ARCHIVED -  Transcript - Hull, QC - 2000/08/29

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 29, 2000 le 29 août 2000

Volume 12

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:

Peter Cussons Hearing Manager and

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 29, 2000 le 29 août 2000

Volume 12

TABLE OF CONTENTS / TABLE DES MATIÈRES

PAGE

PHASE II

INTERVENTIONS BY APPLICANTS /

INTERVENTIONS PAR LES REQUÉRANTES

ALLIANCE ATLANTIS BROADCASTING INC. 3549

ROGERS BROADCASTING LIMITED (OBCI/SDEC) 3562

CTV INC. 3577

BCE MEDIA INC. 3581

CHUM LIMITED 3587

LEVFAM HOLDINGS INC. 3601

GROUP TVA INC. (OBCI/SDEC) (English) 3616

GROUPE TVA INC. (OBCI/SDEC) (French) 3626

LES CHAINES TÉLÉ ASTRAL INC. 3645

DIFFUSION QUEBECOR INC./QUEBECOR BROADCAST INC. 3658

LE RÉSEAU DES SPORTS (RDS) INC. 3682

MUSIQUEPLUS INC. 3688

STORNOWAY COMMUNICATIONS LIMITED PARTNERSHIP 3700

THE PELMOREX LEISURE NETWORK INC./

LE RÉSEAU LOISIRS PELMOREX INC. 3705

GLOBAL TELEVISION NETWORK INC. (OBCI/SDEC) 3711

ASTRAL TELEVISION NETWORK INC./

GLOBAL TELEVISION NETWORK INC. LIMITED PARTNERSHIP

(OBCI)/SOCIÉTÉ EN COMMANDITE (SDEC) 3726

CORUS ENTERTAINMENT 3739

SALTER STREET FILMS LIMITED (OBCI/SDEC) 3748

LEARNING AND SKILLS TV OF ALBERTA LIMITED 3754

TABLE OF CONTENTS / TABLE DES MATIÈRES

PAGE

CRAIG BROADCAST SYSTEMS INC. (OBCI/SDEC) 3765

MÉTROMÉDIA CMR BROADCASTING AND/ET

COGECO RADIO-TELEVISION INC. (OBCI/SDEC) 3775

LIFESTYLE TELEVISION (1994) LIMITED 3780

VISION TV DIGITAL INC. (OBCI/SDEC) 3787

THE SPORTS NETWORK INC. 3790

PHASE III

SPECIALTY AND PREMIUM TELEVISION ASSOCIATION 3795

ADDENDA/ERRATA

Date/ Volume/ Paragraph/Line/Description

08/14 1 -- Page 298/Paragraph 7299/Line15 "150 to 400 hours" s/b

"300 to 400 hours"

08/17 4 -- Page1209/Paragraph12235/Line12 "dans l'existence" s/b

"sans l'existence"

08/18 5 -- Page1653/Paragraph14494/17 "d'Internet" s/b

"d'intermède"

08/23 8 -- Page2577/Paragraph 19716/Line11 "conditional license" s/b

"condition of license"

Hull, Quebec / Hull (Québec)

--- Upon resuming on Tuesday, August 29, 2000 at 0830 /

L'audience reprend le mardi 29 août à 0830

25469 THE CHAIRPERSON: Good morning and welcome to the second phase of our hearing.

25470 Before we begin, I would like to remind parties that although they have been spoiled and heard exactly as scheduled, we said yesterday that we would revert to our usual practice of requiring some flexibility for the hearing of intervenors and for the remaining of the hearing.

25471 We have to ensure that our hearing time is used effectively and that our hearing days are full. So we would ask co-operation by intervenors and parties to be ready to intervene not exactly perhaps on the date that they thought they would, but to be flexible and respond co-operatively to the staff when we attempt to make sure that our agenda moves in a responsible manner.

25472 Nous vous avons gâtés un peu en vous entendant exactement comme nous l'avions exposé à l'agenda -- ou indiqué à l'agenda -- mais j'ai indiqué hier que nous retournerons à notre pratique usuelle qui est de s'attendre à de la flexibilité de la part des intervenants et des parties intéressées pour que nous nous assurions de faire une utilisation efficace de notre temps et d'avoir des journées d'audience qui sont bien remplies.

25473 Alors nous nous attendons à de la coopération de la part des parties pour le reste de l'audience quand le personnel se mettra en contact avec eux.

25474 Je vous remercie de votre coopération à l'avance. Sinon peut-être qu'on ne pourra pas vous entendre.

25475 Monsieur le Secrétaire.

25476 MR. CUSSONS: Thank you, Madam Chair.

25477 Just before beginning, I would like to say that we appreciate your continued co-operation with respect to cellphones and pagers being switched off during the proceedings. Thank you very much.

25478 We will be calling the applicants forward one by one in the same order that they appeared in Phase I. Each applicant is allowed a maximum of 15 minutes to intervene to each other's applications.

25479 We will begin with the first applicant today, Alliance Atlantis Broadcasting Incorporated.

INTERVENTION / INTERVENTION

25480 MR. MacMILLAN: Good morning, Madam Chair and members of the Commission.

25481 In response to your request, we have filed this morning a letter setting out the number of original Canadian hours to be broadcast in each year for each of our applications, along with the backup detail.

25482 With me on our panel today are Phyllis Yaffe, the President of Alliance Atlantis Broadcasting. To her right, Rita Cogini, Vice-President, Business Development. To my left, Kathleen Brown, Vice-President, Business and Legal Affairs.

25483 Let me turn now to our intervention. You have now heard some 87 applications for Category 1 digital services. The task of making choices is always hard, but when you have so many competing applications, it is also a challenging one to distinguish between them.

25484 In our oral intervention today, we are going to focus on applications in five of the various genres that have been proposed, and offer what we hope are constructive comments on how you should deal with that genre in regard to the competing applications before you.

25485 Those comments will focus on the applications in the independent film and documentary, biography, health, book and fashion genres. We have applied for services in the first four of these genres, but we also have comments to make on the fashion and design genre.

25486 Let me start with the independent film applications. This category is the genre of service that is the most important for Alliance Atlantis. It is our number one priority so we will devote most of our oral intervention to it.

25487 All of the applicants have a common theme, namely to present the best independent films from Canada and around the world. All of them also include a major documentary strand within their programming mix, although all agree that they could live beside an "all-docs" channel and their use of feature documentaries is typically no more than 25 per cent of the schedule.

25488 Well, what distinguishes the applications from each other? Let me start with two applications that we think misread the call. The first is CHUM, which alone of the applications for an independent film channel has a Canadian content level below 50 per cent in year seven. And not just a little bit below. Its Canadian content is only 33 per cent in evening hours, and less than that over the broadcast day. The Commission has made it abundantly clear in its call that a 50 per cent level was required overall and in evening hours. But alone among those five applicants in this genre, CHUM chose to ignore both those tests.

25489 So we start by asking that the CHUM application be simply set aside as unresponsive to the call.

25490 A second applicant, Cinefest, from Astral/CanWest in our view fails a second test, and that is the affordability of the wholesale rate. At 65 cents a month, the Astral/CanWest proposal is by far the highest rate among the applicants, although it is the second lowest proposal in terms of Canadian content hours, barely reaching 50 per cent Cancon in year seven.

25491 Affordability will be a key determinant for success in the digital world because only with an affordable rate can cost-effective packaging occur. The Astral/CanWest business plan is based on a rate that would make packaging very difficult. So although it presents a model that purports to have the highest percentage of revenue going to Canadian licence fees, this is dependent on penetration numbers that are inconsistent with its wholesale rate.

25492 That brings us to the remaining three applicants, our own, Craig and Salter Street.

25493 All these applicants have more affordable wholesale rates, and higher Canadian content levels than does Cinefest, although only our application combines the lowest wholesale rate, 30 cents, along with the highest Cancon level in evening hours and daytime, 60 per cent.

25494 But the crucial difference between the applications is what the applicant will do for the Canadian feature film industry.

25495 In terms of licence fees, the three applications commit similar amounts for Canadian expenditures: $16 million for Salter Street; $19.1 million for Alliance Atlantis, and $25 million for Craig.

25496 But Licence fees from a small specialty service are only a tiny piece of the funding needed for feature films. To give you an illustration, CHUM in its application proposed to fund 10 original Canadian feature films over its licence term with fees of $280,000 per film to acquire all broadcast rights. That is only $2.8 million over seven years which works out to about $400,000 a year. All this to support new Canadian feature films, a tiny fraction of what is required.

25497 The Craig proposed Priority Fund is larger, with some $5 million to be spent over seven years, but that still works out to only about $700,000 a year. Neither Astral/CanWest nor Salter Street have any equivalent funding at all.

25498 None of these proposals begins to address the problem of financing for feature films.

25499 To address this issue, we put an unprecedented corporate commitment on the table: $140 million over seven years earmarked entirely for unaffiliated Canadian filmmakers. This is on top of --it's in addition to -- our licence fees from the channel. Salter Street has nothing remotely comparable to this to offer. Neither does Astral/CanWest. Neither does CHUM and the Craig plan, while involving Lions Gate as partner, contains no commitment whatever from Lions Gate or any other distributor to put real money into the independent film sector in Canada.

25500 The average Canadian feature film costs $3 to $5 million to produce. To make a difference in this sector, you need real commitment, not just $400,000 a year, not just $700,000 a year, but $20 million a year. That will make an incredible difference.

25501 There is also another issue to consider, namely the overlap with Showcase. Showcase was specifically licensed to show independent movies and this is part of its core mandate. They are featured every evening on the Showcase Revue. Some of our competitors have tried to minimize this overlap suggesting that the Showcase mandate is focused more on series than on films.

25502 This suggestion is inconsistent with the terms of the Showcase license and with Showcase's actual schedule on the air. The Showcase Revenue, our platform for independent films accounts for a third of Showcase's prime time schedule and almost 50 per cent of the audience. To suggest that this is not part of Showcase's core mandate is simply to ignore reality. So a new independent film channel will undoubtedly compete directly with Showcase for films and for audience.

25503 We agree that a full-time channel celebrating the world of independent films is a wonderful idea. But it does need to be carefully introduced so as to add diversity, minimize overlap with Showcase, and maximize the support of Canadian independent film through scheduling and through financial commitment.

25504 That's where we think the other applications fall short.

25505 Before leaving this matter we want to make some comments on the application by TVA for Digipix. Although purporting to be a channel devoted only to experimental films, the term "experimental" is inherently ambiguous. All experimental films are, in fact, independent films, and we see nothing in this application that would not be covered much better with an independent film channel. We therefore oppose the licensing of Digipix since it would be directly competitive with our Independent Film and Documentary Channel.

25506 MS YAFFE: Our second set of comments relates to the biography genre. In this genre you have only two applicants, namely, our application for Signature Television and the Rogers/Shaw application to bring the A&E Biography Channel to Canada.

25507 We have considerable respect for A&E, but we consider that their application with Rogers and Shaw suffers from a huge problem. It simply fails to recognize that in a biography type of channel Canadian programming should have pride of place. They start their Canadian content at only 25 per cent and barely reach 50 per cent by the end of the licence period. In contrast, the Signature Television application is proudly Canadian, starting at 60 per cent and going to 70 per cent.

25508 There is a reason for A&E's minimalist approach. They have a large library of biographies of U.S. celebrities and they want to offload that library to the Canadian service.

25509 We don't blame them for this motivation. It makes great financial sense for A&E to sell as much as possible of their library to Canadians. And their output deal guarantees them a significant revenue stream from their U.S. programs on the Canadian service, regardless of subscriber penetration.

25510 But isn't it better to have a Canadian biography service owned entirely by Canadians that can decide for itself what biographies, foreign or Canadian, would be of interest to its subscribers? And if you want to run biographies of foreign figures, why tie yourself so heavily to those in the A&E library, acquired by A&E simply because A&E thought they would be of interest to their U.S. subscribers?

25511 Biography, like history, is a genre that speaks to a nation and its people. This kind of service, perhaps more than any other, needs a licensee that will not be dependent on a single foreign supplier for much of its programming. It needs a licensee that will put Canada first.

25512 A biography service should also be true to a biography mandate. The A&E application proposes to run movies throughout the schedule, not because the movies are biographical, but because they feature a director or actor who was the subject of an earlier biography. On that criteria, virtually every movie ever made could qualify for inclusion on its service.

25513 That is not what a biography service should be about. We believe that the A&E application should be rejected on this ground as well.

25514 Let me turn now to the health category. Here you have four contenders.

25515 All of the applications have significant Canadian content commitments, rising to 70 per cent or more on-air, which befits a service that will need to be responsive to Canadians. So we think that on the Canadian content front this is not a key distinguishing feature between the applicants.

25516 However, there are a few points that do distinguish the applicants.

25517 The first is the average wholesale rate. Three of the applicants have relatively low rates: Discovery at 25 cents to 29 cents, Health Network Canada at 30 cents and Wellness at 35 cents. These are all affordable levels. But the VitalTV application is strikingly different. It proposes a wholesale rate of 65 cents, almost double the other contenders. VitalTV also assumes the lowest penetration rate of the four, which is frankly not surprising, given its price level. But as we all know, what will drive success is packaging, and that will not occur unless the rate is affordable. So we think that licensing VitalTV would risk the success of this critically important genre.

25518 Last week, when pressed about their wholesale rate, VitalTV brushed it off by saying they expected the rates to come down in negotiation. But what does that do to their business plan? It seems to us that the Commission should prefer a business plan that puts the emphasis on a low wholesale rate to drive penetration.

25519 Finally, a key difference emerges when you look at the partners involved. There is already a U.S. health network available in Canada, with close to 500,000 subscribers, but only one applicant, Alliance Atlantis, has partnered with the owners of that channel to ensure that when the Canadian service goes on the air it will supplant the U.S. service. And only one applicant, Alliance Atlantis, has partnered with the owner of the most popular health Web site in the world, webmd.com, in order to launch an equivalent Canadian Web site.

25520 We think that the choice of partners is a key distinguishing feature between the four applicants for the health format.

25521 I will now address a few comments on the book category. There are three applicants in this genre, and they are all interesting applications. All three have affordable wholesale rates, although the Alliance Atlantis application proposes the lowest rate.

25522 But there are two key differences. One relates to Canadian content spending and in the commitment to distinctive and original Canadian content. The other difference lies in the budget allocated to interactive components. Corus' Booknet allocates $364,000 over seven years for interactive content. Learning & Skills' Book Television allocates $843,000 over seven years. Our Book Channel allocated $3.3 million over seven years for interactive content.

25523 We think it is important for a book channel to make books come alive. On interactivity, the three applications are quite different, and we think the differences should be a major factor in your decision.

25524 Finally, we wish to address some comments on the three Category 1 fashion and design applications. We have filed a written intervention on behalf of Home and Garden Television Canada in regard to these services. Our intervention makes the point that to avoid direct competition these applicants need to be subject to a maximum limit on programs on home or garden design.

25525 I should note in this connection that we are not just talking about "how-to" programs. HGTV Canada's mandate is wider than this, and embraces any programs that include advice about homes and gardens, including programs about their design.

25526 In response to our intervention we note that CHUM has proposed that no more than 15 per cent of its programs will deal with home or garden design. We find that approach acceptable and ask that if a licence is awarded by the Commission in the fashion or design genre that a limit of this kind be included in the conditions of licence to address the HGTV Canada concern.

25527 MR. MacMILLAN: Thank you, Phyllis.

25528 Before concluding, I would like to add our support to the intervention that will be made later today by our partners in Series+, La Chaîne Télé Astral, in regard to the application for "Troisième Rue".

25529 Thank you, Madam Chair and Commissioners. That completes our intervention today.

25530 THE CHAIRPERSON: Thank you, Mr. MacMillan and Ms Yaffe.

25531 I don't believe we have any questions. We thank you. You have given the Secretary a copy of the response to the question regarding original programming. Thank you very much. We will see you again in Phase IV -- when we are ready, of course.

25532 Mr. Secretary, please.

25533 MR. CUSSONS: Rogers Broadcasting Ltd., OBCI.

25534 Mr. Viner...

INTERVENTION / INTERVENTION

25535 MR. VINER: Thank you, Madam Chairperson and Members of the Commission. I am Tony Viner, President of Rogers Media. With me today are Alison Clayton, Robert Buchan and Peter Kovacs, all of whom were formally introduced to you in Phase I.

25536 As the Commission is aware, Rogers has four Category 1 applications: ZDTV Canada, Biography Canada, Today's Parent TV, and The Documentary Channel. In June, Rogers filed detailed written interventions with respect to the Category 1 applications that we consider to be competitive with our applications. As well, we have been following the hearing closely.

25537 I will begin our intervention by addressing two regulatory policy issues that we considered in our written interventions and written reply. Ms Clayton will then have specific comments to make on several of the competing applications.

25538 The first policy issue is the future place in the system of so-called "nested" programming services. We commented on that issue at some length in our written reply to all interventions, and it has been the subject of some discussion in this public hearing.

25539 As the nesting concept is explained by Alliance Atlantis, Astral/Family Channel, CHUM and CTV, the proposal does appear to have a certain attractiveness. It is not surprising, therefore, that several of Canada's larger, multiple licence broadcasting companies would endorse this concept. It is, after all, very much in their own self-interest to do so.

25540 We fully expect that existing multiple licence broadcasting companies will avail themselves of whatever economic benefits may be derived from nesting when they launch their respective Category 2 services.

25541 However, Rogers believes it is simply disingenuous for those large broadcasting companies to argue that the Commission should, with regard to the licensing of Category 1 services, establish some kind of regulatory double standard and not consider a so-called nested service as being "directly competitive" with its parent or master service.

25542 Such a regulatory proposition, if accepted, would obviously favour existing licensees of analog broadcasting services over all potential new entrants to the digital programming world. This would establish a significant new barrier to entry to the privileged circle of broadcasting licensees, to the detriment of the Canadian broadcasting system.

25543 Some might describe the nesting proposal as anti-competitive. More importantly, it undermines diversity.

25544 In announcing the licensing framework for this hearing, the Commission said that it had adopted a regulatory framework that would provide for, and I quote:

"...a more open-entry environment that allows for greater risk-taking, provides for a greater number of services in the marketplace, and allows the success of services to be increasingly determined by customers."

25545 Rogers salutes the Commission for having adopted this more open-entry approach. If true diversity of programming is to be achieved by the Commission in its licensing of Category 1 digital services, it must not be persuaded by those who argue that a regulatory double standard should be established amongst applicants for Category 1 digital services.

25546 The second policy issue is the licensing of Category 1 services in which BDUs or their affiliates hold an ownership interest. In its appearance before you in Phase I, CHUM has urged you not to license such services.

25547 In compliance with the licensing framework that the Commission established for this proceeding, Rogers Broadcasting is pleased to be here as an eligible applicant. We have a proven ability to launch and operate successful Canadian specialty services. If you approve our applications, we look forward to investing our resources in high quality Canadian programming and programming services.

25548 MS CLAYTON: We recognize and respect the fact that this is a competitive process for a limited number of Category 1 licences. We do not think that any of the other applications in the genres for which Rogers has applied are "bad applications". We just think that ours are better.

25549 We do not say this lightly. We applied for four Category 1 licences because we truly believe that each of our proposed services will make a significant contribution to Canadian programming and will help to speed consumer adoption of digital technology. The research that we filed, and the Research filed by our competitors, clearly shows that these services would be extremely popular with consumers and warranty Category 1 licences.

25550 Most of the applicants who have appeared before you in Phase I placed the "attractiveness of the service" at or near the top of their list of licensing criteria.

25551 In our written interventions, we sought to assist the Commission by pointing out how our competitors' applications did not fully meet the licensing criteria, or how our applications better meet those criteria. I propose today to update our written submission, in light of what we have heard in Phase I, beginning with ZDTV Canada.

25552 Following the encouragement of the Commission in its call, the competitors in this genre each sought a strategic international partnership with ZDTV. We were the ones who were successful. This partnership combines the Internet and interactive television expertise of Rogers and Shaw with the programming, marketing and technical expertise of the inventor of this programming genre, ZDTV, or as it is now called techtv.

25553 As promised during Phase I, ZDTV has now changed its name to techtv. However, only the name has changed. They are still the number one producer of computer and technology programming in the world. They are still the fastest growing cable channel in the United States.

25554 We feel very fortunate to have them as our partners. As John Cassaday noted when he appeared last week during Phase I, and I quote:

"ZDTV has defined the category ... you can't out ZDTV in the computer category."

25555 And you certainly can't out ZDTV by charging the highest wholesale rate of any of the 88 applicants, as proposed by Global/Astral.

25556 And you can't out ZDTV by offering movies as suggested by CTV.

25557 And you can't out ZDTV by presenting an earnest, educational programming service such as that put forward by Learning & Skills.

25558 For all these reasons, and as we said before, ZDTV is the one.

25559 Biography Canada.

25560 Alliance Atlantic has filed an application that is competitive with our Biography Canada application.

25561 Neither Rogers nor Alliance Atlantic can claim to have extensive expertise in the biography programming genre.

25562 We recognized that, and sought out a strategic partnership with A&E, the international programming leader in this genre. As has been pointed out in Phase I, if a company does not have strength in a particular genre, then they should partner with someone who does.

25563 Alliance Atlantis has proposed a cap of 15 per cent on programs about Americans. We think this is nonsense. Biographical programming has nothing to do with where a person is from. It is about what they have done in their life that is remarkable, noteworthy or inspirational.

25564 Rogers' Biography Channel will offer lots of opportunities for Canadian producers to make biographies of interesting people. Most will likely be Canadians, but their place of birth or citizenship will not be the main determinant. Programs that profile Canadians on our channel are also much more likely to find a home on the Biography Channel in the United States. What a wonderful opportunity for our neighbours to the south to learn more about us!

25565 The Alliance Atlantic business plan is based on the highest penetration levels of all of the 88 Category 1 applications. Their estimates of the digital subscriber universe far exceed those of other applicants. While we applaud their optimism, we question their ability to meet their commitments when the foundation on which they are based is so shaky.

25566 In contrast, our digital subscriber universe and take rate projections are reasonable and realistic. They are in the mid-range of all projections -- neither as low as some applicants, nor as high as Alliance Atlantis.

25567 Today's Parent TV.

25568 In the parenting genre, we face competition for Corus.

25569 Corus has said that a parenting service is a natural extension of their acknowledged expertise in children's programming. In fact, parenting programming is at the other end of the spectrum from children's programming. Corus has not brought any partners to its application that would help to mitigate its lack of expertise in this area.

25570 Rogers is a leader in the parenting genre. The Today's Parent Group is Canada's number one parenting communications company, with the number one Canadian parenting Web site. For almost two decades, Canadian parents have trusted the information and resources offered to them by the publications of the Today's Parent group. We are the logical licensee in this genre.

25571 The Documentary Channel.

25572 In the documentary programming genre, we face competition from Corus/CBC/NFB and Learning and Skills Television.

25573 There are very significant differences among these three applications. These differences reflect our very different perspectives.

25574 The NFB defined the documentary genre. The CBC adapted it to television. But the future of this vital form of Canadian expression is now in the hands of Canada's independent filmmakers. Rogers' application is based on its long-standing relationship with Canadian documentary filmmakers, its commitment to their work, and its clear sense of how this genre is evolving. Rogers' Documentary Channel is about the future of Canadian documentary filmmaking, not the past.

25575 Whereas Rogers is committed to acquiring 95 per cent of its Canadian programming from independent filmmakers, only 35 per cent of Corus' on-air Canadian content will come from independent producers. Sixty-five per cent will consist of non-exclusive programming from its two publicly funded partners.

25576 Similarly, only half of Corus' spending on Canadian programming will go to the independent sector, whereas 95 per cent of our Canadian spending will go to support Canada's independent filmmakers, with licence fees that are meaningful, significant and well-received by the industry.

25577 Corus has portrayed its licence fees of $2,000 an hour for NFB and CBC programming as "bargain basement" and suitable for bulk, non-exclusive, Canadian programming. Yet, aside from the 26 hours of new programming, that is all they have in their budget to pay independent Canadian filmmakers. Rogers, on the other hand, will pay licence fees to Canadian independent filmmakers of from two to four times that amount.

25578 We want to emphasize again that the reason Rogers proposed starting with a minimum 25 per cent Canadian content, growing quickly and steadily by 10 per cent each year, until reaching 65 per cent in year five, was not to make room for U.S. imports as suggested by Mark Starowitz of the CBC. Rather, it was so that we would be able to pay a licence fee that would make a difference in the system. We came to this conclusion through our extensive experience and knowledge of what it takes to fund documentaries in this country and by consulting with Canada's independent filmmakers. We were told very clearly that they need the higher licence fees to add to their first or second window licence fees to meet the threshold requirements set by the Canadian Television Fund and Telefilm Canada.

25579 Someone not familiar with Telefilm's and the Canadian Television Fund's eligibility rules regarding levels of Canadian licence fees as a percentage of budgets would not appreciate how important this is.

25580 We would like to make two points with respect to the inventory of NFB and CBC programming.

25581 First, CBC has two existing very high profile analog channels which program a great number of documentaries in several strands including: "Witness", "Life and Times", "Nature of Things", and "Man Alive". Canadians are not being denied access to high quality CBC documentary productions.

25582 Second, the NFB's programming is also widely available. It is already broadcast extensively on many channels, including CBC Newsworld, SRC, RDI, TVO, Knowledge Network, Canadian Learning TV, SCN, Access, Vision, History and Discovery. Canadian viewers, therefore, can see a large volume of high quality NFB productions now.

25583 What is not getting its due is the work of Canadian independents.

25584 MR. VINER: Madam Chair, Members of the Commission, that concludes our intervention. As requested, we will file today the number of original first window hours, excluding repeats of Canadian programming, for each of our Category 1 applications.

25585 We would now be pleased to answer any questions that you may have for us.

25586 THE CHAIRPERSON: Counsel.

25587 MR. McCALLUM: I believe there are a few undertakings that were made by Rogers in the course of the Phase I.

25588 MR. VINER: Yes.

25589 MR. McCALLUM: Are you prepared to respond to those?

25590 MR. VINER: Is counsel referring to the definition of affiliated producers?

25591 MR. McCALLUM: Yes.

25592 MR. VINER: Okay. Yes, we would be happy to.

25593 We have given this some considerable thought. There are two issues, I guess. One is the level of ownership that the licensee company has in a production company and the other is the level of ownership that a production company might have in a licensee company.

25594 In both cases we are suggesting that that level should be less than 10 per cent. So what we are asking is that an appropriate standard COL might be:

"Any producer who owns, directly or indirectly, less than 10 per cent of the total issued equity, whether voting or non-voting, in a company that controls, directly or indirectly, a licensed specialty service should not be considered to be an affiliate or associate of that programming service and, therefore, should be regarded as an independent producer vis-à-vis that service."

25595 Similarly, Rogers believes that if the licensee of a given programming service or a company that directly or indirectly controls a given programming service, owns more than 10 per cent of the total issued equity in a company that produces films or television programmings, that is a production company, that production company should not be considered to be an independent -- to be independent of the programming service.

25596 Therefore, as I said, we believe that the 10 per cent should work both ways. We believe that is simple. We believe that a 10 per cent minority participation does not result in a significant degree of shareholder control.

25597 Finally, the 10 per cent equity level is one generally obliged by securities commissions and an investment in a publicly traded company, for example such as Nelvana, Nelvana would be unaware of an investment up to 10 per cent.

25598 MR. McCALLUM: Thank you.

25599 MS CLAYTON: We were also asked in Phase I to suggest, in our discussion of Today's Parent TV, a cap on how much programming would come from an affiliated producer.

25600 Today we would like to suggest that that would be no more than 5 per cent of the overall Canadian programming on Today's Parent TV would be programming produced by an affiliated producer.

25601 MR. McCALLUM: Thank you.

--- Pause / Pause

25602 THE CHAIRPERSON: Thank you very much, Mr. Viner and Ms Clayton.

25603 MS CLAYTON: Thank you.

25604 THE CHAIRPERSON: You have done your homework well. We expect the same in Phase IV when we are ready to hear you.

25605 Thank you.

--- Pause / Pause

25606 THE CHAIRPERSON: Mr. Secretary, please.

25607 MR. CUSSONS: Thank you, Madam Chair.

25608 CTV Incorporated.

INTERVENTION / INTERVENTION

25609 MS McQUEEN: Good morning, Madam Chair, Commissioners and staff.

25610 I am Trina McQueen, Executive Vice-President of CTV Inc. Here is our panel for our Phase II appearance.

25611 On my left is Kathy Robinson of Goodman Phillips & Vineberg, legal counsel to CTV.

25612 Next to Kathy is Nikki Moffat, Vice-President, Finance of CTV Specialty Operations.

25613 Next to Nikki is Monique McAlister, also of Goodman Phillips & Vineberg.

25614 We will be slightly different from the first two intervenors in that we are reserving our comments on other applications until the next phase. We have come here with our homework basically.

25615 THE CHAIRPERSON: And with your lawyers.

25616 MS McQUEEN: The lawyers do the homework.

--- Laughter / Rires

25617 MS McQUEEN: We are please to be here on behalf of CTV's nine applications for Category 1 licences and to provide you, as you requested, with the details of our plans for original Canadian programming.

25618 The context for these plans lies in our approach to building digital. Each of our applications already responds to your criteria, with high levels of Canadian content and Canadian expenditure, and with affordable subscriber fees. These are the key elements of audience attractiveness and diversity, which, with the excitement of new interactive content, will give viewers good reasons to invest in digital.

25619 We have also submitted plans for substantial original Canadian content. Each of our applications contain a minimum number of hours that will be put into place in year one. That minimum commitment remains in place in years two through seven.

25620 Our expenditures on Canadian programs will continue to rise, and our plan is to use those funds to increase the quality of our original hours as well as funding normal inflationary costs. This continuing investment in quality, coupled with our solid minimum hour commitment will, we believe, develop an excellent library of very high, attractive Canadian content, as well as consistently setting improved standards for the new programs.

25621 When we put together these applications we could have included plans for huge increases in the number of original hours over the years. Of course, we did consider that as part of the "get the licence at any cost" strategy. But we know that without committing to larger expenditures more hours simply means cheaper hours, with the eventual result that the trademark of Canadian digital television will be endless hours of the most inexpensive programs possible. A dreary prospect and a waste of the great digital opportunity.

25622 We think that our strategy of committing to a substantial base of original hours, a high level of Canadian content right from the beginning and an increasing dollar investment is a good way to build digital when this is done in conjunction with affordable subscription rates.

25623 We have attached the application-by-application details of our commitment to original hours. Each one is based on the details of our Schedule 10 filing.

25624 In conclusion, we would like to thank the Commission for offering each applicant an equal and fair chance to provide this clarification. We understand that in this very competitive process it is important that filings should not be amended during the examination. A process such as this present Phase II event on original programming is an excellent way to reinforce the integrity of the hearing.

25625 We are pleased that the whole class has been asked for the same homework.

25626 Thank you.

25627 THE CHAIRPERSON: I believe counsel has a question.

25628 MR. STEWART: Yes. Thank you, Madam Chair.

25629 Do you have any comments on the operation of the BDU access rules with respect to your proposed bilingual service, News Centre, Centre Nouvelles?

25630 MS ROBINSON: Yes. We had understood that the Commission might have some questions on that and it was our understanding that the expectation was that we would come forward in Phase IV of these proceedings with a specific answer to that question, if that is satisfactory to the Commission.

25631 MR. STEWART: Thank you very much.

25632 Thank you, Madam Chair.

25633 THE CHAIRPERSON: Thank you very much, Ms McQueen.

25634 Now that counsel has asked you a question, it was all right to bring your lawyers.

--- Laughter / Rires

25635 THE CHAIRPERSON: Thank you very much.

25636 We will see you again at Phase IV of course.

--- Pause / Pause

25637 THE CHAIRPERSON: Mr. Secretary, please.

25638 MR. CUSSONS: Madam Chair, BCE Media Incorporated on behalf of a general partnership with Travel Co., OBCI, and CTV Incorporated.

INTERVENTION / INTERVENTION

25639 M. GOURD: Madame la Présidente, Madame la Présidente, Commissioners.

25640 Mon nom est Alain Gourd et je suis président et chef de la direction de BCE Media.

25641 I will begin our presentation by introducing the members of our team. To my immediate left is Trina McQueen, Executive Vice-President of CTV. To my right is Jim Macdonald, Senior Vice-President and Chief Media Services Officer of BCE Media. Behind me is Nikki Moffat, Vice-President, Finance of CTV's Specialty Operations.

25642 To her right is David Elder, our legal counsel. To her left is Elizabeth Duffy-MacLean, Director of Business Affairs, NetStar Communications.

25643 Madame la Présidente, we welcome this opportunity to appear before you today to answer the questions you have addressed to all applicants for Phase II of these proceedings.

25644 We commend the Commission for extending this opportunity, this homework to all applicants, all students. Indeed in a competitive hearing this homework approach meets the important test of fairness and transparency.

25645 As indicated earlier, we will confine our remarks to the questions you have asked regarding the number of hours of original Canadian programming which Travel TV will broadcast in its first seven years of operation and we have annexed a chart summarizing our commitments in these matters. We will not be commenting on other applications in this phase.

25646 As we said in our opening remarks, and as filed in our Schedule 10, we wish to confirm to you that in year one of its licence Travel TV will provide a minimum of 750 original hours of Canadian programming.

25647 In year two, this figure will rise to 932 hours and from year three to the end of the seven-year licence, we will provide a minimum of 1,296 hours per year for a grand total of at least 8,162 original hours over the seven years of the licence. And this is consistent with our substantial commitment to the exhibition of Canadian programming beginning at a solid 53 per cent of our schedule in year one, and rising to 70 per cent in year seven.

25648 This is also consistent with our commitment to spend 53 per cent of the previous year's revenue on Canadian programming. And this is projected at $41 million devoted to Canadian programming over the licence term.

25649 Here is how we arrived at our year one figure. Our flagship travel news magazine, Destination Watch, has a new half-hour edition three times a day in the first year. This will provide 456 of those 740 hours. The 204 remaining hours are first-window acquired and co-produced Canadian programs like, for example, New Style, Old Country.

25650 As we said in our supplementary brief, in the spring 2002, the second year of the service -- and just as Canadians are beginning to plan their summer vacation -- Destination Watch will be expanded to one hour.

25651 As shown in Section 8.2, the Canadian programming budget will increase by 12 per cent overall during the year, and this increased spending will kick in when the program expands, about two-thirds of the way through the year.

25652 This will bring the total number of hours provided by our flagship program to 728 hours in year two. With the acquired programming, original hours amount to at least 932 for year two.

25653 In year three, Destination Watch will be an hour-long format for the full year, and it will remain at that length through year seven, for a minimum of 1,092 hours a year. However, budgets in this area will continue to increase at the rate of 19 per cent per year for these years as we continue to deepen the program's ability to provide original coverage and to enhance its quality.

25654 Indeed, as you can see, our commitment to quality will be integral to our strategy at Travel TV and it will extend to our acquisitions philosophy as well.

25655 The second part of our original Canadian programming comes from acquired Canadian production. In reviewing our Schedule 10, you will note that we are providing a total of 203.5 hours of acquired original Canadian programs, including titles such as Famous Footsteps, Postcards from... and Travel XPress.

25656 We are committing to this as a minimum level for the duration of our licence. However, as stated in Section 8.2 of our application, we are also increasing the budget for these acquisitions by 15 per cent per year from our baseline commitments of $1.6 million in year one. We fully expect that as the budgets increase, we will have options to further enhance program quality and/or to increase the number of hours of these original programs.

25657 Therefore, these are minimum commitments which we will meet faithfully. Furthermore, 33 per cent of our Canadian program budget over the licence term will go to non-affiliated Canadian independent productions.

25658 To sum up the, over the seven years, Travel TV will broadcast a minimum of 3,734 hours of in-house original Canadian programming and 1,428 hours of acquired programming for a total over the licence term of at least 8,162 original hours.

25659 En conclusion, Madame la Présidente and Commissioners, original Canadian production is central to our programming strategy. When this is added to the attractiveness and affordability of our service, as well as our strength in interactive services, we believe our application is best positioned to benefit Canadian creators, Canadian viewers and the Canadian tourism industry.

25660 We will be pleased to answer any question you may have.

25661 Thank you.

25662 LA PRÉSIDENTE: Merci, Monsieur Gourd. Nous n'avons pas de question pour vous ce matin.

25663 M. GOURD: Merci, Madame la Présidente.

25664 LA PRÉSIDENTE: Nous vous remercions et nous vous reverrons à la Phase IV sans doute.

25665 M. GOURD: Certainement.

--- Pause / Pause

25666 THE CHAIRPERSON: Mr. Secretary, please.

25667 MR. CUSSONS: Thank you, Madam Chair.

25668 CHUM Limited.

INTERVENTION / INTERVENTION

25669 MR. ZNAIMER: Good morning, Madam Chair and Commissioners. We are Moses Znaimer and Peter Miller with the CHUM Limited interventions.

25670 Despite almost universal recognition that digital specialty services present a fundamentally different business, too many applicants have chosen to combine the rosiest possible interactive future with straight line extrapolations from the analog specialty present.

25671 It is therefore vital that the Commission question overly optimistic business plans and discount subscriber levels of more than two million households that are based on unrealistic digital projections, such as those of The MET, Shadow TV and PrideVision. Only the most optimistic combination of digital home forecasts and penetration assumptions can contrive to reach such levels.

25672 The Commission should also focus on total revenue expectations, not just the subscriber fee. For example, applications such as Craig Broadcasting's Festival, Alliance Atlantis' The Independent Film and Documentary Channel, WTN's R&R, CTV's Shadow TV and Levfam's PrideVision, with their subscriber fees in the 25 cent to 35 cent range based on high subscription levels, would be no more affordable than applications with subscriber fees in the 40 cent to 50 cent range based on more realistic subscription levels.

25673 The Commission should further downgrade annual advertising revenue levels from applications such as DesigNation, Festival and Arc-en-ciel that grow to exceed $1 million to $1.5 million. These fail to realistically assess the three factors that determine advertising revenue: audience size, cost per thousand, and sell-out rates.

25674 MR. MILLER: The need to scrutinize business plans is perhaps no more evident than in the cases of PrideVision and Arc-en-ciel.

25675 In arguably the most niche of genres, gay and lesbian programming, PrideVision expects to attain a 70 per cent penetration level and advertising revenues of $1.6 million in its first year, growing to $2.6 million. In other words, PrideVision expects to be more popular with subscribers than almost any other service before you, and attain seven year revenues higher than CTV and Global's already aggressive mystery/suspense channel proposals.

25676 Add to that a 65 per cent Cancon level, and a dearth of broadcast quality gay and lesbian programming, one can only reach one of two conclusions: PrideVision will morph into a more general interest service to attract subscribers and/or PrideVision will rely heavily on cable access and "spectacle aux chaises" programming to fill its Canadian programming slate.

25677 In fact, it is already clear that PrideVision proposes to do both.

25678 A significant part of its proposed programming schedule consists of general interest cooking and interior design shows widely available on existing channels. Tellingly, PrideVision has described these offerings as being of "various genres" and that "the (audience) spectrum is very wide, and the programming has been designed to appeal to that spectrum". We submit that the words "various genres" and "very wide spectrum" don't belong in this digital specialty hearing.

25679 In addition, the availability of very low budget Canadian gay and lesbian video material is not the issue. Here is what is: the current shortage of broadcast quality gay and lesbian programming that will attract paying viewers. High production values and quality relevant material, such as that being produced weekly for our own Q!Television, must therefore be the priority.

25680 By contrast, Arc-en-ciel emphasizes expensive material, but fails to explain how this can work as a Category 1 licence with its unpackageable, very high-cost, very low-penetration pay model.

25681 MR. ZNAIMER: Competing applications in the independent film, mystery and relationship genres that we have applied for offer significantly less diversity than our own, particularly in comparing our movie driven offerings with series driven or more general competing propositions.

25682 For example, CTV's Shadow TV will provide a useful additional window for mystery and suspense series already on the main network, but surprisingly, given CTV's high revenue expectations for the service, little in the way of distinctively new programming and, most important, nothing for feature film.

25683 Global's 13th Street, on the other hand, would add science fiction and horror to its programming slate. This could make 13th Street directly competitive with Space, and would significantly reduce the program diversity a mystery/suspense channel would otherwise provide to the system.

25684 The Commission should also take note of the fact that Universal's agreement with its Canadian partners includes the option to acquire a level of equity that, if exercised, would make it the largest single shareholder in 13th Street. We believe this raises serious issues of de facto foreign control.

25685 In the genre of independent film, we note that other applicants -- Astral/Global's Cinefest, Craig Broadcasting's Festival, Salter Street's Independent Film Channel and Alliance Atlantis' Independent Film and Documentary Channel -- can only meet their aggressive Canadian content levels through an over-reliance on some combination of entertainment magazine and information shows that are already well represented all over the system, mini series or made-for-TV movies that have little or nothing to do with independent film, documentary programming that should rightfully find pride of place on a distinct documentary channel and/or direct-to-video movies whose quality is, at best, uneven and unproven.

25686 The reality is that in the last 40 years of Canadian film there has been a total of 718 Canadian feature films, English and French, theatrically released in English Canada and another 72 theatrically released feature length documentaries. We know this because Mr. Paul Gratton has compiled a list of them, and we have annexed this list to this intervention.

25687 Consider that movie rich services such as MovieMax, Citytv, A-Channel, Bravo! and Showcase use up this inventory at a rate of 30 to 50 films per year and you can easily see that the inventory is not sufficient to warrant levels that are higher than other pure movie driven services, such as The Movie Network and MoviePix.

25688 The greatest contribution an independent film channel can make is to sensibly rotate the best of these titles, add to their number through licensing new Canadian feature films, and whet Canadians' appetite by exposing them to the best the world has to offer -- and in doing so not over-expose Canadian titles.

25689 In the romance genre, Astral and Global's Violet brings high revenue expectations, but again little new and no commitments to film. WTN's R&R has far more realistic revenue expectations, but it has significantly overestimated advertising revenue potential. R&R may thus lack the resources necessary to provide romance programming truly distinctive from what is already on WTN.

25690 In the genre of fashion and design, competing applications from Global's DesigNation and TVA's Infashion offer far less diversity from current lifestyle and interior design offerings than CHUM's FT: The Channel. Players with virtually no track record in fashion and design programming are hardly likely to offer a more distinctive and attractive service than CHUM, with our 15 years of pioneering experience, contacts and resource of archival material.

25691 TVA testified that it was intrigued by the success of the U.S. service Style and seeks to bring the "equivalent Canadian format" with Infashion. We respectfully ask: Why choose a Canadianized version of Style when a Canadian original, Fashion Television: The Channel, is on offer?

25692 MR. MILLER: Dealing with Craig Broadcasting's The MET and CTV's TV.tv, the lack of diversity offered by these services is, in our view, so evident as to render them directly competitive with CHUM's existing services.

25693 CTV's TV.tv proposes to combine three programming elements that today are already served in at least three different ways: program promotional clips currently seen on barker channels, program guides currently offered by BDU's in many different forms, and the promotion of Canadian television stars and programming -- a core mandate of Star!

25694 TV.tv would inevitably duplicate the vast majority of Star!'s entertainment format and content, and be directly competitive with it. Covering behind-the-scenes "on set" interviews with directors and stars and program promotion is what we do every day on StarNews, MovieTelevision, StarNewsWeekend, Startv, and all day long throughout the day with our flow programming.

25695 CTV argues, however, that TV.tv will do it better than everyone else. Even if this were true as it relates to Star!, we fundamentally disagree. This is the wrong test. Having missed the boat, CTV cannot now ask the Commission to reopen this matter.

25696 The MET, by its own admission, plans to leverage off the success of MuchMusic and will have significant overlap with Much's core rock base. In fact, the very name, Music Entertainment Television, suggests the far more mainstream ambitions of this channel.

25697 Nevertheless, analysis of MuchMusic's playlist filed by The MET attempts to show that in one particular week only 11 per cent of the videos played on Much would be classified as rock and, therefore, The MET is not competitive with MuchMusic.

25698 However, study of The MET's own analysis reveals unusual criteria for determining what is a rock song. For example, a video by Guns `n' Roses, one of the quintessential rock bands of the eighties, is not classified as rock because the song is not currently on the rock chart. They also don't count videos by The Tragically Hip, Limp Bizkit or the Tea Party, to name just a few. Our analysis of the playlist in question reveals that in fact 38 per cent of the videos played on Much were from the rock genre.

25699 Lastly, in their application, in their response to CHUM's intervention, and again in their oral presentation The MET suggests that Bruce Allen, one of Canada's most successful artist managers, supports their application.

25700 I quote from a letter to The MET's Mr. Donnelly, given to us by Mr. Allen, quote:

"After giving some thought to the aforementioned application, I don't feel that I can be of support. I am a main supporter of MuchMusic and MuchMore, so I do not want to be seen as supporting every channel that comes along."

25701 MR. ZNAIMER: Finally, we would like to comment on one service whose potential negative impact is of a local rather than of a national nature, CTV's proposed News Centre Nouvelles that would serve the National Capital Region.

25702 Far from adding to the diversity of local and regional news voices in the nation's capital, the granting of a licence to NCN risks the reduction of local service on competing local broadcasters, including TVA, TQS, the CBC, and CHUM's The NewRO.

25703 The Ottawa market is a far cry from the Toronto market and the Outaouais is not yet ready for its own version of Pulse 24 in economic terms.

25704 In particular, we are seriously concerned that NCN would ultimately give CTV such dominance of local, regional and national news in the Ottawa area as to seriously compromise CHUM's ability to foster a distinctive news alternative at The NewRO. The NewRO is far from profitable, and our hopes for a turnaround lie largely in building a strong bond with the community through local news.

25705 That completes our oral intervention. Thank you.

25706 THE CHAIRPERSON: Thank you, Mr. Znaimer.

25707 We are sorry for this noise, but we wouldn't want you to think you are the only one who has said anything earth shaking.

25708 Commissioner Wilson has a question.

25709 COMMISSIONER WILSON: I want to pursue with you for a minute or two on the issue of direct competitiveness because you have made some comments about Craig's proposed service The MET.

25710 Before this process started, you had filed applications for repeat channels as defined under our previous rules. Those rules were abandoned when we issued the licensing framework.

25711 I think we heard some comments this morning about the notion of nesting. I am just wondering if it is your opinion that anybody but you would be able to launch a music service in Canada that contained some of the music that you play on MuchMusic without it being directly competitive?

25712 MR. MILLER: Perhaps I can start. There are already services that have been filed, music-based services, that we do not consider to be directly competitive, be they in the Christian music category or classically driven jazz, any of those kinds of categories.

25713 COMMISSIONER WILSON: You don't carry any of those genres of music on MuchMusic, do you?

25714 MR. MILLER: They are not a big part of Much. They are a big part of MuchMoreMusic.

25715 COMMISSIONER WILSON: Right.

25716 MR. MILLER: Our analysis reveals that areas such as pop dance would, for example, not be core to MuchMusic and there are some other categories that would not be directly competitive with Much, but of all of the areas, the subgenres of music, that rock is the largest area that overlaps with Much.

25717 MR. ZNAIMER: Well, it's the heart and soul of Much.

25718 COMMISSIONER WILSON: And yet their argument is that there are literally thousands of Canadian rock videos and other foreign rock videos that never make it to air, and that in fact there needs to be a market where those videos can be shown. So --

25719 MR. MILLER: The difficulty is in constraining service to those, if you will, less popular videos. The inevitable consequence of the competitive process is that services gravitate to the most popular services and so given that the very core of Much is rock and the very core of MET is rock, it is absolutely reasonable to assume that they would start to look and feel very similar in most respects.

25720 COMMISSIONER WILSON: Okay. Thanks.

25721 THE CHAIRPERSON: Counsel.

25722 MR. McCALLUM: Thank you for filing the "Analysis of Original Hours of Canadian Production". Just to understand, does the first page, is that inclusive or exclusive of repeats?

25723 MR. MILLER: The first page is exclusive of repeats, unless I am being told otherwise. No, it is exclusive of repeats.

25724 MR. McCALLUM: Exclusive of repeats?

25725 MR. MILLER: Yes. Those are original hours.

25726 MR. McCALLUM: So on the second page where you say "approximate repeat factor assumed in each model" what does that mean?

25727 MR. MILLER: That means in our program schedule and to fill out the programming year that's the approximate repeat factor that would be applied.

25728 MR. McCALLUM: So, just to take an example, with Fashion Television the first figure is 173 and the first figure on the second page is 7.5. Does that mean that the 173 is multiplied by the 7.5 repeat factor to get how it would fill out?

25729 MR. MILLER: Precisely.

25730 MR. McCALLUM: And does that apply also to Canadian acquired hours, the 175 on that page?

25731 MR. MILLER: I believe that's correct.

25732 MR. McCALLUM: Sorry, you have to press the microphone.

25733 MR. MILLER: Sorry. Yes, that's an average. 7.5 is the average that would apply to both.

25734 MR. McCALLUM: Could you explain also what the flow service is that you refer to on the second page?

25735 MR. MILLER: We are just pointing out that for music video based services given that they are flow oriented. This analysis of repeat factors is not quite the same. It isn't quite applicable. So what we are pointing out is that those numbers apply to the originally produced programming for those music video driven services, not to the music videos themselves.

25736 MR. McCALLUM: Thank you.

25737 THE CHAIRPERSON: Thank you, Mr. Znaimer and Mr. Miller.

25738 Again, we are sorry for the noise. I hope it doesn't go on all day because we will be earth shaken by then too. Thank you.

25739 MR. ZNAIMER: Thank you.

--- Pause / Pause

25740 THE CHAIRPERSON: Are representatives of Levfam here? Yes.

--- Pause / Pause

25741 THE CHAIRPERSON: We want to keep the seats hot. So as soon as someone is finished, proceed and then the Secretary will officially call you on the record.

--- Pause / Pause

25742 THE CHAIRPERSON: Mr. Secretary, please.

25743 MR. CUSSONS: Thank you, Madam Chair.

25744 Levfam Holdings.

INTERVENTION / INTERVENTION

25745 MR. LEVY: Thank you. Good morning.

25746 THE CHAIRPERSON: Good morning.

25747 MR. LEVY: Madam Chair, members of the Commission, my name is John Levy and with me today is Robert Malcolmson, Executive Vice-President and General Counsel.

25748 During the first portion of our intervention we will be highlighting the reasons why we believe that in the gay and lesbian genre the Commission should prefer the PrideVision application over the Q! proposal submitted by CHUM and the Arc-en-ciel stand-alone offer from Quebecor. We will then focus on the Health and Wellness applications.

25749 First, we will turn our attention to the CHUM application.

25750 Madam Chairperson, the CHUM proposal is deficient in all the key areas, Canadian content, Canadian program expenditures and wholesale pricing. In short, CHUM's commitment to Canadian content, what one Commissioner described during the questioning as your raison d'être is missing.

25751 On two separate occasions during its presentation, CHUM witnesses called Canadian programming expenditures the "great equalizer".

25752 How has CHUM responded to the "great equalizer"? With only $17.2 million on Canadian programming expenditures, which is little more than half of the PrideVision commitment of $31 million. In fact, PrideVision has committed to spend more on in-house and produced Canadian programming, $17.4 million, than CHUM will spend on Canadian programming expenditures overall.

25753 Expressed as a percentage of the broadcasting revenues, CHUM's offer represents only 40 per cent over the licence term, again as compared to PrideVision's commitment of 49 per cent.

25754 CHUM says that it is "quite proud" of its 40 per cent Cancon during the evening period throughout the entire licence term. It says that it is also proud of its initial 40 per cent throughout the entire broadcast day, a level that only reaches the Commission's absolute minimum requirement of 50 per cent in year seven. Recall the discussions that Commissioner Wilson had during the presentation regarding closed captioning and her concerns about the credibility of reaching the absolute minimum only in year seven.

25755 We submit that the Commission should be very hesitant before accepting the proposition that a last minute bust to the 50 per cent Cancon floor is achievable.

25756 CHUM has attempted to position itself as David in a world of Goliaths. The reality is that CHUM is a large, well-entrenched incumbent member in the broadcasting scene. CHUM argues that it has taken into account all of the synergies and efficiencies in filing its application. However, despite its established base and opportunities for synergies, these alleged synergies are not being passed through to the Canadian viewers.

25757 Where are these efficiencies reflected?

25758 Not in the wholesale price.

25759 Not in lower Cancon commitments.

25760 Certainly not in that great equalizer, Canadian programming expenditures.

25761 MR. MALCOLMSON: In our view, CHUM's application is glaringly deficient. The Commission's call for applications clearly told Category 1 applicants that the Commission was looking for market research to support demand projections and business plan assumptions.

25762 Despite the Commission's request, CHUM refused to do any research. When asked by the Commission why it didn't bother to research this genre, CHUM's cavalier response was that research was a waste of time and money because it was "completely unclear" how many services would be launched, citing discussion of 40 to 50 channels.

25763 This attitude permeates all aspects of the CHUM approach, an approach that seems to say only CHUM knows best. Madam Chair, Members of the Commission, we disagree.

25764 We took the time to do three original pieces of research: a national telephone survey, focus groups in Toronto and Vancouver, and an advertiser demand study. We have studied this market and our knowledge is based on much more than anecdotal assumptions that what is good for downtown Toronto's gay and lesbian community is appropriate nationwide.

25765 Because CHUM did no research, it apparently is unaware of the driver potential of this genre. This is reflected in the low penetration rate of 35 per cent to 37.5 per cent over the seven years. Mr. Znaimer even called the entire digital universe a "really thin atmosphere" with "desperately few subscribers".

25766 This pessimistic attitude is also apparent in the low projection for national advertising revenues of $4.1 million, although this may also be a reflection of CHUM's fear of cannibalizing existing ad revenue streams. Or perhaps these pessimistic projections are CHUM's way of trying to justify its thin commitments to Canadian content and Canadian programming expenditures.

25767 Our advertiser research showed that there is real demand and that demand comes from blue chip advertisers such as The Gap and Nautica. With an investment in ongoing research and our understanding of niche marketing and programming, we know that the gay and lesbian genre will be in high demand among advertisers seeking to tap into this demographic.

25768 Also because of its lack of research, CHUM is unaware of the interactivity potential and the related revenue streams that can be generated from those activities. Over the license term, PrideVision, through Rainbow Connections and its web portal strategy, anticipates more than $13 million in merchandising revenues. CHUM appears content to sell T-shirts and rely on a total of about $200,000. That is 1.5 per cent of PrideVision's expectations.

25769 MR. LEVY: Thanks, Rob.

25770 Members of the Panel, we submit that CHUM is tired.

--- Laughter / Rires

25771 MR. LEVY: When you listened to the CHUM panel making their presentation, did you hear a group of people enthusiastically looking forward to the challenges of the digital world? Were they committed to making the Commission's new framework a great success? Or did you hear several comfortable broadcasters, content to spin-off one program after another into yet another full service? CHUM's presentation brought that point home, as A begat B, which begat C, and ultimately begat Q!

25772 Did they have the energy that you were expecting? Did they commit the resources that you anticipated into the digital world: Canadian program expenditures, closed captioning or Canadian content? Or did you get the impression that they were moving into digital mainly as a defensive move, with both eyes fixed solely on the bottom line?

25773 It is our submission that CHUM has not given this genre the attention it deserves. The Q! application is one of seven filed by that company and it relies very heavily on levering one or two programs into an entire service. Where CHUM repeatedly refers to "conservative" or "realistic" estimates, we see only pessimism and lack of interest in the digital environment by CHUM.

25774 To conclude, for all of these reasons we believe that CHUM has not played straight with you. They have attempted to hide their own deficiencies by accusing others of being unrealistic and/or inexperienced.

25775 On the other hand, we have produced a credible, realistic plan that embraces the coming digital era and that is built upon solid research and experience with innovative specialty programming that is attractive to Canadians. We built Headline Sports from nothing and we know how to grow in a competitive world. We think that we deserve the opportunity to serve a community that has no voice in today's television spectrum.

25776 MR. MALCOLMSON: Turning now briefly to the Arc-en-ciel application.

25777 In our view, the flaw with respect to the Arc application is the fundamental misunderstanding of the community that it proposes to serve.

25778 The Quebecor advisor who made the oral presentation for Arc began by stating the need to avoid "gay ghettoization" and noted that gays are isolated and afraid of being discovered.

25779 How does Quebecor propose to respond to this fear of "ghettoization" and being discovered? By filing a stand-alone service that is not packaged with any other licensed service in Canada and that is priced at the Pay TV level. Could you seriously imagine a member of the gay community who is not yet "out, or a family member, telling a total stranger in a cable call centre that he or she wants to subscribe to Arc-en-ciel for $9.95 a month? This approach only further contributes to the marginalization of the gay and lesbian community.

25780 The combination of the price and the apparent implications for being "outed" speak volumes about why the Arc-en-ciel anticipated penetration never reaches more than 5.5 per cent of the digital subscriber universe.

25781 This incredibly low penetration level is a very inefficient use of valuable Category 1 real estate. It does nothing for the distribution of Canadian programming since it is a stand-alone service. Moreover, it is clearly not the attractive driver that the Commission had in mind in its call.

25782 We have very similar comments with respect to Quebecor's Canadian content commitments as applied to the CHUM application and will not repeat them here.

25783 You will see as part of this submission a chart setting out the key different objective measurements that we believe the Commission should consider in determining which applicant to license. Like CHUM, Quebecor falls short in the key areas of Canadian content and Canadian programming expenditures as compared to PrideVision.

25784 Briefly with respect to the other relationship genre applications -- there are three others, CHUM's Relationship TV, Global's Violet and WTN's R&R. They all propose genres that could theoretically encroach on a gay and lesbian channel.

25785 For that reason, we intervened in July asking each to commit to an overall 5 per cent limitation on gay and lesbian thematic programming as a proportion of the overall schedule.

25786 CHUM's Relationship service refused. To our knowledge, Violet did not reply on this point. For its part, R&R said this would not be inconsistent with its programming plans, but declined to give a specific commitment. We think this is a reasonable request, given the nature of the genre for which we are applying.

25787 MR. LEVY: Thanks, Rob.

25788 I will now turn our attention to the Wellness Network.

25789 In this case, we believe that each Category 1 proposal represents a high quality, licensable application and that your choice will obviously be a tough one. Frankly, it is difficult for us to intervene in a negative manner against any of our competitors.

25790 Having now heard all of the applicants, we are of the view that in licensing this genre the Commission should, however, take into consideration two issues:

25791 First, the ownership and control or influence of the applicant and the impact that that has on the "look and feel", and ultimately the usefulness, of the service that is provided to Canadians; and

25792 Second, the need for a variety of players in the overall Canadian broadcasting system.

25793 On the first issue, we believe that it is inevitable that both Alliance Atlantis' Health Network and CTV's Discovery Health will brand themselves as a Canadian franchise of a successful U.S. health service. You already saw that in CTV's Discovery Health video.

25794 We do not believe that such an approach is either necessary or inevitable but, of course, we don't make the final determination. However, as we asked during the written intervention stage: Do we really need to encourage the notion that licensed Canadian undertakings can only succeed by holding themselves out as Canadianized versions of American programming services?

25795 In the case of the Global VitalTV application, we share the concern of others that the Commission should consider very carefully whether to license applications that contain BDU equity participation, especially during the first round of digital licensing and especially when there are alternatives available. We also think that their $0.65 wholesale price is too high for the service offered.

25796 The second issue is more fundamental in that it will have more lasting repercussions.

25797 In this proceeding, the Commission has repeatedly focused on diversity, and indeed many of the applicants before you have agreed that it is essential for the health of the Canadian broadcasting system.

25798 Levfam is a relatively small player in the licensed specialty genre, with a strong desire to grow and contribute to the Canadian broadcasting system. In the health and wellness genre, we ask you to consider how you can best achieve your regulatory and policy objectives.

25799 First: Is it by granting an increasing number of specialty licences to fewer and fewer and larger and larger entities, or is it by encouraging new voices to be heard, especially as the new digital frontier opens up?

25800 Secondly: Which of these alternatives do you think best captures the essence of what Parliament had in mind when it framed section 3 of the Broadcasting Act?

25801 We believe that there is a place within the system for larger and smaller players. That is part of what diversity is all about. Not everyone is the same.

25802 Thank you for your attention, Madam Chairperson, Members of the Panel.

25803 Just before I turn it over to you, I just want to go off the speech for a couple of quick comments. I will only take a second.

25804 You know, it appears something to do with the fresh Ottawa air that hits you in the morning before the hearing, and what appears to us as the essence of our application in comparison to the other applications that are in front of you really comes down to two issues.

25805 One, as we have stated, is diversity and the other is trust. As I said at our original hearing, our two applications really deal with these issues head-on.

25806 With respect to PrideVision, it was clear to us from our research, and it is clear to us that we have a high percentage of the population which is in need of this specialty service and it is our belief that it is through diversity of ownership that these ideas come forward.

25807 I would ask you: Where are the more traditional broadcasters in front of you with their application to represent this particular genre? They don't exist.

25808 The reason for that, we submit, is because we don't have any luggage coming forward and we only look at the genres as they exist and as the need exists. That is why we are here.

25809 This is also true in the application of the Health Network, when we compare our health application to the other networks.

25810 Obviously health is a genre that is in need of servicing. When you look at how the other applicants approached it, none of the applicants in themselves can produce that programming. So what do they do? They go to the experts. In their particular case the experts were south of the border.

25811 In our particular case, we decided to take a fresh approach. That was by partnering with the predominant supplier of Canadian medical information in the country, and that is the medical institutions and the universities. We happened to choose McMaster, quite frankly, because they think a little bit out of the box like our organization does. They have thrived in a very competitive marketplace.

25812 So I think those two factors relate to our application versus the other applications.

25813 Of course the last matter, and then I will close, is the issue of trust. I'm not talking about the trust where people come before you and say "Trust us. We know what we are doing. We are not filing any research." I'm talking about the trust which says "We have a fresh team. We have a new team. We have tremendous ideas" and we believe -- and we are in front of the Commission hoping that they will trust that we are going to be able to turn those ideas into two new, sparkling programming services.

25814 Thank you very much.

25815 THE CHAIRPERSON: Thank you, Mr. Levy.

25816 I take it you are not convinced that CHUM's Q!Television would end the begetting?

--- Laughter / Rires

25817 MR. LEVY: I don't want to speculate where that leads to.

--- Laughter / Rires

25818 THE CHAIRPERSON: Thank you very much for your presentation. We will see you again at Phase IV.

--- Pause / Pause

25819 THE CHAIRPERSON: Mr. Secretary, please.

25820 Monsieur le secrétaire, s'il vous plaît.

25821 MR. CUSSONS: Thank you, Madam Chair.

25822 We will now hear Group TVA Incorporated.

25823 My understanding is that Group TVA will make a presentation on its English-language applications, including the applications in partnership with Global, and then a separate presentation on its French-language applications.

25824 Is that correct, sir?

25825 MR. BELLEROSE: No. Global Television will provide its own comments on 13th Street later when they will be before the Commission.

25826 MR. CUSSONS: Fine. Thank you.

25827 MR. BELLEROSE: We have no comments on 13^e Rue.

25828 MR. CUSSONS: Thank you for that clarification.

25829 Please proceed, sir. Thank you.

INTERVENTION / INTERVENTION

25830 MR. LAMARRE: Thank you.

25831 Good morning, Madam Chair, Members of the Panel, Commission staff, ladies and gentlemen. My name is Daniel Lamarre and I am the President and CEO of TVA Group.

25832 The following remarks constitute TVA's Phase II intervention related to our four applications for new English-language specialty digital television services from TVA Group: Men TV, Infashion, Digipix and Game One.

25833 With me today are, on my left, Serge Bellerose, General Manager of LCN and the TVA National Network; Jacques Dorion, President of Carat Canada.

25834 To my immediate right, Francine Côté of Côté & Associés, our legal counsel.

25835 TVA believes there are no applications currently before the Commission for services that would be directly competitive with Digipix or Game One in English. Both Digipix and Game One are unique and would provide considerable added value to any combination of Category 1 and Category 2 applications the Commission may choose to license.

25836 TVA has identified two Category 1 applications, each accompanied by a similar Category 2 application, that are directly competitive with Men TV. They are CTV's Men's Entertainment Network and Corus Entertainment's Chrome.

25837 Men TV would have difficulty operating in the Canadian digital television universe if either of these two services were in operation.

25838 TVA has also identified a Category 1 application that is directly competitive with Infashion, CHUM's Fashion Television: The Channel. In a similar way, Infashion would have difficulty operating if Fashion Television were in operation as a digital service.

25839 TVA believes that the applications for Men's Entertainment Network, Chrome and Fashion Television: The Channel should be denied for reasons that I will explain.

25840 I begin with Men's Entertainment Network.

25841 Men's Entertainment Network proposes to air a large quantity of original Canadian programming. According to its application, the vast majority of these programs would be produced by the service itself, notwithstanding CTV's attempt to enhance their proposal regarding the independent production sector at Phase I of the hearing.

25842 In our view, the Canadian programs of Men's Entertainment Network would not be of very high quality since they would involve very low expenditures per Canadian program, i.e., around $3,300 an hour, too little to create programming attractive to new digital service subscribers in a format such as that proposed by CTV.

25843 At more than $18,000 an hour, Men TV's Canadian programming, all of which will be commissioned, would be much more attractive to potential digital viewers and better able to help drive digital set-top box penetration in the early years.

25844 With regard to the exhibition of Canadian programming, Men's Entertainment Network proposes 42.5 per cent over the broadcast day and in the evening hours for each of years 1 and 2. Over a 7-year period, Men's Entertainment Network would broadcast an average of 50.7 per cent.

25845 Men TV proposes 50 per cent Canadian content in year 1 and throughout the license period. Men TV's commitment would therefore better help to identify and distinguish the new service and contribute to increased digital subscriber levels over the crucial start-up period.

25846 In regard to expenditures on Canadian programs, Men's Entertainment Network proposes spending $20.6 million over a 7-year license term. In each year of the proposed licence term, Men's Entertainment Network proposes spending less on Canadian programs than Men TV, resulting in a difference between the two of more than $6 million over a 7-year period. This is in spite of Men's Entertainment Network's forecast of much higher -- and in our view, unrealistically high -- digital subscriber penetration rates and subscriber levels compared to Men TV.

25847 With regard to diversity, Men's Entertainment Network's program schedule reflects a very broad programming concept, including everything from how-to programs and human interest programs to magazine-style programs and entertainment shows. This schedule indicates a diffuse approach to men's programming that aims to create a sense of identity for men, but with no other apparent unifying theme.

25848 In contrast, Men TV is dedicated exclusively to lifestyle programming and the contribution of Men TV to the diversity of new and existing services would be greater than that of Men's Entertainment Network.

25849 Finally, as regards marketing and advertising of the new service, Men's Entertainment Network does not propose nearly enough spending on this essential component to launch a new service in the digital environment. Men's Entertainment Network is proposing $2.4 million over seven years, including start-up costs -- less than one-third of the marketing and advertising expenditures proposed by Men TV.

25850 I will now turn to the Chrome application.

25851 According to its sample programming schedule, Chrome proposes to air a relatively small volume of original Canadian programming, and Chrome's expenditures per hour on Canadian programming would be lower than those of Men TV, all of which will be commissioned. Chrome proposes to spend $20.3 million over a seven year licence term. Men TV proposes more than Chrome in each year of the proposed licence term, for a total of $27 million on Canadian programs over the seven year period. This reflects Chrome's lower commitment to Canadian quality programming on its service.

25852 With regard to the overall exhibition of Canadian programming, Chrome proposes 40 per cent over the broadcast day and in the evening hours for each of years 1 and 2. Over a seven year period, Chrome would also broadcast an average of 50.7 per cent. Men TV proposes 50 per cent Canadian content in year 1 and throughout the licence period. Men TV's greater commitment in the early years will help to identify and distinguish the service and better contribute to increased digital penetration.

25853 What is more, Chrome is forecasting more subscribers than Men TV throughout the proposed licence period and this has the effect of further reducing Chrome's gross subscriber rate assumptions.

25854 With regard to diversity, Chrome proposes a wide variety of programming, ranging from news, analysis and interpretation to sports and entertainment, including a high level of reruns of drama series, such as Nikita and Lexx, which are already aired on conventional Canadian services. In fact, up to 50 per cent of Chrome's schedule could consist of drama programs drawn from a broad range of drama categories. This hardly constitutes a major contribution to diversity with regard to existing services.

25855 Oriented exclusively to lifestyle programming, Men TV will not air news and sports programming, and overall the contribution of Men TV to the diversity of new and existing services would be much greater than that of Chrome.

25856 Finally, as regards spending on marketing and advertising of the new service, Chrome does not propose enough to successfully launch a new service in the competitive digital environment. Chrome is proposing $2.5 million over seven years, including start-up costs -- less than one-third of the marketing and advertising spending proposed by Men TV.

25857 Now for Fashion Television: The Channel. This channel is essentially a spinoff from the program FT: Fashion Television. However, one successful program does not a viable digital service make. The application for Fashion Television was not accompanied by any consumer opinion survey indicating the potential attractiveness of its format to viewers.

25858 According to its sample programming schedule, almost all of Fashion Television's original Canadian programming would be produced by the service itself. Very little will be commissioned from outside producers. This helps to explain the low level of expenditures per hour on original Canadian programming for Fashion Television -- around $5,000 an hour, as opposed to $20,000 an hour for Infashion.

25859 In the format proposed by CHUM, the quality of Fashion Television would suffer as a result. Overall, Fashion Television would spend a total of $27.3 million on Canadian and non-Canadian programming, compared to $39.5 million for Infashion.

25860 TVA's Infashion has drawn the appropriate lessons from the successful Style channel in the U.S. and will be more attractive to potential digital viewers than Fashion Television and better able to help drive digital set-top box penetration in the early years.

25861 With regard to the exhibition of Canadian programming, Fashion Television proposes 40 per cent for each of the first three years, and this gradually rises to 50 per cent in year 7. Infashion's Canadian content will be 50 per cent in year 1 and throughout the licence period. Fashion Television's Canadian content does not appear to be designed specifically to identify and distinguish its service, especially in the early years.

25862 Concerning expenditures on Canadian programs, Fashion Television proposes to spend $18.4 million over a seven year licence term. Infashion proposes more spending on Canadian programs than Fashion Television in each year of the proposed licence term, for total spending of $33.5 million on Canadian programs over the seven year period.

25863 In regard to diversity, Fashion Television proposes a very broad range of programming and program categories that encompass not only fashion and style, but all kinds of other subjects, including beauty, architecture and photography, as well as a variety of drama series, sitcoms, movies and animation. This lack of focus reduces the potential contribution of Fashion Television to the diversity of new and existing services, compared to that of Infashion, which is oriented exclusively to lifestyle programming.

25864 Finally, as regards the marketing and advertising of the new service in the competitive digital environment, Fashion Television proposes far too little to drive digital penetration -- less than half of that proposed by Infashion.

25865 Madam Chair, for the record, today we have filed with the Commission a definition of experimental programming for Digipix and a response to your request at the hearing of August 23 that all applicants indicate the number of hours of original Canadian production for each Category 1 service over the proposed licence term.

25866 This concludes our Phase II intervention. We would be pleased to answer any questions you might have.

25867 THE CHAIRPERSON: I believe we have no questions on this part of your Phase II presentation.

25868 My understanding is that you will proceed now with the Phase II presentation on the French channels. Thank you.

INTERVENTION / INTERVENTION

25869 M. LAMARRE: Alors bonjour à nouveau, Madame la Présidente.

25870 Nous allons maintenant passer à la langue de Molière.

25871 Je suis Daniel Lamarre, Président et chef de la direction de Groupe TVA.

25872 Je suis accompagné aujourd'hui à ma droite de Serge Bellerose -- à ma gauche de Serge Bellerose -- et toujours à ma droite de Francine Côté et Jacques Dorion. Même en français on n'a pas changé de place.

25873 Notre intervention comporte deux volets, un premier volet dans lequel nous vous faisons part de nos observations sur deux services de Catégorie 1, soit Zone Jeux proposé par Les Chaînes Astral et Perfecto, la chaîne proposée par MusiquePlus.

25874 Le deuxième volet de notre intervention comporte des observations plus générales sur des recommandations formulées par certains requérants sur les relations entre les fournisseurs de services et les distributeurs et les modalités d'opération des services numériques.

25875 Serge.

25876 M. BELLEROSE: Les Chaînes Télé Astral proposent une chaîne portant sur les jeux vidéo tout comme notre demande Game One, qui est toutefois assortie d'une proposition de chaîne de langue anglaise. Il va sans dire que tout comme la requérante de Zone Jeux, nous sommes convaincus de l'importance d'intégrer le phénomène des jeux vidéo à l'offre de services spécialisés numériques.

25877 Ceci dit, nous croyons que Zone Jeux est une proposition directement concurrentielle à la nôtre. Toutefois, nous sommes d'avis que la proposition de Zone Jeux est moins intéressante pour le système de radiodiffusion de langue française que celle de Game One pour les raisons suivantes.

25878 Tel que nous l'avons déjà mentionné lors de notre présentation, il nous apparaît crucial de différencier l'offre numérique de l'offre analogique afin de favoriser le déploiement accéléré des décodeurs numériques, stimuler l'abandonnement et de le maintenir. Cette stratégie nécessite des services qui seront attrayants, qui ajouteront à la diversité des choix existants, qui s'appuieront sur un effort de marketing sans précédent et qui contribueront à enrichir et renforcer le système canadien de radiodiffusion.

25879 Ainsi, la proposition de Zone Jeux est présentée comme le prolongement du service analogique Canal Z, exploité par Astral. Cette approche nous apparaît contraire à celle qui devrait être adoptée pour les services numériques.

25880 Dans son mémoire, Astral reconnaît que Zone Jeux, un service numérique, consolidera son service analogique Canal Z qu'elle exploite et je cite:

"Zone Jeux se veut un prolongement de Z. Zone Jeux offrira en outre à l'un des nouveaux services spécialisés de langue française, autorisés en 1999 et entrés en ondes en janvier 2000, l'occasion de se consolider et de développer des synergies qui lui permettront d'approfondir sa mission à travers un nouveau service qui dans l'univers étroit des abonnés de langue française à la distribution numérique pourra en retour profiter de la notoriété et de l'image de chaîne de Z."

25881 L'approche de Astral qui tend à confondre les services analogiques et les services numériques a été le sujet de plusieurs échanges au cours de l'audition de la demande de Zone Jeux entre le Conseil et les représentants de Zone Jeux. Les réponses fournies par les promoteurs de Zone Jeux nous ont donné l'impression qu'ils visent à reproduire le même genre de services que ceux qu'ils offrent en mode analogique. Il ne nous semble pas qu'une telle stratégie soit prometteuse pour l'environnement numérique.

25882 Nous croyons que la participation de nouveaux joueurs, comme les partenaires de Game One, est synonyme d'un apport de créativité, de nouveaux choix et d'une nouvelle approche en marketing qui se traduira par une meilleure différenciation de l'offre numérique.

25883 Il nous apparaît important pour démarquer l'offre numérique de l'offre analogique de favoriser les demandes qui démontrent un effort de créativité, de recherche de l'expertise pour offrir des services pertinents et de qualité dans les domaines proposés.

25884 Rappelons à cet effet que le seul actionnaire de Zones Jeux est Les Chaînes Télé Astral qui exploite déjà six chaînes de télévision spécialisée analogiques de langue française, sans compter les autres services payants et spécialisés où il détient des intérêts.

25885 Les risques inhérents à l'univers numérique ne sont par ailleurs pas négligeables et l'association avec des partenaires qui ont l'expérience de lancer et d'exploiter des chaînes sur une plate-forme numérique, comme c'est le cas pour la chaîne Game One en France, est certainement un avantage précieux.

25886 L'association avec la chaîne Game One France est, selon nous, garante de meilleurs chances de succès d'une nouvelle chaîne consacrée aux jeux vidéo ce que Zone Jeux n'offre pas.

25887 Le tarif de Zone Jeux -- 1,50 $ par mois par abonné -- est beaucoup plus élevé que celui de Game One et le rapport qualité/prix moins attrayant. Par exemple, alors que Game One propose 876 heures de programmation originale canadienne par année, Zone Jeux n'en propose que 338. Game One, pour un tarif très modeste, offre plus de programmation originale que Zone Jeux en raison de la synergie entre la chaîne de langue française et la chaîne de langue anglaise et aussi en raison de son modèle de production à l'interne qui permet d'offrir des émissions de qualité à un coût moins élevé.

25888 Le concept des jeux vidéo est sans doute l'un des plus prometteurs en ce qui a trait à l'interactivité et sa fusion avec la télévision, avantage conféré par la technologie numérique. La proposition de Zone Jeux sur ce sujet nous a laissés sur notre appétit, les promoteurs de Zone Jeux n'ayant pas cru bon de retenir le critère de l'interactivité parmi ceux qui devraient être privilégiés par le Conseil pour l'attribution des nouvelles licences numériques.

25889 Le concept avant-gardiste proposé par Game One qui intègre l'interactivité à la télévision et qui connaît déjà du succès en France est encore une fois susceptible de plaire davantage aux amateurs de jeux vidéo qui celui de Zone Jeux.

25890 En considérant donc les critères d'octroi de licences numériques, soit le caractère attrayant du service, sa contribution à la diversité et la qualité de la programmation canadienne tout comme l'interactivité, nous pensons que Game One est une chaîne qui répond mieux à ces critères que Zone Jeux.

25891 Rappelons enfin que Game One offre en plus une fenêtre européenne pour les émissions qui seront produites par la chaîne canadienne, ce que Zone jeux ne peut évidement pas faire.

25892 Nous aimerions maintenant faire quelques commentaires sur la chaîne Perfecto, proposée par MusiquePlus, dont l'un des actionnaires est une filiale du groupe Astral.

25893 La chaîne Perfecto n'entre pas en concurrence directe avec notre projet de chaîne EXIT qui porte sur l'actualité artistique, la mode, la beauté et le design. Le chevauchement entre EXIT et Perfecto porte seulement sur le segment mode, beauté et design, qui représente moins de 25 pour cent de la grille de programmation de EXIT. Il nous apparaît que le sujet de la mode, style "Fashion Television" de CHUM, qui occuperait la plus grande partie de la grille de Perfecto est par ailleurs trop mince pour alimenter une chaîne numérique attrayante dans le marché francophone.

25894 Les recherches et le sondage que nous avons effectués pour notre chaîne EXIT indiquent que seulement 30 pour cent des répondants se déclarent intéressés par le sujet.

25895 Une chaîne comme EXIT qui offre une thématique enrichie avec l'actualité artistique pourrait obtenir une part de marché de 0,2 à 0,5 pour cent. Perfecto qui se limite en grande partie à la mode, la beauté et le design indique qu'elle prévoit une part de marché évaluée à 0,01 pour cent en l'an un à 0,02 pour cent en l'an sept, ce qui confirme le peu d'attrait de la chaîne et soulève même la question de sa viabilité.

25896 Ces résultats peu encourageants expliquent sans doute pourquoi la requête de Perfecto ne comporte aucune démonstration de la demande des téléspectateurs pour ce concept, ni aucun sondage, contrairement aux exigences de l'appel de demandes du Conseil. Nous désirons également attirer votre attention sur l'annexe 14 de la requête de Perfecto, soit le plan de mise en marché du service qui, avec un budget de 250 000 $, s'avère vraiment insuffisant pour mousser et assurer la notoriété d'un concept aussi étroit.

25897 La part de marché négligeable et l'effort très modeste de marketing que Perfecto envisage indiquent déjà que cette chaîne ne peut être considérée comme un agent de déploiement de la technologie numérique et serait plutôt tributaire du succès des autres chaînes du bouquet numérique.

25898 La contribution de Perfecto au système de radiodiffusion nous apparaît de plus peu significative en termes d'heures originales. La grille prévoit 830 heures de production originale dont 80 pour cent serait constitué de capsules vidéo de quatre minutes. Ce concept est présenté comme un prolongement des services analogiques MusiquePlus et MusiMax, ce qui est d'ailleurs confirmé par l'échange intervenu entre le Conseil et les divers représentants de Perfecto lors de l'audition.

25899 Perfecto diffusera 131 heures d'acquisitions canadiennes, dont 97, plus de 70 pour cent, sont des reprises de Perfecto ou des productions de CHUM. Dans les acquisitions non-canadiennes, on compte 52 heures de cinéma, 32,5 heures de dramatiques et 26 heures de reprises.

25900 EXIT propose 100 pour cent de nouveautés avec une quotidienne, 52 semaines par année. Le concept enrichi et mieux équilibré de EXIT qui offre un volet mode, beauté et design comme accessoire à son mandat principal qui porte sur l'actualité artistique et la promotion du star système, propose une contribution beaucoup plus enrichie au système de radiodiffusion que la chaîne Perfecto.

25901 M. LAMARRE: Le deuxième volet de notre intervention porte sur la recommandation de certains requérants de fixer des modalités contractuelles applicables aux distributeurs de services de programmation.

25902 Nous ne partageons pas la proposition de Astral et MusiquePlus demandant au Conseil de prévoir un délai dans ses décisions pour signer des ententes d'affiliation. Nous pensons que les distributeurs et les fournisseurs de services devront travailler ensemble et que nos intérêts respectifs sont convergents pour assurer le succès du déploiement du mode numérique. Nous sommes confiants que nos services seront suffisamment attrayants à cette fin. Nous ne pensons pas qu'il soit approprié de fixer une échéance pour conclure une entente de distribution autre que celle relative à la date de lancement des services.

25903 Une telle disposition aurait pour effet de retarder le lancement du bouquet autorisé si l'un des fournisseurs ne s'entend pas avec un distributeur dans le délai imparti, pénalisant ainsi les autres fournisseurs.

25904 L'univers numérique devrait se distinguer par une plus grande flexibilité, compte tenu des risques qui résultent de son caractère incertain. Il est inutile de multiplier les règles tatillonnes qui peuvent engendrer des confrontations. Le Conseil a l'occasion de dessiner un nouveau cadre réglementaire pour faciliter le succès de l'univers numérique. Nous pensons qu'il est approprié de l'aborder avec le plus d'ouverture possible et d'éviter de reproduire les règles et les situations qui pouvaient être justifiées dans le cadre analogique.

25905 Les requérants demeurent imputables devant le Conseil et sont responsables de la réalisation de leurs plans d'affaires dans un univers beaucoup moins protégé. Les règles qui seront déterminées par le Conseil devraient donc refléter ce changement d'environnement.

25906 A cet effet, nous invitons le Conseil à reconnaître les projets qui sont originaux, attrayants et susceptibles de contribuer à définir un univers numérique vraiment différencié plutôt que de répéter le modèle existant pour les services analogiques.

25907 Dans cette optique, la prétention de certains des requérants à l'exclusivité de certains secteurs de programmation ou de certains genres ne nous paraît pas être une approche que le Conseil doive nécessairement suivre puisqu'elle risque de nuire à la diversité des services numériques et tendre à confondre l'offre analogique et l'offre numérique.

25908 Dans l'analyse des services devant composer un nouveau bouquet numérique, le Conseil devrait s'en tenir à évaluer si les projets proposés sont en concurrence directe avec des services existants ou proposés, c'est-à-dire s'ils s'appuient sur une même thématique ou chevauchent de façon substantielle le mandat de programmation d'un autre service et visent le même public-cible. Les services qui seront autorisés devront de plus répondre à vos critères définis dans votre décision.

25909 Dans ce contexte, nous sommes d'avis que les propositions de Zone Jeux et Perfecto devraient être rejetées. Enfin, nous avons déposé avec notre intervention l'information demandée par le Conseil quant au nombre d'heures de programmation originale canadienne dans chacune de nos demandes, soit Télé Ha!Ha!, LCN Affaires, EXIT, Game One et 13^e Rue.

25910 Nous vous remercions de votre bonne attention et sommes prêts à répondre à vos questions.

25911 LA PRÉSIDENTE: Monsieur Lamarre, est-ce que vos commentaires plus généraux dans les trois dernières pages de votre présentation s'appliquent au marché anglophone aussi, parce qu'il y a des représentations similaires qui ont été faites et vous avez devant nous quatre demandes de langue anglaise aussi bien que quatre demandes de langue française. Je ne vois aucun commentaire à cet effet dans votre présentation pour vos services de langue anglaise.

25912 M. LAMARRE: Merci pour la clarification. Oui, nos commentaires s'adressent également pour nos demandes de langue anglaise.

25913 LA PRÉSIDENTE: Monsieur le conseiller juridique.

25914 Me McCALLUM: Oui si je peux. C'est une question concernant 13^e Rue étant donné que...

25915 LA PRÉSIDENTE: Je crois, Monsieur le conseiller juridique, que 13^e Rue, Global s'en occupera.

25916 Me McCALLUM: Ma compréhension c'est que concernant 13^e Rue, TVA va répondre aux questions mais en ce qui a trait à 13th Street, Global va répondre.

25917 M. BELLEROSE: C'est exact.

25918 Me McCALLUM: Donc ma question concerne 13^e Rue et vous avez indiqué dans la Phase I que 13^e Rue serait viable même si 13th Street n'obtenait pas de licence.

25919 Donc ma question c'est: Si 13th Street n'obtient pas de licence, comment est-ce que vous entendez respecter vos engagements en ce qui a trait au contenu canadien, et deuxièmement, à la production d'émissions canadiennes?

25920 M. BELLEROSE: Ce que nous avons répondu en Phase I c'est qu'il existait des synergies qui étaient réelles entre les deux applications, 13th Street, 13^e Rue, mais que le service pouvait être viable, contrairement à ce que nous avions indiqué dans notre présentation initiale.

25921 Ce qui se produirait cependant c'est que 13th Street n'était pas lancée ou autorisée dans la Catégorie 1 c'est que certaines des composantes du projet 13^e Rue, certains des éléments de la programmation qui reposent sur les synergies avec 13th Street, certaines séries, entre autres, qui sont faites dans les deux langues, évidement ces projets-là ne pourraient pas voir le jour.

25922 Alors c'est sûr que ça risque d'affecter le contenu canadien parce qu'on ne pourrait pas avoir accès à ce contenu canadien-là qui est possible parce que 13th Street existe également. Je fais référence notamment au fameux fonds de un million chez Global, 400 000 dollars chez 13^e Rue que nous avons prévu. Avec 400 000 dollars dans 13^e Rue évidement ce ne serait pas suffisant pour pouvoir lancer ou supporter des oeuvres comme celles qui sont prévues dans la grille proposée.

25923 Est-ce que je suis clair?

25924 Me McCALLUM: Oui. Donc les chiffres doivent être révisés à la baisse en effet?

25925 M. BELLEROSE: Probablement oui, mais on n'a pas fait l'exercice à ce sujet-là. On pourrait vous fournir une information en Phase IV si vous le désirez.

25926 M. LAMARRE: Peut-être si je peux ajouter la précision, pour être très clair, c'est que les engagements que nous avons pris en contenu canadien ne changeraient pas. Ce que Serge a exprimé c'est au niveau des modalités de certaines séries.

25927 Alors ce qu'on vous dit aujourd'hui c'est 13^e Rue pourrait vivre sans 13th Street. Les engagements en contenu canadien demeureraient les mêmes mais les modalités, tel que Serge vient de vous l'exprimer, se feraient un peu différemment.

25928 M. BELLEROSE: Pour préciser c'est qu'il nous faudrait remplacer les éléments de la grille proposée, ceux qui sont prévus en partenariat avec Global. Évidement, ces projets-là ne pourraient plus voir le jour tels quels. Ils seraient remplacés par d'autre contenu canadien qui pourrait être de nature un peu différente de ce qui est proposé.

25929 Me McCALLUM: Si je peux résumer. Vos engagements en ce qui a trait au contenu canadien reste ferme.

25930 M. BELLEROSE: De 50 pour cent? Oui, il serait respecté.

25931 Me McCALLUM: Et la production d'émissions canadiennes quand même reste ferme?

25932 M. BELLEROSE: Tout à fait, tout à fait.

25933 M. LAMARRE: Si je peux me permettre pour point de clarification. Quand Serge mentionnait tout à l'heure les modalités ce que ça voudrait dire c'est que -- et je pense que c'est une norme qui s'applique à toutes les demandes qui sont devant vous -- c'est évident que quand il y a un service qui est offert seulement en français, à ce moment la qualité du contenu canadien pourrait être un peu pénalisée.

25934 Mais nos engagements demeurent les mêmes. Ce qu'on vous dit, et notre position est très claire, c'est que d'avoir le même service dans les deux langues nous donne plus de flexibilité et nous permettrait d'avoir un contenu qui est plus relevé ce qui est tout à fait logique parce qu'on pourrait servir les deux marchés en même temps. Mais ceci dit, tous nos engagements pris en langue française demeurent les mêmes.

25935 Me McCALLUM: Et la part de Global disparaît dans l'hypothèse qu'on envisage.

25936 M. BELLEROSE: Exact. Donc, comme j'expliquais, nous devrons remplacer la programmation qui était prévue à ce moment-là par d'autres éléments de programmation mais ça sera du contenu canadien.

25937 Me McCALLUM: Merci.

25938 M. LAMARRE: Et encore une fois pour un souci de clarification, je vous réitère que Global est également partenaire avec nous en français.

25939 Me STEWART: Madame la Présidente, j'ai une question d'ordre semblable mais par rapport à Game One français. Est-ce que Game One français serait viable si Game One anglais ne reçoit pas de licence de Catégorie 1, et si oui, pouvez-vous rassurer le Conseil que vous seriez en mesure de respecter vos engagements tel le contenu canadien et la production d'émissions canadiennes?

25940 M. BELLEROSE: Comme j'ai eu l'occasion de le mentionner à la Phase I à une question semblable qui m'a été posée, c'est que ces deux licences-là -- la licence de Game One français telle que nous l'avons proposée actuellement est vraiment liée à l'existence de Game One anglais. C'est que nous avons développé un concept identique en anglais et en français.

25941 En français si Game One anglais n'existe pas en Catégorie 1, Game One français peut être lancé, mais il nous faudra à ce moment-là réviser à la hausse le tarif de gros proposé dans notre licence parce qu'évidemment il y aura des coûts excédentaires à l'application.

25942 C'est vraiment un exemple, comme Daniel expliquait, où vraiment on a une synergie véritable entre deux applications, deux demandes, deux propositions en anglais et en français. Un centre unique de production, c'est ce que nous proposons. Un centre unique de production, synergie entre les deux groupes.f

25943 Alors évidement, compte tenu que dans le marché anglophone la base du numérique va être plus importante, évidement on comprend -- et que l'univers du numérique en français est plus petit, c'est que la chaîne française pourrait être lancée et pourra offrir une programmation de qualité parce qu'il y aura la chaîne anglaise et c'est pour ça que c'est si important pour nous qu'il y ait aussi Game One en anglais, parce que non seulement Game One en anglais, parce que le marché est plus important, pourra offrir un produit de qualité, mais il va aussi permettre de lancer Game One en français avec une qualité équivalente.

25944 Si jamais on n'a pas Game One en anglais, Game One en français peut être lancé. Le modèle il est là, sauf qu'il nous faudra bénéficier de revenus additionnels pour offrir la même proposition qui est sur la table actuellement, donc un tarif de gros plus élevé.

25945 Me STEWART: Et dans ce cas, est-ce que vous seriez en mesure de respecter vos engagements, ou est-ce que ce serait une hypothèse qu'il faudrait examiner au bon moment.

25946 M. BELLEROSE: La proposition serait la même et on respecterait nos engagements. Tout à fait.

25947 Me STEWART: Qui restent fermes en ce qui concerne la production d'émissions canadiennes et de contenu canadien quoiqu'il arrive vis-à-vis Game One anglais.

25948 M. BELLEROSE: Tout à fait.

25949 Me STEWART: Merci beaucoup. Merci, Madame la Présidente.

25950 LA PRÉSIDENTE: Nous poserons la même question évidement à Global au sujet des demandes où vous êtes partenaires à parts égales.

25951 Nous vous remercions de vos présentations et nous vous reverrons évidement à la Phase IV.

25952 Nous allons maintenant prendre une pause de 15 minutes.

25953 We will now take a 15-minute break.

--- Upon recessing at 1040 / Suspension à 1040

--- Upon resuming at 1100 / Reprise à 1100

25954 THE CHAIRPERSON: Welcome back. We will resume now Phase II of the hearing.

25955 Nous recommencerons avec la Phase II.

25956 Monsieur le Secrétaire, s'il vous plaît.

25957 Mr. Secretary.

25958 MR. CUSSONS: Thank you, Madam Chair. I would just like to note that Levfam Holdings have filed their commitments on original Canadian programming in writing and we are adding this to their file.

25959 Et maintenant Les Chaînes Télé Astral.

INTERVENTION / INTERVENTION

25960 M. BUREAU: Mesdames les Présidentes, Madame et Messieurs les Conseillers.

25961 Je suis André Bureau, président du conseil d'Astral Media et je suis accompagné aujourd'hui à ma gauche de Pierre Roy, président et chef de la direction de Les Chaînes Télé Astral et à ma droite par André Préfontaine, président de Publications Transcontinental.

25962 Notre intervention sera divisée en deux parties.

25963 Nous interviendrons d'abord en tant que titulaire de services spécialisés de langue française existants contre les projets de services de Catégorie 1 qui sont directement concurrents avec nos services.

25964 A l'intérieur de cette partie, nous interviendrons, au nom des Chaînes Télé Astral et de Alliance Atlantis, contre la demande intitulée 13^e Rue, puis au nom des Chaînes Télé Astral contre les demandes intitulées Canal F et Canal Nature.

25965 Dans la seconde partie, nous interviendrons en tant que requérante contre les demandes de Catégorie 1 de même genre que celles que nous avons déposées.

25966 Tout d'abord avec Publications Transcontinental, au nom de Canal Chez-moi, contre la demande de Téléservice, puis au nom de Zone Jeux contre la demande intitulée Game One.

25967 Si nous intervenons aujourd'hui à plus d'un titre et avec des partenaires différents, toutes nos interventions poursuivent cependant un même objectif.

25968 Cet objectif c'est d'assurer que l'offre de nouveaux services numériques de langue française sera suffisamment abondante, attrayante et distincte pour susciter l'engouement des francophones et pour les inciter à franchir le pas vers la distribution numérique, rapidement et en grand nombre.

25969 Les demandes contre lesquelles nous intervenons ne permettent pas, ou permettent moins bien que d'autres, à notre avis, d'atteindre ces objectifs, et elles ne répondent pas, ou répondent moins bien que d'autres, à notre avis, aux critères d'attribution de licence établis par le Conseil. C'est pour cette raison que nous vous invitons à les rejeter.

25970 Je passe maintenant la parole à Pierre Roy qui va vous expliquer les motifs à l'appui de notre position.

25971 M. ROY: Merci, André.

25972 Nous avons exposé en détail dans nos interventions écrites les raisons pour lesquelles nous considérons que certaines des demandes de services de Catégorie 1 de langue française entrent en concurrence directe avec un ou plusieurs services spécialisés existants.

25973 Comme rien de ce que nous avons entendu à l'audience n'est venu modifier ou remettre en cause le caractère concurrentiel de ces demandes, nous rappellerons brièvement les grandes conclusions qui se dégagent de nos interventions écrites.

25974 Dans le cas de 13^e Rue, nous avons établi, sur la base d'une analyse très détaillée, que 65 pour cent de l'ensemble de sa programmation et 76 pour cent de sa programmation en soirée, recoupera directement la programmation actuelle de Séries+, une chaîne que nous détenons en co-propriété, à parts égales, avec Alliance Atlantis et qui a été lancée il y a à peine quelques mois.

25975 Il est donc évident et indiscutable que 13^e Rue serait en concurrence directe avec Séries+. Cette demande nous apparaît donc inadmissible à une licence en vertu des règles établies par le Conseil dans son nouveau cadre de politique et son appel de demandes.

25976 Ajoutons que 13^e Rue emprunte aussi une part très significative de sa programmation à Z et une autre part, un peu moindre, à Canal D ce qui fait qu'au moins 90 pour cent de sa programmation en soirée sera similaire, thématique pour thématique et catégorie d'émissions pour catégorie d'émissions, à celle déjà offerte dans l'univers analogique. Sa contribution à la diversité de la programmation sera donc, à toutes fins utiles, inexistante.

25977 Dans le cas de Canal F, nous constatons le même phénomène de duplication avec la programmation existante.

25978 La requérante a soumis une grille de programmation qui aborde non seulement les mêmes thématiques que celles offertes par un service analogique existant, mais qui propose exactement les mêmes concepts de programme, relevant des mêmes catégories d'émissions et s'adressant au même auditoire cible, la plupart du temps aux mêmes heures de diffusion.

25979 Nous avons établi que 54 pour cent de l'ensemble de la programmation de Canal F et 61 pour cent de sa programmation en soirée recoupe directement la programmation actuelle de Canal Vie.

25980 Il nous apparaît donc évident que Canal F serait en concurrence directe avec Canal Vie et à ce titre inadmissible à une licence en vertu des règles fixées par le Conseil.

25981 Dans le cas de Canal Nature, la situation est un peu différente. Son concept est à ce point mal défini et contradictoire qu'il pourrait se révéler en concurrence directe avec une multitude de services existants, dont Canal D et Canal Famille.

25982 Nous notons que le Conseil a offert à la requérante, lors de sa présentation orale, de nombreuses occasions de le clarifier. Canal Nature en a saisi quelques-unes seulement acceptant, par exemple, de préciser la part de sa programmation qui serait reliée à la thématique animale versus la thématique nature/environnement.

25983 Notons qu'il s'agit de deux thématiques qu'exploitent déjà Canal D à travers sa programmation quotidienne de documentaires animaliers et ses émissions portant sur la nature et l'environnement.

25984 Mais il y a plusieurs autres contradictions qui n'ont pas été résolues, la requérante voulant probablement conserver un maximum de flexibilité pour faire évoluer son concept dans un sens ou dans l'autre.

25985 Ainsi, nous comprenons mal comment un service qui se décrit comme l'équivalent de Discovery et de Animal Planet -- deux services essentiellement documentaires -- puisse demander à être autorisé à distribuer au moins 100 longs métrages de fiction différents par année ce qui, compte tenu du facteur de répétition, se traduira par des milliers d'heures de diffusion sur une base annuelle qui pourraient occuper la totalité des heures de grande écoute.

25986 Autre exemple. Comment peut-on concilier l'auditoire cible visé, les 35-54 ans, avec le fait qu'une très vaste portion de sa programmation sera consacrée à des séries dramatiques et à des longs métrages ayant un animal comme personnage principal?

25987 Chacun sait, en effet, que l'immense majorité des films et séries de ce genre s'adresse à un auditoire jeunesse, du type de celui desservi par Canal Famille. C'est le cas de presque toutes les séries mentionnées dans la demande, qu'il s'agisse de Skippy, Lassie ou Flipper, comme ce sera également le cas pour les longs métrages.

25988 Bref, à moins que la requérante n'accepte des restrictions nombreuses et sévères qui, de fait, modifieraient fondamentalement la demande initialement déposée, nous ne croyons pas que Canal Nature puisse répondre, même de très loin, aux critères établis par le Conseil.

25989 M. BUREAU: Nous sommes convaincus, Madame la Présidente, que des services qui ne font que réassembler de façon très légèrement différente une programmation déjà offerte dans l'univers analogique ne pourront pas apporter la diversité et la complémentarité requises pour la nouvelle offre de services numériques.

25990 Nous croyons que le Conseil ne devrait pas prendre le risque d'octroyer des licences à des services de Catégorie 1 ou même de Catégorie 2 qui soulèvent des problèmes de concurrence avec des services existants. Il n'a d'ailleurs aucun besoin de le faire étant donné l'abondance des demandes.

25991 Le Conseil a reçu une quinzaine de demandes de services de langue française ou bilingues de Catégorie 1. Même en éliminant, comme nous le suggérons, tous ceux qui n'apportent pas une contribution claire et indiscutable à l'accroissement de la diversité de la programmation, et en n'autorisant qu'un nouveau service par genre, il lui restera une dizaine de projets de Catégorie 1 parmi lesquels choisir, des projets qui répondent à des concepts différents et qui proviennent d'un éventail de groupes corporatifs responsables, prêts à assumer les risques financiers associés à leur lancement.

25992 Nous espérons sincèrement que parmi cette dizaine de concepts de chaîne de langue française différents entre eux et distincts de l'offre existante il en choisira -- le Conseil -- au moins cinq auxquels il attribuera une licence de Catégorie 1.

25993 Pour nous, l'abondance de l'offre est un facteur très important. Nous craignons que si le Conseil n'octroyait que deux ou trois licences de services de langue française de Catégorie 1, cela ne constituerait pas une masse critique suffisante pour stimuler l'abandonnement à la distribution numérique des foyers francophones.

25994 Tout le monde le sait, dans le marché francophone ce sont les services de Catégorie 1 qui seront assujettis à des obligations de contenu canadien élevées et, parmi eux ceux, qui seront les plus enracinés dans la culture d'ici qui vont attirer les téléspectateurs de langue française. Il faut donc qu'il y en ait un nombre suffisant pour séduire des publics cibles variés.

25995 Je vais maintenant demander à André Préfontaine d'amorcer la seconde partie de notre intervention qui porte sur les demandes de Catégorie 1 qui sont directement concurrentes avec nos propres demandes.

25996 M. PRÉFONTAINE: Merci, André.

25997 Publications Transcontinental n'a pas d'expertise en matière de services de télévision spécialisée, Madame la Présidente, mais nous pouvons faire valoir une longue expérience dans le secteur des magazines spécialisés -- en fait nous en avons 51 -- une expérience dans la conception, le lancement, l'établissement puis le maintien en position de tête dans leurs créneaux respectifs, d'une foule de magazines ciblés pour répondre aux intérêts spécifiques de groupes de consommateurs d'ici partageant une même communauté d'intérêts.

25998 Ce que je peux vous dire, à la lumière de cette expérience, c'est que le concept de Canal Chez-moi est beaucoup mieux défini et circonscrit que celui de Téléservice, qu'il est ciblé avec beaucoup plus de précision et surtout qu'il a su segmenter sa programmation de façon à ce que chacune de ses émissions réponde précisément à un type de besoins et à une communauté d'intérêts, contrairement à Téléservice qui tente de répondre à tous les besoins dans le cadre d'une émission unique de trois heures.

25999 Je puis vous assurer, Madame la Présidente, que si nos magazines tentaient de traiter de tous les sujets du mois dans un article marathon occupant 70 pour cent des pages, ils ne seraient pas en position de tête dans leurs marchés. Ils ne seraient probablement même plus en kiosque également.

26000 Une autre chose que l'expérience m'a appris c'est que si on attend qu'un nouveau magazine ait atteint le point d'équilibre budgétaire pour y injecter les ressources financières qui sont nécessaires à un contenu de grande qualité il y a de fortes chances que ce magazine n'atteigne jamais ce point d'équilibre.

26001 Si on veut réussir, il faut absolument s'assurer dès le premier numéro que le rédacteur en chef dispose des budgets nécessaires pour que tous les articles soient de première qualité, que la mise en page soit impeccable, et que tout converge pour assurer que le consommateur accorde une forte valeur perçue au produit.

26002 Sur ce point aussi, Canal Chez-moi est nettement mieux positionnée que Téléservice mais je vais laisser à Pierre le soin de développer cet aspect.

26003 Merci.

26004 M. ROY: Merci, André.

26005 La philosophie que vient d'exprimer André Préfontaine a toujours été partagée et appliquée par Les Chaînes Télé Astral.

26006 Dans nombre de nos demandes antérieures, nous avons fait valoir que nos engagements étaient pondérés de telle façon que la qualité de la programmation canadienne ne soit jamais sacrifiée au profit de la quantité.

26007 Nous croyons que cette philosophie, qui est aussi une stratégie, est plus que jamais pertinente dans le cadre de l'introduction de nouveaux services numériques.

26008 Ce n'est pas parce que la base d'abonnés francophones à la distribution numérique sera très étroite au départ que les téléspectateurs vont être prêts à accepter des contenus de moindre qualité que dans l'univers analogique. Au contraire!

26009 Si au premier jour de leur mise en ondes les téléspectateurs ont l'impression que les nouveaux services numériques leur proposent des émissions bas de gamme, disposant de budgets dérisoires, nous aurons déjà perdu notre pari.

26010 C'est pourquoi nous avons prévu affecter à nos émissions originales canadiennes, et ce dès l'an un, des budgets horaires comparables à ceux qui sont alloués dans l'univers spécialisé analogique à des émissions de même catégorie. Pour nous, c'est un pré-requis essentiel au succès.

26011 Nous avons évidement suivi avec attention les discussions que vous avez eues avec Téléservice et Game One. Or, en mettant en regard leurs engagements en termes de nombre d'heures d'émissions originales canadiennes et les budgets de programmation canadienne prévus dans leurs plans d'affaires, nous constatons que leur stratégie est très différente.

26012 Dans le cas de Téléservice, par exemple, nous estimons que les budgets horaires moyens qui seront affectés aux émissions originales canadiennes sont environ quatre fois inférieurs à ceux prévus par Canal Chez-moi. Dans le cas de Game One, nous estimons qu'ils seront plus de cinq fois inférieurs à ceux prévus par Zone Jeux.

26013 C'est un état de fait qui, selon nous, milite très fortement en faveur du choix de nos demandes car un des facteurs décisifs dans le succès ou l'insuccès de la nouvelle offre de services numériques de langue française ce sera le rapport qualité/prix, c'est-à-dire la relation que le public va établir entre la valeur perçue d'un service et le tarif demandé pour y accéder.

26014 Pour les consommateurs, un service de piètre qualité est toujours trop cher.

26015 André.

26016 M. BUREAU: Voilà qui complète notre intervention, Mesdames les Présidentes, Madame et Messieurs les Conseillers.

26017 Vous trouverez en annexe à notre présentation des réponses précises aux questions auxquelles le Conseil a demandé aux requérantes de répondre au plus tard en Phase II. Elles sont sous l'annexe 1 qui est déposée au Conseil.

26018 Nous sommes disposés à répondre à vos questions s'il y en a.

26019 LA PRÉSIDENTE: Merci, Monsieur Bureau et vos collègues. Je ne crois pas que nous ayons de questions. Je vois que vous déposez vos devoirs tôt.

26020 Nous vous remercions de votre présentation et nous vous reverrons à la Phase IV.

26021 Merci.

26022 LA PRÉSIDENTE: Monsieur le Secrétaire, s'il vous plaît.

26023 Mr. Secretary, please.

26024 M. CUSSONS: Merci, Madame la Présidente.

26025 Diffusion Quebecor Inc., Quebecor Broadcast Incorporated.

INTERVENTION / INTERVENTION

26026 M. GUIMOND: Madame la Présidente, Madame la Présidente du Conseil, Madame et Messieurs les Conseillers.

26027 Mon nom est René Guimond. A titre de président et chef de la direction de TQS, je représente Diffusion Quebecor, une filiale de Quebecor Inc., et une des requérantes de licences de télévision spécialisée numérique.

26028 M'accompagnent aujourd'hui à ma gauche, M. Mark Bradley, conseiller spécial de TQS pour le Canal Arc-en-ciel, The Rainbow Channel; M. Luc Doyon, vice-président à la programmation de TQS et à ma droite, M. Denis Rozon, vice-président, finances, de TQS.

26029 Au nom de la requérante, nous faisons ce matin une intervention de vive voix à certaines autres demandes comme le prévoit l'Avis d'audience publique CRTC 2000-5 que le Conseil a publié le 14 août dernier.

26030 Notre intervention portera sur les demandes de groupes qui ont présenté des projets concurrents aux nôtres, à l'occurrence Canal Chez-moi soumis par Les Chaînes Télé Astral et Publications Transcontinental ainsi que Q!Television de CHUM Limited et PrideVision de Levfam Holdings.

26031 J'invite Luc Doyon à vous faire part de nos remarques sur la demande de Télé Astral et Publications Transcontinental relativement au Canal Chez-moi.

26032 M. DOYON: Le Conseil a déjà établi clairement qu'il examinerait le bien-fondé des demandes de nouveaux services de la Catégorie 1 en fonction des critères d'attribution de licence établis dans son Avis 2000-6.

26033 En ce qui concerne la contribution à la programmation canadienne, la grille présentée par Canal Chez-moi prévoirait, à l'instar de celle de Téléservice, 50 pour cent de contenu canadien au cours de la première année de licence. Par contre, à la septième année de la licence, la grille d'Astral compterait 60 pour cent de contenu canadien, comparativement à 70 pour cent pour Téléservice.

26034 Sur le plan de la production originale canadienne, Canal Chez-moi produirait 258 heures de production locale originale canadienne par année, comparativement à 780 heures pour Téléservice.

26035 En ce qui concerne les investissements en programmation pendant la durée de la licence, selon la formule du Conseil, Astral investirait 27 millions de dollars, ou 44 pour cent des revenus tirés des abonnements et de la publicité, comparativement à 28 millions de dollars, ou 65 pour cent pour Téléservice.

26036 En ce qui concerne le critère du Conseil relatif au caractère attrayant du service pour les téléspectateurs, il faut noter que les études que nous avons menées confirment que les gens veulent avoir rapidement et facilement accès à des trucs simples et des conseils pratiques qui leur permettent de se dépanner, en particulier des démonstrations du genre "How to...".

26037 A l'évidence, Canal Chez-moi ne serait pas une télévision de services. La programmation qu'il proposerait ne serait pas focalisée sur des démonstrations concrètes, simples et pratiques car on y diffuserait des thèmes déjà abordés ou susceptibles de l'être par les chaînes généralistes.

26038 En pratique, Canal Chez-moi ne présenterait pas du "How to..." en continu préférant focaliser sur des sujets dont Téléservice se tiendra très loin, par exemple, les décors de vedettes, les cuisines et les salles de bain de rêve, les maisons extrêmes et les jardins du paroxysme.

26039 Contrairement à Canal Chez-moi, Téléservice répond adéquatement et efficacement à la demande sans cesse croissante des téléspectateurs qui sont pressés par leurs obligations quotidiennes, qui manquent de temps et qui veulent donc pouvoir regarder des émissions de services, de dépannage, de démonstrations et de "How to...".

26040 Et contrairement à Canal Chez-moi qui mettrait l'accent sur le confort au foyer, Téléservice se démarquera dans l'univers télévisuel francophone en offrant des services, toujours des services et rien que des services, et ce au moyen de trucs, de conseils, d'instructions, de modes d'emploi ainsi que de démonstrations pratiques, simples, efficaces et économiques. Ce faisant, il permettra d'attirer de nouveaux téléspectateurs, c'est-à-dire des gens qui regardent peu ou pas les canaux spécialisés à l'heure actuelle.

26041 Au chapitre de la contribution à la diversité des genres de programmation disponibles, il faut noter que, contrairement à Téléservice qui est positionné de façon claire et non équivoque comme une télévision de dépannage et de services, Canal Chez-moi voudrait occuper -- et je cite:

"Une position mitoyenne entre une chaîne de services et une chaîne de divertissement".

26042 Comme l'adjectif "mitoyen" signifie "qui est entre deux choses", Canal Chez-moi ne serait donc, aux yeux des téléspectateurs, ni tout à fait une chaîne de services, ni tout à fait une chaîne de divertissement. Contrairement à Canal Chez-moi, Téléservice a clairement défini le créneau dans lequel il entend évoluer et se démarquer.

26043 Finalement, l'abordabilité ou le coût du service proposé pour les abonnés en fonction du tarif de gros proposé est un autre critère du Conseil.

26044 A cet égard, il convient de signaler que le tarif de gros proposé par Astral pour Canal Chez-moi est 25 pour cent plus élevé que celui proposé par Diffusion Quebecor pour Téléservice, soit 1,50 $ au lieu de 1,20 $ par mois.

26045 Je vous remercie de votre attention et je cède maintenant la parole à Mark Bradley.

26046 M. BRADLEY: Le projet de chaîne de télévision numérique Arc-en-ciel/Rainbow est en concurrence directe avec deux autres services proposés en Catégorie 1, soit PrideVision de Levfam Holdings et Q!Television de CHUM Limited.

26047 Toutefois, en raison de son concept unique et véritablement bilingue, Arc-en-ciel/Rainbow se démarque nettement dans l'univers télévisuel canadien.

26048 Une chaîne véritablement spécialisée. En ce qui concerne le critère du Conseil relative au caractère attrayant du service on peut se poser quelques questions.

26049 Quel peut bien être l'intérêt pour les téléspectateurs gais de regarder des émissions comme What's for Dinner? et The Galloping Gourmet? En quoi les intérêts des personnes et des communautés gaies du Canada sont-ils mieux servis avec une programmation de chaîne généraliste comprenant des émissions de cuisine, de jardinage ou de sport ainsi que des jeux-questionnaires?

26050 Leurs besoins ne seraient-ils pas mieux servis par une programmation complémentaire à ce qui est actuellement offert par le système canadien de radiodiffusion et surtout par une grille qui refuse d'enfermer les personnes homosexuelles dans un ghetto télévisuel? C'est précisément ce que propose Arc-en-ciel/Rainbow -- un contenu canadien exceptionnel.

26051 En ce qui concerne la contribution à la diversité de la programmation, il est important de noter que Q!Television consacrerait 70 pour cent de son budget de programmation canadienne, soit 12 millions de dollars sur 17, à des acquisitions, c'est-à-dire à des émissions qui existent déjà et non pas à de la production originale.

26052 Même chose pour PrideVision qui entend dépenser 13 millions de dollars pour acquérir, entre autres, 364 épisodes de Savoir Faire, 364 épisodes de The Galloping Gourmet et 364 épisodes de What's for Dinner?. Or chacune de ces émissions de cuisine et de décoration serait diffusée tous les jours, sept jours par semaine, quatre fois par jour!

26053 Quant à Arc-en-ciel/Rainbow, à l'exception de quelques films et documentaires canadiens qu'il rediffusera avec plaisir, 100 pour cent de ses dépenses en productions canadiennes iront à la production de matériel neuf, c'est-à-dire des contenus jamais encore diffusés à la télévision et produits tout spécialement pour lui.

26054 De plus, les dépenses de programmation de Q!Television en productions originales canadiennes sont de 5,3 millions de dollars, comparativement à 8 millions de dollars pour Arc-en-ciel/Rainbow.

26055 Au total, Q!Television compte dépenser moins d'argent en programmation qu'Arc-en-ciel/Rainbow, soit 27,4 millions de dollars contre 31 millions de dollars. Les chiffres parlent d'eux-mêmes.

26056 En ce qui a trait aux heures de programmation canadienne, Q!Television démarre avec seulement 40 pour cent et ne présentera jamais plus que 40 pour cent de contenu canadien en soirée, aux heures de grande écoute, même après sept ans.

26057 Par contre, les engagements d'Arc-en-ciel/Rainbow prévoient des pourcentages qui augmentent sans cesse, soit de 45,7 pour cent la première année jusqu'à 50 pour cent dès la sixième année, le jour comme le soir.

26058 Enfin, sur le plan du développement de scénarios et de concepts pour les émissions canadiennes, Q!Television ne dépenserait que 525 000 $ au cours de ses sept années de licence; PrideVision ne consacre rien à ce poste et quant à Arc-en-ciel/Rainbow, notre engagement est de dépenser 3 612 000 $ en développement de scénarios et de concepts pour les émissions canadiennes.

26059 Les portails Internet, un avantage concurrentiel certain. Ni Q!Television, ni PrideVision ne peuvent garantir aux téléspectateurs canadiens qu'ils auront d'entrée de jeu accès à un portail qui est un chef de file dans le marché canadien et qu'ils n'auront jamais à passer par les États-Unis pour interagir sur les contenus à l'antenne. Par contre, Arc-en-ciel/Rainbow bénéficiera dès le premier jour de sa mise en ondes de la force d'impact des portails Internet Canoe et Canoë les plus importants au Canada.

26060 Une télé qui sert les communautés anglophones et francophones. Dans l'étude de la demande, il est fondamental, selon nous, de prendre en compte les points suivants.

26061 Premièrement, l'étroitesse du marché que constitue l'auditoire d'un canal spécialisé numérique. Deuxièmement, la spécificité de l'auditoire visé dans un tel marché, en l'occurrence celui des communautés gaies et lesbiennes du Canada. Troisièmement, l'ampleur des besoins et des attentes de ces communautés, tant chez les anglophones que chez les francophones.

26062 Ni Q!Television, ni PrideVision ne répondent de façon satisfaisante au défi de donner accès aux communautés anglophones et francophones gaies au Canada à un canal national qui réponde à leurs besoins.

26063 Par contre, Arc-en-ciel/Rainbow y répond, avec un concept de télévision vraiment bilingue offrant une programmation dont 85 pour cent du contenu pourra être suivi, compris et apprécié par les citoyens unilingues, tant anglophones que francophones.

26064 Une distribution à la carte par respect du libre choix. Il est à noter que le plan d'affaires soumis au Conseil par Q!Television n'est pas basé sur une distribution à la carte du service, mais bel et bien sur une distribution à l'intérieur d'un bouquet de services. Contrairement à Arc-en-ciel et à PrideVision, Q!Television ne prévoit pas un prix d'abonnement élaboré en fonction d'une distribution à la carte.

26065 A cet effet, la proposition d'Arc-en-ciel/Rainbow s'inscrit dans une volonté de respecter non seulement le libre choix des téléspectateurs canadiens, mais également les autres services numériques.

26066 Nous sommes en effet conscients que certains citoyens pourraient ne pas vouloir souhaiter recevoir ce service de façon automatique parce que lié à un quelconque bouquet. De la même façon, d'autres services numériques pourraient ne pas souhaiter se retrouver dans un bouquet formé notamment d'une chaîne destinée principalement aux personnes homosexuelles et lesbiennes, et ça Arc-en-ciel/Rainbow le respecte profondément.

26067 Merci de votre attention.

26068 M. GUIMOND: Merci Luc, merci Mark.

26069 En terminant cette présentation, force est de reconnaître que ni le projet Canal Chez-moi, ni les projets Q!Television et PrideVision n'offrent autant d'avantages que Téléservice et Arc-en-ciel/Rainbow, que ce soit sur le plan de la pertinence, de l'attrait pour les téléspectateurs ou de la contribution à la diversité des genres de programmations disponibles.

26070 Maintenant avec votre permission j'aimerais prendre quelques minutes pour répondre très brièvement aux questions que vous avez posées lors de notre présentation du 18 août dernier et par le fait même respecter notre engagement à vous fournir les réponses appropriées dès la Phase II.

26071 Sous le dédoublement possible, en ce qui concerne les dédoublements possibles au niveau de la programmation de TQS et des services spécialisés et de Diffusion Quebecor, nous sommes disposés à nous engager à ce que les émissions diffusées à TQS ne composent jamais plus de 10 pour cent de la grille horaire du service spécialisé ou de chacun des services spécialisés qui auront été octroyés à Diffusion Quebecor.

26072 Lors de notre présentation à l'audience, nous vous avons souligné que nous souscrivions à la politique du Conseil visant à atteindre des niveaux de sous-titrage de l'ordre de 90 pour cent à la fin des licences, et ce bien que nos engagements dans les demandes n'atteignent pas ce niveau.

26073 Nous désirons vous confirmer notre engagement ferme à nous conformer à la politique et conséquemment d'atteindre des niveaux de sous-titrage de l'ordre de 90 pour cent lors de la septième année de licence ou des licences.

26074 Au cours de l'audience, le Conseil a également demandé à toutes les requérantes de lui confirmer le nombre d'heures de productions originales canadiennes et de lui indiquer où il peut trouver ces renseignements. Je suis fier aujourd'hui de vous mentionner que le nombre d'heures de productions originales canadiennes pour les licences de Diffusion Quebecor sont réparties de façon suivante: Téléservice, 780 heures; Arc-en-ciel/Rainbow, 585; Canal F, 364 et Canal Nature, 182.

26075 J'aimerais maintenant répondre aux questions plus spécifiques que le Conseil nous a posées sur chacune des demandes de licences. Téléservice, en ce qui concerne les descriptions du service, nous accepterions premièrement de retirer toute émission concernant la santé tant physique que mentale, et deuxièmement, de limiter à 10 pour cent de la grille toute émission concernant l'entretien et la réparation des voitures.

26076 Concernant le Canal Nature, en réponse à une remarque de Madame la Présidente du Conseil nous invitant à clarifier la nature de ce service, M. Louis Trépanier a répondu que nous privilégerions peut-être une programmation comprenant environ 65 pour cent de contenu consacré au monde animal, la différence étant orientée vers la nature et l'environnement.

26077 Après mûre réflexion, nous désirons préciser notre réponse de la façon suivante. Dans la description du service, nous accepterions que celui-ci comporte au moins 75 pour cent d'émissions traitant des animaux, la différence étant consacrée au domaine de la nature et de l'environnement.

26078 Sur Canal F, en ce qui concerne la description du service, nous accepterions premièrement que la grille soit composée à 90 pour cent d'émissions faisant partie des catégories d'émissions apparaissant à notre grille type produite à l'annexe 9. Deuxièmement, de retirer la catégorie d'émissions sports, et troisièmement, de limiter le nombre de longs métrages diffusés à cinq par semaine.

26079 Sur Arc-en-ciel/Rainbow, dans la description du service, nous proposons la définition suivante de matériel gai et lesbien ce qui est relatif à l'homosexualité et d'intérêt pour les personnes et/ou les communautés homosexuelles, plus précisément du matériel adressant les réalités gaies et/ou les caractéristiques de l'homosexualité produit par, pour, au sujet ou à propos des personnes ou de personnages gais. Nous accepterions également de limiter à 15 pour cent de la grille les émissions de catégorie vidéoclips.

26080 Le Conseil nous a également demandés quel était le pourcentage de diffusion dans les deux langues. A cet égard, nous tenons à préciser que sur 42 heures par semaine de programmation originale, Arc-en-ciel/Rainbow offrira 19,5 heures, ou 51 pour cent, d'émissions en anglais ou en français avec sous-titres dans l'autre langue. Il est à noter que la majorité de ce matériel serait en langue anglaise. Huit heures, ou 19 pour cent, dans les deux langues, 6,25 heures, ou 15 pour cent, en français uniquement, et 6,25 heures, ou 15 pour cent, en anglais uniquement.

26081 Ainsi, 85 pour cent des émissions de la grille horaire d'Arc-en-ciel/Rainbow pourrait être comprise par un unilingue anglophone ou un unilingue francophone.

26082 Le Conseil nous a aussi demandé d'évaluer l'impact sur notre plan d'affaires d'une décision autorisant la distribution d'Arc-en-ciel/Rainbow uniquement dans le marché francophone. Selon un scénario optimiste, il nous faudrait exiger un prix de gros plus de deux fois supérieur à celui prévu dans notre plan d'affaires pour que ce projet soit toujours viable.

26083 En conséquence, il nous est impossible d'envisager le lancement d'Arc-en-ciel/Rainbow selon le plan d'affaires déjà établi avec une distribution sur le marché francophone uniquement.

26084 En effet, comme je l'expliquerai plus en détail dans quelques instants alors que nous aborderons le point relatif à la distribution et aux règles d'accès, nous croyons qu'Arc-en-ciel/Rainbow est véritablement un canal à la fois francophone et anglophone qui devrait bénéficier d'une distribution prioritaire dans tous les marchés d'un océan à l'autre.

26085 Concernant la distribution et les règles d'accès -- et je termine là-dessus -- finalement, le Conseil s'est dit intéressé à recevoir nos commentaires sur la distribution d'un canal bilingue dans un marché francophone et anglophone, et ce plus particulièrement à la lumière des récentes modifications aux règles d'accès et de la politique du Conseil qui ont conduit à l'Avis d'audience publique pour les services spécialisés numériques.

26086 A la lecture du règlement existant, nous constatons qu'aucune disposition spécifique ne prévoit des règles applicables pour la distribution d'un service bilingue. Nous croyons qu'Arc-en-ciel/Rainbow devrait être considéré comme un service francophone dans les marchés francophones, et comme uns service anglophone dans les marchés anglophones, ce qui lui permettrait de bénéficier dans chacun de ces marchés des règles de distribution avantageuses.

26087 En effet, même s'il est décrit comme un service bilingue, nous croyons qu'Arc-en-ciel/Rainbow peut se qualifier à la fois comme service francophone et comme service anglophone puisque 85 pour cent de sa programmation peut être comprise soit par une personne unilingue francophone ou une personne unilingue anglophone, et ce en raison du fort pourcentage d'émissions sous-titrées. Enfin, Arc-en-ciel/Rainbow bénéficierait d'un accès lui permettant une distribution adéquate et assurée dans tous les marchés qu'ils soient francophones ou anglophones.

26088 Par conséquent, nous croyons qu'une licence anglophone/francophone devrait être accordée à Arc-en-ciel/Rainbow. Nous sommes d'opinion que cette approche est conforme à l'esprit de la politique décrite dans l'Avis 2000-6 du Conseil qui souligne l'importance des privilèges d'accès numérique pour les services de Catégorie 1.

26089 Nos réponses ont été communiquées par écrit à la Secrétaire du Conseil.

26090 Je vous remercie de votre attention.

26091 LA PRÉSIDENTE: Monsieur Guimond, à la page 5 de votre présentation où vous parlez de la distribution d'Arc-en-ciel par respect du libre choix seulement à la carte, vous semblez critiquer les deux autres requérantes pour n'avoir pas même établi un tarif pour la distribution à la carte.

26092 Est-ce que ce n'est pas vous plutôt qui demandez une exception à la règle formulée par le Conseil? Est-ce que je comprends bien que vous n'allez pas essayer de profiter d'arrangements de mise en bloc comme au paragraphe 22 de l'appel de demandes -- plutôt de la politique relative au cadre de réglementation? Est-ce que de fait vous demandez une exception à ce paragraphe qui postule que:

"Les distributeurs ne sont pas autorisés à distribuer un service de la Catégorie 1 sur une base autonome à moins qu'il ne soit également distribué dans le cadre d'un bloc. De plus, chaque service de la Catégorie 1 devra être mis en bloc et commercialisé de façon équitable par comparaison aux autres nouveaux services numériques". (Tel que lu)

26093 Est-ce que je comprends bien que Quebecor demande une exception à ce paragraphe pour n'offrir Arc-en-ciel, pour les raisons que vous aviez élaborées évidement, qu'à la carte?

26094 M. GUIMOND: Le plan d'affaires que nous avons développé prend en considération évidement un des facteurs que nous avons expliqué dans notre demande -- et je ne veux pas revenir sur ces détails. Un point qui est important, c'est le point évidement d'une part de la petitesse du marché que nous visons, c'est-à-dire environ 6 pour cent de la population canadienne, et également de notre désir de vouloir offrir un produit tant à la clientèle francophone qu'anglophone.

26095 Évidement, si on parle de la petitesse du marché canadien, évidement lorsqu'on regarde le marché francophone, il est évidement beaucoup plus restreint. La base de notre plan d'affaires prenait également en considération le respect qu'on voulait donner au 94 pour cent de la population qui ne sont pas des gens qui sont gais ou lesbiennes, et le pourcentage n'est pas établi, mais peut-être un fort pourcentage de ce 94 pour cent là ne voudrait pas recevoir de services de télévision destinés aux gais et lesbiennes.

26096 Prenant ces critères en considération, nous sommes arrivés à la conclusion que la demande d'un service bilingue allait être le meilleur concept pour répondre aux besoins du marché dans le contexte économique actuel et nous avons également conclu dans notre démarche que le prix que nous demanderions, compte tenu du fait qu'il allait être offert à la carte, que ce prix était acceptable compte tenu de la spécificité du produit.

26097 Maintenant, il est évident que si le Conseil décide d'accorder la licence à Arc-en-ciel/Rainbow, donc un service bilingue, pan-canadien qui servirait l'ensemble de la communauté gai, que ce soit francophone ou anglophone au Canada, et si le Conseil décidait que cette considération de sensibilité de la population par rapport aux types de services offerts n'est pas un élément qui pourrait venir influencer la mise en marché des bouquets éventuellement offerts, bien nous on va se plier évidement à la décision du Conseil et le cas échéant on serait prêts évidement à offrir notre service en bouquet et réviser en conséquence le prix de gros que nous avons indiqué dans notre plan d'affaires en fonction évidement de la pénétration qu'un bouquet pourrait nous offrir par rapport à la pénétration qu'une offre à la carte nous offrirait.

26098 LA PRÉSIDENTE: Si je me souvient bien vous n'avez pas proposé de tarifs dans un contexte de mise en marché en bloc.

26099 M. GUIMOND: Nous n'avons pas proposé de tarif.

26100 LA PRÉSIDENTE: Donc je peux conclure que la réponse à ma question et que oui, vous considérez que le Conseil devrait faire exception pour Arc-en-ciel et permettre la mise en oeuvre à la carte.

26101 M. GUIMOND: Nous on considère que le critère ou la référence à la considération -- c'est-à-dire la considération du respect des cibles de la population canadienne, on pense que le produit est suffisamment spécifique bien que nécessaire, mais suffisamment spécifique, qu'il serait possiblement bienvenue de la part du Conseil d'octroyer une licence bilingue distribuée à la carte.

26102 LA PRÉSIDENTE: Puisque vous seriez prêts à accepter une licence avec une mise en marché dans un volet, est-ce que vous avez considéré le tarif qui serait -- puisque vous avez lu, comme tout le monde, les règles relatives à l'implantation de ces services, à la mise en oeuvre de ces services, avez-vous fait le calcul parce que le calcul -- vous critiquez vos collègues pour n'avoir pas fait de calcul à la carte, alors moi je suggère peut-être que les règles au paragraphe 22 auraient dû vous inviter à établir un tarif en volet si par hasard le Conseil s'en tenait au cadre réglementaire et ne retenait pas vos revendications, que nous comprenons évidement.

26103 Alors vous n'avez pas fait un calcul de ce que le volet...

26104 M. ROZON: On ne l'a pas fait parce que nous on était vraiment sous le principe d'aller à la carte, mais en toute règle de trois on pourrait revenir à la Phase IV avec un chiffre plus précis, mais on avait abordé à un moment donné un prix aux environs de 65 sous qui serait l'équivalent, selon nous, selon les taux de pénétration qu'on peut envisager dans un bouquet.

26105 Mais pour vous revenir exactement avec un prix formel, on reviendra en intervention.

26106 LA PRÉSIDENTE: Et votre taux de pénétration a été formulé à la carte.

26107 M. ROZON: Oui.

26108 LA PRÉSIDENTE: Est-ce qu'il serait semblable si ce n'était pas à la carte?

26109 M. ROZON: Le taux de pénétration serait davantage plus élevé.

26110 LA PRÉSIDENTE: J'essaie de déterminer, selon les chiffres que vous nous avez déposés maintenant il n'est pas possible de faire un calcul parce que vous n'avez pas indiqué la pénétration. Alors il faudrait refaire un calcul complet.

26111 M. ROZON: Il s'agit de prendre nos revenus totaux et de les diviser par le taux de pénétration réaliste ou que les...

26112 LA PRÉSIDENTE: Alors la partie de l'équation qui nous manquerait serait la pénétration à volet plutôt qu'à la carte.

26113 M. ROZON: Exact.

26114 LA PRÉSIDENTE: Si nous avions ce chiffre-là, nous pourrions déterminer à ce moment-là le tarif.

26115 M. ROZON: Exact.

26116 LA PRÉSIDENTE: Alors ce serait peut-être la façon la plus équitable de compléter cet aspect, de nous donner vos calculs de pénétration au volet ce qui nous permettrait à ce moment-là, avec les chiffres que vous avez déjà, d'établir quelle allure le tarif aurait à peu près avec la pénétration.

26117 Je vous remercie.

26118 Me STEWART: Merci, Madame la Présidente.

26119 Comme vous l'avez dit, vous avez fourni vos réponses aux questions par écrit et je constate que pour le nombre d'heures de production originale canadienne vous avez fourni seulement une série d'heures pour chaque service.

26120 Est-ce que ces chiffres s'appliquent à chaque année de la licence, donc les heures de production originale demeurent stables durant la durée de la licence?

26121 M. ROZON: Oui, ces chiffres-là c'est le minimum qu'on s'engage à faire par année. Ils correspondent à notre programmation type déposée pour la première année.

26122 Me STEWART: Ce serait pour chaque année de la licence?

26123 M. ROZON: Oui.

26124 Me STEWART: Merci, Madame la Présidente.

26125 LA PRÉSIDENTE: Et voilà. Nous vous remercions, Monsieur Guimond et vos collègues.

26126 Nous vous reverrons à la Phase IV.

26127 Mr. Secretary, please.

26128 M. CUSSONS: Merci, Madame la Présidente.

26129 Le Réseau des Sports, RDS Inc.

INTERVENTION / INTERVENTION

26130 M. FRAPPIER: Merci.

26131 Madame la Présidente, Mesdames les Conseillères et Messieurs les Conseillers. Bonjour.

26132 J'espère que vous vous rappelez de moi. Mon nom est Gerry Frappier, je suis le président et directeur général du Réseau des Sports. Permettez-moi de vous présenter les autres membres du panel pour cette deuxième étape, des gens que je présume vous connaissez assez bien maintenant après les quelques dernières semaines.

26133 A ma gauche, Mme Kathryn Robinson qui est conseillère juridique de Goodman Phillips et Vineberg. A côté de moi, Mme Trina McQueen, vice-présidente exécutive de CTV. Ici à côté de moi, M. Kevin Dumouchel, le directeur, finance et administration du Réseau des Sports et Elisabeth Duffy-MacLean, directrice des affaires commerciales de NetStar.

26134 Il nous fait grand plaisir de vous fournir l'information additionnelle quant à nos engagements en terme d'heures de programmations originales canadiennes pour les Réseaux Info-Sport ainsi que pour Grand Air.

26135 D'entrée de jeu, il est important de noter que nous voulions avant tout privilégier une approche qui favorisera le déploiement de l'univers numérique francophone. Nos deux demandes répondent favorablement aux critères de contenu canadien ainsi qu'aux dépenses en émissions canadiennes et elles le font tout en assurant un prix abordable au consommateur, un prix nettement inférieur aux autres requérantes pour des services spécialisés francophones.

26136 La diversité et l'attrait global du service. Voilà des ingrédients essentiels à la réussite, des ingrédients qui jumelés à des applications interactives innovatrices, encourageront la mobilisation des consommateurs envers les nouveaux services numériques.

26137 Dès la première année, nos demandes contiennent des engagements fermes en ce qui a trait à un minimum d'heures de programmations originales canadiennes et ils seront maintenus à chaque année tout au long de la période initiale de licence.

26138 Dans le cas du Réseau Info-Sport, les heures de programmations originales canadiennes se chiffrent à 3 998 heures par année, pour un total de 27 986 heures au cours de la période initiale de licence.

26139 Pour ce qui est du Réseau Grand Air, l'engagement annuel est d'un minimum de 247 heures pour un total de 1 729 heures de programmations originales canadiennes.

26140 Toutefois, s'ajoutera à cela un nombre supplémentaire de 462 heures de programmations canadiennes anglaises qui seront adaptées au marché francophone et qui s'échelonneront sur les sept ans pour en engagement total de 2 191 heures de programmations originales canadiennes.

26141 Nos dépenses en émissions canadiennes ne cesseront d'augmenter dans un souci d'améliorer continuellement la qualité du contenu et aussi d'ajuster nos coûts en fonction de l'inflation.

26142 Somme toute, un engagement envers un nombre important d'heures originales canadiennes jumelées à un investissement envers la qualité assureront en bout de ligne un contenu canadien attrayant pour le téléspectateur et voilà notre but ultime commun.

26143 Nous vous avons soumis tous les détails pertinents quant à nos engagements en terme d'heures de programmations originales canadiennes et ceux-ci sont tout à fait conformes aux détails qui apparaissent à l'annexe 10 des deux demandes.

26144 Alors nous vous remercions pour cette occasion d'apporter les précisions nécessaires à ce sujet, et nous souhaitons que le Conseil jugera qu'on a bien fait nos devoirs.

26145 On vous remercie et on est prêts à répondre à vos question.

26146 LA PRÉSIDENTE: Ça c'est pour le premier semestre.

26147 M. FRAPPIER: Oui, c'est ça.

26148 LA PRÉSIDENTE: Donc on vous reverra en Phase IV.

26149 M. FRAPPIER: En autant que je n'ai pas coulé mon cours.

26150 LA PRÉSIDENTE: Les examens, on ne corrige pas ça si vite que ça.

26151 M. FRAPPIER: D'accord.

26152 LA PRÉSIDENTE: Pas de questions? Non.

26153 Nous vous remercions et nous vous reverrons...

26154 M. FRAPPIER: Madame la Présidente.

26155 LA PRÉSIDENTE: Oh, pardon. Monsieur le Conseil juridique.

26156 M. McCALLLUM: Merci, Madame la Présidente.

26157 Lors de votre présentation, on a essayé de faire un peu de précisions pour Réseau Info-Sport qu'en fin de semaine vous ne diffuserez pas ce qui serait non-disponible sur une autre chaîne.

26158 M. FRAPPIER: Oui.

26159 M. McCALLLUM: On cherchait à mettre un peu de précisions sur ça et je voudrais vérifier si vous avez...

26160 M. FRAPPIER: On s'attendait d'y répondre à la Phase IV, mais on est prêts à y répondre aujourd'hui.

26161 Alors pour nous une précision serait les compétitions sportives qui n'auraient pas suscité d'engagement de diffusion en direct en français de la part de soit la Société Radio-Canada, le Réseau TVA, Quatre-Saisons ou Télé-Québec.

26162 Alors j'espère que ça répond à votre question.

26163 M. McCALLLUM: Merci beaucoup.

26164 M. FRAPPIER: Merci.

26165 LA PRÉSIDENTE: Nous vous remercions, Monsieur Frappier, de votre présentation et nous vous reverrons.

26166 Madame McQueen, vous êtes toujours là.

26167 Mme McQUEEN: Oui -- ou mardi.

26168 LA PRÉSIDENTE: Ah, oui, c'est ça, Monsieur Frappier, mercredi ou mardi dépendant de la rapidité de notre développement. Absolument, ça fait partie des devoirs d'être là à temps.

--- Pause / Pause

26169 THE CHAIRPERSON: Mr. Secretary, please.

26170 Monsieur le Secrétaire, s'il vous plaît.

26171 M. CUSSONS: Merci, Madame la Présidente.

26172 MusiquePlus Inc., Monsieur Marchand.

26173 M. MARCHAND: Merci beaucoup.

26174 THE CHAIRPERSON: We are happy to see you back, Mr. Znaimer. We can check from closer whether you are tired or not.

--- Laughter / Rires

26175 MR. ZNAIMER: I keep coming back.

INTERVENTION / INTERVENTION

26176 M. MARCHAND: Donc, Madame la Présidente, distingués membres du Conseil, Mesdames et Messieurs.

26177 Je suis Pierre Marchand, vice-président directeur général de MusiquePlus et MusiMax. Avec moi aujourd'hui vous trouverez à ma droite, André Bureau, président de notre conseil d'administration et Moses Znaimer, producteur exécutif. A ma gauche, Michel Arpin, notre secrétaire corporatif.

26178 En premier lieu, nous désirons compléter notre réponse à une question que le procureur du Conseil nous a posée lors de notre comparution du 18 août dernier. Dans sa question, Me Stewart faisait état de la grille de tarif variable proposée par notre service.

26179 Cette dernière prévoyant un tarif différent lorsque la pénétration atteignait 45 pour cent, Me Stewart voulait s'assurer en fait que nos projections financières en avaient tenu compte.

26180 A cette question, nous répondons que l'état des revenus et dépenses de notre demande contenait une erreur ou une confusion. Il aurait dû tenir compte de la grille de tarification variable qui accompagnait nos hypothèses de revenus. Afin de compléter le dossier et répondre adéquatement à la question du Conseil, nous vous déposons en annexe 1 des projections financières révisées.

26181 En second lieu, nous vous informons qu'en réponse aux diverses questions soulevées par le Conseil pour la Phase II, vous allez trouver l'annexe 2 qui répond à ces questions.

26182 Donc passons maintenant à l'intervention. Elle se divise en trois parties. En premier lieu, comme titulaire de licence, MusiquePlus entend faire quelques observations sur la demande déposée par le Groupe TVA qui a pour nom EXIT.

26183 Deuxièmement, Perfecto, la Chaîne vous fera part de ses observations relativement à ce même projet EXIT du Groupe TVA. Finalement, nous ferons quelques observations sur divers aspects reliés à l'audience.

26184 Lors de sa comparution, le Groupe TVA a identifié la contribution à la diversité de la programmation comme étant son troisième critère en importance. Nous souscrivons entièrement à ce critère au point où nous l'avons identifié chez nous comme le premier critère d'évaluation que le Conseil devrait retenir. Par ailleurs, comme nous en ferons état, nous croyons que le projet de TVA n'a pas satisfait à ce critère.

26185 Quand nous approchons la programmation proposée par EXIT, nous en faisons une analyse sous deux aspects. Le premier concerne les genres d'émissions alors que le second touche leur approche du Star System québécois.

26186 Abordons en premier lieu leurs genres d'émissions. On y dénote un nombre important de similitudes de programmes avec différentes chaînes de télévision dont particulièrement MusiquePlus et MusiMax. Ainsi, les biographies, les magazines culturels, les profils d'artistes, les entrevues, les événements et les galas représentent la majeure partie de leur grille du volet portraits et célébrités de leur demande, tous des genres d'émissions qui sont, outre le vidéoclips chez nous, la pierre angulaire de nos services MusiquePlus et MusiMax. Ce sont d'ailleurs les émissions qui nous fournissent nos plus fortes cotes d'écoute.

26187 Lorsque nous nous arrêtons aux fournisseurs de ces émissions, nous retrouvons nécessairement les mêmes fournisseurs que ceux de MusiquePlus et de MusiMax avec lesquels nous faisons des ententes annuelles du type "output deal". A tire d'exemple, notons E!, Star, MTV et VH1 qui sont tous des fournisseurs importants d'acquisitions étrangères pour MusiquePlus et MusiMax.

26188 Or, à la lumière de la grille proposée par EXIT, il est clair que ce service s'approvisionnerait aux mêmes sources que nous et qu'il viendra dupliquer notre service en plus de nous faire concurrence pour l'acquisition des droits.

26189 En ce qui regarde l'approche du Star System québécois, EXIT affirme vouloir donner une vitrine aux artistes et au show business. A notre avis, cette vitrine est déjà bien remplie. Aujourd'hui on compte à la télévision généraliste un nombre important de magazines couvrant les arts et les artistes.

26190 Aux fins du dossier, notons par exemple à TQS l'émission quotidienne Flash, l'émission quotidienne Tam Tam à Radio-Canada ainsi que Vie d'artistes. A Télé-Québec on retrouve le magazine Francs Tireurs et encore en quotidienne Les choix de Sophie. Finalement, notons que TVA participe également à cette vitrine avec Tôt ou Tard, une autre quotidienne, et qui annonce pour cet automne une autre émission quotidienne qui s'intitule Jet Set.

26191 Chez nous à l'antenne de nos deux services, nous couvrons l'actualité artistique, particulièrement celle associée à la musique, dans le cadre des émissions Interfax, une quotidienne diffusée donc tous les jours, et Fax, notre émission du week-end.

26192 Nous avons créé ce genre d'émission pour la télévision en 1988 alors que le paysage était complètement vierge. Nous avons été les précurseurs pour ce genre d'émissions et nous continuons de l'être. De plus, nous présentons Box Office, notre magazine qui porte sur le cinéma.

26193 A ces émissions dédiées il faut ajouter les contenus que véhiculent quotidiennement et à forte fréquence nos animateurs qui apportent donc de manière continue une visibilité au showbiz local, national et international.

26194 Ainsi lorsqu'il y a un événement, un groupe ou un artiste de passage, nous les recevons dans notre environnement. A titre d'exemple, aujourd'hui, à l'heure où on se parle, Johnny Halliday, le Elvis des Français, est à Montréal pour trois spectacles. MusiMax le reçoit aujourd'hui et lui consacre non pas une émission d'une heure ou de deux heures mais 24 heures de sa programmation sont dédiées à Johnny Halliday, donc à cet événement-là.

26195 Dans l'appel de demandes ainsi que dans l'avis d'audience publique du Conseil, ce dernier notait l'importance qu'il accordait à la non-concurrence, à la non-duplication et à la diversité de l'offre par rapport aux services existants. Il notait également la nécessité d'offrir aux abonnés de nouvelles formes de programmation et de nouveaux contenus.

26196 De l'avis de MusiquePlus, EXIT à l'égard de son volet associé aux célébrités, aux événements, aux portraits et à la couverture de la vie artistiques, ce qui représente plus de 60 pour cent de sa grille de programmation, n'atteint pas ces objectifs.

26197 Maintenant nous vous présentons les observations de la requérante, Perfecto, la Chaîne.

26198 EXIT propose d'offrir d'autres types d'émissions que celles associées à la vie artistique et au show business. En effet, EXIt propose un service de programmation hybride dont 34 pour cent seraient dédiés à la mode, à la beauté, au style de vie et au design.

26199 Ces volets sont en concurrence directe avec Perfecto, la Chaîne, un service dédié à 100 pour cent à ces thèmes, un complément naturel aux services existants à MusiquePlus et MusiMax réalisés par ceux qui ont l'expertise et la connaissance du marché dans le domaine de la mode, de la beauté, du design et de l'architecture. D'ailleurs l'abondance de soutien des intervenants de l'industrie démontre à quel point la crédibilité chez nous est reconnue dans le milieu.

26200 Nous sommes d'avis que ces thèmes sont de plus en plus omniprésents dans la vie des consommateurs. Ils suscitent leur intérêt dans leurs modes de vie. Avec le virage au numérique, la télévision doit être en mesure de répondre à ce besoin sur une base continue.

26201 C'est pourquoi nous croyons qu'il est important d'attribuer une licence à un service spécialisé spécifiquement dédié aux thèmes de la mode, de la beauté, du design et de l'architecture plutôt qu'à un service hybride dont une partie importante du service est concurrentielle avec les services existants.

26202 J'aimerais passer la parole à Michel qui va nous parler du réalisme du plan d'affaires du Groupe TVA.

26203 M. ARPIN: Merci, Pierre.

26204 Nous nous questionnons à savoir jusqu'à quel point le plan d'affaires de EXIT est réaliste. Les revenus anticipés de EXIT reposent essentiellement sur deux prémisses. La première une forte progression de l'univers numérique, et la seconde, sur d'imposants revenus publicitaires.

26205 Nous croyons que l'effet combiné d'une surévaluation des revenus comporte des conséquences importantes pour la réalisation des engagements en matière de programmation canadienne.

26206 Premièrement, notre inquiétude vient du fait que dans le rapport intitulé Interactive Broadband Technology Overview, produit au dossier public de l'audience, CableLabs anticipe à 3,6 millions le nombre de foyers canadiens qui utiliseront un set-top box à la fin de l'année 2004.

26207 Étant donné que le Québec représente environ 23 pour cent de la distribution canadienne, c'est 828 000 décodeurs numériques qui seraient en activité au Québec. Or, EXIT prévoit qu'à la même période le nombre de foyers francophones utilisant un décodeur numérique sera de l'ordre de 1 006 000, un écart de 178 000 décodeurs.

26208 Ce scénario fort agressif de EXIT représente un excédent de revenu d'au moins 1 millions de dollars pour cette seule année. Si on extrapole cet excédent sur toute la durée de la licence, cette somme s'accroît de manière exponentielle et pourrait mettre ne péril plus de dix millions de dollars en redevances d'abonnement.

26209 La seconde prémisse est intimement liée à la première. Elle permet à EXIT d'établir des revenus publicitaires. En effet, EXIT anticipe des revenus publicitaires dès la première année de l'ordre de 717 000 $ avec une part d'écoute de l'ordre de 0,2 pour cent.

26210 Selon les hypothèses financières de EXIT, c'est plus de 14,5 millions de dollars en revenus publicitaires qui seront réalisés au terme de la première licence. Or, dans le marché francophone avec le numérique, nous serons dans un univers de petit nombre. C'est pourquoi nous n'avons anticipé que 2,9 millions de dollars de revenus publicitaires au cours de la même période de licence.

26211 Nous croyons au réalisme de nos projections, et nous ne doutons pas que Groupe TVA croit aux leurs. Si nous prenons la différence entre nos projections et celles de EXIT c'est 28 millions de dollars d'écart. Si notre scénario est trop conservateur et le leur trop agressif et que la réalité est à mi-chemin, c'est 14 millions de dollars qui manquent à EXIT. Notre principale interrogation face à ces projections nous porte à croire que les dépenses alloués à la programmation et plus particulièrement à la production d'émissions canadiennes sont à risques.

26212 Si la réalité était meilleure que notre projections pour Perfecto, la Chaîne, cela signifie conséquence de la formule de ré-investissement mise au point par le Conseil, plus de dollars investis en programmation canadienne, donc moins de risques.

26213 C'est pourquoi nous incitons le Conseil à beaucoup de prudence dans son évaluation du projet EXIT.

26214 Nous désirons compléter notre intervention en commentant trois aspects reliés à l'audience.

26215 Premièrement, nous souscrivons entièrement à l'opinion de nombreux intervenants, tels TVA, TQS, Chaînes Télé Astral, TV5, RDS et leurs associations respectives qui s'opposent dans une rare unanimité au projet d'importation rapide de services étrangers de langue française.

26216 Nous ne nous opposons pas à ce que des services étrangers soient offerts à la population canadienne. Ce à quoi nous nous opposons c'est que de nouveaux services étrangers de langue française bénéficient d'une flexibilité pour laquelle les services étrangers de langue anglaise n'ont pas bénéficié et que de ce fait toute la politique canadienne en soit modifiée.

26217 Ce que nous vous demandons c'est de maintenir la présente politique établie par le Conseil. Nous considérons qu'elle est essentielle pour assurer que le marché de la radiodiffusion canadienne va demeurer un marché autonome et distinct.

26218 Deuxièmement, nous recommandons au Conseil d'être vigilant dans l'attribution de nouvelles licences de Catégorie 2 de langue française de sorte que les services autorisés soient à tous égards complémentaires, non-concurrentiels et novateurs.

26219 Si toutes ces qualités sont rencontrées, la nouvelle offre télévisuelle numérique sera promise au succès auprès des consommateurs.

26220 Troisièmement, nous croyons que le Conseil a devant lui suffisamment de nouveaux projets de services canadiens de langue française pour lui permettre d'autoriser un minimum de cinq nouveaux services de Catégorie 1. Parmi les projets qui vous ont été soumis, nous notons complémentarité, attrait et diversité pour constituer la base de la première offre entièrement numérique.

26221 Il est important d'éviter le chevauchement des contenus et la duplication avec les services existants.

26222 Madame la Présidente, ceci termine notre intervention. Nous sommes à votre disposition pour répondre à vos questions.

26223 Merci.

26224 LA PRÉSIDENTE: Nous ne semblons pas avoir de questions. Alors nous vous remercions pour votre présentation et nous vous reverrons à la Phase IV.

26225 Messieurs les Conseillers juridiques, vous n'avez pas de questions?

26226 Me STEWART: Pas de questions, Madame.

26227 LA PRÉSIDENTE: Alors merci. Et Monsieur Znaimer, reposez vous bien ce midi.

--- Rires / Laughter

26228 THE CHAIRPERSON: Mr. Secretary, please.

26229 MR. CUSSONS: Thank you, Madam Chair.

26230 We will now hear from Stornoway Communications Limited Partnership.

INTERVENTION / INTERVENTION

26231 MS FUSCA: Good morning.

26232 You may recall that I am Martha Fusca, President and Chief Executive Officer for Stornoway Communications. To my right is Bill Gray, our Executive Vice-President and General Manager for our four channels, and very near and dear to me and very close to my heart, as you can tell, is Michel Carter, Vice-President and General Manager for Cogeco Radio-Television, our partners.

26233 Stornoway has applied for four Category 1 licences, The Issues Channel, The Pet Network, @work.ca and The Dance Channel. Only one of these channels faces a direct competitor amongst Category 1 applicants, that's @work.ca.

26234 We believe that our written application for @work.ca and the record of this proceeding establishes that our application, when measured against virtually every criteria, is preferable to the alternative application.

26235 We will, therefore, not spend any time repeating a competitive analysis for you at this time.

26236 We also recognize that our Category 1 applications are competing in a much broader sense with all the other Category 1 applications.

26237 We have great respect for many of the applications filed by the other applicants to this proceeding, but we feel very strongly that Stornoway's channels will make the greatest overall contribution to the Canadian broadcast system.

26238 We would like to address a couple of specifics that have been written to us. WIC's concerns, for example, with regard to movies. Firstly, we believe that viewers who are movie fans and really want to watch movies certainly would not turn to any of our channels to be watching films.

26239 We would also like to direct their attention to the fact that both on The Pet Network and The Dance Channel we have taken the initiative of nurturing and boosting feature film production in Canada. I have clearly stated that we would actually broadcast these films that we, in fact, are initiating the development and production of in the fourth window after pay. So we believe that that's a boost to them.

26240 We have a couple of other points with regard to the licensing of a documentary channel. This is not directed at any specific applicant, but rather in general terms.

26241 In our earlier interventions that are on record, we recommended the Commission not license a documentary channel and we would like to reiterate at least two of our concerns in this regard.

26242 We cannot conceive of a documentary that would actually not fit into a current broadcast licence, one that is to be licensed in Category 1 or, in fact, any of the Category 2 licences.

26243 I have sat down and I have thought about this long and hard and, frankly, I can't come up with one single thought where it wouldn't fit in some other channel.

26244 Secondarily, and just as importantly, is the fragmentation of the market for documentary film production. We already know that the CTF is oversubscribed and that, indeed, producers have broadcast commitments in hand. What they don't have is the money. So I think a general documentary channel would just fragment that market.

26245 Frankly, I don't believe that it actually adds anything to the Canadian broadcasting system.

26246 Last, but certainly not least, I would like to take this opportunity to say to you that it may appear naive to say that I cannot reason why many applicants would choose to shut out new voices, new entrants, new players who would clearly strengthen the broadcast system and would also clearly enrich the social, the cultural, the political and indeed the economic fabric of this country, despite the suggestion that new entrants would fail to deliver to you and the Canadian public.

26247 It's interesting to note how much time nearly all of the established applicants have spent trying to impress you with this type of fear mongering. I believe that they are genuinely threatened by new entrants, new voices, specifically because they know all too well that we can deliver, that we have solid business plans, that we have the financial wherewithal to launch and deliver unique, high quality, affordable and desirable channels. They will add diversity to the broadcasting system, using high levels of independent production and marry to leading-edge interactive strategies.

26248 I would like to add simply this, that I have thought about nesting a whole lot lately and it feels a little more like feather bedding and certainly the Commission would not want to put all of its eggs in one basket.

26249 The other thing is that they have obviously been incredibly disrespectful and not looked at the quality of our team, the experience of our team, of our board, of our advisory and our consultative committee because I don't believe that they would dared suggest that we couldn't deliver.

26250 As requested, we will file today by the end of the day the number of original hours that will be produced by our four channels. We, in fact, have it. What we failed to put on each of the sheets was where you can find it in the application, so I beg your pardon that it is not ready for you.

26251 In closing, with respect to other potentially competitive applications, we would like to refer you to our written intervention on record.

26252 Thank you very much.

26253 THE CHAIRPERSON: Thank you, Ms Fusca.

26254 We will see you at Phase IV polishing your eggs further.

26255 MS FUSCA: You can count on it.

26256 THE CHAIRPERSON: We will hear one more before we break for lunch.

--- Pause / Pause

26257 THE CHAIRPERSON: Mr. Temple, you look like you need a specially assigned advocate. Usually when someone is by himself the court assigns a legal aid advocate to make sure that you are protected.

26258 MR. TEMPLE: I will do my best on my own.

26259 THE CHAIRPERSON: We wish you luck.

--- Laughter / Rires

26260 MR. TEMPLE: Come on up, Bob.

26261 THE CHAIRPERSON: I don't know if Mr. Buchan would do legal aid here. Maybe pro bono. That sounds better. Go ahead.

26262 MR. CUSSONS: Madam Chair, our next applicant is the Pelmorex Leisure Network Inc. Mr. Temple.

INTERVENTION / INTERVENTION

26263 MR. TEMPLE: Good morning or good afternoon. Madam Chair, Madam Chairperson, members of the Commission, my name is Paul Temple and I am the Vice-President, Corporate Development for the Pelmorex Leisure Network Inc.

26264 We appreciate this opportunity to appear before the Commission to comment on those applications that we believe to be directly competitive to our Category 1 application for a travel and leisure service to be called L-NET. I promise to be brief, since I suspect I am the only thing between us and lunch, but I wish to raise three points.

26265 THE CHAIRPERSON: Don't hatch your eggs here.

26266 MR. TEMPLE: First, Pelmorex has already filed with the Commission a letter dated July 7, 2000 in which we oppose the licensing of similar services proposed by BCE Media, Global TV, Learning and Skills Television of Alberta, Métromédia/Cogeco and Corus as being directly competitive to our L-NET service. I wish to reaffirm our opposition to these competitive applications.

26267 Second, Pelmorex wishes to clarify its position with regard to CTV's application for its Exploration Network. While we do not believe it to be "directly competitive" in the narrow sense as is the case with the other five applications mentioned previously, there is a significant amount of overlap in programming content between the two services. Consequently, our preference is that the Commission not approve the CTV application.

26268 However, if the Commission does so, we do not believe it would preclude the Commission from also licensing L-NET. In this case, we would encourage the Commission to establish clear boundaries as to the definition of the nature of CTV's service, as well as specific limitations as to the programming categories from which it may draw. These boundaries and limitations should also pertain to the interactive content that might be provided on CTV's Exploration Network.

26269 In fact, this latter point is, we believe, appropriate to all successful applicants. Any interactive content provided by a successful applicant must be consistent with its approved nature of service definition and, therefore, it's interactive content must also be limited to the programming categories approved in its license. Otherwise, quite frankly, we run the risk of services providing interactive content well beyond the approved nature of service definition for which they were licensed.

26270 Finally, we wish to draw the Commission's attention to an imbalance in the comparison between L-NET's commitment to Canadian programming and those of our competitors.

26271 This hearing to license interactive digital services is breaking new ground and raises issues never before contemplated by any of the parties. It is not surprising, then, that a number of anomalies may arise.

26272 In the case of L-NET, we are concerned that the calculation of Canadian programming expenditures as a percentage of revenue may inadvertently be unfairly advantaging certain of our competitors. Specifically, the calculation of L-NET's revenue over the seven year licence period includes revenues from interactive advertising. As best we can tell, this is not the case for applications competitive to L-NET. This has the effect of overstating our competitors' commitments to Canadian programming as a percentage of revenue, or, in the alternative, understating L-NET's commitment.

26273 We also wish to point out that costs related directly to the creation of interactive content for viewing on the TV by means of an interactive set-top box are excluded from the programming costs identified in our application as Canadian programming costs. We are concerned that a number of our competitors identify no costs related to creating interactive content, notwithstanding their applications which discuss interactivity at great length. Our concern is that these costs are buried in their conventional Canadian programming costs, thereby overstating their commitments to Canadian programming, or, in the alternative, understating L-NET's commitment.

26274 By way of example, we point to the complete lack of identifiable costs associated with interactive content in the BCE application.

26275 We encourage the Commission to be particularly diligent in its analysis and evaluation of these competitive applications to ensure an apples-to-apples comparison. To put this issue into perspective, L-NET's commitment to Canadian programming as a percentage of revenue can vary between 36 per cent and 46 per cent, depending on the methodology used.

26276 I wish to thank the Commission again for the opportunity to present these concerns, and would be pleased to answer your questions.

26277 THE CHAIRPERSON: Counsel...?

26278 MR. McCALLUM: No, thank you, Madam Chair.

26279 THE CHAIRPERSON: Thank you, Mr. Temple. I think you did quite well. Mr. Buchan can go for lunch.

26280 MR. TEMPLE: As long as he is buying.

--- Laughter / Rires

26281 THE CHAIRPERSON: That is a new twist on court procedure.

26282 We will adjourn now for lunch. We will be back at 1:30.

26283 Nous reprendrons à une heure et demie. Un moment. Monsieur le Secrétaire a quelque chose à annoncer et aussi je veux vous rappeler qu'il est fort possible que nous commencions la Phase III aujourd'hui.

26284 I want to remind parties that it is quite possible that we will complete Phase II and start with Phase III today.

26285 Mr. Secretary has something to announce.

26286 MR. CUSSONS: Thank you, Madam Chair. I would just like to announce that Mr. Thiessen, the next applicant, New Day Ministries, has advised us that he will not be here in person. He does not wish to participate in Phase II. However, he will of course be responding to the panel's homework questions. This means that after the lunch break we will be starting with Global Television Network.

26287 Thank you very much.

--- Upon recessing at 1222 / Suspension à 1222

--- Upon resuming at 1330 / Reprise à 1330

26288 THE CHAIRPERSON: Bonjour, tout le monde. Welcome back.

26289 Mr. Secretary, please.

26290 MR. CUSSONS: Madam Chair, our next applicant to present an intervention is Global Television Network Inc., OBCI.

26291 Mr. O'Farrell...

INTERVENTION / INTERVENTION

26292 MR. O'FARRELL: Thank you. Good afternoon, Madam Chair, Madame la Présidente, Members of the Commission and staff. My name is Glenn O'Farrell and I am Senior Vice-President of Specialty Services and New Media for Global. With me today are people we introduced to you last week: Charlotte Bell, Catherine Thompson and Patricia Douey.

26293 We are very pleased to appear before you today in Phase II of this proceeding to share our views concerning the many proposals you have heard over the past two weeks. We have intentionally chosen to be brief and succinct with a view to providing useful information to assist you in making the best choice for launching and licensing new Canadian digital services.

26294 Our comments to you today will focus on the broad and competitive field of Category 1 applications, and we then will specifically address the following seven applications, which we have spoken to in our written intervention as well. They are, of course, VitalTV, Digital 1, Your Money, Canadian Travel and DesigNation, and then in the entertainment-based category, Violent and 13th Street.

26295 Before getting to that, however, we would like to submit the following broad comments.

26296 The Canadian broadcasting system currently provides a wide variety of domestic and foreign analog programming choices that inform, entertain and, by extension, make Canadian consumers discerning and sophisticated television viewers.

26297 The licensing and launching of new Canadian digital programming services must, therefore, measure up to and perform in a very competitive and demanding environment.

26298 The range of Category 1 applications that you have heard covers a broad and extensive canvass of programming genres and formats. And while this varied universe of players and programming makes your regulatory decision-making task unenviable, it also demonstrates the genius, innovation and creativity of Canadian entrepreneurs.

26299 The self-evident truth of the matter is that the proposals you choose to license must add value to the choice consumers already enjoy.

26300 In Phase I of this proceeding we offered you our views on licensing criteria priorities based on the parameters stated in the Call for Applications. Having heard the various applicants make their presentations in Phase I and answer your questions, we would suggest that you also give consideration to the following.

26301 First, where more than one application is competing for a programming genre, for instance in the health service category, the Commission should endeavour to assess the strength of the various proposals from a consumer value perspective. The same would be true for an entertainment-based proposal such as Violet or 13th Street, of course. But our point here is that consumer value must be a central consideration to your decisions.

26302 Secondly, we also suggest that you pay particular attention to the marketing and promotion plans submitted by the various applicants. Consumers will only appreciate the value of new services if they are sensitized to the new digital programming choices by innovative and sustaining marketing and promotion campaigns.

26303 Thirdly, and finally, programming value and strong marketing resources and the ability to leverage in the challenging new environment is a key component, we believe. This should also be factored into your decision-making process.

26304 We respectfully submit that you will find each of our applications to measure favourably against all of these considerations.

26305 Charlotte...

26306 MS BELL: Thank you.

26307 Commissioners, you have also asked us to consider which proposals in this proceeding are competitive with our own. We have done our homework, and, by the way, we love bonus points. The answer is simple: They all are.

26308 In an environment where 10, 12 or 15 services -- we hope -- might be chosen from a possible 88 proposals in some 20 different categories, we consider, first and foremost, that all of the proposals before you are competitive. But in response to your question, we consider the following applications to be directly competitive with ours.

26309 In the health genre, we consider that CTV's Discovery Health Channel, Alliance Atlantis' Health Network Canada and Levfam's Wellness Network are competitive with our proposal for VitalTV.

26310 In the technology category, we consider that CTV's Digital Network, LSTA's Computer Access and Roger's ZDTV are competitive with our proposal for Digital 1.

26311 In the category of romance and relationships, we consider CHUM's Relationship Television as well as WTN's Romance and Relationships to be competitive with our proposal for Violet.

26312 In the travel category, we consider that BCE's Travel TV, Corus' Discovery Travel and Adventure, LSTA's Travel Access - the Destination Channel, Pelmorex's The Leisure L-NET, and Métromédia and Cogeco's T&L Network are competitive with our proposal for Canadian Travel Channel.

26313 In the mystery and suspense genre, we consider CTV's Shadow TV and CHUM's Suspense Channel to be competitive with our proposal for 13th Street.

26314 Finally, we do not consider DesigNation or Your Money to be directly competitive with any Category 1 proposal before you.

26315 As we all know, while the promise of digital technology will bring greater choice and quality to subscribers, the services you choose to license will face uncertainty and risk, especially in the first term of licence.

26316 Since only Category 1 services will have guaranteed access to digital carriage, we maintain that the most important criterion of all is that they be attractive in order to provide an incentive for consumers to buy them.

26317 While a number of applicants have filed very innovative proposals as a result of your call, innovation just isn't enough. And while some of these proposals might add some degree of diversity to the system, they will not have the muscle to help drive digital penetration to make this transition a success.

26318 While we recognize the importance of diversity as a criterion and as one of the underpinnings of the Broadcasting Act, we believe that diversity alone cannot be considered in isolation of other criteria. To do so, we feel, would undermine the Commission's stated objective of licensing new services in order to speed up the transition to digital distribution.

26319 In our view, the key questions at the heart of this hearing are whether a proposed service will provide enough of an incentive for consumers to switch to digital technology, and stay there, and whether the service will make a significant contribution to Canadian programming.

26320 We have already filed a written intervention in this proceeding and we would like to add the following specific comments which summarize our views on the applications that are competitive with our own Category 1 applications.

26321 Catherine...

26322 MS THOMPSON: In the case of 13th Street, we consider the projections put forward by CTV and CHUM to be highly optimistic, given that their advertising and subscriber revenues might very well be much lower than forecast. These lower revenues could prevent the services from achieving their proposed levels of spending and exhibition of quality Canadian programming.

26323 In the case of VitalTV, while three other proposals have been filed in this category, VitalTV will make the greatest contribution to Canadian programming and will work closely with its partner, medbroadcast.com, to ensure that VitalTV's programming offers an innovative and accurate analysis of Canadian health care issues. We consider that having a Canadian web partner in this important category is of vital importance to ensure accuracy and relevance of the information provided to Canadian consumers.

26324 While we do not consider the DesigNation proposal to be directly competitive with other Category 1 proposals, none of the applications that include a design component will make a unique contribution to the development of our cultural identity -- only DesigNation will.

26325 Digital 1 makes the strongest commitment to Canadian content exhibition. A minimum of 77 per cent of the programming content broadcast throughout the day on Digital 1 will be Canadian, exceeding CTV's commitment, LSTA's commitment and the ZDTV proposal.

26326 Of the three romance and relationship proposals filed, Violet makes the strongest commitment to Canadian content exhibition by far, exceeding our competitor's commitments in year one by 25 per cent in the case of CHUM, and virtually doubling WTN's commitment.

26327 Our proposal for a Canadian travel channel will commission more new Canadian original programming than any of our competitors in this category. Furthermore, our proposal is the only one offering a unique Canadian perspective in this genre -- something we feel directly speaks to the cultural objectives of the Broadcasting Act.

26328 We submit that in comparison to others, each of our proposals meets and exceeds your tests. We have the resources, the management and the expertise to make this transition a success -- today, tomorrow and beyond.

26329 MS BELL: We would also like to read into the record our response to your questions from Phase I, if you will allow me.

26330 In the case of 13th Street, we confirm that not more than 10 per cent of the schedule will be devoted to programming in subcategory 7(b), which is ongoing comedy series.

26331 In the case of providing descriptive video for VitalTV, the Commission knows that the landscape is changing. Technology is evolving and the costs are somewhat decreasing. We remain, therefore, committed to playing an active role in making as much of our program schedule accessible to the visually impaired over the course of the first licence term.

26332 We further undertake to report on our progress throughout the licence term to you.

26333 In the case of DesigNation, in addition to the other commitments we made last week, we confirm that no more than 15 per cent of our programming will be devoted to each of the following types of programming, respectively: Fashion; interior design; and landscape design.

26334 Finally, we further confirm our commitments to original programming hours, in Year 1, for each of our proposals -- and these amounts are minimum levels. DesigNation: 829 hours. Canadian Travel Channel: 703.5 hours. 13th Street: 80 hours. Violet: 306 hours. VitalTV: 884 hours. Digital 1: 1,339 hours. Your Money: 811 hours.

26335 This concludes our intervention, and we are prepared to answer your questions.

26336 THE CHAIRPERSON: Thank you, Mr. O'Farrell and Ms Bell, but to get bonus points, you have to answer all sections of the question -- and, in original programming, it was to provide, each year, for each Category 1, the number of hours of original per year.

26337 I suppose, here, you have only one, one can say, growing by X number of decreasing or -- but we would have to get that part of the answers.

26338 We only have for Year 1, do we?

26339 MR. O'FARRELL: That's correct, what you have is for Year 1, and we can extrapolate that over a seven-year licence term.

26340 However, just to reiterate, these, we see as minimums going into Year 1 --

26341 THE CHAIRPERSON: Each year, then, would be --

26342 MR. O'FARRELL: Correct.

26343 THE CHAIRPERSON:  -- with a hope of increasing?

26344 MR. O'FARRELL: Exactly.

26345 THE CHAIRPERSON: And the second part that you responded to, at this stage -- which are competitive -- the question is slightly different; it is: If the Commission licensed any one of your Category 1 proposals, what Category 1 proposal of any other applicant, if licensed, would jeopardize the feasibility of the business plan for your licensed Category 1 service?

26346 So the question of competitiveness, it's quite possible that the Commission would not arrive at the same conclusion as an applicant.

26347 What we want to know is which licence we would grant you, along with another licence that you wouldn't be prepared to put into operation because it would no longer be viable, or feasible?

26348 So you will have to come at Phase IV and complete the answer.

26349 MR. O'FARRELL: We can --

26350 THE CHAIRPERSON: Unless you want to make it --

26351 MR. O'FARRELL: Well, I think our understanding of the question -- and thank you for clarifying it -- our understanding of the question and the way we have responded is to indicate to you where we believe in the various categories there are competing applications and where only one of the competing applicants should be awarded a licence.

26352 THE CHAIRPERSON: It may be that -- those questions, apparently, will be put on the Web, if they are not, but I will reread them before Phase IV, but it may well be that your position is "The answer is identical".

26353 MR. O'FARRELL: We will look forward to --

26354 THE CHAIRPERSON: Because there is a difference, presumably, between the two. There have been -- and that's for the benefit of everyone -- there have been discussions as to what is competitive and what is not; it's not to say that the Commission may necessarily agree with the various -- in some circumstances, parties may say, "No, we are not competitive with your service", and so, what we would like to know is: Is one service that you put forward feasible? Would you implement it if you were granted a licence and another service were also granted a licence? It may be that it will be the same answer, it may not be, but I think there is a difference between the two. Because parties are not necessarily ad idem about whether services are competitive with each other and we may not either.

26355 MR. O'FARRELL: As we understand the question, with the clarification, and as we understand the other applications that we have identified to be competitive with our applications, I believe our answer would be the same, but we will look forward to --

26356 THE CHAIRPERSON: Yes.

26357 MR. O'FARRELL:  -- to the Web and exactly how it's worded and provide you with --

26358 THE CHAIRPERSON: We just want to make sure you come back at Phase IV --

26359 MR. O'FARRELL: Well, we will be here.

26360 THE CHAIRPERSON:  -- to complete your nest.

26361 Counsel...?

26362 MR. McCALLUM: You probably were in the room when I asked TVA some questions about 13^e Rue, and you may have heard their answers, I assume.

26363 MR. O'FARRELL: I heard some of the exchange.

26364 MR. McCALLUM: I guess the question was: In the presentation, in Phase I, for 13^e Rue, they said that it wasn't dependent on the licence being granted to 13th Street and they would implement any way, and so I asked what the impact of getting the one licence, the one for 13^e Rue, would be on Canadian programming commitments, and I think what they said was that it would be firm but the way they would do it is perhaps different than what was proposed in the application.

26365 Do you have anything to add to what they had answered?

26366 MR. O'FARRELL: No; I think that's fine. And that answer is accurate, as far as we are concerned.

26367 MR. McCALLUM: Would Global, then, be out of that -- out of that partnership or out of that situation if only 13^e Rue were licensed?

26368 MR. O'FARRELL: No; our partnership with TVA is a partnership which covers both the French-language and the English-language application. So, in the event that you were to approve one or the other, the partnership that we have described for you, in the application, would be intact.

26369 MR. McCALLUM: So, what does it mean when they said that the Global contribution to 13^e Rue would be reduced? What does that mean?

26370 MR. O'FARRELL: I think to clarify that point, the contribution to 13^e Rue was not Global's contribution as much as it was 13th Street's contribution to 13^e Rue.

26371 In the eventuality that you were to licence both 13th Street and 13^e Rue, we agreed to put $1.4 million between the two services to the fund that you discussed with them.

26372 In the event that 13th Street were not licensed, that $1 million contribution from 13th Street would not be available to 13^e Rue; it's not Global's as much as it's really the service 13th Street's.

26373 MR. McCALLUM: Thank you.

26374 What about the other way around? What if 13th Street were licensed and not 13^e Rue? What would be the impact?

26375 MR. O'FARRELL: There would be no impact on our commitments, in any manner of speaking whatsoever -- with the single exception that the $400,000 contribution coming from 13^e Rue to 13th Street would not be available for that fund. But the million dollars would still be there.

26376 MR. McCALLUM: And all the commitments are to remain firm, in those circumstances?

26377 MR. O'FARRELL: Absolutely so.

26378 MR. McCALLUM: Thank you.

26379 MR. O'FARRELL: Thank you.

26380 MR. McCALLUM: Thank you, Madam Chair.

26381 THE CHAIRPERSON: Thank you very much, and we will see you at Phase IV, with the rest of your exam.

--- Laughter / Rires

26382 MADAME LA PRÉSIDENTE: Monsieur le Secrétaire, s'il vous plaît.

26383 Mr. Secretary, please.

26384 MR. CUSSONS: Thank you, Madam Chair.

26385 We will now hear the intervention by Astral Television Network Incorporated, with Global Television Network Incorporated Limited Partnership, on behalf of a company to be incorporated.

INTERVENTION / INTERVENTION

26386 M. BUREAU: Bon après-midi, Madame la Présidente, Members of the Commission.

26387 My name is still André Bureau.

--- Laughter / Rires

26388 MR. BUREAU: I am President of Astral Broadcasting Group.

26389 With me, today, are Lisa de Wilde, the President of Astral Television Networks; Alicia Ortiz, Vice-President, Strategic Planning, Astral Television Networks, and, to my right, Stephen Zolf, our legal counsel, of Heenan Blaikie.

26390 We appear in two capacities, today.

26391 First, in the context of our Cinefest application, we will comment on other applications for independent film services, in that capacity.

26392 Second, with our hat on as an existing pay TV service, we will comment on a number of applications that raise the issue of the Commission's criteria for "directly competitive".

26393 Lisa...?

26394 MS de WILDE: What is an independent film?

26395 This hearing has illustrated that it is pretty near impossible to come up with one single definition. Applicants and intervenors have all offered various definitions, most of which focus on the role played by the eight major Hollywood studies, with respect to the creation of feature films and their exhibition, theatrically, in North America. The proposed definitions focus on what an independent film is not, defining it as "one neither financed nor developed by any of the majors".

26396 The problem is how to assess whether a given film is or is not financed or developed by a studio. It will be difficult to achieve a definitive view, given the complex realities of film financing.

26397 It goes without saying that Cinefest would not have any films originally released by a major "studio". But, in our view, this does not go far enough. In our view, there is a far easier way to ensure that an independent film channel will indeed stay "true to its roots" and add something new. We have offered the Commission a simple an easily enforceable test, one that is has already adopted in the CBC licence renewal and in our recent Moviepix licence renewal. It is The Top 100 Variety List.

26398 By precluding an independent film channel from airing any top 100 titles, the Commission can rest assured that films already largely exposed within the system will not be "repurposed" by a new service.

26399 Yet, in spite of what is a clear and simple test, three of the other applicants are seeking various exceptions. CHUM and Salter want "flexibility" to program their schedules with films from the major Hollywood studios, as much as 10 per cent in the case of CHUM. Alliance is seeking to program up to 10 titles each year from the Variety Top 100 List.

26400 This purported need for flexibility is not warranted. Under closer examination, if the Commission adopts our proposed Variety List condition, an independent film channel will still have complete free reign to program Fellini or Truffaut retrospectives, as well as films such as "Roger and Me".

26401 The 10 per cent flexibility sought by CHUM would though, in reality, allow its independent film channel to replicate the schedules of existing Canadian services, particularly if these titles were programmed in prime time. In fact, under the proposed flexibility sought by these applicants, an independent film service could steer the "Titanic" into the heart of prime time, or it could off "Austin Powers", a film that, while not "technically" a studio picture, was the fourth-highest grossing film in Norther America in 1998. Neither of these films would be appropriate for an independent film channel.

26402 Even films such as "Blair Witch Project" or "Life is Beautiful", which are on the top 100 list, are not crucial to the success of an independent film service. These films don't need us since they will have more than extensive exposure already through existing Canadian television outlets.

26403 In summary, an independent film channel would not need access to the films on the Variety Top 100 List or any other studio title in order to offer an attractive and successful service.

26404 The Commission should not accept a compromise on its key objective of achieving diversity. If you clearly define the independent film niche, the result will indeed be the "best films you've never seen", to borrow Alliance's phrase.

26405 This is no better illustrated than by looking at this year's programs for the Montreal and Toronto Film Festivals. Excluding the small number of films that might end up on the top 100 list, as well the limited overlap between the two festivals, there would still be more than 400 film titles that could easily satisfy the annual needs of an independent film channel.

26406 Alliance has argued that only its application can be licensed, in view of its "nested" relationship with Showcase. Alliance itself conceded in response to Commission questioning that this argument is self-serving.

26407 While Showcase's schedule includes some independent movies, it does not follow that films are its "core mandate". We concur with the comments made by CHUM, Salter and Craig that Showcase's core mandate is broad enough to allow for the licensing of an independent film channel to someone other than Alliance.

26408 Under Alliance's interpretation of "nesting", applications in a number of different genres in this proceeding, including health, travel, exploration, nature, careers, relationships and parenting, would all be unlicensable as "directly competitive" services, simply by virtue of the licensing of the Life Network.

26409 In our submission, the Craig, Salter and Alliance applications squarely raise the issue of producer-broadcaster integration.

26410 The Alliance application, in particular, raises significant self-dealing issues. Not only is Alliance Canada's major production studio, but it is also the dominant film distributor. Last year, they supplied more than 80 per cent of the theatrically released "non-studio" feature films in Canada. Now it is seeking another outlet for its vast library of Canadian and foreign feature film titles.

26411 We have three concerns: The first relates to the issue of equitable access by unrelated independent producers to the original production budgets of a film channel that is highly integrated with Canada's largest production studio.

26412 The second concern relates to the issue of equitable access by unrelated Canadian distributors wishing to sell their titles to a film channel whose parent company already controls, through its distribution company, the largest library of film titles in Canada.

26413 The third concern is the potential impact of an Alliance film service on our existing services, given its role as a key supplier for pay television. If Alliance's application was licensed on its own proposed terms, the question of access by our services to titles in its library becomes problematic.

26414 In fact, we have no long-term assurance of a window on any titles that they supply. By giving an already dominant film producer/distributor a full time film channel, the threat of undue preference becomes unavoidable and there is no rule, prohibition or commitment from a broadcasting licensee that can obviate this risk, since all film distributors fall outside of the Commission's scrutiny.

26415 MR. BUREAU: During its oral presentation, Alliance reiterated its commitment that, quote, "if licensed...it will spend $140 million in cash, over the licence term, on the financing of new Canadian films and documentaries".

26416 While a commitment to spend money on new Canadian programming should never be dismissed out of hand, we fail to understand how this commitment relates to Alliance's proposed film service.

26417 With all due respect, there simply has to be a little "voodoo economics" going on here. This $140 million dwarfs the scale of Alliance's own film service whose total revenues over seven years only amount to $68 million, and which projects losses of $1.2 million over its first licence term.

26418 What is the business case for spending an additional or incremental $140 million on a service which will generate no profits in its first seven years? We cannot believe that Alliance, a publicly-trade company, would even try to convince its shareholders to spend $140 million on a service that doesn't even project a profit.

26419 The answer instead must be that this expenditure is going to be made anyway, by the parent company as part of its distribution and production slate, even if another applicant is licensed in the independent film niche.

26420 Mr. MacMillan has acknowledged that the $140 million would be comprised of, quote, "equity investments and/or distribution advances to movies". This mean, of course, that the "audited list" that they have undertaken to provide would simply be a list of Alliance's ongoing expenditures in the ordinary course as Canada's biggest film production and distribution studio. For example, their fiscal 2000 annual report shows, quote, "investing cash flows in film and television program" of over $620 million, and their balance sheet shows that they carry $229 million in investments in motion pictures alone.

26421 No audit list can reveal whether these commitments will indeed be incremental. The list will only tell you that expenditures have been made, not whether they would not have been made, because there is no baseline for a comparison.

26422 Therefore, the Commission should rest easy in the knowledge that these expenditures will be made regardless of its licensing decision.

26423 MS de WILDE: Turning now to commitments to Canadian programming.

26424 CHUM has offered you a rationale for its low Canadian on-air exhibition levels, noting that the inventory of Canadian films is extremely low. But let's be clear, CHUM is trying to avoid the minimum obligations that were set for all applicants in this process. We addressed this issue in more detail in our written intervention.

26425 With respect to expenditure commitments, we submit that the Commission should look specifically at the percentage of revenues going to Canadian programming spending. All applicants proposed levels lower than Cinefest's 45 per cent of previous year's revenues.

26426 In the case of Alliance, their commitment is only 30 per cent. They have chosen instead to leverage their vision on the rosiest picture of both the digital roll-out and penetration of digital services. If, however, Alliance's overly optimistic view of the future does not pan out, their dollars for Canadian programming fall from $19 million to $13 million. Under this more realistic mid-point scenario, the only way that Alliance could meet its projected Cancon spending would be to increase its wholesale fee from $0.30 to over $0.50.

26427 There was much discussion during Phase I regarding the involvement of the U.S. Independent Film Channel (IFC) in Salter Street's application. Although the Commission's licensing framework encourages alliances between Canadian and foreign services, we believe that these partnerships should only be endorsed if there are no other wholly Canadian and equally attractive proposal in a given niche.

26428 Salters's so-called "arrangements" with the IFC in the U.S. are at best vague and undefined. But such arrangements do raise the spectre of dependency of a Canadian licensee upon an American brand. We believe that the Commission should license an applicant that doesn't raise this risk of "dependency" and instead give priority to a genuinely Canadian perspective.

26429 in the case of independent film, the Commission has a choice of uniquely Canadian visions for this niche. We don't need an American partner to filter the world of film for Canadian viewers.

26430 In our written intervention we proposed, in respect of several applications for thematic services, certain quantitative restrictions in the case of feature films, or Category 7(d), our affectionately known "15-15" rule. This test contemplates a 15 per cent limitation during the broadcast day and also in prime time. We were pleased to note that many of the applicants in the first phase of the proceeding acknowledged the need for quantitative limitations for feature films, in the range of 10 to 15 per cent.

26431 During discussions with Salter last week, we note that the Commission raised the issue of scheduling limitations, especially during prime time. We urge the Commission to establish restrictions as an integral part of the conditions of license of all of the Category 1 applicants that have proposed to include movies in their services. We believe this will avoid a situation of merely duplicating programming during prime time and thereby maximize diversity.

26432 To my last point. A number of other applications contemplate feature film programming as a primary or significant component of their schedules. In several of these cases, no "fences" can address the fact that these applications are directly competitive with existing services.

26433 We have painstakingly identified various Category 2 services that are of concern to us in our written materials that we filed earlier and obviously we are not going to be talking about them today. But we do wish to underscore that the Commission should give its full attention to all of the applications that were filed in this proceeding, in both Category 1 and Category 2.

26434 If the Commission is to fully implement its licensing framework, it must scrutinize all applications before it through the same lens. It will be imperative for the Commission to ensure that each and every application, both Category 1 and Category 2, would not be directly competitive with any existing services. If an applicant doesn't meet this onus, then the Commission should deny the application.

26435 We thank you very much for this opportunity to appear again before you, and we note that we have attached as Appendix "A" to our document our answers to the Commission's homework for this phase of the hearing.

26436 THE CHAIRPERSON: Thank you, Mr. Bureau and Madame de Wilde.

26437 Counsel. No?

26438 Nous vous remercions pour votre présentation. Nous vous reverrons à la Phase IV et possiblement avant, Monsieur Bureau.

--- Pause / Pause

26439 THE CHAIRPERSON: Mr. Secretary.

26440 MR. CUSSONS: Thank you, Madam Chair.

26441 We will now hear the intervention by Corus Entertainment.

INTERVENTION / INTERVENTION

26442 MR. ROBERTSON: Good afternoon Madam Chairperson and Commissioners. My name is Paul Robertson, President of Corus Television. With me is Kathleen McNair, Vice-President, Regulatory Affairs of Corus Entertainment.

26443 We wish to make a few comments about competitive Category 1 applications before you.

26444 In our opening remarks last week, we proposed that the Commission should first determine which genres are deserving of Category 1 status and then compare the various applications. We believe that services offering diverse programming and a high level of quality Canadian programming from the start are most deserving of Category 1 licences.

--- Technical difficulties / Difficultés techniques

26445 MR. CUSSONS: The microphones seem to be working.

26446 MR. ROBERTSON: Yes.

26447 THE CHAIRPERSON: Mr. CPAC, how is your --

--- Pause / Pause

26448 THE CHAIRPERSON: Go ahead. What power.

26449 UNIDENTIFIED SPEAKER: My mother would be disappointed if I'm not on TV.

--- Laughter / Rires

26450 COMMISSIONER WILSON: You're on.

26451 MR. ROBERTSON: I will continue.

26452 The number of travel applications received is indicative of the high level of interest in this genre. Some applicants have proposed a travel service focused predominantly on Canadian destinations. In our view, an attractive travel service must feature Canadian programming prominently, but also offer the best international programming available.

26453 This is why we pursued a partnership with Discovery International. Discovery Travel & Adventure is the preeminent travel network in the world. A Canadian version provides diverse Canadian programming in a highly attractive format while providing export windows for Canadian productions.

26454 Our business plan projects Canadian licence fees of between $11,000 to $20,000 for each half-hour of original programming, which is, by far, the highest level of any applicant.

26455 We would also note that our commitment to the Canadian independent production community is also the strongest. A hundred per cent of our original Canadian programming will be commissioned from arm's length independent producers.

26456 In contrast, the other applicants are proposing very high levels of in-house programming: Global is planning to produce 100 per cent of its original programming in-house.; 82 per cent for BCE; 53 per cent for Pelmorex and 36 per cent for Learning Skills of Alberta.

26457 In contrast, our very high levels of commitment to Canadian independent producers will ensure that the Canadian programming featured on the service will be of such quality that it will be deserving of exhibition on Discovery's services seen in more than 140 countries.

26458 A channel devoted to books is another hotly contested category. The demand studies filed as part of this proceeding demonstrate a strong interest in a service dedicated to books and we believe that our service is the strongest choice for Canadian programming of the applications before you.

26459 We offer the highest level of Canadian content in the early years of the term: Canadian content in year 1 of 65 per cent, rising to 75 per cent. This compared to Alliance Atlantis' commitment of 55 per cent growing to 65 per cent; or Learning Skills of Alberta with a first year commitment of 40 per cent, rising only to the minimum requirement of 50 per cent.

26460 Although all applications are proposing original programming, we have outlined four new series in year 1 that we will commission. Sixty per cent of our original programming will come from arm's length producers. In comparison, Alliance Atlantis' Schedule 10 indicates only 30 per cent will come from non-affiliated sources. Learning and Skills of Alberta's application suggests that only 21 per cent will be arm's length production.

26461 Furthermore, we are the only applicant to partner with a publisher, Kids Can Press, to ensure that the needs and interests of Canadian authors are adequately addressed. Although Alliance Atlantis has proposed children's programming, our children's programming block is the strongest of all applicants and will assist in developing literacy skills of Canadian children.

26462 Our wholesale rate is affordable and, as penetration increases, our rate will decrease. Alliance Atlantis is proposing a flat rate throughout the licence term, whereas Learning Skills of Alberta forecasts a rate increase.

26463 For all of these reasons, we consider that our application demonstrates the strongest commitment to diversity and Canadian programming and, therefore, respectfully request that the Commission approve our application.

26464 A service devoted to the needs and interests of Canadian parents is another competitive category. Both Rogers and Corus have applied for such a service. However, a fundamental difference between the two services is that Rogers has proposed dramatic programming in its schedule, while our service will only exhibit information, discussion and educational programming.

26465 Our research clearly demonstrates that a service focused exclusively on providing information-based programming to parents received a much higher level of interest. Busy and time-pressed parents cannot be tied to appointment viewing.

26466 You have heard from Rogers about the need to begin with low levels of Canadian content building over the licence term. We do not believe that this ramp-up is necessary or appropriate.

26467 Rogers has committed to achieving a Canadian content level of only 25 per cent in year 1, rising to 55 per cent over the course of the licence term, versus our commitment of 55 per cent in year 1, rising to 65 per cent by year 6.

26468 It was difficult to compare Rogers' programming commitments to ours since they have filed their year 5 program schedule. However, their Schedule 10 indicates that the average half-hour cost of their original first run programming will be $1,725, compared to our average cost of $10,000 per half hour.

26469 As well, our commitment to the Canadian independent production community is much stronger, as we will spend $12.9 million on original independent production versus $8.8 million by Rogers.

26470 A programming service devoted to the interests of men is another very competitive genre. We consider that Chrome's commitment to exhibit the highest level of Canadian content by year 7 of 65 per cent demonstrates Corus' belief in Canadian programming.

26471 Over 50 per cent of our original first run programming will be commissioned from independent producers. CTV's Schedule 10 reveals that only 17 per cent of their original programs will come from the independent production community. Unfortunately, Global/TVA's schedule did not provide the information required to complete a similar comparison.

26472 In our application we have proposed safeguards to provide access to arm's length producers. No more than 20 per cent of our Canadian programming expenditures may be granted to our partner, Salter Street Films. By comparison, CTV has committed only half of its original programming expenditures to arm's length producers. Our high level of commitment to arm's length independent producers, coupled with the highest Canadian content level, will ensure that Chrome introduces a very diverse service into the Canadian broadcasting system.

26473 Next we wish to make competitive comments concerning Land and Sea. Although no other applicant has proposed a service that is dedicated to rural Canadians, we consider this service to be in competition with a number of others for a Category 1 licence.

26474 There are more than 3.7 million rural Canadians who deserve a programming service that responds to their needs and interests.

26475 Land and Sea's commitment to Canadian content, 50 per cent in year 1 and rising to 60 per cent over the licence term, committing over $21 million to original programming, representing more than 9,700 hours, demonstrates this service's contribution to the achievement of the objectives of the Broadcasting Act. It is a service that is needed and desired by rural Canadians, and we believe a genre that is very deserving of a Category 1 licence.

26476 Finally, we wish to look at the documentary film services proposed by Rogers Broadcasting and Learning Skills Alberta as compared to our service, The Canadian Documentary Channel.

26477 As our name implies, The Canadian Documentary Channel is dedicated to showcasing Canadian documentary programming. In year 1 we will achieve a Canadian content level of 66 per cent, rising to 75 per cent by year 7. Rogers' year 1 Cancon commitment is 25 per cent, rising to 65 per cent over the course of the licence term. Learning Skills Alberta is proposing a Canadian content level of 50 per cent across the licence term.

26478 Rogers suggests that their proposed channel should be licensed given their commitment to the independent production community. However, unlike our application where we clearly indicate that at least 50 per cent of our acquisition budget would be allocated to arm's length production, we could find no similar safeguards in Rogers' application.

26479 As was the case with Parent TV, it is difficult to compare each Schedule 10, since Rogers uses a five year schedule that does not reflect its much lower level of Canadian content in the early years of the service.

26480 Even by year 5, Rogers will only be acquiring 51 hours of Canadian documentary programming. In our first year we will acquire 164 hours of Canadian documentary programming, which will rise to 212 hours by year 5.

26481 Rogers has committed to no original first run programming. Learning Skills Alberta proposes some Canadian original first run, but for fees of between $500 and $1,750 an hour. In contrast, we have committed to funding 26 hours of original first run documentary programs each year, at licence fees of $25,000 per hour, and all of these expenditures will go to arm's length independent producers.

26482 We believe that our commitments to high levels of Canadian exhibition from year 1, 26 hours of Canadian original first run production each year, guaranteed access for arm's length producers, and our quality partnership with the National Film Board, the CBC and four independent producers makes our application the one most deserving of the licence for this genre.

26483 As requested, we have filed today our commitments to first run original programming for all of our applications. We applaud your examination of these commitments, because it really gets to the heart of the diversity of the offerings.

26484 That completes our intervention. If you have any questions we would be pleased to answer them.

26485 THE CHAIRPERSON: There are no questions.

26486 We thank you for your presentation and we will see you later in Phase IV.

26487 MR. ROBERTSON: Thank you.

26488 THE CHAIRPERSON: Ms Tait, you have a difficult act to follow. You have to manage to get the lights off.

26489 Mr. Secretary, please.

26490 MR. CUSSONS: Madam Chair, we will now hear the intervention by Salter Street Films Ltd., OBCI.

26491 Ms Tait...

INTERVENTION / INTERVENTION

26492 MS TAIT: Good afternoon, Madam Chair, Commissioners, Mr. Secretary and Commission staff.

26493 Thank you for this opportunity to appear today to present our intervention.

26494 I am Catherine Tait, President and Chief Operating Officer of Salter Street Films. Let me introduce my colleagues again.

26495 To my left is Claude Galipeau, Vice-President of Corporate Planning at Salter Street Films. To my right is Joel Fortune, our legal and regulatory counsel from Johnston & Buchan.

26496 Salter Street has already filed its written interventions, and replies, during the intervention process prior to the hearing. We do not have much to add to the written interventions already filed because most of our applications are without direct competition. This fact reflects, we believe, the original thinking that the Commission can expect from Salter Street.

26497 We have only one addition to make to our written intervention regarding one of the applications for an independent film channel.

26498 We are concerned that Alliance Atlantis has introduced its corporate commitment as the overriding argument for licensing its proposed service. It would seem to us that this commitment falls outside the regulatory process and the business plans that are central to this process. Alliance Atlantis can make this commitment with or without a licence for an independent film channel as the major theatrical distributor of Canadian independent films.

26499 We believe it is inappropriate to introduce this corporate commitment in the context of a competitive process, and we respectfully suggest that the Commission disregard the Alliance Atlantis corporate commitment in considering the merits of all the applications before you for an independent film channel.

26500 Our further remarks today will be brief.

26501 We are filing today with the Commission the clarifications that the Commission sought regarding certain programming categories contained in our ZTV and Girls TV services.

26502 With respect to programming categories, the issue of the exhibition of feature films on non-film related services was raised by the Commission during our initial presentation. We have a suggestion which we believe may address the overall concern expressed by the Commission.

26503 Our suggestion is that the services licensed in Category 1 that are not film-based be restricted as a condition of licence to exhibiting no more than two feature films per week in prime time.

26504 The Commission asked all applicants to provide the number of hours of original programming to be exhibited each year on each proposed service, and to identify where these hours are reflected in each application.

26505 In response, in our supplementary brief and in Schedule 10 of each of our applications we identified the original programming that will be shown on each service, and we have filed these numbers with you again today.

26506 In each service the level of original programming is reflected in our first year's budget and is a minimum throughout the licence term. In section 8.2 of each of our applications the Commission will note the corresponding budgets for these commitments, and also that these amounts increase over the licence term.

26507 We believe that the key structural numbers underpinning our business plans -- low wholesale rates, low advertising revenue assumptions, and conservative penetration assumptions -- are among the most reasonable before you. And given our conservative approach, Salter Street's commitments to original Canadian programming are outstanding.

26508 Let me move to the two policy areas that Salter Street wishes to highlight in this intervention, which have been raised by other applicants to support their applications.

26509 First, we believe that the high number of applications, with significant Canadian content commitments, presents the Commission with an opportunity to preserve a privileged position for Canadian programming in our digital future. Category 1 services, unlike their Category 2 counterparts, will make a substantial commitment to the production and scheduling of Canadian programming.

26510 Perhaps the Commission, in the public interest, should consider licensing more than 10 Category 1 services. We would suggest that the Commission consider licensing up to 15 Category 1 services, or perhaps even more, depending on the digital capacity that distributors will have. This is a point that the Commission will, no doubt, explore with distributors in the next phase of this hearing.

26511 Second, a lot has been said about the advantages of synergies. Salter Street has argued its position on nesting and our belief that it runs counter to diversity in the broadcasting system. We will not repeat our reasons here.

26512 What we would like to address, however, is the notion that existing licence holders are better equipped to launch digital services than new entrants due to the synergies of operating multiple services.

26513 This argument, we believe, does not adequately acknowledge the strengths that new entrants bring to the broadcasting system. New entrants, just like incumbents, present opportunities for synergies. In Salter Street's case, for example, specific opportunities for synergies arise from our substantial production, post-production and new media infrastructure, and our creativity and experience in producing high quality, popular Canadian programming.

26514 Moreover, and perhaps an obvious point, the economies of sale to be realized by existing multiple licence holders may be realized just as effectively by a new entrant such as Salter Street Films.

26515 For example, if Salter Street were fortunate enough to receive multiple Category 1 licences, we estimate that we would realize economies of between 20 per cent to 25 per cent on an operating basis with each additional service.

26516 There is no doubt that licensing a new entrant to operate multiple specialty services will play the same role in the realization of synergies as licensing an incumbent broadcaster.

26517 Thank you, Madam Chair and Commissioners, for this opportunity to present Salter Street's intervention. We would be pleased to answer any of your questions.

26518 THE CHAIRPERSON: Thank you.

26519 We have no questions.

26520 It's interesting how the mathematics is used to arrive at different answers.

26521 Thank you.

26522 We will see you, again, at Phase IV.

26523 Mr. Secretary, please.

26524 MR. CUSSONS: Madam Chair, we will now hear from Learning and Skills Television of Alberta Limited.

26525 Dr. Keast.

26526 THE CHAIRPERSON: We have a rested Mr. Znaimer back?

--- Laughter / Rires

INTERVENTION / INTERVENTION

26527 DR. KEAST: Madam Chair, Madam Chairperson, Commissioners and staff.

26528 I am Ron Keast, President and CEO of Learning and Skills Television of Alberta.

26529 With me is Moses Znaimer, Chairman of our Board and Executive Producer -- and, just in parenthesis, perhaps, I would like to assure the Commission that as Executive Producer for both CLT and Access, and for our, hopefully, six new digital services, I can assure that Mr. Znaimer is definitely not tired. Now, he is, on occasion, quite earnest, but he's not tired.

26530 And with me, also, is Peter Palframan, who is our Vice-President of Finance and Administration.

26531 Though we have been impressed by the overall imagination and quality of the Category 1 applications presented at this hearing, we are, nonetheless, intervening against a number of competing applications.

26532 We believe an important question to be asked of some of them is just how committed are applicants to what they proposed and what background and track record do they really have to support this interest.

26533 We suspect that, in many cases, it's simply a case of consultants putting together random applications looking for a licence.

26534 A strong applicant will be one who has a genuine interest in the field and has demonstrated that by what they are already doing.

26535 For example, regarding the books genre, we are intervening against Corus Booknet and Alliance Atlantis - The Book Channel, with the following points:

26536 Both Booknet and The Book Channel have committed to Canadian Content levels that will be extremely difficult, if not impossible, to achieve without a very high repeat factor, based on the amount of material available. This is certainly not helpful, either, in terms of attractiveness or diversity.

26537 The Book Channel is projecting a significantly higher number of subscribers to its service, with 1.5 million, in Year 1, growing to 3.3 million, in Year 3, compared to our own more realistic projections of 700,000, in Year 1, growing to 1.7 million. This is partially due to their projection of higher penetration rates of up to 66 per cent, in Year 7, which are unlikely to be realistic in a digital environment. This results in subscriber revenues that, we believe, are significantly overstated, with the concomitant pressure on programming promises that that entails.

26538 We believe it's premature and highly speculative to project any significant interactive or on-line revenues.

26539 Booknet projects levels of interactive revenues ranging from 200,000 to 600,000, which, we believe, are overly optimistic and, in fact, closely parallel their projected advertising revenues, which range from 200,000 to 800,000, in Year 7.

26540 Advertising revenues of 750,000 to 3.5 million, projected by The Book Channel, are, we believe, also considerably overstated.

26541 While this may partially be a function of overstating the number of subscribers, as noted above, it would, at best, only go part way to explaining these overly aggressive projections.

26542 The Book Channel and Booknet seem to be perfect examples of the phenomenon of random applications in search of a licence. Neither of these applicants are currently active in any book-related programming, nor have they been, while we are in it a very significant way. We are in the business, and we are not leaving the business.

26543 Thus, licensing another applicant will have the effect of weakening book parties; whereas, licensing us will strengthen the ability of this highly-targeted, highly worthwhile niche to find its audience.

26544 MR. PALFRAMAN: Regarding the computer technology genre, we are intervening against Rogers - ZDTV, Global - Digital 1 and CTV - The Digital Network.

26545 Both Digital 1 and The Digital Network project advertising revenues. over the seven-year licence term, that, we believe, are overstated. The new digital environment is highly unlikely to generate these levels of advertising revenues.

26546 Rogers - ZDTV and The Digital Network are projecting subscriber penetrations that grow from 35 per cent and 40 per cent, in Year 1, respectively, to 70 per cent, over the licence term. This would appear to be aggressive, given the industry's experience with the third analog tier, which appears to have topped out at 60 per cent penetration, and the fact that these are digital services.

26547 We have two concerns, with regard to subscriber revenue projections: the subscriber base and penetration; and wholesale rates.

26548 Applicants with lower wholesale rates, in this case The Digital Network, project generally higher subscriber numbers.

26549 On the face of it, the lower rates would appear to provide them with an affordability advantage. However, in the event that the subscriber levels are not achieved, the rates will increase accordingly, thus, eliminating the apparent advantage.

26550 The Canadian programming content commitment by Digital 1, of 77 per cent, throughout the licence period, and by The Digital Network, of 58 per cent, rising to 75 per cent, is almost certainly not achievable, unless based on an extremely high repeat factors.

26551 In the case of a channel dedicated to computers, the instructional component must, by definition, be of overriding importance. Both Rogers - ZDTV and The Digital Network would have you believe that a computer channel should simply be a news channel about computers.

26552 In the case of Rogers - ZDTV, it was described as, quote, the CNN of technology, end quote, and, quote, more like a news service, end quote.

26553 And in the words of CTV - The Digital Network, their computer channel would be, quote, essentially, a news service about digital, end quote.

26554 All research indicates that consumers and viewers need an attractive computer channel that will either help them to learn how to use computers, in the first place, and/or how to use them more effectively.

26555 It is also clear, from the Rogers - ZDTV presentation and application, that, to all intents and purposes, what is being proposed here is an American channel. Cancon, in the first three years, goes from just 25 per cent to just 40 per cent, and it is clearly stated that the foreign partner will provide the majority of the programming for the channel.

26556 You should also not be led to believe that this is the only way to bring ZDTV into Canada.

26557 We have already described to you the programming licensing relationship we have, and have had, with ZDTV.

26558 Our application reflects the fact that, with a variety of other foreign programming, including a good portion from the U.K., Computer Access will be much more than a U.S.-programmed service.

26559 DR. KEAST: In the careers and work genre, we are intervening against Stornoway Communications - @work.ca for a number of exaggerations that put into question their programming commitments.

26560 Here are three:

26561 @work.ca projects a subscriber base that grows to 4.5 million and a penetration level that grows to 60 per cent, in Year 7, which, together, result in subscriber revenues, in the final three years of the licence period, that are significantly higher than, we believe, are achievable.

26562 @work.ca projects advertising revenues, over the seven-year licence term, that grow from one million to $4 million, which we consider to be significantly overstated. It is most unlikely that these levels of advertising revenues will be generated in the new digital environment.

26563 @work.ca projects Canadian content levels of 55 per cent that grow to 70 per cent, which, we believe, are unlikely to be achieved, unless there is a high repeat factor. During their presentation, @work.ca indicated a repeat factor of 8 to 10 which, we believe, will probably go higher.

26564 No broadcaster or production company, in Canada, has been involved in the field of work, jobs and careers, to the extent that we have. It has been one of our key programming and production elements since our start-up, and will continue to be.

26565 And, finally, in terms of our intervention against @work.ca, we need to warn against the siren call of the new, small player. Everyone agrees this digital business environment will be the toughest yet and it's questionable, therefore, whether this is the right time to consider such an option.

26566 Besides, of all the so-called new player shareholders who were parts of new services launched in the last 10 years, barely one or two are still in the game.

26567 The truth is, genuine new players who genuinely stand alone will find the going extremely tough, if not impossible, and will, in our prediction, either go broke or fall inexorably into the hands of the distributors.

26568 MR. PALFRAMAN: We are intervening against The Justice Channel because we believe the Commission should have serious concerns, with respect to the viability of its business plan, for at least three reasons.

26569 Firstly, the very low commitments to Canadian content, with just 15 per cent, in Year 1, growing to just 35 per cent by Year 7, and Canadian programming expenditures, apparently, in the order of only 29 per cent of previous year's revenues.

26570 Secondly, subscriber revenues, with projected subscribers that grow to 6.6 million, by Year 7, appear to be significantly overstated.

26571 And, thirdly, advertising revenues growing to 9 million, in Year 7, are highly unlikely.

26572 Based on the program categories filed by The Justice Channel, we are also concerned that this service appears to be focusing on drama and general entertainment programming.

26573 We do not believe it is necessary to comment on the attempt by the principals of The Justice Channel to change many of the important elements of their application during the course of their oral presentation.

26574 DR. KEAST: Madam Chair, Madam Chairperson, Commissioners and staff, that completes our intervention comments. Thank you for your attention.

26575 We filed today our assignment detailing the number of hours of original first window Canadian programs that each of our proposed services will provide each year.

26576 THE CHAIRPERSON: Counsel.

26577 MR. STEWART: Thank you, Madam Chair.

26578 Are you in a position to fulfil your undertaking that you gave in Phase I to indicate the threshold or the percentage of the schedule consisting of documentaries that would make a proposed service directly competitive with a documentary only service?

26579 DR. KEAST: Ours is a documentary only service.

26580 MR. STEWART: Right. But my question is you indicated what the threshold say in an independent film and documentary service, what percentage of the programming would be competitive with your documentary service in terms of their provision of documentaries?

26581 DR. KEAST: We would be prepared to bring that back to you in Phase IV if that's all right.

26582 MR. STEWART: Okay. Phase IV. Thank you.

26583 THE CHAIRPERSON: Thank you, Dr. Keast. We will see you again, even more rested, at Phase IV.

26584 DR. KEAST: I am the Energizer bunny of applications.

26585 THE CHAIRPERSON: You are not back again, are you? You are not going to come with the Justice Channel after this? Thank you.

--- Pause / Pause

26586 THE CHAIRPERSON: Mr. Secretary, please.

26587 MR. CUSSONS: Madam Chair, our next applicant is Craig Broadcast Systems Incorporated, OBCI.

INTERVENTION / INTERVENTION

26588 MR. CRAIG: Good afternoon, Madam Chair, Commissioners, ladies and gentlemen.

26589 My name is Drew Craig, President of Craig Broadcast Systems. With me today are Al Thorgeirson, Manager of Station Operations and Sandi McDonald, Executive Vice-President of Corporate Development.

26590 Before beginning our intervention, we would like to provide the Commission with the information it requested in Phase I of the hearing.

26591 First, we would like to report the number of hours of original Canadian production offered by each of our three applications: Festival, Connect and The MET. We have filed this information with the Hearing Secretary.

26592 Second, we would like to address the undertaking associated with the demographic profile of our teen channel, Connect. During this intervention phase, we agreed to limit certain program categories. Additionally, stated late last week during Phase I, that the primary demographic group for this channel was intended to be teens between the ages of 12 and 17.

26593 We respectfully offer the following. We would be prepared to accept as a condition of licence that 75 per cent of our programming be targeted to this age group. The remaining 25 per cent of the schedule will be directed to the secondary 18 to 24-year old target group.

26594 It is our intention for Connect to be Canada's teen channel.

26595 Our comments today are directed Alliance Atlantis's application for the independent film and documentary channel, and CHUM's application for Indie. We shall reserve further comments for the final phase of this hearing.

26596 As a backdrop to this intervention, however, we would first like to state our position with respect to the concept of "nesting".

26597 Certain incumbents, such as Alliance Atlantis and CHUM, are promoting the nesting concept in an attempt to walk away with some of the most sought-after licences at this hearing, or to protect profitable, existing services not from "direct competition" but from any competition whatsoever. This kind of thinking is untenable in a competitive environment. In fact, any claim of sole ownership over a genre as broadly appealing as independent film or popular music is simply anti-competitive.

26598 Nesting is also a formula for potential duplication. The danger here is that every new service would have the same brand, same look, same feel, and in some cases the same content as that which already exists on another parent service. Consumers are not going to buy the digital box unless they are convinced that the new services will offer them real choice and real choice only comes with diversity of ownership.

26599 We believe that the choice is clear. The Commission can pick digital duplicates or create digital originals by admitting new entrants into the specialty arena.

26600 This is not to say that there is no place for very narrow, niche services that have been spawned by incumbent services.

26601 We are thinking of a situation here, for example, where an existing service may take one of its popular, signature programs and spin the program off into an entirely separate channel devoted to a very specific brand of programming.

26602 There is also a place in our view for primarily repurposed or repeat programming services. We recommend that both these types of services be considered for Category 2 licences.

26603 For example, Alliance Atlantis argues that because a portion of its Showcase schedule includes independent films, it has "nested" the genre and no other applicant should be entitled to an independent film channel.

26604 Aside from this argument being transparently self-serving, it ignores significant differences between Showcase and the type of service envisioned by our channel, Festival.

26605 For instance, Festival will not air any dramatic television series which is the real core of Showcase's schedule.

26606 By condition of licence, no more than 10 per cent of Showcase's schedule may consist of programs that originated in the U.S. In contrast, because the U.S. is a rich breeding ground for innovative, independent film product, Festival's non-Canadian schedule will include a large number of popular independent films from the U.S.

26607 Showcase airs no documentary programming, and by Ms Michalchyshyn's own account, there are thousands of independent films that do not find a home on Showcase.

26608 Similarly, CHUM argues that it has "cornered the market" on popular music genres, and is opposing other applications that seek to offer popular music services that are different from what is currently available. In doing so, CHUM conveniently ignores the fact that music genres have become so fragmented that its services simply cannot cover all the bases.

26609 We would like to conclude this discussion on nesting by saying that we believe you should consider the corporate strengths that applicants bring to the table in this proceeding. However, we believe that special consideration should be given to diversity of ownership.

26610 As we said last week in Phase I of this proceeding, we believe that this is an opportunity to introduce new players to the digital specialty marketplace. Is it too risky to bet on a new entrant? We believe that the answer is no -- not if the new player can bring a track record, a set of corporate efficiencies and synergies that include experience in niche markets, a new brand and a fresh set of programming ideas and skills.

26611 The successful launch, marketing and operation of these new digital services will require not just corporate wherewithal, but all the entrepreneurial spirit and creativity that licensees can muster.

26612 I would like to turn now to CHUM's application for Indie. CHUM challenged the framework you laid out in your call for applications and, in particular, the Canadian content commitments for Category 1 licences. CHUM argues that there simply isn't enough feature film product available to satisfy the "50 per cent by year seven" requirement.

26613 Out of the five applicants, CHUM is the only one to make this argument. Alliance Atlantis, the largest distributor in the country, thinks there is enough.

26614 Last week you hard from Mr. Link and Mr. Sackman from Lions Gate Films, our partner in Festival. Their view is that this is simply a non-issue, and they should know. Lions Gate has more than 40 years' experience in producing and distributing English and French independent Canadian films.

26615 We wonder why CHUM is singing a different tune. We believe you should view their application as deficient and, therefore, not eligible to be licensed.

26616 And now to Alliance Atlantis's application for the Independent Film and Documentary Channel.

26617 Not only does Alliance Atlantis's nesting argument violate the principles of diversity and competition, the application raises significant concerns about self-dealing. This stems from the fact that Alliance Atlantis is the largest distributor of Canadian and independent film product.

26618 If granted this licence for an independent film channel, Alliance Atlantis would have the ability and arguably the incentive to withhold product from other services in order to favour its own "nest" of services.

26619 While Festival has committed to respect the orderly market for film distribution, the Alliance Atlantis proposal does raise the danger that the orderly marketplace could be manipulated by the applicant to favour its own services at the expense of others who rely on it for product, like the pay services for example.

26620 In that connection we also have a concern with respect to a corporate commitment of an entirely new fund, which is clearly not tied in any way to the success of the business plan of its application for an Independent Film and Documentary Channel.

26621 On the surface this offer may seem generous. However, it is an attempt by Canada's largest producer and distributor to use their market clout and leverage to make a corporate commitment that maybe they have already made, or that they might make regardless of whether they are licensed. After all, they are in the business of producing films.

26622 We are having a tough time figuring out how this seemingly attractive offer can be measured as part of the proposed channel's contribution to Canadian independent film. The offer is vague. It might be bridge financing; it might be equity, but neither of these options will trigger the financing that producers desperately need for new Canadian productions.

26623 The only thing that will trigger this all important financing is cash licence fees which we are offering through Festival's Priority Program Fund.

26624 In our experience every dollar spent in licence fees has a multiplier effect of ten. In other words, our Priority Program Fund will generate $45 million in original new distinct Canadian programming. This is incremental to the system and in addition to the licence fees that we plan on spending to program the channel.

26625 Finally, in closing, I would like to thank the Commission for the opportunity to raise these important points today. We would be happy to answer any questions that you might have.

26626 THE CHAIRPERSON: I will have to ask you if you felt it necessary to rent an apartment in Ottawa with all these phases. I hope you are enjoying --

26627 MR. CRAIG: We were considering it.

26628 THE CHAIRPERSON:  -- Ottawa when you come to visit.

26629 Mr. Secretary -- counsel, please?

26630 Maybe I'm joining Mr. Znaimer in the role of the tired.

--- Laughter / Rires

26631 MR. McCALLUM: Thank you.

26632 I have a note in the transcript that there was discussion with Commissioner Wilson about -- a question was posed to you if you would recommend any specific conditions of license with respect to limitations on Categories 2 and 7 and I have a note that you would come back to us on that point with respect to the MET.

26633 I wondered if you had had a chance to look at that question.

26634 MR. CRAIG: We would like an opportunity, if we might, to come back in Phase IV with the answer to that question.

26635 MR. McCALLUM: Okay, fine.

26636 MR. CRAIG: Thank you.

26637 MR. McCALLUM: I find it at paragraph 22171 of the transcript.

26638 MR. CRAIG: Thank you very much.

26639 THE CHAIRPERSON: Thank you, Mr. --

26640 MR. McCALLUM: I'm sorry, may I ask one further question?

26641 THE CHAIRPERSON: Yes, of course.

26642 MR. McCALLUM: When you answered the undertaking with respect to the original first window Canadian programming today, with the document you filed with the secretary, and you gave a listing of hours, do these hours apply to each of the years?

26643 MR. CRAIG: Yes, they do.

26644 MR. McCALLUM: So the commitment is basically level with respect to each of those years?

26645 MR. THORGEIRSON: If I may, those would be the minimum commitments for each of those years.

26646 MR. McCALLUM: Thank you.

26647 THE CHAIRPERSON: Thank you, Mr. Craig, Ms McDonald and your colleagues.

26648 We will see you again in Phase IV. Thank you.

26649 MR. CRAIG: Thank you very much.

26650 THE CHAIRPERSON: We will hear one more applicant in intervention before taking a break.

--- Pause / Pause

26651 THE CHAIRPERSON: Mr. Secretary, please.

26652 MR. CUSSONS: Thank you, Madam Chair.

26653 Our next applicant is Métromédia CMR Broadcasting Incorporated and Cogeco Radio-Television Incorporated, (OBCI).

INTERVENTION / INTERVENTION

26654 MR. SENÉCAL: Madam Chair, Commissioners, my name is Gilles Senécal of Métromédia CMR Broadcasting. To my left is Michel Carter of Cogeco Radio-Television, our partners in the Travel and Leisure Network.

26655 Vos journées d'audience sont fort bien remplies alors évidement vous avez d'autres intervenants à entendre dans cette seconde phase. Nous serons donc brefs et pour ce faire, je demanderai à Michel de vous présenter notre intervention.

26656 M. CARTER: Merci, Gilles.

26657 Upon concluding our presentation in-chief last Friday, we submitted to you that our application for the Travel and Leisure Network had the advantage of clarity and certainty with respect to:

26658 First, the need for a travel and leisure service in the English language.

26659 Second, the purpose of our application, which is for a service genuinely and exclusively devoted to travel and leisure, with no attendant risk of direct competition, or indeed any material programming overlap, with any existing pay or specialty services.

26660 Third, the focus and complete dedication of our partnership to this proposed travel and leisure service, and to this service alone, with no attendant risk of program or Canadian content expenditure recycling from one language to the other, or from one specialty service to another, be it U.S. or Canada.

26661 Fourth, the inability of either Métromédia or CRTI, separately or in combination, to exercise any market power or to take unfair advantage of related party transactions, whether in program production, broadcasting or distribution.

26662 Fifth, our commitments to the Canadian broadcasting system.

26663 Sixth, our extensive widely recognized and very specific expertise and know-how with respect to popular, attractive travel programming for English-language television.

26664 We wish to add that our proposed service is also clearly affordable, given our projected initial wholesale fee of 35 cents per month per subscriber.

26665 We trust that the Commission will acknowledge these clear and unequivocal advantages by issuing us a Category 1 digital licence for the Travel and Leisure Network.

26666 We have given careful consideration not only to the issue of direct competition raised by the Commission, but also to the need for an attractive, diverse and affordable group of digital specialty services in order to support a successful digital specialty service launch on September 1, 2001 and the rapid growth of digital service penetration following that initial launch.

26667 We consider that the Commission should license only one English-language travel-related specialty service, and that this service should be licensed as a Category 1 digital service. Therefore, we consider that our proposal is directly competitive with the following applications:

26668 BCE Media, on behalf of a general partnership, for Travel TV;

26669 Corus Entertainment, on behalf of a company to be incorporated, for Discovery Travel & Adventure;

26670 Global Television Network, on behalf of a company to be incorporated, for Canadian Travel Channel;

26671 Learning and Skills Television of Alberta, a company controlled by CHUM, for Travel Access - The Destination Channel;

26672 Pelmorex, for The Leisure Network;

26673 Alliance Atlantis, on behalf of a company to be incorporated, for Adventure One and National Geographic Voyager;

26674 Boxer Four Entertainment, for The Sophisticated Traveller Channel and The Travel Canada Channel;

26675 Relax TV Canada, for Travel TV; and

26676 Tapley, for the Tourist Channel.

26677 We are prepared to confirm our commitment with respect to the minimum levels of Canadian content over each year of the proposed license term for the purpose of a condition of license, as well as our scheduled levels of Canadian content over each such year, should you wish us to do so for the record.

26678 Thank you very much, Madam Chair and Commissioners.

26679 THE CHAIRPERSON: Thank you, Mr. Senécal, Mr. Carter.

26680 Counsel? No?

26681 Thank you very much for your presentation.

26682 We will see you again at Phase IV.

26683 MR. SENÉCAL: Thank you.

26684 THE CHAIRPERSON: We will now take a 15-minute break.

26685 Nous reprendrons dans 15 minutes.

--- Upon recessing at 1500 / Suspension à 1500

--- Upon resuming at 1520 / Reprise à 1520

26686 THE CHAIRPERSON: Welcome back to our hearing. Nous vous souhaitons la bienvenue encore une fois.

26687 Monsieur le Secrétaire.

26688 Mr. Secretary, please.

26689 MR. CUSSONS: Thank you, Madam Chair. I would like to announce that WETV Canada has advised us that they will not appear in this particular phase of our hearing. However, they will be responding to your homework questions, Madam Chair.

26690 Therefore, we will now turn to Lifestyle Television 1994 Limited.

INTERVENTION / INTERVENTION

26691 MS ALI: Good afternoon, Madam Chairperson and Commissioners. My name is Elaine Ali and I am President of Lifestyle Television 1994. Appearing with me here today to present our interventions on Category 1 services is Laurie Stovel, whom you met last week.

26692 We hope to make this fairly quick, as it has already been a long hearing, it is beautiful outside and you still have more than a week ahead of you.

26693 Before we get started we would like to say that in anticipation of the importance of original Canadian hours, we did file it as part of our application. It can be found at page 29 of Schedule 1 of our supplementary brief, which is CRTC page 266. I do have a copy of that page with me, so I could file it with the Commission, if that is necessary.

26694 MS STOVEL: On to the interventions.

26695 Lifestyle has filed two written interventions on behalf of R&R, the Category 1 specialty service for which we are applying. These two interventions addressed our direct competitors in the romance and relationship genre: CHUM Limited for its Relationship TV application and Global Television for its proposed Violet service.

26696 You may take that also as our response to your take-home assignment, as those are the only two applications that we would consider competitive to our R&R proposal, and further to your conversation with another intervenor earlier today, we would say that those are the only two that would significantly affect the viability of our R&R service.

26697 We also believe that our written interventions on these two applications cover all the points that we wish to make. And together with the thorough discussion that we enjoyed with you last week on our own application, we don't feel that we need to add anything more at this time.

26698 On behalf of our existing specialty service, WTN, we also filed two interventions, the first of which was a general intervention of comment with respect to 32 English-language applications considered at this hearing. In that intervention we wished to bring to the Commission's attention the cumulative impact on WTN of licensing a number of services that propose niche programming that currently forms a portion of the WTN schedule.

26699 As we stated in our written intervention, we do not believe that any of these applications taken individually represent a service that could be considered directly competitive with WTN. However, the cumulative effect of licensing 10, 15, or perhaps even the 20 that we are hearing now, new Category 1 services, together with an unknown quantity of Category 2 services, will be increased competition for audiences, programming and advertising revenues.

26700 We certainly do not oppose the licensing of any of these individual applications. However, we believe that the competitive impact on an existing, stand-alone specialty service such as WTN could be addressed by licensing Lifestyle's application for a program service in the one genre that comprises the most significant amount of overlap -- romance and romantic relationships. Again, we believe that our written comments on this subject are complete and we don't feel it necessary to add anything at this time.

26701 MS ALI: The second intervention filed on behalf of WTN was an intervention opposing the application by Groupe TVA for its proposed Infashion service. We do consider this application as representing a service that approaches a level of duplication with WTN that should be considered significantly competitive and, therefore, should not be licensed by the Commission.

26702 The channel proposed by Groupe TVA is not dedicated to fashion, beauty and interior home decoration, as stated in its proposed nature of service definition. According to the written application and to statements made by the applicant at this hearing, fully 26 per cent of its schedule would be comprised of lifestyle programming. The application includes references to programs addressing such topics as health, child care, fitness, cooking, nutrition, pets, celebrity interviews, public speaking, the Internet, entertainment, dating, resumes and cover letters, investing and personal finance, automotive care, shopping, et cetera.

26703 However, the market study submitted as evidence that Infashion was not directly competitive with existing services included only an analysis of programming oriented toward fashion, beauty and interior design. It did not include a competitive analysis of lifestyle programming; programming that forms a significant portion of WTN's service.

26704 Using the program descriptions supplied by Groupe TVA, we analyzed the amount of potential overlap with WTN's schedule. We found that between 35 per cent and 40 per cent of the programming offered by WTN could find a home on Infashion. And we did not include in this analysis any entertainment programming, which Groupe TVA has proposed to include in its schedule, specifically from Category 7(c) and Category 11.

26705 We heard nothing during the presentation of this application to give us any comfort that the proposed service would be different from that which we originally saw in the written application.

26706 Groupe TVA's agreement to exclude "how-to" programs seems to address more specifically the concerns of HGTV rather than WTN. If we eliminate the one program that could be considered "how-to" from our previous analysis, we still reach a level of some 33 per cent to 38 per cent overlap. If we add to this the 15 per cent limit from Category 7(c), as agreed to by the applicant, this overlap grows to some 48 per cent to 53 per cent. Again, this doesn't include any general entertainment or human interest programming.

26707 The Infashion service is specifically targeting women between the ages of 25 and 49. WTN's target audience is women 25 to 54 -- essentially the same target markets. Contrary to Groupe TVA's written reply to our intervention, WTN is not suggesting that "no other service should be licensed that addresses women as its target market".

26708 We would point out that WTN did not intervene in opposition to the several other Category 1 applications that target a female audience, specifically: The Dance Channel application, submitted by Stornoway Communications, whose primary target is women 18 to 49 and whose secondary target is 49-plus; The Biography Channel, submitted by Rogers Broadcasting, targeting adults 25 to 54, with a skew toward women; VitalTV from Global, targeting women 20 to 50; Wisdom by Vision TV, targeting women 18 to 34 and 35 to 49; and The Women's Sports Network from TSN, targeting women 18 to 29.

26709 Nor have we intervened in opposition to other fashion/style/design applications, or, for that matter, travel, health, parenting or other service genres that would provide niche programming competitive with a portion of WTN's schedule.

26710 The Groupe TVA application for Infashion does represent a program service that could most definitely be considered competitive with an existing specialty service. We wonder about the programming diversity that would be added to the system, given the amount of potential duplication with an existing service. And we think this is a particularly relevant question when you have so many excellent proposals before you by applicants who have clearly incorporated your policy framework with respect to competition, including, I might add, fashion, style and design applications that are more directly focused on that genre.

26711 If Groupe TVA truly wanted to offer a new specialty service dedicated to fashion, beauty and interior home decoration, they could have done so. If that were the case, you probably would not have heard from us.

26712 However, they clearly have different designs, and that has led us to intervene against their proposed application.

26713 That completes the presentation of our intervention, Madam Chairperson. We would be willing to answer any questions.

26714 THE CHAIRPERSON: We have no questions. Thank you very much. We will see you again at Phase IV, Ms Ali and Ms Stovel.

26715 MS ALI: Thank you.

26716 MS STOVEL: Thank you.

26717 THE CHAIRPERSON: Mr. Secretary, please.

26718 MR. CUSSONS: Thank you, Madam Chair.

26719 Our next applicant is Vision TV Digital Incorporated (OBCI).

26720 Mr. Fraser...?

INTERVENTION / INTERVENTION

26721 MR. FRASER: Thank you very much.

26722 Good afternoon, Madam Chair, Members of the Commission. Good afternoon, staff.

26723 My name Is Fil Fraser. I'm the President and CEO of Vision TV, which controls Wisdom, Canada's Body, Mind and Spirit Channel.

26724 I'm here to tell -- just to make two points, and I won't take up much of your time.

26725 THE CHAIRPERSON: Where is Mr. Buchan?

--- Laughter / Rires

26726 MR. FRASER: Who?

--- Laughter / Rires

26727 MR. FRASER: Phase II provides the opportunity for us to intervene against other applicants in this proceeding and, in addition, Madam Chair, you sent us home, from this classroom, to do some homework, particularly, in our case, the hours of original Canadian programming in each year of the licence term and an indication of where these commitments can be found in our application.

26728 I'm happy to say that we have done our homework. We have, today, filed a detailed document which contains our response, by fax and by e-mail, and we are hoping for an A+ on our assignment.

--- Laughter / Rires

26729 MR. FRASER: As I noted, last Friday, which seems like a long time ago, we have been impressed by the quality of a significant number of the applications that have appeared before you, over the past couple of weeks, and we believe that a wide diversity of high-quality services at a reasonable cost will provide the value for money necessary to convince Canadians to buy set-top boxes and dishes.

26730 Our application serves that diversity. We are unique in the genre that we are proposing to you. We have told you that Canadians are flocking to book stores, to magazines racks, to the Internet, to access content that focuses on self-improvement which involves the exploration of the interconnection between body, mind and spirit.

26731 We, therefore, have no need -- because no other applicant at this hearing proposes to serve that need -- which, I think, we have identified very clearly -- we have no need to intervene against any other applicant or to comment on their proposals.

26732 Wisdom will provide a diverse service, with significant commitments to original Canadian programming and very substantial budget to commission, co-produce and acquire programming from the independent production sector in the years ahead.

26733 We believe our application speaks for itself.

26734 We look forward to seeing you in Phase IV, and thank you.

26735 THE CHAIRPERSON: Thank you very much, Mr. Fraser.

26736 I don't believe we have any questions.

26737 We will see you at Phase IV, for the second semester, before you get your A+.

--- Laughter / Rires

26738 MR. CUSSONS: Madam Chair, we have been advised that The Justice Channel have decided not to actually appear during this particular phase of our hearing.

26739 So, that being the case, I would like to invite The Sports Network to come forward and make their presentation, please.

26740 THE CHAIRPERSON: Go ahead when you are ready.

INTERVENTION / INTERVENTION

26741 MR. BRACE: Thank you, Madam Chair.

26742 Good afternoon, Madam Chair and Commissioners.

26743 I'm Rick Brace, President, NetStar Sports, and Senior Vice-President of CTV Sports and the Outdoor Life Network.

26744 May I introduce the panel, for our Phase II appearance.

26745 On my left -- we have changed the seating plan just a little, from the script -- on my left is Trina McQueen, Executive Vice-President of CTV Inc.

26746 On my right is Nikki Moffat, Vice-President, Finance, CTV Specialty Operations.

26747 Next to Nikki is Monique McAlister of Goodman Phillips & Vineberg.

26748 We are pleased to address the Commission on behalf of TSN's Category 1 application for WSN, the Women's Sports Network, and to provide you, as requested, with the details of our plans for original Canadian programming.

26749 Our philosophy in developing WSN was to create an attractive, affordable service that will add diversity to the broadcast mosaic.

26750 Integral to our service is a significant commitment to Canadian content, along with an innovative approach to interactivity.

26751 A key component to our plan is to launch WSN with a healthy amount of Canadian original programming -- in Year 1, a minimum of 700 hours, as set out in Schedule 10 of our application.

26752 Details of the methodology are attached.

26753 That minimum commitment remains in Years 2 through 7.

26754 Throughout our licence term, our expenditures on Canadian programs will continue to rise. These funds will be used to increase the quality of our original hours, as well as funding normal inflationary costs.

26755 The combination of growth in financial investment and a solid minimum hour commitment to Canadian original programming will ensure that WSN continues to be an attractive service for our viewers, as well as consistently setting higher standards for the new programs that we develop.

26756 We believe that this, along with affordable subscription rates, will be the key to building digital.

26757 Thank you.

26758 THE CHAIRPERSON: Thank you, Mr. Brace and your colleagues.

26759 I don't believe we have any questions.

26760 Thank you for your presentation.

26761 MR. BRACE: Thank you.

26762 THE CHAIRPERSON: We look forward to seeing you again.

26763 MR. CUSSONS: I would now like to invite KRG Television Limited to come forward and present their intervention, please.

26764 Mr. Koehler...?

--- Pause / Pause

26765 Perhaps Mr. Koehler has decided not to appear in this particular phase, Madam Chair.

26766 THE CHAIRPERSON: Thank you, Mr. Secretary.

26767 This would appear, then, to complete Phase II of the process and, after a short break, we will begin with Phase III.

26768 SPTV has graciously accepted to fill the rest of our day. We also are pleased that we will have a broadly-based association to establish the beginning of the process in Phase III.

26769 So, we will take a 10-minute break to allow them to get organized and we will proceed.

26770 Before we do that, I will read into the record the exact questions that are expected of applicants at Phase IV.

26771 So, the first one would be: To which two or three of any Category 1 proposals should the Commission give priority and why?

26772 Auxquels de vos deux ou trois projets de Catégorie 1 le Conseil devrait-il donner priorité et pourquoi?

26773 The second question: If the Commission licensed any one of your Category 1 proposals, what Category 1 proposal of any other applicant, if licensed, would jeopardize the feasibility of the business plan for your licence Category 1 service? And we would like a list of your proposal and the proposals that would create a problem.

26774 Si le Conseil vous octroyait une licence pour un ou l'autre de vos projets de Catégorie 1, quel autre projet de Catégorie 1 d'un autre requérant qui recevrait aussi une licence remettrait en question la faisabilité de votre plan d'affaires pour votre projet de Catégorie 1 autorisé et nous nous attendons à vos projets et la liste des projets qui vous causera des problèmes.

26775 The third question: How many Category 1 proposals should the Commission licence in the English-language; in the French-language?

26776 Combien de projets de Catégorie 1 le Conseil devrait autoriser de langue française, de langue anglaise?

26777 My understanding is that these questions will be on our Web site, as of today -- and they will, obviously, be in the transcript, as well -- for your guidance, some days from now, because Phase III will take some time.

26778 We will now take a 10-minute -- we thank the applicants for appearing today, homework in hand, and we will take a 10-minute break before beginning with Phase III.

26779 And we will proceed tomorrow with the list of interventions in the order that you are aware of, and I repeat: Those of you who were to appear for the following -- on the following day, should keep track of the schedule because we may hear some intervenors, depending on how quickly the process develops, before the day on which they were tentatively agendaized.

--- Upon recessing at 1540 / Suspension à 1540

--- Upon resuming at 1555 / Reprise à 1555

PHASE III

26780 THE CHAIRPERSON: Welcome back to our hearing and the beginning of Phase III.

26781 Nous vous souhaitons la bienvenue à la Phase III maintenant de notre audience.

26782 Mr. Secretary, please.

26783 MR. CUSSONS: Thank you, Madam Chair.

26784 Just a reminder that in this phase that Intervenors have 10 minutes to present their interventions. Our first one is the Specialty and Premium Television Association. We have Ms Logan and Mr. Mota. Welcome to our hearing.

INTERVENTION / INTERVENTION

26785 MS LOGAN: Good afternoon, Madam Chair and members of the Commission. My name is Jane Logan and I am the President and CEO of the Specialty and Premium Television Association. With me is Mario Mota, SPTV's Director of Policy and Regulatory Affairs.

26786 SPTV appreciates the opportunity to appear before you today as the industry association that represents the majority of Canadian specialty, pay and pay-per-view television networks. Our 40 members range from networks held by large corporate groups to public broadcasters to independents and stand-alones, including third-language networks.

26787 Les observations que nous ferons aujourd'hui portent sur des questions de politique, de concurrence et de marché très importantes par rapport à l'autorisation et au lancement de nouveaux services de programmation numériques canadiens.

26788 A notre avis un contexte de lancement approprié est essentiel à la préparation d'un avenir prometteur pour la télévision numérique, tant au point de vue des consommateurs que celui des programmeurs et des distributeurs. Comme la distribution numérique est en pleine croissance, les politiques qui seront mises en place au cours de la présente instance façonneront en même temps l'avenir du système de radiodiffusion canadien.

26789 The licensing of a new wave of Canadian specialty services for digital distribution will provide Canadians with an unprecedented diversity of television choices. Programmers and broadcasting distribution undertakings alike are banking on consumer interest in digital services to create a groundswell of new digital subscribes. This will create a viable business case for the expansion of viewing choices.

26790 However, rolling out new technology or creating new Canadian programming services are not ends in themselves, but rather a means to continuing and reinforcing important public policy objectives.

26791 And these objectives include providing Canadians with a greater selection of diverse, high-quality television services that are affordable; maximizing the quality of Canadian programming; and fostering a strong Canadian film and television production sector.

26792 Nous avons suivi de près l'audience quant au nombre des licences de Catégorie 1 que le CRTC devrait attribuer. Nous soutenons qu'un minimum de cinq services de langue française et au moins dix services de langue anglaise devraient être autorisés. En effet, nous sommes d'avis que la diversité et l'intérêt du nombre impressionnant de propositions devant vous justifie d'autoriser davantage de services de Catégorie 1 que les dix envisagés au départ.

26793 SPTV would now like to briefly outline four key ingredients we believe are essential to ensuring a vibrant digital distribution future that fulfils the public policy objectives we mentioned earlier.

26794 These ingredients are: Services that offer fresh new concepts to make digital attractive; a co-ordinated launch to make promotion and marketing efforts more effective; broad packaging to ensure affordability; and a level playing field where all licensees have an equal opportunity for success.

26795 First, diverse services. As each applicant has stated, a key success factor for the launch of digital services will be their audience appeal, and their ability to offer something new to Canadians.

26796 The Commission's "one service per genre" policy is an underpinning of this licensing framework. It allows Canadian programming services to make significant contributions to the broadcasting system while ensuring affordability, quality and diversity for consumer. Competition still thrives -- today, nearly 60 distinctive Canadian specialty, pay and pay per view offerings compete for viewers. And they also compete with public broadcasting, conventional television, not to mention foreign networks.

26797 As you have questioned applicants for the past two weeks, you have done an admirable job of ensuring that every proposal meets the test of offering a distinct concept to Canadians.

26798 You have called it "fencing them in" as you have requested precise commitments with respect to program categories and overlap with other services. Good fences make good neighbours. We urge the Commission to use the same rigor for both classes of licences. That is, the test of directly competitive should be identical for Category 1 and Category 2 services, and the "fencing in" as well.

26799 Second, SPTV believes that a single, co-ordinated launch of new digital programming services licensed in this proceeding is critical to maximizing consumer interest in becoming digital subscribers.

26800 A single launch will result in the biggest bang for marketing dollars, and it will be easier and less confusing for consumers than adding new services in a staggered way. It will make packaging easier, and a set date also gives distributors a realistic deadline for having those set-top boxes ready in the warehouses and not on back order. The Commissioner has a role to play in setting a September 1 launch date.

26801 The third criteria for a successful launch is great packaging and pricing, so consumers receive top value. After all, they will be evaluating the digital offer based on their current subscriber experience which combines the highest programming quality, and the lowest cable and satellite TV prices in North America.

26802 We are asking you to encourage top-down selling. That means the promotion of broad inclusive packaging at the lowest price per service first, before consumers are offered narrower, more expensive selections. It is the marketing approach that Bell ExpressVu and Star Choice use with great success today. They offer The Works and Platinum packages, respectively, combining almost all services at one great price -- and up to 80 per cent of new subscribers buy in.

26803 Top-down selling will give digital services the chance to build the audience base and the financial base they will need to succeed in this risky digital environment.

26804 "Pick and pay" and "pick a pack" inevitably mean fewer subscribers. To generate the revenue required to maintain quality, the price to the subscriber rises significantly. If the price is held constant, money available for content plummets. So in summary, "pick and pay" or Pick a pack" marketing strategies will dramatically increase consumer prices, weaken distribution levels, reduce advertising and subscription revenue for programming services, and ultimately threaten the survival of programming services and viewing choices.

26805 We believe that pick and pay will diminish consumer choice and not increase it because few, if any, programming services can survive on that basis alone. The math just doesn't work, which is precisely why BDUs in the United States have backed away from pick and pay marketing. Perhaps it is telling that the business plans of nearly all of the Category 1 applications before you are predicated on broad packaging.

26806 The fourth element of a successful launch is a level playing field. We urge you to adopt measures to ensure an equal opportunity for all new licensees. There remains a major imbalance of power between BDUs and programming services. A BDU has the power to make or break a programming service not only with respect to carriage, but also with respect to the other elements of access. These include such things as pricing, packaging and promotion -- keys to survival and success in our business. We submit that these issues are even more critical in the digital distribution environment, which has relatively few subscribers and a still limited channel capacity.

26807 The imbalance of power between BDUs and programming services creates a disincentive for any service to complain about undue preference and undue disadvantage, which is why the current complaints-driven process for addressing anti-competitive behaviour by BDUs yields few complaints.

26808 This disincentive will be even greater as programmers negotiate carriage for Category 2 services. SPTV respectfully asks the Commission to clarify and augment its undue preference provision by listing circumstances in its licensing decision that constitute an undue preference by BDUs. We believe that an ounce of prevention is worth a pound of cure, and this will save all parties from time-consuming disputes when they could be focusing on joint efforts for a successful launch.

26809 We also ask the Commission to preview distributor packaging plans prior to launch, for the same reason.

26810 Pour résumer, cette audience publique nous conduira à l'adoption de politiques qui aideront à façonner l'avenir du système de radiodiffusion canadien. Comme la distribution numérique est en pleine croissance, il importe d'établir dès maintenant les conditions qui assureront la réussite de la télédiffusion numérique au Canada.

26811 Vous avez pu observer au cours des dernières semaines que les télédiffuseurs spécialisés ont hâte d'apporter leur solide contribution à la programmation canadienne. Nous avons recommandé ce que nous croyons être les ingrédients essentiels pour leur permettre de respecter leurs engagements. Nous croyons que notre plan est bon à la fois pour les consommateurs, les programmeurs et les EDR.

26812 In conclusion, we thank you for the opportunity to come before you today to elaborate on our written intervention and some of our recommendations.

26813 We welcome your questions. Merci.

26814 THE CHAIRPERSON: Thank you, Ms Logan, Mr. Mota.

26815 We thank you, of course, for accepting to appear today although seriously out of order. Besides bonus points, that usually ensures skipping an entire grade.

--- Laughter / Rires

26816 THE CHAIRPERSON: Now, I do have some questions for you. It will give us an opportunity -- it is really not a bad circumstance to begin with you. It will give us an opportunity to establish some interesting points of interest as we start Phase III.

26817 I have some questions based on your presentation today and some based on your written intervention.

26818 One of the matters you address is the number of services that the Commission should license and you are more numerically precise about the French market.

26819 In the English market I notice that you think it should be more than 10 and in your written intervention, at paragraph 18, in your view there should be packages with five or more services in the package. So if I combine those two, are you looking at two packages of five or more; three packages of five or more?

26820 You know that 10 isn't right. What do you think it should be?

26821 MS LOGAN: Well, for English services we would like to see at least 10 Category 1 licences.

26822 When it comes to packaging, our real preference, of course, is for top-down selling, which includes the aggressive promotion of all-inclusive packaging and contributes to the broadest possible penetration, the best possible price for consumers and, of course, the best possible financial and subscriber base for the licensees to eventually achieve profitability in this risky digital environment.

26823 So we have suggested five -- a minimum of five services to a package, but our main recommendations on packaging are the top-down approach that places an emphasis on broad, all-inclusive packages.

26824 THE CHAIRPERSON: It's interesting you say five. Presumably the package will contain foreign services as well, or are you speaking here of an only Canadian package, a tier that would contain only Canadian services?

26825 MS LOGAN: Distributors may choose to mix and match the digital services they are currently carrying and construe new packages. We have not assumed that these will only be Canadian services.

26826 Where we are looking for real help from you is to establish that it is not a package if it is two services or three services. There should be at least five.

26827 THE CHAIRPERSON: Of course I would assume that you are envisaging an equal number, at a minimum, of a predominance of Canadian services.

26828 MS LOGAN: Oh, absolutely. In fact, you know, I would not want to suggest that Canadian networks need foreign packaging partners in any way. We have fabulous concepts that have been put before you. Each of them has come to this hearing intending to be drivers and I think we are well beyond the day when foreign packaging partners were needed for lift.

26829 THE CHAIRPERSON: Now, you speak at length in your written intervention and again today about the importance of having a top-down offer, and today I think you characterized it as top-down selling.

26830 I'm not quite clear on what you are envisaging when you say that the BDU should offer a package, a large package or a total package first. Do you mean by that that there would be an incentive commercially to take the entire package or are you looking at a chronology when you say "first"?

26831 MS LOGAN: No. We mean that the biggest and best value should be provided in an all-inclusive package. This is what has been so successful with satellite providers. This is what has been successful in the United States and elsewhere. It is sometimes called platinum, sometimes called the works, the big meal deal, the all-you-can-eat menu, the all-in package, but this should have the lowest average cost per service and be highly attractive to consumers if we are going to achieve broad penetration for these new services and, of course, affordability for consumers.

26832 THE CHAIRPERSON: So the "first" relates to the obvious value-added if one takes a large package or the entire --

26833 MS LOGAN: Absolutely.

26834 THE CHAIRPERSON:  -- or the entire offering, not a seriatim offering?

26835 MR. LOGAN: No, no. It's a value proposition.

26836 THE CHAIRPERSON: You speak in your intervention and today about what you sometimes characterize as creating a level playing field and sometimes as protecting programming services from undue preference or disadvantage.

26837 In your written intervention, I think at paragraph 52 and then again at paragraph 67, you speak of the need for a co-operative collaborative effort if this is going to work successfully.

26838 You also speak of a new era, a new age. We all know that some BDUs, the cable operators for example, will not be in the same position with regard to digital as they were with analog services because there is competition in digital services.

26839 So it seems to us that all the ingredients are there to work at creating an environment that is collaborative and where there is co-operation. However, your conclusion appears to be that the Commission should interpret in advance what undue preference is when in fact this is a regulation, it's a piece of legislation in a sense, and it is quite difficult to fence in in any way what it means in various circumstances.

26840 So rather than your Appendix "B", which is "Circumstances of Undue Preference" which you would offer as a piece of advice that the Commission be prepared to establish, have you or your members thought of the possibility instead of a code that would be established in a co-operative way by the members of the industry that will participate in this new world and that would be chosen by them as their view of what is a co-operative way of behaving to launch services?

26841 MS LOGAN: Certainly. We had discussions with representatives from the Cable Association, we had discussions with some of the BDUs. In fact, there wasn't much interest among distributors, with the exception of Bell ExpressVu, in developing a code. They said "Hey, section 9 works for us", so --

26842 THE CHAIRPERSON: Did you bring this idea to them in the guise of your Appendix "B", which is, "Here is how we will define `undue preference' and when the following occurs you have breached a regulation?

26843 MS LOGAN: Actually, we did not get to first base with distributors, except for, in fact, detailed discussions with ExpressVu, who I understand are currently working on a code.

26844 I think our challenge for this hearing was -- you say it is difficult to fence in and we have not prepared an exhaustive list, but we think these are good illustrations. As we said initially, an ounce of prevention is worth a pound of cure.

26845 The challenge really was to find a way to make these illustrations binding and for all parties to know what the rules of the game are upfront.

26846 THE CHAIRPERSON: We have discussed briefly with some parties instituting a collaborative group to discuss various aspects of the developing world. In fact, in a recent public notice we asked that the industry get together to discuss migration and other issues.

26847 Do you think that after this hearing it may be possible to address these matters in a way that emphasizes collaboration and the incentive for everyone to make this work, rather than by reference to regulation? That possibly would get you further into discussing a way of launching these services to the advantage or to the best -- in a manner that pays back everyone. Because there is more emphasis --

26848 When you talk about undue preference you are talking about law; when you talk about a co-operative/collaborative approach it should lead you down a different path, possibly.

26849 MS LOGAN: We are fully willing to collaborate and co-operate. As I said, we certainly did try to engage in this kind of discussion and collaboration in advance.

26850 I would like to suggest that maybe these are parallel tracks.

26851 We are fully prepared to work on a code. We are deeply concerned that the code be binding.

26852 We thought that one element, in terms of the launch, would be for you to provide these illustrations in your licensing decision. And the reason we picked that mechanism was that you had done that kind of thing in your introduction to the BDU regs, where you had provided illustrations of the kinds of things -- not an exclusive list, but the kinds of things that would qualify.

26853 We are fully prepared to flesh out this list with the cable and satellite and wireless industries.

26854 THE CHAIRPERSON: Do you have any suggestions as to how it should be done from the bottom up? Selling top down, but getting along together from the bottom up.

26855 MS LOGAN: Commissioner, it would be extremely helpful if you looked at these suggestions that we have provided in our appendix, and if you endorse them as a starting point, that might give us a basis for beginning. That would be extremely helpful, because I think the process will need that kind of nudge-along from you. Or we will perhaps arrive at something so broad that we have not brought the precision that we are looking for to the exercise.

26856 THE CHAIRPERSON: Various parties have talked about launch dates, and you address at length, as do some others, the need for the wholesale rates to be respected, et cetera.

26857 To you, that would certainly not be circumstances of undue preference, would it? It is not in your list. They would be matters that, unless we imposed them, would have to be discussed and some agreement found. Because I can't see a co-ordinated launch date if there isn't some agreement as to how the parties will work toward it by actually coming to agreements -- to commercial agreements.

26858 If everybody agrees that there has to be a common launch date, isn't it difficult to envisage that occurring easily if distributors and programmers and programming undertakings have not come to terms in some way with parameters as to how this is going to be done?

26859 Because everybody has had experiences now. We can't just simply order how things are to be done. Well, I suppose we could, but it may not be the best way to approach it. Rather than to learn to find a code --

26860 You know, we have codes that have been agreed to about sexual stereotyping and about violence. I don't see why we can't also devise one that would address the manner in which distributors and programmers find a way, since they have eventually the same goals -- and it is a new world, again. I mean, we talk about the unevenness of the negotiating power. Right now the cable operators are not in the same position they were in before. So it would seem a perfect occasion to find some way of establishing a way of launching these services quickly, together and without complaints that the Commission has to post facto sort out.

26861 MS LOGAN: I would certainly be very agreeable to marshal SPTV's resources to work on such a binding code, obviously with the intention that all of these understandings be in place before licensing decisions are rendered and the great race for carriage begins.

26862 THE CHAIRPERSON: Your association won't disappear whether or not your members get all the licences they ask for, so I don't think we have to wait until we know who the parties are to start thinking --

26863 MS LOGAN: No, no. Absolutely. My point -- and I think I expressed it poorly -- was that in fact we should make sure this code is developed before the race to negotiate carriage begins.

26864 THE CHAIRPERSON: I am just using the word "code" because we have codes in the industry already, and some of them are adhered to, basically, in a self-regulatory manner, with the Commission, of course, having the responsibility to get involved if there is a problem. But those have been developed and they are adhered to, so it is not something that is unknown in the industry, trying to sort out together how best to reach a goal.

26865 We will hear, of course, from other parties --

26866 MS LOGAN: Indeed.

26867 THE CHAIRPERSON: So this would be, to me, a different line of approach than establishing ahead what is undue preference under regulation, which should be an instrument of last resort.

26868 That doesn't mean that some of the matters you propose wouldn't fit in under a more self-accepted, self-developed code by members of the industry, but we will have occasion to hear from other parties during this phase of the hearing.

26869 With regard to interactivity, some problems -- or potential problems -- are addressed by you. They have been addressed by other parties as well. You address them, of course, in a more finely developed way.

26870 Do you think that any of these problems -- and how to handle them -- need to be developed ahead of second level or set-top interactivity being in place?

26871 I am asking you because suggestions have been made that maybe eventually we would need a specific process to look at how this is developing in the relationship between distributors and programming undertakings.

26872 MS LOGAN: Certainly one of our recommendations is that the right to interactivity is given to every licensee, and that BDUs be required to distribute a licensed digital service's interactive data stream.

26873 I think you have heard a lot of applications where the real creative genius and, in fact, some of the revenue streams and certainly a large part of their appeal depend on coming into this new digital world and trying to be leaders and pioneers in the area of interactivity. So we would like to see that basic ability for every licensee to be able to have the option of providing an interactive data stream recognized at this hearing.

26874 THE CHAIRPERSON: Do you think in any way, because of the very embryonic industry with regard to the use of channel capacity and set-top boxes for services that would actually be revenue generating, that there is a need, if the industry were to sit down and discuss together -- and I am using your words at page 8, focusing on joint efforts for a successful launch -- that it is necessary to involve this aspect of it at this stage, or whether it could be left to a further process?

26875 MS LOGAN: We don't have all the answers on interactivity, and I am not sure we have a consensus in the industry on another process yet.

26876 We have had exchanges, already, with at least one distributor. StarChoice held a seminar, for our membership, on its Liberate technology platform, so that applicants could learn how to use it and plan their applications in line with some of its features.

26877 We would certainly be willing to participate in any process you are suggesting.

26878 THE CHAIRPERSON: No; my question was more: Do you think that the use of it and the problems, or the questions, or concerns, that it will raise, which are elaborated in your written intervention, are at a stage that will make it easy to sort them out and that they may, in fact, too, early, throw another problem in the face of the difficulty of launching, that that's what should be focused on, at the moment, and it's not so urgent as to be all sorted out, at this stage?

26879 MS LOGAN: You are absolutely right. There is so much in the digital world that we don't know, today. We don't know what technology standards will be put in place. We don't really understand how the business cases will eventually develop. We have a lot to figure out and discuss.

26880 So, in a sense, it's urgent. But, in another sense, some of these answers will have to wait until we have more information about the technology, in particular.

26881 THE CHAIRPERSON: Yes; it would appear from the presentations we have heard that it's still difficult to know exactly when and how this will develop. So, it may well be, if we want to solve everything, this early, your joint efforts for a successful launch may be impeded by the difficulties brought in unnecessarily when --

26882 MS LOGAN: Very true. Absolutely.

26883 THE CHAIRPERSON:  -- we are all, more or less, aware of what the other problems are and they can be reduced to something that, with goodwill, may not look so complicated.

26884 Your comments on the French-language foreign services raise a question in my mind.

26885 At the bottom of page 21 of your written intervention, paragraph 95, you speak about the Canadian broadcasting system having matured beyond a reliance on foreign services as packaging partners to help sell Canadian programming services, and your last sentence is:

This is true for Canadian English-, French- and third-language services.  (As read)

26886 What leads you to conclude that whatever lift may be brought, or afforded, by having some foreign services paired with Canadian services in the French market has occurred, when you look at the difference between the English market and the French market, with regard to the use of foreign services as drivers or additional appeal?

26887 MS LOGAN: I think we base this conclusion on the fact that there are 51 applications for French-language or bilingual services before you, in both Category 1 and 2, and what we see in those French-language applications are great proposals with Canadian contributions. And, also, the best of foreign programming, and this French-language programming from around the world, certainly, there are no barriers to it, within the contest of these Canadian applications.

26888 The question, really, is: If you need this programming to give lift, why not house it within a Canadian service that is willing to sit before you here this week and say, "Yes, we will also make commitments to original Canadian production; yes, we will also make commitments to the Canadian independent production sector; yes, we will agree to the various codes and to respect privacy, et cetera. Why would you have this programming come in under the guise of a foreign service that is not here making those contributions?"

26889 THE CHAIRPERSON: And it is your view that the argument you are making about the maturity of this service and a number of applications and -- the maturity not of the service but of the industry -- that the argument is the same in the French-language market as it is in the English market --

26890 MS LOGAN: Yes, it is.

26891 THE CHAIRPERSON:  -- English-language market?

26892 MS LOGAN: Yes, it is.

26893 THE CHAIRPERSON: And what would be your reason to come to this conclusion, in light of the fact that foreign services have always been paired with Canadian services, despite the fact that Canadian services also have foreign-language programming nested, or imbedded, into their Canadian service?

26894 MS LOGAN: I think there's a particular aspect of the French-language market where, in fact, there is a huge preference for programming produced by Canadians and that the viewing levels to Canadian programming are extremely strong and, based on this preference for Canadian content, which we see again and again in all the viewing data, it is, indeed, hard to conclude that foreign networks which offer absolutely none of this can be as appealing and that they will provide lift.

26895 THE CHAIRPERSON: Ms Logan, I thank you, again, for your co-operation, and we expect you to get some homework going for your members and we hope that all other parts of the industry that will appear before us will also follow the lead and get some homework so people come down to what it is they don't want or they want and see where they can sort it out without us, unless there's no possibility after a noble effort.

26896 We thank you, again, and I think some of my colleagues have questions. Madam Bertrand has.

26897 CHAIRPERSON OF THE COMMISSION: Good afternoon.

26898 MS LOGAN: Good afternoon.

26899 CHAIRPERSON OF THE COMMISSION: Listening to you and having read your intervention and having been here, and reading even before getting here, I want to come back to that inclusive-type of package --

26900 MS LOGAN: Sure.

26901 CHAIRPERSON OF THE COMMISSION:  -- and the platinum package. And, certainly, I can understand that all the market studies, and even the reality tests, show that customers, if led to make the good choice of a platinum package, if the "rapport qualité-prix" is right --

26902 MS LOGAN: Exactly.

26903 CHAIRPERSON OF THE COMMISSION:  -- they will go for it. But one thing seems to be sure, at the same time, is when they do that, they have the choice.

26904 So what I have difficulty to reconcile -- but it could be that I have misunderstood what you meant -- is the inclusive package you are talking about. It's almost like the consumer will not be offered a choice if you have your pick, that you would prefer that all Category 1s, either in French, with a French package, or in English, in an English package, would come at such, you know, a low price that, automatically, that would be only way to package it, and it would be all together.

26905 MS LOGAN: No.

26906 CHAIRPERSON OF THE COMMISSION: I'm a bit concerned of that, and I want to hear what you have to say on that.

26907 MS LOGAN: Well, absolutely not, and thank you for the opportunity to clarify, because we would fully expect the offer of thematic packages, we would fully expect all kinds of other packages, as we have said, with fibre more networks, to also be offered to consumers. And it's not that we are 100 per cent against pick-and-pay, for example. We are saying it can't be the first option. It can't be the only option. We would like to see the emphasis on these affordable, great-value packages, first, be inclusive, the thematic packages, the family packs or general interest packs. We would like to see an emphasis on those, first.

26908 CHAIRPERSON OF THE COMMISSION: But what do you mean by "emphasis on those first"?

26909 Do you mean getting into the market that would need to be for the first two years? That kind of package first. Then, eventually, down the road, we could have another approach?

26910 I'm not sure I understand exactly what you mean here. Because, you know, what I'm trying to get here is what kind of choice the consumer that may have been listening to us or --

26911 MS LOGAN: Right.

26912 CHAIRPERSON OF THE COMMISSION:  -- who knows -- but one day we will have to talk to viewers, and I'm wondering what kind of choice you are forging in your mind for them.

26913 MS LOGAN: These are not sequential choices that would roll out with time delays. These would all be offered simultaneously.

26914 One of the things about the digital environment, where you have the low subscriber base, is that we really want to make it affordable and we really want all Canadians to be able to participate in this new digital world and have access to these new digital services, and we feel very strongly that the all-inclusive packages do that. Which isn't to say that the other packaging options won't be offered at the same time.

26915 Now, if you are asking: Well then, what do I mean by the aggressive promotion of all inclusive, certainly not to the exclusion of other options. But we would rather see advertising programs that say: Here's your best option for great values. See all the Canadian services you want. Then an advertising programs that says: Hey, we offer choice. You only have to pick two.

26916 That would really not work in terms of our industry.

26917 CHAIRPERSON OF THE COMMISSION: So it's not in reality what the viewer or the subscriber will be able to do. It's the way we'll present their choice to the consumer?

26918 MS LOGAN: Yes, it is.

26919 CHAIRPERSON OF THE COMMISSION: Which angle will be put rather than the other is what you are meaning?

26920 MS LOGAN: Exactly. We really think that the satellite service providers today that offer a full range of choices and all kinds of packages, almost endless choice with addressability, have done a super job in providing variety of choice and also in providing big value in the big packages. That's the kind of thing we would like to see more of.

26921 CHAIRPERSON OF THE COMMISSION: Thank you. That clarifies my --

26922 THE CHAIRPERSON: And if I may, I believe that your position is that each service should have the power, have reserved to itself the power to say this is the only way I want to be put forward.

26923 MS LOGAN: Yes. You have given, in fact, Category 1 services, you have stipulated in your licensing framework that they should not be offered exclusively on a pick and pay basis, that they should all form part of the package. We think that's appropriate for Category 2 as well.

26924 We think it would be in fact the wrong situation for a distributor to say, "well, I have offered Channel B package. I told them they could go pick and pay, so that's my access offer and that's it."

26925 Really, a serious access offer must include packaging that allows the service in fact to have a hope in the future of achieving its goals.

26926 THE CHAIRPERSON: I was referring to your comment which goes beyond what the Commission has said in its call. At paragraph 25 you say, quote:

"Any digital programming services must have the discretion of whether to agree to distribution of its service on a pick and pay or pick a pack basis." (As read)

26927 So I gather from that you are saying the programming undertaking should have the right to say the only way you can market me is in a tier, not pick a pack?

26928 MS LOGAN: Yes. We got this idea in fact from the American networks, the big American networks that have in every contract they have signed with every cable and satellite distributor across North America a clause which says we must be carried in packages of five or more.

26929 These are services, for example, like A&E which have broad distribution, but which do not want to be high-priced elitist services, and which reserve the right to do what's best for their business case. We feel Canadian networks should have this same option.

26930 THE CHAIRPERSON: Thank you.

26931 Commissioner Wilson.

26932 COMMISSIONER WILSON: Ms Logan, are you suggesting that the Commission prescribe how the services are packaged or the right that they reserve to themselves to decide how they will be offered in a package and what size that package is and that we should also prescribe that more emphasis should be placed on the marketing of the large packages, as opposed to the small packages?

26933 I guess I am struggling a little bit with what you are saying and this sort of goes back to what Commissioner Wylie said about now being a good time to approach the notion of trying to work out something with particularly the cable operators because they are no longer in a dominant position of distribution in digital and if they are investing all of this money theoretically in rebuilding their plant and trying to get their subscribers to take digital, would they not have an equal business incentive to make that work, which means that they might try anything and everything in terms of how they offer those packages because with addressable technology now they can.

26934 I am sort of trying to figure out what -- maybe my colleagues understand it, but it is getting towards the end of the day and I am a little tired, so maybe I am just a little --

26935 MS LOGAN: I think we are looking for some encouragement from the Commission that this is an appropriate way to proceed, that this meets your launch vision as well as ours, that every effort is made to maximize the penetration of the new services.

26936 COMMISSIONER WILSON: Including saying large packages and you should advertise those first?

26937 MS LOGAN: Or words to that effect. There should be an emphasis on creating big, affordable value for consumers in the packaging plants.

26938 COMMISSIONER WILSON: Because I actually had this discussion with Ms Rankin from WETV and was asking her about the fact that digital presents this extraordinary opportunity now for the consumer to be able to choose what they want. I think we as a Commission even expressed that in the licensing framework, the benefits that digital will bring to the consumer and it certainly seems to be something that they have been waiting for.

26939 So it seems to me -- I am trying to find the balance in my mind between the kind of protection that you are seeking as businesses and the ability to fulfil the desires of the consumer through the digital technology and what it can bring to them.

26940 MS LOGAN: Well, if we start with consumers, the digital world will offer all kinds of choice for consumers, all kinds of neat new services. The interactivity we have heard here is in fact innovative and exciting and we have a real concern that some of that could be priced outside the range of your average Canadian consumer.

26941 If the services were marketed for $5 or $10 each this would be a dreadful scenario where the average Canadian wouldn't in fact get to participate in this digital world. So we are saying, you know, most of the applications you have seen before you, nearly all of them for Category 1 are predicated on broad penetration and you have seen the numbers and, in fact, you have questioned them. You have seen the wholesale fees and the way we achieve that is through broad penetration.

26942 We are looking for your help in making it happen. You know, I am not saying it's that difficult because the satellite distributors have done a fabulous job of it. They are doing it naturally.

26943 COMMISSIONER WILSON: So why would the cable operators do it naturally, which is partly my point.

26944 MS LOGAN: Well, in fact, they may be trying to --

26945 COMMISSIONER WILSON: If they have been investing in that technology, and I am not here to make their case, I am looking forward to having the opportunity to talking with them as well, but why would it not be in their interest to do that?

26946 MS LOGAN: I would suggest it is in their interest.

26947 COMMISSIONER WILSON: But they need to be pushed in the right direction?

26948 MS LOGAN: Well, of course, every distributor will want to distinguish its offer from those that are already available. We have to be -- on behalf of the industry, we have to take into account all the various CCTA conventions we have gone to, where we have heard over and over again the vision for the future. Frankly, it hasn't always been this top down, all inclusive get Canadians to buy more. So that's a concern and we are reacting to that.

26949 COMMISSIONER WILSON: Thanks.

26950 CHAIRPERSON OF THE COMMISSION: May I? I would like to pursue this because there has been many of people already who have brought forward that going into that new world we should not import from the analog world everything that was like the rules.

26951 MS LOGAN: That's right.

26952 CHAIRPERSON OF THE COMMISSION: I read there that we should import whatever is necessary and essential in order to keep a rich broadcasting system, but what did belong to what was particular to the analog world should not kind of be imported or transferred.

26953 I'm not clear on if distributors, be it the ones that have the most subscribers today in the digital, which are the DTH, but eventually the cable industry, why wouldn't they push the selling of the boxes as much as the programmers would be interested in getting subscribers?

26954 I don't see why in this new world there isn't more incentive really to get the boxes out there, because at the same time as those boxes bring the services it also brings new types of businesses and the distributor has really all interest in order to deploy those boxes and to really get the subscriber interested.

26955 So I'm not clear on why there isn't a business case in itself. It's almost like you are saying, going into the digital there is only the specialty channels who have that interest and the distributors don't really have that interest. That is how -- if I push what I hear what you are saying to its limit.

26956 I know, I'm sure I'm playing the devil's advocate here, but I want to hear exactly what are your thoughts and why do you feel the way you are feeling and kind of recommending or advising the Commission the way you are today.

26957 MS LOGAN: Well, you are absolutely right. It is fundamental common sense and business sense that every distributor should want to maximize the sale of services and all of that.

26958 Yet we have an unfortunate experience that gives us pause, and it is the experience of Look TV that has in fact been out in the marketplace with such a desire to differentiate itself from the incumbents that it has been running advertising saying "Take only 10." You know, "With us you can reduce the number of services you take."

26959 This is not a model -- I mean, it works fine for Look because they have incredibly low penetration so it hasn't hurt our industry yet, but if you spread that kind of model over eight million subscribers or three or four million subscribers, there would be repercussions.

26960 Certainly the Look model is not something that would be healthy for these new digital licences because their wholesale fees and their affordability is predicated on broad penetration and much higher levels of penetration than the Look model gives to the networks it offers today.

26961 CHAIRPERSON OF THE COMMISSION: But you will agree that the Look model is based also on technological capacity or incapacity in comparison to the other players, so that they are playing in the market advantages, that are somehow limitations too, of what they can really offer.

26962 You know, it seems to me that I recognize that they have a different approach, but that approach is also based on a different situation, which is a technological one. They don't have the same capacity as the cable distributors and neither the DTH. So they are trying to play that in the market, otherwise they wouldn't make any noise, and even if they are playing that, they are still with a very small portion of the subscribers. They haven't been that successful.

26963 My concern is, why do you see the situation of Look, which is almost like an exception in the whole system as we speak today, as being the ultimate threat to the kind of principles that have been established in the system up to now and that would prevent -- or, you know, kind of not give the opportunity of, in the new world, getting a more collaborative approach between distributors and programmers?

26964 MS LOGAN: Well, I guess the Look experience has made us concerned. What if others followed suit with a competitive response? What then?

26965 We know that Pick-a-Pack or Pick-and-Pay pricing is a double-edged sword for us. We would have to offer our networks at such high prices that the consumers would be angry and frustrated, or if we kept a low wholesale fee, as we have for broad packages, in fact there would be no business case at all for the services and they would go out of business, so again the consumers would lose and obviously we would lose too.

26966 So that is the concern that there might be this follow suit.

26967 And, you know, maybe our concern is misplaced, maybe it is. We were looking for your encouragement to say "Yes, ensure Canadian consumers get affordable big packages; ensure that these new digital offerings are within reach of the average Canadian through the big value pricing that only broad packaging can afford. Then obviously we would also be offering the services in smaller packages, et cetera, for those who prefer those options.

26968 CHAIRPERSON OF THE COMMISSION: Thank you.

26969 THE CHAIRPERSON: Ms Logan, given less capacity constraints -- which nothing is unlimited I suppose -- what is obvious to you and you think should be obvious to us, why should it not be obvious to all distributors, which is selling the most services and satisfying the consumer in the less rambunctious way possible.

26970 MS LOGAN: Well, you know, indeed we hope it is. We do hope it's obvious to all distributors. I think we would be foolish to appear before you without taking these words of caution.

26971 The Cable Association is coming forward with a whole lot of marketing information that has nothing to do with broad packaging. They have focused on Pick-and-Pay. That is where their market research is. We have to respond to that and we have to respond to all the speeches at the cable conventions where they would appear to be telegraphing that their interpretation of consumer choice is a narrower choice.

26972 THE CHAIRPERSON: Well, that has been, to use the vernacular, the buzzword, hasn't it?

26973 MS LOGAN: It has, of course.

26974 THE CHAIRPERSON: You won't be able to have Pick-and-Pay but it will be something closer because it will be Pick-a-Pack. I mean, we have all used that hope in the last few years.

26975 Now, I know the literature and the surveys and the commercial activities coming out of the United States, which has such a very big market, would appear to show that this doesn't necessarily work, but I find it difficult to believe that if that is the case it won't also be obvious to the cable companies and to the other distributors that their commercial interests are best served in the end.

26976 Unless you can show us that there is a commercial incentive somehow to doing it in a manner that is not conducive to the highest penetration possible by having the highest appeal possible, so that that decoder box gets into the home, or the other distributors, if they are more clever and agree with you, will actually reduce their market share.

26977 MS LOGAN: Well, we are certainly hoping that common sense prevails and that, what you suggest, business sense prevails and that the future is out there to maximize the roll-out of services and the offer and the affordability.

26978 THE CHAIRPERSON: Not my business sense, but your business sense imparted in what we hope can be a collaborative, co-operative way to the distributors.

26979 But I think I have made my point sufficiently.

26980 MS LOGAN: Indeed. Indeed.

26981 THE CHAIRPERSON: We will hear from the distributors as well as to -- because it is somewhat sad to get excited about all the lovely proposals we have before us and we shouldn't be limited to 10, we should license more, but then when you come to discuss how these will be sold there seems to be a pall on the whole process because of the belief that there is no way to make it work without heavy regulatory intervention.

26982 MS LOGAN: I think we are really looking for a light hand. We are looking for your encouragement. We are looking for packages of five or more. I think these elements are pretty light.

26983 THE CHAIRPERSON: Commissioner Williams.

26984 COMMISSIONER WILLIAMS: Well, the first big question to this new digital area: Big packages versus survival of the fittest.

26985 Big packages are viewed by some to be consumer unfriendly, particularly people that want to purchase à la carte or from a menu. Packaging appears to help the weaker service and hinders the stronger service because they are all in the same boats, some are drivers and some are riders.

26986 Don't you think that when we are entering a very competitive era, particularly among distributors, that flexibility in packaging is important, that they would have the ability to react to changing markets, the ability to differentiate service offerings, the technological concerns that Françoise alluded to?

26987 Why not have the flexibility in that you can offer both packaging and stand-alone?

26988 I think your offer to offer smaller packages, as long as they are limited to five -- maybe five is still too large a number. I think that when companies are competing aggressively -- and they all have similar goals; everybody wants to maximize the digital opportunity -- you would need that type of flexibility.

26989 I am interested to learn a bit more about why not you, who has to work with all of these distributors, are favouring one distributor's method of marketing over another distributor's method of marketing, when you have to work with all of them.

26990 MS LOGAN: I agree with you that distributors will need flexibility to differentiate their product offerings. They will want to put together packages in different kinds of ways and price them differently. That will be part of the appeal of digital and part of the appeal of having competition in distribution.

26991 So, by all means, we encourage it. In fact, it will make the launch very interesting and a lot of fun.

26992 Certainly, we do expect stand-alone services. We expect that among the Category 1s there will be a number who will say: Thank you for putting me in the all-inclusive package. Thank you for putting me in the theme package. I am also prepared to be stand-alone, and here is my price.

26993 We do expect that price must be, by definition, substantially higher than the huge volume discounts that are afforded in the broader packages. That makes sense.

26994 COMMISSIONER WILLIAMS: So is it in the best interest of your members to focus on one marketing focus, as opposed to whatever is out in the full marketplace?

26995 MS LOGAN: It is in the best interest of our members, and, I think, of consumers as well to make sure that there are broad, affordable packages.

26996 I mean, all of the applications that you have heard here, and all of their many contributions, are predicated on broad distribution. They are not predicated on the networks being sold at $15 each to the diehard aficionados of their genres.

26997 For services to launch initially at a high price, and in a narrow package, it is a very hard way to build your brand and build your audience and build your contributions to the system at the same time.

26998 COMMISSIONER WILLIAMS: I guess that is my point. Because this is so difficult, maybe that is why the distributors need the ultimate flexibility. Because they are the ones who interface directly with the customers. They are the ones who take the complaints if the packages are not acceptable; the packaging options. And I believe that packaging is a good way to move product as well, but so is the stand-alone.

26999 I know that when I was a distributor, the largest complaint we got on a regular basis was: When can we just pick the channels we want? They felt they were being manipulated or controlled into packages, or that we arranged and packaged them in such a way that would appeal to different members of their family, so that they had to buy the most possible product from us. And to some extent that was true.

27000 MS LOGAN: Let me be very clear. We are saying that pick and pay should not be the first option and it shouldn't be the only option. But we are not against packaging flexibility. I think that is going to be one of the delights of the digital world.

27001 COMMISSIONER WILLIAMS: Except you say a minimum of five services in a package. What if it is a minimum of one service in a package, or two? Or maybe it is one specialty channel and an Internet service, for example.

27002 There could be different ways of packaging, other than just among the 87 potential contenders here.

27003 MS LOGAN: It would be very hard for a Category 1 licensee to achieve broad penetration exclusively in a narrow package. And the business plans depend on broad penetration to fulfil the commitments they are making here. I think that is something we have to keep in mind.

27004 But if you start with top down, so that there are those all-inclusive options, so there are the opportunities, then you can add on narrower packages after that.

27005 Now, we have picked this number five. I guess it wasn't that scientific. But we did look at the rules of thumb being used in the United States, for example, by very, very sharp marketers, and that was their cut-off. They said: That is where we can achieve a price that delivers value and the penetration we need to get enough advertising to keep our costs low. That is what works for us.

27006 COMMISSIONER WILLIAMS: That would be like a package nesting and harvesting off a successful member of that package to form a smaller package.

27007 Like you say later, as things roll out and move along, as opposed to initially.

27008 MS LOGAN: Oh, no. Sorry. Again, thank you for the clarification. I did not mean sequentially; I meant at the same time, within the same consumer offer.

27009 Let's pick The Travel Channel. The Travel Channel may be included in -- here are 30 networks -- or here are, in fact, 100 networks and all this audio and a discount on your telephone service or your Internet service, and they are included in that great big, the works -- all of that package.

27010 And then they are also included in a thematic package, which is aimed at families perhaps. I don't know where travel would --

27011 And then they might be included in something else. They might be included in a couple of thematic packages, depending on where they fit. And they may also, in fact, be offered on a stand-alone basis. Who knows.

27012 That whole offer, you know, could go day one.

27013 But we like the idea of the top down, where the emphasis is on creating the value and the affordability of the big all-inclusive, and that you can't have narrow packages as the first option or the only option.

27014 COMMISSIONER WILLIAMS: Would you consider, rather than the CRTC hearing all of these arguments and deciding on packaging, which is essentially a business decision, that the service providers and the distributors get together and work out what is the most acceptable method for packaging and selling their services? Jointly work it out together.

27015 MS LOGAN: When you talk about jointly working it out, we have been down that road. No, we are clearly coming to you and asking you to set the tone and the guidelines for this hearing, based on the contributions that you are expecting from the networks that have presented their business cases and based on the evidence you have heard about this risky digital environment. We are asking you to set the tone.

27016 COMMISSIONER WILLIAMS: Yes, it would be risky, I would imagine, for both sides in this --

27017 MS LOGAN: Absolutely.

27018 COMMISSIONER WILLIAMS:  -- equation. There are costs and investments --

27019 MS LOGAN: Definitely.

27020 COMMISSIONER WILLIAMS:  -- for the distributors as well.

27021 MS LOGAN: Definitely. But it isn't just about rolling out technology; it is also about the Canadian programming, and the benefits we are talking about, and the public policies we are talking about. It is about having more high quality Canadian shows in front of Canadians and trying to achieve Canadian leadership in interactivity in television programming.

27022 COMMISSIONER WILLIAMS: So you are suggesting, without our intervention, that the distributors and the services would not be able to come to some form of accommodation that would maximize this opportunity?

27023 Are we your only hope?

27024 MS LOGAN: We like to think you have a role to play in helping to make this happen.

27025 If you are saying: Should we just cut you loose to negotiate? No. That is the reason, in fact, we have these recommendations before you.

27026 COMMISSIONER WILLIAMS: Yes, and I imagine the other side will have their set of recommendations as well.

27027 MS LOGAN: Yes. I expect we will have a full exchange, indeed.

27028 COMMISSIONER WILLIAMS: Thank you very much. I have no further questions.

27029 THE CHAIRPERSON: Thank you, Ms Logan. Again, thank you for making sure we put in our hours. Since we have rented this place, we must use it for a full day.

27030 Thank you very much.

27031 We will proceed tomorrow morning down the list of intervenors.

27032 I would like to remind parties, as well, that tomorrow we must adjourn at approximately 11:40, and we will resume at 2:00 p.m.

27033 We may, therefore, sit beyond, let's say, six o'clock to make sure that we hear at least all of the intervenors scheduled for tomorrow. Hopefully we will start down the list for the following day.

27034 So please check with the staff and make sure you are aware of how quickly or slowly the process is developing, so that we have a continuous process in the most effective way possible.

27035 Alors je rappelle à tous que demain nous devrons ajourner à 11 h 40 pour reprendre à 2 heures. Alors nous aurons une pause pour le déjeuner un peu plus longue que d'habitude. Nous siégerons peut-être plus tard que 6 heures pour définitivement entendre tous les intervenants qui doivent être entendus demain et possiblement les intervenants de la journée suivante si c'est possible.

27036 Alors je demanderais à tous de bien surveiller le déroulement de l'audience et si nécessaire d'entrer en contact avec le personnel pour s'assurer que nous avons un déroulement aussi efficace que possible.

27037 Alors bonsoir à tous.

27038 Goodnight to everyone. We will be back at 8:30 tomorrow morning.

27039 Nous reprendrons à 8 h 30 demain matin.

--- Whereupon the hearing adjourned at 1715, to resume

on Wednesday, August 30, 2000 at 0830 / L'audience

est ajournée à 1715, pour reprendre le mercredi

30 août 2000 à 0830