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.