to do it, as well, going forward. That's essentially what Andy is saying.
LISTNUM 1 \l 12691 MR. NEWMAN: Yes.
LISTNUM 1 \l 12692 COMMISSIONER NOEL: But that's always been the Commission's policy, that they can accept, if ‑‑
LISTNUM 1 \l 12693 MR. NEWMAN: I believe the question ‑‑
LISTNUM 1 \l 12694 COMMISSIONER NOEL: ‑‑ out‑of‑market advertising.
LISTNUM 1 \l 12695 MR. NEWMAN: I believe the question from Mr. ‑‑ from Commissioner Williams this morning was specific on "solicit or accept", and that's why I'm addressing it that way. But yes, it has been the Commission's ‑‑
LISTNUM 1 \l 12696 COMMISSIONER NOEL: But the answer was that he would accept a condition not to solicit.
LISTNUM 1 \l 12697 MR. NEWMAN: Yes.
LISTNUM 1 \l 12698 COMMISSIONER NOEL: And that's what I'm asking.
LISTNUM 1 \l 12699 MR. NEWMAN: We ‑‑
LISTNUM 1 \l 12700 COMMISSIONER NOEL: If he accepts a condition not to solicit advertising in the St. John's market, what is the downside to you?
LISTNUM 1 \l 12701 MR. NEWMAN: The question that we have with respect to that, Madame, would be is it the St. John's market, as defined by BBM, Statistics Canada, and the CRTC, or is it the city of St. John's, as defined by their application.
LISTNUM 1 \l 12702 Because if it is the St. John's CMA, yes, we would be fine with that.
LISTNUM 1 \l 12703 COMMISSIONER NOEL: Thank you. I don't have any other questions.
LISTNUM 1 \l 12704 THE CHAIRPERSON: Just ‑‑ excuse me. I just had one question, Mr. Newman. I just wanted to get your comment on Mr. Pelser's comment that that realistic contour wouldn't provide, if I understood him correctly, a city‑grade signal.
LISTNUM 1 \l 12705 MR. NEWMAN: We all, all of the operators out of the St. John's market, because of the nature of the terrain, which was addressed by Mr. Steele this morning, which I do agree with, it is difficult, we do all have issues in the downtown portion of the city of St. John's.
LISTNUM 1 \l 12706 There is some multi‑plexing, there are issues with the ‑‑ there are issues with coverage in the basement in some of the steel and concrete buildings, not unlike most major cities in North America.
LISTNUM 1 \l 12707 Will it be a listenable signal? Again, it's our view that it's a concern of ours. The CRC Predict suggests that they will avoid the city of St. John's currently, as defined. Our contention is that the market of St. John's is the real issue here. The market of St. John's has been growing consistently; the only spot in Newfoundland that has been so.
LISTNUM 1 \l 12708 MR. BELL: If I might add to that, too, where St. John's is growing is on the eastern portion, or sorry, the western portion of the peninsula, which is where the towns of Paradise ‑‑ which is, should be noted as the fastest‑growing community, one of the fastest‑growing communities in Canada, not only Newfoundland ‑‑ and Conception Bay South.
LISTNUM 1 \l 12709 So where it does reach, and clearly the map shows that it does reach that area, those are two of the fastest‑growing communities, and two of the bigger communities, and two of the bigger towns or cities in the province of Newfoundland.
LISTNUM 1 \l 12710 MR. NEWMAN: The city ‑‑ sorry, Madame ‑‑ the city of St. John's is currently enclosed by the boundaries set out by the Provincial Government. The actual city of St. John's, in order to expand, will have to amalgamate, and the city has put forth a proposal to amalgamate with some of the outlying ‑‑
LISTNUM 1 \l 12711 COMMISSIONER NOEL: We're not into Municipal ‑‑
LISTNUM 1 \l 12712 MR. NEWMAN: No, certainly not, and we respect that, but we did want to make the Commission aware that the city boundaries will be changing, and the reality is, is the city of St. John's is not growing because it cannot physically grown any more. It's being surrounded by these other communities.
LISTNUM 1 \l 12713 It's our contention, and I believe Newfoundland Broadcasting's contention, that it's the outside areas of the city that are of the greatest concern, 'cause they are growing.
LISTNUM 1 \l 12714 THE CHAIRPERSON: Just help me out, here. I'm tryign to find Mount Pearl and Paradise. Just tell me where I'd look in relation, for example, to Portugal Cove, or St. Thomas, St. Phillip? Am I in the right place?
LISTNUM 1 \l 12715 MR. BELL: Portugal Cove, St. Thomas, St. Phillips, is part of Paradise.
LISTNUM 1 \l 12716 THE CHAIRPERSON: Oh, they're part of Paradise.
LISTNUM 1 \l 12717 MR. BELL: Yeah, they're part of Paradise.
LISTNUM 1 \l 12718 THE CHAIRPERSON: Okay. So then this goes to the question, I think, that I was asking Mr. Steele, and maybe what you started out with. I understood them to say it was 44,000 households. Not population.
LISTNUM 1 \l 12719 MR. NEWMAN: From their ‑‑
LISTNUM 1 \l 12720 THE CHAIRPERSON: That's what ‑‑
LISTNUM 1 \l 12721 MR. NEWMAN: From their conversation this morning, they state 44,000 persons.
LISTNUM 1 \l 12722 THE CHAIRPERSON: Bear with me a second. Okay. So it is persons. I see it is, just looking at what they filed, here. So it's 44,000 persons, and what I was wondering was what they considered to be the increase, potential persons, then, that they could reach with their new contours. And ‑‑
LISTNUM 1 \l 12723 MR. NEWMAN: From their, from their application, the ‑‑
LISTNUM 1 \l 12724 THE CHAIRPERSON: Dealing with the three millivolt.
LISTNUM 1 \l 12725 MR. BELL: Well, CBS alone has 28,000 people, so that's an additional 28 to the 44.
LISTNUM 1 \l 12726 THE CHAIRPERSON: Carbonear South? Is that ‑‑ ?
LISTNUM 1 \l 12727 MR. BELL: No, that's CBS, right across the Bay from Conception Bay North is Conception Bay South, which would be Kelligrews, Topsail, Manuels, Foxtrap, Holyrood, right next to Harbour Main. That's 28, 30,000 people on its own. Paradise is 20 ‑‑
LISTNUM 1 \l 12728 THE CHAIRPERSON: Are you saying that they're falling, then, in with the twenty ‑‑ the three millivolt contour?
LISTNUM 1 \l 12729 MR. BELL: If you look at that side of the Bay, which included ‑‑ which was included on the map, that includes that area.
LISTNUM 1 \l 12730 THE CHAIRPERSON: So you're saying it's increasing the 28,000 households?
LISTNUM 1 \l 12731 MR. BELL: I'm saying 28, plus another 20 in Paradise ‑‑ St. Phillips and all those areas. I think that they suggest it's immaterial is absolutely incorrect. I think that ‑‑
LISTNUM 1 \l 12732 THE CHAIRPERSON: I think that that was my word, but the number was what I was basing it on. So ‑‑
LISTNUM 1 \l 12733 MR. BELL: I think it at least doubles, and I think that some accurate numbers, you know, need to be I guess calculated or worked within those contours.
LISTNUM 1 \l 12734 THE CHAIRPERSON: And did you have a technical solution that would see their three millivolt contour ‑‑ because obviously we want the residents, they're upgrading 1960 technology, and it's fair that the residents in those areas get the best signal they can. So do you have a technical suggestion that would see that signal not reach that area?
LISTNUM 1 \l 12735 MR. NEWMAN: We certainly do not dispute, as we stated in our intervention and as we've said on personal conversations with Mr. Steele, that we do not want top see the people of Carbonear be held back. It is an area that is growing.
LISTNUM 1 \l 12736 Perhaps, you know, where it is a single‑station market, we're not certainly privy to their financial information, other than what they proposed for their conversion, but we do know that the market area is growing.
LISTNUM 1 \l 12737 The technical suggestion from their own engineer was to do a series of low‑power re‑broadcasters. We do recognize that it is a more expensive proposition, but two or three repeaters would certainly fill in all of the gaps.
LISTNUM 1 \l 12738 THE CHAIRPERSON: And would that be cost equivalent, would you say?
LISTNUM 1 \l 12739 MR. NEWMAN: No, it would be much more expensive.
LISTNUM 1 \l 12740 THE CHAIRPERSON: Much more.
LISTNUM 1 \l 12741 MR. NEWMAN: Yes.
LISTNUM 1 \l 12742 THE CHAIRPERSON: And I'm just wondering, then, the Coast's three milli ‑‑ your three millivolt contour, does it, does it include these communities?
LISTNUM 1 \l 12743 MR. NEWMAN: Yes, it does.
LISTNUM 1 \l 12744 THE CHAIRPERSON: Your three millivolt one does.
LISTNUM 1 \l 12745 MR. NEWMAN: Yes. Yes, it does. Our proposed three millivolt was not to cover the Carbonear area. However, after putting the station on the air, the height of our antenna and our power does get us clearly into that market, with the power output that we have.
LISTNUM 1 \l 12746 We have not conducted measurement tests, as we're not at that stage of our license yet to do a supplementary brief, but we certainly will be, we certainly would be willing to conduct a study, if asked.
LISTNUM 1 \l 12747 THE CHAIRPERSON: But let me ask the question again. Does your license, three millivolt contour, include that area that ‑‑ where ‑‑ Mount Pearl, Paradise, which I understand to be Carbonear South?
LISTNUM 1 \l 12748 MR. NEWMAN: Yes. Conception Bay South, yes.
LISTNUM 1 \l 12749 THE CHAIRPERSON: Conception Bay South. Okay. Thank. I think Andree ‑‑ or Commissioner Noel has another question.
LISTNUM 1 \l 12750 COMMISSIONER NOEL: Yes. We've heard Mr. Pace yesterday tell us about the cost of building towers. Do you think it's an economical proposition to build a forest of re‑broad to cover the area?
LISTNUM 1 \l 12751 MR. NEWMAN: I think that ‑‑
LISTNUM 1 \l 12752 COMMISSIONER NOEL: And then there's a subsidiary question; is it a good use of the spectrum to gather a number of FM frequencies for re‑broadcasting purposes?
LISTNUM 1 \l 12753 MR. BELL: I don't know that ‑‑ we've been asked to intervene on what they've presented. They did not present towers. We're intervening and suggesting that what they've presented is not something that we're ‑‑
LISTNUM 1 \l 12754 COMMISSIONER NOEL: But you said there was an alternative, and this was the forest of re‑broad ‑‑
LISTNUM 1 \l 12755 MR. NEWMAN: Mr. Pelser suggested that they explored that as one of their own alternatives.
LISTNUM 1 \l 12756 The ‑‑ it's my understanding that Newcap will be renting space from Aliant, just in behind their Carbonear operation, as we do from the CBC. That certainly is much more cost effective that doing your proposition with putting up towers, which is ‑‑
LISTNUM 1 \l 12757 COMMISSIONER NOEL: Thank you.
LISTNUM 1 \l 12758 MR. NEWMAN: ‑‑ very expensive.
LISTNUM 1 \l 12759 COMMISSIONER NOEL: Well, we saw yesterday that it could run in the half a million dollars per tower.
LISTNUM 1 \l 12760 MR. NEWMAN: That is a ‑‑ give our terrain and the ability to get power ‑‑
LISTNUM 1 \l 12761 COMMISSIONER NOEL: Given. the number of listeners ‑‑
LISTNUM 1 \l 12762 MR. NEWMAN: It's not ‑‑
LISTNUM 1 \l 12763 COMMISSIONER NOEL: ‑‑ it would be suicidal.
LISTNUM 1 \l 12764 MR. NEWMAN: They are in possession of, under the old Colonial Broadcasting, when Aliant was being merged together, the Butlers did purchase some of Aliant's or NewTel's old towers. I do not, I do not think that a large number of low‑powered transmitters is the ri ‑‑ is a hundred percent correct the way to go. I do think that there are ways to warp patterns, and I think Mr. Neal will certainly be more adept later on to talk about that.
LISTNUM 1 \l 12765 COMMISSIONER NOEL: Now, just on that, you mention in your intervention that this was an omnidirectional tower, and the reply said that it was not. So ‑‑
LISTNUM 1 \l 12766 MR. NEWMAN: Yes. And we didn't dispute Mr. Pelser's discussion.
LISTNUM 1 \l 12767 COMMISSIONER NOEL: Thank you.
LISTNUM 1 \l 12768 THE CHAIRPERSON: Thank you Mr. Bell and Mr. Newman. I appreciate it. Madame ‑‑
LISTNUM 1 \l 12769 THE SECRETARY: Thank you, Madame Chair. I would now call upon Newfoundland Broadcasting Company to come to the front.
LISTNUM 1 \l 12770 Please introduce yourself before your presentation, and you have ten minutes for this presentation.
LISTNUM 1 \l 12771 THE CHAIRPERSON: It's okay, Mr. Steele. Go ahead, thank. I called you Mr. Steele. I'm sorry for that, Mr. Stirling.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 12772 MR. STIRLING: That's okay.
LISTNUM 1 \l 12773 THE CHAIRPERSON: I'm sorry.
LISTNUM 1 \l 12774 MR. STIRLING: Well, good morning, Madame Chair, and Commissioner Williams and Commissioner Noel.
LISTNUM 1 \l 12775 My name is Scott Stirling, President and CEO of the Newfoundland Broadcasting Company. With me today is Mr. Doug Neal, our Senior Vice‑President. He's also Newfoundland Broadcasting's Chief Engineer, with over 30 years' experience in engineering, and in fact Mr. Neal put CHVO's signal originally to air, so you can ask him lots of questions about this.
LISTNUM 1 \l 12776 We're here today because we believe that a competitive imbalance exists in this St. John's radio market, which is our core market. We also believe that the grant of an FM license to station CHVO AM in Carbonear will increase that imbalance in favor of Newcap, our main competitor.
LISTNUM 1 \l 12777 The ratio of Newcap to Newfoundland Broadcasting's radio signals in the St. John's CMA today is four to one. This creates a competitive imbalance in our core market, due to a higher‑than‑normal ratio of radio signals brought about when Newcap required the assets and licenses of Colonial Broadcasting, Decision CRTC 2000‑141, in which the Commission granted an exception exemption to its own rule regarding ownership of commercial radio licenses.
LISTNUM 1 \l 12778 We believe that the grant of an FM license to CHVO Carbonear will increase this imbalance to a five to one ratio, in favor of Newcap.
LISTNUM 1 \l 12779 The 2002 call for FM applications serving the St. John's market saw Newfoundland Broadcasting apply because we believe, from experience, that an additional license was required to offset the competitive disadvantage or imbalance created by the consolidation of Newcap and VOCM stations and the exemption that the Commission made two years prior.
LISTNUM 1 \l 12780 Newfoundland Broadcasting stated that it needed to balance the playing field through provision of a second license, in order to provide the revenues required to maintain, upgrade, our aging FM transmission facilities in rural areas.
LISTNUM 1 \l 12781 Only two years prior, in the Newcap/VOCM decision, the Commission clearly recognized a broadcasting undertaking's ability to provide service to rural Newfoundland was directly linked to the revenues it garnered in the St. John's market.
LISTNUM 1 \l 12782 Coast FM, by comparison, offers little service to rural Newfoundland.
LISTNUM 1 \l 12783 We note that in the Newcap/VOCM decision, CRTC 2002‑141, the Commission stated, in paragraph 19:
"Except for the implication within the St. John's market, the present transaction raises no concern under the commercial radio policy..."
LISTNUM 1 \l 12784 And in paragraph 17 of the same decision:
"...that one of its major objectives was to ensure a strong, well financed radio industry that is better poised to achieve its obligation under the Act and to meet the challenges of the 21st century."
LISTNUM 1 \l 12785 Newfoundland Broadcasting maintains that these statements by the Commission underscore points concerning the competitive imbalance which we have lived with since 2000, and the need to maintain a radio station's profitability.
LISTNUM 1 \l 12786 Our point is, despite our efforts to survive the four to one imbalance the Commission created, and to demonstrate our need to offset this imbalance through a second FM license, our forecast, that without challenges we would find ourselves facing severe economic challenges, has now come true.
LISTNUM 1 \l 12787 The economic pressures caused by Newcap's dominance in St. John's could see the future of the OZ FM's rural network of eight transmitters, serving hundreds of thousands of listeners, most assuredly in jeopardy.
LISTNUM 1 \l 12788 If this higher‑than‑normal ratio of signals continues or is allowed to become five to one with CHVO licensed, our revenue base will erode to a point that the very thing the Commission sought to avoid by allowing the Newcap VOCM consolidation will have been created, but this time with OZ FM.
LISTNUM 1 \l 12789 Today, Newcap holds 15 of the 17 commercial radio licenses in our entire province. Once Coast was licensed, the four to one ratio of commercial radio stations, compared to OZ FM, within the CMA, became a five to one ratio. They all compete with OZ.
LISTNUM 1 \l 12790 In our view, why should Newcap have CRTC exemptions in a small central market that larger markets do not have?
LISTNUM 1 \l 12791 For most commercial stations, rock music or music is our stock and trade. Today, Newcap dominates the St. John's market with its overwhelming ratio of distinct niche music formats.
LISTNUM 1 \l 12792 We also face the future effects of satellite radio, Ipods, in‑vehicle MP3 players, all targetted specifically to deliver music and further fragment available audiences.
LISTNUM 1 \l 12793 With its increased power and reach, the CHVO application poses an additional threat, because we see it as the introduction of a seventh commercial signal available to the St. John's market, where it's quite capable of competing with OZ FM by providing higher‑quality FM service, as opposed to today's AM.
LISTNUM 1 \l 12794 CHVO FM will be available to the vast majority of the people within our core CMA market, especially to those thousands of commuters who make their daily trek to and from the city to the outskirts where they reside.
LISTNUM 1 \l 12795 In our view, the station has the potential to strengthen Newcap's market share, and by doing so weaken OZ FM's share, which we emphasize supports the service we bring to the Island of Newfoundland.
LISTNUM 1 \l 12796 We've state that OZ FM revenues have fallen significantly. We note what the Commission wrote in paragraph 26 of Decision 2000‑141:
"According to Newcap, the exemption that it has requested to the commercial radio policy would create a grouping of four stations that would present a much more attractive buy to national advertisers, and the stronger backbone necessary to provide radio services elsewhere across the province."
LISTNUM 1 \l 12797 National advertising agencies normally purchase markets two to three stations deep, but with Newcap stations higher or closely rated to OZ FM, agencies will choose to place one buy rather than two or three. Therefore, it's easy to understand why our national sales are off so much.
LISTNUM 1 \l 12798 Thirty years ago, when OZ FM was licensed, in 1977, the Commission encouraged us to expand service to cover the remainder of the Island, and into Labrador. We were the first FM in Newfoundland.
LISTNUM 1 \l 12799 In response, we established eight additional transmitters, bringing FM radio to hundreds of thousands of rural Newfoundland residents. But OZ FM lost money for years before the medium became widely accepted.
LISTNUM 1 \l 12800 IN the past, the Commission did consider the economic impact of CHVO on the revenues of St. John's stations. CRTC Decision 80‑51 approved the original licensing of CHVO, and the Commission was satisfied that CHVO would serve listeners in Trinity‑Conception, and would not impact on St. John's.
LISTNUM 1 \l 12801 On June 1st, 1990, CRTC Decision 90‑474, the Commission was satisfied that CHVO's change from 850 kilowatts to 560 kilowatts, while remaining at 5,000 watts, would improve service locally without impacting upon the St. John's market. The Commission should at least bar Newcap from selling advertising on CHVO in the St. John's CMA.
LISTNUM 1 \l 12802 Newcap claims that CHVO is not a competitive threat to OZ FM. They'd have us believe that coverage of the station is diminished within the CMA and that the station's daily activity is centered in Carbonear, when in reality no signal has originated from Carbonear for about two years.
LISTNUM 1 \l 12803 The morning man lives and works in St. John's, where the CHVO control room and automation is located. While Newcap maintains a building in Carbonear, it houses sales and reception, and although equipment exists there, it is not actively on the air, and we're told it cannot easily be put to air.
LISTNUM 1 \l 12804 Newcap laid off their local Carbonear morning show co‑host two years ago. She was not replaced. However, a local component is maintained through morning traffic reports by cell phone from CHVO's sales manager, with local voice‑overs for commercials recorded on computer and then emailed to St. John's for production and play‑out from the CHVO control room located there.
LISTNUM 1 \l 12805 In Newcap's response to our written intervention, paragraph 14, they say that they do not sell in combination, and that they have separate sales teams. Our sources tell us these sales teams sell either AM or FM. However, Newcap has four stations but not four sales teams.
LISTNUM 1 \l 12806 We're also told that any sales rep can pitch any station. While it may not be evidence on the surface, the ability to package exists, and we've heard from clients that this is done, and we have an exhibit as part of their advertising that you can see that you can pick and choose among their stations.
LISTNUM 1 \l 12807 Newcap already has four times the available inventory of OZ FM. If successful, they will have five times more available inventory to flood the market with in CMA. This suppresses radio advertising rates, which have already been suppressed significantly over the past three years.
LISTNUM 1 \l 12808 Newcap's four separate formats in St. John's CMA are all rated by BBM. They mostly attract healthy average quarter hours, cume in narrow demographics, slicing up the available audience. Combined, they represent a very distinct competitive advantage.
LISTNUM 1 \l 12809 Today, CHVO is not one of them, but should Newcap apply to BBM to have CHVO FM rated or to extend the CMA, as they tried to do a few years ago, CHVO would show up as a fifth BBM‑rated Newcap format in our core market, creating a very attractive national and local sales package, based on CMA ratings.
LISTNUM 1 \l 12810 Newcap sells using CMA ratings, avoiding full coverage. OZ FM has significant full‑coverage audiences, due to the reach by our network of transmitters, but we are disadvantaged as these numbers are of little interest to national advertisers and local agencies who buy CMA, or to local clients who primarily trade within the St. John's CMA.
LISTNUM 1 \l 12811 Although Newcap's full‑coverage numbers would crate higher yield on a cost‑per‑point basis, avoidance in using full coverage provides Newcap with the ability to force the cost per point in the market down, in comparison to OZ FM's rate. This raises the specter of predatory pricing.
LISTNUM 1 \l 12812 The Competition Bureau of Canada does not allow individually‑owned stations, like OZ FM and Coast, to get together to set rate. That would be collusion. But Newcap, as one owner with four stations in the same market, has the ability to set rates for the market.
LISTNUM 1 \l 12813 Newcap downplays the presentation of the CHVO FM signal into St. John's. We agree, the signal may be marginal in the business, downtown St. John's, which is located in the Valley, but we all have those problems, and this is a small area compared to the rest of the market, where the signal will be available and very useable.
LISTNUM 1 \l 12814 In their response to us, Newcap's consultant, responding to our point four, says the proposed station is not capable of covering the entire market. However, he does not refer to our point about the signal strength within the gradients between the shown contours.
LISTNUM 1 \l 12815 Here, the signal will be quite useable within the St. John's market, with improved audio quality and signal strength.
LISTNUM 1 \l 12816 Newcap says they have no intention of competing in the central market, but this will create a fifth niche format, and will siphon off audience by further fragmentation of the available audience base. This issue concerned us when we applied for a second FM license to create a fair and levelling effect in the CMA, against a four to one ratio of formats, and the possible new entrant. Despite this concern, Coast FM was licensed, and should CHVO obtain an FM license the fragmentation for OZ will be six to one.
LISTNUM 1 \l 12817 We believe that, should CHVO FM be licensed to cover the CMA, Newcap should be required to divest itself of two of its five existing radio licenses in the St. John's CMA, bringing it back into compliance regarding CRTC rules of ownership as they apply to the rest of the country.
LISTNUM 1 \l 12818 In addition, should this station be licensed, conditions should be placed in the license, regardless of ownership, to provide assurances that CHVO FM could not become an additional signal sold in the St. John's CMA. Otherwise, the St. John's CMA will be over‑licensed, compared to better economic markets, including Halifax/Dartmouth.
LISTNUM 1 \l 12819 And I draw your attention also to a chart that we've included, Exhibit 1, and it shows, for example, that the population of Halifax/Dartmouth is double the CMA of St. John's, which means Halifax should have 12 or 14 commercial radio stations, if the ratios were equal; not the number they have now, which is eight.
LISTNUM 1 \l 12820 We thank you for the opportunity to appear here today. Should you have any questions, we'd be happy to answer them to the best of our ability.
LISTNUM 1 \l 12821 Thank you.
LISTNUM 1 \l 12822 THE CHAIRPERSON: Mr. Stirling, I don't have that many questions for you. I'm just wondering, I believe in the material I read that you supported, am I correct, Newcap's application for the ‑‑ when it got the exemption in the St. John's market?
LISTNUM 1 \l 12823 MR. STIRLING: About five years ago, when they bought out Colonial, we did support, because the concept was that they were going to support the rural stations. So we wanted to keep the money in Newfoundland and to support the rural stations that they had.
LISTNUM 1 \l 12824 But since then, they have passed back a couple of licenses, they've consolidated, for example, CHVO now fed out of Halifax, so that was not what we supported.
LISTNUM 1 \l 12825 And then, two years ago or three years ago, when the station licensed a third player into the market, then we appeared in front of you and explained or position at the time, and said that we certainly felt that we deserved a second station. We've been there 30 years. We have one radio station. And the ratio is four to one.
LISTNUM 1 \l 12826 THE CHAIRPERSON: And I understood, I believe, in something I read that they supported that application when you made it ‑‑
LISTNUM 1 \l 12827 MR. STIRLING: They did.
LISTNUM 1 \l 12828 THE CHAIRPERSON: ‑‑ at that time.
LISTNUM 1 \l 12829 MR. STIRLING: They did.
LISTNUM 1 \l 12830 THE CHAIRPERSON: I'm just ‑‑ I guess the dilemma that we have, 'cause we're hearing all of this, the engineer for Newcap, as I mentioned to Mr. Newman, he says it wouldn't be a city‑grade signal ‑‑
LISTNUM 1 \l 12831 MR. STIRLING: Well, I'll let Mr. ‑‑
LISTNUM 1 \l 12832 THE CHAIRPERSON: ‑‑ in that market.
LISTNUM 1 \l 12833 MR. STIRLING: ‑‑ Neal, who's our ‑‑ who's a bonafide, legendary engineer in that area, talk to that. But I think, as Coast said this morning, their signal, with less power, easily is heard in Carbonear. So it seems logical, in reverse.
LISTNUM 1 \l 12834 But I'll let Mr. Neal talk to that.
LISTNUM 1 \l 12835 MR. NEAL: Good morning. It's correct, there won't be a city‑grade signal in the downtown area of St. John's. But certainly, okay, the topography of St. John's leads itself to fairly high points. I mean, it's a very, very hilly city, I mean, in the downtown area, which is what we're really talking about, which if I ‑‑ what I see there is that very pink kind of colour that's on the St. John's map.
LISTNUM 1 \l 12836 And but the outskirts of St. John's and certainly, okay ‑‑ my eyes are failing me and I unfortunately don't have ‑‑ I can't see, here. But I think that this contour that is the realistic point five millivolt is ‑‑ looks to me like it's passing through certainly parts of Mount Pearl and the northern area of St. John's, the northwestern area of St. John's.
LISTNUM 1 \l 12837 You know, the downtown area, it probably won't work down there, but it's going to work, and it's going to be quite reliable, in my view, certainly all down the Trans‑Canada Highway, where all the commuters are, and back and forth, the various arterial roads going in and out in the areas of ‑‑ I mean, all these areas down around St. Phillips, Portugal Cove, all those communities up that shore, Conception Bay South, which, you know, as we've heard today, is huge. And, I mean, it clearly covers that.
LISTNUM 1 \l 12838 And these are the areas of concern. This is, this is what we're getting at.
LISTNUM 1 \l 12839 THE CHAIRPERSON: So at this point in time, the people in Conception Bay South wouldn't receive CHVO? AT least according to ‑‑
LISTNUM 1 \l 12840 MR. NEAL: Oh, they do receive ‑‑ yes, they do receive it. Yes. But what we're saying, okay, that it's an AM signal right now.
LISTNUM 1 \l 12841 THE CHAIRPERSON: Yes. Yes.
LISTNUM 1 \l 12842 MR. NEAL: It's also subject to night interference. You know, on a 24‑hour basis, okay, it'll be a very, very useable signal in all of those areas, and you know, it will be listened to.
LISTNUM 1 \l 12843 THE CHAIRPERSON: The ‑‑ I guess, as I mentioned to Mr. Newman and Mr. Bell, the dilemma, I would say, is that CHVO is trying to upgrade 1965 equipment and be competitive with new media sources, so we can all understand that that's ‑‑
LISTNUM 1 \l 12844 MR. STIRLING: I don't know why they say '65. They went on the air in '80, wasn't it?
LISTNUM 1 \l 12845 MR. NEAL: Well, no, I think what they're referring to, okay, is that a day of transmission, okay, would be ‑‑
LISTNUM 1 \l 12846 THE CHAIRPERSON: '65 technology.
LISTNUM 1 \l 12847 MR. NEAL: ‑‑ an old technology, and certainly ‑‑ and it is, yes. I agree that, you know, I mean, we look at that, and anybody would certainly want to try to do that.
LISTNUM 1 \l 12848 I think what I'm ‑‑ I think what we're objecting here to, today, is the area that they define as ‑‑ I missed that reference to BBM, and they drew a square on the map, they showed it there, the BBM Carbonear North or something like that, they called it.
LISTNUM 1 \l 12849 Well, that area, okay, is the whole of that particular peninsula. I notice here, okay, the realistic contour, alright, does not necessarily cover all of that peninsula. In fact, it's running up the center of it, and I can understand why.
LISTNUM 1 \l 12850 Perhaps they ‑‑ I think what I'm asking, okay, is why can't they go back and take ‑‑ revisit this, take a look at it technically, and cover the area which they purport they're wanting to cover, and not necessarily encroaching into the St. John's market any more than they're encroaching with a quality FM signal.
LISTNUM 1 \l 12851 There's our objection, really.
LISTNUM 1 \l 12852 THE CHAIRPERSON: So we do have your suggestions that we, what we might do to allow this to proceed.
LISTNUM 1 \l 12853 MR. NEAL: Pardon me?
LISTNUM 1 \l 12854 THE CHAIRPERSON: You do recommend that ‑‑ make some recommendations at your paragraph 95 of the presentation today, that Newcap be required to divest itself of two of its five existing radio stations?
LISTNUM 1 \l 12855 MR. STIRLING: Yes, Madame Chairperson. You know, the exception was made. This is a very small market, Newfoundland. It's a very poor market. And there are six commercial radio stations in that market, as I said, in comparison to Halifax. Saskatoon, for example, has 200 and ‑‑ over 200,000 population. We have 160,000. They have six stations; we have six stations. Now we're sitting here today talking about a seventh signal coming into the CMA.
LISTNUM 1 \l 12856 And then there's the rule, the Commission's own guidelines about three stations in a CMA by a single owner. Now, it's ‑‑ you know? It's, it should be fair. It should be equitable. It should be seen to be fair and equitable. Why does this company have this exception?
LISTNUM 1 \l 12857 I mean, once the station was granted to Coast, the license was granted to Coast, it seems to me, at that point, it might have been a good opportunity to say to Newcap, "It's time to divest". The reason we gave you the exception is now over, obviously.
LISTNUM 1 \l 12858 THE CHAIRPERSON: I guess the reason that we gave ‑‑ you're not suggesting, though, that becau ‑‑ are you suggesting that we would take the license back, because the exceptions for it?
LISTNUM 1 \l 12859 MR. STIRLING: Well, I mean, when you ‑‑ for example, if CTV buys CHUM, you will say to them, "Well" ‑‑
LISTNUM 1 \l 12860 THE CHAIRPERSON: Right.
LISTNUM 1 \l 12861 MR. STIRLING: ‑‑ "you have to divest of some" ‑‑
LISTNUM 1 \l 12862 THE CHAIRPERSON: Yes.
LISTNUM 1 \l 12863 MR. STIRLING: ‑‑ "other stations". I mean, why should this exception continue, and why should it now be buil ‑‑ expanded?
LISTNUM 1 \l 12864 THE CHAIRPERSON: Alright. I can ‑‑
LISTNUM 1 \l 12865 MR. STIRLING: Why should they have five stations in one CMA.
LISTNUM 1 \l 12866 THE CHAIRPERSON: Okay. I appreciate comments. Thank you.
LISTNUM 1 \l 12867 Andre?
LISTNUM 1 \l 12868 COMMISSIONER NOEL: Yeah, I just, I'm just reading from a decision 2001‑41, and it says:
"Further support was expressed in the written interventions filed by NBCL. This intervener, a competitor of both of the vendor and the purchaser, acknowledged the essential role played by the St. John's advertising market in enabling that city's radio stations to subsidize radio operations serving other several Newfoundland communities which are broadly dispersed and difficult to serve."
LISTNUM 1 \l 12869 So are you regretting your support at the time? That's what you're telling (inaudible)?
LISTNUM 1 \l 12870 MR. STIRLING: Obviously we are. Obviously we are.
LISTNUM 1 \l 12871 COMMISSIONER NOEL: Thank you.
LISTNUM 1 \l 12872 MR. STIRLING: I mean, we said, for example, that our revenues needed to have the St. John's advertising market to sustain the coverage of hundreds of thousands of Newfoundlanders in the rural area.
LISTNUM 1 \l 12873 We appeared in front of the Commission at the time of Coast's application. We pointed out that they could skim off revenues, specifically just in St. John's, without those obligations. I'm a capitalist, I'm a free enterpriser. I think that both those people, Andy Bell and Andy Newman, are fine human beings, and I'm happy that they're successful.
LISTNUM 1 \l 12874 But they're appearing here in front of your yesterday, saying that the revenues from St. John's are going to help them start up a station here, so those revenues are coming out of Newfoundland, and they're not going to rural Newfoundland, which is what we told you three years ago was needed to maintain the service.
LISTNUM 1 \l 12875 I mean, we appreciate the fact you're allowing us to videotape this today, because if we have to start closing down our transmitters, the people of Newfoundland deserves an answer ‑‑ why are you doing that?
LISTNUM 1 \l 12876 THE CHAIRPERSON: Thank you, Mr. Stirling.
LISTNUM 1 \l 12877 MR. STIRLING: Okay.
LISTNUM 1 \l 12878 THE CHAIRPERSON: We appreciate your comments, and all of the interventions, of course, will be given careful consideration in our ‑‑
LISTNUM 1 \l 12879 MR. STIRLING: Thank you.
LISTNUM 1 \l 12880 THE CHAIRPERSON: ‑‑ deliberations. Thank you ‑‑
LISTNUM 1 \l 12881 MR. STIRLING: Thank you so much.
LISTNUM 1 \l 12882 THE CHAIRPERSON: ‑‑ very much, Mr. Neal.
LISTNUM 1 \l 12883 MR. NEAL: Thank you.
LISTNUM 1 \l 12884 THE SECRETARY: Thank you, Madame Chair. This completes the list of appearing interveners.
LISTNUM 1 \l 12885 We will now proceed to Phase III in which the applicants can reply to all interventions submitted on their application.
LISTNUM 1 \l 12886 Newcap Inc. may respond. You have ten minutes for this purpose.
REPLY / RÉPLIQUE
LISTNUM 1 \l 12887 MR. J. STEELE: Good morning, Madame Chair, Members of the Commission, Commission staff.
LISTNUM 1 \l 12888 I'm John Steele, and with me are John Murphy, Aiden Hibbs, Kerry Pelser and Mark Maheu.
LISTNUM 1 \l 12889 Before I respond to the negative interventions by Coast Broadcasting, Coast, and Newfoundland Broadcasting, I would be remiss if I did not thank the many residents of Conception Bay North, who took the ‑‑ (clears throat) ‑‑ who took the time to write letters in support of our application. They are from the many communities of our area, and from many areas of endeavour.
LISTNUM 1 \l 12890 We receive support from all three levels of government, from musicians, and their organizations, educators, community service groups, tourism associations, businesses, as well as many listeners. They spoke to you of the importance of CHVO to their community, and individual lives, and their hopes to be able to receive it in the near future in FM stereo.
LISTNUM 1 \l 12891 Let's contrast that with the interveners. They propose no solution for the people of the area who do not receive local service in stereo because they somehow believe that the unspoken agenda here is to put another FM station into St. John's. That's one area where we totally agree with the interveners ‑‑ is that St. John's cannot absorb any additional radio service.
LISTNUM 1 \l 12892 Mr. Stirling would have you believe that he's going to a gunfight with a knife. He owns the OZ FM network that goes right across Newfoundland, very well programmed, NTV, and a local weekly publication, the Newfoundland Herald, which is an icon in print in Newfoundland and Labrador. These products are sold in combo. And he talks about the hit on his revenues on OZ FM. I don't know ‑‑ they're a private company ‑‑ how they do the breakdown internally, of where the money is put ‑‑ against the television, or the radio.
LISTNUM 1 \l 12893 Because St. John's cannot absorb any additional radio service, that's why we asked DEM Allen to come up with a technical solution that would not put a reliable signal into St. John's. The interveners have reiterated their arguments from written interventions that we will put another signal into St. John's. We must repeat, once again, this does not reflect the realities of topography.
LISTNUM 1 \l 12894 Mr. Newman is not an engineer. I would ask Mr. Pelser, with 23 years' experience, to speak on technical issues.
LISTNUM 1 \l 12895 Kerry?
LISTNUM 1 \l 12896 MR. PELSER: To again demonstrate the realities of topography, we decided to present this in another way.
LISTNUM 1 \l 12897 The Carbonear signal will the transmitted from the proposed site, which is using a leased space on an Aliant tower whose base elevation is about 105 meters above sea level, with an antenna that is mounted 95 meters above that, for a total height of 201 meters above sea level. St. John's is very hilly, as the interveners acknowledge, and parts of it are at sea level, while the highest sections are in the west end of the city, maybe in the Mount Pearl area. Between Carbonear and St. John's, the rocky coast on the east side of Conception Bay, and the Portugal Cove, St. Phillips, and St. Thomas areas have peaks ranging in height between 150 and 170 meters, and even higher. Further inland, there are hills between the coast and St. John's, one of them being Kenmount that is approximately 250 meters above sea level.
LISTNUM 1 \l 12898 In our written reply to the interventions, we provided a profile of terrain to illustrate that the path of the Carbonear FM signal is shadowed into the City of St. John's. We have prepared two more plots to illustrate the path to three sections of the city.
LISTNUM 1 \l 12899 In the first slide, which is before you now, we show the path from Carbonear, which is at the left side, to the intersection of Mount Carson Avenue, and Smallwood Drive in Mount Pearl. What we've drawn is a direct path from our proposed transmitting antenna to that intersection. As you can from the Carbonear site, the signal passes over Bell Island, but is blocked by the coastline, and the hills inland. These hills shadow the signal in attenuated strength to the point where it is insufficient to provide to a reliable sitting in St. John's.
LISTNUM 1 \l 12900 The next slide, if you can ‑‑ thank you ‑‑ shows a path at the center of the city at the intersection of Columbus Drive and Empire Avenue. Once again, the signal clears Bell Island, but encounters the rocky coastline. The hills substantially shadow the signal penetration into this area.
LISTNUM 1 \l 12901 The third slide shows the path to a lower section of the east side of the city. This time, at Torbay Road and MacDonald Drive. Once again, the signal passes over Bell Island, but is blocked by the coastline and the Portugal Cove area. We recognize that there could be a weak Carbonear signal in St. John's, but the majority of the City of St. John's is outside of the realistic .5 contour. This means that the quality of reception in the City will be weak, at best, and certainly will not be a reliable signal.
LISTNUM 1 \l 12902 The interveners have suggested that since the Coast FM signal, at a lower effect of radiant power in Carbonear, is useable in the Conception Bay area. The CHVO FM signal should therefore be useable in St. John's. Once more, while at first blush, they may seem logical, it in fact ignores the topographical realities.
LISTNUM 1 \l 12903 I hope you'll excuse one more slide. I promise it will be the last one. If you can go to the next ‑‑ this slide shows the Coast FM transmitter site on Kenmount Hill, one of the highest points in the St. John's area, with a base elevation of 253 meters above sea level. The center of their antennas, it's 64 meters above that, giving them an elevation of about 317 meters above sea level.
LISTNUM 1 \l 12904 As you can see, this height provides an excellent service into the City of St. John's, and, but more importantly, provides a clear line of sight into Conception Bay North. So the plot we've put ahead of you on the left‑hand side is the center of Carbonear. On the left‑hand side is the Coast FM transmitter site. There's absolutely a clear line of sight from Coast into Carbonear.
LISTNUM 1 \l 12905 Therefore, we can see why Coast FM has a solid signal in the Conception Bay North area, however, the Carbonear, the proposed Carbonear station will not enjoy the same coverage into St. John's.
LISTNUM 1 \l 12906 In conclusion, it is clear to me that CHVO will not provide reliable service in the City of St. John's.
LISTNUM 1 \l 12907 Thank you. John? Or Mark?
LISTNUM 1 \l 12908 MR. MAHEU: If I may, Madame Chair, they're ‑‑ listening to the interveners appearing this morning, obviously they have some concerns, but there are numerous inaccuracies about our programming policy, about our sales practices, and so forth.
LISTNUM 1 \l 12909 But the real issue that seems to be coming forth here from the interveners is the two‑fold concern. Number one, that Newcap, by being granted this conversion, would actually, in fact, have five radio stations in the area, and secondarily, that it would have a detrimental impact on both Coast and OZ.
LISTNUM 1 \l 12910 And going back to the basic fundamental issue, we're not asking, as a company, for a new radio station, for a fifth radio station in the area. We have one already, and that was settled a long time ago. What we are asking for is the opportunity to provide better service, and a more reasonable signal to the people that we serve now.
LISTNUM 1 \l 12911 I listened to the folks from Coast talk about how they, you know, they put a great signal into Carbonear, and our Carbonear, therefore, should be great into St. John's, and this graph and, on the screen right now reminds me of why I like the music, and programming, and sales end of radio, and not engineering, because this stuff does get complicated. But you know, from their tower height, it's no wonder they can get into Carbonear, but when you looked at the previous slides, it's pretty evident that the signal that we're proposing from Carbonear coming into St. John's is going to hit a rocky coastline. It would have to go over top to get into any reasonably‑populated area.
LISTNUM 1 \l 12912 The bottom line is, and the point was made by the folks, by Mr. Stirling, that if licensed, an FM country station would have a detrimental effect on listenership in St. John's. And I, we disagree with that. Number one, we have a very large listening share to our Newcap stations in St. John's, and all indications are that any loss of listenership ‑‑ we're going to carry the bulk of that. We're going to lose more to ourselves than anybody else is going to lose to us.
LISTNUM 1 \l 12913 There's not a big call for country music programming in the city, or the CMA of St. John's. We used to be a country station. It wasn't working for us in that marketplace, and we changed format, and we don't see any marked increase in the need or want for country in the St. John's area. So it works in Carbonear, and that's why it's there, but we know it doesn't really work in St. John's. We used to do country, and we failed miserably, and got out of that format, because the city wasn't calling it.
LISTNUM 1 \l 12914 I'd like to touch on a couple of other things that Mr. Stirling mentioned, just for the record, to clear anything up. Talking about Newcap's approach to selling advertising in St. John's ‑‑ that we sell under the CMA, and we refuse to get into the full coverage thing, which brings prices down in St. John's. You know, that really is not true. We sell CMA in St. John's because the advertisers in St. John's don't want to pay for wasted reach into the outlying areas. And that frustrates Newfoundland Broadcasting, because they run a network, and their whole sales proposition is based on selling full coverage. They'd love us to get into that competition with them, but we can't compete there. We're not a full‑coverage sales proposition, we're a ‑‑ in St. John's ‑‑ we're a central‑market proposition.
LISTNUM 1 \l 12915 And in terms of extending the CMA, we tried to do that, and we talked to Newfoundland Broadcasting about that some time ago, and they refused to co‑operate. And the reason we wanted to extend the CMA was part of a discussion we had yesterday about national advertisers. If we could extend the CMA of St. John's, we could actually offer a greater population for sale to national advertisers, and move St. John's, Newfoundland up the list of market sizes to get in onto more national buys, which we think would benefit everybody in the market. But we couldn't come to an agreement on that.
LISTNUM 1 \l 12916 There was also some mention by the interveners a concern that if we were approved for a conversioned FM, that we would have another radio station in the BBM, and I'd like to tell the Commission, for the record, it is not our intention at all to subscribe to the St. John's BBM for the Carbonear radio station. We don't now, and we don't, we will not in the future. And if you wanted to make that a condition of license, we'd be happy to live with that. It is not our intention to make CHVO FM a competitive radio station in St. John's. We will not subscribe to BBM in that market, and will not be part of the rating survey, and will not be taking those numbers out to clients, and selling them.
LISTNUM 1 \l 12917 As John told you earlier, and provided you a list, the overwhelming majority of our revenues in Carbonear come from Carbonear ‑‑ local, small retail businesses. We get the odd client that would like to buy more than Carbonear. If we can make it easy for them to buy other stations within our group, we do, but that is such a small part of our business. 95 percent of what we've got on these, on CHVO comes from the CHVO listening area, Carbonear and Conception Bay.
LISTNUM 1 \l 12918 So those were the key points that we wanted to at least get on the record to let you know where we were coming from. But the bottom line is this about better service to the Carbonear community, Carbonear community and to bring them into the 20th century, with a minimum standard of sound quality FM stereo.
LISTNUM 1 \l 12919 THE CHAIRPERSON: Thank you, Mr. Maheu.
LISTNUM 1 \l 12920 MR. J. STEELE: We would like to assure OZ FM, NTV and Coast that we have no intention to enter the St. John's market with this signal. Our goal is a simple one ‑‑ to give the people of Conception Bay North the same great stereo FM sound as people have in Toronto, Halifax or St. John's.
LISTNUM 1 \l 12921 We will be pleased to answer any questions you may have.
LISTNUM 1 \l 12922 THE CHAIRPERSON: Thank you, Mr. Steele.
LISTNUM 1 \l 12923 Commissioner Noel?
LISTNUM 1 \l 12924 COMMISSIONER NOEL: Just one question.
LISTNUM 1 \l 12925 Would you like to comment on the suggestion that you should divest of two stations?
LISTNUM 1 \l 12926 MR. MAHEU: Newcap has made a significant investment into the St. John's market, and you know, divesting of those properties, you know, is not part of our plan, you know, and I can understand how an intervener may want to put that forth, but we've made a significant investment in the community, and the goodwill in that area, and that's not in our plan.
LISTNUM 1 \l 12927 But in terms of a ‑‑ going back to a statement you made, Madame Noel, concerning the advertising ‑‑ you know, we'd reiterate our willingness to agree, as a condition of license, not to solicit advertising from the St. John's market, but we do want to reserve the right that if somebody picks up the phone, and says ‑‑ you know, we would like to ‑‑ yes, we would like to be able to accept that, so ‑‑
LISTNUM 1 \l 12928 COMMISSIONER NOEL: Thank you.
LISTNUM 1 \l 12929 MR. J. STEELE: Thank you.
LISTNUM 1 \l 12930 THE CHAIRPERSON: I'm just ‑‑ would you like to make any comments, so we could get the clarification on the population versus household numbers so I have that right?
LISTNUM 1 \l 12931 MR. J. STEELE: Yes. In fact, we were dealing with the population one before we mentioned households, and one of the interveners actually corrected that himself there, so that's quite correct.
LISTNUM 1 \l 12932 There are 44,000 people in the primary coverage area right now, and of course we don't get to all of those either, and we're dealing with the theoretical .5 curves, as well, so if we just transpose people, households, we've got it right.
LISTNUM 1 \l 12933 THE CHAIRPERSON: Okay. And so then just to go back to the question that I asked, then. For the Carb ‑‑ Conception Bay South, is it? Do you agree that it would double your households, or ‑‑ I think they, Mr. Bell suggested Mount Pearl and Paradise would be in the area of 50,000 population I believe he said.
LISTNUM 1 \l 12934 MR. J. STEELE: Well, the 3‑millivolt per meter contour will barely touch on the coast, and to double the population I think would be a very optimistic quote there. The CHVO 5‑millivolt per meter contour, and the three‑millivolt per meter FM contours are very, very similar there, but when you look at the 3‑millivolts per meter contour in blue, it barely touches that coast, and is well outside of the heavily populated areas of the, that part of the Avalon Peninsula.
LISTNUM 1 \l 12935 THE CHAIRPERSON: I appreciate it's way outside of St. John's. I just wanted to understand how many ‑‑ what that households would be, or the population would be along the coast, then, I guess, just to see what increase households that was for you. And I see your application, and you mention the number, too. It said "51,602", the population, and that was in the 3‑millivolt contour.
LISTNUM 1 \l 12936 MR. J. STEELE: We have that here.
LISTNUM 1 \l 12937 Kerry, you got it?
LISTNUM 1 \l 12938 MR. PELSER: Okay. The populations we have ‑‑ I don't have the existing AM populations in front of me. I apologize for that. But the population within the FM 3‑millivolt per meter contour, population is 51,600, the number of households being about 20,343. In the .5 FM contour, we have a population listed in the application of 101,000, and households are 40,700.
LISTNUM 1 \l 12939 THE CHAIRPERSON: Thank you. That answers my question. I just wanted to clarify that.
LISTNUM 1 \l 12940 MR. PELSER: Thank you.
LISTNUM 1 \l 12941 THE CHAIRPERSON: Thank ‑‑ oh, I think Commissioner Noel has ‑‑
LISTNUM 1 \l 12942 COMMISSIONER NOEL: Yeah, or ‑
LISTNUM 1 \l 12943 THE CHAIRPERSON: ‑‑ another question.
LISTNUM 1 \l 12944 COMMISSIONER NOEL: ‑‑ maybe just one thing, and could we, could you file those four graphs, 'cause I only ‑‑ unless I, you all received them, but I only have one.
LISTNUM 1 \l 12945 MR. J. STEELE: We can file those. Thank you.
LISTNUM 1 \l 12946 MR. MAHEU: Can we file those by the end of the week? Would that be acceptable?
LISTNUM 1 \l 12947 MS. FISHER: That would be fine.
LISTNUM 1 \l 12948 MR. MAHEU: Okay.
LISTNUM 1 \l 12949 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 12950 MR. J. STEELE: Thank you very much.
LISTNUM 1 \l 12951 MR. MAHEU: Thank you.
LISTNUM 1 \l 12952 THE SECRETARY: Thank you, Madame Chair. This completes the consideration of item five on the agenda, and would you like to do a break?
LISTNUM 1 \l 12953 THE CHAIRPERSON: Sorry. We're going to take a break now until 11:15. Thank you.
‑‑‑ Upon Recessing at 1053 / Suspension à 1053
‑‑‑ Upon Resuming at 1120 / Reprise à 1120
LISTNUM 1 \l 12954 THE CHAIRPERSON: Okay, I think we're ready to proceed, Madame Secretary.
LISTNUM 1 \l 12955 THE SECRETARY: Thank you, Madame Chair.
LISTNUM 1 \l 12956 And now, Madame Chair, we will proceed with item six on the agenda, which is the application by Newcap Inc. for a license to operate an English‑language FM commercial radio programming undertaking in Kentville to serve the Annapolis Valley.
LISTNUM 1 \l 12957 The new station would operate on frequency 89.3 megahertz, Channel 207C1, with an average effective radiated power of 9,900 watts, maximum effective radiated power of 30,000 watts, antenna height of 251.1 meters.
LISTNUM 1 \l 12958 Appearing for the applicant is Mr. Rob Steele, who will introduce his colleagues. You will then have 20 minutes to make your presentation.
PRESENTATION / PRÉSENTATION
LISTNUM 1 \l 12959 MR. R. STEELE: Thank you.
LISTNUM 1 \l 12960 Well, good morning, Madame Chair, Members of the Commission, Commission staff.
LISTNUM 1 \l 12961 I'm Rob Steele, the President and Chief Executive Officer of Newcap Radio, and before we begin, I'd like to introduce our team.
LISTNUM 1 \l 12962 Seated in the front row furthest to my left is Glenda Spenrath, Newcap's Director of Operations, and next to Glenda is Brad Muir, the Program Director and Operations Manager for Fredericton FM Rock station. Beside Brad is Mark Maheu, Executive V‑P and Chief Strategist for Newcap, and seated next to me is Jennifer Evans, the General Manager of our Charlottetown classic hits station, CHCN FM, known as OCEAN 100.
LISTNUM 1 \l 12963 We are here today to present our application to provide a new listening choice for the Annapolis Valley. We propose to provide a new service reaching a broad adult audience with the best hits of the '70s, '80s and '90s.
LISTNUM 1 \l 12964 We'll introduce a new editorial to a market which has had only one broadcast voice for many, many years, and we will provide a significant contribution to the development of Canadian, both on a national and a local level.
LISTNUM 1 \l 12965 And once again, I would like to ask Glenda Spenrath to start our presentation by outlining the economic case for a new station in the Valley.
LISTNUM 1 \l 12966 Glenda?
LISTNUM 1 \l 12967 MS. SPENRATH: Thank you, Rob, and good morning, Madame Chair, and Members of the Commission.
LISTNUM 1 \l 12968 Kentville is the largest town in the Annapolis Valley, and is part of Kings County. Kings County, more or less, is the area covered by our three microvolt per meter contour. The County had a population of 60,000 in 2006, two percent higher than in the previous census, and FP markets projects Kings County to grow to over 70,000 in the next five years.
LISTNUM 1 \l 12969 Yet the market is only served by two radio stations, both FM's licensed to the same company.
LISTNUM 1 \l 12970 If we look at similar sized, or even smaller markets around Canada, most of them have more stations. Brandon, Manitoba, with a Census Agglomeration population of 45,000 is served by four stations with two different owners.
LISTNUM 1 \l 12971 Charlottetown, with an extended market of about 80,000 people is served by two ownership groups, and four radio stations.
LISTNUM 1 \l 12972 North Bay, Ontario, whose Census Agglomeration population is about 65,000 has four stations with two ownership groups.
LISTNUM 1 \l 12973 In a moment, Brad Muir will speak to you about the research into this market, but one telling piece is the large share received by our Moncton station, C103. Fully a quarter of respondents report listening to the station, and ten percent call it their favorite station.
LISTNUM 1 \l 12974 Moreover, the two local stations garner barely over half of the most favorite stations mentioned. The people of this community want and need a new and different local station that will not only provide their music preference, but will also provide local news and information.
LISTNUM 1 \l 12975 The economic indicators for this market are also indicative of the capacity to absorb a new station. According to the 2006 census, population has been growing, and as I mentioned earlier, FP markets predicts ongoing population growth.
LISTNUM 1 \l 12976 While agriculture is the largest engine of economic activity, the economy is still quite diversified, with manufacturing, construction, Acadia University in Wolfville, tourism, financial and other services. The economy has many supports
LISTNUM 1 \l 12977 FP markets projects that personal income in the area will grow from about 1.8 billion in 2007 to over two billion in 2009.
LISTNUM 1 \l 12978 The value of building permits in Kentville grew from 44.6 million in 2003 to 67.2 million in 2005.
LISTNUM 1 \l 12979 Per capita retail sales in the Kentville Census Agglomeration index 66 percent higher than the Canadian average.
LISTNUM 1 \l 12980 As I mentioned during the Sydney presentation, the Radio Bureau of Canada indicates that on average in Canada, the total advertising spend is three percent of retail sales, and that radio gets about 12 percent of this. Using this analysis, we believe that the projected retail sales for 2007 for Kings County of some $844,000,000 should result in an advertising pie of 25 million, and radio revenues of about 3,000,000. In fact, radio should be even stronger, as there is no local television station, or daily newspaper.
LISTNUM 1 \l 12981 To us, all this indicates that the market can absorb a new station with first‑year revenues just shy of $1,000,000.
LISTNUM 1 \l 12982 Now to tell you a bit about our research, and the format we propose, here is Brad Muir.
LISTNUM 1 \l 12983 MR. MUIR: Thanks, Glenda, and good morning.
LISTNUM 1 \l 12984 We asked Kassof Research to help us determine the largest unserved format segment in the Annapolis Valley. They tested eight formats with 300 respondents, playing them montages of the artists from each format. Kassof asked them how interested their are in that format on a scale of one to five, and five being most interested.
LISTNUM 1 \l 12985 Of the eight formats tested, the top three were classic hits, mainstream rock, and Hot AC, but the next step is equally important. They are asked their perception of whether the format is available in that market, so while AC tested high in interest, 47 percent indicated that it was already available on MBS's Magic 94.9.
LISTNUM 1 \l 12986 Kassof then combines the two measures to determine what they call the percent of format void ‑‑ the percentage of people showing strong interest in a format who also cannot name a station playing that kind of music. The results were key to our proposed format.
LISTNUM 1 \l 12987 Classic hits had a percent of format void of 16 percent, and '80s and '90s and active rock tied for second at 11 percent. In order to reach more people, Kassof suggested a variant of classic hits, which includes a significant amount of '80s and '90s hits. This format has been popularized under the trademarks Bob FM and Jack FM.
LISTNUM 1 \l 12988 Classic Hits 98.7 will combine the hits of the '70s, '80s and '90s, with a distinct rock focus, along with the hits of today. The station will have a significantly different sound than the station we outlined to you yesterday. While Sydney's rock 101.9 would play a harder sound with a wider playlist, and significant amounts of contemporary rock, the focus on Classic Hits 98.7 will be more on the mainstream hits of the classic rock and pop acts. The station will combine mainstream top 40 hits with mainstream charted rock hits.
LISTNUM 1 \l 12989 The research also told us that there was some interest in active rock ‑‑ the more mainstream rock from longstanding rock artists like the Rolling Stones, Neil Young and Tom Cochrane. And we'll also zero in on Atlantic Canadian musicians from a wide range of sounds, including artists like the Joel Plaskett Emergency, and Ashley Debison.
LISTNUM 1 \l 12990 The Annapolis Valley has had a single source of electronic news for a long time. MBS has two FM radio stations in Kentville, heard through the Valley, as well as an AM station in Middleton. There is no other point of view available on local matters, on radio, nor is there a local television station, or a daily newspaper.
LISTNUM 1 \l 12991 We will bring a new presence in news with three new journalists on the street. A new and different schedule of news will ensure live, local news to the Annapolis Valley, with five minutes or more of news on the hour throughout the day, seven days a week. We will also add shorter updates on the half hour through the weekday morning drive. In all, seven and a half hours of news each week.
LISTNUM 1 \l 12992 We will be live and local for the entire broadcast day, Monday to Friday ‑‑ a new approach to radio in this market. Our announcers will provide a wide range of features throughout the day, and the evening. As we outlined in our Sydney application, we propose a live breakfast show through the weekday evenings, with the same kind of news, information and live interaction that you'll hear on the morning drive.
LISTNUM 1 \l 12993 In our application, we outlined a wide range of special features that we will broadcast.
LISTNUM 1 \l 12994 I would particularly like to draw your attention to a feature we call "King of the Road". This show will take our station out to be live around the Annapolis Valley every Friday afternoon. The emphasis will be on local musicians, community events and information from towns from Waterville, to Auburn, to New Minas. We will put a particular focus on our Canadian Armed Forces by visiting 14 Wing Greenwood on a regular basis.
LISTNUM 1 \l 12995 Every weekday, at lunch, when other stations are voice tracked, we will have the live "Resurrection Lunch", and we'll ask our listeners to send in their favorite monster hits from the past, and we'll play them on the air for them.
LISTNUM 1 \l 12996 And now to talk to you about the impact the station will have on the market, here's Jennifer Evans.
LISTNUM 1 \l 12997 MS. EVANS: Thanks, Brad, and good morning.
LISTNUM 1 \l 12998 At Newcap, we have had considerable experience in launching stations into non‑competitive markets. We also have a great deal of experience in competing with the Maritime Broadcasting System.
LISTNUM 1 \l 12999 It's obvious that MBS has all the real competitive advantages, with two FM's, as well as their AM stations in Windsor and Middleton. They also have years of long‑standing relationships with both listeners, and clients. But at the same time, there is real opportunity here. MBS cannot be all things to all people.
LISTNUM 1 \l 13000 While the Valley is not a rated market, there is some data from BBM that indicates to us that as much as one‑third of the listening in Kings County goes to out‑of‑market radio stations from Halifax, Saint John and Moncton. Class Hits 98.7 will bring many of these listeners back to local radio.
LISTNUM 1 \l 13001 We propose a fresh, new product, on that is not currently delivered by local radio. If we are awarded the license, the people in Kings County will hear the difference that a live and local radio station can make. During our Sydney presentation, I shared with you how well our new rock stations in both Fredericton and Charlottetown did, when we launched, and we've also had great success in launching classic hit stations, as well.
LISTNUM 1 \l 13002 When we converted CHTN to the FM band in Charlottetown, the new FM station known as OCEAN 100 debuted as the number two station in our market, after our rock station. In this last book, it passed K‑Rock to be first in the market. We are confident that we can duplicate this success in the Annapolis Valley with a good product, strong, local and community involvement, a fresh and live air sound, we can do well, despite the many advantages that the incumbents will have.
LISTNUM 1 \l 13003 And now to talk about Canadian Content Development is Mark Maheu.
LISTNUM 1 \l 13004 MR. MAHEU: Thank you, Jennifer.
LISTNUM 1 \l 13005 As we usually do, we have proposed a strong package of Canadian Content Development initiatives ‑‑ $504,000 over the first seven years of operations. Our approach is to fund national initiatives with $102,000 going to FACTOR, and $105,000 to Canadian Music Week, but we have a local focus, as well. We will provide the Annapolis Valley School Board with $252,000 over seven years to help budding musicians further their studies, and careers.
LISTNUM 1 \l 13006 We had also originally proposed $45,000 going to Radio Starmaker Fund, but as we discussed in the Sydney application, we realized that this would not likely meet the Commission's new CCD policy. So we have decided to re‑direct the money to Acadia University's Music School for bursaries for deserving music students.
LISTNUM 1 \l 13007 Madame Chair, Members of the Commission, we believe that we have an exciting proposition for the people of the Annapolis Valley. For the first time in many years, they will have real diversity in music, in editorial voice, and in advertising options.
LISTNUM 1 \l 13008 MBS has done well in this market, but with only two FM stations, it is impossible to cover all the major programming groups. Classic Hits is a format that is not available, and we intend to bring a strong format with an emphasis on the hits from the '70s, '80s and '90s, as well as compatible rock hits of today.
LISTNUM 1 \l 13009 We proposed to bring a strong local and live focus to the market. Newscast on the hour until 6:00 p.m. seven days a week, with a three person newsroom, and this will be supplemented by a more informal approach to news in the evenings on our late night breakfast program
LISTNUM 1 \l 13010 A quality program service ‑‑ we will direct $4.6 million to programming expenses over the first seven years, enabling us to be live and local with a quality on‑air staff. We will reach out to the Annapolis Valley with a Friday afternoon show to bring attention to smaller communities, and their events. We will contribute significantly to the development of Canadian content, with $504,000 in spending over the first seven years.
LISTNUM 1 \l 13011 Newcap Radio is looking forward to the opportunity of launching a live and local radio station in the Annapolis Valley. Classic Hits 98.7 will re‑invigorate, and re‑energize the radio market that, until now, has had little listening choice.
LISTNUM 1 \l 13012 With a strong focus on being live, of having people in the station all the time to respond to the community, of investing significant resources in programming, and in the development of Canadian content, we believe that we will make a strong contribution to the people of the Annapolis Valley.
LISTNUM 1 \l 13013 For these reasons, we ask you to grant us a license in Kentville.
LISTNUM 1 \l 13014 We thank you, and we'd be happy to answer any questions you may have about our proposal.
LISTNUM 1 \l 13015 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 13016 Commissioner Noel will be asking the questions.
LISTNUM 1 \l 13017 COMMISSIONER NOEL: I would like to know who wrote the supplementary brief? I mean, I was reading poetry in the first few pages.
LISTNUM 1 \l 13018 MR. MAHEU: It was a combined group effort. Everybody doing ‑‑
LISTNUM 1 \l 13019 COMMISSIONER NOEL: Gee, I ‑‑
LISTNUM 1 \l 13020 MR. MAHEU: ‑‑ a little piece.
LISTNUM 1 \l 13021 COMMISSIONER NOEL: ‑‑ didn't know you were so lyric.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 13022 COMMISSIONER NOEL: I mean patting the back of the whales, and the swells of the Fundy Bay. Fabulous. I mean, I thought I was ‑‑ I'm not ‑‑ I wasn't sure I was reading a supplementary brief, but otherwise, I thought it was very, very written.
LISTNUM 1 \l 13023 Let's go back to your application. I don't have many questions. Some of them you've already answered, but I will unfortunately have to come back with those nasty questions about CCD that you've heard yesterday asked of all participants. But before that, I would like to just go over your business plan, and your financial projections.
LISTNUM 1 \l 13024 You're projecting total revenues in year one of $930 ‑‑ oops, $930,000, increasing to a million, nearly 1,600,000 in year seven, and your suggestion is that 30 percent of your projected revenues will be derived from the incumbent's actual services in the Kentville market, and that 70 percent would come from new radio advertiser, or increased budgets from existing advertisers.
LISTNUM 1 \l 13025 However, given the fact that MBS is the only incumbent in that market, is it possible that they could experience a greater financial impact than the 30 percent you're mentioning?
LISTNUM 1 \l 13026 MR. MAHEU: Madame Noel, I think, to be fair, that is possibility, but we do not have the financial data for that market to know exactly how much is out there right now. We based most of our projections in our financial plan based on our previous experience as how things have gone in ‑‑
LISTNUM 1 \l 13027 COMMISSIONER NOEL: That's, that was ‑‑
LISTNUM 1 \l 13028 MR. MAHEU: ‑‑ other situations.
LISTNUM 1 \l 13029 COMMISSIONER NOEL: ‑‑ my next question.
LISTNUM 1 \l 13030 MR. MAHEU: Yes.
LISTNUM 1 \l 13031 COMMISSIONER NOEL: What was, what assumptions have you used to determine that ‑‑
LISTNUM 1 \l 13032 MR. MAHEU: Right. We ‑‑
LISTNUM 1 \l 13033 COMMISSIONER NOEL: ‑‑ portion of 30/70?
LISTNUM 1 \l 13034 MR. MAHEU: We, we've kind of based that on a number of situations we've been in, where we've launched stations, classic hits stations or new formats into marketplace of similar size, and to give you a good example ‑‑ Wainwright, out west, when we got a conversion to the FM band, we changed our format to classic hits, and you know, the station covered Wainwright and also gets into Lloydminster rather clearly.
LISTNUM 1 \l 13035 And we have a station in Lloydminster, and we found the way our revenues grew is, because we put this format on, we were able to attract customers that weren't buying our country station, that were looking to reach an audience that the classic hit station reached. And we also traded some revenue off of our country sta ‑‑ we lost some revenue to the new station, so ‑‑
LISTNUM 1 \l 13036 We also went through the recent example in Charlottetown, which kind of confirmed a little bit what we, what we've seen in other situations where some of the revenue that we're going to generate with a new offering into the marketplace is going to come from the incumbent. And it ‑‑ we estimate it to be about 30 percent, but because Kings County is unique in a way, in the fact that it's quite a large population area ‑‑ about 65,000 ‑‑ with no daily newspaper, no local television, and only two radio stations, and pretty good economic growth.
LISTNUM 1 \l 13037 We think and we believe ‑‑ it's our belief, from what we've been able discern, that there are a number of advertisers that are in that area that presently are not using radio, and would spend on radio, if people called on them, on a regular basis; made presentations to them, showing them the benefits of radio; and delivered an audience target that they can't buy on local radio right now.
LISTNUM 1 \l 13038 So I don't know if that gives you enough to give you a sense of where were coming from, but we considered this a pretty conservative approach, based on previous experience.
LISTNUM 1 \l 13039 COMMISSIONER NOEL: Yeah. The only point is that your previous, in your previous experience, you were taking some revenues from yourself.
LISTNUM 1 \l 13040 MR. MAHEU: Yes, we were. Well, we ‑‑
LISTNUM 1 \l 13041 COMMISSIONER NOEL: Which would not be the case here.
LISTNUM 1 \l 13042 MR. MAHEU: No, it would not, although in that case, we did have separate sales departments, so they did compete against each other, and obviously the incumbent station didn't want to lose any revenue to the other station, and ‑‑
LISTNUM 1 \l 13043 COMMISSIONER NOEL: And who won the trip down south.
LISTNUM 1 \l 13044 MR. MAHEU: Yeah, exactly. So ‑‑ but Charlottetown is a good example where we know if we put a radio station on that is doing a good job, and bringing something different to the market, that inevitably some of that money is going to come from an incumbent.
LISTNUM 1 \l 13045 But we believe the vast majority of our revenues, in the first year, and throughout the life of the radio station, are going to come, and the only way we're going to be able to make a difference, and make a living there is to go out and generate some new business ‑‑ people that are not spending in radio right now, or using alternative advertising sources ‑‑ and we think that it'll be good for radio, in general, that radio spend will ‑‑
LISTNUM 1 \l 13046 COMMISSIONER NOEL: And Mr. Stirling is not running any newspaper in the area?
LISTNUM 1 \l 13047 MR. MAHEU: Not that we're aware of, at this time, so ‑‑
LISTNUM 1 \l 13048 COMMISSIONER NOEL: Thank you.
LISTNUM 1 \l 13049 My other questions will, are concerning the CCD.
LISTNUM 1 \l 13050 In your letter of January 29, 2007, you modified the annual financial contributions you intended to make to Canadian Content Development. I would like to talk about the contribution you plan. Oop, no, you decided not to do Radio Starmaker. That's one down.
LISTNUM 1 \l 13051 Let's move to the 2006 Policy. Could you confirm your understanding that if licensed, your station will have to contribute a basic annual CCD contribution imposed by a regulation, based on the sha ‑‑ on the station's total annual revenues, and in the amounts as set out in paragraph 116 of the new Radio Policy, Public Notice CRTC 2006‑158?
LISTNUM 1 \l 13052 MR. MAHEU: Yes, we confirm that we will, we will ‑‑
LISTNUM 1 \l 13053 COMMISSIONER NOEL: Thank you.
LISTNUM 1 \l 13054 MR. MAHEU: ‑‑ adhere to that.
LISTNUM 1 \l 13055 COMMISSIONER NOEL: Could you confirm your understanding that no less than 60 percent of the station's basic annual CCD contribution must be allocated to either FACTOR, or Musique Action, and the remaining amount, if any, may be directed to any eligible CCD initiatives, at your discretion?
LISTNUM 1 \l 13056 MR. MAHEU: We understand a minimum of 60 percent of that minimum contribution will go to FACTOR.
LISTNUM 1 \l 13057 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 13058 And as set out in the new Commercial Radio Policy, the new annual basic CCD contribution will be imposed on all commercial radio licensees by regulation, the Commission could impose a transitory COL, condition of license, reflecting the new basic annual CCD until such time as the regulations comes into force. Once the regulation is in place, the COL would expire.
LISTNUM 1 \l 13059 Do you have any comments regarding the Commission imposing such a COL?
LISTNUM 1 \l 13060 MR. MAHEU: We understand, and we would accept a transitionary COL, and a permanent COL, when the Policy's confirmed.
LISTNUM 1 \l 13061 COMMISSIONER NOEL: Thank you.
LISTNUM 1 \l 13062 As was the case with the previous CTD policy, an applicant or licensee may choose to exceed the minimum annual basic CCD contribution. Under the old CTD policy, it was clear that your funding proposal exceeded the minimum plan requirements.
LISTNUM 1 \l 13063 As part of this application, you are proposing to contribute additional annual funding to CCD that would be over and above the basic required CCD contribution. Can you confirm for us the total annual amount of this over and above CCD contribution? And I guess that's probably the little sheet that I have somewhere here.
LISTNUM 1 \l 13064 MR. MAHEU: Yes, the over and above annual amount is $72,001 ‑‑
LISTNUM 1 \l 13065 COMMISSIONER NOEL: Mmm hmm.
LISTNUM 1 \l 13066 MR. MAHEU: ‑‑ for a total of $504,000 over seven years, and we confirm that all of that amount is over and above the basic requirement.
LISTNUM 1 \l 13067 COMMISSIONER NOEL: Thank you.
LISTNUM 1 \l 13068 Please confirm your understanding that under the new Policy, not less than 20 percent of this annual over and above CCD contribution must be allocated to FACTOR, or Musique Action.
LISTNUM 1 \l 13069 MR. MAHEU: Yes, we understand, and 20 percent of that amount, $14,572 each year for seven years, will be directed to FACTOR.
LISTNUM 1 \l 13070 COMMISSIONER NOEL: And please identify the eligible CCD initiative and annual funding level for each that you would support with the remaining annual over and above CCD contribution. I guess that his the Canadian, Canada Music Week, the School Board, and the Acadia Music department, as per the documents that was filed this morning with your presentation.
LISTNUM 1 \l 13071 MR. MAHEU: That is correct, and we believe, and are of the opinion that all of these areas of contribution qualify under the new Policy from the CRTC, and we will also work to have a contribution agreement with each one of these groups, which we will file with the Commission, after they've been negotiated, to ensure that they qualify under the new Policy.
LISTNUM 1 \l 13072 COMMISSIONER NOEL: Well, those are my questions.
LISTNUM 1 \l 13073 THE CHAIRPERSON: Okay. That's fine, Mr. Maheu and Mr. Steele, panel. Thank you.
LISTNUM 1 \l 13074 MR. MAHEU: Thank you very much.
LISTNUM 1 \l 13075 THE CHAIRPERSON: Oh, excuse me.
LISTNUM 1 \l 13076 MR. MAHEU: Oh, there you go.
LISTNUM 1 \l 13077 THE CHAIRPERSON: Yes, thank you. Counsel?
LISTNUM 1 \l 13078 MS. FISHER: Actually, I think they've already answered my questions, so ‑‑
LISTNUM 1 \l 13079 THE CHAIRPERSON: Okay. Thank you.
LISTNUM 1 \l 13080 MS. FISHER: ‑‑ thank you.
LISTNUM 1 \l 13081 THE CHAIRPERSON: Madame Secretary, then? Thank you.
LISTNUM 1 \l 13082 THE SECRETARY: Thank you, Madame Chair.
LISTNUM 1 \l 13083 This completes Phase I of the consideration of item six on the agenda. As there are no competing applications with respect to the siting, we will now proceed to Phase II, interventions.
LISTNUM 1 \l 13084 Other parties appear in the order set out in the agenda to present their intervention.
LISTNUM 1 \l 13085 I would now call Maritime Broadcasting System Limited to come to the front. Please introduce yourself before your presentation, and you will have ten minutes to ‑‑
LISTNUM 1 \l 13086 COMMISSIONER NOEL: They'll be relieved that I'm not doing their questions.
LISTNUM 1 \l 13087 MR. PACE: Good day, Madame Chair, Commissioners, Commission staff, ladies and gentlemen.
LISTNUM 1 \l 13088 My name is Robert Pace, and I am the owner of Maritime Broadcasting Systems Limited.
LISTNUM 1 \l 13089 I'm here with Diane Best, General Manager of our Annapolis Valley radio stations, Owen Barnhill, who is our Chief Financial Officer.
LISTNUM 1 \l 13090 Our position with regards to Newcap's application for a new radio station in Kentville, Nova Scotia was presented in our detailed written intervention, which the Commission will consider during its deliberations. While we do not intent to repeat our entire intervention here today, we will summarize our primary concerns.
LISTNUM 1 \l 13091 Very basically, given the historic financial data for the existing stations in the market, and the general economic forecast for the Annapolis Valley, MBS opposes Newcap's application for a new radio license.
LISTNUM 1 \l 13092 To put our intervention in context, I will call on Diane Best to discuss the history of radio in the Annapolis Valley. Diane was born and raised in the Annapolis Valley, and has proudly served the radio industry her entire career.
LISTNUM 1 \l 13093 Diane?
LISTNUM 1 \l 13094 MS. BEST: The Annapolis Valley radio network was born out of love, and the hobby of ham radio by Mr. Willard Bishop and his father, Avard, in 1945. CFAB in Windsor, operating with a 250‑watt AM transmitter, and a small studio was the birthplace of what is now AVR.
LISTNUM 1 \l 13095 Mr. Bishop continued his dream over the years by adding CKEN in Kentville in 1948, and CKAD Middleton in 1962. Mr. Bishop was a innovator and a broadcast pioneer, and erected the very first FM transmitter in the Maritimes in 1963 which allowed VHF communications from studio to studio, providing network potential between the small towns up and down the Valley.
LISTNUM 1 \l 13096 In 1970, the addition of the Digby transmitter and studio fulfilled Mr. Bishop's dream of serving the length of the Annapolis Valley.
LISTNUM 1 \l 13097 After 43 years of dedication, Mr. Bishop sold AVR to Neil MacMullen. Mr. MacMullen maintained the stations as locally owned and operated, serving the entire Annapolis Valley. After 21 years, Mr. MacMullen chose to sell to MBS because of their commitment to small market broadcasting.
LISTNUM 1 \l 13098 It is worthy to note that Newcap's proposed station servicing the Annapolis Valley is based in Kentville. MBS's commitment, as its history confirms, is to all the small towns and villages throughout the Annapolis Valley. As a consequence of this obligation, MBS has to rely on the success of its Kentville operations to underwrite costs associated with operating Weymouth, Digby, Middleton and Windsor. Nearly 70 percent of MBS's total Annapolis Valley revenues are derived from Kentville, permitting MBS to carry out its Valley‑wide broadcast commitments.
LISTNUM 1 \l 13099 MR. BARNHILL: The historic financial performance of existing stations in the market is a fundamentally important metric in assessing whether a market can bear licensing additional commercial radio services.
LISTNUM 1 \l 13100 In 2004, the average profit before interest and taxes, or PBIT percentage, for all radio stations in Atlantic Canada and Nova Scotia was 24.8 and 28.4 respectively. In 2005, these corresponding figures increased to 27.15 and 30.53 respectively.
LISTNUM 1 \l 13101 In contrast, the combined PBIT percentage for MBS stations CKEN and CKWM in Kentville, Nova Scotia, from 2005 was 22, representing a decline from the prior year.
LISTNUM 1 \l 13102 Furthermore, CKEN and CKWN's combined PBIT percentage was lower than Nova Scotia's in each of the five years from 2001 to 2005, and lower than Atlantic Canada's average PBIT percentage during the same period.
LISTNUM 1 \l 13103 The Annapolis Valley market is not sufficiently robust to support licensing additional operators, without undue financial hardship on the incumbent broadcaster.
LISTNUM 1 \l 13104 MS. BEST: Deteriorating PBIT figures are symptoms of a weakening business environment in each of the rural communities which make up the Annapolis Valley, a factor that has been of particular importance to the Commission in determining whether a radio market can support new entry in retail sales growth.
LISTNUM 1 \l 13105 It is important to note that Kentville is projected to lag behind the national average in this regard over the next two years. Interestingly, Newcap makes several statements regarding the overall health of the Annapolis Valley economy which are unsupported by fact.
LISTNUM 1 \l 13106 Newcap heralds Acadia University, Shaw Wood Products, and Larsens as example of economic prosperity in the Annapolis Valley when, in reality, the opposite is true. The following are brief examples of the economic events facing western Nova Scotia communities since Newcap's application was filed:
LISTNUM 1 \l 13107 Enrollment at Acadia University in Wolfville has decreased 6.4 percent from 2005 to 2006, two and a half time the average decline of 2.6 percent experienced by all universities in Nova Scotia. Declining enrollment has resulted in staff reductions at the University.
LISTNUM 1 \l 13108 Shaw Wood, a furniture manufacturer in the Annapolis Valley, shut down at the end of July 2006. The closure of this manufacturer put 200 people out of work.
LISTNUM 1 \l 13109 The decline of the pork industry in Nova Scotia will have a huge effect on the Annapolis Valley. 89 percent of the pork industry in Nova Scotia is located in the Annapolis Valley. The pork crisis will indirectly put 1,000 people, Nova Scotians, out of work. It is feared that Larsens, which is currently the largest resource for slaughtering pigs in Nova Scotia, may also have to close its door with the decline in the pork industry.
LISTNUM 1 \l 13110 If this were to happen, it would be another major blow to the agriculture industry in the Annapolis Valley. 28 percent of the Town of Berwick taxes come from employees at the Larsens plant, which employs approximately 500 people.
LISTNUM 1 \l 13111 "The Valley Today", a daily evening newspaper based out of Windsor, Nova Scotia, was launched in October 2006. On January twenty ‑‑ on January 14th, just three months after going to press, the tabloid, along with its extensive website, closed its door, leaving 31 people out of work, citing a lack of advertising as a major factor.
LISTNUM 1 \l 13112 This month, Maple Leaf Foods will close its poultry plant located in Cunard, just north of Kentville, Nova Scotia. Many of its 380 employees are families that have worked at the plant for decades. The loss to Kings County in payroll and taxes is estimated to be $11,000,000.
LISTNUM 1 \l 13113 This week alone we have had two additional announcements that are further troubling. The largest employer in the Annapolis Valley, Michelin Tire, announced this week that all new employees will begin their employment at $3 an hour less than previous hires.
LISTNUM 1 \l 13114 The Windsor Co‑op, after more than 80 years in business, is now closing and laying off all of its employees.
LISTNUM 1 \l 13115 The Hants Journal editorial notes that:
"With the hog, beef, and poultry industries in crisis, the government must step in before the entire farming industry on the east coast of Canada ceases to exist."
LISTNUM 1 \l 13116 The list above provides recent, real examples of the economic challenges facing communities with the Annapolis Valley. With the sever impact these closures have on local livelihoods, it is no surprise that the estimated growth in income levels for Valley residents lag behind both provincial and national statistics.
LISTNUM 1 \l 13117 While Newcap claims the Annapolis Valley provides an attractive economic backdrop for our business, MBS's experience as a local broadcaster in these communities suggests that the financial performance of radio in these markets indexes lower than the remainder of the province.
LISTNUM 1 \l 13118 The weakening general economic forecast for the market cannot support another radio entrant.
LISTNUM 1 \l 13119 MR. PACE: We would like to briefly draw the parallels between the current competitive situation in Kentville with that of New Glasgow, Nova Scotia. A little over a year ago, all three applications for new radio licenses in New Glasgow were denied by the Commission, while incumbent broadcaster, Hector Broadcasting, was approved for a conversion to the FM frequency band.
LISTNUM 1 \l 13120 As a result of this decision, New Glasgow will have one commercial FM station for every 36,000 residents. With a population of about 26,000, Kentville has one commercial FM station for every 13,000 residents. In reviewing the entire Maritime Provinces, we are hard‑pressed to find another community with fewer commercial FM stations per capita than Kentville.
LISTNUM 1 \l 13121 Granting Newcap's application would result in one FM station for every 8,600 residents, which would suggest that Kentville would be over‑licensed.
LISTNUM 1 \l 13122 The reason new commercial licenses were denied in New Glasgow were primarily to softening economic forecast, and historical financial performance of the existing station. Given the demographic and economic similarities with Kentville, the New Glasgow decision provides valuable guidance on licensing alternatives.
LISTNUM 1 \l 13123 Specifically, the decision states:
"While the Commission's predisposition generally lies in favour of increased competition and diversity, it must also ensure that the competitive impact of a new radio station on a market will not impinge unduly on the ability of any existing station to meet its programming responsibilities under the Act."
LISTNUM 1 \l 13124 Consider the historic PBIT data of the incumbent stations, coupled with a challenging economic forecast, Kentville's current situation is very similar to New Glasgow's. Therefore, the precedent of the New Glasgow decision in support of the incumbent broadcaster must be considered during the Commission's deliberations.
LISTNUM 1 \l 13125 Owen?
LISTNUM 1 \l 13126 MR. BARNHILL: We must point out that the effects of licensing Newcap reach far beyond MBS stations CKEN and CKWM in Kentville.
LISTNUM 1 \l 13127 As outlined in detail in our written intervention, MBS is proud owner and operator of CFAB in Windsor, Nova Scotia. Faced with plans to expand Highway 101, MBS is being forced to abandon its current AM site. To preserve its commitment to local radio presence in Windsor, MBS requested a technical upgrade of CFAB to the FM frequency band, which has been conditionally approved by the Commission.
LISTNUM 1 \l 13128 As a backdrop to this FM conversion is Windsor's economic hardship, which mirrors that of the Annapolis Valley. Diane discussed the poignant example of economic adversity with the closure ‑‑
LISTNUM 1 \l 13129 THE CHAIRPERSON: Excuse me, Mr. Barnhill. Can I just check with Counsel? Is that okay to be discussing the Windsor application?
LISTNUM 1 \l 13130 MR. PACE: It's been approved.
LISTNUM 1 \l 13131 MS. FISHER: No, I don't believe it is.
LISTNUM 1 \l 13132 THE CHAIRPERSON: Alright. I just ask you skip that part, if you don't mind.
LISTNUM 1 \l 13133 MR. PACE: Okay. Sure.
LISTNUM 1 \l 13134 To conclude, PBIT percentages for MBS stations CKEN, CKWM and CFAB lag behind comparable statistics for radio operations in both Atlantic Canada and Nova Scotia.
LISTNUM 1 \l 13135 Furthermore, recent general economic data reveals a weakening overall business environment in communities with the Annapolis Valley. MBS has great concern that CFAB would be a fledgling FM station in a rural community is particularly vulnerable to the threat of new media entrants.
LISTNUM 1 \l 13136 For these reasons, the competitive impact of a new station on the Annapolis Valley, Nova Scotia, will unduly stifle MBS's ability to meet its programming responsibilities. MBS respectfully suggests that Newcap's application for a commercial radio station serving the Annapolis Valley, Nova Scotia, is not in the public interest, and should be denied.
LISTNUM 1 \l 13137 MBS appreciates the opportunity to provide comments, and welcomes any questions. Thank you.
LISTNUM 1 \l 13138 COMMISSIONER NOEL: I will not cite numbers, but I see from your 2005 to 2006 figures, that your PBIT margin in Kentville went down. I think you gave us the 2005 number. Oh, no, you didn't mention it.
LISTNUM 1 \l 13139 COMMISSIONER NOEL: But it went down to the tune of 49 percent between 2005 and 2006, according to my fancy calculations, but at the same time, and at the same your operating expenses went up 40 percent.
LISTNUM 1 \l 13140 So could you tell us what's the relationship between your operating expenses, and your PBIT margin, and why did your operating expenses to the tune of 40 percent?
LISTNUM 1 \l 13141 MR. BARNHILL: Sure. Thank you, and Mr. Pace will address that, but just for clarification, is that our two FM's combined?
LISTNUM 1 \l 13142 COMMISSIONER NOEL: Yes, it's the Maritime two ‑‑ CKWM FM and CKEN FM.
LISTNUM 1 \l 13143 MR. PACE: Okay. That's pretty easy ‑‑
LISTNUM 1 \l 13144 COMMISSIONER NOEL: That's derived from your filings ‑‑
LISTNUM 1 \l 13145 MR. PACE: Sure, yeah.
LISTNUM 1 \l 13146 COMMISSIONER NOEL: ‑‑ with the Commission.
LISTNUM 1 \l 13147 MR. PACE: Sure. This is the situation that we were faced with in the Valley.
LISTNUM 1 \l 13148 We have spent, as the Commission knows ‑‑ I know we can't talk about Windsor, but we've spent a considerable amount of money over the last year and a half, looking at technical briefs, changing technical briefs, and everything else. That's added to the cost.
LISTNUM 1 \l 13149 We had to test towers. One of the real challenges that we're having here is to find ‑‑ we don't want to build a tower ‑‑ is to find a tower operation that we can rent, that fits within the contours of what the Commission is looking for. That was an expensive aspect of it.
LISTNUM 1 \l 13150 The other real challenge that we had, we knew that this newspaper that was coming to the Valley, which was going to be a daily, had significant financial backing behind it. So what we did is we ramped up considerably our promotions budget to take on this new newspaper that wasn't just going to serve Windsor; it would, it'd served Windsor right down to Digby. The people that were behind the paper were serious financial players. We took them seriously, and consequently, we expensed during that time to make sure that we could take them on.
LISTNUM 1 \l 13151 Good for us, we did. We took it straight on, but I mean, these numbers ‑‑ our fall numbers are going to show that we took a significant hit, before they went out of business. But it shows a pure example of the real market here. It's not as strong as it has been in the past.
LISTNUM 1 \l 13152 We ‑‑ the Valley, about 30 percent is agriculture. We've given real numbers here. We've given real details that are not two years old. These are things that are happening right now in the last six months. I mean, it's not rosy picture. You know, the pork industry, it's challenged by international events. This is outside of the farming families in the communities, but it's something ‑
LISTNUM 1 \l 13153 COMMISSIONER NOEL: We know about the ‑‑
LISTNUM 1 \l 13154 MR. PACE: ‑‑ that we've got to live with.
LISTNUM 1 \l 13155 COMMISSIONER NOEL: ‑‑ pork industry in Quebec, as well. Yes.
LISTNUM 1 \l 13156 MR. PACE: The same. But it just doesn't go away overnight. These people lose their farms, and it's serious money. So that's what we, that's what we're concerned about here, 'cause we are serving the whole Valley. We're not cherry picking one area here.
LISTNUM 1 \l 13157 COMMISSIONER NOEL: Thank you very much.
LISTNUM 1 \l 13158 MR. PACE: Thank you.
LISTNUM 1 \l 13159 COMMISSIONER NOEL: Oh, how long was that newspaper on ‑‑
LISTNUM 1 \l 13160 MR. PACE: Four months.
LISTNUM 1 \l 13161 COMMISSIONER NOEL: Alive? It died pretty quickly, eh? Thank you.
LISTNUM 1 \l 13162 THE CHAIRPERSON: Thank you, Mr. Pace.
LISTNUM 1 \l 13163 MR. PACE: Thank you.
LISTNUM 1 \l 13164 THE SECRETARY: This completes the list of appearing interveners.
LISTNUM 1 \l 13165 We'll now proceed to Phase III, in which the applicants can reply to all interventions submitted on their application.
LISTNUM 1 \l 13166 Newcap Inc. may respond, and you'd have ten minutes for this purpose.
REPLY / RÉPLIQUE
LISTNUM 1 \l 13167 MR. MAHEU: Thank you, Madame Secretary, Madame Chair.
LISTNUM 1 \l 13168 Mark Maheu and Rob Steele for Newcap to very briefly respond ‑‑ maybe two, two and a half minutes, if you would allow.
LISTNUM 1 \l 13169 Thank you very much to the folks from MBS. We have certainly read their written intervention, and listened to their additional comments today. Just a couple of very brief things relating to a couple of things that they mentioned in their intervention.
LISTNUM 1 \l 13170 First of all, the distinction between New Glasgow and Kings County, just kind of trying to compare apples to apples ‑‑ you know, New Glasgow has a population of somewhere in the neighbourhood of 40,000. You know, our application for Kentville and our 3‑millivolt curve that we're contemplating, if we were licensed, covers a population of about 65,000 people, so it's a significantly larger area.
LISTNUM 1 \l 13171 Secondly, listening to Maritime talking about if Newcap were to be licensed in the Annapolis Valley that ‑‑ I think their phrase, I'm quoting roughly here, "would stifle MBS's ability to perform it's programming responsibilities".
LISTNUM 1 \l 13172 Part of the reason we feel there is an opportunity in the Annapolis Valley, and the proposal that we made, was to put on a complete live and local radio station. And our programming budget is rather robust, because we feel, and we've found through the research, and we know from experience there's not a lot of local service happening now on those radio stations, and we feel that is an opportunity for us to bring something different to the marketplace.
LISTNUM 1 \l 13173 So I was a little ‑‑ I was ‑‑ I'm wondering what they exactly meant by stifling their ability to perform their programming responsibilities when, you know, large portions of the day are voice tracked; very little local news after 10:00 in the morning, et cetera; but be that as it may.
LISTNUM 1 \l 13174 And, finally, the expenses relating to fighting the new newspaper coming in with the change in the PBIT and so on, one would think then, since they have been successful in their battle against this new upstart newspaper, and it's gone out of business, that the expenses in that area would recede, and would fall to the bottom line in future years, so the PBIT coming back up to where it was.
LISTNUM 1 \l 13175 And, finally, in terms of the economic situation in the Annapolis Valley with various businesses closing, or having hard times, I think you could look at every community in Canada, and if you wanted to find bad news, you could find it. There are companies that are going out of business in Alberta, and it's one of the most robust economies in North America. In Ottawa, there are companies that close every day. Things happen, and things change.
LISTNUM 1 \l 13176 What you're not hearing is the other side of the story ‑‑ that for every action, there's an equal and opposite reaction. There are new businesses, and new ideas coming forth every day in marketplaces across the country, and the Annapolis Valley is no different. These people are very resilient.
LISTNUM 1 \l 13177 I was watching television this morning, where they were talking about, and celebrating an initiative in Wolfville this morning ‑‑ the new fair trade initiative ‑‑ encouraging people of the area to shop in the area, to the initiatives that local farmers in agriculture are taking to make products from the Annapolis Valley more appealing to increase their ability to do business.
LISTNUM 1 \l 13178 These are initiatives that are grass roots in the area from the people who live there everyday. When you go to that area, and Rob has been to that area ‑‑ he went to school there ‑‑ the people there are optimistic. They think their best days are still very much ahead of them. Yes, that's not to dismiss that there are some economic concerns in the city. There are in every city, but there's another side to that story, too, and there are other things happening in that marketplace.
LISTNUM 1 \l 13179 We would be in this for the long haul, and the level of service in the marketplace is low. We believe that with the economic activity forecasted by FP markets, that there is an opportunity for another radio station to enter the marketplace, and not have a substantial negative impact on the incumbents. We don't enjoy their economies of scale, and I think we could co‑exist quite well, and bring the advertisers and listeners of that area a new choice.
LISTNUM 1 \l 13180 Those were the specific comments about the intervention by MBS.
LISTNUM 1 \l 13181 COMMISSIONER NOEL: I have no questions.
LISTNUM 1 \l 13182 MR. MAHEU: Okay.
LISTNUM 1 \l 13183 COMMISSIONER NOEL: Thank you very much.
LISTNUM 1 \l 13184 THE CHAIRPERSON: Thank you very much, Mr. Steele and Mr. Maheu.
LISTNUM 1 \l 13185 MR. MAHEU: Madame Chair, if I may, just before you wrap up ‑‑
LISTNUM 1 \l 13186 THE CHAIRPERSON: Sure.
LISTNUM 1 \l 13187 MR. MAHEU: ‑‑ since this is the final part of Phase IV. On behalf of Newcap, we'd all like to thank you, and Commissioner Williams, and Commissioner Noel for a wonderful couple of days. This was a great place to have a hearing, by the way. It's one of the nicest rooms I think I've ever been in for a hearing, so it was a very good choice, and a special thank you to the staff who I know do most of the heavy lifting behind the scenes, and don't get a lot of the glory, and Cindy Lee in the examination room who's out in the hallway looking for business every once in awhile, because there's not a lot going there, but thank you very much for your efforts, and your help to us. We really appreciate that.
LISTNUM 1 \l 13188 THE CHAIRPERSON: Thank you very much, Mr. Maheu.
LISTNUM 1 \l 13189 THE SECRETARY: Thank you, Madame Chair. This completes the consideration of item six on the agenda.
LISTNUM 1 \l 13190 I just have a few closing remarks. There are a number of non‑appearing applications on the agenda of this public hearing. Interventions were received on some of those applications.
LISTNUM 1 \l 13191 The panel will consider these interventions, along with the applications, and decisions will be rendered at a later date.
LISTNUM 1 \l 13192 This completes the agenda of this public hearing.
LISTNUM 1 \l 13193 Madame Chair?
LISTNUM 1 \l 13194 THE CHAIRPERSON: Thank you, Madame. Ladies and gentlemen, thank you.
‑‑‑ Whereupon the hearing concluded at 1210 /
L'audience se termine à 1210
Michelle Moody Lynda Johansson
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