APPENDIX 1 SUPPLEMENTARY BRIEF CHQR (AM) LICENCE AMENDMENT INTRODUCTION This is an application by CKIK-FM Limited, a wholly owned subsidiary of Corus Entertainment Inc., to amend the licence of CHQR (AM) Calgary, by adding an FM transmitter in Calgary at 106.9 MHz (channel 295A) with an effective radiated power (ERP) of 1,000 Watts. The purpose of the FM transmitter is to rebroadcast the programming of CHQR in order to correct coverage deficiencies in downtown Calgary associated with CHQR’s AM signal. Extensive surveying has shown that significant numbers of residents, workers and commuters in the downtown core have difficulty receiving a clear and uninterrupted AM signal from CHQR. This is due to the continuous growth in the number of both commercial and residential high rise towers and the increasing presence of man-made interference in downtown Calgary. The proposed FM transmitter will operate as a full-time rebroadcaster of the AM signal within CHQR’s existing licenced area. This will allow CHQR to provide a reliable high-quality signal on the FM band to listeners in downtown Calgary who are no longer able to obtain satisfactory reception of the AM signal, whether in their homes, cars, on public transit or at their place of employment. This will enable CHQR to properly fulfill its mandate to deliver a vital and comprehensive (and sometimes essential) news and information service to all areas of the Calgary market for which it is licensed. The proposed coverage contours of the FM rebroadcast transmitter are completely enclosed within the existing equivalent AM coverage contours of CHQR. Appendix B provides comparative maps showing the proposed 3mV/m and 0.5 mV/m contours of the FM rebroadcast transmitter in relation to the existing 15 mV/m and 5 mV/m contours of CHQR (AM), for both its day-time and night-time operation. Accordingly, as a “nested” rebroadcaster, the new FM transmitter will not extend in any way the geographic reach of CHQR’s AM signal and the area it is currently licensed to serve. The presence of an FM signal delivering CHQR’s programming will simply allow us to properly serve a segment of the audience that CHQR has in fact been licensed to serve for the past 47 years, but which for technical reasons it can no longer consistently reach on the AM band. In this Supplementary Brief supporting the proposed amendment to CHQR’s licence, we address the following matters: • an overview of the Calgary radio market; • CHQR’s importance to Calgary and service to the community; • CHQR’s signal quality issues in Calgary; 2 • technical alternatives to correct reception issues; • the use of 106.9 MHz (channel 295A) for the proposed FM rebroadcast transmitter; and • compliance with the common ownership policy OVERVIEW OF THE CALGARY RADIO MARKET When it launched 47 years ago in 1964, CHQR became the 6 th station in the Calgary market. By 2001 the number of radio stations had grown somewhat, but there were still only 10 commercial English-language stations in the market, as well as an ethnic service and the stations operated by the CBC. Since 2001, however, the Calgary radio market has expanded rapidly. Today, there are 26 radio stations licensed to serve the Calgary market, of which 18 are commercial English-language stations (5 AM and 13 FM). These numbers do not include three stations licensed to Golden West Broadcasting in High River/Okotoks to the south of Calgary which serve the southern part of the Calgary CMA. Add to this mix of conventional radio stations new content delivery platforms such as satellite radio, a virtually unlimited range of internet-delivered audio services, and a host of personal electronic devices that enable listeners to access audio content anywhere from multiple sources, and it becomes obvious that CHQR must continuously adapt to new competitive realities to maintain the loyalty of Calgary radio listeners. In the introductory statement to its 2006 decisions approving applications for four new FM stations to serve Calgary and one new FM station to serve Airdrie 1, the Commission reached the following conclusion respecting the ability of the Calgary market to support new radio services at that time: The Calgary commercial radio stations enjoyed a combined profit before interest and tax (PBIT) of just under $24.5 million in 2005. This represented an increase of just over $5 million, or 26%, compared with the results for 2004. In 2005, the average PBIT margin of all Calgary radio stations was 31.8%, well in excess of the average PBIT margin of all English-language Canadian radio stations, which was 22.9%. ... On the basis of the strength of the Calgary market and the current profitability of Calgary commercial radio stations, the Commission is of the view that the Calgary radio market can support the introduction of four new commercial radio stations to serve Calgary as well as a new radio station to provide local service to Airdrie without an undue negative impact on existing stations. Now, five years later and after the stations licensed in 2006 have had a chance to become established, the economic performance of the Calgary radio market is considerably less robust than it was at that time. 1 Broadcasting Public Notice CRTC 2006-97, Licensing of new radio stations to serve Calgary and Airdrie, Alberta – Introduction to Broadcasting Decisions CRTC 2006-321 to 2006-326 . 3 According to the financial information released by the Commission with the recent call for applications for radio stations to serve Calgary 2, the combined PBIT of the Calgary radio market increased slightly to $27.2 million in 2006, held relatively steady in 2007 ($26.5 million) and 2008 ($25.1 million), and then declined sharply in the following two years as a result of the global economic recession of 2008. In 2010, the PBIT of the Calgary radio market was only $17.5 million, almost 30% lower than the 2005 PBIT level cited by the Commission in 2006 when it decided to licence five new stations in the market. Meanwhile, more stations were dividing this total. The decline in profitability is attributable to the weak revenue performance of the market since 2008. From a high of $102.2 million in 2008, radio revenues in the Calgary market have declined to $87.9 million in 2010, a drop of some 14%. The July 2011 Trans-Canada Radio Advertising by Market (TRAM) Report shows only modest improvement in Calgary radio revenues this year, with an increase of 3.7% in total revenues on a year-to-date basis but only a 1.7% increase in local revenues on a year-to-date-basis. Clearly the Calgary market continues to struggle and its performance in 2011 remains far below the levels achieved in 2006 to 2008. Given the depressed economic performance of the Calgary radio market over the past three years, Corus believes that the market cannot support the licensing of new radio services at this time. Nevertheless, given that three months ago the Commission issued a call for applications for new commercial radio services in Calgary, the fact is that the door has been opened to further upheaval in the market, potentially adding to the already daunting competitive challenges outlined above. In this context, Corus must act now to address the serious technical reception issues that have increasingly plagued CHQR over the past several years. Our reception problems in downtown Calgary, in high-rises, and along the LRT tracks have resulted in the loss of listeners and hampered our ability to fulfil our programming mandate to the best of our ability. These technical issues and the solution we have proposed are described in more detail later in this Supplementary Brief. With the potential of further changes to the Calgary market, CHQR cannot afford to be left behind with an AM frequency that, while providing extensive rural coverage both day and night outside of Calgary, is incapable of properly serving a significant segment of its listening audience in Calgary’s core areas. We must apply now for a technical amendment to CHQR’s licence to address these reception issues, so that we can compete on a relatively equal footing going forward with existing players in the market and with any new players that might be licensed as a result of the current proceeding. Unlike potential new entrants, approval of our proposed rebroadcast transmitter will have negligible impact on the Calgary radio market. We do not project any revenue increases over the next three years as a result of this amendment; we simply wish to provide a reliable high- 2 Broadcasting Notice of Consultation CRTC 2011-398, Call for applications – Radio stations to serve Calgary, Alberta . 4 quality signal in Calgary to fulfill the coverage mandate of our existing licence. It will provide our listeners with improved access to CHQR’s signal in their cars when they commute downtown, in their high-rise condominiums and apartment buildings and at their offices in downtown commercial towers. At the same time, we do acknowledge that over the longer term, the availability of CHQR’s signal on AM may enable us to attract new listeners, particularly in the younger demographic, who tend to listen only to FM. A news/talk format can work in FM, and we will address this point in more detail below. Approval of this rebroadcast transmitter will better position CHQR to reach these FM-only listeners in the longer term. CHQR’S IMPORTANCE TO CALGARY AND SERVICE TO THE COMMUNITY Since CHQR (“QR77”) first went on the air in 1964 it has been one of Calgary’s leading stations.