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Finance Minister Jim Flaherty has earned himself a slap on the wrist from the federal Ethics Commissioner for violating the Conflict of Interest Act. His infraction? Writing a letter to Canada's broadcast regulator in support of a constituent who was vying for a highly coveted radio station licence in Toronto last year (and ultimately lost) on his MP letterhead but accidentally using his ministerial signature block. The revelation follows reports last summer that at least two other applicants made donations to the Conservative Party of Canada (see all related links at bottom).

While Mr. Flaherty's letter is mildly troubling, what is more problematic is a system for licensing new radio stations in Canada that leaves room for political interference or persuasion in the first place.

The process for granting radio licences in Canada is a crap shoot: the criteria are vague and Canadian Radio-television and Telecommunications Commission's method for picking winners lacks transparency, coherence and consistency . Interventions on behalf of applicants such as the one by Mr. Flaherty are not unusual, but merely part of the process.

The CRTC takes a paternalistic approach, shaping the radio landscape with the visible hand of government rather than by letting market forces prevail. Applicants for new stations are supposedly judged on the "quality of the application", "diversity of news voices" and the "level of market impact." The first two criteria are vague and subjective, the latter means new applicants must convince regulators they are meeting unfulfilled demand – without hurting incumbent stations. Heaven forbid the CRTC allow a little competition.

Of course there are the notorious Canadian content rules as well as the unspecified amounts of money applicants are expected to put up to support Canadian artists. The CRTC doesn't say how much is enough – unsuccessful applicants in the Toronto bidding process pledged to spend $12-million on Canadian talent, while the winner, Rock 95 Broadcasting Ltd., got away with committing just $2-million Compare that with the process in the United States. When a frequency opens up, the Federal Communications Commission holds an auction, and the highest bidder wins. There are credits offered to help disadvantaged bidders who want to start up ethnic radio stations, and basic background checks on the bidders, but that's about it: no complicated criteria, no content requirements, no ownership limits (like there are in Canada) and let the market take care of the rest.

That's not to say U.S. radio is better – consolidation and aggressive cost cutting by the largest radio groups have taken the "local" out of radio, leaving some stations sounding like little more than automated jukeboxes with pumped-in Ryan Seacrest. It's arguable that auctions and consolidation crowd out upstarts and innovators who can't write the biggest cheques to get on the public airwaves.

But there has to be a better way to rule the Canadian radio marketplace than the current top-down, politically vulnerable approach that ultimately yields too many stations playing the same narrow handful of formats and the same limited supply of Canadian music, and station owners who quickly change formats or flip their stations for big profits after being granted licences by the CRTC.

Here's a simple way to make the system simpler and more transparent: the CRTC could set out basic criteria for anyone applying for a new station, then hold a lottery for anyone who meets the test. The process and outcome couldn't be any worse than is already the case.