CRTC approves sale of radio stations without public process

Less than a week before Christmas, the CRTC approved the sale of two FM radio stations in Winnipeg and one in Calgary without giving the public any opportunity to comment on it.

The stations were sold by Bell as part of the divestments it was required to make in the Astral acquisition. Because adding the Astral stations put Bell over the limits set by CRTC policy in major markets, it was required to sell 10 stations to someone else. Bell came to agreements to sell two stations in Ottawa to Corus, two stations in Toronto and three in Vancouver to Newcap, and two stations in Winnipeg and one in Calgary to the Jim Pattison Broadcast Group.

Specifically, Pattison was getting:

The list of stations that were sold, which includes a mix of Bell and Astral stations, was never discussed during the second public hearing into the Astral acquisition, despite the fact that the decision the first time around criticized the list because it appeared Bell was keeping the best-performing stations and selling the worst-performing ones (instead of, say, just selling all the Astral stations they couldn’t acquire).

Bell countered that there were reasons other than ratings for its decisions of which stations to sell, and that some of the stations it was selling had high ratings. But the details of the reasoning behind the selling of those stations was submitted confidentially to the CRTC, and so we don’t know what they are.

The divestments require their own process, since they are not automatically approved in the Astral decision. The Corus sale was discussed at a hearing in November (along with its acquisition of Teletoon, Séries+ and Historia, which have since been approved.) And the sale to Newcap has been made part of a public process though no hearing has been scheduled.

But as I explain in this story on Cartt.ca (subscription required), the CRTC approved the Pattison acquisition, valued at almost $30 million, without opening it up to public comment.

The CRTC can issue decisions on an administrative basis for things that it doesn’t believe require public input. It even has a policy for such decisions. For example, if there’s an intra-corporate reorganization, or if the owner dies and control of the station gets passed along to a family member, there doesn’t need to be a public process. An acquisition of a radio station can also be approved without public process if the CRTC believes it doesn’t bring up any policy issues and the value of each station is under $15 million.

Because the acquisition wouldn’t put Pattison over the common ownership limit in either market, the CRTC apparently felt there was no policy issue here. (Of course, the CRTC tends to decide whether there’s a contentious issue by looking at the interventions filed during the comment phase of a proceeding, which it has short-circuited here.)

As for the money part, the Calgary station was actually sold for $16.5 million, which is above the limit. So why not a public process? I asked the CRTC, and here was its response:

In its determination to process this application using the administrative route, the Commission agreed that the value of one of the three stations was slightly over the $15M threshold, but also considered the fact that the value of the other stations involved in the same transaction was well below the $15M threshold (i.e. 3.5M and 5.5 respectively).

The Commission considered that the transaction did not present any policy concerns related to concentration of ownership, cross-media ownership, or diversity of voices. In addition, the Commission accepted the tangible benefits proposed would make a contribution to the enhancement of the Canadian Broadcasting System. Therefore, the Commission concluded that the transaction was in the public interest.

I understand that some non-controversial proceedings should be expedited and that the bureaucratic process can get cumbersome at times. But this transaction, even though it’s within CRTC policy and likely would have been approved, could bring up many policy issues. For example, is the tangible benefits package that Pattison has proposed appropriate? (It has proposed a standard package worth 6% of the transaction price, so one would suppose the answer is “yes”.)

This isn’t a minor share transfer. The application file contains 33 documents. Both the seller (Bell) and the buyer (Pattison) are large broadcasters (Pattison owns dozens of radio stations), and the stations being sold are in large markets. In 2012, the CRTC sought applications for new radio stations in Calgary and got 11 applications, of which it only approved two (one of which was by Pattison).

What’s perhaps most baffling about this situation is that the decision itself is not posted online. Pattison announced the decision by press release on Dec. 20, and on Jan. 4 the CRTC posted the application with a note saying it was approved.

I had to request the actual decision letter, which was scanned and sent to me. (You can read it here as a PDF.) It includes information that is not posted elsewhere online, such as the actual value the CRTC set for the transaction.

Pattison had set it at $26.5 million, which included the $25.5 million purchase price and a little over $1 million in assumed leases. But the CRTC decision increased the value of those leases (taking their value over five years), and added costs of working capital and cash (Pattison had argued that Bell would keep any cash the stations had when the deal closes, but CRTC policy is to establish value when the deal is made, not when it closes), as well as $90,000 for two trademarks owned by Kool FM. The total price was established as $29.8 million.

This is significant because the value of tangible benefits (money to help the broadcasting system that the CRTC imposes as a tax on any acquisition of a licence) is proportional to the value of the transaction. The higher purchase price means this package, which is made up of contributions to Canadian music funds, the Community Radio Fund of Canada and other initiatives that help develop Canadian content, goes up by $200,000.

It’s the kind of thing you’d expect people should be given a chance to comment about.

I’ve updated my media ownership chart with this approval.

8 thoughts on “CRTC approves sale of radio stations without public process

  1. Dilbert

    Considering you generally agree with the CRTC or defend their decisions, they must really have screwed up here. Reading between the lines you seem rather frustrated by the lack of transparency here.

    I agree with you, but I would take it one step further and say that the CRTC seems to be pretty much rubber stamping stuff for Bell now. Playing with the numbers a bit is nice, but not particularly noteworthy. I would say that a public hearing might have brought up other groups interested in the stations, or might have shown where the deal wasn’t in the best interest of people in Winnipeg, where there will be significant shift in overall ownership in the marketplace.

    Then again, they bent the rules all the way over to snapping to make the Bell / Astral deal work in Montreal, so why would they apply their own rules here?

    Reply
    1. Fagstein Post author

      Considering you generally agree with the CRTC or defend their decisions, they must really have screwed up here.

      CRTC decisions are generally consistent with CRTC policy, and where new policy is created, or exceptions granted, or judgment calls made, they tend to be reasonable, even if they’re not popular. I don’t agree with all of them, but most of them aren’t particularly controversial.

      I would take it one step further and say that the CRTC seems to be pretty much rubber stamping stuff for Bell now.

      It’s denial of the Astral acquisition the first time around would seem to contradict that theory. As would its wireless policy. And a bunch of other things it has done that have made Bell unhappy, from rejecting a request to increase the price of payphones to denying requests for licence changes to specialty channels like Book Television and MuchMusic. I see no evidence that the CRTC is treating Bell any differently from any other company, or that it is being overly favourable to it.

      I would say that a public hearing might have brought up other groups interested in the stations, or might have shown where the deal wasn’t in the best interest of people in Winnipeg, where there will be significant shift in overall ownership in the marketplace.

      The CRTC doesn’t solicit competing bidders when licences are sold. Instead, it leaves it up to the free market to decide (and, indeed, there were several bidders for the stations up for sale). The tangible benefits policy is designed to compensate for the fact that the CRTC doesn’t decide who a licence gets sold to.

      The Pattison acquisition certainly changes the market in both cities, but I don’t think the change is any larger than if the stations were sold so some other company. The disruption was caused by Bell’s acquisition of Astral, which has already been approved.

      But sure, maybe someone could have brought up something the CRTC hadn’t considered that might make Pattison an unwanted suitor. That’s why we have public comments.

      Then again, they bent the rules all the way over to snapping to make the Bell / Astral deal work in Montreal, so why would they apply their own rules here?

      Which rules did they break to make the Bell/Astral deal work? The only policy exception they made concerned the TSN Radio station in Montreal.

      Reply
      1. Dilbert

        “It’s denial of the Astral acquisition the first time around would seem to contradict that theory.”

        Not really. The denial was “no, but…” and they let Bell wander away and modify it’s offer and allowed it to come back again and get a yes. When the CRTC says no to Bell, it’s a gentle one, when they say yes, it tends to be a big, chunky thing. Media isn’t getting more and more concentrated because the CRTC is watching out for consumers, they are basically letting the media players chop things up their own way and nodding their heads.

        “I see no evidence that the CRTC is treating Bell any differently from any other company”

        ‘Tis the problem right there, the CRTC has spent 2 decades being the door mat for all of the big players, which is why there are mostly big players and very few smaller players. It’s why Canadians are faced with intense media concentration, such that a very few companies hold a majority of the television, radio, cellular phone, and television delivery systems, and why those same companies often end up partnered up in various deals – cooperation rather than competition.

        “The Pattison acquisition certainly changes the market in both cities, but I don’t think the change is any larger than if the stations were sold so some other company.”

        The question to me is that, just like Montreal, the FM radio band in both Winnipeg and Calgary are max’ed out. That means that a private deal transfer without public consultation means a missed chance to assure that the stations are meeting the needs of the public. It also means that the “old boys” network gets to keep the stations with people who are less likely to compete with them, thus controlling the market.

        The CRTC missed a chance by ignoring it’s own rules and allowing this transaction to pass without public consultation.

        In Montreal, really the same thing happened. There could have been any number of companies or groups interested in operating some or all of the Astral stations, and the CRTC could have forced the deal in a manner that would have added a diversity of voices to the airwaves. Instead, they chose to break their own rules (once again) and allow Bell to exceed the ownership rules, and as a result to end up as the overwhelming dominant player in Anglo Montreal media. All that was required was that the CRTC ignore it’s own guidelines on ownership concentration in radio, and also turn a blind eye to the impact of Bell’s CFCF12 as the dominant anglo tv station in the marketplace. “P-thwack” is the sound of the rubber stamp. Yeah, they made Bell sweat a bit, but in the end, the CRTC caved pretty good, and let Bell choose which properties to divest and maintain their market dominance.

        Reply
    1. Fagstein Post author

      “Can a journalists/opinionists working at these radio stations report all the bad things about Bell?”

      If you’re referring to the radio stations that were sold, then they no longer belong to Bell, so I don’t see why not.

      Reply
      1. grate

        Fagstein
        I meant the ones that they own now, like CJAD. I read somewhere that theirs’ (the talk show hosts/ newscasters) as well as the audiences’ freedom of speech is curtailed. Callers can’t be let on the air if it is to complain. The employees would be too afraid of losing their jobs.

        Reply
        1. Fagstein Post author

          I read somewhere that theirs’ (the talk show hosts/ newscasters) as well as the audiences’ freedom of speech is curtailed. Callers can’t be let on the air if it is to complain.

          Well I don’t know if freedom of speech includes freedom to complain on air on any radio station. I think most stations wouldn’t be too eager to let people complain on-air about it (unless it was respectful and constructive).

          Reply
          1. grate

            “I think most stations wouldn’t be too eager to let people complain on-air about it”. Yes, and no matter how respectful or constructive. Which is why there is a conflict of interest.

            Reply

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