ARCHIVED - Transcript, Hearing 6 April 2011

Volume 3, 6 April 2011

TRANSCRIPT OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION

SUBJECT:

To consider the broadcasting applications for the group-based licence renewals for English-language television groups listed in Broadcasting Notice of Consultation CRTC 2010-952, 2010-952-1, 2010-952-2 and 2010-952-3

HELD AT:

Outaouais Room

Conference Centre

140 Promenade du Portage

Gatineau, Quebec

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.

Canadian Radio-television and Telecommunications Commission

Transcript

To consider the broadcasting applications for the group-based licence renewals for English-language television groups listed in Broadcasting Notice of Consultation CRTC 2010-952, 2010-952-1, 2010-952-2 and 2010-952-3

BEFORE:

Konrad von Finckenstein   Chairperson

Leonard Katz   Commissioner

Rita Cugini   Commissioner

Suzanne Lamarre   Commissioner

Peter Menzies   Commissioner

Tom Pentefountas   Commissioner

Stephen Simpson   Commissioner

ALSO PRESENT:

Jade Roy   Secretary

Joshua Dougherty   Legal Counsel
Valérie Dionne

Sheehan Carter   Hearing Manager

HELD AT:

Outaouais Room

Conference Centre

140 Promenade du Portage

Gatineau, Quebec

April 6, 2011

- iv -

TABLE OF CONTENTS

   PAGE / PARA

PHASE I

PRESENTATION BY:

Shaw Media Inc.   421 / 2527

- vi -

   UNDERTAKINGS

   PAGE / PARA

Undertaking   456 / 2713

Undertaking   463 / 2755

Undertaking   514 / 3033

Undertaking   537 / 3167

Undertaking   542 / 3202

Undertaking   547 / 3244

Undertaking   551 / 3267

Undertaking   558 / 3323

   Gatineau, Quebec

--- Upon commencing on Wednesday, April 6, 2011 at 0900

2523   THE CHAIRPERSON: Good morning.

2524   Madame la Secrétaire, commençons.

2525   THE SECRETARY: We will start today with item 4 on the Agenda, which are applications by Shaw Media Inc. on behalf of the licensees listed in Broadcasting Notice of Consultation CRTC 2010-952 for the renewal and/or the revocation and the issuance of broadcasting licences for the television stations and services listed in the notices for this proceeding.

2526   Please introduce yourself and your colleagues and you have 30 minutes to make your presentation.

PRESENTATION

2527   MR. ROBERTSON: Thank you.

2528   Good morning, Chairman, Vice-Chairs, Commissioners and Commission staff. We will begin by introducing our panel for today's presentation.

2529   My name is Paul Robertson, Group Vice-President of Broadcasting and President of Shaw Media.

2530   In our front row, to your far right is Ken Stein, Senior Vice-President, Corporate and Regulatory Affairs, Shaw Communications. Next to Ken is Jean Brazeau, Senior Vice-President, Regulatory Affairs, Shaw Communications. Next to me is Troy Reeb, Vice-President of News, Shaw Media. This is Charlotte Bell, Vice-President Regulatory and Government Affairs for Shaw Media. Next to Charlotte is Barb Williams, Senior Vice-President of Content for Shaw Media. On the end we have Christine Shipton, Vice-President of Original Content for Shaw Media.

2531   Going back to the second row, again from your right, we have Carol Darling, Vice-President Engineering and Broadcast Systems, Shaw Media. Next to Carol is Ken Goldstein, President Communications Management Inc. Next to Ken is Michael French, Vice-President of Finance for Shaw Media. Completing our panel is Errol Da-Re Senior Vice-President of Sales for Shaw Media. So that's the panel.

2532   We are really pleased to appear before you today and really the first time we have been in front of you as the Shaw Media team to discuss our group licensing renewal.

2533   This team has been together just for 6 months as part of Shaw Media and in this short time we have made substantial and positive progress in bringing the broadcast assets of the former Canwest back to financial health, as well as on broader issues that have challenged our industry for years.

2534   Our vision for Shaw Media is to delight our audiences every minute of the day by offering an extraordinary cross-platform customer experience: We will invest in Global TV with the best Canadian and foreign content; we will create a News powerhouse by building on the success of local broadcasts and Global National; we will continue to build our specialty portfolio, adjusting to changing consumer needs; and we will deliver it all anytime, anywhere.

2535   We have been really encouraged by the new dialogue that has been created among industry colleagues in both content and in distribution on such challenges as creating an authenticated industry solution to TV Everywhere, developing a commercially viable on-demand business, and managing distant signals to monetize all of our audiences.

2536   Now, Mr. Chair, you challenged us to take a leadership role to conclude a deal on Terms of Trade and we did. We want to acknowledge Christine Shipton for her dedication in getting the deal done.

2537   Really --

2538   THE CHAIRPERSON: Thank you, Christine. You were essential to it.

2539   MR. ROBERTSON: Certainly true.

2540   Now, this is the kind of industry leadership that is needed to help navigate a future filled with promise and new challenges. This is the kind of leadership that the CRTC showed in developing a policy framework that provides essential flexibility to programmers.

2541   But we forget, at our peril, the warning signs of the recent past. The industry's vulnerability was made painfully evident in Canwest's inability to survive the last cyclical downturn. Most of the team before you here today lived through Canwest's CCAA proceedings. The fact that they kept Canwest going, while supporting the production community at every step is nothing less than extraordinary.

2542   The lesson that we take from this is that the obligations placed on broadcasters must be considered in light of future downturns and the looming threats of new unregulated competition.

2543   The threat today from over-the-top television is alarming. It stems from major structural shifts in technology and rights exploitation that are permanently reshaping the global broadcast landscape.

2544   Google, Netflix and Hulu launching into the TV industry is only the beginning of what we can expect. Any attempts by these new entrants to characterize their presence here as merely complementary to ours is disingenuous. We are now competing head-to-head with OTT players within all key areas of our business, whether program acquisition, subscription fees and advertising revenues.

2545   Now, these foreign players have minimal distribution costs; no Canadian content requirements, accessibility or other obligations; and the financial ability to outbid us with very deep pockets. Given what we have seen over the last 6 months, we know that they will have a destabilizing impact on the Canadian broadcasting system if they continue to be allowed unfettered access.

2546   This is why the flexibility in the policy framework you described as having "a positive impact on the viability of the Canadian television industry" is now proving to be vital to it. While we have moved into a more positive business cycle, the structural changes remain real and even more considerable.

2547   In our remarks today, we have three critical points we wish to reinforce.

2548   First, maintain the forward-thinking policy you have established. Don't allow it to be watered down by adding complexity to the new requirements.

2549   Number two, set our overall CPE obligations and PNI obligations to reflect historical spend levels.

2550   Three, accept our requests for fine-tuning to COLs for three of our 18 specialty services.

2551   We could have come before you asking for major reductions in obligations; we didn't do that. Instead, we have committed to accept the obligations of the new framework, maintain our benefit commitments, implement terms-of-trade and put the system on a sound and sustainable track.

2552   Barb...?

2553   MS WILLIAMS: Other applicants have already mentioned Netflix's signing just last week of an unprecedented program supply agreement with Paramount for hundreds of hours of exclusive content for distribution in Canada. A week before that, Netflix announced its acquisition of exclusive rights to 26 episodes of the new original production "House of Cards", starring Kevin Spacey. And of course just this morning we would have read about the syndication rights of "Mad Men" that Netflix has picked up at a reported $750,000 an episode.

2554   It may be tempting to dismiss these as one-offs, possibly a concern for pay TV, but not specialty or conventional. But unfortunately, that's not what we see.

2555   The regulatory bargain for private conventional television lies in a model of profits from U.S. programming that then subsidize Canadian content. Netflix's moves strike at the heart of that bargain. Losing control of program rights for U.S. series will only jeopardize our ability to uphold that bargain. Specialty may be even more vulnerable because of its dependence on new original series and library movie titles.

2556   If our best History or Slice programs start to show up on Netflix a couple of days after their original broadcast, will subscribers opt out of cable and be lost to the system? If Showcase loses one of its newest dramas "Burn Notice" or "Covert Affairs", or if Action loses the Bond movie franchise, do we simply lose some ad revenue or will a significant number of subscribers disconnect?

2557   These are the kinds of questions that keep programmers up at night. And from now through to the May screenings and on to the launch of the new broadcast season in September, we will start to get some answers.

2558   And yet we don't want to leave you with the impression that we are only worried about the future. This is an incredibly exciting time to be in broadcasting; the quality of both Canadian and foreign programming has never been better. In an effort to stay ahead of the competition, just last week Global TV was the first in Canada to launch both an iPhone and iPad App providing access to our news programming and many of our top shows.

2559   Through it all, we are striving to be a great Canadian broadcaster and this will always be our top priority.

2560   MR. REEB: Over the past license term, we have operated our conventional stations in compliance with all of your regulations, policies and our specific license obligations. Each of our local stations remains an essential part of the community it serves. We do this through the provision of high quality local newscasts, our contribution to community development, and our fundraising and other charitable activities.

2561   We are proud of our ability to meet and exceed -- often by a wide margin -- the regulatory minimums you have established for local programming. In fact, of the top four stations in Canada in terms of number of hours of local news produced, three are Global TV stations.

2562   Our contributions to local expression are recognized by our viewers and by our colleagues in the industry. This Saturday, RTNDA Canada will hold its Prairie regional awards in Saskatoon and of the 16 honours for excellence in journalism, 10 will go to Global News stations, in markets both large and small. We are understandably thrilled to be recognized once again for the quality of our news coverage.

2563   Despite our much-honoured local programming and some economic improvement in the past year, our smaller market stations continue to struggle financially. The provision of LPIF funding has helped. Indeed, its principal benefit has been the maintenance of local service and, in some cases, the very preservation of a local station. CISA in Lethbridge for instance would likely have lost 9.5 hours of local programming absent LPIF funding.

2564   That said, we have heard the Commission loud and clear on its principle of LPIF, and are working hard to make additional investments in local programming where possible. This includes: the provision of local news seven days a week across all of our small markets; the maintenance of news bureaus in Penticton and Vernon, B.C., as part of our station in Kelowna; the addition of a full-time Halifax-based meteorologist and two additional reporters in New Brunswick, this just in the last year, for Global Maritimes; new "live" coverage capability at Global Regina and Saskatoon; and the addition of a new 10:00 p.m. weekend newscast at Global Winnipeg.

2565   These examples demonstrate that LPIF support is playing an important role in the production of local programming across the country, much of which would otherwise have been at risk of being lost.

2566   MS SHIPTON: We work closely with independent producers to bring Canadians the best of what they have to offer and we consistently give such productions centre stage in our programming scheduleS.

2567   For over a decade the independent production community has been focused on two objectives. One, to reinstate a Canadian programming spending requirement on conventional television; and, two, to conclude an agreement on Terms of Trade. Both of these objectives have now been met. In addition, the Commission's framework now imposes a 75 percent PNI spend requirement to independent producers.

2568   Not only do independent producers now have a new guaranteed spending minimum in the all important doc and drama categories, but they now also have guarantees on the nature of their business arrangements with us. In light of this, accepting our requests for removal of independent production requirements on individual specialty services is both reasonable and consistent with the flexibility inherent in the new policy framework.

2569   We will continue to invest in Canadian content which has been extremely successful both north and south of the border. "Rookie Blue" premiered on Global and ABC last summer and became one of the most watched Canadian dramas in over 10 years. It is returning for a second season alongside "The Hot Zone", our second original drama series to be picked up by ABC, which will also air in simulcast this summer. We are proud of all of our Canadian commissioned shows, including "Canada Sings", "Holmes on Homes", "Museum Secrets", "Til Debt do us Part" and "Top Chef Canada".

2570   We have a long history of working with and supporting independent producers from all regions across Canada. Right now on our channels four of our biggest hits come from outside of Ontario: "Ice Pilots" from Onmi Films shooting in the Northwest Territories; "Endgame" from Thunderbird Films in B.C.; and "Chuck's Day's Off" and "Property Shop", both from Whalley Abbey in Montreal.

2571   Despite the challenges of the last years, we have made it a point of pride to continue to visit all key markets, festivals and conventions across the country. It's clear to us that mandated regional production quotas are not necessary or desirable. The proof is on our schedules and in our continued strong relationships with producers from every province.

2572   MS BELL: Good morning, Commissioners. Here are the changes that we have proposed to our licences:

2573   As long as LPIF continues to exist, it must be administered efficiently, effectively and, most important, fairly. To that end, we believe that the criteria for determining LPIF eligibility in the context of minority language stations such as CKMI in Montreal, a station operating in an English-language market smaller than Winnipeg, should be revised.

2574   Currently, LPIF funding is available to stations operating in non-metropolitan markets, which are defined as those:

"...in which the population with knowledge of the official language of the station is less than one million."

2575   It is our view that the "knowledge of the official language" criterion does not accurately reflect media use and that it exaggerates the potential reach of minority-language stations like CKMI.

2576   Rather, we believe that "language spoken at home" would be a more appropriate metric on which to define "non-metropolitan markets." Under such a definition, stations like CKMI, whose potential audience falls far below the threshold of one million viewers, would be eligible for LPIF funding.

2577   This would also be consistent with the policies of the Commissioner of Official Languages in terms of providing service in minority language markets.

2578   We are asking the Commission to consider specific amendments for three of our specialty licences: Showcase, Slice and TVtropolis. These amendments would grant us greater flexibility to provide Canadians with the best available content, while also ensuring the continued viability of these services.

2579   Currently, U.S. programming is limited to no more than 10 percent of Showcase's overall programming. We are asking to increase that number to 20 percent of Showcase's schedule. Now, I want to be clear, we are not requesting a change to the requirement for 95 percent of the schedule to focus on drama programming as per the nature of service, or to the requirement that programming from 7:00 to 10:00 p.m. be 100 percent Canadian.

2580   We expect that approval of this amendment would lead to increased revenues, which would in turn increase spending on Canadian content in future years.

2581   Next, we propose an amendment to the licence for Slice which would decrease its Canadian exhibition requirements from 82.5 percent to 60 percent of the broadcast year and evening broadcast period. No other non-news specialty service is subject to such a high requirement and, in fact, the current Canadian content requirement is 23 basis points higher than the average exhibition requirement for any Category "A" service. Even third parties such as the CMPA and ACTRA have agreed that the licence is an outlier in the system.

2582   In our opinion, the current requirement places an undue burden on Slice and, therefore, consistent with one of the key thrusts of the policy framework, we hope the Commission agrees to bring its Canadian content requirements in line with similar services.

2583   Like Showcase and Slice, TVtropolis' financial performance has been negatively impacted by the current conditions of its license, which restrict all scripted television series to those copyrighted at least 10 years prior to the year of broadcast.

2584   We propose amending the condition of license restriction to 50 percent of scripted television series programming. In making this request, we note that such copyright restrictions are based on the myth that older viewers only want to watch older shows. We therefore hope the Commission agrees to grant the proposed amendment, as TVtropolis would then be able to attract the demographic it originally set out to serve by scheduling its programming in a manner that better reflects the interest of older viewers.

2585   MR. ROBERTSON: In conclusion, we believe that three key requests of the Commission are essential to our future.

2586   First, that you stand firm on the policy framework you have created and not water it down.

2587   Second, that you fix our CPE and PNI commitments at levels reflective of historical spending.

2588   Third, that you grant our reasonable requests for COL changes to only three of our 18 specialty services.

2589   We are proud to be Canadian broadcasters. The 2,000 people of Shaw Media want nothing more than to create and showcase great Canadian content to all our audiences, but we also know firsthand how fragile the system is. A major broadcaster failing less than two years ago; we should not fool ourselves into thinking it could not happen again if we don't get it right.

2590   Thank you. We look forward to your questions.

2591   THE CHAIRPERSON: Thank you for your presentation.

2592   First of all, some procedural issues. We asked you, like everybody else, to do certain CPE and PNI numbers for us. If you have done that we will deal with those in the in camera portion, but I would appreciate it if you could give it now to staff.

2593   MS BELL: It's already done. We have given it to them.

2594   THE CHAIRPERSON: Wonderful. Charlotte, as usual, you are a step ahead of me. Thank you. Whenever we are finished it we will go into in camera as we did with the other broadcasters.

2595   First of all, like everybody else, I commend you for doing the Terms of Trade Agreement, and if you were the driving force you deserve particular thanks. I think it's great that that's out of the way and that you and the industry hopefully on that basis will have a much more easy time of coming to agreement on the various contracts between you.

2596   Before we get onto the main, let me just deal with a couple of things.

2597   Because you have gone to CCAA, et cetera, there are certain things that are offside, understandably so. When you are fighting for survival regulatory compliance is not key on your mind. But I understand on Mystery, History, TVtropolis, BC Canada and Showcase Diva you are non-compliant with the Cancon requirements.

2598   Can you comment on that, please?

2599   MS BELL: Absolutely, Chairman.

2600   In fact, we received this like other applicants last Thursday and we went back. It's fair to say -- and I think CTV explained this also on Monday -- that the apparent non-compliance is actually an issue with reconciling our logs with those of the Commission. To some extent in each of these -- actually, I believe in each of these, except for TVtropolis, the issue is missing "C" numbers.

2601   What often happens, as I think you are aware, we have already aired the program, it has been logged but the Commission's logging system doesn't record it as Canadian because we don't have the "C" number at the time that it was broadcast.

2602   We have gone back and actually reconciled all of this. There is one issue with Canadian compliance and that is on BBC Canada. We have found actually that our numbers show 34.61 percent as opposed to 35 percent Canadian content in the evening period. It was because of one program that didn't qualify and we made up the hour the following year. So in terms of Canadian content we are in full compliance.

2603   THE CHAIRPERSON: I appreciate the "C" number problem. If the "C" number is not clear right away the system has a default. All I'm saying is, I understand what you have been through and if you are offside that's something I can understand, I just want to make it clear I don't want to see this again. I think now that you are on a sound financial basis and part of a major group, I expect compliance on this.

2604   The same thing on CPE. I understand you were short on Food Network and History and Slice.

2605   MS BELL: No, actually we are not, Chairman.

2606   We filed a detailed response to the Commission's letter, I believe it was last week, and in fact the apparent shortfalls were there because exactly the CMF numbers and also overages that hadn't been taken into account, but we explained that in detail and we have filed that with the Commission.

2607   I just wanted to say for the record, Chairman, we agree with you. Just so you are aware, for many, many years we have been tracking compliance on a quarterly basis on every single licence and we make sure -- and I make sure that we are complying with everything and if ever there is an issue we go back and we make up the hours, because we believe that it's important to be compliant with our licences and we have always done that and we will continue to do that.

2608   THE CHAIRPERSON: On digital transition I understand you are totally on track with our policy and your OTA stations in mandatory markets will be converted on August 31st?

2609   MS BELL: Yes, they will.

2610   THE CHAIRPERSON: Okay.

2611   Now then, you mentioned in this morning's presentation a couple of things I would like to pick up on.

2612   First of all is the CKMI-TV. I understand your request of rather than using knowledge of a language using language spoken.

2613   We are going to hear later on from -- I think they are called ELAN, English Language Association of Producers or something. Their beef with you is that you do not produce anything in Montreal, that your English programming is basically out of Toronto and therefore giving you LPIF is sort of rewarding the fact that you have English programming in Montreal but it is not Montreal-originated.

2614   MS BELL: Chairman, I don't want to disagree with the statement you have just made, but actually we looked at the intervention filed by ELAN and actually they supported our request for LPIF funding and they also acknowledged the fact that we were doing a fair amount of production in the Montreal -- English language production in Montreal. But obviously we look forward to hearing what they have to say when they come before you.

2615   THE CHAIRPERSON: Yes, we will, but assuming --

2616   MS BELL: Yes.

2617   THE CHAIRPERSON: Just assuming we do grant you LPIF status for CKMI, what would you be doing?

2618   MS BELL: I'm going to ask Troy Reeb to give you a little more detail.

2619   MR. REEB: Mr. Chairman, we are currently producing 15 hours of -- or airing 15 hours of local news and current affairs content from CKMI Montreal where we do produce a weekly community reflection show as well called "Focus Montreal", which does repeat as well.

2620   Certainly out intention, if LPIF funding was there and the corresponding reduction in obligations from the 14 to 7 mandatory hours, our intention is to increase actually the number of hours of original produced.

2621   The Commission will be aware that we have made a tangible benefits commitment to launch a morning news program in Montreal, which we intend to do in the next calendar year, and with LPIF funding we would anticipate doing additional weekend and having other resources added to our news coverage as well. It would probably be as much a qualitative improvement as it would be a quantitative improvement in hours.

2622   THE CHAIRPERSON: Did I hear you say you are doing 14 to 15 hours right now?

2623   MR. REEB: Yes.

2624   THE CHAIRPERSON: So this would be -- really I'm not making any commitment, I'm just trying to explore possibilities.

2625   You are basically saying the English minority in Montreal -- and I'm sure I'm going to hear the same argument when we do the French cases about the French minority in Toronto, it's a special breed. While they are in a metropolitan area their true audience is less than a million. I don't know what the reach is. I saw the numbers. You think it's around 600,000 I think is what you estimate, et cetera.

2626   MS BELL: Yes.

2627   THE CHAIRPERSON: On the other hand, you are in the richest, one of the second richest markets in the country, in a big metropolitan area, et cetera. So normally if it's under one million, the requirement is seven hours per week.

2628   So you are telling me you are already doing 14 or 15?

2629   MR. REEB: Yes, we are. That is the licence requirement currently, to be able to do 14. We struggle, to be quite frank, and from a local news perspective this is by a wide margin our least financially successful market for Global News. We struggle from a qualitative standpoint and to be able to produce that number of hours.

2630   What we think a reduction in the obligation coinciding with the provision of LPIF funding would do for us is allow us to not only increase the quality of our programming but allow us to do the number of hours we are now much more comfortably and better service to the viewers as well.

2631   THE CHAIRPERSON: So you would be committing to do 14 hours in Montreal if you become LPIF-eligible? Because I don't want to see the opposite, that you become LPIF-eligible and as a result of that you drop the number of hours.

2632   MR. REEB: Yes, and I think the -- as I mentioned we are also -- we are intending to increase our number of hours produced, with the tangible benefits promised this morning.

2633   THE CHAIRPERSON: Obviously you have good intentions, it's a commitment that I am looking for.

2634   MR. REEB: We made a commitment as part of the approval for Shaw's acquisition of Canwest to launch morning news in Montreal as well.

2635   MS BELL: And, Chairman, it's fair to say that station has -- if I remember correctly, it hasn't been profitable in many years. It has struggled financially.

2636   So when you look at the potential audience, that is actually far less than its reach actually, which is around 500,000. I think its audience is closer to 200,000.

2637   It seems reasonable to us --

2638   THE CHAIRPERSON: And what is your competition? How many other English -- I'm sorry, I am not familiar with Montreal.

2639   MS BELL: There is -- CTV has CFCF in the marketplace and CBC also has an English-language station.

2640   THE CHAIRPERSON: Who presumably would all want to be on the same bandwagon?

2641   MS BELL: I am assuming that if you adjusted the definition --

2642   THE CHAIRPERSON: They would all say, we are all LPIF stations here.

2643   MS BELL: That's correct. But it would reflect really the situation of the marketplace.

2644   THE CHAIRPERSON: As a result of it, as you see it, obviously it would help your profitability, but in terms of the viewer, he would get better local programming is what you are saying?

2645   MR. REEB: I would say absolutely the viewer would get better and more local programming.

2646   THE CHAIRPERSON: And your local programming right now, just so we can get some facts, do you have some facts as to how much of it originates in Montreal and how much comes from Toronto? Because, as I say --

2647   MR. REEB: All of our news programming originates in Montreal, with the exception of the National News, which is just half an hour a day, but all of that 15 hours of local programming we are doing -- news programming we are doing in the Montreal market originates from Montreal.

2648   THE CHAIRPERSON: Okay.

2649   MR. ROBERTSON: Just my comment that, you know, the Montreal station is -- when we first visited -- they are really an enthusiastic bunch but they really haven't had any leverage in the marketplace. And when we went and talked to them about the potential for morning news, I mean they really got very excited about it.

2650   And, you know, this move to provide some support with the LPIF and just showing a renewed interest in that market, you know, we just really think we can do something there that will be important.

2651   THE CHAIRPERSON: Yes, but you appreciate, of course, the predicament you are putting me in, because the LPIF was meant to help the small markets like your Lethbridge, which you mentioned, that wouldn't have been alive if it hadn't been -- if you let Montreal qualify, it means so much less for Lethbridge.

2652   MR. ROBERTSON: And certainly, our station feels every bit like it's operating in a tiny market because it just doesn't have the viability of -- I mean it's not as strong as -- certainly not as strong as Winnipeg or any of those kind of mid-size western markets.

2653   MS BELL: We are not suggesting that French-language stations in Montreal be eligible.

2654   THE CHAIRPERSON: No, of course not.

2655   MS BELL: This is just to be clear.

2656   MR. ROBERTSON: To draw the line there.

2657   MS BELL: Yes.

2658   THE CHAIRPERSON: Now when you started out this morning, Mr. Robertson, you set out three principles.

2659   Your first one:

"Maintain the forward-thinking policy you have established. Don't allow it to be watered down by adding complexity to the new requirements."

2660   What are you worried about? I mean we are trying to do exactly the opposite. I am trying to give you maximum flexibility. So what hidden complexities do you see?

2661   MR. ROBERTSON: Thanks for asking. Perhaps it's just a little caution that other stakeholders in our industry may feel that additional safeguards or requirements are important and that we should kind of build back into this flexible system some additional criteria, some minimums on this and some regionalization and various factors that we have seen in previous hearings.

2662   So we appreciate that you, Chairman, and the Commission was very clear on the policy of gaining flexibility for the industry. We appreciate that, we understand that and we are just encouraging through this process to keep our eye on that ball.

2663   THE CHAIRPERSON: Okay. But there's not something specific that you have heard or that others have advocated that you are targeting on?

2664   MS BELL: Well, there are a number of things, I think, that it's fair to say. We haven't heard from the interveners yet, but we have seen their written interventions and in those we have obviously seen a lot of attempts to go back to old policies and either have content quotas in prime time that look a little bit more like the old priority requirements, regional production, that sort of thing.

2665   So we are just -- all we are saying is we think we have a reasonable framework, something that will work, and we are hoping that we all stick to that framework.

2666   THE CHAIRPERSON: Okay. Now, your second point:

"Set our overall CPE obligations and PNI obligations reflective of historical spend levels."

2667   It seems that everybody sort of misunderstood our policy, because we were pretty clear, I thought, obviously not clear enough, there should be a minimum of 30 percent of group level. And this is based on historicals and I actually have the numbers here that we had when we made this.

2668   You stood at 30.3 percent over the average of 2007-2010, Rogers stood at 31.4 and Globemedia at 31.3.

2669   So we were fully aware. Obviously, this fluctuates a bit from year to year, but by pegging it at 30 percent we were reflective of historicals. Yet, you come in at 29 now.

2670   MR. ROBERTSON: It's been helpful for us to be the fourth applicant to be here, so we have been able to hear the dialogue throughout. So, you know, we have a clear understanding of where you are at on this.

2671   I guess as we got prepared for our appearance today and our submission, we had gone through all our numbers and felt that based on our sense of what was a reasonable historical view would take us in at 29.

2672   We took your policy to mean -- in all honesty we took your policy to mean that it was based on historical. I think that we are very close in terms of how we would interpret the historical data and we will have the time to talk about this when we are together later if that is something we can resolve then.

2673   THE CHAIRPERSON: Okay.

2674   The other one is regional production. I heard you -- I don't know which one, I think it's Miss Williams -- talking about how you have worked in the regions and how you reflect, et cetera.

2675   The last thing I want to do is add complexity, impose it, but I hear from the regional people, Manitoba people, Saskatchewan, Alberta, et cetera, there are always these wonderful words when you have a hearing but the reality is different. You know, we no longer get visited, we have to go to Toronto, et cetera. And I have gone through this twice now in hearings.

2676   If you are doing this, tell me what you -- for instance, let's take one province, Manitoba. How often do you go to Manitoba? Do you have a once-a-year meeting to visit production people there, et cetera?

2677   Because what they all seem to say, the main thing, is nobody ever comes to us. We are forgotten. We have to push our way in and have to get onto the radar screen.

2678   MR. ROBERTSON: I will ask Christine to comment. Thank you.

2679   MS SHIPTON: We make every attempt to go to every province, but I can't give you an absolute list of where I have been flying for the last 24 months, you know, every month and how many executives were where.

2680   I think it has become an industry standard that all producers know that we have designated times of meeting in the year, and there are, I would say, at least 10 of them if you count all the different festivals and conferences that we all make our way to. We are all travelling to meet each other there.

2681   I think it goes beyond that, though. It's once you are there, you have to have your door open and I just can't say enough how much my executives when they are at these conferences have doors open. We don't hide from pitches. We don't hide from producers. We want to be in dialogue with them.

2682   We have a tremendous amount of regional production on the go, and when we are in production in these provinces, we make sure it's in our budgets that our executives go to the set.

2683   And again, we don't have to. We can see rushes come in electronically every day. But not only do we go to the sets, we make sure while we are in those cities to go see other producers in the cities. I mean it is just a mushrooming initiative that we take on. We are quite committed to this.

2684   Is that enough? I can go on.

--- Laughter

2685   MS SHIPTON: I also want to say that it's a shared --

2686   THE CHAIRPERSON: No. Let me just cut down right to the chase.

2687   MS SHIPTON: Okay.

2688   THE CHAIRPERSON: They would love to see us impose on you a requirement that you have a regional office in each province or that you go three times a year to each province or something like that.

2689   I don't particularly like to tell you how to run your business. On the other hand, I understand their point that they want to have some guarantee that they have a chance to pitch their stuff to you.

2690   How do we solve this?

2691   MR. ROBERTSON: Every producer association, as we would fully expect, is looking to gain more production in their region. So I think every hearing I have ever been to there will be a pretty similar chord of gee, you know, we would love it if you were here more, we would love it if you did more.

2692   We understand that and, you know, we want to do more. The reality is that we are in an outreach scenario. We are in the markets. We are talking to the people. What we are searching for is the very best ideas.

2693   And then, you know, as the policy provides for, we are able to invest in the very best ideas and look to make these programs famous and rate well and do all the things we all want them to do.

2694   If we start to impose from the other end and say, we have to look at balance or putting infrastructure by the region or, you know, the other side of that scale, it kind of -- it is sort of the opposite end of searching for the very best out there, which is really, I think, where we want to land from our standpoint.

2695   THE CHAIRPERSON: Okay. Look, you are in this business, not me. I don't want to prescribe how you run your business. On the other hand, think about what you can do to address this concretely, rather than -- the assurance is there.

2696   I just heard from Ms Shipton, which I don't doubt at all, but, you know, I think it's now twice I have gotten assurances. I need a bit more than assurance, you know. See what you can come back with in terms of -- I don't expect you to do it off the cuff. You may want to reflect on it.

2697   The other thing, Ms Shipton, you said -- I just didn't understand it. What are you talking about on page 9 when you say:

"In light of this, accepting our requests for removal of independent production requirements on individual specialty services is both reasonable and consistent with the flexibility inherent in the new policy framework."

2698   Put some flesh on those bones.

2699   MS SHIPTON: We are merely reflecting that the new policy is having it shifting from exhibition to creation and spend --

2700   THE CHAIRPERSON: Yes.

2701   MS SHIPTON: -- so taking away the actual levels of exhibition of independent production, and we just wanted to reinforce how much we like the simplicity of how the policy states the 75 percent of productions of national importance for the independent producers.

2702   I would just add, because it wasn't in the opening remarks, that, of course, we have approximately $123 million in PNI commitments and benefits as well over the next five years that are going to independent producers in dramas and docs.

2703   THE CHAIRPERSON: But you are asking for removal. I assumed when you said this you meant that -- for instance, take any channel, Slice, for instance, or something, you have a specific independent production requirement there and you want us to lift that?

2704   MS WILLIAMS: We have sort of an odd collection, if you will, of unique requirements on a variety of our stations that speak to exhibition of hours produced by independent producers.

2705   These requirements, as I say, some of our channels don't have any mention of this whatsoever. Some have -- Mystery has a 25 percent. Showcase has a 75 percent. Twist has a 25. They are all over the map and they are all exhibition.

2706   So in this move from exhibition to spend, and given the enormous commitment through PNIs and, as Christine mentioned, the benefit spending, we don't think at this point there's a lot of value in this hodgepodge of unique COLs on individual stations, that rather the flexibility of this policy and the simplicity of this policy would suggest that we clean those out.

2707   THE CHAIRPERSON: And clean it up how?

2708   MS WILLIAMS: Remove them.

2709   THE CHAIRPERSON: Why not just average it?

2710   MS WILLIAMS: That would be a conversation point. Our recommendation was to remove them.

2711   THE CHAIRPERSON: No, but I mean I want to give you flexibility. I mean we made that clear. On the other hand, I am sure I am going to hear from CPMA that there is some protection in this, et cetera.

2712   So wouldn't the logical thing be, you know, calculate it, average it out, and say, we will do this average across the specialties?

2713   MS BELL: You know, we are happy to go back and think that through and come back to you in reply.

UNDERTAKING

2714   THE CHAIRPERSON: Thank you.

2715   MS BELL: There is just one more point though.

2716   When these conditions were attached to these licences, it's important to remember that some of the services were owned by Alliance Atlantis, which was a producer. The Commission had imposed these types of requirements because the services were affiliated with a producer and they wanted to make sure that they were going outside of -- using non-affiliated companies.

2717   So some of those requirements are there for that reason also. Obviously that situation no longer exists today. So that is why we are going to the other system.

2718   THE CHAIRPERSON: So this is really point 4 to you? You said you have three specific amendments to specialty lines and there is a fourth one, which is removal of the independent --

2719   MS BELL: We thought that was a little one, just on the side.

2720   THE CHAIRPERSON: Okay, three and a half. Three and a half, not four. Okay.

--- Laughter

2721   MS BELL: Sorry about that.

2722   THE CHAIRPERSON: Okay, thank you.

2723   Okay, I think I will pass this over to -- we will do the CPE and PNI in turn. So Peter, you are next.

2724   COMMISSIONER MENZIES: I just want to go back at this production question.

2725   We have your request to have the regional designation deleted and you point in your verbal remarks to shows like "Ice Pilots" in the North, "Endgame" in B.C., "Chuck's Day Off."

2726   I know you are saying that's proof that it's not needed, but how would you address the argument made by others that it's proof that it does work, that without that those shows might never have taken place? Because I'm sure that argument will be raised.

2727   MS WILLIAMS: We are not doing those shows because of any obligation to be in those regions. We are doing those shows because they were pitched to us as great ideas by very competent producers that came forward at a time when that idea suited one of our schedules. We are not doing any of our regional production at this point because of a requirement.

2728   I think what those shows demonstrate is the way that the system works, that one of the challenges with a regional commitment is that it sort of forces that ideas come in the door on a regular basis from regular regions at regular times.

2729   And actually this is not a business that works very regularly. This is a business that really depends on a brilliant idea coming out of wherever it comes out of at the right time for a schedule that makes sense.

2730   The flexibility that we are interested in is our ability to keep combing the country constantly to find that right idea at the right time and I think the demonstration of success of that process is that our schedules are filled with regional production.

2731   But some years there might be more from the West, in some there might be more from the East, in some there might be none from a particular province and the next year two or three. It really depends on the creative process and that's a tough thing to nail down.

2732   So, you know, I think we have a great relationship with producers that know we will be in their back yards and, frankly, also know that they have a responsibility to be reaching out to us when they have a good idea. We can't sort of count on landing at their doorstep and hope that that might be the moment that that idea burst forth.

2733   This is a shared responsibility for them to know who we are, what we are looking for, what we want and to put forward those ideas. And it doesn't have to be the famous $3,000 cup of coffee. We can do so much electronically now.

2734   And then it behooves us to stay on top of the great producers and the great writers and be poking away at them about what they are thinking about and what might be coming down the pipe.

2735   So I actually think we have developed a terrific ongoing relationship that way and I think the proof is on our schedules.

2736   COMMISSIONER MENZIES: Do you think they would say that?

2737   MS WILLIAMS: Yes. You know, with Norm Bolen looking over my shoulder here, I think they would.

2738   THE CHAIRPERSON: He will have the chance to confirm it.

--- Laughter

2739   COMMISSIONER MENZIES: We will find out what he will say soon.

2740   So what I am getting from this is that nothing will be different under the new regime, with changes in terms of your relationship with independent producers, than it has been in the past?

2741   MS SHIPTON: Absolutely not, because I am confident that we have excellent relationships right across the country.

2742   COMMISSIONER MENZIES: How did you manage this in the last couple of years to maintain your commitments to independent producers?

2743   MS SHIPTON: If you are referring to our times during CCAA --

2744   COMMISSIONER MENZIES: Yes.

2745   MS SHIPTON: -- because I marched into Barb Williams' office and said, you can't cut that budget. I need executives still to be going.

2746   I will say we send less executives. So at the Banff Festival two years ago we may have had four, whereas this upcoming festival we will have 10. But we just didn't cut that from the budget.

2747   MS WILLIAMS: I will take this opportunity, since you have opened the door for us, to say that we went to the wall for Canadian producers when we were in CCAA. She marched into my office and I marched into Mike French's office, and we together marched into bankers' offices and monitors' offices and everybody else you can think of and screamed and stomped and stormed about the need to protect our Canadian producers.

2748   And I am confident that Norm Bolen and the CMPA will sit before you and say that we did an unbelievably fantastic job of supporting them through CCAA. We didn't shut down a single project. We didn't take advantage of all those opportunities in CCAA to cramp any of our ongoing efforts with the producers and we are really proud of that.

2749   COMMISSIONER MENZIES: I can tell.

2750   MS WILLIAMS: I could keep going.

--- Laughter

2751   COMMISSIONER MENZIES: Would it be acceptable to lock in through a condition of licence a percentage spend on independent production outside of the 75 percent already for PNI?

2752   MS WILLIAMS: Yes. I think, as Charlotte mentioned, if we can think about how to reply to that and whether there is some average commitment across non-PNI programming that would make sense.

2753   I don't doubt at all that we will continue to do the vast majority of our content with the independent production sector. We need them as much as they need us. It's a great two-way street.

2754   I guess what we are most concerned about is these unique one-off requirements on individual stations that would really hamper our ability to take advantage of the flexibility.

2755   But we can come back with some sort of average, as the Chair suggested. We will return to you with that.

UNDERTAKING

2756   COMMISSIONER MENZIES: Okay.

2757   Can you give me just some idea generally what your product development looks like right now, like how many shows do you have in development, et cetera?

2758   MS SHIPTON: Right now, first of all, in active production across all of our regional content, we have 103 projects on the go. Aside from that, in all my three teams of original executives, we have 80 projects in development.

2759   COMMISSIONER MENZIES: Thanks. I think that covers the production issues, but I do have one question on the LPIF, a follow-up.

2760   If Montreal becomes an LPIF city, that means there is less money for Medicine Hat, there is less money for Lloydminster, there is less money for Lethbridge, which is one of your.

2761   I mean how do we justify making a city of 3 million people a small market?

2762   I mean I understand that the anglophone, you know, speak English at home, population might only be three-quarters of a million, but it's not like Francophones in Montreal don't speak English and are able to access your programming.

2763   How do I walk into the Medicine Hat office and explain to them that they are getting less because one of the -- because if you get it, CBC and CTV get it. So Medicine Hat gets less because the three largest broadcasting corporations in the country need to move their money to Montreal? Help me with that.

2764   MS BELL: Commissioner Menzies, I am going to suggest to you that you would actually not go in and tell them that they would get less because the way the LPIF works is that it's a percentage of revenues from the BDUs, and we would assume that -- and in fact we have seen over time that envelope, the number of dollars has actually grown. So it's unlikely.

2765   The other thing is there are so many stations --

2766   COMMISSIONER MENZIES: To be fair, they would still get less than they might have gotten, right? I mean we are starting to move the shells around here. Unless I am looking at a Shaw table that is suggesting that we increase LPIF?

2767   MS BELL: No. No, we are not saying that. We are not suggesting that at all.

2768   All I am saying is that over time as the revenues increase, the envelope has increased, that's all, and then it is redivided. So I am saying to you that the amount that each station is getting is probably not going to be reduced by very much, if any at all.

2769   COMMISSIONER MENZIES: I will take your advice and not attempt to explain that to Medicine Hat if your request was approved.

2770   MR. REEB: We would note as well that the French-language stations here in the Ottawa-Gatineau markets have been designated as LPIF-eligible even though the marketplace is well in excess of a million people.

2771   COMMISSIONER MENZIES: I understand that is your point of view. Thank you.

2772   THE CHAIRPERSON: Okay. Steve Simpson.

2773   COMMISSIONER SIMPSON: Thank you.

2774   Good morning.

2775   MR. ROBERTSON: Good morning.

2776   COMMISSIONER SIMPSON: Welcome to the windowless room that we all get to sit in for two weeks.

2777   MR. ROBERTSON: It's a pleasure.

2778   COMMISSIONER SIMPSON: I would like to pick up on -- you know, my style of questioning is that I like to go with the big ideas first and then drill down and get the housekeeping done later, and today will be no different.

2779   I would like to pick up on something Konrad was drilling you on and it was to do with regional production and demonstrations of commitment to the regions and I heard you loud and clear. There is no doubt, I think, with any broadcaster's commitment to regional productions.

2780   What I find kind of interesting actually is that when you look at shows like "Ice Pilots" and "Ice Road Truckers" and, you know, that whole panoply of what are really regional programs coming out, what I am finding absolutely amazing is that they are not only filling a huge appetite for programs of national interest but they are becoming so marketable internationally it's blowing my mind.

2781   I find that a very promising avenue for Canadian productions because it seems to satisfy regional production, it brings a region of the country to the rest of the country that makes you understand more about what it means to be a Canadian, it's cool programming, it's adventure, it's lifestyle, the whole nine yards, but it also paints the international picture.

2782   So I think it has given me a whole new view as to the importance of regional productions because that regional producer brings something that they know about to the table and it's amazing how marketable it is.

2783   But with that, I just wanted to throw something open to you as an idea because I am kind of of a view that just because you are a regulated industry, you know, you shouldn't have to always reach into your pocket to demonstrate your commitment to the industry as part of a condition of licence.

2784   From another life that I led in the transportation industry there was an interesting model that may be looked at that does have perhaps a financial implication but it lessens the cost and perhaps amplifies the benefit.

2785   When you look at -- not the merits of the idea but the action of North America doing a lot more outsourcing to Asia, retailers and shippers found it very practical to set up -- not through the government because government-funded initiatives have a tendency to not be as productive as originally intended -- but Sears, The Bay, Canadian Tire, would set up one office in Hong Kong that became a landing pad offshore for them to be able to have their buyers and their shipping guys, and the shippers they use, you know, have essentially a foot down in that market in a convenient way and it worked like crazy simply because it eliminated the need for repetitive wheel-building, if you like.

2786   And as I think about the markets of Montreal and Toronto, there may be something in that that might even go back to terms of trade discussions, but it would, I think, actually punch an idea that might punch beyond its weight in terms of lessening the need for every broadcaster to have some kind of a facility there.

2787   And also, two, I would be very interested in hearing your views -- and you may want to reserve this for the in camera -- as to what the role of the Canadian Media Fund, Telefilm and other initiatives that are funded by government are really working for you.

2788   You know, are these entities that -- you know, if you feel that you are biting the hand that feeds, you know, we can take it into in camera, but I would really like to know more about whether they are connecting the dots for you with the independent producers.

2789   MR. ROBERTSON: Thank you very much, Commissioner Simpson. I think the notion of being there when the producers need us by region is the key to that, and, you know, given our base in Calgary as well as Toronto, we are frequently in Western markets and available to people.

2790   So maybe it's just a matter of kind of firming up, you know, when our plans are to be in Calgary and making sure that anyone in that vicinity has easy access to us.

2791   So that is certainly something that we could maybe put a little bit more thinking around.

2792   With respect to the efficacy of the Media Fund, that is something that Barb and Christine, I am sure, would like to talk to.

2793   MS SHIPTON: Thanks, Paul.

2794   I was fortunate enough to be on the working group advising the CMF in the last two years, as they went to set new guidelines and to propose to their Board of Directors what those new guidelines are.

2795   I think the CMF is working extremely well. I think they are listening to all of the stakeholders in the industry, and coming up with some really satisfying compromises.

2796   It is not an easy job, and it's not an easy fund to manage at all, and we are quite pleased with how that is all working.

2797   There are limitations. We only get so much, and there are only so many projects we can use CMF on because of that. I think you heard that yesterday from the Rogers folks, as well.

2798   But then we just get creative, and we find ways to work with the producers, to finance projects without CMF.

2799   COMMISSIONER SIMPSON: Terrific. Thank you very much.

2800   Another sort of high level question, and it has to do with Netflix. Everybody is getting quite preoccupied with OTT. I am curious, from your perspective as distributors, as well as broadcasters, whether you have figured out whether Netflix is simply a commoditization of content and a pricing game, or is it a niche, a programming niche that we are going to see repeated with sports content and the like?

2801   Where do you think this phenomenon is going?

2802   MR. ROBERTSON: I am going to pass that over to Mr. Stein, who has some thoughts there.

2803   MR. STEIN: There are a number of issues with respect to it that we have to deal with. The first is that there are a lot of changes going on.

2804   I think the deal with Paramount was a real ground-shaker, in terms of our concerns.

2805   We did point out our concerns to the standing committee. They were reflected in their recommendations, which the CRTC was already moving with, with respect to a consultation.

2806   Our view on Netflix is that it is providing broadcasting content. It is not Canadian owned or controlled, as per the Broadcasting Act.

2807   I think there may be a misunderstanding on the part of Netflix, because in the U.S., programming services such as theirs are not required to be licensed. If you want to start a programming service, you buy programming, you make a deal with a distributor, and away you go.

2808   That is not the law in Canada, and I think that when you operate in a country, even if you operate under the basis of an exemption, you have to be consistent with the laws that exist. The Broadcasting Act is quite clear that any broadcasting service provision of programming to Canadians must be Canadian owned and controlled, and if it looks like a duck, it is a duck.

2809   That is our view, but we are going to participate fully in the Commission's processes in order to try to deal with this problem.

2810   I think that one of the big issues for us is one of time, as well. If they continue to make deals, as they have done with Paramount, as they have done with Lionsgate -- if that starts to accelerate -- I mean, their market caps at about $11 billion, so they have a lot of cash to be able to put on the table.

2811   So we are going to have to find some means to deal with it, both in terms of the program rights issue, but also in terms of the tremendous load it is putting on the capacity of the system.

2812   We are going to really push for something to be done in a timely fashion. This is not something that we want to take a long time to do.

2813   I would point out that this is not an unusual kind of thing. We have dealt with this in the past, both with respect to "death stars" -- I think we called them -- a number of years ago, in terms of the attempts by the U.S. satellite companies to offer services in Canada, and we also dealt with it in terms of the entry of U.S. specialty services, to bring them under the regime.

2814   So we are confident that we can find a means to do it in an appropriate way, which serves the objectives of the Act, but also serves the interests of consumers.

2815   I remember when we had discussions with people across the country about the Canadian broadcasting system. One of the strongest focus groups we had was in Calgary, and one of the comments that was made was: Well, if we don't have a Canadian broadcasting system, all we are going to have is basketball. We are not going to have all the hockey that we want and need.

2816   I also think that we have to make sure that the broadcasting system is Canadian. We have to make sure that with respect to these new technologies -- we have to be flexible, we have to adapt to them, but we have to do it in a way that recognizes that we all have to make a contribution.

2817   MR. ROBERTSON: There was one other element to your question that had to do with what might be their ultimate objective in terms of genres presented and that kind of thing. I just tend to look at it and feel that they do what would seem logical: you start with a library, you move to original content, you knock out as early a window as you can possibly get a hold of, which is happening right now, and then you start making the move into live sports and news.

2818   And ABC would do it, and we would do it, and that's what you do.

2819   I would just presume that's where they are headed. I don't think they are painting any kind of a box that they are going to be comfortable staying inside.

2820   We almost tried to talk ourselves into that when they were doing library only, but it didn't take long for us to be reconditioned that they are -- you know, they are on their way up the quality curve.

2821   COMMISSIONER SIMPSON: Thanks, that's exactly what I was looking for. Great. Terrific. Thank you.

2822   Now that you are in the OTA game -- and I understand the economics and I understand the strategy, I think, of trying to widen out the genres of Category A channels, because of their relative value with respect to mandatory carriage and the like -- but if OTA is under threat from specialty, as a categorical statement, are you not in pursuit of a business plan that tries to get as much as you can out of a Category A station, with respect to your ability to wheel assets in and out of it, and also monetize it through advertising revenue, but are you not eating your own leg when it comes to not helping your OTAs?

2823   MR. ROBERTSON: That's a very good question.

2824   I think that when we look at the way in which conventional works together with our specialty channels, we do see it as kind of an overall play. As you know, we would have some programming that could find a second window on the specialty channels after being premiered on the big stage with OTA. So we do find ways to operate them together.

2825   And with respect to the genres kind of being broadened and how that might affect OTA, we don't feel that we are aggressively going out to pursue broadening of the genres, we are really more responding to changes in the marketplace or in the needs of viewers.

2826   I will give you a couple of examples. One came up earlier, which is the way the internet has affected the work that we do.

2827   And being that music is in your background, I know that you appreciate how much music really comes through the internet now, in terms of displacing the job that was originally handled so effectively by the specialty channels in music.

2828   The same kind of thing is happening with the internet and the way in which it delivers health-oriented content.

2829   Another thing that we deal with is changing consumer habits, in the sense that -- when our licence on TVtropolis was first granted over 50, we thought we knew what that meant, and now we have found that the baby boom generation is redefining old age and we are not sure what it means as much any more.

2830   We have had to keep pace with changing dynamics in terms of what the over-50 set is really interested in watching.

2831   I guess another thing is that you have regulations that change. For example, you offer a 10 percent allowable -- to add flexibility to the system, everyone can do kind of 10 percent of this and that. It's a great ideal, but then some of the venerable analog stations find that a lot of programming they used to use has now gone off to other places and they need to respond and make changes.

2832   I know that there are a lot of applicants before you with a lot of changes, and it's tough to say which ones are worthy or not worthy, but I would just say, as an industry, genuinely, we are here to respond to changing marketplaces, changing needs, and that's what we do.

2833   In our case, we come forward with three changes. We are trying to be moderate in our request.

2834   COMMISSIONER SIMPSON: I understand. Thank you. Again, that was very insightful and very helpful.

2835   Continuing with OTAs, I think we are all feeling the gravitational forces within this universe of television. You know, they are pulling our planets in different directions, and a lot of the directions that we seem to be heading in we can't really talk about, because it is contemplating a future that is not our reality here at the Commission, but you are living it.

2836   Unfortunately, we regulate it, and sometimes we have a tendency to get in the way. We don't mean to, but it's tough, as you have said, to deal with both continuums, to plan for the future and deal with the present. We understand that.

2837   One of the gravitational forces that seems to be coming up that you can work with is where OTA is going.

2838   A couple of years ago, when I joined the Commission, I walked smack into the whole issue of value for signal and the arguments of the potential threats to conventional television. What kept coming up as the baseline argument was the importance of local television, or the locality of television, and it struck me, as a guy who spent more time in radio than TV, that as we watched us come out of the recession, radio was recovering more quickly. I don't know if that was because of its buoyancy or its ability to move faster because its infrastructure just inherently is different, but I am hard pressed to give up the argument that it hadn't lost its locality and, to a certain extent, some TV OTA had.

2839   I remember going through the hearings, and I just kept on looking at the television schedules of CTV and Global, in the Canwest days, and the similarities of the schedules was startling. At least 90 percent of the network side of the OTA was cloned, essentially, and the local content was struggling.

2840   That's one of the reasons why LPIF was created. It has its detractors, but it has its value.

2841   With this question, I would like to get a better idea, now that you are a custodian of OTA -- and a formidable one, and, again, congratulations on the turnaround, but with the benefits that have resulted from the acquisition, could you drill down a bit, without telling any trade secrets, as to what you are going to do?

2842   You are strong in news content. Are we going to see more, or better, or both, or something different with respect to spend in the OTA?

2843   MR. ROBERTSON: That's a very important question. I will set it up a little bit, and then pass it to Troy.

2844   We certainly came into the acquisition totally believing in the future of OTA. Some would say that perhaps we were a little too enthusiastic, and we recognize that, from a structural standpoint, it is a challenging go.

2845   But we totally agree with you, it's all about local, and we really believe that we can make a difference in our news product. It is wonderfully strong in the western markets. We are adding morning news where we don't have morning news, and Troy has great plans to continue to build on a wonderful framework there, so I will pass it over to Troy.

2846   MR. REEB: Thanks, Paul.

2847   Commissioner, you will be familiar with our Vancouver station, where we actually think that we are successful fighting against the trend that you suggested. In fact, close to one-third of our daytime schedule in Vancouver throughout the week, including on weekends, is locally generated. It's locally reflected. It is not cookie-cutter out of Toronto or anywhere else. We are doing more than 40 hours a week in Vancouver, Calgary and Edmonton of local programming, and we are being, we think, successful in doing that -- successful from a community standpoint and successful from a financial standpoint.

2848   We want to take that model and we want to build on it elsewhere. One of our commitments as part of the Shaw acquisition of the Canwest assets was to add more than 80 hours of additional local programming across the country over the next year and a half, and we are in the process now of doing that, to try to make our stations more reflective of the communities they serve.

2849   We know that is not a financial winner in all cases, but we believe it's a winner from a long-term branding standpoint. The more we can be in touch with those communities, the better off we will be.

2850   And we are going to do our darnedest to replicate what we have been able to do so successfully in British Columbia and Alberta.

2851   MR. ROBERTSON: Could I just ask Ken Stein to add a bit, from the Shaw perspective on acquiring the company, of what he thinks about this?

2852   MR. STEIN: Thanks.

2853   I would also like to go back to a comment that Commissioner Menzies made about the commitment -- what the company was able to do through the CCAA process.

2854   What really impressed us at Shaw, and still impresses us, was the commitment that the management team at Canwest had to preserving the conventional broadcaster, confirming the strength of the specialty services, and their absolute commitment to the fact that the combination that they had outlined years before when they took over Alliance Atlantis -- the commitment to try to make that work.

2855   What we see going forward is the commitment to local programming, its relevance in the community, which is particularly strong in western Canada, but we are going to make that stronger right across the country -- but the commitment with the company to do that was really impressive through the whole CCAA process, and it is the commitment that we see going forward.

2856   It may seem a bit strange for a very highly advanced technical company to say that we still like the old technologies, but we do. We think that the over-the-air networks have relevance to the local market. Their involvement in the community is going to be a pillar as we see this going forward.

2857   So we see it that way. We see it as one of the essential platforms of what is going to be an essential platform kind of world.

2858   The Chairman dragged us off to a consultation a few years ago, where we heard various presentations on the future of television, and the one thing we learned from all of that was that you can't really predict it.

2859   I think at that convention nobody even knew what an app was. Now we all talk about apps.

2860   We now are talking about how we are going to flip the signals over to people's iPads.

2861   So the future is really -- as Paul said, it's exciting. There are some challenges that we have to deal with, but it's a very exciting future, and we see conventional TV as being a central part of that.

2862   COMMISSIONER SIMPSON: A last question on this subject, just drilling down a bit into something that was timely asked the other day about emergency broadcast services -- the Japanese earthquake/tsunami.

2863   I commended Rogers the other day, and I commend you, as being only two that I am aware of, with the exception of Fairchild, I think, which was also on the air that morning live -- but out of all the signals that were coming into Vancouver, there were only really two principal English-language broadcasters who were on the air that morning, when Vancouver woke up to the earthquake and the resulting potential of a tsunami.

2864   All the rest of the distant signals that were out there, coming in from CBC's news service in Toronto, CTV's news service, the American networks, CNN, KTLA in Los Angeles, KIRO in Seattle, were all on tsunami watch, probably because it's good television, but what was ironic was, in Vancouver, we were sitting in the eye of the hurricane, potentially, and with the exception of the news cycle talking about this tragic event for ten minutes instead of five at the lead, at the top and bottom of the hour, there wasn't anything on a recurring basis to assuage the fears of Vancouverites, who were getting inundated with the issue of the potential tsunami from everywhere but their local broadcaster. And that's not your fault, but this is the question.

2865   In talking to Environment Canada, they have a graduated system. This could be the wrong terminology, but it goes from an advisory to a watch to a warning, and that graduation works within the environmental system.

2866   The provinces, from what I understand, are sort of the first line of defence with respect to information gathering, and then they sort of pump it up to Environment Canada, which aggregates everything, and it is Environment Canada that has been in negotiation with Pelmorex and the broadcasters with respect to how that stuff gets out.

2867   The broadcasters, from what I understand, really don't want a first and second graduated warning or advisory coming across their desk, they just want to deal with it when it's "Duck for cover".

2868   That may sound good with respect to the advisory of the potential threat, but there isn't anything in the mitigating -- alternative scenario that assuages people's fears, or at least talks more consistently about the event.

2869   I am just asking you -- and you can comment if you wish -- if you wouldn't have a look at how the negotiations are going, and the view of the broadcasters independently, that they just go for a third stage warning and nothing else, and review your whole policy on how that information is processed.

2870   Because it was ironic to sit watching the local broadcasters and not hear a whole heck of a lot about what the rest of the world was, you know, completely on the point about.

2871   MR. REEB: I appreciate you raising the point, Commissioner. In fact, it's a good one, from the point that we, as the local broadcaster, want the right to be able to continue to be the gathering point when there is a crisis in the community. I think we have been incredibly effective at doing that, whether it was the fires in suburban Halifax a couple of years ago that forced the evacuation of Spryfield, whether it was the fires in Kelowna that forced the evacuations of large sections of that community.

2872   We were live, providing the most accurate breaking news coverage of those events, and becoming a gathering point for the community to get the most relevant information.

2873   I think that our very serious concern about the idea that suddenly there could be a blanket warning that would take our signal off the air and override our signal is that you could have a meteorologist in Toronto, for instance, providing very detailed information about a tornado alert, what neighbourhoods, what areas could be directly affected, and suddenly you would have the screen go blank and it would turn over to a red warning that would be a blanket warning with not nearly as much detail, and would be potentially misinforming people over a much larger area, when we are speaking to a very specific community, in detail, in context, with the resources we provide.

2874   We have a commitment in our communities, large and small, that we will cover those types of events, and that we will provide the appropriate warnings and alerts in regards to them.

2875   I think the issue becomes, if you start to put it down to a level where, suddenly, you could get a fire chief in Parry Sound, who could put a warning across the Global Toronto system, you put us at risk.

2876   COMMISSIONER SIMPSON: Agreed. With your point, I understand --

2877   THE CHAIRPERSON: That's not at all what the system is about. That's not how it works at all. What you have just described is not what the national alert system is designed to do.

2878   Nobody is talking about pre-empting your programming and putting something on. It is a message that scrolls at the bottom with a warning.

2879   Where did this come from, pre-empting your programming and putting a message on the whole screen?

2880   MR. REEB: I apologize, Mr. Chairman. In the discussions we have had with the Emergency Alerting Working Group, that was one of the suggestions that was out there, in order to provide, basically, a cover-over of programming in an emergency situation.

2881   COMMISSIONER SIMPSON: Yes, a hard cut.

2882   MR. REEB: A hard cut.

2883   COMMISSIONER SIMPSON: Yes. Again, I don't want to dominate, but there is nothing like a drill of that massive proportion to show the deficiencies. I am simply saying that the broadcasters --

2884   Radio was all over it. They seemed to be aware of the different types of conversations that were pouring into households when people woke up in Vancouver.

2885   All I am saying is that the acknowledgment, somewhere in the news cycle, on a more continuous basis than at the top and bottom of the hour, seemed to be appropriate for this level of emergency, particularly when Vancouverites were watching Hawaii running for higher ground. We had no idea what to do.

2886   It just seems like it's a great opportunity to review news policy, to perhaps be more aware of what the other channels are doing, so that it's not as binary as it is now, where it's either an emergency or it's not. That's all. That's all I am asking about, it's context.

2887   MR. REEB: We will certainly take a look at that.

2888   COMMISSIONER SIMPSON: I would sure appreciate it.

2889   I would like to go back to a production question which relates to programming. It has to do with your request for the removal of independent production requirements. I just want to more fully understand what you are requesting.

2890   The ability, in general, to move your spending more fluidly back and forth between OTA and specialties, up to 100 percent, is obviously getting green lights from you.

2891   This is the question. What you are talking about is the unique, individual production requirements. For example, yesterday -- I am familiar with Rogers, where they had a requirement of 50 percent, and production was linked to exhibition. That is a carryover that is becoming a pea under the mattress with respect to what we are trying to do with group licensing.

2892   Have I got the idea?

2893   MS WILLIAMS: Yes, that's right.

2894   COMMISSIONER SIMPSON: Okay. So, on the basis of your recommendation, which is fine, because it's the old high/low thing, your suggestion is the removal of that requirement. But it is a little bit problematic, in that some parameters, I think, have to be dealt with.

2895   What would you be most comfortable with in terms of looking at a more middle-ground approach that satisfies the goals of group licensing and the efficiencies, administratively, that this whole concept was designed to try to fulfil?

2896   What would be your best methodology for the Commission to get some idea of finding a medium between no restrictions at all and the ones we have now?

2897   MS WILLIAMS: I think the right way to think about it, possibly, is to consider all of the commitments of non-PNI programming and think as to whether there is a reasonable level of a percentage of that non-PNI spending that should be committed to the independent production sector.

2898   But, as we mentioned earlier, we will do a re-think on that, and as we said to the Chair, we will come back with a point of view.

2899   COMMISSIONER SIMPSON: Fabulous. Thank you very much.

2900   Okay. We started off the conversation about the Category A's and --

2901   THE CHAIRPERSON: Steve, may I interrupt?

2902   COMMISSIONER SIMPSON: Yes.

2903   THE CHAIRPERSON: I have a request for a health break, so let's take a 10-minute health break, and then we will continue.

2904   COMMISSIONER SIMPSON: Absolutely. Thank you.

--- Upon recessing at 1027

--- Upon resuming at 1041

2905   THE SECRETARY: Please take your seats.

2906   THE CHAIRPERSON: Okay. Stephen, you still have the floor.

2907   COMMISSIONER SIMPSON: Okay, now for the fun stuff.

2908   We talked earlier about Category As and widening of genres, you know that there may be an economic or a demographic or a more fitting need to do this, but there are genres we still have to deal with right now.

2909   I'm going to -- to me, you know, the genres are the elephant in the room and the trouble is that if we keep on making them -- if we keep on feeding them they are just going to get bigger.

2910   I guess my question is from your viewpoint, do you think that we should be looking at genres in terms of their viability?

2911   MR. ROBERTSON: Well, we have listened with interest throughout these hearings about that debate and, clearly, there is enough various points of view being represented that it sounds like there is a need for further discussion. So we would agree with that.

2912   You know, our own view is that genre protection has served us really, really well as an industry and as a result of genre protection we have created some wonderful franchises that have made huge contributions to Canadian content at a time when conventional was unable to kind of keep pace from a production standpoint.

2913   So you know, as we look -- we look on it kind of fondly and recognize that there are some unravelling around the edges, but that as a concept it's been very effective.

2914   I guess we also recognize that, from a timing standpoint, to move forward in any kind of abrupt way with changes to genre protection at a time when this new licensing regime is brand new and with the amount of change we are facing as an industry, we have got to be a little bit cautious, we think, in trying to gauge kind of one, the effect of a new policy before throwing another whammy into the system. So that's certainly on our minds.

2915   I guess the final thought on it is that genre protection is intricately woven into the system for those that have lived through it for all these years and seen it develop and advance. It really has elegantly found a way to evolve with our industry but it's intricately woven with access rules, definition of Cat As and Cat Bs and of course the Cancon requirements that have stemmed from those, which now get blended into 30 percent. But I think there is -- there is just a lot of layers to this.

2916   I guess in coming to the hearing today, as we talked about it before, it would have been our wish to say, you know, "Let's reopen that at the" -- "Let's kind of deal the best way we can with the requests that are before" -- I say before us or before you -- on changes to COLs and condition of licence issues and the nature of service issues but let's try to hold on to this for this licence term, with the recognition that we understand that it's something we are going to want to open up and spend more time on.

2917   THE CHAIRPERSON: Do you go further and say only for this term?

2918   You said, "Let's go forward with genre protection for this licence term", but with a clear understanding that the next renewal will be without genre?

2919   MR. ROBERTSON: Well, my comment, it is close to that. My comment was, let's go forward throughout this licence term with an understanding that, as we proceed in the next licence term, this needs a serious rework.

2920   MR. STEIN: Can I just comment on that, in the sense that, it doesn't really matter what we think. It's the Broadcasting Act that says that there is a requirement that the services offered all Canadians be diverse.

2921   And given the size of the Canadian market and our ability to provide a range of services to Canadians, the genre protection has genre exclusivity as being central in terms of the development of particular services over the time period. So if one is going to really re-look at that, one is going to have to say, "Well, how are you going to make sure that that Broadcasting Act objective of diversity is met?"

2922   One example I would use is the Food Channel. Food Channel has been immensely successful in establishing as a service in Canada. Barb and the others can talk more about it than I can, but it's impressed us that it has provided -- it fills a real niche. It fills a real demand for Canadians, been tremendously successful. It's had a huge international impact and a huge impact from Canadians.

2923   If there had been a whole bunch of them it probably wouldn't have had that effect. We would have had a whole bunch of, you know, smaller, kind of, services that probably would not have been anywhere near as successful.

2924   So over the next five years we don't know how it's going to unfold. I'm not -- I do think that we do agree of course, as Paul said, because he makes a decision on this, that you know, a review of it is probably a good thing but to just, you know, say, "No, it's going to end at a certain period of time" I think it is going to really require a substantive review and experience with it.

2925   But you know right now, clearly, it's been a very important tool in the system and it's not one that we should throw away.

2926   MS BELL: Can I just add one very quick couple of thoughts on that?

2927   It's not just opening up genre protection. It would also have, I think, impacts in a variety of ways in the system, for instance the access rules.

2928   When we talk about the contribution that those Cat As have made to a large extent because of that, you know, you look at the spending on Cancon in 2009 at $930 million versus all the Cat Bs combined at $33 million, there is a difference. You have to appreciate that there is a difference and that genre exclusivity has had a very significant and positive impact. So we have to think of those things.

2929   If you opened up drama genres like Showcase, can you justify keeping a condition of licence that's from seven to 10 p.m. 100 percent of our drama would be Canadian? In an open genre you have to look at all that and standardize conditions.

2930   So it's a bit more complicated and I think we need to have a serious discussion about it. We are just saying maybe not right now but we appreciate that in the future we will have to have that debate.

2931   THE CHAIRPERSON: Lest you read more into what I said, I just was suggesting to get a change you need a deadline. Otherwise, it's not happening. We both know that.

2932   And the whole genre -- and on all of this is based on controlling access and, as we all know, we are losing more and more the ability to control access. So it behoves us to rethink this, et cetera.

2933   I am just picking up on Mr. Roberts' idea that, you know, yes, for this term obviously we have to -- it's something that worked in the past and it's still working, albeit with some defects, et cetera, but it's time for us to think of a new way of doing it.

2934   The logical target date for doing it would be its next licence renewal. We really have to come up with ways to substitute. The goals as Mr. Stein says, you know, remain the same, but the mechanism may have to change.

2935   Sorry, Steve, I didn't mean to --

2936   COMMISSIONER SIMPSON: Oh, no. I was just remarking on how Rita has got curb-side service with Tim Horton's.

--- Laughter

2937   COMMISSIONER SIMPSON: Tenure. Have you got shares, Rita?

--- Laughter

2938   COMMISSIONER SIMPSON: Not to beat a dead horse or to be trying to create a new one, but I am asking these questions because, again, I am -- right to your very point in your opening statements, you know, one of the three statements is, "We have to be looking forward".

2939   You know we have to be progressive. We have to not only look at the conditions of what we are dealing with now but make every step that we take a step toward the destination that we want to go to.

2940   I fully believe that, you know, the difficulty with tightening genres, should they stay, is that it blockades Category Bs and the appetite for more niche because television is going more and more vertical, and that is problematic. If you widen the genres you are making the OTA existence more difficult and more problematic and, yet, you have got the issues of asset management.

2941   We get it, is what I'm trying to say. But still it's an elephant in the room that I think we have to deal with.

2942   And on that theme, considering that you know we have to deal with present realities, I'm going to sort of take the view with some of the grocery list that I want to deal with that -- starting off with History Television, you know that if you want the car this weekend you have got to clean your room.

2943   With History, as a starting point, sort of going to that as probably the most problematic, we have issues of Cancon and we have issues of genre or, sorry, of categories of programming that I would like you to talk to.

2944   Before we sit down and make a determination as to compliance and COL compliance and Cancon compliance, would you like to talk to what the new Shaw Media and having as many assets in your basket that you do, can help reconcile some of the things I want to talk about with History and a few of the other Category As and Bs as a starting statement before we get into the list?

2945   MR. ROBERTSON: No, I think that we -- we are really in compliance. I think that it's one of these situations where we have a different sense of what has gone on here and we should just clarify for the record where we stand on History.

2946   MS BELL: Commissioner Simpson, I think it goes to the response I gave the Chairman earlier.

2947   The apparent non-compliance on Cancon was simply a matter of our logs not matching the Commission's logs because of the missing "C" numbers. We are actually in full compliance and, in fact, I am very thrilled to tell you that we are above our commitments we are supposed to be doing.

2948   In the evening period we are about 6 percent over what we are supposed to be doing and over the broadcast day we are also over once we factor in all the C numbers that we received late in the game.

2949   So we are in, just to be very clear, we are in full compliance with all of our services in Canadian content.

2950   COMMISSIONER SIMPSON: Terrific. There may be in the fullness of the hearing, a request to clarify that with a written submission.

2951   WS BELL: We have done that, yes.

2952   COMMISSIONER SIMPSON: You have, okay.

2953   MS BELL: Yes, absolutely.

2954   COMMISSIONER SIMPSON: Okay, thanks.

2955   The issue of nature of service now, why I asked the question that I did was to do with -- I understand it is programming decisions. You know, it's finding a needle in the haystack when you do come across particularly a program that was a sleeper or, you know, a complete treasure that you didn't know you had.

2956   Was the circumstance at the time of ownership that caused Ice Road Trucker and Rodeo and Outlaw Bikers to wind up on History, is this something that you can correct given, again, you know, the breadth of the assets that you have?

2957   You know, might these find their way on to OTA now, without telling stories out of school?

2958    MS WILLIAMS: Those three programs that you have mentioned are all actually terrific programs for History and have performed well for us on the service and we think really live up to the nature of service of History very, very clearly.

2959   The Rodeo show which was shot out in Alberta, actually one of our regional productions, is a show that talks about the current life of the rodeo but is constantly doing that in the context of where the rodeo -- where rodeo life came from and the instrumental role it played in building the West. And all of the history of the rodeo life is very, very fully talked about in that series.

2960   So we think it's an excellent way, actually, to make History stand out for people today by giving them some current touch points and then pulling them into the story.

2961   I'm going to let Christine expand a bit more on that, though.

2962   MS SHIPTON: I also pick up on your mentioning Outlaw Bikers, Commissioner, because you know we discovered that the category of crime forensics -- and looking back into different crimes, how were they committed, how were they solved -- was a category of programming that our audience was really responding to and, hence, telling those tales of what happened in those biker gangs.

2963   There is other shows that fall into that as well. Cold Blood is one of our crime forensics of looking back again into very odd criminal cases and how they were solved. There is a real audience demand for them.

2964   COMMISSIONER SIMPSON: I do understand and fully appreciate the challenge because, as a programmer, I sense that you are constantly -- well, you are not only trying to attract eyeballs to that program but to continue those eyeballs onto the next program but creating an environment within that channel. I totally get it.

2965   But I'm having a really hard time with the argument that a program on Canada's military in Libya links back to Montcalm and Wolfe because it's all to do with the passages of time and Canada's role in various wars. It doesn't push the envelope. It breaks it in my mind.

2966   And I would like you to tell me why I shouldn't think that way.

2967   MS WILLIAMS: I guess a couple of thoughts off the top.

2968   I think it's important to remember the nature of service of History actually references not only the telling of past events but also of current events, so the nature of service itself actually is a little bit broader than simply talking about Montcalm. I think it actually encourages one to think about the connections between Montcalm and Libya, if you will.

2969   I also think that, you know, what we have discovered is that there certainly is an audience for what was the traditional kind of History programming as it was first thought of, what some might have flippantly referred to as the black-and-white war channel. There is an audience for that kind of historical content and we still do a big chunk of it. A big chunk of the schedule speaks to that and we found some interesting ways to do that.

2970   You look at Greatest Tank Battles which actually has taken advantage of great CGI and retelling some of the greatest tank battles of all time. We have phenomenal audiences to a show like that. So it's not an abandonment of that kind of content at all.

2971   But any successful schedule will have a balance of content. You will be trying to broaden your audience, trying to reach out into other sectors.

2972   And one of the challenges in an odd sort of way of having a service named "History" is a very particular idea pops into people's heads with that name. And part of our challenge and our opportunity is to help people think about that word and that name a little differently and understand that this channel could actually bring them a broader interpretation of history and a more dynamic one and a more current view than they might have thought.

2973   I'm going to throw it again to Christine to give you a few more title that might help you sort of grasp what we are accomplishing here.

2974   MS SHIPTON: We are really trying to make the channel accessible and fun and feel relevant.

2975   I mean we have brought a lot more women to the channel. I mean people have looked at this as sort of a men's channel but over the last year our percentage of women has grown by almost 9 percent. And that speaks to taking us into history through characters.

2976   When I say fun, I mean we look at -- you know, we brought William Shatner to the History Channel with this little show called William Shatner's Weird or What?

2977   He is just looking at mysterious and peculiar events of history through his own sensibility, like who knew that they found cocaine in the mummies. I'm just citing one particular example, you know. His perspective on it was very, very funny but it was actually based on something, a real finding that that had happened.

2978   So again, it's trying to broaden our audience and bring younger and women to the channel as well.

2979   COMMISSIONER SIMPSON: Great.

--- Laughter

2980   COMMISSIONER SIMPSON: But do you not perhaps then have a branding problem?

2981   Because I understand what you said about history but, you know, there was a great show produced by public broadcasting, I think in the seventies called Connections, and it was doing exactly that. It was saying where did the word limelight come from, you know, in its present context and then it threw you back into the linkages over time. You know it made for a very compelling broadcast.

2982   But I think there is an expectation of the audience and I certainly know from the Commission that within the definitions of nature of service the History Channel -- perhaps you know we are getting into points of law or a definition here that could become regulatory problematic -- but I think there is an expectation that is set out that is being challenged economically by the broadcaster because of economic necessity and the inherent need to create an environment for that audience.

2983   We saw it the other day with a technology show produced by another broadcaster that argued that people who are highly interested in technology are usually interested in certain types of shows like The Office. And we were supposed to draw a correlation to that nature of service that it makes perfect sense to have that type of humour/drama in a technology show because of the taste levels of the audience and the interest levels of the audience beyond the subject of technology.

2984   I feel we are kind of knocking on that door here. You know, I'm not quite there with your argument.

2985   So you know a final comment?

2986   MS WILLIAMS: Yeah, I think a variety of thoughts pop into my head as I listen to your perspective.

2987   I think off the top do we have a branding issue; absolutely not. I think we have actually come to brand History in a brilliant way and programming is often only as successful as the branding around it and the selling of those programs can be.

2988   I actually think we have opened people's eyes to this channel in a way that has surprised so many people. The evidence of that is in the ratings. History is the number one channel now after TSN and nobody is more frustrated with that then Discovery, may I say.

2989   Yes, so I think we have had enormous success with reinterpreting and helping people understand the branding. I don't think there is an issue there at all.

2990   And I guess what I would hate to see is a very, very initial idea and understanding of what a brand should be, get stuck in the past, no pun intended, and not be allowed to evolve as audiences evolve and as the landscape evolves and as the whole industry evolves.

2991   Because we have found a very clever way to go back into the past through a show like Canadian Pickers or American Pickers that develops a huge audience around it, we shouldn't be penalized for that cleverness as programmers.

2992   I think we have an astoundingly successful schedule here that really speaks to a unique understanding of our history and world history that is absolutely diverse from the rest of the broadcast landscape.

2993   You don't see these shows on other services. We are doing something quite special here and frankly, I think we should be commended for it and not penalized for it.

2994   COMMISSIONER SIMPSON: No one is trying to penalize you. We are just trying to understand.

2995   But within the context of genres, a reality-based television show like Ice Truckers or Ice Road Truckers, as you very eloquently said, has historical connotations somehow, whether its glacial formations of ice in the Canadian Shield. I don't know what it is.

2996   But it does blockade specialty opportunities in Category B which I don't know is a good thing and I don't know why a program is not that successful that it has not migrated over to an OTA. It's not my business decision. It's yours, but if it's that successful -- I'm just trying to understand whether you are trying to preserve genre or find a great argument for its removal.

2997   But I take from what you said that it's going to be business as usual at the History Channel.

2998   MS WILLIAMS: Yeah. I think we are going to continue to find interesting ways to talk about history through great characters, absolutely.

2999   COMMISSIONER SIMPSON: Great, okay.

3000   Before I outstay my welcome here at the bench I will try and move on to some of the other stuff.

3001   Okay, let's talk about Showcase. There has been a request that has raised the hackles on some of the content production industry in Canada with respect to foreign programming broadcast by the channel. I'm wondering if you could speak to your thoughts on that.

3002   The Writers Guild, for example, are indicating that they feel that the reduction of the U.S. programming limitation to 50 percent coupled with lack of narrative description will negatively impact genre diversity.

3003   MS WILLIAMS: Sure. I would be happy to speak directly to that point.

3004   It's interesting. Right out of the gate, I guess, we are most proud on Showcase of the seven to 10 primetime Canadian commitment. No other service in Canada is committing to that kind of Canadian content and we are not in any way looking to disrupt that.

3005   In fact, I would say for the first time we are having more success with that block than we have ever had before. Christine's slate with Lost Girl and Haven and the new Endgame have really, really supported some Canadian dramas to pop in that time block in a way they hadn't before, which is really the heart and soul of that network.

3006   But, beyond that, I think a couple of things that have changed that the intervention maybe should reflect on. One of them is that when this service was first launched many, many years ago, there weren't very many services in Canada that were bringing foreign drama from around the world into the country. There are more now.

3007   So Showcase doesn't need to carry that burden all on its own, if you will, and nor can it because it is in competition with many services that are bringing in some of that content now. Whether it's AMC that's now bringing a while other slew of drama into the country or whether it is BBC Canada that is bringing a lot of British content into the country, there is a lot more services have been launched since.

3008   But specifically on the American content -- and please note we are asking for only a very small increase here. Our foreign content is still a commitment across a variety of territories that that content would come from. At the moment 10 percent of it is allowed to be U.S. and, as we have acknowledged, many services now have a 10 percent drama rule. So that doesn't make us special or unique. It just makes us now compete with many others.

3009   And we are asking to change that 10 to 20 so we are not looking to absolve ourselves of all responsibility to bring content from other territories, just add a little bit of U.S. content.

3010   The key reason why that has changed is that in the last number of years, the American cable system has sprung up to do a tonne of original Canadian drama that was never done -- excuse me -- American drama that was never done before.

3011   When you look at U.S. and TNT and SciFi and Lifetime and on and on, there is a slew of actually quite fantastic American drama that's not finding its way into this country anymore. In fact, the Rogers folks commented on this also.

3012   And it's an opportunity, frankly, the kind of drama that it is, it's not network stuff. We are not looking to duplicate what is on Global or CTV. It's not the big U.S. studio stuff.

3013   It's the cable stuff that's a little quirkier, a little edgier, if one dares to use the word, that really suits the Showcase brand and the Showcase attitude. And it is content that's not in this country and it seems a shame, frankly, to not continue to find ways to bring that content to Canadians.

3014   We know they hear about it. They read about it. They learn about it. They want it. And the best way to keep those U.S. services out of Canada is to be sure we bring the best of it in.

3015   So we are looking to just increase that foreign American slice by just a little bit without it all interrupting our commitment to Canadian. We think overall Canadians will be better served by that and the service will do better.

3016   COMMISSIONER SIMPSON: Boy, you are persuasive.

3017   Taking that argument fully in stride, then what would the potential impact be of the potential of bicycling? I use the word bicycling as opposed to recycling, bicycling that content around other television assets of yours that might, you know, water the wine.

3018   MS WILLIAMS: I don't think there is much risk of that at all. You know, Global is very dependent on simulcast. This is content that is not simulcast because it's on cable in the U.S. It's not on network. So it's not an opportunity for Global.

3019   History is not running this kind of content, obviously, and we don't have other services that run drama. So it's actually not at risk there at all.

3020   I guess that despite that -- not only is there no risk, there is only opportunity here. When Showcase does better and revenue does better, more money goes back into the hands of the Writers Guild for the projects that they want to do. I see this only as a win, frankly.

3021   COMMISSIONER SIMPSON: Okay, thank you.

3022   Just to clean up on this line of questioning, on narrative description, would you just one more time for me, sort of comment more fully on the appropriateness of narrative description and what type of narrative description would you suggest is appropriate?

3023   MS WILLIAMS: Sorry, I'm not sure I am --

3024   COMMISSIONER SIMPSON: My question --

3025   MS BELL: Is this what you are talking about a proposed condition of licence change for this?

3026   COMMISSIONER SIMPSON: No, well, just your general comments. The question I had written is: Will you comment on the appropriateness of adding a narrative description to Showcase's COL? Yeah, I didn't say that. I'm sorry.

3027   MS BELL: To account for that specific change? So we are clear to account for that change?

3028   COMMISSIONER SIMPSON: Yeah.

3029   MS BELL: Could we file something?

3030   COMMISSIONER SIMPSON: Absolutely.

3031   MS BELL: We could suggest a language to put around that, if that would be okay?

3032   COMMISSIONER SIMPSON: Yeah, absolutely.

3033   MS BELL: Thank you.

UNDERTAKING

3034   COMMISSIONER SIMPSON: Absolutely.

3035   Sorry, I have got so much -- swimming in a sea of paper here, so much for the digital world.

3036   Diva -- Showcase Diva -- in your application letter form, your nature of service is described as:

"...providing a national English-language Cat 2 specialty service devoted to romance. Programming will include relationship-themed game shows and magazine style programs featuring romantic vacation resorts. Other programs will explore romantic moments in peoples' lives as well as classic romantic feature films, epic mini-series and made-for-TV movies."

3037   However, the current programs on Showcase Diva include police dramas such as CSI, NCIS, Crime Scene Investigation, Numbers, Lost Girl, Bones and Premonition.

3038   How are these linked romantically to the nature of service?

--- Laughter

3039   COMMISSIONER PENTEFOUNTAS: Crimes of passion on the CSI -- if I can help you out?

3040   MS WILLIAMS: You have got it. Just run with it. You are on a roll.

3041   We have been continuing to find a way to be sure that Diva speaks to the core female audience that I think is at the heart and soul of -- sorry, heart and soul, that wasn't intended either -- of the nature of service.

3042   This is clearly a service that is dedicated to women. It's where we run our chick flicks, if you will. It's where we run the female protagonist series that -- some of what you have touched on. It's a service that needs to keep finding a way to reinvent what women are watching on TV and what they want to touch and we keep trying to find ways to throw that at them.

3043   One of the challenges is there might have been an initial idea that a lifestyle series on romantic getaways was a good way to reach women and good way to understand and identify that service.

3044   Frankly, over the last 10 years it hasn't really turned out to be a very good idea at all. So we have to keep finding ways to stay true to the big idea of a service that's geared towards women that are interested in relationships and romance and all the movies and series that underlie that.

3045   That's what we are working out. And does every single one of them hit the button exactly the way it might have originally been intended? Maybe not but I think the direction of the service is absolutely on track.

3046   COMMISSIONER SIMPSON: I have got to comment on that last sentence because, again, I am having trouble connecting the dots between my question and the answer, other than to hear very clearly that it's back to the environmental thing again. It's what interests your programmers.

3047   You have got a target audience and you have got -- your job is to find programs that click and I totally endorse that. The whole idea is to make money and entertain and I totally endorse that.

3048   It's the genre elephant again that is problematic here because the more you widen out the -- the more you do your job and succeed, the more the regulatory environment fails because it gets in the way of other Category A and B services.

3049   So I just wanted to say that as a comment because there is -- I don't think -- any answer that would be the answer that we need to hear at the Commission given the regulatory environment that we have. So we will just agree to disagree, I guess.

3050   TvTropolis I won't go through the nature of service description, but you have requested some changes. You know what they are. They are on the record.

3051   Would you give me -- again, I'm sorry to keep on -- you might need some more water here.

3052   But would you please tell me how this programming strategy that you are proposing would differ from other services such as Showcase, Mystery or Comedy Network programming?

3053   MS WILLIAMS: I will sure give it a shot.

3054   This particular service -- and Paul kind of touched on it earlier in his remarks -- one of the challenges with this service is that I think when it was first licensed there was again an original idea of what it meant to be 50-plus, and that that's changing, that I think Paul's line was that baby boomers are redefining old age and it's a great line and it's true.

3055   Maybe it was when I turned 50 a few years ago and I started to think about what do I watch on TV and what would I want to watch if this service was dedicated to me that I started to think about that differently as a programmer, too.

3056   But at the core of the TVtrop licence is this idea that programming needs to be 10 years old. So the way we approached it is, we said "Okay, if that's sort of the dividing idea behind this nature of service, if that is the tool that the Commission put forward to define this service, then we are going to work with data we are going to build a service that sort of is around this idea of they are hits of my generation, that over 10 years ago when I fell in love with television and I watched stuff, what did I love? Those are my hits and that's what I want to see today on my service now that I'm 50+. So we ran with that idea big time.

3057   There turned out to be one little problem and the problem is that actually old people don't necessarily like watching old shows, but they also sometimes do. So what we have learned is that if you put "Fraser" on or "Everybody Loves Raymond" or "Golden Girls", you can get that older audience you expected. If you put "That 70s Show" on -- which actually should have worked if you think about it -- not so much.

3058   If you put "Friends" on, not so much. In fact, if you put "Friends" on really young people watch it because they never saw that show and it turns out that they really like it.

3059   So despite our best attempts to say. "Okay, we are going to focus and put 10 year old stuff on the air", that by itself didn't end up generating the older audience that was expected.

3060   We do think a certain percentage of that make sense -- as I mentioned, "Everybody Loves Raymond", "Golden Girls", whatever -- but what we also are watching now is an interesting evolution of some content that's being made specifically for an older demo, if you will. Again, it's not network stuff, it's not what's already what's on Showcase or Global.

3061   Look south of the border once again to TV Land and look at some of the shows that they are starting to make there. One of the ones that we would know here in Canada is called "Hot in Cleveland" starring Betty White. It was made for TV Land because they are struggling with the same issue that we are here and it's very much a brand-new drama that's focused on an older demo. We would like to be able to run "Hot in Cleveland". To us that makes a ton of sense.

3062   There are a couple of other shows they are doing, one is called "Retired at 35" and it's about a 35-year-old guy that moves into the retirement facility in Florida with his parents and experiences that dream of retirement in Florida with his parents. It's hilarious.

3063   That's a brand-new drama, it doesn't come close to being 10 years old, but it absolutely is bang on to what we are trying to do here.

3064   "Happily Divorced", another one, follows Fran Drescher's sort of own personal life -- and she's a woman in her 50s -- and it's about sort of what it's like to be in your 50s and recently divorced. Again, brand new. I don't want to wait 10 years to put that show on this service.

3065   So what we are asking here is to stick to that core principle of 10 years old, but instead of having all of it having to be 10 years old let's split the difference here and let half of it be new so we can go at some of these new approaches and new ideas of reaching this older demo.

3066   But we are not trying to walk away from the core principle that we know is at the root of the Commission's understanding of this nature of service and hence the request.

3067   COMMISSIONER SIMPSON: Somehow I get a feeling that you are ripping a page out of our book with group-based licensing. I'm thinking about your target demos on your Category "A"s and maybe you have a group-based advertising program that you take to the agencies which provides the same demographic group for every genre, but a different environment rather than nature of service.

3068   How do you sell that to an advertiser?

3069   MS WILLIAMS: Well, you know, it's interesting -- and maybe Errol wants to speak to it -- but a great article was flipped to me just last night actually, again out of the United States, but about the maybe slow but persistent growing interest in reaching an older demo because, guess what, we do buy stuff after all.

3070   So it actually encourages us to continue to find a way to make this genre successful as opposed to encouraging us to find a way to walk away from it.

3071   I think demo-based licences are some of the toughest ones out there to define and to be very specific about what makes it a woman's channel or a kids channel or a men's Channel. Demo-based or gender-based licence, these are the toughest to define, but they are valuable, they are unique and we believe that there is a future in this one and we are determined to get it right and to make it work. We would just appreciate a little leeway here as programmers around the world get a little smarter than just throwing on the old stuff.

3072   COMMISSIONER SIMPSON: Thank you. Thank you very much.

3073   MR. ROBERTSON: I just want to say, it's one of these situations where when the licence was originally struck it was probably struck in the shadow of YTV that was such a great success and that, you know, here is a kids channel defined nice and neatly and then all the programs that fit into it, everyone would say, "Well, those look like kids channels, that all checks out."

3074   On this one we thought, "Well, if you can do a kids thing maybe you can do a 50+ thing." The issue that you see we are struggling with is it's really hard to say, "Hey, that's an over 50 program."

3075   So I think that the original intent was -- and it's been a great contributor, so I mean as much as we are saying, you know, we are having a little challenge answering your questions, we are having a little challenge trying to describe it at times, you know, it's a great contributor to the system. It's doing well, it's finding an audience, it's all the things we would wish for from a Canadian broadcasting standpoint.

3076   So, you know, it's a bit messy around the edges, but it's a great contributor.

3077   COMMISSIONER SIMPSON: And it goes to Mr. Stein's point earlier that you have to live with these assets for a while to be able to understand, you know, how to evolve them. Again, you don't have any opposition to that notion that it takes a bit of living in the house to figure out where you are going to put the furniture.

3078   I have three more questions then I'm done. They are pretty short.

3079   First is Twist, which I don't have that much of an issue with because I think where you are going with it is definitely into uncharted waters, but very interesting, and actually has a health theme. So I commend you for that. It's darned interesting. I don't know what its merits are going to be commercially.

3080   But could you tell me how you arrived at the decision to do what you are doing with rebranding and, for the benefit of the staff, help them understand the direction you are taking this channel with the content?

3081   MS WILLIAMS: Sure.

3082   I actually had the pleasure of being part of the initial Alliance Atlantis team -- I'm smiling at Rita, because she was there with me -- when we came and proposed to get a health licence and we won and that was really great. Then we proceeded to try to figure out how to make that licence work and a number of things happened.

3083   First of all, just that that licence was first put on the air the Internet started to really take off and the first and most important thing we learned is that traditional health programming was very, very, very quickly replaced by the Internet, that there was no longer a need for someone to come to a television service and sit and wait for the program on diabetes and hope that it might come up in the next week or two, but they could go to the Internet and instantly get the information they needed about their health concern or the health concern of someone that they knew. So the Internet started to eat away very, very quickly at that idea at the time of a big health service, of a broad-based health information to all Canadians.

3084   Time goes on, many things happen, I didn't -- I wasn't a part of all of them. But back now with this licence as part of our group, what we tried to think about is what is the aspect of health program that actually would still be relevant on a daily basis on a linear platform that could complement what people find on the Internet but not try to replace the Internet, because that sort of seemed like a futile exercise.

3085   So the aspect of it that we have discovered really makes most sense is to focus on family health and to focus really on the parenting angle of that, that there is a real interest in and appreciation for that aspect of how -- it's at the core of most people's health concerns actually is within the family unit and how parenting relates to all that.

3086   So the rebrand and the refocus, if you will, is absolutely tightly within the health genre, it's just even more narrowly in a way to family health and to parenting than it was to the broad-based more illness and disease-oriented schedule of its early days.

3087   COMMISSIONER SIMPSON: That's one down, two to go. Thank you very much.

3088   MS WILLIAMS: You're welcome.

3089   COMMISSIONER SIMPSON: That was very helpful.

3090   Food Network. You are requesting an elimination of a certain aspect of your COL. If that were to happen how would -- if we were to approve this amendment, would you tell me what you are going to do with that in terms of programming strategy?

3091   MS WILLIAMS: I'm sorry, Food Network?

3092   COMMISSIONER SIMPSON: Yes.

3093   MS WILLIAMS: What am I forgetting? I apologize.

3094   You mean Slice possibly?

3095   COMMISSIONER SIMPSON: Oh sorry, yes.

3096   MS WILLIAMS: Oh, okay.

3097   COMMISSIONER SIMPSON: I'm sorry.

3098   MS WILLIAMS: You scared me there for a minute.

3099   COMMISSIONER SIMPSON: Yes, sorry. My notes. My bad.

3100   MS WILLIAMS: Sure. No, happy to talk about Slice.

3101   Once again I have the -- God I'm old -- the history of this licence. We used to always sort of fondly referred to it back in its day as Life Network, as the problem child. We did that because it's an outlier. This licence has been an outlier from the day we got it and really that's what's at the centre of this request.

3102   It has a more aggressive exhibition requirement and CPE than any service that has ever walked this territory and we are not asking to change the CPE. We understand that the commitment to dollars is what the flexibility of this policy is really all centred on, we are not looking to take any dollars out of the system in any way with this change, we are just looking to get the exhibition requirement down within the realm of reality here against all of our competitors.

3103   We are 82.5 percent Canadian content and we have proudly gone at that year after year after year and had some good success. But to have a schedule that has only lifestyle programming, only non-scripted content at an 82.5 percent Canadian content level is a tough -- is a tough ride, I will admit that. So we have asked to bring it down to 60 percent, still far above anybody else. We are at the outside edge of the range.

3104   We just think honestly we can do a better job by focusing the dollars on fewer hours, make them better hours and make the whole schedule work better with a better spread of foreign and Canadian programming across the service.

3105   COMMISSIONER SIMPSON: Would you do me a distinct favour, please, and submit something, a one-pager even, that would give us a clue as to what that means directionally?

3106   I know what the problems -- you have done a great job of articulating the fact that, you know, the original licence COL vastly overreached, but in terms of what directionally you would do would be very helpful. Understanding that it is a competitive issue, I would take it as a written submission.

3107   MS WILLIAMS: Happy to, although I will also just give you 30 seconds on it so you get the top line.

3108   We are not looking directionally to change this service at all in any way. It is clearly a lifestyle service, it has an absolute restriction around, you know, stepping outside of that box. It speaks to family, fashion, relationships, weddings, finance, the world of celebs, it's all that sort of fun entertainment that the services nature speaks very directly to. It speaks to women, it has a younger women demo and we are not looking in any way to change or adjust that.

3109   COMMISSIONER SIMPSON: Okay. Well, then I don't think the submission is necessary.

3110   So it's just a question of alternate services of programming.

3111   MS WILLIAMS: That's right.

3112   COMMISSIONER SIMPSON: Okay.

3113   Last question, wow. This is a commercial question, it goes back to the guys in the suits -- not that the ladies aren't wearing suits, but -- and I don't know how to tackle this because it is a commercial question and if you want to talk about in the in camera, that would be great, but it has to do with this coverover agreement in British Columbia which, like LPIF, depending on who you talk to, it's of vital importance to the economic viability of some of the broadcasters that it impacts.

3114   In the course of digging into all the things that you would with a new acquisition you have taken it upon yourselves to revise the language of the coverover agreement and my first question is -- again, this may be the in camera answer -- is what was the necessity to do this?

3115   The second part of the question is: Was it done in collaboration with and in the end with the agreement of Astral and Pattison? Are they happy with this change?

3116   MS BELL: Thank you for asking that question. Yes and yes.

3117   We revised the language in the condition of license to take into account the change of ownership and the stations that were included in the original condition. As you probably know, it has existed since the early '70s I think, so it has a long tradition.

3118   I guess if we did make one mistake it is before we filed it we didn't speak with Pattison and Astral at the outset. They intervened, we subsequently had discussions with them and we have all come to an understanding and an agreement that the language works for everyone.

3119   We have also further agreed that in future if we ever have any disagreements about the nature of the advertising that we are talking about or anything else that pertains to that definition, that we will all sit down and talk to each other and sort it out.

3120   COMMISSIONER SIMPSON: Okay.

3121   MS BELL: So I think we came out of this in a positive place with the two parties who had intervened in the first place.

3122   THE CHAIRPERSON: Are we talking about the Vancouver station being rebroadcasted and you substituting the ads. Is that what you're talking about?

3123   MS BELL: It includes our Kelowna station, yes. It includes all of the small stations in the interior. So basically what it does is it would --

3124   THE CHAIRPERSON: You are taking the Vancouver station and you are rebroadcasting it and you are substituting the ads. That's really what it boils down to; right?

3125   MS BELL: Yes. Yes.

3126   COMMISSIONER SIMPSON: It's an institution right --

3127   MS BELL: Yes. Absolutely, yes.

3128   COMMISSIONER SIMPSON: -- into a provincial carriage.

3129   MS BELL: Yes.

3130   COMMISSIONER SIMPSON: Thank you very much. Believe it or not, we are done.

3131   THE CHAIRPERSON: Tom, you had a question?

3132   COMMISSIONER PENTEFOUNTAS: Thank you.

3133   First of all, Ms Williams, I find it hard to believe --

3134   THE SECRETARY: I'm sorry, Mr. Pentefountas, please open your microphone.

3135   COMMISSIONER PENTEFOUNTAS: Thank you so much.

3136   Hard to believe you have turned 50 at all that many years ago.

3137   As for Viva, if you want the ratings to go crazy just play Brad Pitt and George Clooney movies all day, but you can't do that.

3138   Did I understand correctly on CKMI that if you had LPIF funds you would create a morning show in Montreal?

3139   MR. REEB: Commissioner, we have already -- we have committed to creating a morning show, it was part of the commitment we made under tangible benefits for Shaw's acquisition of Canwest. We would commit to doing that and to maintaining the current hours of original programming on CKMI with --

3140   COMMISSIONER PENTEFOUNTAS: When would you start that morning show?

3141   MR. REEB: It's currently scheduled to be started in the summer of 2012, so about a year and a half.

3142   COMMISSIONER PENTEFOUNTAS: LPIF money or not you are committed to starting that show?

3143   MR. REEB: Yes.

3144   MS BELL: Could we just be very clear that all of the morning shows, Vice-Chairman, are totally incremental and they are part of a very separate initiative. So the hours and the spending are in addition to whatever we do in terms of local news and whatever we would do that's part of LPIF, just to be very, very clear.

3145   COMMISSIONER PENTEFOUNTAS: Great. That's clear; thank you.

3146   MS BELL: Thank you.

3147   COMMISSIONER PENTEFOUNTAS: Secondly, in the interest of you mentioned in your introduction that you would like the CPE and PNI commitments at levels reflecting historical spending.

3148   If you were to have your PNI fixed at 9 percent, would that be problematic?

3149   THE CHAIRPERSON: We will do this in --

3150   UNIDENTIFIED SPEAKER: She just turned 60.

3151   MS WILLIAMS: Yes, the grey just --

3152   COMMISSIONER PENTEFOUNTAS: I don't mean to age anyone.

--- Laughter

3153   MS WILLIAMS: Yes, age me on the spot.

3154   No, but what's key to understanding around the PNI issue is the definition of PNI and I think you may have had some conversation around this already this week.

3155   What we have been operating under as an assumption of what defines a PNI program has changed recently and as we have understood that new definition and applied it to our content actually our historical spending of PNI under the new definition --

3156   COMMISSIONER PENTEFOUNTAS: Yes.

3157   MS WILLIAMS: -- is at 5 percent, 5.1 maybe. The old definition puts us up at about 7.5, but when you carve out the content -- the new definition actually affects our services in a big way because a lot of the content that did count that will no longer count is reality, documentary, content that's on Slice and on Food and on services like that, lifestyle services, and it won't count any more.

3158   So historically we are at 5. So honestly, to consider almost doubling that going forward would be an enormous challenge.

3159   COMMISSIONER PENTEFOUNTAS: Thank you.

3160   The old PNI numbers I have here have the decreasing from '08 to 2011. In '08 you were at 12.2 and you are at 6.3 in '11 Those are the projections for 2011.

3161   MS WILLIAMS: And those would all be numbers under the old definition.

3162   COMMISSIONER PENTEFOUNTAS: Even under the old definition, is there a reason why you have dropped by half your PNI spending?

3163   MS WILLIAMS: There must be. That's the program mix, I guess.

3164   We have always lived up to our priority commitments on Global, which is really what the new world is, so those priority hours have always been there. We have never not complied with that. So I'm challenged off the top of my head to give you a clear answer to that, but I can try and think that through.

3165   Whether it's that we did a lot of lifestyle-related PNI content for a few years there that we no longer do -- I mean what was at the heart and soul of PNI before was priority and I know we have always lived up to that.

3166   COMMISSIONER PENTEFOUNTAS: Maybe you can get back to us.

3167   MS WILLIAMS: Showcase -- yes.

UNDERTAKING

3168   COMMISSIONER PENTEFOUNTAS: Maybe you can get back to us, because it is a 50 percent drop. You are dropping by half in 3.5 years time.

3169   MS WILLIAMS: Christine has reminded me, there was a significant overspend on Showcase for the couple of years there where those numbers dropped, we would have been using up that overage which would have reduced, likely, the spend on new content for those years where used up the overspend from previous years. So that could account for why it was so big for a bit and then much smaller, because we overspent for a couple of years and then brought it back into line to meet ultimately the CPE requirement that we always had to hit. That could be at the root of that.

3170   COMMISSIONER PENTEFOUNTAS: Okay. We will discuss that more in --

3171   MS WILLIAMS: Yes, yes.

3172   THE CHAIRPERSON: Just what are you talking about when you say old and new definition?

3173   We didn't have PNI, we invented the PNI --

3174   MS WILLIAMS: It's the documentary --

3175   THE CHAIRPERSON: We invented PNI for the this hearing.

3176   MS WILLIAMS: Oh, absolutely. It's a documentary definition. Everyone has always been clear about what's scripted, but what counts as a documentary there is a new definition there so there is a new -- a subcategory now of documentaries that are understood to be reality, not true docs --

3177   THE CHAIRPERSON: I see.

3178   MS WILLIAMS: -- and only true docs count as PNI's, reality doesn't. It is 11(b) in the categories.

3179   THE CHAIRPERSON: Okay. I have two more questions and then I have some cleanup.

3180   My intention is to go through this and then to go in camera after lunch, okay.

3181   Peter...?

3182   COMMISSIONER MENZIES: As quick as I can, on the nature of service.

3183   Here is the problem. I think this is one of the few rooms in the country where some of these conversations make sense, but "Rodeo Life on the Circuit", "Ice Pilots", great shows, probably exactly what the Broadcasting Act had in mind and that sort of stuff but, to quote Mr. Stein, it's not a duck, it's not history in terms of that.

3184   Now, that's not a problem for me, I can't speak for the others, but in terms of having the flexibility to do what you need to do is fine, but what you are doing is redefining history, just as CTV is redefining education or whatever it is we are doing.

3185   Having flexibility to give what Canadians want is just fine. Here's the problem. If somebody else comes along and says, "I have access to the news archives of the country and I want to launch a channel that's called "Today in Canadian History" for instance and it will just have loops of Canadian history on it, "This day in 1942... This day in 1924...", et cetera, we have to say no because your genre is protected.

3186   So as you get the flexibility to serve your audiences you are retaining this protection.

3187   Now, I need you to explain to me how that isn't restricting competition and being essentially anti-competitive.

3188   MR. ROBERTSON: Commissioner Menzies, it's a very apropos question and what we would say is that there has been an evolution that has been reflected in the way in which the Commission has been licensing Cat "B"s over the last few years and we have certainly seen -- I don't know whether you would call it a relaxation, but a broadening of allowing new Cat "B"s that are, one would say, more competitive with the core Cat "A" category than you would have seen historically.

3189   So in other words you have within your power the ability to license new channels that you feel are kind of subgenres, but if you felt that there was an element of history that is viable that could be better dealt with by a Cat "B" channel, you have the ability to license it.

3190   COMMISSIONER MENZIES: You would not object to that. You would be open to having somebody, one or more, launch history-based channels?

3191   MR. ROBERTSON: Well, I think that you find a way to kind of split it up a little bit. It has been happening over time.

3192   If you look at the most recent --

3193   COMMISSIONER MENZIES: I mean, you have mandatory carriage and you have genre protection, you are owned by a cable company, right, I mean you need the mandatory carriage to tell Shaw that they need to carry you?

3194   It's sort of like I said, help me. You are telling me we can go ahead and do it, what I want to hear is who is going to object if we do.

3195   MS BELL: Sorry, could I just try this for a second?

3196   The Commission already has criteria to determine what would be directly competitive and I think we would object if we saw another service come around with an identical nature of service or an identical or almost identical programming schedule that would go head-to-head with ours, but if there was just a minimal overlap, for instance like 10 percent or under 10 percent, we are not going to object. We don't do it now. We do not do it now. We didn't object to all the services that Rogers just applied for and got licences for.

3197   So, you know, we object when clearly it is coming right at us and it's trying to duplicate exactly what we are doing because it's going to harm our ability to continue to meet our objectives and our commitments.

3198   COMMISSIONER MENZIES: Okay. Well, maybe you can think about it because it's just tough.

3199   Like I said, giving you the flexibility, speaking only for myself, is not an issue, but allowing you to be free and maintain all your entitlements at the same time does have implications in terms of competitiveness and competitiveness you are all in favour of because it spurs innovation and creativity, et cetera, et cetera.

3200   So ponder on it. Thank you.

3201   MR. ROBERTSON: We will give it some thought.

3202   I would just make one more comment. As the Commission well knows, the obligations that come with a Cat "A" are much more stringent, so there are obligations kind of them commensurate with any carriage preference.

UNDERTAKING

3203   COMMISSIONER MENZIES: Understood. You get flexibility on the obligations, it's just the other side. We need to talk about both sides.

3204   THE CHAIRPERSON: We found it very refreshing yesterday when your corporate cousin said on the Oprah Winfrey Network that they wouldn't protect the genre, so you might want to follow and see whether there are some channels where you take the same attitude.

3205   MR. ROBERTSON: We were here. I think we heard them say that.

3206   THE CHAIRPERSON: Okay.

3207   Rita... ?

3208   COMMISSIONER CUGINI: Yes, thank you.

3209   I have a couple of clean-up questions and then a broader question.

3210   Very simply, why not apply for a Cat "B" for Twist, if you are going down to the Category "B" level of Canadian content for Twist and its nature of service is fairly broad, so why shouldn't it be open to competition?

3211   MS WILLIAMS: I guess one's first inclination always is to hang onto the licence one has and the carriage one has with it --

3212   COMMISSIONER CUGINI: And to hang on to mandatory carriage.

3213   MS WILLIAMS: -- and to evolved an audience into -- you know, we are trying to move an audience that was there supporting a more broadly based health service. We understand that audience, for the most part, was female, young with families and saying how do we best keep that audience and engage them further and grow the service. That's our job.

3214   So we absolutely would look as a first intention to hang onto that licence, fulfil its obligations and deliver a more focused service that will perform better for the audience and the advertiser.

3215   COMMISSIONER CUGINI: But the question is, what makes it unique at this point?

3216   MS WILLIAMS: Nobody else is doing a family health service.

3217   COMMISSIONER CUGINI: And you maintain that it will continue to be a family health service?

3218   MS WILLIAMS: Absolutely.

3219   COMMISSIONER CUGINI: Okay.

3220   Showcase and the changes that you have requested. I heard you say that it's "only" going from 10 to 20 percent, but that means 25 hours -- 25.2 if my math is correct -- which also means more than three hours in prime time and three hours of Canadian.

3221   MS WILLIAMS: Yes, but please remember -- I know you know this, Rita -- 7:00 to 10:00 is Canadian --

3222   COMMISSIONER CUGINI: I understand that.

3223   MS WILLIAMS: -- so those three are not prime time, they are off prime some of us would say in terms of where the real core audience is.

3224   So actually you are right, your math is bang on and we would take advantage of that opportunity to bring some fresh programming into this country that has not been seen before, but as long as 7:00 to 10:00 is still Canadian then we are pushing that content to the outside of its best-performing opportunity of the core of its service and we are preserving what's central to Showcase, which is Canadian.

3225   COMMISSIONER CUGINI: Will you be looking for simulcast opportunities at 10:00 p.m., one of the most competitive time slots in prime time?

3226   MS WILLIAMS: At 10:00 p.m., no. No. We don't have the right to get that. I guess we could ask.

3227   COMMISSIONER CUGINI: You can.

3228   MS WILLIAMS: We certainly don't have the right to automatically have it.

3229   This is not about simulcast. Showcase is a brand that is distinct from conventional television and this is not about trying to duplicate Global.

3230   COMMISSIONER CUGINI: Okay.

3231   I found the question that Mr. Simpson couldn't find on Food Network and that is your request to eliminate the COL that 80 percent of Canadian be original.

3232   MS BELL: We were cleaning up the licence basically and one of the -- I guess the only rationale there was that there were one-off requirements and that it was not needed because we now were going from exhibition to content creation. That was really the rationale behind that.

3233   COMMISSIONER CUGINI: So it's a harmonization across your services?

3234   MS BELL: Absolutely. It's that we felt it was consistent with the new policy and that it was -- it was kind of an outlier condition.

3235   COMMISSIONER CUGINI: Okay.

3236   Our staff has done some analysis of program categories that have been aired on some of your services and it seems that you have drawn programming from categories for which you are not authorized to draw programming. One is Showcase Action.

3237   Our analysis shows 105 hours and 6 minutes are from 7(b) and 65 hours and 55 minutes from 5(b).

3238   MS BELL: Also, we went through all of our logs and again, in some cases -- and you may have a couple of other ones because you have provided us with that information.

3239   COMMISSIONER CUGINI: Yes. I have DejaView and MovieTime that I am supposed to ask you about.

3240   MS BELL: We were confused because we were actually having difficulty finding programs in our own logs that were logged that way. IFC, we can't find it. It does not -- that result does not match our logs. Same thing for Showcase Action.

3241   I am not sure -- I mean we got this on Thursday and we immediately gave it to our programming people to do a crosscheck to see what the issue is and it doesn't appear that those examples are matching our logs.

3242   We can go back again and make extra sure and then file with our reply any comments that we have. It appears that we were in compliance, but let me --

3243   COMMISSIONER CUGINI: Okay. We would appreciate it if you could.

3244   MS BELL: -- just take the time to do that for you.

UNDERTAKING

3245   COMMISSIONER CUGINI: Thank you.

3246   MS BELL: All right.

3247   COMMISSIONER CUGINI: Now, Mr. Stein, I have a question for you. I found your response to the issue of genre exclusivity quite interesting, essentially given what Shaw said at the BDU review.

3248   There was a report filed by Steve Globerman as part of that BDU Reg review which said in part:

"The analysis presented in this report supports the policy recommendation that genre protection among Canadian programming services be eliminated." (As read)

3249   And it continues on. I could read the whole paragraph, but in the end it says:

"There seems little economic justification for enforcing genre protection among Canadian programming services." (As read)

3250   Have you changed your mind?

3251   MR. STEIN: I am glad I hired Steve as a consultant.

3252   COMMISSIONER CUGINI: Well, you supported Steve's report in your whole submission during that review.

3253   MR. STEIN: The main thing about Steve's report that we supported was the whole nature -- and I think it goes to Mr. Menzies' point, which is that, you know, if you are going to be Canadian and you are going to be strong and competitive you can't just hide behind these kinds of rules, that you have to go further than that.

3254   And the point that we were trying to make at the time, maybe imperfectly, was we were really concerned about the whole concept of Canadian content production and how it was arranged.

3255   I think my view at that hearing was much more focused on how we approach the development of Canadian content and that we should be seeking international markets for that.

3256   So the genre protection, yes, was part of Steve's review of that situation, but our focus, I hope, at the time was primarily on the basis of making Canadian content more competitive and I think that was a common theme that Jim developed through the whole BDU review and also in terms of our positions with respect to the then called Canadian Television Fund, which the Minister finally accepted.

3257   COMMISSIONER CUGINI: No, but I mean you were pretty categorical during that proceeding.

3258   MR. STEIN: Well, I would have to go back and look at the transcript because in our company we have always felt that having very distinct services was very important.

3259   Now, whether you get that through competition, and we do agree you have to be selective -- and you have done the same process, you have dropped the protection on -- or the exclusivity on sports and news, and that is important. But what I do think is that it's a balancing act.

3260   I will go back and look at my exact comments at the time on genre protection, but as a general position we think that genre protection in terms of the services we offer our customers has been a very useful technique.

3261   I will have to go back and see whether I am contradicting what I said five years ago. Maybe my thoughts evolved.

3262   COMMISSIONER CUGINI: It's only three.

3263   THE CHAIRPERSON: But there is no shame in admitting your thinking evolves in that there is an vertically integrated company, you are having different views just being a distributor. I don't know what is so difficult about that.

3264   MR. STEIN: I mean, yes, but the thing is we have always been focused in our company, and that focus hasn't changed, on our customers. So I would hope to be consistent in that sense.

3265   COMMISSIONER CUGINI: Thank you.

3266   One more housekeeping question.

3267   I know you were in the room over the last couple of days. You know we are asking questions about described video and you can provide the answers in reply: cost of one hour, the impact of incrementality and video for current licence term -- oh, increasing.

UNDERTAKING

3268   MS BELL: We are working on that now.

3269   COMMISSIONER CUGINI: Thank you. Those are all my questions.

3270   THE CHAIRPERSON: Thank you.

3271   Rita just did two of my clean-up questions, so I only have the last one, which is advertising.

3272   In terms of advertising, there's two things.

3273   Number one, you want, if I understand it correctly, an affirmation from us that non-traditional advertising doesn't count as advertising, so product placement in the middle of a show or something like that.

3274   Has anybody suggested that it would?

3275   MS BELL: You know what, a few years ago, I think it was in 2006, you lifted or you redefined what advertising was for conventional television and explicitly said, we will no longer count those elements as part of the 12 minutes.

3276   We haven't done that for the specialty sector and the only issue we have is we just want to make sure that we are being consistent.

3277   THE CHAIRPERSON: I just want to know what you want.

3278   MS BELL: That's it. We just want the same thing to apply to specialty because specialty advertising restrictions are in the COLs as opposed to conventional, which is part of the Regs. That's all, we just harmonize it.

3279   THE CHAIRPERSON: But then you go to the second step. You want us to lift the advertising limitations in Cat As and Cat Bs?

3280   MR. ROBERTSON: We felt that the move that had been made to lift the advertising limits on conventional was the wise thing to do and at the time I think that specialty channels were held back from raising the limit, presumably for fear of being overly competitive with fragile conventional channels.

3281   We just felt that as we saw the way the marketplace evolved as the limits were lifted on conventional, there wasn't a huge rush to overcommercialization. It was really a fairly moderate increase and we saw very little downside to extending the same kind of thinking into specialty.

3282   My sense is over the years it's always been the Commission's -- or it's often been the Commission's view that, you know, why are we involved with telling the industry what their limits are, let them work it out because they have to put a good service on the air, so why are we regulating stuff that doesn't add a lot of value.

3283   We would argue that a 12-minute limit on specialty television falls into that category. We would just be done with it.

3284   THE CHAIRPERSON: The answer I get from others is that the effect would be just to, in effect, depress the price of advertising because it would be much more available in the market, and so rather than benefiting the system, you are actually driving prices down horizontally for everybody.

3285   MR. ROBERTSON: We have definitely heard that view and just from our analysis of what happened on the conventional side, we didn't see it in any way destabilizing. So we think if you would consider that effect that we have seen play out in reality in conventional that those fears about a dramatic increase of supply are unfounded.

3286   THE CHAIRPERSON: Interesting that you are the only group who asked for this. I didn't see that either in Bell or Rogers. So maybe -- they are undoubtedly listening -- in their final comments they might want to comment on that.

3287   MR. ROBERTSON: Thank you.

3288   THE CHAIRPERSON: Peter, did you have a follow-up question on this?

3289   Suzanne, please.

3290   COMMISSIONER LAMARRE: On this advertising limit, would it be your position that -- is your position the same for the English markets and the French markets or are you only referring to the English markets?

3291   MS BELL: We hadn't really contemplated whether you should lift it in the French-language markets. We don't operate in that market.

3292   THE CHAIRPERSON: Well, this is for English here, English broadcasts.

3293   MS BELL: Yes. So we would --

3294   THE CHAIRPERSON: So restrict yourself to the English markets.

3295   And as I say, I expect to hear from Bell and Rogers too.

3296   Now, Peter, I believe you have a clean-up question.

3297   COMMISSIONER MENZIES: In terms of your Showcase prime time commitments, is prime time the same all across the country for Showcase?

3298   MS WILLIAMS: Yes, it is.

3299   COMMISSIONER MENZIES: So if prime time is 7:00 to 10:00 in Toronto, it's the same prime time in --

3300   MS WILLIAMS: Yes. We are a two-feed service that way. So prime time in Vancouver is 7:00 to 10:00 local time.

3301   COMMISSIONER MENZIES: And in Alberta and Saskatchewan?

3302   MS WILLIAMS: Well, you only have two feeds. In this system you don't get five time zones, but the West --

3303   COMMISSIONER MENZIES: So prime time in Alberta is 8:00 until 11:00 and --

3304   MS WILLIAMS: Yes. It would be 8:00 till midnight. Yes.

3305   COMMISSIONER MENZIES: Okay, thank you.

3306   THE CHAIRPERSON: Tom, last question.

3307   COMMISSIONER PENTEFOUNTAS: One last clean-up question.

3308   PNI is a new concept. I think you were referring to priority programming; is that correct?

3309   MS WILLIAMS: We were referring to the fact that PNI is sort of the new priority, if you will. It's the new understanding of how to make the commitment to those underserved categories, yes.

3310   THE CHAIRPERSON: Okay. Then thank you very much. I will have counsel repeat the undertakings and then we will break for lunch and we will come back at 1:30.

3311   Counsel, do you want to read out the undertakings to make sure we --

3312   MS DIONNE: Yes, thank you, Mr. Chairman.

3313   I would ask that you provide the following information prior to Shaw's reply scheduled for Friday, April 15th:

3314   - File proposed commitments regarding better interaction with regional producers.

3315   - Comments on the possibility of standardizing all of your independent production requirements on all your services.

3316   - Commitments with respect to the allocation of a percentage of your group CPE to non-PNI independent production.

3317   - Provide a narrative description for Showcase in light of your request to reduce programming produced from outside the U.S.

3318   - Comments on the Commission's analysis sent to Shaw on March 31st relating to program logs.

3319   - The current cost of producing one hour of described video.

3320   - Comment on the impact of incrementally increasing the amount of described video for each year of the licence term, for example, by one hour per week per year.

3321   - Comment on the impact of increasing the percentage of original programming described from 50 percent to 75 percent.

3322   - Lastly, independent of standards that may come out of the closed-captioning working group process, please explain what measures you will implement to enhance and to monitor the quality of the captioning you provide.

3323   Thank you, Mr. Chairman.

UNDERTAKING

3324   THE CHAIRPERSON: Okay.

3325   I think you forgot one. I asked you whether there are any candidates of Cat As where you are giving up general protection.

3326   Okay, thank you very much. We will break and we will come back at 1:30.

--- Upon recessing at 1156, to resume in camera at 1330

--- Upon resuming at 1438

3327   THE SECRETARY: We are now back in the public session of the hearing.

3328   THE CHAIRPERSON: Okay. Now, Mr. Robertson, you or one of your colleagues, explain the PNI numbers for Shaw, please.

3329   MR. FRENCH: Yes. So if we take a look at the percentage of prior years' regulated revenue of a restated PNI definition, for 2009 it is 5 percent and for 2010 it is 5.1 percent.

3330   THE CHAIRPERSON: Okay. And that's restated using the definition that the Commission issued in November?

3331   MR. FRENCH: That is correct.

3332   THE CHAIRPERSON: All right, okay, thank you.

3333   Then Ms Dionne, do you want to read out the undertakings, please?

3334   MS DIONNE: Yes. Thank you, Mr. Chairman.

3335   I have three undertakings. I would ask that you file the information prior to Shaw's reply scheduled for Friday, April 15th.

3336   - Numbers showing the profitability on Canadian drama.

3337   - Numbers showing the expenditures made on Canadian drama back to 2008 and also the percentage of your previous PNI spending that was made on Canadian dram.

3338   - And profitability or non-profitability on Canadian spend looking at direct and fixed costs on a station by station basis.

3339   Thank you, Mr. Chairman.

3340   THE CHAIRPERSON: Okay. Thank you.

3341   And what time do we resume, Madame la Sécretaire?

3342   THE SECRETARY: 9:00 tomorrow morning.

3343   And this concludes Phase I for Items 1 to 4 on the Agenda.

3344   Thank you.

3345   THE CHAIRPERSON: Thank you.

--- Whereupon the hearing adjourned at 1440, to resume on Thursday, April 7, 2011 at 0900

REPORTERS

Johanne Morin

Jean Desaulniers

Monique Mahoney

Sue Villeneuve

Date modified:

2011-04-06