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Broadcasting Decision CRTC 2003-205
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Ottawa, 2 July 2003
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Astral Media inc., on behalf of
9122-8106 Québec inc., a corporation composed of TVA Group Inc. and
Radio Nord Communications inc.
Montréal, Québec, Sherbrooke, Trois-Rivières, Shawinigan, Saguenay
and Gatineau, Quebec |
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Applications 2002-0767-2, 2002-0768-0,
2002-0769-8, 2002-0770-6, 2002-0771-3, 2002-0772-1, 2002-0773-9,
2002-0774-7, 2002-0775-5, 2002-0776-3, 2002-0777-1, 2002-0778-9
Public Hearing at Montréal, Quebec
3 February 2003 |
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Acquisition of radio assets in Quebec
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The Commission denies the
applications by Astral Media inc. (Astral Media), on behalf of 9122-8106
Québec inc., for authority to acquire the assets of Quebec radio
undertakings held indirectly by Astral Media, including eight AM
stations, two digital stations and three radio networks, and the assets
of radio station CFOM-FM Lévis held by Entreprises Radio Etchemin inc. A
list of the radio undertakings involved in these applications is set out
in the appendix. |
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The applications raised various concerns
relating in particular to concentration of ownership and to media
cross-ownership. The applicant has not satisfied the Commission that the
applications, as filed, are the best possible proposal under the
circumstances. The Commission is not convinced that the recovery
strategy for AM radio in Quebec proposed by the applicant and its
eventual benefits would significantly outweigh the concerns about
concentration of ownership and media cross-ownership. |
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Parties to the transaction
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1. |
The proposed licensee of the broadcasting
undertakings involved in the transaction would be the corporation
established as 9122-8106 Québec inc. (TVA/RNC). The shareholders of TVA/RNC
would be TVA Group Inc. (TVA), with 60% of the voting shares, and Radio
Nord Communications inc. (RNC), with 40% of the voting shares. TVA would
control TVA/RNC. |
2. |
TVA is an integrated communications company
that is an important player in Quebec television. TVA is the largest
private broadcasting company involved in the French-language
conventional television sector in Quebec. Six of the ten stations in the
TVA network serve Montréal, Québec, Sherbrooke, Trois-Rivières, Rimouski
and Saguenay. |
3. |
TVA is also active in the television
specialty services sector. It is the licensee of Le Canal Nouvelles (LCN),
an all-news service, in addition to holding interests in other
programming and pay-per-view television specialty services, including
Canal Indigo, as well as in Category 1 and 2 French- and
English-language digital specialty services recently or about to be
launched, including LCN Affaires. |
4. |
The majority shareholder of TVA, Quebecor
Media Inc. (QMI), is a major player in Quebec’s newspaper and magazine
sector, with such daily newspapers as Le Journal de Montréal and
Le Journal de Québec, and magazines such as Le Lundi, 7
Jours and Dernière Heure. In addition to its various
activities involving publishing houses and an Internet portal, QMI
controls the largest cable undertaking in Quebec, Vidéotron ltée (Vidéotron),
as well as Distribution Select and Archambault Group Inc. |
5. |
RNC is controlled by the Gourd family. It
operates five French-language conventional television stations
affiliated with the TVA, TQS and Canadian Broadcasting Corporation
networks, and six FM radio stations serving mainly the
Abitibi-Témiscamingue and Outaouais markets. RNC also controls a
production company in the Gatineau-Ottawa region. |
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Background
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6. |
These applications were filed following the
publication of Transfer of control of 3903206 Canada Inc., of
Telemedia Radio Atlantic Inc. and of 50% of Radiomedia inc. to
Astral Radio inc., Broadcasting Decision CRTC
2002-90, 19 April 2002
(Decision 2002-90). In that decision, the Commission approved
applications for authority to transfer effective control of the
broadcasting undertakings held by Telemedia Radio Inc. (Telemedia) in
Quebec, New Brunswick and Nova Scotia to Astral Radio inc., a subsidiary
of Astral Media inc. (Astral Media). |
7. |
Decision 2002-90 was subject to two
conditions precedent, one of which concerned the transfer of ownership
of station CFOM-FM Lévis to a third party not associated with Astral
Media. The latter undertook to divest itself of CFOM-FM to comply with
the Commission’s policy on common ownership of radio stations in the
same market, set out in Commercial Radio Policy 1998, Public
Notice Crtc 1998-41, 30 April 1998 (the Commercial Radio Policy). |
8. |
In addition, the Commission noted in
Decision 2002-90 that, on 21 December 2001, pursuant to section 92 of
the Competition Act, the Commissioner of Competition filed an
application with the Competition Tribunal opposing the proposed
acquisition of Telemedia’s eight French-language radio stations in
Quebec and of Telemedia’s 50% ownership interest in Radiomedia. Astral
Media submitted these applications to divest itself of the Quebec radio
undertakings listed in the appendix to this decision according to the
terms of a consenting agreement in September 2002 between the
Commissioner of Competition, Astral Media and Telemedia, which was
registered with the Competition Tribunal. This agreement terminated the
application by the Commissioner of Competition to the Competition
Tribunal. |
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Interventions
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9. |
The Commission announced the reception of
these applications in Broadcasting Notice of Public Hearing CRTC
2002-13, 27 November 2002 (Notice of Public Hearing
2002-13). The
Commission indicated in the notice that it wished to discuss certain
questions with the applicant, including concentration of ownership and
cross-ownership, the proposed contribution to the attainment of the
objectives of the Broadcasting Act, particularly to local and
regional programming production, and the value of the transaction and of
the proposed tangible benefits. The Commission also invited interested
parties to submit their comments on the applications. |
10. |
The Commission received 64 interventions in
response to Notice of Public Hearing
2002-13. While 54 interventions
supported approval of the applications, 5 were opposed and 5 provided
various comments. |
11. |
Certain interveners expressed concerns
about the cross-ownership situation that would result from the proposed
transaction. In their view, the addition of radio stations under TVA/RNC,
and under QMI at the same time, would have the effect of intensifying
the situation of media cross-ownership in Quebec in the hands of a
single group. They argued that this privileged position could lead to a
reduction in the diversity of editorial voices offered by the various
media and that the safeguards proposed in this regard by TVA/RNC would
be inadequate to ensure the true separation of the newsrooms of the
media concerned. |
12. |
Concerning the plan to revitalize AM radio
in Quebec, some interveners argued that the TVA/RNC proposal would not
result in a true revitalization of French-language AM stations in
Quebec, and that the proposed investments would not be sufficient and
would not be used effectively. Some interveners also questioned the
estimated value of the radio stations involved in the transaction and,
consequently, the amount of the tangible benefits proposed by TVA/RNC. |
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Cross-ownership
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Interveners’ concerns
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13. |
The Fédération professionnelle des
journalistes du Québec (FPJQ), the Fédération nationale des
communications, the Conseil provincial du secteur des communications and
the Syndicat des employés(ées) de TVA opposed the transaction because of
the increase in the levels of concentration and media cross-ownership
that would result. In the view of these interveners, the synergies that
would flow from the proposed transaction would heighten their concerns
about the already existing cross-ownership situation. They argued that
the expected synergies would lead to a certain amount of information
standardization and a decline in news quality caused by a reduction in
the diversity of voices. The interveners also expressed their
dissatisfaction with the commitments by TVA/RNC regarding the
independence of the radio newsrooms relative to the television
newsrooms. In their opinion, moreover, the AM network would be doomed to
become a promotional vehicle for QMI’s other media windows, including
television, records (through Archambault Group Inc.) and newspapers. |
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TVA/RNC’s reply
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14. |
In its reply to the interventions, TVA/RNC
stated that it does not deny that the proposed transaction would involve
some increase in concentration of ownership and in cross-ownership.
However, it pointed out that this increase would be small, given the
size of the transaction, and that it would not significantly alter the
existing overall balance among the many media groups competing in Quebec
and, to an even greater degree, in Canada. |
15. |
Regarding concerns about the diversity of
voices and editorial independence, TVA/RNC stated that the proposed
safeguards were at least equivalent to and generally far better than
those imposed on any other Canadian broadcasting group in a
cross-ownership situation. It proposed that radio be subject to the same
conditions as those contained in the code of professional conduct that
currently governs the television activities of TVA, LCN, LCN Affaires
and QMI’s newspapers following the publication of Transfer of
effective control of TVA to Quebecor Média inc., Decision CRTC
2001-384, 5 July 2001. However, TVA/RNC specified that, with respect to
the application of the code of professional conduct, its proposal was
limited to interactions between radio and QMI’s newspapers, just as the
current code is limited to interactions between television and QMI’s
newspapers, but that it should not be broadened to include interactions
between radio and television. In this regard, TVA/RNC proposed as
another safeguard that each radio station have its own newsroom, a
separate news director and its own journalists to ensure the
independence of the newsrooms and editorial choices. TVA/RNC was also
willing to have monitoring of the application of its commitments
entrusted to an independent monitoring committee that would report to
the Commission annually. |
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The Commission’s analysis
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16. |
The issue of media cross-ownership is
addressed in the Commercial Radio Policy, in which the Commission notes
the concerns raised by cross-ownership regarding the impact on
competition and on the diversity of news voices in a market. In
particular, the Commission notes that ownership or control by one person
of undertakings in a number of media outlets including radio,
television, print and distribution undertakings in a given market might
give that person an undue influence in a market and affect the level of
competition. This situation could also give rise to concerns regarding
the potential for gate-keeping with respect to information, and the
concentration of the advertising market in the hands of a single group.
The Commission stated that it would assess these concerns when examining
applications for licences or for authority to transfer the ownership or
control of broadcasting undertakings. |
17. |
The Commission notes that, because of TVA/RNC’s
association with the QMI corporate group, the TVA/RNC partnership would
benefit following the proposed transaction. The Commission also notes
however that TVA accounts for more than 47% of television viewing hours
among Francophones (conventional television and analog specialty and pay
services) and that, following the transaction, the TVA/RNC partnership
would acquire more than 25% of viewing/listening hours for all private
sector broadcasting in Francophone Quebec (including conventional
television, specialty services and radio). In addition, QMI holds more
than a 38% share of the sales of Quebec daily newspapers, while
Archambault Group Inc. is the leader in record distribution and
Vidéotron is Quebec’s main cable distributor. For all the markets
affected by the transaction, the QMI group would now be a participant in
the radio market as well. Even though its participation would not be
large, the QMI group would be in an unprecedented privileged position in
which it would be the only corporate group, in three specific markets,
namely Montréal, Québec and Saguenay, that would hold an ownership
interest in radio, television, local newspapers, pay and specialty
television services, and magazines, in addition to having a presence
through community-based television (Vidéotron’s Canal VOX). |
18. |
The Commission considers that the concerns
about cross-ownership raised by these applications must be balanced
against the main objective at the heart of the TVA/RNC proposal, which
is the revitalization of AM radio in Quebec, in order to determine
whether the possible benefits of approving these applications outweigh
the concerns they raise. |
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The AM radio revitalization plan
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19. |
TVA/RNC stated that its AM radio
revitalization strategy would hinge on four main aspects: |
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- the effective creation of a network;
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- a local and regional presence;
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- the repositioning and enhancement of content; and
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- the establishment of a strong identity.
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20. |
The applicant stated that its ultimate goal
is to develop a true French-language, talk-format radio network that is
dynamic, people-oriented and indispensable, and that can regain its
popularity, bring back advertisers, compete more effectively with other
media and renew itself with the profitability that is essential for its
survival. |
21. |
With regard to CFOM-FM, the applicant
stated that its development plan is intended to consolidate its position
in the Québec market and to enhance its programming while maintaining
its current format. The applicant added that the expected synergies
between CFOM-FM and CHRC in Québec are a very important component of the
transaction, since CHRC is by far the most unprofitable of the group of
AM stations involved in the transaction. In this context, it stated that
the acquisition of CFOM-FM was inseparable from the rest of the
transaction. |
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Interveners’ concerns
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22. |
In the view of FPJQ, the strength of AM
radio is its news service, and yet, in its opinion, news is the most
seriously neglected and most underfunded sector. FPJQ argued that the
minimum commitments related to the revitalization plan proposed by TVA/RNC
should consist of providing all the radio newsrooms with larger budgets
than they have now. FPJQ added, at the hearing, [TRANSLATION] "The
status quo is what you are being offered, and in our view that is
insufficient." |
23. |
The Syndicat des employé(e)s CKRS-CJAB
stated the following: [TRANSLATION] "We believe, like the applicant,
that radio with content, wherever it no longer exists, should again
become an indispensable service. Aside from such pious wishes, however,
the applicant is strangely silent about how it intends to achieve this
objective." The Conseil provincial du secteur des communications,
referring to the restructuring of AM radio in Quebec in 1994 and 1995,
stated: [TRANSLATION] "The promises were not fulfilled after 1994 and
substantially the same players are again promising us the revitalization
of radio." A number of interveners, including the Fédération nationale
des communications, also questioned whether TVA/RNC’s business plan was
realistic. |
24. |
TVA/RNC did not offer any specific comments
in reply to these interventions, other than to maintain its programming
commitments. |
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The Commission’s analysis
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25. |
In order to assess the scope and soundness
of the AM radio revitalization plan in Quebec, the Commission examined
the proposal by TVA/RNC from two main perspectives: |
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- the proposed programming, to consider whether there would, in
fact, be an increase in service, an improvement in quality and a
diversity of editorial voices; and
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- the business plan, to consider whether the financial projections
are realistic and support a revitalization of AM radio.
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Proposed programming |
26. |
With regard to the number of hours per week
of local programming, TVA/RNC committed at first to maintain the current
minimum levels, or an average of 36 hours 25 minutes. It added that its
objective was to harmonize the hours of local programming and to reach a
level of 41 hours of local programming per week by the end of the
current licence terms for the Trois-Rivières, Sherbrooke, Gatineau and
Saguenay stations. However, the applicant stated that it did not wish to
have this local programming objective imposed as a condition of licence. |
27. |
With regard to news services, TVA/RNC has
committed to maintain the total weekly production levels, or an average
of 13 hours 41 minutes, and, at a minimum, 2 hours 32 minutes of local
news per week at each station. It also stated that the collection,
processing and dissemination of news would be done by the existing staff
and resources. |
28. |
In addition, further to a review of
historical data relating to programming expenditures for the stations
involved in this transaction, the Commission notes that TVA/RNC’s
business plan proposes essentially to maintain programming expenditures
at the current level, taking into account an annual growth rate of 2%
for inflation. There is no evidence that new funds would be invested.
The applicant’s financial projections seem to indicate that TVA/RNC
would reinvest into programming any savings from the synergies achieved
in the programming sector, while those from the synergies attained in
the other sectors would be primarily allocated to improving
profitability. However, since TVA/RNC did not submit a breakdown of
forecast programming expenditures for each station, the Commission was
not able to assess the allocation of expenditures, particularly for CHRC,
in which the applicant stated it would have to invest more, but without
specifying any amount. |
29. |
The Commission also notes that TVA/RNC’s
plans provide no indication that AM radio would be distinct and would
not eventually become an additional promotional vehicle for QMI’s other
assets. The applicant stated that it was counting to a great extent on
the synergies with its other media to ensure the success of its
proposal, and this could result in a degree of standardization of
programming, particularly in public affairs and general interest
programming. TVA/RNC stated that certain television programming formats
could even be adapted for radio broadcasting. This is a situation of
particular concern in Québec, but the applicant did not submit a
detailed revitalization plan for CHRC. Instead TVA/RNC is relying on
projected synergies between CHRC and CFOM-FM to re-establish the AM
station, increasing the risk of integration of the services provided by
these two stations. |
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Business plan |
30. |
On the whole, the AM radio stations
involved in this transaction were unprofitable in the 1997-2002 period,
except for CKAC, whose financial position is relatively sound. CHRC
suffered substantial losses during this period. |
31. |
For the 2003-2007 period, TVA/RNC is
forecasting revenue growth of $3.4 million for the AM stations, at
annual growth rates between 2.3% and 6.2%. The growth would come mainly
from local sales and the remainder from an increase in national sales.
To achieve its forecast levels, the applicant is counting on
cross-promotion with the other media under QMI’s control. |
32. |
The Commission considers that the AM
stations could benefit from cross-promotion to generate additional
national advertising sales. The Commission is not convinced that the
growth in advertising revenues will be sufficient to support the
projections submitted by TVA/RNC, given the current trends related to
the growth in advertising revenues for stations in Quebec and across
Canada. The Commission notes in this regard that radio has become a medium
that is oriented primarily to the local community, and that 80% of its
revenues come from local sales, with this percentage reaching 90% for
stations operating outside the major centres. This trend was confirmed
at the public hearing by the representative of Carat Canada, who stated
that this phenomenon is borne out not only in the regions, but also in
Montréal. He added that the more television becomes fragmented with
specialty channels, the more radio will become a local medium. |
33. |
The Commission also notes that the AM radio
revitalization plan will require considerable investment and that such
investment is not reflected in the business plan submitted by TVA/RNC.
This is especially true for the Québec market, which, according to the
applicant, is the real challenge and one of the keys to the success of
its revitalization plan. While CHRC’s revenues fell by nearly 80%
between 1997 and 2002, the applicant did not provide any details
concerning its plans to revitalize that station, wishing to retain
[TRANSLATION] "maximum flexibility" for itself. |
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Conclusion
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34. |
As stated in Elements assessed by the
Commission in considering applications for the transfer of ownership or
control of broadcasting undertakings, Public Notice CRTC
1989-109,
28 September 1989, since the Commission does not solicit such
applications and because there is, thus, only one proposal presented to
the Commission, the onus is on the applicant to demonstrate to the
Commission that the application filed is the best possible proposal
under the circumstances, taking into account the Commission’s general
concerns with respect to transactions of this nature. |
35. |
Moreover, when a transaction such as this
one raises particular concerns about concentration of ownership and
cross-ownership, the onus is on the applicant to demonstrate to the
Commission that the benefits of its proposal outweigh the concerns that
it raises and that its approval would be in the public interest and
would benefit the broadcasting system as a whole. |
36. |
Following its examination of TVA/RNC’s
programming proposals and of the various elements of its business plan,
the Commission finds that the revitalization plan proposed by the
applicant is not sufficiently detailed, concrete or tangible to
demonstrate that it would bring about a true revitalization of AM radio
in Quebec. The Commission notes that the revitalization plan is very
conservative in terms of expenditures and very optimistic when it comes
to forecast revenues. Furthermore, it contains no details on the
individual stations involved, particularly for the revitalization of
CHRC, which is the weak link in the group of AM stations involved in
this transaction. |
37. |
With regard to CFOM-FM, the Commission
notes that this station offers a musical programming format that is
essentially different from the talk format of the AM stations. The
Commission considers that the acquisition of CFOM-FM, which is not in a
precarious financial situation, is not necessary for the revitalization
plan for the AM stations involved in the proposed transaction.
Furthermore, the Commission is not convinced that the acquisition of
CFOM-FM is inseparable from that of CHRC, since the synergies to be
derived from the common ownership of these two stations, as proposed by
TVA/RNC, could very well be achieved through ownership of CFCM-TV, TVA’s
local station. Moreover, the Commission notes that ownership in the same
market of CFOM-FM and CHRC, combined with television station CFCM-TV,
the daily Le Journal de Québec and the weekly Le Peuple
Tribune, would result in a very high level of ownership
concentration in Québec. |
38. |
In light of all of the foregoing, the
Commission denies the applications by Astral Media, on behalf of
TVA/RNC, for authority to acquire the assets of the broadcasting
undertakings listed in the appendix to this decision. The applicant has
not satisfied the Commission that the applications, as filed, are the
best possible proposal in the circumstances. The Commission is not
convinced that the recovery strategy for AM radio in Quebec proposed by
the applicant and its eventual benefits would significantly outweigh the
concerns about concentration of ownership and media cross-ownership. |
39. |
As a result of this decision, the assets of
the AM stations and of CFOM-FM will continue to be held by a trustee.
The Commission expects that Astral Media will take all necessary
measures to find a permanent solution as quickly as possible regarding
the ownership of these radio stations. With respect to CFOM-FM
specifically, Astral Media must immediately forward a notice of sale to
the trustee so that the trustee may submit to the Commission, within 90
days of the date of this decision, a new application for the transfer of
the assets of CFOM-FM to a third party not associated with Astral Media. |
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Other matters
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40. |
As indicated in Notice of Public Hearing
2002-13, the Commission also discussed, at the public hearing,
additional measures that should be set in place to reduce concerns about
ownership, the value of the transaction put forward by the applicant,
and the acceptability of the value and nature of the proposed tangible
benefits. In its intervention, the Association québécoise de l’industrie
du disque, du spectacle et de la vidéo (ADISQ) raised concerns about
these issues, regarding in particular unlimited access to the airwaves
for all artists, the fair market value of the assets sold and the base
for determining the tangible benefits proposed by TVA/RNC. As the
applications have been denied, the Commission does not consider it
necessary to address these issues further. |
41. |
The Commission has noted the opposing
intervention submitted by the Société pour la promotion de la relève
musicale de l’espace francophone (SOPREF). SOPREF’s opposition was based
essentially on procedural issues. The Commission notes that the
examination of these applications has been carried out in accordance
with the CRTC Rules of Procedure (C.R.C., c. 375) currently in
effect. |
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Secretary General |
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This decision is available
in alternative format upon request, and may also be examined at the
following Internet site:
http://www.crtc.gc.ca |
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Appendix to Broadcasting Decision CRTC 2003-205
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List of Quebec radio undertakings involved in this
transaction
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Stations owned by Astral Media inc.
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- 5 Digital radio station CJRC Gatineau
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Stations owned by Telemedia Radio Inc. and for which control was
transferred to Astral Media inc. under Decision CRTC
2002-90
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- 6 Digital radio station CKAC Montréal
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- 7 Radiomedia news network
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- 8 Réseau de hockey des Canadiens de Montréal
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- 9 Réseau de baseball des Expos de Montréal
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* Stations involved in the Consent
Agreement between Astral Media inc., Telemedia Radio Inc. and the
Commissioner of Competition. |
Date Modified: 2003-07-02 |