ARCHIVED -  Transcript - Hull, QC - 2000/08/21

TRANSCRIPT OF PROCEEDINGS

FOR THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

TRANSCRIPTION DES AUDIENCES DU

CONSEIL DE LA RADIODIFFUSION

ET DES TÉLÉCOMMUNICATIONS CANADIENNES

SUBJECT / SUJET:

APPLICATIONS FOR LICENCES TO OPERATE NEW PAY AND SPECIALTY

SERVICES FOR DIGITAL DISTRIBUTION / DEMANDES DE LICENCES

VISANT LA DISTRIBUTION NUMÉRIQUE DE NOUVEAUX SERVICES DE

TÉLÉVISION SPÉCIALISÉE ET PAYANTE

HELD AT: TENUE À:

Conference Centre Centre de Conférences

Outaouais Room Salle Outaouais

Hull, Quebec Hull (Québec)

August 21, 2000 le 21 août 2000

Volume 6

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

bilingual as to their covers, the listing of the CRTC members

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

verbatim transcript and, as such, is taped and transcribed in

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

bilingues en ce qui a trait à la page couverture, la liste des

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

textuel des délibérations et, en tant que tel, est enregistrée

et transcrite dans l'une ou l'autre des deux langues

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

Canadian Radio-television and

Telecommunications Commission

Conseil de la radiodiffusion et des

télécommunications canadiennes

Transcript / Transcription

Applications for Licences to operate New Pay and Specialty

Services for Digital Distribution / Demandes de licences

visant la distribution numérique de nouveaux services de

télévision spécialisée et payante

BEFORE / DEVANT:

Françoise Bertrand Chairperson of the

Commission / Présidente

du Conseil

Andrée Wylie Chairperson / Présidente

Jean-Marc Demers Commissioner / Conseiller

Ronald Williams Commissioner / Conseiller

Martha Wilson Commissioner / Conseillère

ALSO PRESENT / AUSSI PRÉSENTS:

Secretary / Gérant de

l'audience et secrétaire

Alastair Stewart Legal Counsel /

conseiller juridique

Peter McCallum Legal Counsel /

conseiller juridique

HELD AT: TENUE À:

Conference Centre Centre de Conférences

Outaouais Room Salle Outaouais

Hull, Quebec Hull (Québec)

August 21, 2000 le 21 août 2000

Volume 6

TABLE OF CONTENTS / TABLE DES MATIÈRES

PAGE

PHASE I

PRÉSENTATION PAR / PRESENTATION PAR

STORNOWAY COMMUNICATIONS LIMITED PARTNERSHIP 1789

PRÉSENTATION PAR / PRESENTATION PAR

THE PELMOREX LEISURE NETWORK INC. /

Le RÉSEAU LOISIRS PELMOREX INC. 1934

PRÉSENTATION PAR / PRESENTATION PAR

NEW DAY MINISTRIES INC. 1995

Hull (Québec) / Hull, Quebec

--- L'audience reprend le lundi 21 août à 0830 /

Upon resuming on Monday, August 21, 2000 at 0830

15213 THE CHAIRPERSON: Good morning.

15214 Bonjour et nous vous souhaitons la bienvenue à la deuxième semaine de notre audience.

15215 Monsieur le Secrétaire. Mr. Secretary, please.

15216 MR. CUSSONS: Thank you, Madam Chair.

15217 Before announcing our first applicant today, I would just like to mention the withdrawal of the Category 1 application by Home Interactive Television, which would have been heard later in our hearing.

15218 At the same time, Home Interactive Television still wishes to proceed with the two Category 2 applications gazetted for this hearing.

15219 I would now like to introduce Stornoway Communications Limited Partnership.

15220 Stornoway is proposing four new Category 1 services, therefore they are entitled to a maximum presentation time of 35 minutes, and these four services would be @work.ca, Issues Channel, The Dance Channel and The Pet Network.

15221 We have Ms Martha Fusca and her team.

15222 Ms Fusca.

PRESENTATION / PRÉSENTATION

15223 MS M. FUSCA: Thank you.

15224 Good morning, Madam Chair and Commissioners. Before we begin our presentation today, I would like to present to you our team.

15225 My name is Martha Fusca and I am President and Chief Executive Officer of Stornoway Communications. In 1983 my husband, Kitson Vincent and I co-founded Stornoway productions, the lead partner of Stornoway Communications. As President for the past seven years, I have managed a successful operation producing and distributing documentaries, series and drama.

15226 To my left is Bill Gray, Executive Vice-President of Stornoway Communications and General manager of our four channels. Mr. Gray is former General Manager of Prime TV and a lawyer.

15227 To his left is Nancy Smith, CEO of Next Media, Stornoway's advertising agency and new media consultant.

15228 To my right is Don Richardson, our Vice-President, Business Affairs, Original Independent Production.

15229 To his right is Julia Walden, President of Borden Street, our partner in new media business and production strategies.

15230 In the second row, starting from your right, is Stu Turner, our Senior Vice-President, Operations and Advanced Technical Planning. Mr. Turner was formerly Director of Operations at YTV and conducted both the launches of YTV and Treehouse.

15231 Next to Mr. Turner is Inta Erwin, our Vice-President of Program Acquisitions and Distribution.

15232 Next to Ms Erwin is Michel Carter, Vice-President and General Manager of Cogeco Radio-Television.

15233 On Mr. Carter's right is Dr. Gerry Wall, President of Wall Communications Inc. Dr. Wall co-ordinated our market research with Decima and assisted in the preparation of our business plans.

15234 Next to Dr. Wall is John Hylton, Q.C., of Borden, Ladner, Gervais, our legal counsel.

15235 On the side panel, starting on the far left is Terry-Anne Boyles, Vice-President of the Association of Canadian Community Colleges; Dennis Murphy, writer/director, formerly with the National Film Board and TVOntario; choreographer Clarence Ford and Sean Debidin; Victoria Fusca, Vice-President, Program Development, Stornoway Communications; Sheldon Ehrenworth, founding President of the Collegium for Work and Learning and the founder of the Public Policy Forum; Paul Kemp, Producer for Stornoway Productions; Louis McCann of the Pet Industries Joint Advisory Council, and Oleh Iwanyshyn, Director of Research for ViewStats Research Inc.

15236 We are also very pleased today to have our advisory board, a highly regarded and experienced team who will work with our board of directors on broad policy issues: Senator Céline Hervieux-Payette, Senator Erminie Cohen, Gordon Ashworth and Diane Lam.

15237 As well as our consultative committee members on our side panel, many of whom are here today, Senator Catherine Callbeck; Bob Van Tangerloo, Executive Director of the Canadian Federation of Humane Societies; our legendary Celia Franca, founder of the National Ballet of Canada; Jim Byrd, former CBC Vice-President of English Television; Dr. Sarah Bassett, London-based veterinarian; and Don Devoretz, Professor of Economics at Simon Fraser University.

15238 We are also joined by Kitson Vincent and Mark Curry, the principals of Stornoway's Investors group, and Louis Audet, Chair, President and CEO of Cogeco Radio-Television.

15239 Madam Chair, we would now like to begin our presentation.

15240 THE CHAIRPERSON: Ms Fusca, we hope that you will slow down your delivery because we have simultaneous translation.

15241 I'm putting Mr. Gray in charge of reminding you so I don't have to do it.

15242 MS M. FUSCA: I'm sorry.

15243 We are here today to present our applications for four digital licences: Issues Channel, The Dance Channel, The Pet Network and @work.ca.

15244 This hearing offers a significant opportunity for the Commission to maintain, and indeed promote, a healthy balance of programming by adding new voices to counter the ever more concentrated broadcast universe. Stornoway Communications is one of these new voices.

15245 This dynamic partnership between Stornoway Productions and Cogeco Radio-Television is based on a shared vision of creative business acumen and innovation.

15246 This highly creative team of English and French Canadian businesses will provide exciting new broadcast services and a commitment to interactive broadcasting that will ensure that the terms of the Broadcasting Act become a living, breathing reality and meet the needs and desires of Canadian audiences.

15247 The creative and business success of the partners in this new company run strong and deep. We have a highly experienced team fully capable of launching and operating new services. We have created four distinctive television channels, innovative and new.

15248 We have created them with passion and enthusiasm, achieving the objectives of this call, with a conservative eye on our business plans and backed by solid financial commitments.

15249 Our services will provide diversity in the Canadian broadcasting system with innovative programming schedules, a leading edge interactive strategy and new viewing choices Canadians do not now have. Hundreds of letters of support, representing millions of Canadians, attest to the major contribution we can make to the economic, social, cultural and political life of our country. We will use the new technologies to develop, produce and distribute high levels of original Canadian content.

15250 As evidence of the desirability of our services, we are very pleased to announce that prior to these hearings Stornoway Communications signed a master agreement for carriage of all of our four channels with the Canadian Cable Systems Alliance. This agreement was made at the same subscriber rates presented in our applications.

15251 We would now like to share some further thoughts with you with a video presentation.

--- Video presentation / Présentation vidéo

15252 MS M. FUSCA: Madam Chair and Commissioners, we would now like to address the specifics of each of our applications.

15253 MR. GRAY: Issues Channel. With the explosion of television options that have come before viewers in the past few years, we have seen an ever-increasing number of sources of information. But where on the dial can we find a comprehensive service completely devoted to the ongoing discussion of public and social affairs not in the news?

15254 Where can we find in-depth analysis and opinion in respect of concerns not in the headlines, even though they affect the day-to-day lives of Canadians? Where can we go for context? Where can we turn to discuss, vent and explore our values, concerns and attitudes along with the rest of the country?

15255 Issues Channel is the answer. Designed to engage. It's about our country, our idea. Whether it's agricultural matters, medical ethics, technological safety, consumer problems, child-rearing, drug use, legal and otherwise, all, and much more, are topics deserving of continuing attention.

15256 Dynamic new initiatives for Issues Channel include New Voices which will be exclusively produced by 17 to 24 year olds. For the first time young Canadians will be part of the national dialogue. Ombudsman will provide a national forum for those who seek help.

15257 Two Solitudes: An Uncommon Dialogue will introduce a much needed venue for ongoing discourse between our founding French and English peoples. First Nations, created for and by aboriginal broadcasters in partnership with Issues Channel.

15258 Connections will be a quarterly long forum investigative report focusing on matters that affect the nation from the underground economy to air safety, hospital care or organized crime.

15259 Issues Channel is committed to fulfilling a fundamental need not now being served by providing Canadians with comprehensive context on events in our own country and abroad.

15260 If news and conventional broadcast of current affairs programming can be seen as the tip of a floating iceberg, Issues Channel will take you below the water line where the vast bulk and irregular shape of matters reside.

15261 We will present a wide range of views -- divergent, thoughtful and thought-provoking. Issues Channel will take the time to find out what people care about. We will explore and follow topics throughout the life of their impact and importance to Canadians rather than simply reacting to the temporary prominence of a news item or the broadcast of a one off documentary.

15262 Issues Channel will be the place to go for those who want more, who want to understand the complexities, who want to focus on discussion as they formulate their own opinions.

15263 The new technologies are a perfect match for a quality service dedicated to connecting and engaging people from every region of Canada. Interactivity will be a valuable tool to enable us to seek out and receive input directly from Canadians. This interactive engagement with our audience will help shape the content of our service. Canadians want this kind of channel on their television. Our independent research confirms an interest level of almost 60 per cent.

15264 In the process of providing Canadian viewers with a vast and creatively diverse forum ranging from domestic concerns to international affairs, Issues Channel has much to offer the Canadian broadcast system. Beginning in year one, Canadian content will occupy a minimum of 55 per cent of our broadcast day, rising to at least 65 per cent by year seven.

15265 This means more than $42 million spent over the term of the licence on Canadian programming of which almost $12.5 million will go to independent Canadian producers. This represents 76 per cent of all programming expenditures.

15266 Documentaries, talk shows, forums, magazine programs, debates, occasional movies. Comprehensive and affordable at a wholesale rate of 35 cents per subscriber.

15267 Issues Channel will be an exciting and indispensable broker of ideas, of points of view, of knowledge, of values, of people.

15268 MS M. FUSCA: The Dance Channel. Dance is a universal language. It is an expression of culture and history, the translation of ideas, values, attitudes and emotions. Dance has given mankind a sense of belonging during times of hardship, of war, of poverty, of oppression. Dance allows all of us to leave our everyday lives and to enter into the blissful realm of the spirit. Dance in its many forms has developed, grown and evolved in every culture on this planet. Now there will be a television service devoted entirely to what the Greeks call a gift from the immortals: dance.

15269 Our broadcast schedule is designed to engage a broad multicultural, multiracial audience from every region of this country.

15270 Programs such as Dance News and Romancing the Past will serve as a cultural focal point to help bring both audiences and the dance communities from across the country together. The Dance Channel is a major cultural initiative for this country in a significant performing art which is seriously under-represented on our broadcast system today.

15271 We will all have an opportunity to watch, to learn, to be enlightened and entertained by the teachers, the choreographers, people who dance for a living and those who do it for fun. We will explore the purposes of dance, the rigours of training, the creation of new forms, the history of dance.

15272 And there is something here for everyone from Webcast.Dancecast for the net generation to dance and a movie for those who prefer to sit back and think back. And for viewers who want to plug in and charge up their bodies, we will have instructional series, Dance Lessons and Dancefit, with schedules tuned into our viewers morning, noon and night.

15273 We are very excited about the opportunities and the initiatives this channel affords the broadcast system, Canadian audiences and the independent sector as well as the dance community itself. For example, we will drive the independent production of Canadian dance films by providing a new source of licence fees.

15274 We also plan a regional teen competition that culminates in a national competition in year three, with a regional competition and a U.S. challenge in year four. The enthusiasm for this initiative from every province and the territories has been spectacular. And the Dance Channel's Annual Celebrity Ball will celebrate a different kind of dance each year with the proceeds going to charity.

15275 This channel provides outstanding value at an affordable wholesale subscription rate of 39 cents, Over the seven years, original Canadian production represents 64 per cent of total programming expenditures or more than $20 million with over $7 million going to independent producers.

15276 We have committed to spending 35 per cent of each previous year's gross revenues on Canadian programming. This reflects Canadian programming content that begins with 55 per cent, rising to a minimum of 65 per cent.

15277 Our market research tells us that 40 per cent of current digital subscribers and future subscribers will want the Dance Channel. What's more, 19 per cent of TV households who are not digital and do not plan to be would go out and get a digital set top box if that was the only way they could get the Dance Channel.

15278 The Dance Channel will be historic and contemporary, both traditional and hip, allowing viewers to make the connections between them. As parents and grandparents continue to waltz to the gentle sounds of years, their children and grandchildren, rock, swing and rave, finding their own rhythm in this universal instinct.

15279 MR. GRAY: The Pet Network. A couple of years ago, finally succumbing to years of pressure from my children, I purchased a dog, an Old English Sheepdog. Brilliantly, within an hour of bringing the young puppy home, it occurred to me to surf the net to see if I could find out something about the breed.

15280 I was astonished, not only by the enormous number of commercial sites wanting to sell me dogs themselves as well as related products, but by the astounding number of personal Web sites about particular Sheepdogs, their families, histories, habits and care requirements. There were stories purported to have been written by individual dogs, tales of family outings featuring dogs, first day home anecdotes, requiems for dogs who had passed on and pictures, pictures, pictures.

15281 These sites were the result of a great deal of time, effort, care and passion. And I was only researching sheepdogs! It became very clear to me that pet owners are themselves quite a breed.

15282 Add to that the fact that more than half of Canadian households keep pets and it is obvious that a specialty service devoted to them is a must. A large, at least semi-obsessed audience is a natural for its own channel: The Pet Network.

15283 Dogs, ponies, budgies, cats. Ferrets, gerbils, parrots, rats. Little boys, old ladies, moms and dads. Waiters, plumbers, techies, grads. This service is for everyone, and our independent research confirms that almost 50 per cent of current and future digital subscribers agree.

15284 And we will do it, while at the same time making major contributions to the broadcast system. At least 55 per cent Canadian content in year one, growing to a minimum of 65 per cent in year seven. We will spend more than $24 million on Canadian programming, almost $7 million of it with independent producers in Canada. This amounts to 71 per cent of total program spending.

15285 The Pet Network will explore the worlds of pets wherever they are. People from all walks of life, cultures and ethnic origins care for pets. They and their familiars will be an integral part of our programming.

15286 And we will use our special relationships with the Canadian Federation of Humane Societies and the Pet Industries Advisory Council to be sure we cover all the bases.

15287 The schedule will include programs for general audiences, for children, for seniors. There will be shows about veterinary medicine, training, pet behaviour. We will feature a regular series, Adopt-A-Pet, for those in search mode.

15288 And for the first time, there will be a television opportunity for public health authorities, breeders, humane societies and others to get necessary information to pet owners on general care, disease control and other important aspects of the responsibility of owning an animal. And we will have fiction too, movies and series where pets take the lead.

15289 The Pet Network will be full interactive. The service is about community. We will bundle tools and software so pet owners can contribute photo and video files of their beloved animals. We will establish discussion forums.

15290 We will create connections with organizations from humane societies to veterinarian organizations to pet product producers. We will seek input from our audience to allow us to create new programming for television or revise what we are already doing to better meet their needs better.

15291 The Pet Network, a package driver for Category 1 that is affordable at 30 cents wholesale, attractive and necessary. Just ask your dog!

15292 MS M. FUSCA: @work.ca. Work occupies one-third or better of ourselves. We dream about it, worry about it. We love it. We celebrate it. We hate it. It bores us. It's a tonic. We find refuge in it. We learn from it. We grow with it.

15293 There is no endeavour outside of love that creates so many different, sometimes conflicting, even dangerous or euphoric emotions leading to the greatest variety of action. All levels of governments across the country and around the world are concerned with work, with job creation, with education, with skills training, as are tens of thousands of organizations and corporations in Canada alone.

15294 Work affects all of us. Rich and poor, young and old, women and men, the healthy, the sick and the challenged.

15295 It can change our health, our marriage, our relationship with our children, our neighbours, our community, our country. Even after we are finished with work, think about how much times we spend talking about it.

15296 @work.ca is the first proposed Canadian specialty channel that speaks to the values Canadians bring to their every day experience of work. This channel will provide people with practical information in order to find work, improve skills, succeed and advance.

15297 Through a carefully constructed interactive strategy using television content, @work.ca will be a welcome guide to the growing complexities of the labour market in Canada.

15298 For example, our Work Update series will develop specialized applications for target sectors of the working world such as youth, the home office, the family business, the trades, managerial and professional occupations. We propose to marry this broadcast platform programming with the Internet platform by potentially steering viewers to, for example, job databases that would be relevant to their region, industry, interest or age.

15299 Programming strands such as The Home Office, Work Update and The Balancing Act will provide audiences with practical, enlightened, educational and interactive viewing. @work.ca also engages, explains and documents the diverse accomplishments of the fruits of our own labour with our series Investors, Inventors and From Rags to Riches. We will explore the little known world of work of our silent soldiers, volunteers, with Charity Works and The Mission.

15300 We will celebrate Canadian achievers who have been at the forefront of many areas of endeavour, be they our teachers, our leaders, our entrepreneurs, our thinkers, our artists, our quiet achievers, our heroes.

15301 For the first time, we will take account of and share with audiences the stories of immigrants in our series entitled Newcomers, where we will explore how their work has helped shape our great nation.

15302 Over 50 per cent of current and potential digital subscribers would watch @work.ca. @work.ca will begin with 55 per cent Canadian content in year one and will reach 70 per cent in year seven. We will spend $30 million on Canadian content with nearly $8.5 million for independent producers.

15303 Significantly, total expenditures on Canadian content over the seven-year licence period are 75 per cent of total programming expenditures. We have committed to spending a minimum of 38 per cent of each previous year's gross revenues on quality Canadian programming. Our asking price, a very affordable 35 cents.

15304 @work.ca, a high quality Canadian service that has demonstrated appeal to Canadian viewers will be an affordable addition to a new package of Canadian digital services, one that will help drive the penetration of these new services.

15305 MR. GRAY: Madam Chair and Commissioners. Stornoway Communications offers the advantages of a new player: flexibility, enthusiasm, and a start-from-scratch nimbleness necessary in this new digital world.

15306 We would like to note and applaud the Commission's desire to see new digital services explore and utilize interactivity. All four of our channels will make use of the Internet to communicate with our viewers through e-mail, discussion forums, streaming videos, posting of transcripts, contact lists, research, and so on.

15307 But our plans go much further into true interactivity, the most important aspect of which is content. Technology in new media is rapidly evolving and changing, something with which we, as producers, are very familiar. Just as we bring in the best people and the latest hardware and software in our productions, our interactive programming will remain on the leading edge.

15308 Ten years from now, we will barely remember a time when television was not interactive, and we will look back on an era when media spoke, and we merely listened.

15309 But how will we get there from here?

15310 Technology moves faster than our ability to predict it. Certainly there will be new forms of hardware, and just as certain, we will witness the genesis of new types of interactive programming.

15311 We understand that it will not be good enough to simply rework extinct programming ideas in order to survive. With the rise of popularity of the Internet, viewers have come to expect choices, the choice to go further and learn more, to ask questions and get answers, to connect instantly with experts, neighbours and citizens from around the world.

15312 At Stornoway, we have already started programming interactivity in creatively innovative ways. Here is an example.

--- Video Presentation / Présentation vidéo

15313 MR. GRAY: The cross-promotional value between television and the Internet is clear. TV programming such as "Canada's Brain Drain" can be expanded on to the net, as you have just seen. Likewise, programming concepts can launch on the Internet to drive viewers to the television screen.

15314 We are committed, creatively, financially and strategically, to integrating interactivity into all programming strands for all four of our channels and will continue to forge alliances with all appropriate partners in this ever-evolving world.

15315 We are already developing, for example, a further phase of "Canadasbraindrain.ca" with our partner, the popular Canoe portal.

15316 And so, until set-top interactivity becomes sophisticated enough, we have chosen to launch our interactive media projects first on the Internet where they will be, at least for now, available to a greater number of people than through digital television. Then our programming plans and concepts will move over into interactive digital TV as it rolls out.

15317 It is worth noting that in its first three weeks, "Canadasbraindrain.ca" has logged 40,000 "unique visitors" -- that is not hits, but visitors -- without the benefit of a broadcast channel.

15318 Interactivity, though in its infancy, is an integral aspect of each of our channels.

15319 MS M. FUSCA: Madam Chair and Commissioners, this Commission's licensing and regulatory policies have fostered the development of sustainable, high quality Canadian specialty services. The year 2000 gives us an opportunity to further this good work and to enter the new millennium with fresh voices and strong new players. Category One licensing will give added strength to new entrants seeking carriage.

15320 As we have demonstrated, our channels are not simply recycled or spin off versions of existing services. They have been constructed from the ground up, and our interactive plans and the channel strategies have been developed and executed together, interwoven from day one.

15321 Issues Channel, The Dance Channel, The Pet Network, and @work.ca, each one appeals to Canadians of all ages, from all regions and from all walks of life.

15322 Each one with a built-in audience; each one distinct from existing services; each one poised to entice viewers to the new realm of digital television, while strengthening the broadcast system through high levels of Canadian expenditures and independent production, all presented at a reasonable cost and backed by solid research and financing.

15323 We submit that each of them meets, and indeed exceeds, the criteria outlined in your Notice of Public Hearing and therefore deserves a Category One licence.

15324 Stornoway Communications -- new voices, new concepts, a new player in a new millennium.

15325 We are passionate; we are committed. We are prepared, and we are geared up and ready to prove it. Merci.

15326 THE CHAIRPERSON: Thank you, Ms Fusca and your team. You did very well.

15327 Thank you, Mr. Gray.

15328 Commissioner Williams, please.

15329 COMMISSIONER WILLIAMS: Good morning, Ms Fusca and the Stornoway Communications Panel Members. It is my pleasure to work with you this morning to help us gain a better understanding of your application through questions and discussion.

15330 As is our practice, I will proceed through a set of general and corporate questions on your applications. We will then take a short break prior to proceeding through each of your four services in detail.

15331 To begin, I would like to talk about selection criteria.

15332 The Commission has indicated certain selection criteria that it will use to license Category One services: specifically Canadian programming; exhibition levels; the amount of original programming and Canadian programming expenditures; contribution to program diversity; attractiveness or demand for the programming genre; and the use of interactivity.

15333 What criteria do you think are most important in licensing the Category One services?

15334 MS M. FUSCA: Thank you, Commissioner Williams.

15335 We all looked at the criteria together, and we spent a lot of time thinking about it. We had little minor debates, but the long and the short of it is that we really believe that the Commission had provided us with a very holistic, very broad comprehensive list of criteria with which to work. We approached the applications working with that criteria.

15336 Going through it, however, and coming from the background that we do, we are attracted just naturally to content. In tandem with content, and always in tandem with content, is the notion that it must be attractive. Without attractive content, we really don't believe that you get anywhere.

15337 Therefore, we measured attractive content against the rest of the criteria and we determined, for example, such things as: Could we use the attractive content that we had designed in an interactive way? Would we be able to take advantage of the technologies and genuinely engage with the audience? We said yes.

15338 Then we looked at reasonableness of the business plan and whether it would be affordable to the customer and again measured against attractive content, and our answer was yes, we can. We came up with affordable prices and a very reasonable business plan.

15339 When we got to how much could we co-produce with independent producers from across the country, and could we afford good solid licence fees to deliver quality Canadian attractive programming, the answer was yes.

15340 The one thing that I would like to add is that in terms of diversity, not only were we looking at attractive content that came from each region of the country and the territories, we would be using multiple layers, you know the independent production sector organizations, to make sure that it was indeed truly diverse.

15341 But when we got to diversity, we believed very strongly -- and we would like to include it as part of the criteria -- that one of the criteria is in fact to have new voices. As the world is shrinking around us, we believe that this is very critical for any number of issues, the most critical being diversity.

15342 I believe it was Chair Wylie, in her opening remarks, that mentioned, and I was looking for it to quote from it, but, you know, the notion of providing a healthy balance by providing choices. We are obviously your answer to that, providing a healthy balance of choices to Canadians.

15343 So, basically, that's the way that we approached the criteria, with the addition of new voices to increase and maintain and provide diversity.

15344 COMMISSIONER WILLIAMS: Okay. Maybe I can get you to build on that a little bit.

15345 How important do you think diversity of ownership is to the Canadian Broadcasting system?

15346 MS M. FUSCA: This isn't just self-serving. I actually believe it's critical. I always have. You know, I don't want to pick on the banks or anything, but, you know, I have always been a little miffed that we don't have, you know, more diversity in banking in Canada. I would hate to see that happen in our industry.

15347 It's great. I believe that it's important. I think that when the Commission earlier on was quoted, probably last year, as saying that we needed a strong industry, well, I couldn't agree more.

15348 Having said that, however, I also believe that I think what Madam Wylie, Chair Wylie, was perhaps alluding to -- maybe I'm just stretching it a little -- was the notion that, you know, we do need to make sure that we have a balance there. We don't want to get all of our news and entertainment from a couple of sources. I believe that personally. And I believe Canadians feel the same way.

15349 THE CHAIRPERSON: Okay. Thank you, Ms Fusca.

15350 The implementation of service. Should the Commission impose a minimum amount of time by which a Category 1 licensee must implement its service? How about a Category 2 service; should the time frame be the same as for a Category 1 service?

15351 MS M. FUSCA: Well, we have obviously had the benefit of what has come before us. We are pretty agreed with most of the other applicants, that I have heard anyway, that it is critical that Category 1 licences be launched at the same time.

15352 We are more than ready to launch September of 2001. We obviously believe that they have to go before -- Category 1s must be launched before Category 2s.

15353 Did you want to add something to that, Bill?

15354 Did I answer your question in full?

15355 COMMISSIONER WILLIAMS: Yes, I think you did. You said: September 1, 2001, much like the others; a natural launch was important; and, Category 1 should be done before the Category 2s.

15356 MS M. FUSCA: Yes. Well, particularly if we want to take, you know, the synergies of marketing strategies as a group. It makes a lot of sense.

15357 COMMISSIONER WILLIAMS: Thank you.

15358 I will now move into the area of independent production.

15359 Given the challenges of the near term digital environment, should the Commission be concerned about commitments to independent production?

15360 MS M. FUSCA: Well, we love that question, as independent producers, of course.

15361 Absolutely, would be the quick answer. I would like to expand on that a little.

15362 When designing our channels, you know, loving the subject, I must admit, came first. Second to that was really our concern for the independent production sector.

15363 We know that in the past launch has always been a very difficult time for just about everybody, big and small, I might add, new players and old. Therefore, the licence fees have often been very trying on the independent production sector. That's why, when you take a look at our applications, you will notice that we did our darndest and, in fact, are losing money for a number of years, specifically because we wanted to make sure that the licence fees were very solid and grow very steadily over the period of the licence to the point in fact where when we sat back we could have produced more hours in some instances, so that I could tell you that I was producing 4,000 instead of 3,000 hours.

15364 But we felt that two things were really critical there: the quality that was going to go onto the screen; and, also the livelihood of the independent production sector. So for that reason, we actually increased licence fees.

15365 Again, I would like to say that on the dance channel -- on the two channels we are taking an initiative to nurture -- along with others, including the federal government -- the production of feature films in Canada. We could not do it in the first few years of our licence, but in years 6 and 7, we are very proud to say to you, and to the independent production sector, that we have come up with licence fees equal to conventional broadcasters in a forth window -- in other words, after pay -- equal to current conventional broadcasters.

15366 So that's how we feel about the independent production sector.

15367 Did you want to add something?

15368 MR. GRAY: It's also a little bit of self-interest in a positive way, too, because if we are to properly reflect this country to itself, being based in Toronto we must work with independent producers across the country if we really want to find out what people are thinking and doing from coast to coast.

15369 So putting all of that together, the answer to your question is yes.

15370 COMMISSIONER WILLIAMS: Thank you, Mr. Gray.

15371 Ms Fusca, how would you define "independent producers" and how would you define "affiliated producers"?

15372 MS M. FUSCA: We thought about that as well, because I had heard what I consider to be some rather disturbing definitions as an independent producer.

15373 I think that an independent producer is truly independent at, you know, 10 per cent. I think that it gets very dangerous when you get beyond 30 per cent, particularly when you start going to the business Acts and that sort of thing. I mean, I'm just somewhat concerned. I don't know the particulars, so it's very difficult to gauge. I think it's very clear. I think 10 to 15 per cent is enough.

15374 I can appreciate, I want to add however, that because this is digital it's a different environment. There are larger groups who may have the wherewithal to help smaller groups to the advantage of both groups and the system. That makes sense. But I do think we have to be somewhat cautious that we don't -- you have heard this before so this is nothing new, right -- that the money goes out and actually it sort of comes back in, and we have to be very concerned about who is really gaining the advantage, and also who has editorial control.

15375 COMMISSIONER WILLIAMS: You have made specific commitments in all of your applications indicating that no more than 10 per cent of programming will come from Stornoway Productions. Is this 10 per cent included or excluded in your overall in-house production figures?

15376 MS M. FUSCA: That would be excluded from the in-house production figures. However, I would like to say that it's less than 10 per cent from either Cogeco Radio-Television and/or Stornoway. So it's joint. In other words, we wouldn't have 10 per cent from one and 10 per cent from another. And we also would exclude it from our commitment to the independent production sector.

15377 So it wouldn't be any money that is directly arm's length. That's what we are proposing.

15378 COMMISSIONER WILLIAMS: Thank you.

15379 I'm going to now move into the area of interactivity.

15380 In accordance with your description of your proposed interactive elements and what we saw on the videos this morning, could you tell us about your plans to introduce a set-top box with interactivity and could you comment on what specific conditions you think will be necessary to be in place in order to bring this about.

15381 MS M. FUSCA: I beg your pardon. Could you please just repeat the last part of your question?

15382 COMMISSIONER WILLIAMS: Sure. I'm talking about interactivity and I guess your future plans to introduce set-top box related interactivity.

15383 We are curious as to your comments on what special conditions you feel would need to be in place in order to bring this about.

15384 MS M. FUSCA: Thank you.

15385 Our plans are actually very focused on a specific type of programming. The strategies actually differ from channel to channel, simply because they are so different, they are so unique and diverse.

15386 For example, you may have heard me mention, when I was speaking about the dance channel, that we will have a Webcast.Dancecast. It's geared at a younger, targeted at a younger group -- I think it might just be easier if I described it to you, if you like, how that would work -- whereby we would actually be televising/broadcasting the program, but it would also be currently available on your computer; and you would get different windows, if you will, on your computer where you could, you know, chat with a friend or chat with other people that are actually watching it. You would have the capability of, you know, focusing on shoes or a t-shirt, that kind of thing.

15387 So it will have a multiple, very interactive use to it, and it will be streamed at both levels.

15388 In terms of the set-top box, we believe that we are developing programming that will actually drive the consumers to the set-top box, specifically because when they hear what is out there they will want to participate, and so it will grow.

15389 So we are very poised to make sure that our programming and interactive strategies are there to push that envelope.

15390 COMMISSIONER WILLIAMS: Thank you.

15391 You have noted in your applications that you have not submitted cost of revenues relating to interactivity as they will not be regulated under the Broadcasting Act. However, could you please elaborate on whether your plans for interactivity will impact on your business plan.

15392 MS M. FUSCA: No. The plans for interactivity are aside and apart from the business plans.

15393 COMMISSIONER WILLIAMS: Okay.

15394 Should distributors be obligated to carry the interactive components of those services that are granted Category 1 licenses?

15395 MS M. FUSCA: Well, I'm not in disagreement with what you have basically heard before, so I'm not going to bore you with repeating it.

15396 Having said that, there is some concern. I mean, the idea that it will require greater bandwidth at some point and that we may be getting into gatekeeping modes and self-interest, those are some concerns, yes, they are.

15397 Having said that, I gather from conversations that we have had that right now the mood is reasonably co-operative, in fact quite co-operative, so I'm not hugely concerned. The concern is more potentially technological later on.

15398 Do you want to add something, Bill?

15399 MR. GRAY: I think there is a bit of a line that -- I think you have heard from other applicants last week, there is a bit of a line.

15400 If the interactivity is integral to the program itself, it seems to us that that is part of the program service. If it becomes ancillary to that, then it occurs to us that there would probably have to be some level of negotiation with the BDUs.

15401 COMMISSIONER WILLIAMS: Okay. Thank you, Mr. Gray.

15402 I'm going to now move into the area of Canadian programming expenditure.

15403 Is a condition of license requiring minimum levels of annual Canadian programming expenditures necessary for digital services?

15404 MS M. FUSCA: Yes.

15405 COMMISSIONER WILLIAMS: In a word. Thanks.

15406 Several different approaches to calculating Canadian programming expenditures have been proposed as alternatives to the Commission's formula. Do you have any comments on any of the suggestions made during this hearing?

15407 MR. GRAY: Again, as we have said a couple of times, we witnessed last weeks' sessions and are aware of this concern.

15408 In fact, with our applications we had averaged over the term after year two. With our Issues application, in the deficiency stage the Commission came back and asked us if we would be willing to go to previous years' gross revenues in the instance of Issues -- we weren't asked in the other four -- but we said sure.

15409 So when it comes right down to it, we are prepared to go with either calculation as the Commission sees fit.

15410 COMMISSIONER WILLIAMS: Well, using the CRTC methodology, which is the Commission's formula, take the seven year total Canadian programming expenditures and divide it by the total seven year projected advertising and subscription revenues, would result in a slightly lower percentage in three cases as compared to the method that you have just described, particularly in the Issues, the Dance and Pet Networks, for work, the percentages are the same.

15411 MR. GRAY: Yes.

15412 COMMISSIONER WILLIAMS: My question is: Would you accept 38 per cent as a condition of license?

15413 MR. GRAY: Yes.

15414 COMMISSIONER WILLIAMS: Okay. Thank you.

15415 I am now going to move into the area of Cancon exhibition.

15416 In each of your applications you start at year one with relatively high Canadian content, 55 per cent. Can you please comment on your ability to meet this commitment? Specifically, is there sufficient programming available in each genre to meet these levels in the early years of the license term?

15417 MS M. FUSCA: Well, we are actually very confident. We wouldn't have made that commitment -- because we take commitments to Canadian content and to the independent production sector very seriously. So in terms of what can we produce and did we cost it all out, and all of that, to the nth degree.

15418 In terms of, you know, our discussions with the independent production sector, I can only tell you that they were delighted to be offered two or three times more than they are typically offered in a launch situation.

15419 Last, but not least, we have a great team with Victoria Fusca, my sister, and Inta Erwin, our Vice-President of Acquisition and Distribution, where, you know, we checked what was available in Canada either from independent production sources and also community channels, i.e., TVO, we spoke to the National Film Board and then, of course, we went out into the world, so to speak, and there is lots of good stuff.

15420 Now, of course, our ambition is always original.

15421 COMMISSIONER WILLIAMS: In each of your applications your Canadian content levels are lower during the evening hours, between 6:00 and midnight. Can you explain this difference?

15422 MS M. FUSCA: Yes. We were -- I guess you could call it just a little producer insecurity. We simply did that because we wanted to make sure that we had ample opportunity to get people accustomed to the new series. This is quite apart and aside from flagships.

15423 While we are ready to launch, we are not certain, depending on how negotiations go, whether we can commit to the independent producers and whether they would be ready to deliver by that date. So that is why you see a slightly lower percentage in prime time where we would indeed and in fact build more Canadian content in those slots as time goes on, as early perhaps as the second half of the year or, alteratively, year two. That is pretty much why you find that that way.

15424 The other thing I might add is that we wanted a little flexibility in terms of content as it rolled out to us.

15425 COMMISSIONER WILLIAMS: What is the repeat factor in your programming schedules?

15426 MS M. FUSCA: That is a really interesting question because it is a very big issue with us. It is a very big issue for two reasons. One is that it is reasonably high. It depends on the channel, it depends on the program, but the reason -- so it's between, say, 8:00 and 10:00. Some instances, foreign stuff that we may have a little more of in sort of the wee hours of the morning.

15427 But the reason why it is so important is really the design of the channels. If you take a very close look at the way that @work.ca and the Issues Channel are designed, what you will discover is that the flagships are actually on, you know, between 7:00 in, say, the work channel, and, I think, 12:00 on the Issues Channel. That is because you are getting little building blocks, the way that -- may I explain to you how it's done?

15428 So that if you get up in the morning and there is a little bit of a story, let's take Canada's Brain Drain for an example, the first issue might be: Well, what on earth are we talking about when we are talking about Canada's Brain Drain? Well, that story is on at 8 o'clock in the morning. We might actually repeat that story at 3 o'clock in the afternoon and again at 8:00 because it makes sense. It is an integral part of the way that the schedule is build and not a repeat in the traditional way that we understand repeats.

15429 Bill, did you want to add something on repeats as well?

15430 MR. GRAY: Yes.

15431 First of all, we don't think repeats are bad. I know you have heard that from others and we feel very strongly that with the explosion of the number of channels available few people are sitting watching one channel all day long, so we are providing alternative viewing possibilities. We don't for a second think that somebody watching our Issues update program at 6 o'clock in the morning is going to be watching it seven times that day. So we want to keep people informed.

15432 At the same time, in those flagship programs, as Martha described, as they are repeated through the day they are updated and altered with server technology, which is very simple to do. We are calling that one original program, but in fact they are sort of semi-original, semi-repeat. Again, we see nothing wrong with repeat programming.

15433 We also intend not to just simply run repeat cycles where we have a 26-half hour episode series and simply run the 26 weeks back-to-back to back-to-back. Depending on the channel, but on Issues Channel for example, we will select from a series that we would buy that has 26 or 52 episodes and program those episodes that we already have in the can in order to tie into the themes that we are doing throughout the week.

15434 So our repeats aren't just -- we are not just rolling it, we are actually programming the repeats in selected order.

15435 MS M. FUSCA: If I might just add to that, because I was fumbling a little earlier, is we also plan theme months for Issues and @work, and also we have decided that we would like the audience to participate in telling us, you know, what they felt was worth repeating or what we discovered was the best of from the various chatrooms that we will have. So part of the repeat is actually determined directly by the audience.

15436 COMMISSIONER WILLIAMS: Thank you, Ms Fusca.

15437 I would like to talk a bit now about penetration rates.

15438 Could you please describe how you determined your penetration rates and how they relate to your market research for each of your four proposals?

15439 MS M. FUSCA: I would do that for you, but Dr. Wall is so much more articulate in this area than I am so I think I will ask him to talk to you about this.

15440 COMMISSIONER WILLIAMS: Okay. Thanks.

--- Pause / Pause

15441 DR. WALL: The red light is on, I guess we are rolling. Thanks, Martha.

15442 I guess the starting point for making the penetration forecasts has to start with an understanding of what is going to happen with digital subscribers and, of course, we, like all other applicants, started with the information filed by the cable operators, CCTA, and the satellite operators.

15443 So our own approach was to use a midpoint between the pessimistic and the optimistic for the cable operators, to take the satellite operators forecasts -- and not that we didn't trust their forecasts, but to be conservative about it -- we took a discount on that, if you will, we lowered their estimate by a considerable amount, by about 40 per cent starting in year one, to give us a reasonable starting point.

15444 We also included MDS based on published statements and conversations with them. So that gave us a digital universe, if you will.

15445 Moving from that to a market research, we approached it in a number of ways. You have seen from other applicants what I would call a conventional approach to doing market research where you go out and you describe a concept and you let the respondent know that this may be on a television channel. You ask for an expression of interest.

15446 That can occur in a number of ways. You can simply grade it "very interested" to "somewhat interested", "less interested" and "not interested at all", or you can use a point scale, which some of the applicant's research has done.

15447 Our own approach was to take it a step further, if you will, and to separate out those subscribers who are currently digital subscribers or who are planning to become digital subscribers within the next two years. Using that as a foundation universe, because those are really the folks that are going to make the decisions on purchasing, those are the ones that we focused on and developed our expressions of interest, if you will, "Are they interested in our particular channels".

15448 Moving from that, we then went and got specific with price. Again relative to most of the research that has been filed, there have been relatively few that have actually got into the price question. As you know, if you are expecting people to spend money, they want to know what it's going to cost them. We don't think it's sufficient to simply ask "Are you interested in the service?" and not let the respondent know that they will have to pay for it and, going beyond that, that they will have to pay something very specific.

15449 What we did was we categorized two different kinds of package, plus a stand alone package, and asked respondents their willingness to purchase at price points. We had three different price points for each of those packages and for a stand alone.

15450 Coming out of that market research we had a pretty good sense of what the Canadian public, in particular what digital subscribers or those who plan to become digital, would purchase, at what price. Based on that, we derived our penetration rates. Normally, although our market research gave us a higher level, we started at a somewhat lower level for penetration.

15451 We also cross-checked our penetration levels against things like what's happened historically with other launches of tiers, what can we expect. We also have to remember that we are going to be packaging some of these services with other channels, so there will be a lift, if you will, in the complementary or from the difference in channels across packages.

15452 Just in conclusion we, you know, started top-up -- excuse me, bottom-up and ran it all the way through to establish our penetration rates.

15453 COMMISSIONER WILLIAMS: Thank you, Dr. Wall. I would like to go back to Canadian programming expenditure for a moment or two. I missed a couple of questions there and I would like to cover them.

15454 This is regarding your calculation of Canadian programming expenditures and the two different formulae. You said for work, CAU would accept 38 per cent as a condition of licence. For the Issues Channel, your calculation of 42, or the Commission's figure of 37. This would be a question. Would you accept 37 per cent?

15455 MS M. FUSCA: Yes, we would.

15456 COMMISSIONER WILLIAMS: For the Dance Channel, is it your calculation of 35 or the Commission's figure of 32? Would you accept 32?

15457 MS M. FUSCA: Absolutely.

15458 COMMISSIONER WILLIAMS: And for the Pet Network, your calculation of 35 per cent or the Commission's figure of 32 per cent.

15459 MS M. FUSCA: Absolutely.

15460 COMMISSIONER WILLIAMS: Thirty-two. Okay. Earlier in the hearing Astral raised the issue of the difficulty in concluding negotiations with distributors. I noted your opening remarks where you had signed a master agreement with the Canadian Cable Systems Alliance and that it was at the rates as presented in your application. Certainly with that group you haven't had any difficulty.

15461 Have you approached other broadcasting distribution undertakings?

15462 MS M. FUSCA: No.

15463 COMMISSIONER WILLIAMS: Okay. Do you think that the CRTC should order that negotiations must be completed six months prior to the launch?

15464 MS M. FUSCA: We believe it's a good idea.

15465 COMMISSIONER WILLIAMS: Okay. Should we conclude that larger BDUs like a shareholder, Cogeco, would accept your wholesale rates without much, if any, negotiations based on your experiences with the Canadian Cable Systems Alliance?

15466 MS M. FUSCA: We would certainly like to think so, but we haven't had that conversation.

15467 COMMISSIONER WILLIAMS: Okay. All right. The main point that I wanted to bring out of that was if the six months prior to launch idea was a good one. You seem to support that.

15468 MR. GRAY: Mr. Commissioner, I think it's very important that we as a community establish through the Commission some kind of deadline. We all witnessed what happened last time in terms of the negotiation process. It made it very difficult for a number of channels that launched. It really wasn't very good for anyone. We would very much encourage that kind of deadline.

15469 COMMISSIONER WILLIAMS: Do you envision different rates for different sized BDUs?

15470 MR. GRAY: We propose our market rates, our wholesale rates rather, as market rates. We have established our business plans, as you have seen, based upon them. We have estimated to the best of our ability what the penetration in digital will be.

15471 We think those are very fair numbers and in our case we think they are very affordable from, again, the research that we have done. Indeed, we believe that our CCSA agreement in fact establishes a market rate for our four channels. Those are numbers that we would expect from other BDUs and, indeed, if the Commission were to consider enforcing wholesale rates, we would be quite comfortable with those numbers.

15472 COMMISSIONER WILLIAMS: If a BDU has a significant digital penetration as opposed to CCSA which it may be developing, but say it was CCSa and ExpressVu, for example, a dominant digital player, would you think that they would be obtaining the wholesale rate?

15473 MR. GRAY: We fully expect it's going to be a difficult negotiating time. As I said a moment ago, we would happily accept legislated amounts from the Commission. I don't know if you are considering that or not -- rates, I should say.

15474 I'm not trying to dodge your question, but we feel that we want to remain quite firm with our published rates.

15475 COMMISSIONER WILLIAMS: I'm not sure how the rest of the panel or Commission members feel about negotiating -- I mean mandating certain wholesale rates, but my own view is we are into an age of negotiation and we are into an age of market demand, let the invisible hand, I guess, work out where your level should be.

15476 MR. GRAY: I think we are in general agreement with that, but I did bring up the idea of mandated amounts simply because of recalling the history of the negotiation last time, but perhaps the answer is what you were suggesting, which is some kind of deadline for negotiation and some kind of arbitration process so that we can be assured that the new applicants or the new tier aren't trying to figure out whether they are launched or not two months before the package goes out.

15477 COMMISSIONER WILLIAMS: Thank you. Madam Chair, it's still early. I propose rather than the break that we keep --

15478 THE CHAIRPERSON: We are not finished.

15479 Madam Bertrand.

15480 CHAIRPERSON OF THE COMMISSION: Good morning. I was listening to you and maybe with the rest of the week, it kind of brought of a question that I will address to you, but probably address to others.

15481 We have been talking a lot about the attractiveness of a service that is the most important element and many other applicants have expressed the same priority. It just occurred to me, should we look at attractiveness in the same way as we have looked at it in the analog world? Isn't the fact that even if it will roll out slowly in terms of the full potential of interactivity, how should we -- is there a different way to look at attractiveness and appealing service in this world in comparison to where you were a more passive type of viewer?

15482 I was watching on the screen your activity of the brain drain. I was wondering how much of that kind of alphanumeric type of information should be on the screen.

15483 How much will that be -- comment dire donc --bringing new viewers that wouldn't have watched in the past and at the same time, how much would more traditional type of viewers be kind of upset, you know, not really go for it at first.

15484 So I would like to know of your views, if it's a genuine concern or should I just put it back on my weekend and say I was too tired or is it something we should be concerned about?

15485 MS M. FUSCA: It is interesting. In your question I felt that there were a couple of bundled issues in there and I think my favourite part was probably something that I, as a producer and person who is sitting right before you, I am a little concerned with myself, which is to say that I like a nice clean screen. I don't want to see 16 boxes, and so on and so forth, right? Having said that, I have four children who love it. I mean just love it. They are just whizzing away and they are changing the English language as well, I don't know if you have notice.

15486 Like they never spelled the word "for", it's like 4, and "you" is U. So there is going to be a whole revolution in language.

15487 So having kept that in mind as well when we were thinking about these channels, I think that we really have to make sure that with each sectors of our market that we are very careful about how it is that we are speaking with them, interacting with them, so that the programming will have a lot to do with the time of day, the type of program, the type of audience that you are dealing with. I mean, that's my approach. We have discussed this, that is my own personal approach, and I think it makes sense. You really don't want to alienate. If you note, for example, on the Issues Channel that you have a very hot subject that is going to appeal to women between 45 and 65, let's say. You know having a lot of split-screen stuff and pointing them to the Web for the moment, the Internet for the moment, and/or trying to get them all wound up as digital rolls out in a couple of years is probably not a good idea. So that is one issue.

15488 In terms of attractiveness. You know, attractiveness is a very interesting word and there are various and sundry ways of trying to determine what is attractive.

15489 Typically, the people that are good in our business, anybody will tell you honestly, it's a gut thing, it comes from the gut. Having said that, Dr. Wall with Decima and you know, his own capability, I think he is well-known to the Commission, really did a phenomenal job for us and with us, determining in a very real way what the attractiveness in terms of scientific measurement.

15490 So you work with your gut, you work with the market research, but then we went far and wide into the community to speak with people like Terry-Anne Boyles and Sheldon Ehrenworth and the Senators even just to see how they felt having had a long history in community work, and so on and so forth.

15491 So there was all of that, and those are the ways and means that we decided on what was attractive. At the end of the day, personally again, it's really content that we are talking about, is the content attractive? And then we have to make sure that when we marry it to the new set-top boxes that we are all so eagerly anticipating, that it really makes sense to your audiences.

15492 Nancy, did you want to add something?

15493 MS SMITH: I would just add that in our work that we are doing with new media, we are finding, you know, you have the early adaptors, but then we are finding that mass audiences are now really responding to new media in a way that we never would have imagined. Women are on in huge numbers now. So I think that part of the answer here is to evolve as your audience does so that in fact you are taking them with you, and at the point that you have a screen that looks different, they are actually ready for it and they want it, and I think that is part of what we have to do, we have to roll out with our audience.

15494 CHAIRPERSON OF THE COMMISSION: Well, my question is: If we were like five or six years ago and you would come forward with those themes, what would be the difference in terms of saying those are attractive themes for the analog world and we are sure of it. Wouldn't we have the same kind of, you know, choice as you are presenting here? What makes the difference of appeal going into digital? Are the themes different or are we having the same themes and what will be strictly different will be the fact that, yes indeed, it will be the interactivity first with the Internet and eventually directly with the TV screen?

15495 MS M. FUSCA: If I have understood you correctly, I think you are asking a very interesting question which is --

15496 CHAIRPERSON OF THE COMMISSION: Thank you.

--- Laughter / Rires

15497 MS M. FUSCA: You are welcome. It's interesting because I am indirectly flattered, perhaps, and probably naively so, I might add, but no, the notion of analog versus digital -- and I am probably way out there not understanding. But the interesting thing is that when you take a look at the four channels that we have proposed to you, they have very broad appeal beyond, I believe, what would typically be called niche and/or specialty spin-off stuff, work. You know, we have market research that shows 50 per cent, but I will bet you anything that it will be a far greater number of people, and it will be dependent on attractiveness of content, appeal, marrying the educational with the what I call intrinsic education entertainment value.

15498 Even dance. You know, when you are doing your research and you say to people "Would you subscribe to a dance channel", immediately there is a certain ballet stage thing that happens. You are not able to really wow them with the dynamic variety and diversity of what you are going to have on the channel.

15499 When it's on, I am convinced that, in fact, it will have a far larger viewing public that the 40 per cent. So if you are talking -- and please forgive me if I am totally out in left field here -- if you are talking about attractiveness and the notion of these channels and whether they are actually bigger perhaps than what we have typically seen with some other applications, I would say, yes.

15500 You know, the interesting thing about producers is that they really want as many people to see their stuff as possible. So that is what we are always after, and I guess we did the same thing with these applications.

15501 MR. GRAY: Madame Bertrand, I think -- and this is not market research, it's personal anecdote and gut feeling, but it seems to me that people who are not involved in our industry don't have a clue about what all this digital business is other than there are going to be more channels and they have to pay extra for them and they have to have a box for them.

15502 But I think the capabilities of the box and all this stuff that we talk about is probably not, at least initially, why people are going to buy say a digital tier. They are going to buy it because they see a group of channels that they want, and they have marketed those channels and they want to buy them, and there is an added bonus if there is some kind of interactivity coming or whatever.

15503 But first and foremost, it's kind of the mentality of saying, "I want to get those channels. Oh, I have to get a box for that" and somebody convinces them that oh well, it's worth it. Anyway, apparently you get a better picture. I think that is where it will start, and I think then down the line things will start to change as the set-top box becomes truly interactive in any kind of mass way that is workable. Then we will see that sort of value-added part to having channels that are in that realm and not the other. But then we will get into analog cross-over and all of that down the line anyway.

15504 I guess what I am saying is the content of the channels themselves on this first digital tier, TV content, is still the first and most important element.

15505 MS M. FUSCA: Julia Walden would like to add something.

15506 MS WALDEN: You were mentioning alphanumeric and that is how you read Canada's Brain Drain content. To simplify it, imagine an exciting issue going by on the Issues Channel and alphanumeric could be live poling. I think that is very acceptable to audiences now, as Nancy says. We would be positioning ourselves with their acceptance.

15507 On the other end of the scale, on Ken's brain drain, we set out to target the office professional and youth job market and we were very successful in reaching that group. Ironically, it's precisely the group for whom the brain drain issue has a potentially significant impact on their lives and they are younger. Two out of every three are below 35, males outnumber females 5 to 1, 71 per cent are university educated, 55 per cent earn more than $50,000 a year. So you can see that even in advance of the roll-out of digital television, we are building a relationship with a potential audience through the Internet and that is very important.

15508 CHAIRPERSON OF THE COMMISSION: Thank you very much. Thank you.

15509 THE CHAIRPERSON: You were following the hearing so you must have heard about, if you hadn't already, about the uproar in Alberta the Log Channel was removed, a picture with burning logs.

15510 I often wondered just how that would have fared on Mr. Wall's survey beforehand -- unless there are a lot of grandmothers in Alberta.

15511 All that is to say that perhaps attractiveness should be diversity. Is there something there that we didn't have before, since even burning logs seemed to have appeared attractive to some viewers? And then of course there is Canadian content. It is a very difficult thing to test, no doubt, because no one would have thought of asking anyone: Would you find burning logs appealing?

15512 It is difficult to pitch something that you don't have already, and lo and behold you find it interesting.

15513 I say that, of course, after reading all these clever surveys telling us what is most attractive and most appealing. You will have an opportunity, of course, to discuss with Commissioner Williams later this whole aspect of diversity, which I think is linked to attractiveness. What is there may be popular as an addition.

15514 I would like to go back to the independent producer issue. You will again have the opportunity, when Commissioner Williams discusses your specific applications, to address it.

15515 In the two applications where you commit to not having more than 10 per cent produced by Stornoway, there is no mention of Cogeco or of Carrefour. In one -- I think The Pet Channel -- there is only a mention of Stornoway in the application and it is only for the first year. So hopefully you will clarify that.

15516 Would it be your view that what you feel strongly about the 10 per cent rule would capture your partner -- I think you said that, although I am not sure it is in the applications -- and the company owned by Cogeco?

15517 Do you think it is important that this definition of an independent producer be the same in every application? You have heard different definitions of what is an independent producer in the commitment made by other applicants.

15518 MS M. FUSCA: I am going to ask Bill to respond to this as well.

15519 For starters, just to get back to the Cogeco, Carrefour and Stornoway, as I did mention earlier, we are very committed to providing less than 10 per cent each, together. In other words, the total that we would acquire, whether it already produced material or original material, would equal less than 10 per cent from both of these companies and/or any other affiliated company.

15520 In terms of -- I have lost my train of thought.

15521 Also, I wanted to specify that this money would not come from the money allocated for independent producers. It would actually come from in-house production.

15522 In terms of my own personal view about independent producers, I think we have to make sure that we are very careful. I think we can have some flexibility in terms of 10 per cent or 15 per cent. I just believe that getting to 30 per cent to 35 per cent is far more than I believe is required or is necessary.

15523 Why would anybody have to have that? You worry about the independence of the producer, and you also, frankly, worry about where the money is going.

15524 Stornoway Productions, by the way, is on record at the last round as having supported applications and being very concerned about the money going out and coming back, sort of leaving one hand and flowing directly to the other. If they wanted our support, I felt that it should at least come to us, a good chunk of it.

15525 So that is really where I stand.

15526 Bill...?

15527 MR. GRAY: I have been an executive at Téléfilm, a broadcaster and an independent producer. So I have seen and thought about this particular concern from all of those perspectives, and I think I understand it. And each of them has a different perspective.

15528 I think we have to take a kind of overview in terms of the industry. If we are to encourage independent production by having independent producers, maybe not controlled by but certainly there is a large enough economic interest by a broadcaster that it benefits the broadcaster to focus its independent production commissioning on that producer.

15529 It is going to limit all the various diversities of different numbers of producers who can produce for those particular channels, as well as again the diversity of voice that will get further narrowed.

15530 THE CHAIRPERSON: You would want this limitation on yourself and on everyone else as well.

15531 MR. GRAY: Yes.

15532 THE CHAIRPERSON: You are a production company effectively, are you not?

15533 MR. GRAY: Yes.

15534 THE CHAIRPERSON: So if by any chance you were so unlucky as not to have any licence, it would be important to you to make sure that some production comes to you as well.

15535 MR. GRAY: And if we are fortunate to have licences, we are quite happy to deal with a broad spectrum of independent producers. And if we became a very successful broadcaster and purchased a large chunk of another producer, then we would be limited in our self-dealing with that producer.

15536 THE CHAIRPERSON: As the world evolves, we see a lot of connection now in licensees between producers. What is virtue today may be sin tomorrow.

15537 So there should be a very low threshold, and it should be applicable to everyone.

15538 MR. GRAY: Even with our long-term view, yes.

15539 THE CHAIRPERSON: With the Canadian programming expenditures limit, usually when we ask a question we get very long answers. All we heard you say was yes, there should be such a mechanism.

15540 Would you expand on why you are so sure that it is a yes.

15541 We have not heard, for example, any comment about whether the same thing should be applicable to everyone. Should it be based on the numbers that are put forward? Do you see, like so many others, a difficulty if there is not some flexibility brought in? And if so, how should it be brought in?

15542 You have been following what other parties have said to date?

15543 MS M. FUSCA: I am sorry, I wonder if you could reiterate the beginning of the question, just so that I am clear.

15544 THE CHAIRPERSON: You were asked by Commissioner Williams whether you felt that it was necessary to have Canadian programming expenditure requirements demanded of every applicant, and you just said yes. Usually, we get a long answer.

15545 So that we don't feel deprived, we would like to hear you on the usual questions which are: Should the mechanism be applicable across the board to everyone, and why or why not? And do you share the concern of many applicants that it is too rigid a formula and requires flexibility in riskier digital environment?

15546 MS M. FUSCA: I would definitely agree in terms of flexibility. I think it is very important to be as flexible as we all can.

15547 Having said that, I believe it is really critical. After 20 years in this business, I hate to say it, but if we didn't have those rules in place, you would see a lot less Canadian content. It is just too tempting, too easy, too profitable to go elsewhere. And that is the rather sad reality of life.

15548 I know that there are going to be a lot of people who want to kill me over this, but I have been --

15549 THE CHAIRPERSON: Well, the party to please is the regulator, of course.

--- Laughter / Rires

15550 MS M. FUSCA: Interestingly enough, I could not say otherwise.

15551 Just on the previous issue, we have been on record earlier, when we were not applying for licences, saying that we need this; we really do.

15552 THE CHAIRPERSON: Of course, that was your livelihood at the time.

15553 You mean you applied co-producer.

15554 MS M. FUSCA: Yes, this is true.

15555 The other issue about the minimums, I firmly, firmly believe -- and I have thought about this actually long and hard, especially these days -- that we need minimums. We can be flexible if we find -- I think the Commission in the past has shown extreme flexibility, seriously, when people have come before you and have been having a difficult time and have required changes, and that sort of thing, which have made sense, which were in the public interest. It happened.

15556 I think that flexibility is always a good thing, but I think minimums are critical.

15557 THE CHAIRPERSON: Would it be better to build in flexibility in the formula rather than have those awful hearings where people want to reduce their commitment?

15558 MS M. FUSCA: I guess it is really up to you, isn't it. Do you want to hear them or not?

15559 THE CHAIRPERSON: It seems to us, of course, the points have been made, that it's more equitable, if there is a need for flexibility, to build it into a formula so that it's applied across the board and then the requirement is expected to be met throughout the licence term. I don't see how else we can choose what will be, in any event, a few applicants out of the number we have before us.

15560 MS M. FUSCA: It makes a lot of sense.

15561 THE CHAIRPERSON: Yes.

15562 I hope you have been keeping track of the take-home exam, as well.

15563 MS M. FUSCA: Actually, what I have been dying of curiosity is, you know, how many grandchildren.

15564 THE CHAIRPERSON: Isn't that lovely. She is really catching on now talking about grandchildren.

--- Laughter / Rires

15565 THE CHAIRPERSON: I have four grandchildren. I have very clever children who had twins, a boy and a girl, then the rest was just "par surplus". They are, of course, very clever, all of the four.

--- Laughter / Rires

--- Off microphone / Sans microphone

15566 THE CHAIRPERSON: Thank you.

15567 Counsel?

15568 MR. McCALLUM: Just on the question of affiliate, I believe you were asked for a definition of "affiliated company" in relation to independent production, and I don't think you supplied a definition of "affiliate", although I think your answer did strongly suggest that both Stornoway and Les Productions Carrefour would be affiliates.

15569 Do you have a proposed definition of what is meant by "affiliate"?

15570 MR. GRAY: We would suggest 10 per cent economic interest as apart from simply trying to determine equity or voting.

15571 MR. McCALLUM: Ten per cent economic interest. So that is the same threshold for both independent producer and affiliate? That's what you are proposing?

15572 MR. GRAY: Yes.

15573 MR. McCALLUM: And that would be for the purposes of designing a condition of licence? Those would be the sort of definitions to incorporate into such a definition?

15574 MR. GRAY: Yes.

15575 MR. McCALLUM: Thank you.

15576 MS M. FUSCA: Actually, since Bill and I have had a chance to discuss this ever so briefly, I would like to also ask Mr. Carter.

15577 Michel.

15578 MR. CARTER: Thank you, Martha.

15579 Following your question, counsel, and that of Chair Wylie earlier, we agree with what obviously Martha and Bill have just said. We would just like to point out one element that sometimes is not well understood.

15580 Productions Carrefour, obviously, would be an affiliate of any of those four channels; no question about that. Now, if Production Carrefour were to produce something, was to produce something for, say, Canal Vie or Canal D, I think it should be clear that in that particular instance it is an independent producer because there is no economic relationship between Cogeco or Cogeco Radio-Television or Carrefour and Canal D. It's not because Carrefour is owned by a broadcaster that automatically it is not an independent producer.

15581 MR. McCALLUM: In that case, then, I take it you would want to have the possibility of a first window opportunity in such a situation as opposed to something produced by Stornoway, where you have suggested that a second window opportunity would be applicable. Is that correct?

15582 MR. CARTER: Well, I'm talking about any productions that could be done by Carrefour for a completely separate third party, not for any of those channels. But sometimes within the broadcasting and the independent production community, this is a little bit confused. I strongly believe that if Carrefour is to produce for Global or for Astro, it is totally independent.

15583 MR. McCALLUM: Thank you.

15584 Some other parties, by the way, have suggested, in terms of the definition of "affiliate", that there would be no equity interest owned by either of the shareholders in such an affiliate. You are proposing something a little different because you are suggesting a 10 per cent equity level. If the Commission felt that the definition, that it be at zero level, were appropriate for that definition, how would you react to that?

15585 MS M. FUSCA: The reason why I just wanted to be a little cautious, and again a little flexible, and I wouldn't have even limited to 10 per cent, I could live with 15 per cent, is simply that in the new digital environment it may be necessary in fact, for the companies that can afford it, to nurture and help develop independent producers who would in fact, I believe, still be very independent but would provide them with a source of product.

15586 MR. McCALLUM: Thank you.

15587 There are a few, I guess, standard questions that were asked to the other applicants -- I will just take two seconds, if I may -- regarding filler programming.

15588 I take it you would distribute those amongst the other categories.

15589 MS M. FUSCA: We are in agreement.

15590 MR. McCALLUM: And regarding the Personal Information Protection and Electronic Document Act, I assume you have intention to comply with that.

15591 MS M. FUSCA: Absolutely.

15592 MR. McCALLUM: And with respect to descriptive video, will you be technically capable of doing that?

15593 MS M. FUSCA: Yes, we will.

15594 MR. McCALLUM: Thank you.

15595 Thank you, Madam Chair.

15596 THE CHAIRPERSON: Mr. Carter, I take it that the definition, as you see it, would capture programming produced for you by another broadcaster for first window but, let's say, in your system for second window it would remain captured by the definition and fall within the percentage.

15597 MR. CARTER: If that broadcaster has no economic interest in any of the channels, I guess it should.

15598 THE CHAIRPERSON: No. I'm talking about suppose Carrefour or Stornoway produces a program for Global and somehow or other it's on Global as a first window and then it's on one of your applications, on a second window it would be captured just as if it had been the first time.

15599 MR. CARTER: Yes.

15600 THE CHAIRPERSON: I had another question which I have forgotten. Let me think about it while I have an extra cup of coffee.

15601 It's not that I have another grandchild. I did that right.

--- Laughter / Rires

15602 THE CHAIRPERSON: We will take a 15-minute break and reprendrons dans 15 minutes.

--- Upon recessing at 1020 / Suspension à 1020

--- Upon resuming at 1040 / Reprise à 1040

15603 THE CHAIRPERSON: Welcome back. Rebienvenue.

15604 There seems to be some confusion in some of our minds about the answer to our question about second window and first window.

15605 MR. CARTER: There is no question that if there would be a second window in any of our channels it would count within the 10 per cent we have mentioned before.

15606 THE CHAIRPERSON: As would be caught by the definition of --

15607 MR. CARTER: Yes.

15608 THE CHAIRPERSON: -- a production made by an affiliated company?

15609 MR. CARTER: Yes, no question.

15610 THE CHAIRPERSON: I have remembered now what I was going to ask.

15611 Ms Fusca, if we took your advice and limit it to 10 or 15 per cent, a production company that would be considered related or not independent, would you have a problem if we retained then the advice of other applicants who feel that 30 per cent or 34 per cent, barring the factor control, is good enough?

15612 MS M. FUSCA: My colleagues reminded me that we were even willing to live with zero per cent. But in terms of your question, I can only say that you have made excellent decisions in the past; I trust that you will make an excellent decision now.

15613 I noticed -- and I don't mean this facetiously at all, by the way, not at all -- I noticed that when the issue became one of, you know, increasing beyond the 30 per cent, there were some very tough questions that were asked here in that room that day, very legitimate. So, again, we can really only reiterate that our position is to be wary, to be careful, and make sure that independent producers are truly independent. That's really it.

15614 THE CHAIRPERSON: You are leading to our judgment, whether it would be acceptable to have an asynchronous requirement, that somebody may have 30 per cent but you are willing to live with less?

15615 MR. GRAY: No. I think maybe we weren't clear there.

15616 It's our view, in general, in the industry, that above 10 or 15 per cent should constitute self-dealing because, as we mentioned earlier, our concern is an industry-wide concern. It has to do with shelf space and the accessibility of it by independent producers, as well as the fact that if licence fees go to affiliated companies that have a significant economic interest in a production company, then, in effect, the amount of licence fees in the system is reduced.

15617 THE CHAIRPERSON: Commissioner Demers has a question, but I want to remind the audience that grandmothers hate cell phones and pagers in the hearing room.

15618 Commissioner Demers.

15619 COMMISSIONER DEMERS: Thank you, Madam Chair.

15620 Just one question on the master agreement, as you call it, with the Canadian Cable Systems Alliance. My question is whether that agreement provides for your channels to be carried on digital.

15621 MR. GRAY: The agreement provides carriage anticipating the digital environment. However, as you know, some of the small systems are unlikely to go digital any time soon, and with the exemptions they are allowed the potential for analog is there. But, in principle, it's a digital agreement.

15622 COMMISSIONER DEMERS: So there is a possibility that some of them will do -- should you be licensed, some of these would offer your service on analog?

15623 MR. GRAY: The potential is there, but again, with the smaller Class-3 companies.

15624 COMMISSIONER DEMERS: Thank you.

15625 THE CHAIRPERSON: Commissioner Williams?

15626 COMMISSIONER WILLIAMS: Thank you, Chair Wylie.

15627 Before the break Chair Wylie described the burning log channel as an Alberta service. In fact it was a British Columbia channel, very popular in parts of Vancouver Island, particularly with the senior community and those cold, damp winter days sometimes experienced on the west coast. Perhaps an Alberta channel of a similar nature featuring the burning flare of a new natural gas discovery well --

--- Laughter / Rires

15628 COMMISSIONER WILLIAMS: -- would provide similar comfort and attract as many Albertans as did the log channel to the logging industry base of British Columbia.

15629 I propose now to explore your four services in the following order: @work.ca, the Issues Channel, The Dance Channel and The Pet Network, sometimes referred to as the poodle network in various media -- the poodle network in various media.

15630 So beginning with @work.ca, we will start in program categories.

15631 Could you describe how you will determine when a sitcom or drama series is appropriate to the programming genre defined within this application?

15632 MS M. FUSCA: Interestingly, we actually haven't looked at series very closely, to be honest with you, but we have looked at work films. Of course, they would have to be dealing with one of the issues that would be important to work, any number of which could include, you know, The Balancing Act, for example, which is a title of one of our series, you know, what are the pressures of work and how do they relate to the structure and make-up of the family, whether we are talking the nuclear or the extended family.

15633 That is an example of one. Would you like me to give you some more?

15634 COMMISSIONER WILLIAMS: Yes, please.

15635 MS M. FUSCA: Okay.

15636 The other thing that I have found, again with a younger audience, is that oftentimes -- and as we have heard from very good groups that are within, for example, like the Collegium for Work and Learning, is that at the end of the day after kids have spent all day in school they are really not interested in going to a television set and being "educated" again. This is where we get into what I call intrinsic education.

15637 So therefore there are any number of films, for example, that are clearly about what someone is doing for a living and this is a very good way of relating to a younger person in a more entertainment fashion what it is like to be in that field.

15638 For example, we all know that film producers, or even models, it seems like, you know, a very glorious and glamorous and nothing can go wrong kind of world, and when you get behind the scenes it is, more often than not, a very different situation.

15639 So those are some of the ways that we believe we can contribute with films.

15640 COMMISSIONER WILLIAMS: In your proposed Schedule 10 you list programs under Category 5(a), which is formal education and preschool, but you have not selected this category under your proposed nature of service. Do you wish to do so now?

15641 MS M. FUSCA: Yes. I'm sorry we didn't do it earlier.

15642 COMMISSIONER WILLIAMS: We will check that box for you. Thanks.

15643 I now move into the area of finance.

15644 You talk about -- I guess the majority of respondents to your survey are classified as "somewhat" to "very interested" or the "somewhat interested" category.

15645 I guess the few concerns we have are: This low level of "very interested" respondents may mean your penetration rates are a little optimistic. Would you care to comment on that?

15646 MS M. FUSCA: We, of course, were very careful to make sure that we didn't do that, but I will ask Dr. Wall to respond.

15647 DR. WALL: Thanks, Martha.

15648 Yes, Commissioner Williams. If you were -- I agree with you.

15649 If you were take a simple level of interest or measure of interest, general interest, as your sole tool or primary tool for determining your penetration rate, I think that would be a mistake.

15650 I think what it does is, it gives you a sense, first of all, as you go through deeper into your survey, it gives you a starting point and from then you can get more and more detailed.

15651 In particular, what you need to do is get specific about price. In other words: Okay, you're interested. What if you had to pay for the service? Not only a general sort of a price question, if you had to pay, I mean what does that mean? It could mean you are paying a nickel, it could mean you are paying $5.

15652 The way we approached it, as I mentioned earlier, was to give respondents two different packaging options. We had a theme pack, which is a series of channels that are roughly related, for example like an information pack, thematically related, and they were given -- we split up our sample.

15653 Some respondents were asked: At $3 would you be interested in that package if it had this particular service, Issues specifically in this case. Some respondents weren't given a choice, they were asked: Would you be interested if it was $5? Others were asked would they be interested at $7. And those are different people.

15654 In other words, you are not asking the same person: Would you be interested at $3, $5 or $7? You are picking a different group of people each time so you are getting a very objective sense of what people are willing to pay and how much interest falls off as you increase price.

15655 In addition to a thematic pack we also tested a variety pack, a larger group of services, maybe 10 to a dozen services that were spread across a spectrum. They would include things that might be interesting or in the same category or genre, but also things that were widely diverse.

15656 For example, you could have Dance, Pets, Issues and Work would all be fairly diverse along with six other types of channels. Again, we tested that against price points, specific price points, $12, $15 and $18. So that is in terms of packaging. We also asked stand-alone. Would you be interested if you had to pay for it on a stand-alone basis?

15657 Again to gauge -- since that is a new part of what customers want is that pick-and-pay, if you will, that ability just to purchase a single channel, not have it packaged, and that again was tested at three different price points.

15658 So having dug deeper into the specifics of general interest, I think what we have by way of developing our penetration levels is something that is very substantially related to the market research that was done.

15659 COMMISSIONER WILLIAMS: Thank you, Dr. Wall.

15660 I have a question on @work.ca as to Stornoway has stated they are involved in a mentorship program for young Canadian independent producers, writers and directors. Could you tell us a bit more about that and how that will benefit young independent producers, writers and directors in the @work.ca proposal?

15661 MS M. FUSCA: Before I elaborate on that actually I wouldn't mind introducing, as I did earlier, you to Paul Kemp who comes to us from Winnipeg who started with us on a project.

15662 There is also another young woman in the audience today, Brigitte, who is from Montreal who started in the same way with us. In fact, both of these young people are currently working with us. So I would like at least Paul to start out by telling you how it began and I will elaborate a little bit on that.

15663 COMMISSIONER WILLIAMS: Thank you, Ms Fusca.

15664 MR. KEMP: Just to follow up on that, the mentorship program, I think Stornoways have a long history of supporting younger people. I came to the company shortly after university and have been supported, you know, from every aspect of the production phase all the way up to now I am full producing, In fact, Canada's Brain Drain was my first producer's credit.

15665 We, at Stornoway, have also dealt quite elaborate connections with Carleton and Ryerson, journalism schools and film schools, where we try to get two or three people from each school and have a lot of success with them. Some of them have come back on short-term -- I guess for short term stints with us, and others, like Brigitte, have stuck around and worked.

15666 The idea for all -- this isn't just @work.ca. For instance, I know you were just talking about that one, but on the Issues Channel for instance, we have actually talked with the journalism schools about their producing of short-form documentaries, long-form documentaries, and if we could use those programs and build them in with our programming schedule and have had very deep interest from both schools about having their students in a real way being involved with the station.

15667 There isn't any formal situation like that today, so that would be a way we would do it. Of course, in-house would be another way.

15668 Martha, did you want me to go further than that?

15669 MS M. FUSCA: No, that's good.

15670 Obviously, having four channels would give us an incredible opportunity to expand on that program, because typically right now it has been in production. We are moving it into distribution. Then, you know, with the channels you would get this huge wealth of opportunity and, as Paul mentioned, we have talked to, for example, Sheridan, CWC, Canadian Women in Communications, other women's groups, making them aware of these initiatives.

15671 I think that what makes this one, APTN, AFM -- I could go on. The lists are very long. I think what I would like to mention about this initiative is that, as the President of Women in Film and Television Toronto, for a number a years what I noted were that women in particular, you know, have children, then go back into the work force and they are not necessarily youth.

15672 We felt that we would have a number of slots per channel if we were to be selected to be licensed with all four that would provide for men and women who are in mid-life career changes and are returning back into the work force.

15673 MR. GRAY: Mr. Commissioner, if I could just add too. We introduced at the beginning -- Terry-Anne Boyles was with us on the side panel who represents the Association of Canadian Community Colleges which in turn represents 175 community colleges across Canada and hundreds of thousands of students.

15674 We have established a working relationship, an agreement, between us to work with -- at work.ca to do a number of things, but one of them certainly involves some process of mentorship as well. Again, across the country.

15675 COMMISSIONER WILLIAMS: Thank you, Mr. Gray. I have another question on this mentorship program. How formal is the mentorship program? For example, are beneficiaries assigned a coach to help guide them through the labrynth? Is there training support, career pathing? Is it a one, five, ten year relationship, assuming the employee stays the full time?

15676 MS M. FUSCA: It's actually very extensive. You have gathered unto a good chunk of it. We don't want to make any promises that may not be suitable for the employer and the, you know, mentoree to make long term promises. It just has happened in the past that, you know, of say the 12 that have gone through Stornoway, we have got three that have become full time employees, from Winnipeg, Ottawa, and they still live in their locations, and Montreal.

15677 We would provide them with pay equal to, you know, starting out. We provide with very hands-on experience. I mean the only way they get into it is to sort of roll up the old shirt sleeves and get knee-deep into the work.

15678 This isn't simply observing. This isn't simply, you know, being able to talk and have lunch or that kind of thing which is all really quite wonderful. We really want these young people and/or mid-life individuals to really get in there and see whether it's appropriate to them and so on and so forth.

15679 Of course, this is a fabulous resource for us. It's a win-win situation because it's a fabulous resources for us and where it makes sense, we would keep some of the students that are graduating, particularly from Sheridan, hopefully preventing them from going to Disney.

15680 COMMISSIONER WILLIAMS: The mentors. The mentors I assume are not direct supervisors. They are seasoned television career people that are not directly supervising these people, so a real mentorship relationship can develop.

15681 MS M. FUSCA: We are obviously really stretching the word and the notion of mentorship. Yes, they would be working alongside highly experienced individuals. The reason why the channels were so important is because they provide, you know, administration, marketing and promotion, sales, just those other, you know, avenues, technical. Working with somebody like Stu Turner would just be an amazing experience with that wealth of experience that he brings to it.

15682 COMMISSIONER WILLIAMS: Thank you, Ms Fusca.

15683 I will now move into an area of programming, beginning with foreign programming. Where do you plan to acquire the necessary foreign programming, both initially and in subsequent years?

15684 MS M. FUSCA: We have with us here today our Vice-President of Acquisitions and Distribution. Before I turn it over to her, I would like you to note that it's really quite interesting that there's a phenomenal amount of material. We only need to have a very small portion for this channel.

15685 I would like to turn that question over to Inta Erwin.

15686 MS ERWIN: Commissioner Williams, your question was where we might source material.

15687 COMMISSIONER WILLIAMS: Yes. Where would you plan to acquire foreign programming, both in the beginning initially and then in subsequent years?

15688 MS ERWIN: In my experience with TVOntario and CBC and International Distribution, the -- I know that area of business in terms of going to markets and the network of distributors and programming sources that are available internationally.

15689 I was quite gratified. It seemed daunting at first to take a look at programming, 1,500 hours a year, at the start of this process. The Work Channel specifically was a big surprise. Our international sources, because it's an English speaking service, were largely from the U.K. The BBC was an extraordinary source, and a number of independent production houses there as well as Film Australia and ABC Australia.

15690 Also, we were pleased in that regard at finding the weight of product that we could have programmed four years with the amount of material that we found. We were also able to work with Canadian distributors that represented foreign companies.

15691 Work was an easy one to program. There were so many products, programs and series that had not been airing in this country.

15692 COMMISSIONER WILLIAMS: Thank you. Now I would like to talk about original programming. We note in your proposed Schedule 9 a substantial amount of repetition of original Canadian programming. For example, on Monday there are four and a half hours original Canadian programming coming from only two shows of a half hour each, 12 Workopolis updates of a half hour each and one more half hour show. Could you comment on this, please?

15693 MS M. FUSCA: Certainly. As I had mentioned earlier this morning, what's very interesting and important to us is that the information we are sending out to our viewers actually reaches as many of our viewers as possible. Therefore, in the Workopolis, for example, strand, not dissimilar to the issues update strand, what we will have is three or four segments in each of those shows.

15694 One of those segments may be shown at eight o'clock in the morning. That same segment may be shown, you know, two or three times during the same day. Some of those segments may be only shown maybe once or twice. It will obviously depend on what we feel is relevant at the time.

15695 If we get, you know, new and important, you know, labour legislation news, keeping in mind that we never plan to be a news channel on this channel either, we would again be putting into context. We believe that that kind of information is very important for our audience to get it.

15696 As well, that information might come in the form of, you know, one component in the morning and it might be married later on in the afternoon and in the evening with commentary that would be appropriate to that component. That's the way that these programs are built. Is that clear?

15697 COMMISSIONER WILLIAMS: I think so. Does staff need more clarification than that?

15698 MS M. FUSCA: It's just that it is a little complex.

15699 COMMISSIONER WILLIAMS: Are staff satisfied with the answer? Okay. Thank you.

15700 I guess during your opening remarks I was pretty impressed by the advisory board you put together. It's a lot of people with a tremendous amount of experience from all areas. Will the full advisory board be working on work.ca or is there a committee of the full advisory board or does the advisory board advise -- I will ask this once, I guess, for all four services -- as a group on all aspects of all of the channels?

15701 MS M. FUSCA: Well, we developed two groups. One is the advisory board which is comprised of a smaller group of individuals. Those individuals would actually be dealing with the Board of Directors. We wanted to ensure that the promises that we made to you and to the Canadian public and, indeed, to ourselves was really fully covered.

15702 These are individuals that, as you know, are out there doing other types of work than we are. We believe that they can also bring, you know, fresh ideas, fresh resources to the table a few times a year.

15703 The second group -- and so those are on broad policy issues -- is our consultative committee, those who actually meet a little more often and each channel actually has its own consultative committee. We have chosen -- well, actually I think they have chosen us, to work with us -- as you quite rightly mentioned, fabulous, highly experience, well-regarded individuals to work on each of our channels.

15704 The way that we had planned to structure those, by the way, is that we would deal with all four channels at the same meeting because again the notion of cross-over synergies is really quite exciting. You know, you think that somebody like Celia Franca would be into dance and dance alone, but she may very well have some very interesting things to tell us on issues programming or @work.ca type of programming.

15705 So basically that is the way that is structured.

15706 COMMISSIONER WILLIAMS: Okay. So if I understand it then the advisory board is a sounding board for the board of directors and consultative committees I guess are more focused on individual channels. Now, do they have a representative from the advisory board on each of these? How do they pass their information between themselves?

15707 MS M. FUSCA: And I am sorry, I should have been a little more clear. The consultative committee, first of all, would actually be working with myself and our senior team of individuals. So it's an ongoing directly, you know, program-related group. In terms of the interface between the board of directors and the management team and the consultative committee, of course, the way that that works is that I would be at the board meetings, senior staff would also be at the board meetings and we would make certain that they were married together and that we are not sort one group is thinking one thing and the other group is doing something else.

15708 COMMISSIONER WILLIAMS: Good. It's a good approach, thank you.

15709 I will now move on to the Issues Channel.

15710 THE CHAIRPERSON: Perhaps we can ask the applicant -- I see you are all shifting papers. Sometimes we have asked additional questions after each specific application, sometimes we have waited until the end. Do you have a problem if we wait until the end? You won't lose your papers.

15711 Go ahead.

15712 COMMISSIONER WILLIAMS: Thank you, Chair Wylie.

15713 Programming. The Issues Channel is described as appealing to young adults. Could you expand on how the programming will be designed to attract young people?

15714 MR. GRAY: It's described as appealing to young adults, but I think it's important to note that it's meant to appeal to a broad range of audience, but we are trying to focus on the fact that as well as appealing to various demographics, programming of this nature, where it does exist, in our view, in small bits is seldom focused on younger people.

15715 As we mentioned in the opening address, we have a program called New Voices which indeed will be produced by, with our assistance, young Canadians. It's also a matter of determining the subject matter of both our programs and our sort of themes and strands. As we outlined in the application, one of the concepts we have for programming issues is to discover an issue, perhaps through our Issues Update program, perhaps in the morning, that there is an issue we just cover from our interactive process that there is something out there that is of concern to Canadians and we may have small kind of reports on that, on Issues Update. During the day on later versions of the program we will go to different perspectives on that from different Canadians of varying sorts of expertise and it will happen that some issues will grow larger and they will create program concepts for other kinds of programming on the channel, be it documentary, discussion forum or phone-in shows.

15716 And when we do all of that, it's very important to us that we don't go to the regular sources that we often see in newspapers or in the brief versions of this kind of programming we might see on other channels.

15717 So it is part of our concept to be concerned about younger Canadians as well as other demographics when we go through that process with any given issue.

15718 COMMISSIONER WILLIAMS: Thank you.

15719 In your opening remarks, you spoke of a program called First Nations created for and by aboriginal broadcasters in partnership with Issues Canada.

15720 Have you entered into this partnership already and who with and what is the goal?

15721 MR. GRAY: Obviously, we are not launched yet, so it's early, early discussions and we don't have agreements in place, but we have had discussions with APTN, yes.

15722 MS M. FUSCA: And AFN.

15723 MR. GRAY: Sorry, and AFN as well --enthusiastic discussions, I might add.

15724 COMMISSIONER WILLIAMS: Can we now move into the area of nature of service? In your application, you state that the Issues Channel will have a significantly different emphasis than any other specialty service available.

15725 Could you elaborate as to how you would ensure that the Issues Channel would have a different emphasis than CPAC, for example, or CBC NewsWorld and Talk TV.

15726 MR. GRAY: Certainly. I would be very happy to.

15727 What we are not, if you are comparing to those channels, we are not a news channel. We don't have "news" in our title. NewsWorld is called NewsWorld and like many specialty channel it has a focus and it will have some additional programming that is triggered or instigated or flows from that particular focus.

15728 Issues Channel is not about news. It's not about something that happened yesterday. It's not the crash of the Concorde, it's not that kind of programming. What we will do is fare it out from the audience, and as I said, from our programmers and our own feelings, of issues that are of concern to Canadians and their ongoing coverage, their ongoing discussion and debate from a variety of Canadians from various walks of life.

15729 What we are also not is any kind of live event coverage. We would not have cameras on this hearing. We would not have cameras covering Parliament, or whatever, without getting into the interventions that CPAC, its prime focus is still capital to capital. We specifically do not intend, and will accept any condition that we don't do that. The same as to news programming.

15730 In the process of building our applications, we naturally sought out intervenors, and I would like to read, if I may, a couple of quotes extracted from a couple of the many interventions, positive, of course, that we received.

15731 From Maurice Tudwell in Victoria:

15732 I would also like to read a comment from Peter Newman, who I think you all know:

15733 We want to provide the audience with that luxury and we believe that is what makes us quite distinct from the channels that you mentioned.

15734 MS M. FUSCA: I would really like to add something to that -- and I can only do it as a way of telling you a story, and I will choose pesticides, one of my own personal pet peeves. On the Issues Channel in the morning you might actually see a very small story on what is going on with pesticides in P.E.I. In the afternoon, we might check out what is happening with pesticides in Central Canada and later in the day we might actually do a piece on pesticides in another part of the country.

15735 The following day, we would actually -- or the following week -- we could actually have a full-fledged independently produced documentary on a story that involves the death of, say, a child which has actually happened whose mother and medical authorities are convinced died from playing in a park sprayed with pesticides.

15736 We might actually then build a very similar project to Canadasbraindrain.ca where we will solicit and engage the Canadian public and we believe also -- and so does the Sierra Club, I might add -- in informing them on what medical authorities have found that about this and where the Government of Canada stands on this issue, the fact that it involves all levels of government and that kind of thing.

15737 So you can begin to appreciate, as with canadasbraindrain.ca that began as a documentary goes onto the web, goes into print, really is a very multimedia project. These are the kinds of ways that we would dealing with issues on the Issues Channel.

15738 The other thing I would like to mention is that I am sure all of us have noted that. We hear a story, it's in the news for a while, you might even see a documentary, and then for some strange reason that issue falls off the edge of the earth. I mean there are any number of them where we can say, "whatever happened to that?". We don't know. Well, that won't happen on the Issues Channel.

15739 Again, I would really like to reiterate on the initiatives taken by this channel that are really nowhere. For example, "Two Solitudes: An Uncommon Dialogue". How many times do French and English speaking Canadians speak to each other, and about what? More often than not, we are speaking "entre nous", and then on occasion we get the odd little bit. A very critical kind of ongoing -- this is ongoing; not just once but ongoing.

15740 The same thing with youth. How do you attract youth? You let them tell you what they want to tell you. Don't tell them. This is why we are going to be giving them the opportunity, 17-to-24, to tell us what they want.

15741 I could go on, but I won't. Thank you.

15742 COMMISSIONER WILLIAMS: Thank you, Ms Fusca.

15743 Just to get back to your pesticide thing, I was just reading a paper on the weekend that said that pesticides have recently been enhanced and that they were removing the strong chemical odours and adding in artificial scents, floral scents, even bubble gum, to try and make them more pleasing to the general population.

15744 In program categories, you have included movies and drama programming in your proposed description. Given that such programming could encompass a fairly broad range of dramas and movies, could you provide specific examples of the types of Category 7 programs that you would propose to air?

15745 MS M. FUSCA: Before I pass this on to my colleague, again an experience story.

15746 Years ago I desperately wanted to do a feature length documentary on Cambodia. It was very difficult to get the financing and so on. Then I went to the theatre and watched "The Killing Fields", and I came back and thought: Well, no need for that documentary. And it hit such a huge audience.

15747 So that, from my view, is why we would have feature films.

15748 MR. GRAY: It is also important -- and you heard this last week, I think, from Trina McQueen, and it certainly applies to the Issues Channel. Sometimes an issue or a matter can be sparked with an audience when its imagination is first triggered.

15749 The example Martha just used I think is a good one. One could imagine "Lorenzo's Oil", or something, if one was talking about medical issues and the medical system.

15750 The way we would want to use this is not just simply air the movie but use the movie to trigger the issue and then follow through, over whatever amount of time was necessary, with whichever of our program strands made sense to take that issue on and carry it through and get various opinions and views about it.

15751 COMMISSIONER WILLIAMS: What mechanisms would you put in place in order to assure that the movies and drama selected for your service properly reflect your nature of service?

15752 MR. GRAY: I think the starting point is we are talking about one movie a week, with a couple of repeats. That is the most we would do. We would happily accept a condition of one movie per week.

15753 It is not directly answering your question, but if we are only airing one movie a week, it would be pretty bizarre to show a blockbuster Schwarzeneger movie in the middle of a bunch of programming about issues of concern -- bad programming, I would say.

15754 MS M. FUSCA: I would like to go a little further with that, because I know the difficulty that can arise from broadcasting of movies on these other channels.

15755 It will only be a film that actually has a theme in it that provides a catalyst for other programming, whether in fact it deals with an issue that would be on our Ombudsman series or something that came from the 17-to-24-year olds.

15756 In other words, it is never a single component of the broadcast schedule. We are not showing you a movie just simply to show you a movie. That movie, in fact, has impact on the schedule and ongoing in terms of public issue and discussion on those issues.

15757 COMMISSIONER WILLIAMS: I appreciate your offer of one movie per week as a condition of licence.

15758 Would you accept a condition of licence stating that no more than 5 per cent of the broadcast week would be drawn from Category 7?

15759 MR. GRAY: Yes.

15760 COMMISSIONER WILLIAMS: I don't know how close that works out to be.

15761 MR. GRAY: Our estimation at the moment was around 2 per cent. So that is not a problem.

15762 COMMISSIONER WILLIAMS: That is a little better for you.

15763 MR. GRAY: Yes.

15764 COMMISSIONER WILLIAMS: Good.

15765 MS M. FUSCA: Could I just ask before we go on. I had hoped for 8 per cent, to be honest with you. I just felt that we could really use that flexibility. Not that we plan to; it is just that it is such a small per cent. We are talking below 10 per cent.

15766 It would enable us, just in case we had a partner situation in a given week, to be able to do it. On occasion I can just imagine that we might have that, and that is all we would be asking for: 7 or 8 per cent.

15767 COMMISSIONER WILLIAMS: Okay. I heard you ask earlier for movie, which Mr. Gray said was 2 per cent. We asked if you would take 5, and we are at 8 now.

15768 I don't know whether to take issue with this thought --

15769 MS M. FUSCA: I'm sorry. Actually, what Mr. Gray was referring to is that currently in our schedule. What we have not had a moment to confer on here -- because we are so anxious to answer your questions as quickly as we can -- is to provide for the future. This is the schedule that we have now.

15770 It actually occurred to me, to be quite candid with you, after we put in the application that there are occasions when, depending on the subject matter, it would be incredibly useful -- and I am talking about the audience here; I am not talking about our schedule.

15771 It would be incredibly useful for our audiences to have a companion piece.

15772 I think when we calculate somewhere around 7 per cent, it allows us the flexibility of the companion piece that might go with the initial film, either a one two-hour or one 90-minute.

15773 If you could see your way through that, I would be most grateful.

15774 COMMISSIONER WILLIAMS: So, I understand that you would accept 5 per cent as a condition of licence, but ideally 7 to 8 per cent would be something that you would be happy with.

15775 MS M. FUSCA: Yes.

15776 COMMISSIONER WILLIAMS: These conclude my questions on the Issues Channel. Perhaps my colleague Commissioner Wilson who, as many of you know, has a more in-depth knowledge of CPAC, will have a few questions in that area at the appropriate time.

15777 I am going to move on now to The Dance Channel.

15778 My first question is in the area of nature of service.

15779 In your nature of service definition, you state that the service will focus its programming on all aspects of dance.

15780 Would you accept a condition that this service will focus its programming exclusively on all aspects of dance?

15781 MS M. FUSCA: Yes.

15782 COMMISSIONER WILLIAMS: Interactivity: Will any of the viewer-produced content gathered on the Web site be integrated into the service's programming; and if so, could you describe how?

15783 MS WALDEN: At the core of The Dance Channel is the daily dancecast webcast called "Dancing the Web". So it is totally integrated into the broadcast.

15784 We plan that this program strand will push the edge on interactivity. Down the road we are going to seek out software applications so that viewers can do their own camera switching. In the dance portal there will be tools and software to allow the viewer to experiment with the streaming video that will be webcasting and broadcasting.

15785 COMMISSIONER WILLIAMS: Thank you.

15786 You talked a bit about all the different types of dancing that would be exhibited on this channel. I see one of the areas called "Cultural Dancing".

15787 Could you tell me what your efforts would be in that area, in the cultural dancing area.

15788 MS M. FUSCA: The interesting thing is that we are a bit of a cheat, because we have so little work to do. When the various dance communities heard about this channel, they have made life for us very easy by coming forward, literally from coast to coast and as well from the territories.

15789 So we have gone from aboriginal to celtic. The list is even longer than I actually ever dreamt that it could be for a subject that I truly love.

15790 COMMISSIONER WILLIAMS: In your application you state that you have reached out to several culturally oriented broadcasters to share second window dance programs.

15791 Are there specific agreements being made or contemplated with any of APTN, Odyssey, SATC, Tele Latino or Fairchild? And if so, what is the nature of these agreements?

15792 MS M. FUSCA: I don't know if Victoria may want to add something in a minute.

15793 But again, as with other in principle agreements that we have made with any other group, because we don't have the channels again, what we have is very enthusiastic support and a genuine willingness to work together, whether it is in the area of acquisitions and indeed full-fledged co-production.

15794 MS V. FUSCA: If I may add that the only solid agreement that we have actually comes from the Asian Television Network who has been extremely supportive. I do have a letter, an agreement in principle, that states that they have a huge variety, a wonderful variety, of dance, much of which is Canadian content.

15795 They have actually also agreed to a licence fee of $500 an hour, which of course will be very helpful to our launch.

15796 MS M. FUSCA: Also, maybe Julia could step in here because the Banff Centre for the Arts is very much on side on both counts, whether we are talking about programming or interactivity.

15797 MS WALDEN: Yes, we have an agreement in principle or a strategic alliance with the Banff Centre for the Arts with the new media centre, and also you are probably aware that they have a world famous dance training facility there, and they will be partners for production resources. We are going to try to leverage each other's resources, and we will also take full advantage of their expertise in new media.

15798 COMMISSIONER WILLIAMS: Great. Thank you.

15799 I am going to move into an area now of attractiveness and demand. Just a brief question on your summary of your market research.

15800 Your market research from Decima -- your Decima research concluded that:

15801 So if your opportunity for success is high if you are packaged, have you given much thought to who you would like to be packaged with or the kinds of services you would like to be packaged with? Are there concerns in packaging?

15802 Given that 10 or more services will be licensed as part of this process as Category 1 channels, how large, small, if any, or number of packages should be developed as a result of this? Should there be, for example, two or three packages or one big package?

15803 MS M. FUSCA: We prefer a slightly larger package, and believe that, you know, a minimum of four or five would be best. But I would like to also throw the question over to Gerry, who will have a fuller answer for you.

15804 COMMISSIONER WILLIAMS: Dr. Wall.

15805 DR. WALL: Thank you, Commissioner Williams.

15806 I guess the first thing I would point out is that you have to look at your BDUs separately because satellite is already fairly well established in terms of how they are going at packaging digital services. For example, they have theme packs already up and running. So they look at a service and try and determine would it fit in with an existing package, a thematic package.

15807 For the cable industry, who is just entering the digital age, it's much more open in terms of how will these things be packaged and how will they be offered. In terms of this specific channel, a dance channel, while the market research we got had highest response in a variety pack, I think the theme pack is just underneath that. I think they both came up around 38 per cent with a slightly higher number for variety.

15808 So I think you would be equally well off for this channel if you went either thematically or in a variety pack.

15809 In terms of how many packages, at a philosophical level I think what you want to do is provide the consumer with as many options as you possibly can, ways of getting that service.

15810 I don't necessarily see this or any other service being offered just in one package, particularly with the technology, that it will allow you to put it in a couple of different ways, thematically, variety pack, standalone.

15811 So, at a philosophical level, I think what you would like to encourage is the offering of that service in as many different packages as possible. In terms of the number, I think Martha has already answered the minimum number of five services.

15812 COMMISSIONER WILLIAMS: Okay.

15813 In the area of independent production and the contribution to independent producers, it's unclear how much of Stornoway stated Canadian telecast commitment will be indicated to independent production as compared to in-house production.

15814 We note that you have budgeted 22 per cent of Canadian telecast expenses, rising to 39 per cent in year 7, to programming from independent producers. Will the rest be in-house production, say, for example, Stornoway productions?

15815 MS M. FUSCA: No. Our commitment to the production from Stornoway or in fact Cogeco with Carrefour would be the same for each channel. We would be making the same commitment -- in other words, less than 10 per cent would be coming from Stornoway.

15816 COMMISSIONER WILLIAMS: Less than 10 per cent.

15817 Okay. That completes my questions in the area of the dance channel.

15818 MS M. FUSCA: Commissioner Williams, would it be untoward to ask yours and the Chair's indulgence? We have with us today Sean Debidin, who came from Winnipeg, in the middle of choreographing a Disney movie. I just thought if we could just take 15 seconds to allow him to speak on behalf of, you know, the dance communities in this country. We are talking Saskatoon-like communities and Yukon and so on. Could we do that?

15819 COMMISSIONER WILLIAMS: I would hope, since he came from so far away from otherwise important activity, that he would take more than 15 seconds to do this.

--- Laughter / Rires

15820 MS M. FUSCA: Thank you ever so much.

15821 THE CHAIRPERSON: Anyone who can speak while dancing on Monday morning is welcome.

15822 MS M. FUSCA: Thank you.

15823 MR. DEBIDIN: I have a real unique position with the dance community in Canada. Several years ago I got frustrated by losing Canadian talent that would find their way to the States believing that they can only find work in the States. So I took it upon myself, packed up in my car and started driving across the country looking for talent. I discovered a community that is alive and well, that is screaming to be heard, seen and educated.

15824 I have continued to do this on my own time in the past three or four years and have now based myself -- even though I'm based out of Toronto, I pretty well have found a home in about 21 different communities across the country.

15825 So I'm a little tired from travelling right now, as I speak, but I feel that channels like The Dance Channel would give not only an opportunity for us to show our talents but also to educate the country about each other. People in Saskatoon know very little about people in Quebec when it comes to dance, when it comes to the cultural part of it, as well as the social and artistic part of it. I think it would help develop the companies and communities that turn to the government for help. They would be able to support themselves by having their profile raised and featured.

15826 I think one thing that I'm very, very passionate about is to keep our talent in Canada. I'm having a hard time sitting easy when we start bringing our American talent up here because we just haven't looked hard enough to find the talent in Canada.

15827 I believe the importance of this channel is underlined, that it wouldn't be seen for awhile but it would certainly have a tremendous impact on the Canadian arts community.

15828 Thank you.

15829 MS M. FUSCA: Thank you, Sean.

15830 COMMISSIONER WILLIAMS: Okay. On with the dog and pony show.

--- Laughter / Rires

15831 COMMISSIONER WILLIAMS: First I would like to talk about I guess just the area of synergy because of your partnerships. This, of course, would apply to all of your services, but I'm bringing up the question in this particular one.

15832 Stornoway has stated that:

15833 It adds that:

15834 Can I get you to expand on that a bit as to the synergies your partnership will lend to these channels?

15835 MS M. FUSCA: Absolutely. I would like Michel to add where I leave off. I will talk primarily about Stornoway.

15836 We have been around for 20 years. Ironically, but I suppose not surprisingly, we made our first entry into the business from the U.S. and back into Canada. We have been producing information, public affairs and social affairs programming since 1983. So we actually bring an incredible wealth of experience in the production and distribution of that product outside of this country. We have only managed to produce the type of programming that we have produced in this country because we were able to leverage our talent originally, and eventually our reputation, into the U.S. and into Europe and indeed Asia, so that we are very well known in Canada and abroad.

15837 In fact, when I think of people like Trina McQueen and Ivan Fecan, I actually think of them as my colleagues -- you know, we are talking about content -- and, again, with Jim Macdonald, and so on and so forth. So this is where we come from.

15838 As you know, when we are talking about attractiveness -- as we were with Madam Bertrand and Madam Wylie earlier -- when we were talking about attractiveness, I mean, we have the track record to prove that we have developed, produced and distributed attractive programming that other applicants have programmed in prime time to critical acclaim and high ratings, programming that has been launched at the United Nations, at the White House and here in Ottawa.

15839 So married to that -- and we are so delighted, I can't begin to tell you how delighted we are to be in partnership with Cogeco Radio-Television. I would like to hand it over to Michel who will talk about what they are bringing to this incredibly dynamic partnership.

15840 Michel.

15841 MR. CARTER: Thank you, Martha.

15842 Indeed we are very happy to be partnered with Martha and her team. They came to us with the idea and they were enthusiastic and they knew where they were going and it looked like for us a right fit.

15843 Some examples of synergies, we have been in broadcasting for now over 43 years. We have been close to our public in all of our regions and, therefore, we have produced news and public affairs for a number of years. We know what the public wants and we can go below the tip of the iceberg. We are used to that in our communities.

15844 Another example, we will start shooting the eighth season of a series called Pas si bête que ça for the TQS Network which talks about pets and animals and it is a very successful show on the TQS Network now for eight years.

15845 We will be producing, for the third year, another series called Plein Emploi for our regions of Sherbrooke and Trois-Rivières where we talk about work. This is done in collaboration with the various levels of government and we help people find jobs in the areas.

15846 In addition to that, to the production capabilities and the knowledge we have, we bring traffic and sales expertise as well as the use -- the environment of automated control room.

15847 So I think we are bringing lots of broadcasting, per se, experience to the partnership and we are delighted to be able to do that.

15848 MS M. FUSCA: I would just simply like to add that on the Internet -- and having had the privilege and the pleasure of working with Julia Walden and Nancy Smith on interactivity -- just three seconds on bragging for a moment.

15849 If you had the opportunity to really visit canadasbraindrain.ca as opposed to just simply watching it but actually participating in it, it is the most dynamic interactive Web site that I believe exists in this country.

15850 Each of the components you may have seen before, for example, you know, streaming video. We know that people like CHUM have streamed whole channels, so streaming video.

15851 We know that there are surveys that are being done. What we believe -- and we have Oleh here to discuss it if anybody is curious about it -- we believe that getting results in near real time is a very tricky and highly innovative business which we take advantage of on this site.

15852 We also have a chat discussion forum in there. We also have facts and factoids, you know, some fun stuff -- the price of an Oreo cookie in Canada versus the U.S., that sort of stuff. So there is a lot of fun.

15853 What is incredibly unique, okay, is the marriage. This is where we are really terrific. When you are talking about attractiveness, diversity and content, this is where we excel. This is where the other applicants come when they want attractive, dynamic programming that is wholly Canadian. This is where they come.

15854 So there isn't a Web site that has actually married all of these various components and made it attractive to, as you saw in the video, young kids and, you know, quite elderly individuals.

15855 So that is the end of my bragging.

15856 COMMISSIONER WILLIAMS: Well, I'm going to give you an opportunity to do a bit more.

15857 The Pet Network programmers will provide the tools and resources to allow users to build pet pages and link them through a series of pet communities to the pets portal.

15858 I guess I would like to spend a bit more time on Stornoway's plans for interactivity for The Pet Network.

15859 I'm going to take a look at your braindrain.ca whenever I get some free time one of the evenings this week just to take a look at it, but for purposes of this questioning I'm interested in how and what your plans are regarding The Pet Network.

15860 MR. GRAY: The biggest part of the plan is to connect pet owners with the channel in a number of ways, and I will ask Julia Walden to give you some more detail about what our specific plans are.

15861 MS WALDEN: Well, as you remember Bill's opening remarks about all of the Web sites and the particulars of the Web sites already built, so we are going to go with that. In other words, we are going to give something to that community and to that community's enthusiasm about their pets.

15862 So we are going to bundle tools or software so that pet owners can contribute to our Web site to make it their Web site.

15863 When I talk about tools I mean things like Photoshop, on a simple level. Give it to them at a discounted price or in a bundle.

15864 Another tool at a more advanced level could be an educational game which involves pets, animals, for a family household with a pet. It's a good learning tool, not just for children but also for adults.

15865 You were talking about mentoring, I mean there is such a thing as reverse mentoring as well so that the children in the family might bring their parents on-line and help them learn about the Web.

15866 We will review and recommend some of the best sites out there so that The Pet Networks portal will be a source of authoritative information, reliable information on the serious side.

15867 As digital television rolls out there is a lot of potential for things like auction programming, live auction programming for pet products beefed up with content, integrated with content.

15868 MR. GRAY: The other element of this, too, is the marketing potential both in the marriage -- in the marriage of the television and in the interactive side.

15869 Nancy has a comment or two.

15870 MS SMITH: What we see happening in the marketing community is, marketers are trying to adapt to the change where a lot of control that has really been in the hands of the broadcaster or the marketer is now shifting to the consumer. What is key in the future is to build relationships with the consumer and to be able to market to them in a way that isn't as passive, that it is in fact interactive.

15871 There are buzzwords like viral marketing and permission marketing, and what that really means is that I communicate an offer to you or an opportunity to you that you actually have told me you want to receive, that I am helping you in a way and that our dialogue is really something that is viewed not as an irritant and not as an interruption, but it is actually viewed as something that is welcome and helpful.

15872 So Pets is only one place where we can prove that the relationship we are building with our audience will help us to take a very leading role.

15873 COMMISSIONER WILLIAMS: Thank you, Ms Smith.

15874 We will now move into the area of nature of service.

15875 The Commission notes that you have included a range of drama programming in your program description. Could you give us an estimate of the weekly number of hours you propose to allocate towards drama programs? And would you be willing to accept a condition of license restricting you to a specific number of hours or percentage, as we worked on earlier?

15876 MR. GRAY: We would certainly accept 10 per cent in Category 7. And we would be willing to accept a condition of license to that effect and that the nature of the programming is programs that feature pets, stories that feature pets.

15877 COMMISSIONER WILLIAMS: Okay. Now I'm going to go into the area of your program schedule.

15878 Schedule 10 refers to the program Perfect Pet People as a Category 5(a) program, which is formal education and preschool. However, this subcategory has not been included in the proposed program categories. As with the other earlier, do you wish us to add this in for you?

15879 MR. GRAY: Same problem, same answer.

15880 COMMISSIONER WILLIAMS: Okay. Original Canadian programs. It is noted that you have identified a certain number of original Canadian programs in your program schedule. For clarification purposes, could you give us an estimate of what proportion of your program schedule these programs represent? For example, could you indicate the total number of original Canadian programs that you propose to broadcast on a weekly basis, excluding the repeats?

15881 MR. GRAY: I actually have numbers here on a larger basis than weekly. We were tabulating on an annual basis in terms of the number of hours. The number of original hours over the course of the term was -- is 7,400 approximately, which is about 1,100 in the first year and then it grows there according to our other formula.

15882 COMMISSIONER WILLIAMS: Okay. Contributions to independent producers. With regard to the partnering of the application, you have stated that you would accept a conditional licence that a Stornoway production may not appear on the Pet Network in the first window during the first year of the licence. Would you accept a similar condition of licence limiting programs production by les Productions Carrefour Inc.

15883 MR. GRAY: Yes.

15884 COMMISSIONER WILLIAMS: Okay. This concludes my questions on these four services. They are very interesting. I have enjoyed questioning you and your responses. I know my colleagues will have some questions on many of the different areas and, for sure, Commissioner Wilson may want to scout out the landscape of one of her pet areas of interest. It's an inside one there.

15885 I will pass it back to Chair Wylie now.

15886 THE CHAIRPERSON: Yes. This process is mainly to clarify things. I'm not that clear on this independent production. Your applications, two of your applications, talk about limiting Stornoway to 10 per cent. Two of your applications talk about that probably in one case will not or in the other case the applicant would not use or air productions first window in the first year.

15887 This is not at all what we have been speaking about this morning. It's quite different. I want to know what we are talking about in all applications. Is your commitment that there would be no more than 10 per cent of any window programming in any year of the licence that is produced by a company that is owned -- that is related, but by equity, with either of the partners in the application to the level of 10, anywhere up to 15 per cent? Is that your commitment in all four?

15888 MS M. FUSCA: Yes. And I'm sorry. We have been a little remiss in being as clear as we could have been. The two issues are in first window, just let it be known that across the board on all four channels you will not see in the first year a Stornoway production or one from Carrefour or any company related beyond -- related in any way, shape or form that would have a first window on any of these channels.

15889 THE CHAIRPERSON: Even if it fitted -- even if it did not cause you to go beyond the 10 per cent?

15890 MS M. FUSCA: Even so because we wanted to send out a signal to the independent production sector in the first instance, okay, that this was not going to be, okay, let's all gear up and get ready to go on these private companies to produce for these channels.

15891 Furthermore, we made it very clear with the signal that we would not have any more than 10 per cent on any channel that came from the existing businesses that have gotten together, Stornoway Productions and Carrefour, that would be shown on any of these channels ever and also would not be calculated from the moneys that we have allocated to the independent production sector.

15892 THE CHAIRPERSON: You are adding the word "existing". Presumably if there was such a condition, it would capture any further investment that there may be --

15893 MS M. FUSCA: M'hm.

15894 THE CHAIRPERSON: -- from a production company. Now, I'm glad it's to the production industry you want to send a message and not to us. There is a slight --

15895 MS M. FUSCA: We were just hoping you would notice.

15896 THE CHAIRPERSON: There is a slight contradiction, Mr. Carter, in your comments about the value -- you can abuse me of the -- disabuse me of the contradiction -- between saying that Cogeco, there's a value in having this partnership, so to speak, with Cogeco because of its experience and yet agreeing to limit its ability to provide programming in which it had a hand to 10 per cent.

15897 In what other ways would the synergies between the two companies be of value given this fairly restrictive position?

15898 MR. CARTER: We never entered into this partnership with a view to producing a lot of programming. First of all, currently Productions Carrefour produces exclusively in the French language.

15899 THE CHAIRPERSON: Except that -- unless you have some bilingual pets -- you referred to programming that will be quite suitable for the Pet Network that you are already producing and seemingly putting that forward as an advantage of the combination, which we may lose with a very restrictive condition of licence.

15900 MR. CARTER: Well, we don't feel that the condition of licence proposed here is restrictive to the point that it removes our interest to the channel. We are quite in agreement that we have to support the independent production sector.

15901 What we are bringing to the table is a lot of expertise and synergies with our existing traffic people and our existing sales organization people which we fully anticipate will collaborate with all of the four networks or any of them being licensed by the Commission.

15902 With respect to our production experience, I think we will be in a position to bring ideas to the consultative or advisory boards as to what works and what does not with respect to Pets or Work or we can bring -- could the Quebec view, for example, on the two solitudes that has been discussed previously? Those are the types of input that Cogeco and Carrefour can bring to the table.

15903 THE CHAIRPERSON: Commissioner Wilson.

15904 COMMISSIONER WILSON: The inside joke is that my dog's name is Scout. I would be a member of that semi-obsessed audience. Our Chair was laughing at me during your presentation on the Pet Network because I talk about my dog all the time.

15905 Before I venture into my question on my other pet area of interest, I just want to say that when I came out and looked at your tag line for the Pet Network, I had a really good laugh. I remember going through exercises developing tag lines. You want something that's obvious, that's memorable, that gives people a laugh and that says it all. I really enjoyed that.

15906 As Commissioner Williams noted, I do have some familiarity with the area of public affairs broadcasting and with the vernacular used to describe it vis-à-vis distinguishing it from what is already available in a system. In fact, I have written a lot of that vernacular myself over the years.

15907 In your opening remarks, you posed a number of rhetorical questions. On pages 8 and 9 you say:

and on all counts.

15908 I have to answer to myself "CPAC". One of the things that is really important for us in this whole exploration of digital licences is how to distinguish what is competitive and what is not and how to define direct competitiveness.

15909 I guess my first question is when we consider the issue of directly competitive, should we -- besides looking at the direct overlap of programming, should we be looking at such things as whether or not the channel has must carry status, the levels of Canadian content, the rate or the costs to the subscriber for the service and the presence of advertising?

15910 Should we be looking at those things to help us distinguish what is directly competitive and what is not?

15911 MR. GRAY: I think when it comes to CPAC, it is a bit of a different situation because technically, as you know, CPAC is not licensed as a specialty service.

15912 COMMISSIONER WILSON: Yes, I would argue that that could be called splitting hairs, it's still in the system. The programming is there regardless of the nature of the channel, but why don't you just address the substance of the direct competitiveness and leave that aside?

15913 MR. GRAY: Our view is that CPAC, while it does have programming that is of a similar nature as the kind of programming we are talking about on Issues, again its starting point, as I mentioned earlier, was, and arguably remains, capital to capital in nature.

15914 I take your point absolutely and agree with you about addressing the other elements that you raised, but also it's important to us -- the diversity of voices issue is very important. Nobody has a stranglehold on ideas -- nobody should have a monopoly on ideas, I should say -- and what we are offering here, we believe very strongly, is a channel that provides a new voice to social and public concerns.

15915 In our application and in our opening presentation, we referred to -- or tried to refer to the difference -- between public affairs and current affairs because we were trying to find words that would create the distinction. But it's difficult and it gets to be kind of semantical.

15916 So we sort of avoided getting too far into it. It's the content that matters to us, as we have said, with all of our channels, but in this one in particular it's how we approach it and what we do with it, how we carry a topic for the long haul whether it has spun off something we have found or it's something that has grown from the ground up that we discovered through our audience and we address them, the concerns that we raise, through a variety of program types and a variety of formats.

15917 COMMISSIONER WILSON: When you say "a new voice", are you suggesting -- I mean, of course, in the journalistic world and in the political world there has been lots of discussion about whether or not individual broadcasters have a particular voice, but when you talk about bringing a new voice to the area of public affairs broadcasting, are you suggesting that somehow the ownership of the channel has an impact on the voice of the channel because that seems to me to be what you are saying, that no one has a stranglehold on the voice.

15918 I would argue that good public affairs programming of which there is a significant amount in the system already, not just on CPAC, but on NewsWorld and RDI and the conventional broadcasters, good public affairs programming has the voice of the people in it and that is the voice that is communicated.

15919 MR. GRAY: I didn't mean to create any sense that there was an editorial -- to say anything in an editorial sense. It is absolutely the voice of the people and that is what we see The Issues Channel being and for 24 hours a day, seven days a week throughout the year that's what it is. It's not partly something else and partly public affairs. It's fully public affairs.

15920 We want a variety of voices, we want opinions, we want opposing opinions and we think that the system does not have a channel that exclusively deals with that and it does bring a new voice, not our voice, not our editorial voice. We don't have that, that's why we have our consultative committee and our advisory committee to ensure that we have balance.

15921 But it is new voices that were in the system that raise concerns that are not necessarily being dealt with.

15922 MS M. FUSCA: May I just --?

15923 COMMISSIONER WILSON: By all means.

15924 MS M. FUSCA: Thank you.

15925 The Issues Channel was my idea and it came actually from a conversation you and I had a number of years ago when --

15926 COMMISSIONER WILSON: Great minds think alike.

15927 MS M. FUSCA: -- I was here for the first time in, say, 18 years complaining about CBC and I specifically stated at that point that I firmly believed that there were very few people in the City of Toronto who were determining what we got on the airwaves, and I decided, since I wanted a channel such as this one since 1985 anyway, that I should put my money where my mouth is and go into it on our own.

15928 If I firmly did not believe that we could definitely -- we needed this channel, that we could definitely use this channel, that this channel is definitely in the public interest as, you know, hundreds of people who have put applications also believe, we wouldn't be here frankly. We would have come up with perhaps another subject or left it at three -- the other three.

15929 So that is where we come from to begin with, but furthermore in terms of -- you brought up some very key words that are actually in our application: Context, ongoing and diversity. I think that the fundamental difference between CPAC and what we are proposing, it's not so much that CPAC does not have ongoing, you know, programming of the gabble to gabble nature on an issue, but it pretty much, let's face it, begins where it begins and ends where it ends.

15930 When we talk about ongoing, we mean it in a very different fundamental critical way. Our stories don't begin just because something is happening in Parliament, or just because it's on in the news which is pretty much what you are getting, not just on NewsWorld and CBC and CPAC. That is not where we are coming from at all.

15931 Ongoing begins when we believe, as programmers, when we believe and our partners, independent producers, believe a subject merits attention. When the public believes, and often times you know, you know, all right, that the public is very concerned about certain things, and by George, try to get a little press on it. Good luck!

15932 That is where we are coming from. We will not drop that issue simply because it is not in the news, simply because it's not on Parliament Hill.

15933 Furthermore, we also believe that the time for dialogue and conversation is not when a subject is necessarily hot. I mean, it's the worst time to be talking to unions particularly in education or health care when everybody is up in arms. If you really want good, solid, honest, truthful, open dialogue, it's before, it's after, not during a crisis. So we are not into crises.

15934 I was in the room when Trina McQueen and Maria Mironowitz so many years ago pitched us, as independent producers, for NewsWorld and I specifically was told, and I firmly believe to this day that NewsWorld was meant to be Canada's version of CNN with some documentary specials, and so on and so forth. That is pretty much what NewsWorld has been doing and adding a little eclectic mix of general interest stuff. Totally cool, totally fine.

15935 This is not what The Issues Channel is about and I tried earlier without boring you to give you a sense, you know, with pesticides and with canadasbraindrain.ca, of the manner in which we will be presenting these issues to you and I can only reiterate that with context, what context does really CPAC provide? What context does NewsWorld, CBC or indeed the very nominal amount which they have been purchasing primarily from producers like Stornoway or the other conventional broadcasters producing? I suggest it's tiny.

15936 But in terms of context, there really isn't any contest. There is an enormous amount of confusion. There is a documentary, yes, it comes and it goes. There is a conversation, yes, it comes and it goes. Where is the input? Where is the interactivity? And I will stop there. It's just that I feel so passionate about this and I feel desperate in my effort to try to make you appreciate, if I can, that it is different. We have no desire to be competing with CPAC on any level, or NewsWorld.

15937 COMMISSIONER WILSON: I hope you will appreciate that we are just trying to find an approach to the notion of directly competitiveness.

15938 MS M. FUSCA: Absolutely.

15939 COMMISSIONER WILSON: When you are talking about doing a public affairs program, there is already a channel doing that and many other channels doing pieces of that.

15940 So thank you for your views.

15941 MS M. FUSCA: You are welcome.

15942 THE CHAIRPERSON: Counsel.

15943 MR. McCALLUM: I believe in the discussion on The Pet Channel you said that you would be willing to accept a condition of licence of 10 per cent maximum drama programming in the schedule. Is that correct?

15944 MR. GRAY: Yes.

15945 MR. McCALLUM: I would like to ask just the same question for @work.ca. A couple of questions were asked to you about sitcom or drama. I think there is Category 7(b), 7(a) and 7(g) that you have said you would like to have in the program categories.

15946 I am wondering if there could be a limit to Category 7 in @work.ca.

15947 MS M. FUSCA: Yes.

15948 MR. McCALLUM: And would that same limit of 10 per cent that was proposed in the other one be appropriate?

15949 MS M. FUSCA: Absolutely.

15950 MR. McCALLUM: For the three set categories?

15951 MS M. FUSCA: Yes.

15952 MR. McCALLUM: Thank you.

15953 Similarly, with Category 5(a) -- and again I think it was both @work.ca and The Pet Network -- you wish to add it to the proposed nature of service, but again I would like to as the question of would there be any limits to programming coming from that category?

15954 MS M. FUSCA: We believe that we can live with 10 per cent.

15955 MR. McCALLUM: So again, 10 per cent would be the proposed condition of licence if the Commission saw fit to impose it for those two applications.

15956 MS M. FUSCA: Yes.

15957 MR. McCALLUM: Thank you.

15958 With respect to the independent production, in each of your applications you stated that a certain percentage of your Canadian telecast expenditures will be for independent producers. For example, at page 180 of the Dance Channel application, you stated that 22 per cent of your Canadian telecast expenses, rising to 39 per cent in year seven, would go to programming from independent producers.

15959 My question is: Where will the remainder go?

15960 MS M. FUSCA: The remainder will go to their in-house production, the acquisition of Canadian-produced programming that we did not put in the independent production category that could be coming from community channels, places like TVOntario.

15961 MR. McCALLUM: So by in-house, what you mean of course, in my understanding, is the company to be incorporated, which has something like 49 per cent Stornoway and 49 per cent Cogeco.

15962 Is that what the in-house means in that context?

15963 MR. GRAY: In-house means what it would mean for any broadcaster. The Pet Network will have in-house production. The Pet Network will have staff, cameramen, studios and will indeed produce in-house owned by The Pet Network material. That is what we are referring to there.

15964 MR. McCALLUM: I think we are seeing eye to eye on that issue.

15965 MR. GRAY: Yes.

15966 MR. McCALLUM: Thank you. One final question, and it is a clarification question again.

15967 At page 17 of your presentation this morning, referring to The Dance Network, what you said was over seven years original Canadian production represents 64 per cent of total programming expenditures.

15968 I wondered if you had a similar amount or a similar percentage of original Canadian production for the other three channels.

15969 MS M. FUSCA: Yes, we do. Would you like them now?

15970 MR. McCALLUM: If you have them handy.

15971 MS M. FUSCA: Certainly.

15972 MR. GRAY: They are just scattered in a couple of places.

15973 You are referring to the percentage of --

15974 MS M. FUSCA: I'm sorry. Actually, they are on our power point. Could we get that back?

--- Pause / Pause

15975 MR. GRAY: There you go.

15976 MR. McCALLUM: I don't think I can read it.

15977 MR. GRAY: So Issues is 76 per cent.

15978 MS M. FUSCA: And I know that @work.ca is actually 77 per cent.

15979 MR. McCALLUM: So that leaves, I think, The Pet Network.

15980 MS M. FUSCA: It is 64 per cent on The Dance Channel. We knew that.

15981 MR. GRAY: And 78 per cent for Pets.

15982 MR. McCALLUM: Thank you.

15983 Thank you, Madam Chair.

15984 THE CHAIRPERSON: Commissioner Williams has another question.

15985 COMMISSIONER WILLIAMS: This is not so much a question as a light-hearted comment, I guess.

15986 When we came into this this morning, we had come, sit and stay in good company with television that moves us about our country and our ideas.

15987 Once again, I would like to thank Ms Fusca and the Stornoway panel for their presentations and answers to our questions this morning. You have certainly made our work easier, as we helped you dance your way through your pet issues with us as they relate to proposed Category 1 services. It has been a good morning. Thank you very much.

15988 THE CHAIRPERSON: We have some budding producers here.

--- Laughter / Rires

15989 THE CHAIRPERSON: We are willing to sit and stay a little longer and to give you a few minutes to wrap up, Ms Fusca or any of your colleagues, as we usually do. This is the part where you answer questions we didn't ask.

15990 MS M. FUSCA: Thank you. Having been a sweating bullet since last Monday when I watched everybody else, you are actually a lot more fun to work with than I ever imagined.

15991 THE CHAIRPERSON: You mean we don't look fun on TV?

--- Laughter / Rires

15992 MS M. FUSCA: It is just more fun being interactive with you instead of watching from a distance.

15993 Madam Chair and Commissioners, our livelihood has revolved around original programming, attractive and stimulating content that Canadians like to watch. We are entrepreneurs who love turning ideas into real programs that make a difference.

15994 We understand the value of creativeness. We appreciate the meaning of risk. We can relate to independent producers, because we have been in the independent business for so many years and we thrive on new challenges. This is why we are so thrilled by your call for new digital services and why we have responded to your call with so much enthusiasm and commitment.

15995 We have come to you with four highly original, distinctive service proposals that are ideal complements to the range of Canadian television services that we have now; that are solid building blocks for new digital service packages and the growth of digital and interactive services in the years to come; that make outstanding contributions to Canadian programming; that are clearly desirable, attractive and affordable to Canadian households; that are backed by the resources required to make them succeed and make strong business sense.

15996 We have come to you with the endorsement of Canadians from all regions of the country, from all walks of life, and from diverse origins, as evidenced by the hundreds of supporting interventions on file.

15997 We have come to you with significant prior broadcasting distributor support, as evidenced by our agreement with CCSA.

15998 Finally, but not least, we have come to you as a new voice in the assembly of Canadian specialty broadcasting because we trust that you will license based on merit, not just tenure.

15999 In this regard, Category 1 digital licences provide a unique opportunity to bring new players into the Canadian broadcasting system without detracting from any of the existing players.

16000 Give us our chance to step into the ring like the established players have had in the past, and we will make you proud. Thank you so much for hearing us today and for carrying out this complex but exciting process to provide new avenues of communication to Canadians in the digital world.

16001 Merci beaucoup, merci beaucoup.

16002 THE CHAIRPERSON: Thank you, Ms Fusca and your team. We will see you back with the same enthusiasm, we hope, in the next phase of the hearing and eventually in Phase IV with your exam in hand.

16003 MS M. FUSCA: Thank you.

16004 THE CHAIRPERSON: We will adjourn for lunch, considering the hour, and treat ourselves to 15 minutes more by coming back at two. We will have a slightly longer lunch today.

16005 So we will resume at 2 o'clock with the Pelmorex application.

16006 Nous reprendrons à deux heures avec la demande de Pelmorex. Merci.

--- Upon recessing at 1215 / Suspension à 1215

--- Upon resuming at 1400 / Reprise à 1400

16007 LA PRÉSIDENTE: Rebienvenue à notre audience.

16008 Monsieur le Secrétaire, s'il vous plaît. Mr. Secretary, please.

16009 MR. CUSSONS: Thank you, Madam Chair.

16010 We will now hear an application by the Pelmorex Leisure Network Inc. for a new Category 1 service to be called the Leisure Network, L-NET.

16011 For this presentation, 20 minutes maximum is allowed. We have Mr. Morrissette and colleagues.

PRESENTATION / PRÉSENTATION

16012 MR. MORRISSETTE: Thank you, Mr. Secretary.

16013 My name is Pierre Morrissette, and I am the President and CEO of the Pelmorex Leisure Network Inc.

16014 With me today, starting on my immediate right, is: Paul Temple, our Senior Vice-President, Corporate Development; on Paul's right is Basia Ujejska, our Director of Programming; on my left is Luc Perreault, Vice-President, Affiliate and Government Relations.

16015 Moving to the second row, immediately behind Luc is: Alysia Charlton, Vice-President, Finance; to Alysia's right, Taylor Emerson, Manager of Interactive Television & Commercial Services; and, finally, on Taylor's right, Jean-Pierre Boulanger, our Senior Vice-President, Technology.

16016 Madam Chair, Madam Chairperson, Commissioners, as several applicants have already noted, this hearing is about the future of broadcasting in Canada. The Pelmorex team is delighted to have this opportunity to share with you today our vision of the digital future of broadcasting. With your approval of this application, we will start making that future a reality by launching an exciting new interactive specialty television service to be known as L-NET: The Leisure Network.

16017 Several applicants at this hearing are proposing travel channels of one sort or the other. We agree with all of the consumer research clearly demonstrating that one of the most attractive new specialty services for digital distribution would be a service offering relevant, up-to-date travel and leisure programming. L-NET will offer all of that, but at the same time it will offer much, much more.

16018 While travel to distant locations is undoubtedly an important part of leisure activities for some people, the fact remains that most Canadians spend their leisure time in activities near their homes: attending a concert, visiting a museum, going on a day trip to a country fair, or simply exploring a different neighbourhood or nearby community. L-NET is designed to meet the real day-to-day needs of Canadian viewers, helping them to plan the optimal use of their leisure time.

16019 L-NET will be an authoritative Canadian source for leisure and travel information programming, showcasing the wide variety of recreational, cultural, travel and tourism opportunities available in all parts of Canada. Viewers will discover interesting people, places, sights, sounds and activities in their own neighbourhood, across the country and around the world. It will help viewers to plan their day, their weekend, the next few weeks or months, their next trip or vacation.

16020 L-NET will also incorporate a strong interactive element, providing viewers with the opportunity to personalize additional content on demand. Through interactivity, a viewer will be able to get more information, events, transportation schedules, show times and so on. Ultimately, viewers will be able to access supplementary local and regional content to meet their individual needs. Our innovative interactive elements and programming concepts will greatly enhance the value of the service.

16021 Why are we convinced that L-NET is the best choice for a new programming service to meet the travel and leisure-related needs of Canadians? We believe that there are several reasons, but let's focus on three.

16022 First, our expertise is in the provision of multimedia information services that meet the day-to-day needs of Canadians, and this is something we do very well. Pelmorex operates two of the most successful specialty services in Canada: The Weather Network and MétéoMédia. We have an established track record in operating national specialty services with regional and local content that is constantly changing and updated 24 hours a day. We know how to acquire, process and deliver content, using several different technology platforms. Our team is experienced, knowledgeable and highly competent. L-NET fits perfectly with our vision and expertise and its format is a natural complement to our existing specialty services.

16023 Second, Pelmorex continues to be something that is increasingly rare in the Canadian broadcasting system -- a company that is 100 per cent independent in its corporate structure. We do not have ownership ties or corporate links to broadcasting distribution undertakings, or to conventional television broadcasters, or to production companies, nor do we seek such ownership ties.

16024 Pelmorex is independent in every sense of the word. We do not have conflicting priorities when developing our strategies. We are able to deal in an equitable manner with all sectors of the Canadian broadcasting system.

16025 Third, and most importantly, we are convinced that the L-NET programming concept will provide tremendous value to Canadians and strongly support the Commission's objectives in licensing new digital services. L-NET will be a highly attractive service that will engage both casual viewers and those more involved in the search for relevant information to meet their needs. We believe that its interactive capabilities will be compelling and will in fact help spur the continued evolution of interactive broadcasting technology and its use by Canadians.

16026 Now, let's take a closer look at L-NET: The Leisure Network.

--- Video presentation / Présentation vidéo

16027 MS UJEJSKA: Now that you have seen a bit of the style and flavour of L-NET, I would like to take a few minutes to review some of L-NET's programming highlights and contributions to Canadian content and to the independent production sector.

16028 L-NET will be unmistakably Canadian in content and style from the first day of operation. We will broadcast a minimum 50 per cent Canadian content in year 1, increasing 70 per cent in years 6 and 7.

16029 A significant portion of our schedule will be devoted to the broadcast of original programming provided by the independent production sector. This will represent in excess of 900 hours of programming in the first year alone. Because our programming will look at events and activities across Canada, this investment will primarily benefit the smaller independent producers in all regions of the country, rather than just a few larger production houses in Toronto, Vancouver and Montreal.

16030 Some examples of programming that we will be commissioning from independent producers:

16031 Canadian Bed & Breakfasts. These are recommendations, reviews and features on B&Bs for local weekend trips and for longer vacations, including features on other things to do and see while you are staying at the B&B.

16032 Travel Arts is where to go to enjoy the arts, including galleries, museums and special presentations. The program would also include interviews and reviews from people involved in the arts in Canada. Interactivity would enable viewers to access additional material on specific art shows, galleries and displaying artists, and video clips of displays featured in the program.

16033 Campfire Confidential. This is about camping in Canada's great outdoors, with recommendations from experts on camping trips and activities. Interactivity would provide viewers with the ability to access detailed maps, campsite listings and reservations, information about camping equipment, and so on.

16034 Our in-house productions include This Weekend, a weekly update of various events and special presentations with reviews and suggestions for what to do for the coming weekend. Another in-house production, Festivals, will feature highlights, interviews and details on what to do at large events and small events, from the Montreal Jazz Festival to the Neepawa Lily Festival in Manitoba. Interactivity for these programs would allow viewers to verify schedules, dates and ticket prices, and to make ticket reservations on line. We will make extensive use of independent producers for our in-house productions, as we do now for The Weather Network and MétéoMédia, further enhancing our contribution to this sector.

16035 In total, original Canadian productions, whether produced in house or by independent producers, would amount to over 1,500 hours in the first year alone.

16036 We are pleased by the support that our Canadian programming proposals have received, as evidenced by the numerous supporting interventions submitted by independent producers. They understand the opportunities that L-NET will present.

16037 We are equally pleased by the support and interest expressed by festival and special event organizers in all parts of Canada, such as the Craft Council of Newfoundland and Labrador, and the Pacific National Exhibit in Vancouver, the Midway Lake Music Festival in Fort McPherson in the Northwest Territories. These people all took the time to state their support for our application, as did many others. They clearly see L-NET as an excellent way to make themselves better known to the rest of Canada. The reflection of Canada's cultural diversity to Canadians is an important part of what we are trying to achieve at L-NET.

16038 Our programming schedule will be rounded out by the best in foreign-acquired travel and leisure-related programming from around the world. We are particularly enthusiastic about partnering with the U.K.-based travel channel, which serves almost 7 million cable and satellite subscribers throughout the U.K., continental Europe and Africa. This partnership will provide us with an opportunity to showcase top-quality international programming on L-NET and to enter into co-productions that will provide a Canadian perspective for international travellers. It will also provide new export opportunities for Canadian programming produced by the independent production sector.

16039 MR. TEMPLE: In talking about the programs that will be included on our schedule, Basia has briefly touched on some of the enhanced services that could be made available through interactive capability. The deployment of a fully interactive service is a central part of our programming strategy and it is ideally suited to the leisure and travel format.

16040 We believe that interactivity will unlock the full value of L-NET and we have developed an aggressive strategy that will make full use of the interactive functionality of set-top boxes as subsequent generations are deployed by distributors. At launch, it is likely that interactive capabilities will be limited to our companion Web site, accessible by separate PCs or by browser-enabled set-top boxes.

16041 As indicated by Rogers Media during their appearance before you last week, we expect that Level 2 interactivity, providing access to on-screen menus and additional pages of text and graphical information, will become possible within a few months of launch and certainly within the first two years of operation. At this point, interactive capabilities, similar to those illustrated in our video presentation a few minutes ago, will be available and fully implemented on L-NET.

16042 Finally, before the end of the license term, probably by the fifth year, we are confident that increasing functionality in the distribution networks and set-top boxes will make it possible for viewers to access rich multimedia content, including full motion video from the L-NET servers, to supplement the content on the main service. In this third stage, the notion of a virtual channel whereby viewers can readily personalize individual viewing experiences becomes a reality.

16043 In developing the L-NET concept, Pelmorex has designed a service that will evolve as distribution technologies evolve. Pelmorex is a leader in applying technology to the creation of innovative programming services and we are confident in our ability to lead the way in the development of interactive broadcasting in Canada.

16044 MR. MORRISSETTE: Madam Chair and Commissioners, I hope that in the last few minutes we have been able to convey our enthusiasm for L-NET and our conviction that Pelmorex is the right company to bring this service to the public.

16045 With its emphasis on meeting the needs of Canadians concerning information about leisure activities, L-NET will be more than just a travel channel. It will be very much "Canada-focused" in its programming and approach, meeting or exceeding all CRTC requirements. It will make a strong contribution to the independent production sector, particularly the smaller regional producers who don't always have access to the Canadian broadcasting system.

16046 Pelmorex is a creative, innovative company with a first-rate team and a history of achievement. We have made The Weather Network and MétéoMédia into Canadian success stories. We have developed two of the most popular Web sites in Canada. We have developed innovative means of delivering content, using the Internet, print, radio, television and wireless.

16047 We now want to apply our creativity and innovation to the development of a new Canadian success story, L-NET: The Leisure Network.

16048 I thank you for your attention, and we look forward to your questions.

16049 THE CHAIRPERSON: Thank you, Mr. Morrissette and your team.

16050 Commissioner Demers, please.

16051 COMMISSIONER DEMERS: Thank you, Madam Chair.

16052 Monsieur, bonjour, mesdames.

16053 As you have listened to us in the last few days, I will be starting with general questions and then get into more details on your application.

16054 The first question is, of course, on the selection criteria.

16055 As you will recall, the Commission published some of the selection criteria, namely for Category 1: Canadian programming, contribution to program diversity, attractiveness, demand and use of interactivity.

16056 The question to you to open this discussion is: What criteria do you think are most important in licensing Category 1 services?

16057 MR. MORRISSETTE: Thank you, Mr. Commissioner.

16058 I guess initially I would like to say that we view all criteria as being significant and relevant to the decisions faced by the Commission in licensing the tier 1 services.

16059 However, having said that, we do identify two particular criteria which, in our view, stand out.

16060 Firstly, the attractiveness of the service has to be one of the top reasons for licensing a proposed service. By attractiveness we mean the contribution that this service will make in terms of showcasing Canadian programming produced for the Canadian market across Canada, Canadian audience. It is definitely an area that is of particular importance.

16061 Involved in that, of course, it involves support for Canadian independent production. It entails also elements of diversity. How unique is this service? How differentiated is it from anything else that is available in the system today? But also, what appeal would it have to the largest proportion of Canadian viewers out there?

16062 The second criteria that we view as being extremely important is one that applies to interactivity. With the arrival of digital distribution capabilities in Canada, this opens up all kinds of new opportunities for the Canadian broadcasting system and one of those main opportunities is the deployment of enhanced interactive television. This will enable viewers to ultimately, as digital distribution evolves, personalize programming on demand, which is a huge new value added for the viewer across Canada.

16063 In terms of interactivity, there is no question that our particular service as an entertaining information service is ideally suited for the deployment of interactivity. Our experience with The Weather Network and MétéoMédia, also an entertaining, interesting information service, is that these types of services for which the information is constantly changing and for which it impacts on people's lives and daily needs, that these kinds of information services are ideally suited for enhanced interactive television.

16064 When we are talking about L-NET, which is a service intended to meet the needs of Canadians in terms of optimizing the use of their precious time off, their leisure time, to have a location or a service whereby they can access all the relevant information that goes into their decision-making in this regard, that is where we see that the application of enhanced interactive television greatly complementing the core television service represents a significant opportunity. A company's ability and experience and expertise in leading the way and fully optimizing the opportunities offered by interactivity is a key criteria.

16065 COMMISSIONER DEMERS: Thank you.

16066 Maybe on your second criteria, interactivity. At the moment you probably are aware of the discussion we had last week and today. Would you be able to offer the interactivity you described in different steps in your presentation? Where are we at the moment and what would you be able to provide when the service goes on the air?

16067 MR. MORRISSETTE: Well, I think the answer to that question is twofold: One that deals with our particular company and our state of readiness and, secondly, the distribution system in Canada and its particular state of readiness and its evolution over time.

16068 Let me start first with the second part of it, and that is the distribution state of readiness.

16069 As we indicated in our oral presentation, we see this evolution taking place in three different phases.

16070 The first phase is one where the interactive capabilities will be mostly Web-based.

16071 However, as time progresses, a few months after launch, perhaps by year two, we expect the second phase to be available, and that is the availability of graphical, text, image-type of information that the viewer will be able to navigate through by a menu to access the information and initiate the process of personalizing information on demand.

16072 The third phase, which we view as perhaps more towards the fifth year, the middle part of our proposed licence term, would see the full implementation of interactivities, the deployment of streaming video and audio capabilities to accompany the ability to navigate through a guide or a menu rather, that would enable people to access a multitude of information on demand.

16073 It's an evolutionary process. We have developed our business plan not as a snapshot at a point in time at launch date, but over the full seven year term that we expect -- that we would hope for the initial licence term.

16074 Our company, to turn to the first part that I was referring to before, has been thinking interactivity since the day in 1989 when I founded Pelmorex. At that particular time, our vision was that the broadcasting system in Canada would evolve to the point where we would witness the convergence of a PC type of information and programming and television type of information and programming, resulting in interactive television some day.

16075 Since that time we have been constantly incorporating strategies to make that happen. Our involvement with interactivity goes back at least ten years. I remember in the early nineties when Pelmorex acquired MétéoMédia and The Weather Network. At that time we already had relationships with Vidéotron in providing interactive content for the Videoway system.

16076 In 1994 when Rogers was in the very early stages, experimenting with interactive television, with its Rogers wave service in the Newmarket area. We were one of the few programmers that was providing interactive weather content for that service.

16077 When we were involved in Europe in the mid nineties, we had a significant minority investment in Lachaîne Météo. Its prime distributor happened to be Canal Satellite in France. The success of Lachaîne Météo and Canal Satellite was dependent or attributable to the extensive use of enhanced interactive television information made available by Lachaîne Météo. This is five or six years ago.

16078 Since that time we have also had a fair bit of experience in terms of developing two of the most popular Web sites in Canada. One of our minority shareholders in Pelmorex is The Weather Channel who are a leader in the States in all trials and in the early deployment of interactive television. We share many experiences together in terms of planning our strategies to be a leader in this area.

16079 Just recently we entered into an agreement with Vidéotron to not only supply on behalf of Météo, The Weather Network, interactive content for an enhanced television capability off of our core channels, but also to supply weather content for their cable portal or, the buzzword is walled garden, I guess. This is an agreement that we have already in place and are working with them in terms of the deployment.

16080 We are also talking to basically all the major BDUs in terms of implementing this. The bottom line, we are ready. We have been looking forward to this day for a long time. In fact, we are ready today to launch a Phase III service capability. We are going to have to wait a while because we are ahead of the distribution marketplace, ahead of the technology in the marketplace, but everything that we are doing today is to be there when that happens and also to try and play -- strive to play a leading role in making that happen.

16081 COMMISSIONER DEMERS: Thank you. We might go on to another point. It's the matter of implementing the service. The question is a general one. Should the Commission impose a minimum amount of time by which a Category 1, like the one you are here applying for, must implement its service.

16082 MR. MORRISSETTE: We have witnessed through discussion with other applicants the timing of next September 1. That has been the assumption of our business plan all along. I would like Luc to perhaps amplify that point.

16083 MR. PERREAULT: Yes, sir. Commissioner Demers, indeed we would be ready for a September 1, 2001, launch. As discussed by other applicants, we do believe that launching all of the Category 1 services together as a group would be a very powerful marketing tool.

16084 If we look at the history of launching Canadian pay specialty services, bundling has always been a quality factor in the relationship between the programmers and the distributors and consumers. If we go back to the early eighties when TSN and MuchMusic were offered stand alone, à la carte, these services didn't do very, very well in terms of penetration.

16085 When they started to be bundled with pay services and U.S. superstations, they did a lot better. When tiering occurred and packaging options were augmented, the penetration raised.

16086 If we look at the U.S. experience right now, major operators in the U.S. are bundling digital services. Recently operators such as AT&T and Comcast and Cox and Adlephia Communications have all gone to plans whereby they are packaging eight, ten, twelve, fifteen digital services with a set top box, adding to that some digital music services and a small markup and they are extremely successful.

16087 Their plans are to install, and if we go to the Cable Labs recent press release, to install another five million set top boxes in the upcoming fiscal year.

16088 It does show that a common startup date with a strong marketing strategy, which we are fully prepared to work with the BDUs in launching the service, will ensure a very high penetration rate and success in the launch of the services.

16089 COMMISSIONER DEMERS: Thank you. You would agree for the Commission to establish a minimum amount of time to launch these services.

16090 MR. MORRISSETTE: Yes. We think that's fully appropriate.

16091 COMMISSIONER DEMERS: Thank you. Would you have comments in relation to the launch of Category 1 in relation to Category 2 services as to the launching date?

16092 MR. MORRISSETTE: I will ask Paul Temple to respond to that question.

16093 MR. TEMPLE: I think it's clear to us in the Commission's call that the obligations of Category 2 services are significantly less than those of Category 1. There's no guarantee in terms of distribution at all. We certainly run the risk of when would they all be ready. Some might, some might not, some may have distribution agreements, some may not. We run the risk of jeopardizing the kind of launches as Luc suggested earlier.

16094 I think our preference certainly would be when the Category 1 services are ready, presumably in the fall of 2001, we launch the services. To the extent Category 2s are able to go, that's great, but I think we would be concerned if the launch was delayed or extended in any way waiting for Category 2 services.

16095 COMMISSIONER DEMERS: All right. It's not clear. Maybe I didn't understand your answer. First, your opinion would be to launch Category 1. Is that what you said?

16096 MR. TEMPLE: Yes. I think your earlier question was should the Commission consider a common launch or a launch date, whether that's a condition of licence or an expectation in its decision and we would agree with that.

16097 In terms of having the same kind of criteria established for Category 2, we don't believe that's appropriate. We would not want the launch of Category 1 services to be in any way jeopardized by having to wait for Category 2 services to be ready for launch.

16098 COMMISSIONER DEMERS: What I understand from your answer is that Category 2 in your view should be launched after Category 1.

16099 MR. TEMPLE: We would not want to see Category 2 launched before Category 1. They could launch with Category 1s or they could launch whenever they are ready, or they may never launch.

16100 COMMISSIONER DEMERS: Thank you.

16101 Now, on another point, and here again from a general point of view, independent production, because you have made oral comments on this so the question is more of a general nature and you have heard these questions probably being asked to other applicants.

16102 Do you think the Commission should require digital services to make specific commitments to independent production -- independent producers?

16103 MR. MORRISSETTE: The answer is yes, and that is a core feature of our proposal, our strategy and it has been our experience with our existing services.

16104 Paul, is there anything you want to add to that?

16105 MR. TEMPLE: I suspect you will be getting into our specific commitments, but just certainly in terms of a general policy I think, yes, there should be a commitment by Category 1 applicants. They are receiving preferential treatment in terms of distribution, so I think that there should be an obligation on their part.

16106 COMMISSIONER DEMERS: Okay, because I was to ask why and I think you brought some reasons why.

16107 You have made certain commitments to independent production. For the purpose of those commitments, what do you mean by independent producer?

16108 MR. MORRISSETTE: Well, given our role as an independent specialty television broadcaster in Canada, our status as an independent specialty television service in Canada, we view an independent producer to be a producer in which we have no ownership.

16109 COMMISSIONER DEMERS: This would be of a general nature, of a statement, because I understand you are not affiliated to any production organization.

16110 MR. MORRISSETTE: That's correct.

16111 COMMISSIONER DEMERS: Because you made a statement to that effect. So an independent in your view is an independent with no strings attached.

16112 MR. MORRISSETTE: Just the way we are.

16113 COMMISSIONER DEMERS: Thank you.

16114 Do you have a view as to what is an affiliated producer?

16115 MR. MORRISSETTE: Well, an affiliated producer is one in which there are ownership ties and it could be a wholly-owned subsidiary or it could be a farm in which, or an organization in which you have a meaningful minority interest.

16116 Now, one could debate, I guess, the level of ownership that applies. You know, it could be anywhere from 10 per cent to 49 per cent, but it's in terms of a minority position. So it's one basically in which there is ownership ties.

16117 COMMISSIONER DEMERS: Thank you.

16118 Now, I will have a few questions of a specific nature on your application. The first one is on the nature of service. While most of the programs described in your Schedule 10 would be derived from Category 3, which is reporting in actualities, the definition of the nature of service does not include this category. So the question is: Should this category be included in the definition of the nature of service?

16119 MR. MORRISSETTE: I will ask Baisa to address that question.

16120 COMMISSIONER DEMERS: I imagine you need to have Schedule 10, unless you knew the question was coming.

16121 MS UJEJSKA: We anticipated the question. Our focus at L-NET is we are very focused with 75 per cent of our station dedicated to Categories 5(b) and 1 and 11 taking 25 per cent up to maximum 15 per cent from each of those categories.

16122 COMMISSIONER DEMERS: But on Category 3, would you have comments?

16123 MS UJEJSKA: That is not included in our application. We are focused just on these three, Categories 5(b), 1 and 11.

16124 COMMISSIONER DEMERS: Thank you.

16125 Original Canadian programs. You provided some figures in your oral presentation, but maybe we can look at it from a different point of view.

16126 Could you please give us an estimate of the total amount of original Canadian production you intend to do?

16127 MS UJEJSKA: In terms of ours?

16128 COMMISSIONER DEMERS: Yes.

16129 MS UJEJSKA: We will be doing a total of 1,508 in the first year.

16130 COMMISSIONER DEMERS: Okay.

16131 MS UJEJSKA: I could break this down for you, if you would like.

16132 COMMISSIONER DEMERS: Please.

16133 MS UJEJSKA: In terms of co-production with L-NET, we have 572 hours in the first year and independents amount to 936 hours.

16134 COMMISSIONER DEMERS: Okay. Thank you.

16135 Competition. Would you consider Exploration Network, that was the application filed by CTV, to be a competitor to your application?

16136 MR. MORRISSETTE: No, we do not.

16137 COMMISSIONER DEMERS: Thank you.

16138 Are the services sufficiently distinct that the Commission could licence the two in your view?

16139 MR. MORRISSETTE: Yes, that's our view based on our clear understanding of their proposal since their appearance here last week. We view the two as separate and standalone.

16140 COMMISSIONER DEMERS: Thank you.

16141 On your business plan, can you comment on how the conclusions of your demands survey correspond with the subscription revenue projections?

16142 MR. MORRISSETTE: I will ask Paul Temple to address that question.

16143 MR. TEMPLE: Within our consumer survey, we did include questions related to certain price points. That was a little bit experimental in the sense that we wanted to try and get a sense of interest, whether there was any reaction to subscribers at certain price points. Half of the survey respondents were asked one price point, half were asked another. But in fairness that, as I mentioned, was more of a an experiment just to see subscriber reaction because we expect that our service will typically be included in a package of more than one service.

16144 So it was useful in giving us a sense of things, but it wasn't the factor that was driving our penetration calculations when we did our business plan. Because it's quite -- it's very hard to do price point research. You are trying to describe a service, did the person really understand it, are they maybe reading too much in or not enough in? So it's not a terribly useful guideline in being able to say, "Okay, if 52 per cent said they would, then we must have 52 per cent". You can't really correlate it, but we did want to put some price point in just to get a feel for what people's reaction would be and what we found was that people who were interested in the concept didn't seem to be impacted by the price points that we tested on.

16145 So that was encouraging, but it's not sufficient to say that that is the penetration we would get.

16146 COMMISSIONER DEMERS: Maybe on that last point, your projected penetration of 75 per cent is rather high in a sense. Could you explain the assumptions behind this projected penetration rate?

16147 MR. TEMPLE: Certainly. It becomes really a process of looking at a whole number of factors: the price, how we anticipate the services to be packaged and promoted, the level of interactivity that will be available at the time. What we did, as Luc mentioned a little earlier, we looked at a number of things. One is we looked at how discretionary services are being sold in Canada, and certainly the tradition has been to package. That is what creates subscriber value, as Luc mentioned, in the early stages where TSN and MuchMusic were available standalone and were not terribly successful in that environment. Once cable operators started to package, after a while when you got pay TV you automatically got TSN and MuchMusic.

16148 As we moved forward with tiers, there were three different tiers. Now, I know if I call my cable company, I can get two tiers or all the tiers, but I can't just get one or I just can't get no. 2, or 1 and 3, because the consumer value is created in the packaging.

16149 As Luc mentioned, again in the United States the move is increasingly to this packaging concept for the major MSOs who are launching digital. They have been offering digital services in packages for a little while now, and they are moving into bundling and packaging. COMCAST is adding 33 channels for $5.00.

16150 Adelphia -- I am reading here from a Cable World article on August 9th:

16151 As a result, Adelphia is packaging digital services with the box. When you get the box, you get the services. There is no extra, or this or that. You go digital and you get a bunch of services.

16152 A couple of days ago AT&T -- so we have COMCAST with about 7 million basic subs; Adelphia with 5 million basic subs. AT&T released a press announcement on August 15th, and depending on how you want to count them they have somewhere between 11 and 13 million subscribers. They are now offering four packages, but with every package you get a bundle of digital services.

16153 I found it very telling in the AT&T press release. They say things like:

16154 So when we looked at how we expect to be sold, we expect that the reality is going to be that the light is going to go on, and to create value; to get those boxes out they are going to have to be putting together some very attractive packaging. That is what creates value for the customer.

16155 So when we developed our business plan, we created a wholesale rate system that encouraged that very packaging. That is going to create the value; that is going to get the digital boxes out. That is going to make the service successful, and it is going to allow for the reinvestment in more good programming and more interactivity.

16156 Pierre is helping me out here.

16157 In the ExpressVu filing I think they mentioned that, notwithstanding that they have theme packages. They have done very well in selling the whole bundle. I think they recorded or referenced in their filing to the hearing that 80 per cent of their subscribers take everything.

16158 So we suspect that if DTH can do it, for sure the cable guys can do it.

16159 MR. PERRAULT: To add to what Paul just said, what is very important I think, and that the major MSOs in the U.S. have understood, is that if you want to have a smooth road out of digital technology you have to have, first, high-quality services with high-quality content. And that is granted.

16160 But on top of that, you have to have services that can provide interactivity. And if you provide them with a very attractive package at an attractive price, it is evident that the consumer will adopt technology. If you want to have services that are successful, the only way to do it is to package and package aggressively.

16161 COMMISSIONER DEMERS: Thank you. I have one last question, and it is a pessimistic one. It relates to interactivity. If you have already said everything on that point, then the answer will be very short.

16162 If for some reason you are unable to implement the interactive components, how would this impact your proposal?

16163 MR. MORRISSETTE: Our business plan already assumes a phased rollout for interactivity, so we don't expect a wide availability of interactive applications amongst all BDUs in Canada on day one. It is going to be a gradual rollout. That has already been factored into our business plan.

16164 There is no question that in the interim we will have the web base capabilities that will provide the ability to viewers to navigate and personalize their content on demand while the distribution infrastructure evolves to ultimately provide the full potential for interactivity.

16165 So that is fully incorporated into our business plan. It is not, from a financial point of view, an issue in our perspective. It is more a question of unleashing the full potential of interactive over the full term of the licence that we are seeking.

16166 MR. TEMPLE: If I might just add, we are very enthusiastic about interactivity; we are not naive. We understand that there is a transition.

16167 I think Pierre mentioned earlier that the group as a whole shares a vision and a goal, and that is what we are here to talk about. That is the most exciting part, or one of the most exciting parts.

16168 As I said, we are not naive; we understand that there are technical limitations. As Pierre mentioned, we have been working very closely with a number of distribution undertakings. So we understand the technical complexities. We have incorporated that into our business plan.

16169 Having said that, we are still excited about it.

16170 COMMISSIONER DEMERS: Merci, mesdames et messieurs; Madam Chair.

16171 THE CHAIRPERSON: Commissioner Williams.

16172 COMMISSIONER WILLIAMS: Thank you, Madam Chair.

16173 During the CRTC's recent regional public consultation process, we received many comments from organizations and individuals concerned with the visually compared.

16174 When we reviewed your application in terms of service to the blind, under the category Other Matters it says that due to the nature of your programming with its focus on travel and leisure information:

16175 I was wondering if you could elaborate on that; just how you think it would make things easier for the visually impaired once you are producing this type of information.

16176 MR. MORRISSETTE: I will ask Baisa to address that question.

16177 MS UJEJSKA: Most of our programs, as in some of the examples I had spoken about earlier, are very rich in context. What we mean by audio is that for the vision impaired you would be able to follow the program and understand the nature of the program and understand the information that the program is providing for you.

16178 In terms of DVS, we will be able to accommodate DVS. But in the meantime we do have this as our foundation, the programming itself.

16179 COMMISSIONER WILLIAMS: Thank you very much.

16180 THE CHAIRPERSON: Mr. Temple, on implementation you are a good candidate for more questions, because you have been on the launching side and the launched side -- although you have launched more often than you have been launched to date.

--- Laughter / Rires

16181 THE CHAIRPERSON: Let me ask you this -- I see two questions here.

16182 One is: Should the Commission put a deadline on launching, as it has in the past -- in other words, 12 months, or whatever period -- or else you have to explain yourself, why you are not ready; and again an extension or the authorization, you have lapses.

16183 The other question is one that has arisen during the course of the hearing, which is a common launch. Most parties, of course, believe in the second one, that a common launch would make sense, would be more cost effective; marketing money would all be put in one pool. There would be more of a splash, hit the ground running, so to speak, with a good package of services.

16184 The two are not unrelated, I suspect. If you have someone who is not ready to launch and there is no need to explain why they are not ready in the period, it delays everything.

16185 And, of course, if no one has a deadline date to launch, because they are getting cold feet or because they just wanted to occupy a genre and they are waiting for the economic situation of digital penetration to be better, then we are missing the boat in trying to use interesting programming as an incentive to launch.

16186 Can I hear you on both of these.

16187 One: Is there a need to have a limit?

16188 And then: Is it feasible, from the distributor's side and from the programming undertaking side, to set a launch date?

16189 MR. TEMPLE: Good questions.

16190 Well, there is nothing like a deadline to get you motivated. Certainly, when Pierre sets my deadlines it gets me motivated. So I guess, in the abstract, setting --

16191 THE CHAIRPERSON: He doesn't look that scary.

--- Laughter / Rires

16192 MR. TEMPLE: Certainly, the key to success will be having the programming services and the distributors working together in concert. That, I think, everyone would agree, I would hope, is going to give everyone the biggest bang for their buck in terms of marketing, if there are going to be packages and whatnot, if someone isn't ready, and how do you do your package, and you are going to add them on later, and it just makes the world, I think, a lot more simple.

16193 In terms of actually trying to make sure I answer your question, a common launch date, I think, is to the advantage of everyone. The issue then is do you set a date. I will kind of answer in two different ways.

16194 In terms of ourselves, our application, I think that we would certainly be ready. We have no, you know, second thoughts about being able to launch this fall.

16195 But I think your question was more of a general nature, and to be honest there are two components to being ready. There is the infrastructure -- you know, do you have your programming, do you have your staff, did you get your equipment -- and then there is do you have your deal. In general, if you are not quite sure what the deal is, your point of greatest leverage is that first agreement.

16196 THE CHAIRPERSON: By a "deal", you mean a distribution deal?

16197 MR. TEMPLE: Yes. If, for instance --

16198 THE CHAIRPERSON: So you are not going to tell me you are less powerful now than you used to be.

16199 MR. TEMPLE: Well, let's put it this way. The first affiliation agreement sets a lot of precedence. We are in a world where we are -- in a digital environment, there are a lot of precedence to be set. I will give you an example.

16200 Earlier, one of the applicants, in commenting, suggested that -- they were referring to a question about transaction revenue, and they suggested that a portion of that transactional revenue would go to the distributor. Now, that's a very significant precedent, one that we don't really agree with. I can get into separately why we feel that way, but if we have to be able to be ready to launch by a date, and we have to sign an affiliation agreement that cuts in the distributor for a percentage of the transactional revenues, we have set the precedent. Now, 50 per cent of nothing is nothing, but in six years it may be something. We have already signed an agreement.

16201 So there are a lot of issues that the Commission is going to have to look at that are beyond the immediate control of the programming service. In terms of those things that we control, I think it is quite reasonable to certainly select licensees that you are confident have the wherewithal to launch on time, and I think we are one of those.

16202 THE CHAIRPERSON: In relation to competitiveness, you were asked about exploration and the answer was, no, that you didn't consider it competitive. As you know, there are other travel services before us.

16203 You have followed the hearing and know that the Commission is planning to ask applicants at the last phase of the hearing to tell us which other potentially licensed of the 88 applications you would not be prepared to launch with. So we will hear further, because there are others that are related, so that we have on the record the applicant's view as to where, if another Category 1 application were licensed, it would harm the business plan to the point where you wouldn't proceed.

16204 Of course you don't have to answer the first question because you only have one service -- we plan to ask applicants to tell us which service they would want us to consider, in order of priority -- but the third question is also probably of relevance to you, which is how many do you think the Commission should licence. So we will hear from you later about that.

16205 You were mentioning the American market moving more and more towards large bundles, actually, so we will hopefully hear from you as to what you think would be a sensible English language -- the number of English language services that would be a sensible package.

16206 MR. TEMPLE: Just for the record, we have already filed with the Commission -- I can't remember the date, but we have filed with the Commission, a list of Category 1 services that we believe to be competitive to ours.

16207 THE CHAIRPERSON: You have, even without being asked?

16208 MR. TEMPLE: I guess we didn't have to, but there was the date for filing interventions --

16209 THE CHAIRPERSON: You are entitled to change your mind by Phase IV after hearing all the applications.

16210 MR. TEMPLE: I don't think we will change our mind on the ones that we feel competitive to. Maybe we will add a few. We will have to have a chat about explorations. But, no, we have filed a letter with the Commission.

16211 THE CHAIRPERSON: Because it is of course possible that a discussion of applications sheds a different light on it, but you will have the opportunity, if you want to, to redefine perhaps your reviews on that.

16212 Commissioner Williams, do you have questions?

16213 COMMISSIONER WILLIAMS: Thank you, Madam Chair, I have just a couple that were brought about by your questioning.

16214 In relation to the notion of transactional revenue sharing, will it not help provide a return on investment to the distributors and ensure that there was a rollout of the highest technically capable set-top boxes?

16215 There has to be a "what's in it for me" kind of thing, I guess, is what, as a former distributor, I would be wondering.

16216 MR. TEMPLE: I will answer that in two ways.

16217 One is we fully expect that distributors will be able to offer transaction services and for that they should be, you know, compensated appropriately. But when you look at a -- we are applying for a digital interactive service, and if you look right now, we already provide transactional ourselves and probably most broadcasters and specialty services today offer, say, per inquiry. Now, we don't share that with anyone.

16218 In the analog world we are providing a transactional base advertising. We get compensated for it. So now we move to the digital world, and we are going to provide the same type of transactional opportunity. You click on this, get that, order, whatever it happens to be. So we said, okay, well, let's look at what's involved.

16219 First of all, all the content is our cost. We are not asking the distributor to provide the fulfilment. When you click on that button and order a ticket, there is no real burden placed at all on the distributor. They don't have to buy extra equipment. There is no taxing of bandwidth. I mean, a click to buy a ticket uses less bandwidth than, you know, downloading another page or ordering the second camera view on a sports programming. That would order --

16220 COMMISSIONER WILLIAMS: Would that not need a box capable of accepting that click, though?

16221 MR. TEMPLE: They need that box that can send that click, but that's already in place. If you have interactivity, you have in place already everything you need.

16222 But if you think about the process, I'm watching L-NET and I see something quite interesting on, say, the Monnet exhibition in -- I think there is a Monnet exhibition in Ottawa right now.

16223 COMMISSIONER WILLIAMS: In one of the museums in town, yes.

16224 MR. TEMPLE: I might say, oh, I want to see some more about that, so I click --

16225 THE CHAIRPERSON: You want to buy one.

--- Laughter / Rires

16226 MR. TEMPLE: Well, I'm getting to that. So I click and I say, oh, that's interesting; I want some more information. The cable operator or the distributor, the DTH distributor, already has in place a complete infrastructure for me -- assuming we have interactivity -- for me to click. The message goes to our file server and we send that content back, so we might give you a little more information about the exhibit, what the times are.

16227 Then you say, well, that's really neat. I want to go. I'm going to order my ticket. That same process now of clicking and ordering a ticket isn't using extra bandwidth. They don't have to put any equipment, extra equipment in place. It's an integral part of the service we are offering. We are responsible for that content. We are going to house that content. It's our file server. You know, we have to get that back to the cable head end.

16228 Ironically, in some of the correspondence with the Commission on our condition of licence it was suggested that one option might be to have a condition of licence based on our revenues. But included in our revenues are commitments to -- included in our interactive revenues are a commitment to spend on Canadian programming. So if we are going to get a couple of bucks, by the time we pay for our file server, pay this, pay that, spend a certain amount on Canadian programming, try and recover our costs, there isn't an awful lot to go around.

16229 MR. PERRAULT: If I may, Commissioner Williams, the set-top box, as we see it, is definitely an interactive device. The operator, it might be a DTH, MMDS or cable operator, will derive significant benefits of deploying this technology.

16230 When we look at the experience worldwide of deploying digital technology with multiplex pay services, for example, the subscription to pay services goes up dramatically.

16231 The set-top box, the digital set-top box will offer the possibility of instant video on demand. So, therefore, it is expected that the buy rates of movies on video on demand would also go up significantly. So, therefore, there are revenues immediately derived from this technology for the operator.

16232 On the other hand, also the operator will have its own wall garden whereby he will be able to generate advertising revenues or transactional revenues from the specific site that is his own site.

16233 MR. MORRISSETTE: If I could maybe just add a few comments?

16234 COMMISSIONER WILLIAMS: Sure.

16235 MR. MORRISSETTE: Our application encompasses the full package, the core television services and supplemented or complemented by the enhanced interactive television capability. That is the licence that we are seeking. Therefore, as we have developed our business plans, we have assumed, for instance, that the advertising revenues derived from the enhanced interactive television capability qualify for us calculating our Canadian programming commitments.

16236 When we develop the criteria for the categories of programming that we will be displaying on the air, we have used the same assumptions to apply in our interactive enhanced television programming service as well.

16237 So everything that we have done essentially views the two components of basic linear television and the interactive component to be a full integrated package.

16238 COMMISSIONER WILLIAMS: Okay, I understand what you have all said.

16239 Earlier in the hearing one of the DTH distributors, when discussing the types of set-top boxes they have today and they hope to have a few months or years out, kind of described what they have now because of the fact that they are using satellite distribution technology, and in their case the data would be all stored on the box in order to achieve the full interactivity. So in that example, I guess, they would have a larger investment in the box, would be my guess, than what you have described in your answers.

16240 MR. MORRISSETTE: I will ask Jean-Pierre Boulanger, our Senior Vice-President, Technology, to comment on that.

16241 COMMISSIONER WILLIAMS: Thank you.

16242 MR. BOULANGER: The set-top box used on the digital, for the DTH as an example, most of them rely on the fact that when you tune a channel you will receive for that channel the data that goes with it. It's clear that you have memory there that needs to retain that. But most of them will erase that when you go to another channel.

16243 In fact, if implemented that way, there is not a real addition there. There are tricks technically that need to be done to be able to accommodate a fancy product. If they do install a box with a hard disk and then they intend to say that all the contents will be resident there, that is basically a no-win situation because there will never be enough space there to maintain all the interactive contents for all the potential channels that can be on that box. Not only that, if you have a rapid pace channel you will need to update that information relatively fast too.

16244 COMMISSIONER WILLIAMS: Okay. Thank you for that.

16245 If the Commission were to agree -- and this is similar to what Chair Wylie was speaking of earlier -- with the proposed deadline for concluding negotiations, what if that was a condition for obtaining the green light for a launch? Like if you get your negotiations done by a certain period of time you are prepared to -- you have received permission to launch, it is your final hurdle. If the Commission was to take a view like that, would that then not let the marketplace decide this issue for all?

16246 MR. MORRISSETTE: What do you mean by "this issue"?

16247 COMMISSIONER WILLIAMS: Well, the issue of getting negotiations concluded prior to a launch, or well in advance of a launch, so it is easier for both sides to do their business planning?

16248 MR. MORRISSETTE: Well, there is no question it will provide a strong incentive, however ultimately affiliation agreement negotiations can become somewhat complex, particularly as we are contemplating a new technology, a new mode of distribution for which there are quite a few uncertainties and for which we have to anticipate the long-term evolution of these programming services and the uncertainties that relate to that.

16249 So I guess the whole bottom line to that question is no question with an open-minded and a willingness to arrive at a balanced win-win agreement that favours distributors and the programming services that are going to be carried, that that kind of goodwill would result in a rapid result. I guess, you know, some of the history in the past may pose a little bit of uncertainty in terms of that happening.

16250 Having said that, I mean we are entering into this process, number one, committed to doing everything within our power to ensure a clear participation in a September 1 launch. We as a company have a track record of always seeking out the win-win scenario.

16251 You know, the whole Canadian broadcasting system has been so successful because of the balance that has existed in this system throughout the last several decades and we don't see why this should change overnight in a digital world.

16252 So, having said that, bottom line is we are committed to that. We are going to sit down and negotiate affiliation agreements with everybody in good faith, seeking a win-win situation and, hopefully, that is the mood that prevails with all other services launched and with all distributors that are going to carry those services.

16253 COMMISSIONER WILLIAMS: Yes, I agree with the notion that any deal that will stand the test of time has to be a win-win and I wish all the Category 1s and all the distributors have an opportunity to reach those kinds of deals well in advance of a launch.

16254 Thank you, Madam Chair.

16255 THE CHAIRPERSON: Mr. Morrissette, do you think that the fact that one launcher can be played against the other and this coming launch will give a certain element of leverage? By that I mean, unlike the analog world the digital world has currently more comparable forces in digital because we have DTH and MMDS in the market which is closer to the number of cable digital subscribers.

16256 MR. MORRISSETTE: I think that that would contribute to providing a strong incentive for everybody to seek a favourable resolution to those types of negotiations.

16257 It is obvious that everybody, whether it is the combined programming services who are going to be investing significant amounts to achieve successful launches and the distributors who will also have tremendous amounts of investments at stake, that there is an awful lot at stake here. There would be nothing worse than a launch, which is so critical to do it right and successfully off the bat, to create a momentum in terms of creating that demand for the package of services that are available. The last thing you want to do is to disrupt that kind of momentum by creating, you know, negative press, or what have you, in terms of any issues that may arise.

16258 So it has to be in a goodwill sense of fairness and responsibility to everybody in concert, in partnership virtually, to make this evolve in an orderly and successful way. Everybody gains.

16259 THE CHAIRPERSON: I would add to that a dash of negotiating cleverness.

16260 MR. MORRISSETTE: I agree with that. We are fortunate in our company that we are one of the most widely distributed services in Canada. We have 9.5 million homes in distributing our existing services. We believe that we have enjoyed very positive and strong relationships with all the distributors that carry our services and in co-operative initiatives in marketing and what have you.

16261 So given our particular track record and experience, I think we have -- and because we have, you know, strong relationships with these people who we view as partners and, as I said before, we have a sense of independence and we sit down with everybody and discuss with everybody in the same terms and what you see is what you get and the end result has been very successful in that regard for us. We would like to carry on that whole spirit because that is what we are all about.

16262 THE CHAIRPERSON: Yes, and in this case everyone agrees that a common launch is important which will require cooperation as between the various program undertakings and the distributors as well so that a common goal is pursued.

16263 Counsel.

16264 MR. McCALLUM: With respect to descriptive video services, you will be technically equipped to distribute these if you should be licensed.

16265 MS VJESSKA: Yes, we will.

16266 MR. McCALLUM: With respect to filler programming, you would redistribute the time allocated to that to the other categories, as all the other applicants agreed to do.

16267 MS VJESSKA: I'm sorry, can you reword that? Sorry.

16268 MR. McCALLUM: With respect to filler programming, you would redistribute it to the other categories.

16269 MS VJESSKA: Yes, we do.

16270 MR. McCALLUM: And with the new Personal Information Protection and Electronic Documents Act, obviously you would be in compliance with that Act or take efforts to be in compliance with that Act.

16271 MR. MORRISSETTE: We are committed to that, indeed.

16272 MR. McCALLUM: Thank you. In your letter dated 15th of May you agreed to the Commission's formula on Canadian programming expenditures. You agreed to the possibility of a condition of licence of 36 per cent of the previous year's total advertising and subscription revenues. Do you have any other comments after having listened to the hearing as to what that formula should be, whether it should be imposed and whether alternative methods should be put in other than what's in that letter?

16273 MR. TEMPLE: Sorry. Could you just repeat the last, "where alternative" --

16274 MR. McCALLUM: Formulas or methods of imposing that.

16275 MR. TEMPLE: We are certainly obviously prepared to stand by our response, the letter, which we would accept as a condition of licence. I think there has been some discussion in terms of an approach taken where it might be over the term of the licence. I mean that adds a little bit more flexibility. You never want to say no to that. But we are happy to stand by our response to the May 5 letter. If the Commission is to give us a little more flexibility, we will gladly take it.

16276 One thing we would like to point out, as I think I alluded to, is that in the calculations used by the Commission and in our understanding, the calculation of revenues includes interactive advertising revenues, so we just want to make that clear.

16277 I think the Commission cited, I think it was $75 million. If you look at our application, within that $75 million is interactive advertising revenues, which is consistent with our approach. We are seeking a licence to provide an interactive service. Therefore, we expect the content and the formulas to apply to the whole and not just the conventional part.

16278 Likewise, we assume that that would be the basis that the Commission would treat all Category 1 licensees.

16279 MR. McCALLUM: Thank you. In respect of your contribution to independent producers, I take it your commitment has been to invest $10.7 million in independent Canadian production over the licence term. I think that's at page 19 of your Schedule 1. If the Commission wished to impose something along that commitment as a condition of licence, you would have no difficulty with that.

16280 MR. TEMPLE: That's correct.

16281 MR. McCALLUM: Do you have any idea what percentage of programming that amounts to?

16282 MR. TEMPLE: Yes. I want to make sure I have the right number. That's a percentage of our Canadian programming. As a percentage of our Canadian programming over the term of our licence, it's 50 per cent for independent production.

16283 MR. McCALLUM: And if that were imposed as a condition, obviously that would be satisfactory to yourselves.

16284 MR. TEMPLE: Yes. That's of exhibition. The 50 per cent is exhibition and we would have no problem with that as a condition of licence.

16285 MR. McCALLUM: Thank you.

16286 Thank you, Madam Chair.

16287 THE CHAIRPERSON: Thank you.

16288 Mr. Morrissette, the last word is yours.

16289 MR. MORRISSETTE: Thank you. Well, first of all, we very much appreciate the opportunity to come before you today to I guess initiate the process for one of the most exciting chapters in Canadian broadcasting.

16290 I guess the way we would like to wrap up is to give you some compelling reasons as to why L-NET ought to be considered for a licence as Category 1 service.

16291 The first reason is the attractiveness of the L-NET service. It will meet a real need of the Canadian public. We are not just a travel service. We encompass leisure activities coast to coast in all regions of Canada. Hence, we are a much broader appeal as a service.

16292 Most of the travel that takes place within this country, as we indicated earlier, is within the one day trip from anyone's home. Our focus is on Canada. What we are going to be talking about is a program or a service, produced in Canada, using quality independent producers from coast to coast, basically put together for the Canadian market coast to coast.

16293 It fills a void. It's very different. It definitely contributes to programming diversity.

16294 The second broad reason is that this service as a multimedia information service represents an ideal application for interactivity. It's an ideal content for viewers to personalize their information on demand, which is what interactivity is all about. Interactive content sure will evolve in stages, but we are ready now to broadcast for the ultimate stage. We are waiting anxiously for that stage.

16295 In the meantime, we are going to play a role which we hope will be a leading role in making this happen.

16296 The third point I would like to address is Pemorex as an independent player in the broadcast system. We are proud of that status. We don't have any conflicts. We are very focused as a company. In fact, our entire strategy emphasizes focus.

16297 We want to be the best at what we do. We don't want to spread ourselves too thin across a whole bunch of different businesses that we don't know very much about. We know what we are good at it and we want to stick to our knitting and continue to create success stories in that area.

16298 We filed only one application today. That's because we used the rifle approach as opposed to a shotgun approach. We have been working on our strategic plan. We update it every year. We know where we want to be down the road. For us, a service such as L-NET is complementary. It's a natural extension of what to do. It builds on what we are all about. It takes advantage of everything that we are good at.

16299 There are very attractive synergies and benefits in terms of continuing to evolve as a leading player in multimedia information services in Canada. Not only that, one of the things that we do best and what interactive requires is a strong sense of innovation and creativity, not just in programming, which is the core of our business obviously, we are a content business, but it's in developing technology, not just buying off the shelf, but in developing technology to basically contribute to the implementation of our strategy over time.

16300 The fourth point I would like to leave you with is our track record. We are not an upstart new company. There's nothing wrong with that because even the biggest players in this system today once upon a time were small.

16301 What we are today is we are a financially strong and rapidly growing medium size company in Canada. We have ambitious plans. You know, there's no question we want to grow, but we want to do it in an orderly way, one that sticks to our strategy, that sticks to our focus.

16302 We turn down so many opportunities that come our way because it's off strategy. For us, we have that discipline of saying no.

16303 The bottom line is we have just not developed two of the most attractive specialty and successful specialty services in Canada. We have not just developed two of the most successful Web sites in this country, but we have been able to do that because we are strong in programming, we are strong in marketing, we are strong in sales, but what sets us apart is our unique strength in applying technology.

16304 In conclusion, we seek an opportunity to create another success story. Given the chance, we will deliver again.

16305 Thank you very much.

16306 THE CHAIRPERSON: Thank you, Mr. Morrissette and your colleagues, for your presentation and clarification of your application. We will see you again.

16307 MR. MORRISSETTE: Thank you.

16308 THE CHAIRPERSON: We will now take a 15 minute break and then hear the last application for today by the New Day Ministries.

16309 Nous reviendrons dans 15 minutes.

--- Upon recessing at 1535 / Suspension à 1535

--- Upon resuming at 1556 / Reprise à 1556

16310 THE CHAIRPERSON: Good afternoon to you, and rebienvenue à ceux qui étaient déjà là.

16311 Monsieur le Secrétaire, s'il vous plaît. Mr. Secretary, please.

16312 Thank you, Madam Chair.

16313 We will now hear an application by New Day Ministries Inc., for a new Category 1 special service to be called IntuneTV.

16314 There is a maximum time of 20 minutes allowed for the presentation and we have Mr. Willard Thiessen and his colleagues.

PRESENTATION / PRÉSENTATION

16315 MR. W. THIESSEN: Good afternoon, Madam Chair, Commissioners.

16316 My name is Willard Thiessen. I am President of New Day Ministries Inc. It is my pleasure to present to you our application for IntuneTV, a western-based digital specialty service to be dedicated to music programming in the contemporary Christian music genre, or CCM as it is more commonly known.

16317 Before beginning the presentation of our application, I would like to introduce the members of our panel. These are the individuals who will make IntuneTV happen.

16318 On my far left is our Director of Programming, David Mills. Dave's exhaustive knowledge of CCM and his understanding of programming for this music market are the result of 13 years of experience in radio, most recently including Winnipeg's first station dedicated to the CCM genre.

16319 Next to Dave is IntuneTV's General Manager, Jeff Thiessen. Jeff and his team have developed this application and he will field your questions at the conclusion of our opening remarks.

16320 Next to Jeff is John Reimer-Epp, Director of Regulatory Affairs for New Day Ministries and Trinity Television Inc.

16321 Next to John is Kevin Dunn, Director of Production and Marketing. Kevin is presently Executive Producer and Director of Marketing for Mid-Canada Productions Inc., Manitoba's leading independent production house. He has also spent many years in marketing with Craig Broadcasting.

16322 In the second row, starting on my far left is Nancy Donnelly representing CHRI-FM in the local Ottawa area. CHRI is one of the growing number of radio stations that the Commission has licensed in the CCM genre over the last several years.

16323 Next to Nancy is IntuneTV's Director of Brand Development, Tim Kroeker. Tim brings 16 years of experience as a marketing consultant and is a founding partner of Brown Communications Group.

16324 Next to Tim is Mark Durst, who is a Chartered Accountant, the President of Patriot Computers Inc., and our valued financial advisor.

16325 Next to Mark is our Broadcast Consultant, Gerry Tymon. In Gerry's 30 years of broadcast marketing experience, he has been responsible for the development and management of advertising sales and marketing organizations for specialty channels in each tier of the evolving Canadian specialty environment, including TSN, RDS, Discovery and Headline Sports.

16326 Directly behind me is Richard Edwards of Edwards and Associates. Richard has lent his expertise and many years of experience in the cable industry to our understanding of the emerging world of digital distribution.

16327 In the third row beginning on my far right is Steve Rendall, President of Harvest Music Group. Steve has devoted 20 years to the development of Canadian CCM artists and has produced almost 300 albums in this genre. He has contributed to the virtually overnight success of a number of Canadian Christian musicians in the United States which Steve signed with American distributors including Reunion Records and Brentwood Records. For the past two years, he has also been a jurist for the newly established gospel music category of the Juno Awards.

16328 Next to Steve is Kathy Grant Mahon. Kathy is a CCM recording artist, song-writer and free-lance writer for gospelcity.com and several gospel music labels. She has been a performing musician since the age of 17 and her band, Chosen, performs in Ottawa on a regular basis.

16329 And finally Andrea Hallendy is a CCM singer and songwriter known as Marika. She has been developing her niche in the Canadian music scene for approximately 15 years and has been recording Contemporary Christian music since 1995.

16330 Commissioners, we begin our presentation hoping that throughout this process you will feel a passion emanating from this group. I can tell you that a team of this calibre is here today for only one reason: each of us is convinced that IntuneTV is among the very best of the many alternatives that are before the Commission in this round of hearings.

16331 To this end, we will address the following four points in the balance of our application.

16332 First, IntuneTV will be nothing like what you may have expected. CCM is an exciting and dynamic musical genre and will support a service that is very attractive to Canadian viewers.

16333 Second, the impact of IntuneTV on the diversity of Canadian cultural expression will be at a level that is unparalleled since the advent of MuchMusic and will allow Canadians to create a new dynamic and competitive world-class industry.

16334 Third, there are very significant numbers of Canadians who eagerly want a service like IntuneTV and will pay to obtain it.

16335 Fourth, our business plan is conservative, attainable and worthy of your confidence.

16336 We recognize that you may have arrived at this point in the hearing without a mental picture of what a Contemporary Christian Music, CCM, service might look like. We hope that the following brief video will help to communicate the reason for our enthusiasm for this proposal.

--- Video presentation / Présentation vidéo

16337 MR. MILLS: We believe that it is clear from the video segments that you have just seen that IntuneTV will be a very attractive addition to the Canadian digital television landscape.

16338 I personally made a transition to Contemporary Christian Music about a year ago, after 13 years in the mainstream radio industry. I can tell you that some of the most exciting developments in the musical world right now are in the CCM genre.

16339 Nevertheless, I can confirm what Malcolm Hunt from CHVN said to you in the video; namely, that one of the most significant challenges that we face in the world of CCM radio in Canada is that very few Canadian listeners are familiar with our music.

16340 Here's the irony. According to Billboard magazine, CCM is the fastest-growing segment of the American music industry. It enjoys nearly one billion dollars in CD and video sales, is played by hundreds of CCM radio stations, and has an annual international awards show. Despite this, CCM is almost completely new to Canadian eyes and ears.

16341 Unfortunately, all of the videos that you saw earlier were American, because that is where the television and radio infrastructure has supported the development of quality in the genre.

16342 In other genres, Canadian music channels are justifiably proud of launching dozens of Canadian artists into international stardom. They did it by putting the faces and the music of these artists in front of millions of viewers over and over again. This exposure invariably leads to CD and concert ticket sales, radio play, video production, and so on. It is a very positive cycle that has created a truly significant industry.

16343 Unfortunately, the list of Canadian CCM videos to go into regular rotation on these services is virtually non-existent. The fact is that good programming decisions dictate that existing music services remain focused on their established niches. Since CCM falls completely outside of the scope of their programming mandate, we inevitably have a serious problem of underexposure.

16344 MR. RENDALL: Fifteen years ago, I started a small CCM record label in Alberta. What I discovered was that hard work and great music could not overcome my limited access to radio or the then new reality of music videos as a driver of music sales. So I began to work together with American CCM labels which have the financing backing to help my artists to reach their audience. This approach has been successful beyond all of my expectations.

16345 Unfortunately, my artists rarely have access back into Canada to a Canadian audience.

16346 I cannot imagine an application that will have a more dramatic impact on Canadian cultural diversity than IntuneTV will have on the CCM industry. IntuneTV's resources will introduce a completely new musical expression into the Canadian television system without overlap or challenge to existing licences.

16347 You may ask if it is possible for Canadian CCM artists to be successful in Canada. Although I am part of the pipeline directing our best and brightest to American labels, my answer is "absolutely they can".

16348 I firmly believe that the present trend can be reversed, given access to the advantages available to musicians in other genres. The alterative, frankly, is to lose these musicians either to obscurity or else to the United States.

16349 In the long run, I believe that it is inevitable that CCM fans in Canada will be served either by a Canadian specialty service or by a proven American CCM service such as Paxnet. The Canadian market is presently without meaningful competition and is therefore open to the first major player to introduce CCM to the Canadian public. Given the success of CCM in the U.S., this development cannot be long in the making.

16350 MS GRANT MAHON: I have been a singer/songwriter in the CCM genre since I was 17, and I have been recording since 1988. Together with my band, I consider myself lucky to be the only gospel musician in Ottawa's dynamic gospel music scene with an opportunity to perform regular weekly gigs.

16351 Exposure through music videos can change everything in the music business. This type of exposure already exists in the United States, and the industry there is booming as a result. I am reluctant to make the move south, but I honestly see the only real possibility of reaching my potential to be in the U.S. industry.

16352 The existence of IntuneTV would change my outlook in Canada dramatically by giving me a profile with an audience across the country. As an independent artist of limited means, the potential impact of music videos on my career is dramatic.

16353 As a Canadian, I would love to help create a unique national voice for CCM musicians.

16354 MS HALLENDY: Like most musicians, it is my hope to one day make a living from my music here in Canada. In the meantime, I continue to teach on a fulltime basis to pay my bills.

16355 Although my most recent recording has been played on CCM stations, the most significant limitation that I face in reaching my goal is the fact that my music is not at home on MuchMusic, MuchMoreMusic or CMT. Consequently, I cannot realistically spend the money needed to make a music video because I know it will never be seen.

16356 This is particularly hard because I tend to write music with a mental picture of what the music video would be like. IntuneTV's plans for investing in and, more importantly, airing music videos would quite literally make a dream come true for me and for countless other musicians in my genre.

16357 On behalf of every CCM artist that I know, I urge you to grant this application.

16358 MR. KROEKER: IntuneTV will give Canadians what our market research shows they really want. There are significant numbers of Canadians who do not watch existing music channels because they feel that the images and music they find there are inconsistent with their own personal values.

16359 In contrast, 81 per cent of Canadians had no hesitation in saying that a Christian music service would be good for the broadcasting system and for society as a whole, and virtually no one said that they would be unhappy if IntuneTV were licensed. In fact, 36 per cent of those who were not interested in watching the service themselves would like their children or grandchildren to have access to IntuneTV.

16360 In this ready environment, IntuneTV will make a strong contribution to the rollout of the digital box, both by motivating a significant group of consumers who are willing to buy the service and by helping to keep the overall cost of any package of services to a reasonable level.

16361 As a family oriented service, IntuneTV will contribute to the broad attractiveness of the new digital package or packages, which will likely include services targeted to more narrow micro-niche markets.

16362 MR. DUNN: This service is by nature ideally suited to interactivity. Our plans for building a Web site that is truly integrated into every aspect of Intune's programming will begin immediately upon receiving a licence, should you deem that so.

16363 Intune Online will embrace the second and third generations of interactive digital television as these technologies become available.

16364 Our immediate goals are for IntuneTV's viewers to be able to interact with artists during our live programming, download music, offer streaming audio and video, search our CCM database for information about music and the artist, chat with other fans, and buy CDs and concert tickets online from a single, comprehensive Canadian source.

16365 We also look forward to becoming a focal point for networking within the CCM industry by facilitating communication between artists, distributors, producers and other members of the music industry.

16366 Merchandising sales are a uniquely strong opportunity for IntuneTV in an environment where an existing distribution of Canadian CCM is limited. Using our Web site, in combination with the powerful promotional potential of the television service, we expect that IntuneTV will become the most effective means of distribution available to many of our featured Canadian artists.

16367 We also expect that IntuneTV will very quickly establish a presence for Canadian artists not only in Canada but also in the United Stated and abroad. We are presently about to confirm an agreement with the Sky Angel Network for distribution across the U.S. and internationally, contingent upon approval of this application. The strong export potential of this service will also result in distribution of Canadian CCM product outside Canada. The Commission therefore, before it, has an opportunity to expand the remarkable success of Canadian artists into a new corner of the musical universe.

16368 MR. THIESSEN: Commissioners, this hearing represents an extraordinary opportunity for Canadian viewers. It also represents a significant opportunity for the Commission to shape our specialty television environment.

16369 We responded to your call for applications, knowing that all the major players in Canadian television would be here to ask for one additional grant of regulatory protection before entering the less regulated Category 2 environment. Despite the wealth of experience that the members of this team collectively bring to this process, we recognize that we do not bring you the comfort of a long broadcasting history. Nevertheless, we can say to you with confidence that we can and will fulfil the commitments that we have made to you and to the Canadian public in this application.

16370 In our view, what is needed in the Canadian broadcasting system at this critical point in time is diversity, not only of programming genres but also of ownership and control. A Category 1 licence is a necessary tool to establish a new player in an entrenched industry. Our decision to wade into this highly competitive hearing was made deliberately in the expectation that the Commission might well find this to be a uniquely appropriate opportunity to inject diversity into the bloodlines of Canadian television.

16371 We believe that the Canadian public will be well served by a decision that favours diversity over the security of synergy. Our program schedule does not contain a shred of repurposed material and our programming concept is completely unique within the Canadian system.

16372 We are an independent western-based broadcaster prepared to deliver a type of musical programming that reflects the lifestyles, tastes and values of a significant but totally unrepresented segment of Canadian television viewers. Almost two thousand interventions have expressed the importance of this service to individuals across this country.

16373 Furthermore, as a registered charity and a not-for-profit corporation, New Day Ministries is committed to returning all of its revenues to music and production. As a result, the diversity which IntuneTV offers to the broadcast system is meaningful at a very fundamental level. We are in fact the only applicant that can say that we are in the business solely for the good of the viewers and the music industry.

16374 Having said all of this, I want to be very sure that we are not misunderstood. Clearly, the content of the application should not take a back seat to ownership considerations. Far from it -- the music content is the reason that we are passionate about this application.

16375 In conclusion, is IntuneTV an idea whose time has come? Clearly, yes. Will it come again? Not for Canadians. We as a team are ready, our facilities and financing are in place. Families across the country are eagerly demanding musical alternatives, and the artists have been preparing for this moment of opportunity all of their lives. For the Canadian CCM industry, this application is the future -- the difference between everything and nothing.

16376 This concludes our opening remarks, and we would be pleased to answer any questions that you may have at this time.

16377 THE CHAIRPERSON: Thank you, Mr. Thiessen and your colleagues.

16378 Like we have of all applications before us, we want everybody to have the opportunity to tell us what criteria we should use in licensing and what the order of priority is.

16379 You have already emphasized new blood, new ownership but not at the expense of quality of programming and, from what I gather from your comments, diversity. Do you have further comments to make about the importance of the criteria we should use to guide ourselves in selecting Category 1 licensees?

16380 MR. THIESSEN: I think what you have done in the call is made it very clear that -- there are six points that you have listed there and all six are incredibly important to this Canadian broadcasting system.

16381 We feel that IntuneTV fits in into each one of those categories very well. We also believe that if you are going to choose any one of the six, and you say "Pick one which just really exemplifies exactly what we would be doing for the Canadian broadcasting system", even though we fit into -- I think we maximize all six of them, but I think if we choose one it would be the contribution to programming diversity.

16382 Our station is going to be very unique and very different and offer something that no one has ever done before and a really great alternative and be a pleasure to serve the Canadian people with.

16383 THE CHAIRPERSON: Before discussing your views on implementation dates and the way in which a launch can be achieved to the greatest benefit of all, since you have identified diversity as the most important criterion, it's very important for us to understand what it is that your service will be. One way of doing that is to ask applicants to identify the categories of programming from which their programming will be drawn.

16384 You have identified, in that section of the application at 7.1, only three categories, yet when we look at your Schedule 10 where programming is actually described there appears to be some programming that would not fit within 8(a), (b) or (c). For example, I'm looking at page 9 of your Schedule 1 where you talk about filler programming concepts which may be part of the programming.

16385 Also, if you look at your Schedule 10 where the programming is described, there appear to be programming concepts there that are not music videos and therefore would be hard to fit within music and dance, music video clips and music video programming.

16386 Do you have any comments as to whether further categories are necessary to really identify the nature of the service?

16387 MR. THIESSEN: Well, we do, in our Schedule 1, and I apologize for this -- we put in that word "filler" which we were wanting to -- it's sort of a little bit of a bad word I guess at this particular time.

16388 THE CHAIRPERSON: Well, no, no. Interestingly, you say you will have filler programming, both in the page I was looking at and in a description of your programs, and yet you haven't indicated a desire for filler programming.

16389 What we have heard to date is people putting in filler programming and seemingly having no intention of having filler programming or being quite prepared or understood that it was to be categorized for whatever it was when it was used.

16390 So I'm a bit puzzled about the fact that you haven't checked that box and yet you do talk about filler programming; and, secondly, is it because you are going to categorize it under the other categories, which is what we have discussed with applicants?

16391 Secondly, for example, when I look at program concepts, you have descriptions such as:

16392 But I expect that not all of it will be music videos but some of it will be programming that ought to be identified perhaps under some other category.

16393 Are you going to have this type of program which will be other than music videos, and what category should it be in if there is such programming?

16394 MR. THIESSEN: Firstly, with the description of filler programming, that word really is a misnomer because really we are not talking about filling up as other applicants have done. We are looking at these fillers actually creating opportunities to discuss the programming, the music. So what I'm going to do is ask Dave, our programming manager, to talk about the program itself and what you were just asking.

16395 THE CHAIRPERSON: Okay. So perhaps we should make sure we understand.

16396 There is nothing wrong with filler programming, but with specialty services, the Commission, unless someone can convince us to the contrary in a particular application, wants it categorized under "Other categories", so we understand that.

16397 But this type of programming, which would be more an artist profile, interviews, et cetera, do not fit under Category 8, so what would they fit under when you categorize it, whether it's filler or longer or -- it's even more difficult if its longer because then some categories are missing.

16398 MR. REIMER-EPP: Commissioner, if I may address that issue briefly, before Dave does.

16399 Just to be very clear that all of the programming that you mentioned out of Schedule 10 and that we have talked about in Schedule 1 is to be understood to be directly related to the music content and, as such, when looking at Category 8 it appears, at least to us, that it would fall into the discussion by VJs for example, or by a host about programming elements or about the artist, things of that nature.

16400 So we are not talking about programs that would in themselves be not devoted to music. This is simply information to make the music more interesting, so to speak, to give it a face and a name, but it is not intended to fall outside of the music programming itself out of Category 8.

16401 THE CHAIRPERSON: It would serve more as a link --

16402 MR. REIMER-EPP: That's exactly right.

16403 THE CHAIRPERSON: -- between the two. And none of them, for example, would be long enough to be documentaries or even analysis and interpretation?

16404 MR. REIMER-EPP: Absolutely not, no.

16405 THE CHAIRPERSON: Which leads me to perhaps address it in another way.

16406 What proportion of the schedule would be dedicated to music videos in the manner in which we understand music videos? I suspect if I went to the regulations I would find a description, which you should be familiar with, so what proportion would be music videos as described in the Commission's categories?

16407 MR. J. THIESSEN: We have 50 per cent which would be music videos. Then there would be about 40 per cent which would be concerts and such wrapped around the music videos and EPKs and BTS, which is electronic press kits and behind the scenes things, as MuchMusic does right now, or other music services. And then there is about 10 per cent where VJs would tie this in.

16408 But Dave here is probably very good at explaining how the program would actually look.

16409 THE CHAIRPERSON: You mentioned MuchMusic. They do have a requirement to have a certain percentage of music videos, so that is one of the reasons why I ask you.

16410 So you say 50 per cent would be music videos as described and 50 per cent would fall under music and dance other than video clips and music video programs and also music video clips?

16411 MR. REIMER-EPP: Yes, that is correct.

16412 THE CHAIRPERSON: So it would be a 50/50 proportion.

16413 MR. REIMER-EPP: Correct.

16414 THE CHAIRPERSON: Go ahead, if you have something to add.

16415 MR. MILLS: Thank you, Madam Chair.

16416 I think I wanted to get back to the word "filler" that has caused kind of some confusion here. I would rather -- I think it more aptly would be called, in our purpose here, foreground or enrichment that would be strategically designed to connect the viewing audience with relatively unknown Canadian artists.

16417 The concepts that we wanted to incorporate, as Jeff had mentioned, were electronic press kits, behind the scenes footage, bios, biography backgrounds within 5 to 10 minute segments, either tying one video to another or giving background on the videos themselves.

16418 THE CHAIRPERSON: They would be linkages outside of music videos and probably would lead themselves to concerts as well, introductions or speaking to artists, et cetera.

16419 MR. MILLS: Absolutely. Absolutely.

16420 THE CHAIRPERSON: So 50/50 would be the difference between music videos as such and the rest of the programming, and the rest of the programming would all be fitted -- could be fitted under Category 8 solely.

16421 Have you thought of whether you would be spreading the airing of your videos throughout the day, especially the Canadian ones, or do you have --

16422 MR. J. THIESSEN: As David has -- I'm sorry?

16423 THE CHAIRPERSON: Yes?

16424 MR. J. THIESSEN: Well, one of the things that we want to do is create a place for our Canadian artists so it is not going to be like putting all the Canadian artists in one little place and then running the Americans throughout the rest of the time. We are going to be interspersing the Canadian videos throughout the entire program schedule, having concerts being played throughout that time as well, and have an opportunity for the Canadian artists to get their faces in front of the Canadian people.

16425 One of the difficulties we have in Canada is the regional problem. You can be an artist in the B.C. area and not ever get a chance to get into the Maritimes. You can have somebody who is really well-known, somebody like Steve Bell, who has to literally -- it's easier for him to go to the States than to go to another place in Canada.

16426 So in terms of geography, it is one of the tough parts of being in Canada is you have to be able to get to the next town and get to the next place. Where I live in Manitoba it is a long way between different cities.

16427 MR. MILLS: If I could just address your question there in regards to playing certain amounts of Canadian content during different parts of the day, and I'm guessing that I can allude to what you are getting at.

16428 Over years and years in mainstream radio I know there has been a practice of almost treating Canadian content like your ugly kid sister and hiding it in the less listened to formats of the day. The beautiful thing about what we want to do is completely the opposite. We want to spotlight our Canadian artists, which would absolutely mean giving them fair coverage throughout the broadcast day.

16429 THE CHAIRPERSON: Before going into more specific questions on Canadian content expenditures and Canadian exhibition to perhaps round out a better feeling for what the sound or the look of the service would be, you say that it won't be based on a programming wheel and repeated three times or, in some cases it's twice.

16430 But I'm looking at your application at Schedule 10 where you talk about three main programming blocks for the typical day with music mixes that appeal to the demographics of the time period and blocks will include five to 15-minute pre-produced segments providing information of interest to the respective demographics. How different would that be from a wheel?

16431 MR. J. THIESSEN: Unlike a traditional wheel, what we are talking about here is we are using video servers. So we can actually use the technology to intersperse the things instead of just saying "This is going to be the tape for the day" and play it. We can choose whatever clip we want and make it unique, make that whole block unique each day. Even though it has a tendency to look like the same kind of format or the same kind of demographics we will be shooting for, it will actually be different. We can reprogram that wheel.

16432 THE CHAIRPERSON: And it would be based on your expected viewership at that time?

16433 MR. J. THIESSEN: Yes. We would want to make sure that we would go right after the audience. We are looking at most capable or able to watch the program at that time.

16434 THE CHAIRPERSON: I take it that what you are saying with regard to video servers is because the blocks are shorter you have even more room to do this than some other genre who program, let's say, long-form documentary who wouldn't have the same flexibility.

16435 MR. J. THIESSEN: Is the ideal --

16436 THE CHAIRPERSON: So here you can mix and match and repeat, which will lead to how much repetition, for example, of Canadian music videos?

16437 What would be a repeat factor?

16438 MR. J. THIESSEN: Well, our repeat factor is going to be quite large for the first year just because we are actually creating this new industry.

16439 But the wonderful thing about the repeat factor is, with music it is very different than other specialty channels or other kinds of programming. A music channel -- music, the more people watch it, the more people see that same face, the more they like that music. So the repeat factor actually works in our favour in music. When you take a look at the heavy rotation that other music services have, they sort of feature a particular artist or whatever is the current hot one at the time.

16440 Maybe I could ask Dave to respond to it because of his radio background.

16441 THE CHAIRPERSON: Yes. I was just going to say, in that regard it is closer to radio --

16442 MR. MILLS: Exactly.

16443 THE CHAIRPERSON: -- where repeat is a positive, not a negative.

16444 MR. MILLS: Exactly. It's a positive rather than a negative. Even the BBM ratings have been based largely due on the statistic that the average radio listener listens 15 minutes at a time through the day and, you know, one of the big complaints in my past experience in CHR Radio, which is very oriented on a repeat factor, is playing the same songs over and over. However, those are not your average listeners.

16445 The reason, though, for higher repetition is so that your average listener can be almost assured that if they are going to listen for any segment of time during the day, they are going to hear their favourite songs.

16446 THE CHAIRPERSON: So to complete the nature of service at this initial level, it will be all music and even the spoken word will be announcement links to the music and 50 per cent videos, 50 per cent concerts, and we can go back to the Canadian content and the difficulty of reaching your goal in the first year.

16447 Everyone has been asked to comment on the need in this new environment to put a deadline time at which your service has to be implemented. Do you see this as a necessity as well?

16448 MR. J. THIESSEN: I think the industry is clear and I think we will be very clear. It is absolutely essential for the industry to roll this thing out together as a package.

16449 It is essential for us to be part of that and we have every indication that we not only want to, we are ready as soon as you give us our licence to go ahead with getting this service ready to launch at the same time or before the others, but we will use everything we can to drive this box and to be part of the industry in launching this service together rather than apart.

16450 THE CHAIRPERSON: So you would see both as necessary then, a launch together which hopefully the industry will achieve, but the other part of the question is whether this launch can be postponed for 18 months, two years, or whether the Commission should require that whoever launches has to do it within a certain period of time if we want to get digital going.

16451 MR. J. THIESSEN: We want to have the service happen right away. We would be very delighted if the Commission would impose on the BDUs and every other applicant that would be successful.

16452 THE CHAIRPERSON: Yes, as long as you understand there are two things here. One is to say to everybody, as we have in the past, you must launch within 12 months or the authorization lapses. The other is the more complicated suggestion, that the Commission impose a launch that everyone has to do it at the same time.

16453 Some applicants have told us they will be ready in six months, others in 12, so there are two questions here. You would want both to be imposed.

16454 MR. J. THIESSEN: Yes, we would.

16455 THE CHAIRPERSON: And one is not difficult for us to impose. We have had lots of practice. The other is more difficult to do.

16456 Independent production. The question that arises immediately, of course, is the connection to Trinity. I see in your application at page 30 of your Schedule 1 that the service would be co-located with Trinity Production.

16457 MR. J. THIESSEN: Yes, it would. The service would be located in Winnipeg. It will utilize the uplink facilities over at WTN, but the service itself would be renting space from Trinity Television.

16458 THE CHAIRPERSON: And you have made commitments to the independent production community of $9 million over seven years to produce 450 videos. As soon as we make commitments to independent producers, then the question arises as to how one defines an independent producer. Have you given that some thought?

16459 MR. J. THIESSEN: Trinity Television until very recently was an independent producer for many years, so we have got a lot of experience in that one. We would --

16460 THE CHAIRPERSON: And how does one lose that? How do you lose that characterization of not being an independent producer any more?

16461 MR. J. THIESSEN: Well, now Trinity Television is a broadcaster, so that is no longer part of -- we are now separate and we understand that relationship.

16462 What I would like to just put on the record is that we feel very strongly about independent production. Our goal for this service would be to provide a great opportunity for the independent production sector to have an opportunity to produce programming. We think it should be arm's length and it should be absolutely separate, a separate organization.

16463 As Trinity Television, we would not be utilizing their services for doing the production part of this stuff. It would be through independent production companies.

16464 THE CHAIRPERSON: So any connection as between the two of you eliminates the possibility of counting that company as an independent producer vis-à-vis the licensee.

16465 MR. J. THIESSEN: Correct.

16466 MR. REIMER-EPP: I believe that there has been some discussion over the course of the last week on independent and then really independent. We would be going for the latter variety where we are not anticipating any ownership in a so-called independent producer. I have forgotten the exact terminology that was being used, but that's really the nature of what we are talking about when we say independent production in the application.

16467 THE CHAIRPERSON: So I would conclude from that that Trinity would not be the producer of any of these videos.

16468 MR. REIMER-EPP: That's correct.

16469 THE CHAIRPERSON: Would Trinity produce any other programming or would you use synergies between them for the programming that would be perhaps that filler programming or those interviews or VJ activity?

16470 MR. J. THIESSEN: We have -- because we would be sharing the same building, there will obviously be some sharing of equipment and people and resources, just as it would with the radio station that's located there.

16471 The synergies there, just because we have got a building which can facilitate other things and new things, and that's to us a great synergy aspect of having it located in our building -- the real thing that we are excited about is that Trinity Television will not be producing programs. There will be no Trinity Television programs put on there at all.

16472 We have as New Day Industries -- IntuneTV has its own set of cameras and VTRs and everything else so it's separate from, but if there is a need to share, we will be sharing, but it won't be on a cost basis.

16473 THE CHAIRPERSON: Can you explain to me what expenditures will be necessary for the concerts. There's $2.6 million over seven years for 350 concerts. What will that include? Will you actually hire a producer to do that or will inhouse facilities and staff be used for the production of concerts?

16474 MR. J. THIESSEN: I'm going to ask Kevin Dunn to answer that. He's our guy who is into independent production.

16475 MR. DUNN: Thank you. We have talked about $2.6 million over seven years, we have talked about 350 concerts during that time. These would be all Canadian all CCM related concerns.

16476 Let's talk about year one for a second just to see where we are going in year one. These 52 concerts that we are talking about, these would be Intune coffee-house concerts independently produced where we would, Intune, license -- give a licence fee to an independent producer to produce those for us.

16477 If there were to be an additional 10 concerts, they would be held on location across the country and a higher licence fee would be given to those producers again for those. In year one, actually we are looking at 62 concerts.

16478 We are offering generous licence fees, but they would also trigger other funding mechanisms which we hope the independent producer would bring to the table.

16479 THE CHAIRPERSON: Of that $2.6 million, what would flow to independent producers over and above the $9 million for the 450 videos, approximately? Is that --

16480 MR. J. THIESSEN: All of the production costs. If it would be any part of the facility cost, it would be taken out from that. They will have to --

16481 THE CHAIRPERSON: Everything else would flow to independent producers over and above the $9 million we were discussing earlier.

16482 MR. J. THIESSEN: Yes.

16483 THE CHAIRPERSON: Now, before going into Canadian content exhibition hours and expenditures, the flip side of what you feel is the most important criterion, as I understood it, which is diversity, is competitiveness, of course.

16484 How would we fence in the genre and prevent crossover with existing music video services or even some that have applied to be licensed?

16485 MR. REIMER-EPP: If I can address that question. Enter the -- at the moment there is no service which is licensed or playing Category 35. Now we are using a radio regulation there to define it. That is not something which is presently appearing at all or at least to a very nominal extent.

16486 We are perfectly content and in fact would ask for a condition of licence that we remain in that genre.

16487 THE CHAIRPERSON: Only.

16488 MR. REIMER-EPP: Yes.

16489 THE CHAIRPERSON: Exclusively.

16490 MR. REIMER-EPP: Exclusively, yes.

16491 THE CHAIRPERSON: Sub-category 35 as defined in the radio regulation --

16492 MR. REIMER-EPP: Correct.

16493 THE CHAIRPERSON: -- which could be imported into your specialty service. That would fence in the genre and ensure diversity by preventing competition with existing or services that have been applied for.

16494 MR. REIMER-EPP: Correct. Yes.

16495 THE CHAIRPERSON: Now, Canadian content exhibition, you had from 40 in the first year to 60 per cent and, of course, because you are a video service, you have 20 per cent to 60 per cent of the videos.

16496 You also have no foreign programming expenses. So you are going to get presumably some U.S. or other country music videos for free, possibly concerts as well?

16497 MR. J. THIESSEN: I believe that there would be some concerts that you would provide us as well.

16498 Steve is a guy who is very involved in the record production and all of the music industry from the American side of it because he has been involved with signing Canadian artists with the Americans. Maybe, Steve, I can get you to comment.

16499 THE CHAIRPERSON: Perhaps I can be more specific by telling you what my question is. I would like to understand, with no expenses for foreign programming, with what you explain as an absolute dearth of Contemporary Christian Music videos already on the shelve, and the fact that you will produce 30 in year one, I wonder how this Canadian content will be achieved at 40 per cent.

16500 MR. J. THIESSEN: I am going to get John to actually describe what the exact way, but what I guess we would like to say is that there is obviously a lot of American content. There is no problem there, there is no problem with Australian content and U.K. content. The record companies and the record organizations, the industry will actually provide us that.

16501 But what this service is all about is finding a way to do something for Canadians. The U.S. guys, they have that. We are not interested in helping them as much as we are interested in helping Canadians do it here. So what we are planning on doing is, although creating 32 videos sounds like almost nothing, we actually are able to create quite a bit more, if you take a look at some of the ways we are going to do it with concerts.

16502 Actually, before I get John to maybe talk about that, I would like to have Kevin describe exactly our plan for production because that to us is the exciting part for getting these independent producers really making a new industry here.

16503 Kevin.

16504 MR. DUNN: Well, I guess it would be a good time to maybe go into our pre-launch strategy to show you how we are going to build this infrastructure before sign out. Would this be an appropriate time?

16505 THE CHAIRPERSON: Yes, but what I want you to relate it to is to look at year one and say during the 18 hours you will have 40 per cent Canadian content and from six to midnight you will have 40 per cent and the programming overall, if I understood earlier, will be 50 per cent music videos of which 20 per cent only is the first year will be Canadian.

16506 So 20 per cent of 50 per cent of the programming will be Canadian. So then you have to have quite a bit of other programming, concerts or whatever, to reach 40 per cent from 6 to 12 and all day. I want you to relate it to what it's going to look like. Of course, there will be repeats, et cetera, but to reach these goals in the first year.

16507 MR. REIMER-EPP: Madam Chair, I can tell you that we were in the preparation of this application very aware of this exact problem and spent a good deal of time working out what kind of production levels would be necessary to meet the requirements that we have given you in Section 7(4). They are achievable based on a split between the videos and concerts and, as Kevin will tell you, concert footage turned into concert videos.

16508 You can in this particular business make a lot of -- I will use the word "milage" although it's not exactly right -- from one performance. And that is how we intend to meet the Canadian content that we have committed to. We have been deliberately realistic in setting the levels that we intend to achieve, but very clearly our goal over the licence term is to maximize the Canadian content on the service.

16509 I don't know if that does answer your question, but because the music video content is low, the concert content will be a significant portion of Canadian content overall, and will in itself spin-off additional videos into the concert video segment.

16510 THE CHAIRPERSON: It's an understanding that music videos can be repeated. I suppose that's one way of reaching it, but not to the point -- there must be a saturation point where it's counterproductive to repeat too often.

16511 MR. REIMER-EPP: Certainly, yes.

16512 MR. J. THIESSEN: I think many Canadian artists who right now don't have that service, they are looking forward to an opportunity to be seen and we are going to give them an opportunity to be seen.

16513 Dave, do you want to add to that as well?

16514 MR. MILLS: Well, I just wanted to clarify the strategy of taking a concert and, as John was describing -- I think he used the word "milage", getting more milage out of a concert. We can take, I would say, a dozen to two dozen songs that are performed in this particular concert. That is potentially a dozen to two dozen videos available for rotation.

16515 Of course, by the nature of the very genre or the format, there will be a repeat factor, but with the increase in concert footage, obviously, we can keep that repeat factor to a minimum.

16516 THE CHAIRPERSON: That leads us to Canadian content expenditures. There is a discrepancy between your comment in your supplementary brief, in the executive summary I believe -- yes, on page 2 -- at point 10 you say that you will spend a total of over $19 million on Canadian program production and acquisition over the seven years. But if I look at your actual breakdown in 8.2 -- does that sound familiar to you, where you breakdown the expenses -- we only arrive at some $18 million -- point two, I think, when we look at the line for total Canadian telecast expenses.

16517 MR. J. THIESSEN: That may end up being the extra that we put into AVLA for LTC artists and the Canadian musicians.

16518 THE CHAIRPERSON: Yes, it adds up to $18.252. So the rest of that --

16519 MR. J. THIESSEN: Is in the administrative line in licensing fees right there.

16520 THE CHAIRPERSON: And may not have been put in Canadian content.

16521 MR. J. THIESSEN: Exactly.

16522 THE CHAIRPERSON: And then when you have the description, you have added it in.

16523 MR. J. THIESSEN: Right, because it's actually going to the artist, the industry itself.

16524 THE CHAIRPERSON: And where would I find it in your financials?

16525 MR. J. THIESSEN: In the administration section.

16526 THE CHAIRPERSON: Administration expenses.

16527 MR. J. THIESSEN: Under licence fees.

16528 THE CHAIRPERSON: The rest of that sum would be there.

16529 MR. J. THIESSEN: It doesn't add up, everything going to the CRTC there.

16530 THE CHAIRPERSON: Now, you have accepted, I believe, a condition of licence of 64 per cent based on a traditional method of calculation which I will assume you are familiar with and that is based on using advertising and subscriber revenue, but not donation.

16531 If you add donation revenue, of course, it's lower. It goes down to 62. What is your view as to whether a donation should be brought in or are you satisfied with a condition of licence of 64 per cent?

16532 MR. J. THIESSEN: We are very satisfied with the condition of 64 per cent, and we are excited about helping with that significant contribution to Canadian content.

16533 THE CHAIRPERSON: And you have heard many comments, of course, about the need for flexibility and the rigidity of the traditional formula in the risky digital world. Do you have any concern with regard to the application of the methodology the Commission has used?

16534 MR. J. THIESSEN: No, we don't. We would be delighted to stay with the letter we have agreed to.

16535 THE CHAIRPERSON: And, of course, if you are given flexibility and you don't want it, you don't have to --

16536 MR. J. THIESSEN: Other applicants seem to --

16537 THE CHAIRPERSON: You don't have to use it.

16538 MR. J. THIESSEN: I don't think we need it, no.

16539 THE CHAIRPERSON: Yes. In interactivity, you say that you will use interactivity as it develops. Am I to understand that initially it will be mostly via the Internet, or possibly phone line?

16540 MR. J. THIESSEN: Before Kevin really gets into it a lot, I would just like to say that we think the music video industry is the perfect place to deal with interactivity, and Kevin you want to add?

16541 MR. DUNN: Certainly. This is a time to talk about our interactive strategy. Intune has administered a realistic approach to our interactive strategy. We really have our ear to the ground or our digital ear to the screen.

16542 With regards to what the box can offer, new Internet strategies, we also want to be realistic. We know we have an incredible merchandising opportunity set before us that will obviously help the industry, which is our main goal, and provide this content for viewers.

16543 While the box offers incredible interactive opportunities, we know that consumer education and demand are going to be key factors in making all of these great new offerings a reality. It will take some time before interactive television becomes common place and everyone understands the ins and outs.

16544 This being so, our initial Internet offerings do not deal with pie-in-the-sky projections but establish Internet revenue generators, the largest of these being CCM merchandising.

16545 Our merchandising efforts online will include CDs; CD sales; video sales; concert videos; concert ticket online; a streaming database of Canadian artists, including interviews and a "buy me" button; books, music scores; chat rooms one-on-one with the artist.

16546 So there will be a real opportunity for those on the net to, on demand, be able to look at their favourite artists and converse with others about the industry.

16547 We also want to encourage young people to follow their dreams with regard to this. We have heard from some musicians here who have really paid their dues, and we would like them to be able to share with our young people what it takes to become an artist.

16548 With this in mind, we will have the Intune mentor site, a virtual "how to" with interviews and demonstrations with those in the know.

16549 We also want to appeal to the artists who, over the broad expanse of this country, maybe have a hard time connecting with each other, who would like to have -- and also with the media, to give them self-helps on marketing video production, accessing funds, new funds, new ways of financing their videos and their CDs and media relations. Basically a forum for Canadian artists associations and promoters and distributors.

16550 In conversations with Steve Rendall, I know that this is a welcome project.

16551 In the competitive world of the web, we are happy to report that there are very few CCM e-commerce sites, let alone ones with a Canadian focus, which ours will be.

16552 In the web environment, it is not new but we know now that anyone with a Web site is a potential webcaster or broadcaster, as it was known.

16553 We have plans to distribute our programming to other demographic Web sites, demographic specific Web sites. For example, at the click of a button, an Intune Top Five Video Picks could be seen, streamed from our servers. Widely visited Internet portals, denominational church sites, family oriented sites, and the like, would all be benefactors to this type of distributed programming on the net.

16554 So you will not have to come to our site. We want to get our programming out there to other sites, for those Web sites who would like this programming as part of their offerings.

16555 One of the biggest forces behind any Web site is driving traffic and knowing the merchandising that we want to derive from this new project. We have to be very concerned about driving traffic to our site.

16556 That is one of the ways: distributing this to the other sites.

16557 Another way is by our on-air promotion --

16558 THE CHAIRPERSON: By the other sites, you mean the web.

16559 MR. DUNN: Yes.

16560 THE CHAIRPERSON: That will drive them to the TV screen.

16561 MR. DUNN: Yes.

16562 Intune's prelaunch and launch, including on-air promotion campaign, totals about $200,000 in air time. And our expenditures in what we would like to do on the net are about $140,000 to start.

16563 Our on-air branding for Intune will also drive traffic to the site. This will be our general strategy. When people think of IntuneTV, it will be Intunetv.com, because when you see the music, when you hear the music, and you like the music, you want to access that music right away. You want to know about that artist, where they are from, how you can purchase the music, and get to know them. You will be able to do that online.

16564 As the digital box and all of its offerings roll out and people get used to it and it becomes viable and understood by the public, we will take these same ideas and put them into strategies with the box so that we can have a menu-driven surfing availability on the screen. So when people are watching a video, they can call up artists' locations and upcoming concerts, et cetera. We will take those strategies.

16565 We want to use a system that is in place now, a system that we know, and then as the digital box reveals its many opportunities to us we will take advantage of those as they roll out.

16566 THE CHAIRPERSON: You say that $140,000 would be spent in the first year on development of interactive and transactional components of the system?

16567 MR. DUNN: That is correct.

16568 THE CHAIRPERSON: What you have in your financial projection is $75,000. So that is not correct. It should be much more?

16569 MR. J. THIESSEN: We also have in the start-up phase your start-up as well as the first year.

16570 THE CHAIRPERSON: I see. It only shows in the breakdown of your programming expenses under Other Programming Expenses that is only $75,000

16571 MR. J. THIESSEN: In year one, yes.

16572 THE CHAIRPERSON: Going only in year four to $150,000.

16573 I hear you that some of this isn't start-up. But even in years two and three it would be more than $75,000 then.

16574 MR. J. THIESSEN: Right.

16575 THE CHAIRPERSON: Or once you have that set up with the start-up, it is not as expensive to keep it going.

16576 MR. J. THIESSEN: Right.

16577 THE CHAIRPERSON: I see what you are saying.

16578 MR. J. THIESSEN: Yes, that is correct.

16579 THE CHAIRPERSON: That leads me to -- you are a non-profit organization. You show a positive PBIT in year five, I believe. So the money would be ploughed back into the development of the service.

16580 Am I right?

16581 MR. REIMER-EPP: That is correct, yes.

16582 THE CHAIRPERSON: In Schedule 15 you say, I believe, in your underlying assumptions for your projections that -- and I am reading:

16583 Although you will not solicit donations on the air, is there not a way of using merchandising to actually do that indirectly? Or is that something you will shy from?

16584 MR. REIMER-EPP: We will absolutely shy from it.

16585 THE CHAIRPERSON: You know what I am talking about.

16586 MR. REIMER-EPP: I understand what you are talking about. It is difficult to describe but that is --

16587 THE CHAIRPERSON: Whatever one buys is whatever one will get for the price. It is not going to be an indirect --

16588 MR. REIMER-EPP: I would like to find a way to put it into words so we could verbalize the commitment not to do it.

16589 But we are not going to do it.

16590 THE CHAIRPERSON: Okay. So donations neither directly nor indirectly.

16591 How important is the set-top box development to this type of service? Would it be a higher level of interactivity? Would it be a big advantage?

16592 I suppose for those who may not have a PC --

16593 MR. DUNN: Anything that adds to the convenience of online viewing is going to be of benefit to the viewer. Right now we see our young people surfing -- well, they are watching two screens going at the same time. It drives me crazy at home.

16594 When this becomes available on one screen, I see that as a great opportunity for us. You don't have to move from your television to the Web site. You stay right on the screen; you are right there. You are able to access and continue your viewing enjoyment. We know we love to do more than one thing at a time.

16595 THE CHAIRPERSON: And this could be over and above a merchandising information on the artists --

16596 MR. DUNN: Absolutely. We would like to --

16597 THE CHAIRPERSON: A whole wealth of information that could be enhancing the viewing experience.

16598 MR. DUNN: This is a very regional thing as well. When we have artists -- in the CCM industry, to be able to know that this artist came from Penticton, B.C. or from Gander, Newfoundland, to get that kind of home feeling and that family feeling, I think is a very positive thing for artists.

16599 THE CHAIRPERSON: When do you see this second level or next level of interactivity developing?

16600 MR. J. THIESSEN: Our expert on the panel on that is Richard, if I could ask him to answer.

16601 MR. EDWARDS: Thank you. I am not sure that we have an exact date. I am not sure that the industry has an exact date. I have heard that two to three years would be about when we would see that begin to be rolled out. That would make sense.

16602 Some of that is dependent upon what the final cost of that box would be and bringing it down to a point where it is affordable. So I believe it is certainly very much in flux. I heard two to three years, and that certainly sounds logistically correct.

16603 I think it is important to note, though, that the service is not predicated on that box. We can certainly flourish very well with the existing generation, say generation three boxes. However, we are all very excited about seeing the next generation hit the streets.

16604 THE CHAIRPERSON: When that occurs what would be your expectation vis-à-vis the distributor's responsibility to carry all of the information?

16605 MR. J. THIESSEN: Our expectation would be for the distributor to carry the information we provide them.

16606 THE CHAIRPERSON: We would expect you to abide by the Personal Information Protection and Electronic Documents Act which is going to come into force soon?

16607 MR. REIMER-EPP: Yes.

16608 THE CHAIRPERSON: With regard to privacy of that information.

16609 MR. REIMER-EPP: We would be prepared to do that.

16610 THE CHAIRPERSON: Everybody will have a good while to study it and to provide mechanisms to make sure they abide by it.

16611 MR. REIMER-EPP: Yes.

16612 THE CHAIRPERSON: Just a few more questions about your business plan.

16613 There is in that section we were looking at, 8.2 describing your expenses for programming, a big jump between years 3 and 4. It is actually almost double.

16614 How do you explain that?

16615 If you look at your Canadian programming expenses projected, they go from $1.5 million to $2.8 million. The difference between the other years is more predictable.

16616 MR. J. THIESSEN: We are planning on having -- by that time, our operation will be very strong. The first thing as charity is when we feel that our viability is very, very complete our whole mandate is to throw that right back into production.

16617 THE CHAIRPERSON: Yes, because you haven't reached profitability by then. That's only in year 5, and that jump is between 3 and 4, but you have no particular explanation of this dramatic jump between those two years.

16618 MR. THIESSEN: We are expecting to continue the aspect of producing Canadian videos as much as possible.

16619 Again, because we are not in this business for the money, we are in this thing to create this industry, we are just going to be putting that money into it as soon as possible. If you look at our cash flow statements, we have the cash available to us to be able to do that.

16620 So our plan is to continue to make our service attractive and to pour that money back into industry.

16621 THE CHAIRPERSON: With regard to revenues, you have a line for digital subscribed revenue in 8.1. I'm looking at the financial operations that was filed I believe along with the clarification to a question asked by the staff and you have a line for analog subscriber revenue. The subscriber revenue projected is quite high. What type of analog subscriber does that represent?

16622 I will ask Richard Edwards to discuss this.

16623 MR. EDWARDS: Thank you.

16624 I think to properly answer that question I probably should back up just a bit to talk about the overall penetration projections in general and to say that we chose the most pessimistic numbers that we could possibly create would be perhaps a bit of an understatement.

16625 We projected, of course, numbers based on the information that we had from the cable industry, but we did not, and I would like to underline "not" do that because we have a pessimistic view of the digital environment overall. In fact, we have quite the opposite. We are certainly not editorializing on the cable industry's ability in general to bring these numbers to the table at some point, nor are we doing the same about the DTH sales.

16626 But for me to address the analog issue, it's, I think, important again for me to address some of the penetrations of the basics that relate to that number. To do that I must again say that we are simply wanting to ensure that by using that very pessimistic number in our business plan we put together, we did that simply to carry out a very conservative approach to doing so.

16627 We know that IntuneTV will drive subscribers, but the projections for the rollout of digital are simply that. As the CCTA has said to the industry several times: they are simply projections. So when we take a look at our analog numbers, we are first looking at the digital cable numbers. I think that's important to explain that to get to the answer, as the CCTA has filed with the Commission recently, there are now a number of studies out that support a mid range or a better penetration between the pessimistic and optimistic penetration projections. In our case, again, we used the extremely pessimistic projections.

16628 So with that in mind, the cable mid range between the pessimistic and the optimistic, the numbers, when you take a look at the studies that have been filed with the Commission, the CCTA, the Warbug, Dillon Reed and the Paul Kagan studies, IntuneTV used again the most pessimistic estimates of CCTA -- so instead of the 750,000 to 800,000 mid range, which the industry was using, the pessimistic base we used was something like 406. So that has to tie through to when we are looking at the analog numbers.

16629 Again, when we took a look at the analog numbers at that point, we have something in the order of about 25 per cent of the actual number of analog subscribers today in the Class-3 area have been reflected and is part of our take rate, and we are estimating and assuming that based on essentially a few factors. The first one is that these Class-3 cable operators will find a way to distribute IntuneTV on their analog systems, and they will do that through --

16630 By the way, I should say I guess that IntuneTV we know is going to be extremely popular, particularly in the smaller communities, so we didn't want to leave them out. Cable operators will find a way to address the digital environment one way or another in these small systems. As the Canadian Cable Systems Alliances said to the Commission in one of their filings, that they have indicated that they distribute in small communities is true but they are very aggressive. They are innovative operators who know their communities and have a track record of applying leading edge technological applications. So what we are looking at is, one way or another, they have to address the issue of providing digital in their systems.

16631 An example of that that is relatively innovative and fairly new is the video and cable system announcement recently where they launched CablePlus, which is essentially a box that's listed as video and cable in Alberta. But they have done that to provide small Class-3 systems in that environment with the opportunity of receiving digital signals in a box as well as the analog signals.

16632 That is just one example. We are not suggesting that we have all of the examples, but we do feel that they will find a way to do that or they will lose their market share to MDS and to DTH applications, in which case the numbers that we reflected there would simply rollout into the DTH and MDS numbers, but we have reflected them there because we felt it was a percentage of a real number that we can get our hands on. Again, if they don't service that industry or that subscriber in that way, through whatever unique means they have, then they will lose those numbers to the DTH and the MDS industry.

16633 Again, we think that because of the way we have calculated that, they are so incredibly pessimistic in their number ranges that they will follow between those two.

16634 THE CHAIRPERSON: Your DTH and MDS numbers for revenues are rolled into the digital subscriber revenue line; it's not separated out.

16635 MR. EDWARDS: That's correct.

16636 THE CHAIRPERSON: Although, your analog numbers do keep growing right up to year 7, what you are saying is quite possibly they will decrease and go into the first line.

16637 MR. EDWARDS: That's correct. They will either address the situation by providing the consumer what they are looking for -- and they are smart business people, I'm sure they will find a way to do that -- and if they don't they will find that they will be losing those subscribers, particularly DTH and MDS.

16638 THE CHAIRPERSON: Yes. But by increasing that line year from year, you are not showing much optimism about them finding a way to become digital.

16639 MR. THIESSEN: Because the line jumps from year 1 to year 2, but then sort of stays flat year 3 --

16640 THE CHAIRPERSON: Not really. No, no. It increases.

16641 MR. THIESSEN: Are you talking about the analogue subscriber revenue?

16642 THE CHAIRPERSON: Yes, the revenue for analog subscription increases from 367,297 in year 1, to 458,734 in year 7. So you are saying quite possibly this will not be the way in which it occurs.

16643 I'm asking because in some cases that line decreases and disappears by year 7. Yours keeps increasing by a certain percentage, which I haven't calculated. I thought, which I heard in the answer, that part of it was that it is perhaps a service that will be attractive to small communities, but it doesn't seem to reflect your optimism about Class-3s becoming digital.

16644 MR. EDWARDS: Just a comment on that. What we did was we took a look from the penetration and we simply took a look at the historical average increase of Part 3 systems and we spread that out through the years and then we took the same percentage.

16645 THE CHAIRPERSON: Yes. What you are saying is forecasts are forecasts.

16646 MR. EDWARDS: This is true.

16647 THE CHAIRPERSON: That's right.

16648 Those complete my questions. Thank you very much for your co-operation.

16649 Commissioner Williams has a question or two for you.

16650 COMMISSIONER WILLIAMS: Thank you, Madam Chair.

16651 I'm interested in having you expand on the comments you made in your presentation a few minutes ago, or perhaps it was an hour ago, when you stated what was needed in the Canadian broadcasting system at this critical point in time is diversity, not only of programming genres but also of ownership and control.

16652 Specifically, why do you feel that a Category 1 licence is required to establish your service? I have heard you say just a few minutes ago that you weren't in it for the money, you were in it for other reasons. So why do you feel a Category 1 licence is required to establish your service?

16653 MR. THIESSEN: I think when you look at the overall broadcasting system in terms of cable and DTH, the Category 2 applications you had before us are going to have a hard time launching if you are independent. I don't think there is any problem if you are a Rogers or Shaw or if you are a big broadcaster who can leverage some of their existing services to ensure that their Category 2s get placed on those other packages, but if you are an independent it's very hard to actually insist on carriage. It's hard for you to leverage anything.

16654 Probably, if I was to take a look at all the different reasons, the biggest reason would be Category 1, ensuring the carriage. That would be our number one reason.

16655 COMMISSIONER WILLIAMS: Okay.

16656 Why do you think the CRTC might find this to be, in your words:

16657 MR. THIESSEN: I think, by and large, you have bigger and bigger corporations who are doing more and more -- taking over more and more of the broadcasting in Canada. If you would take a look at pretty much the very beginnings of the Canadian broadcasting industry when there was discussion, "How is this going to unfold", and "How are things going to happen in Canada here" -- this was back in the fifties when the Royal Commission went across -- one of the things that the Fowler Report described and talked about was diversity of ownership.

16658 They talked at that time that maybe it wouldn't be good to have newspaper moguls control everything. Maybe it wouldn't be a good idea to have radio guys control everything. How do we create something where there is a new level, a new ownership, where there is somebody who controls, say, television?

16659 Now, I think their lot has changed, obviously, from the 1950s and the 1960s, so I don't want to go back through the entire history of the Canadian broadcasting system, but I think it is always great to have something that is new and different.

16660 We will bring something that is very creative to this industry. We are going to have something that is going to be different than what other music services are going to have on, and it is going to be something that is going to benefit Canadians and Canadians want it.

16661 So I think the big reason is, we look at something like the CCM market, see what is happening in different parts of the world and look at how exciting and vibrant it is, and we are looking and saying "You know what, this could happen here in Canada."

16662 We think a Category 1 licence is a perfect opportunity to bring the people who are interested in this genre into the Category 1 mix, tier together with us and create something that is really neat here.

16663 MR. REIMER-EPP: If I can add to that just briefly.

16664 On the issue of why the timing at this particular moment is important -- I believe that was a part of your question as well.

16665 The timing for this industry in particular is that with a lack of Canadian content, as we have already discussed with the Chair, it is important to have an engine to drive the production of Canadian content. As a Category 2 service it would be very easy to meet the levels that are required for Canadian content and just have an American music service.

16666 Clearly that is an option which we rejected. We are not interested in just importing the American music that is already available into Canada. If there is going to be a Canadian alternative in CCM, it has to be supported by some sort of engine. Category 1 is that engine because, of course, mandatory carriage is part of it.

16667 Given that it appears that this might be one of the last opportunities to have a Category 1 license, this point in time is critical. That, of course, is in the Commission's discretion, but given the easy access to the unregulated or less regulated Category 2, the timing for Category 1 and, in particular for this industry, that our application deals with is really essential.

16668 MR. DUNN: I just note Steve had some excellent comments as far as timing as well with the industry, and seeing as we are talking about timing I just wanted to make sure you had an opportunity to speak.

16669 MR. RENDALL: Well, I think it is a critical stage for Canadian artists which are starting to get some recognition within the United States industry but have had no vehicle up until this point to distribute their videos to the entire country. So by providing them that platform, they have much more opportunity to do live concert appearances, retail sales, Web sales, certainly radio airplay and the video would be synergized together.

16670 I think we are at a point where the industry, the CCM industry has been sort of an underground little organization growing for the last 20 or 30 years and it is at the point now where it needs radio, it needs video, it needs some of these larger vehicles from which to grow. I think that is an important thing in terms of the timing of this particular application.

16671 COMMISSIONER WILLIAMS: Thank you very much, Madam Chair.

16672 That concludes --

16673 THE CHAIRPERSON: I thought you would tell me that you were looking for a Trinity of services.

--- Laughter / Rires

16674 MR. J. THIESSEN: A bouquet.

16675 THE CHAIRPERSON: We have been very serious. I have been working quite hard at finding something to make you laugh.

--- Laughter / Rires

16676 MR. J. THIESSEN: Thank you. It is going to help us for the rest of the evening.

16677 THE CHAIRPERSON: Counsel?

16678 MR. STEWART: Thank you, Madam Chair.

16679 Apart from music videos what is the nature of the foreign programming that you plan to broadcast?

16680 MR. REIMER-EPP: Foreign programming would include music videos as well as concert footage. Primarily music videos, but also some concert footage, possibly interview excerpts, things like that, dealing with artists, essentially the exact same kind of programming that we are talking about in the Canadian environment.

16681 MR. STEWART: In the same proportion, roughly speaking?

16682 MR. REIMER-EPP: Correct.

16683 MR. STEWART: Thank you.

16684 I take it that you would accept as a condition of license a requirement that Canadian music videos be evenly distributed throughout each broadcast week?

16685 MR. REIMER-EPP: Yes, we would.

16686 MR. STEWART: Thank you.

16687 Can I get your agreement that you would also accept a condition of license with respect to the proportion of your schedule that will consist of music videos? Could you please also state for the record what that proportion it would be, whether it is the 50 per cent that you have referred to in the course of this proceeding?

16688 MR. REIMER-EPP: If I understand your question it is whether we would accept a condition of license that 50 per cent of the program schedule consists of music videos? Am I understanding?

16689 MR. STEWART: Well, the percentage is over to you, but, first of all, whether you would accept such a requirement by way of a condition of license and, if so, what would the percentage be?

16690 MR. REIMER-EPP: Yes, we would accept a condition of license and we would accept 50 per cent.

16691 MR. STEWART: Thank you.

16692 Just with respect to nature of service, I note on page 101 of your application that you have -- and this is just an example chosen at random -- an objective to bring new music to extreme sports enthusiasts. Can you just describe how that relates to CCM?

16693 MR. REIMER-EPP: I am not the programmer, but I can assure you that consistently with the previous comment made that all programming will relate to the music genre this will not be a sporting event. We had discussed a particular program in some detail with this issue in mind and it will not consist of any one sporting event or any single -- it's not a sports channel so it would be clearly excerpts that go with the music in the way that a music video would, just dealing with sports subject matter.

16694 MR. STEWART: Thank you. But it would be CCM music?

16695 MR. REIMER-EPP: Absolutely correct, yes.

16696 MR. STEWART: Thank you.

16697 Just on page 107 of your application, I see that you catalogue a concert as an in-house production. My understanding was that that would be given over to the independent production. Do you have any comments?

16698 MR. J. THIESSEN: Yes. The comment is that there is a misnomer in that section. It will be to independent production.

16699 MR. STEWART: Thank you.

16700 Those are all my questions. Thank you, Madam Chair.

16701 THE CHAIRPERSON: Thank you.

16702 So it is extreme sports, it is not going to be fire dance for tennis?

--- Laughter / Rires

16703 THE CHAIRPERSON: But that's the idea, right, would be extreme sports with some contemporary music, the character of which would fit the sport.

16704 MR. J. THIESSEN: Without taking too long I would just like Dave to talk a little bit about it.

16705 MR. MILLS: Sure. To maximize the contemporary Christian music that is out there but isn't necessarily already in the video format, we could take these songs that don't have videos yet developed for them and add everything from skateboarding, snowboarding and --

16706 THE CHAIRPERSON: Or extreme skiing or whatever.

16707 MR. MILLS: Exactly.

16708 THE CHAIRPERSON: And create somewhat of a video really --

16709 MR. MILLS: Exactly.

16710 THE CHAIRPERSON: -- a music video with that footage combined with music.

16711 MR. STEWART: Excuse me, Madam Chair.

16712 THE CHAIRPERSON: Yes?

16713 MR. STEWART: I did forget to ask one standard question.

16714 THE CHAIRPERSON: Go ahead.

16715 MR. STEWART: With your permission, thank you.

16716 Just if you could confirm that your proposed service would be technically equipped to allow for the broadcast of descriptive video?

16717 MR. J. THIESSEN: Yes, absolutely that will be part of our plan. In fact, as an applicant we are proposing to spend $100,000 over the license term to have that service actually provided to the blind.

16718 MR. STEWART: Thank you.

16719 Thank you, Madam Chair.

16720 THE CHAIRPERSON: Thank you.

16721 The word is yours, either of the Mr. Thiessen's, but not both.

--- Laughter / Rires

16722 MR. J. THIESSEN: I will proffer the elder.

16723 THE CHAIRPERSON: All Trinity needs a Father.

--- Laughter / Rires

16724 MR. W. THIESSEN: Thank you, Madam Chair, I appreciate that.

16725 Although we described ourselves as being new in the broadcast side of things we do have some of us that have considerable experience in the program production side of things. We have been in production for -- I have been in production for 24 years and a lot of my staff and others that are moving into a new -- hopefully a new marketplace here will bring a lot with it.

16726 I look forward to the opportunity to touch people's lives.

16727 One of the things that we have, as a ministry -- and we have been involved in ministry and the new organization will be a ministry -- is that we see technology as being an opportunity for people touching people. This is all about people touching people. It's not about doing -- I mean, it's fun to do neat things, but if in the end our lives aren't enhanced or in some way built up by it we question why are we doing it. For us, it's about people.

16728 In the organization I have been involved with, Trinity Television, some people -- and I think -- and I don't want to take a lot of time here, but some of the American broadcasters in this field have somehow seen their place as a broadcaster as somehow putting them in a place apart and up above, and something that I have sensed for myself from the very beginning is that we come into this as a servant to provide an opportunity or a vehicle for those who have gifts that are needed to go to those that have the need for these gifts.

16729 It's a matter of connecting gifts that are available to those that are enhanced and enlarged by the gifts they receive. That to me is what media is about. It's about conveying from people to people, but only on a much larger scale than we can do in a single room. Most of us communicate closely around coffee. That's where my life has been enhanced so much, but television is able to go beyond that.

16730 I don't want to get into preaching here. I'm inclined to go that way at times.

16731 THE CHAIRPERSON: That's when you were younger, Mr. Thiessen. It puts a damper on it.

16732 MR. W. THIESSEN: Yes, it does. What I want to say is I personally am delighted to see these young people. I classify them. They have done an excellent job with their presentation today and I am delighted with that. They have done an excellent job.

16733 As we close, just an interesting point I just want to straighten out. There's a little bit of levity here and I appreciate that. With regard to the -- there was a reference to Goldilocks that came along the way earlier on in the hearings. I would just like to straighten out something about the fairy tale that I think we forget.

16734 It was Little Bear whose porridge and whose chair and whose bed was just right. So when you think of your criteria for a successful application and what our proposal means to subscribers, industry and diversity, we suggest that this Little Bear option is worthy of your consideration and is just right.

16735 THE CHAIRPERSON: Thank you, Mr. Thiessen. You will have to phone Mr. Znaimer now and make sure he doesn't copy your genre with some cross-over on to his specialty service.

16736 We thank you very much for your cooperation. We hope you have a good evening. We will see you again obviously.

16737 We will resume at 8:30 tomorrow morning with the Global applications.

16738 Alors nous reprendrons demain matin à 8 h 30.

--- Whereupon the hearing adjourned at 1735, to resume

on Tuesday, August 22, 2000 at 0830 / L'audience

est adjournée à 1735, pour reprendre le mardi

22 août 2000 à 0830