Although its merger with Electrohome is slated for crtc processes April 14, the first piece of Baton Broadcasting’s copious expansion effort could be temporarily sidetracked courtesy of a hardball protest from CanWest Global Communications.

In an intervention filed with the crtc, CanWest is claiming issues inherent in the merger are inseparable from those surrounding Baton’s broadcast property swap with chum (which will give bbs control of the CTV Network), and is requesting that the Baton/ Electrohome proposal be deferred to a single hearing which addresses the broader policy implications of both transactions.

According to Glenn O’Farrell, vp legal and regulatory affairs for CanWest, the implications of the two applications are ‘enormous,’ including, but not limited to, the creation of two de facto regional networks in Ontario (Baton and chum) as well as a ‘high’ degree of ownership concentration in the cash-rich markets of Toronto, Ottawa and the Maritimes. CanWest is the only mandated regional Ontario service.

But perhaps more interesting is the bulk of the intervention, a 22-page legal opinion from Martineau Walker which contends the crtc may be in breach of the Broadcasting Act and has created an ‘illegal situation’ by allowing one owner two stations in a single market on at least three occasions, despite general policy against concentration of ownership. Principal on the document is former Liberal minister of communications, Francis Fox.

The filing is, in part, CanWest positioning for a hearing on national network criteria, which could play in context of the hearing on Baton’s ctv control maneuver later this year. Baton’s application to the crtc outlining the deal with chum and clarifying the impact of Baton’s assuming control of the mother network was filed with the crtc April 1.

Short-term impact

More up to date, the short-term impact of the Aspernet’s filing could be the dragging of Baton folk onto the hearing dance floor this month. Facing the $45 million startup of Vancouver-based citv and The Comedy Network, Baton had hopes that no more than a paper process would be required to seal the merger, passing crtc processes without requiring a huge commitment of resources.

At press time, the commission had yet to announce whether Baton and Electrohome would be required to appear at the hearing, although sources say the CanWest filing virtually forces the merger into a public process.

If CanWest’s request for delay is granted, Baton sources say a delay in the merger’s completion would be ‘no big whoop,’ and that the strategic alliance that already exists between Baton and Electrohome would simply continue through to a summer hearing. Priority for the April 14 processes are applications for a coveted fm radio frequency.

Of most immediate concern is Baton assuming ownership of two key Ontario-based stations, should the commission bless the merger with Electrohome. ‘It would effectively result in providing Baton with two broadcast undertakings (cfto-tv Toronto and ckco-tv Kitchener) of the same class, operating in the same language, and being widely distributed in the same market,’ says O’Farrell in the intervention.

But whether CanWest gets its day in the sun on ownership concentration next week or later in the summer, the issue isn’t going away. Particularly in light of the filing from Martineau Walker, which essentially says there are legal grounds to pursue the crtc and its actions governing ownership of dual stations in a single market.

The commission’s public policy guidelines discourage ownership concentration. The argument – that two stations in a market skews the competitive balance – was trotted out in both the Vancouver and Quebec decisions where CanWest and Videotron respectively were denied licences in part because they already owned properties in the provinces in question.

But the commission has maintained the power to adapt the general guidelines on a case-by-case basis, saying that concentration of ownership is not in and of itself necessarily of concern, provided there is an effective degree of diversity of ownership and of programming sources available meeting the objectives of the Broadcasting Act.

Ownership

So, after last year’s Ottawa decision, Baton owns both chro-tv and cjoh-tv in Ottawa. Earlier, chum was allowed both Citytv Toronto and ckvr-tv Barrie. In b.c., wic owns chan-tv Vancouver and chek-tv Victoria, and could be a 28% shareholder in Vancouver Television, if and when Baton controls ctv.

In his dissertation, Fox points out that the crtc has no clear policy that dictates ownership concentration. Factors playing into decisions to override its general policy include the viability of a broadcasting undertaking, level of local service, undue competitive advantage, program diversity, and ‘opinion, information and expression.’

The circumstances relating to this policy and its exceptions ‘create an illegal situation because of a breach by the crtc of its duties’ under Section 6 of the Broadcasting Act, which says policy statements must be issued through public notice or other forms of publication and not through its decisions processes on a case-by-case basis.

He concludes that the commission has failed to ‘make a proper advance disclosure of applicable guidelines,’ and that decisions on ownership concentration by the crtc ‘may appear to be founded on mere pretexts, arbitrary or irrelevant considerations.’

Also this month, Baton’s second quarter financials are reflecting the downsizing in process.

For the three months ending Feb, 28, 1997, Baton recorded a net loss of $4.million, compared to a net loss of $1.6 million in the comparable quarter last year. The numbers reflect a one-time severance cost of $6.4 million.

Airtime revenue for the three months came in at $56.6 million, up 24% over the mirror period.

Net income for the six months are $635,000, down from $5.2 million last year. Cash flow from operations was $0.41 per share, compared to last year’s $0.69.